Enhancements and reforms of the budget process
The essential features of the budgetary system have proved their worth; the system also leaves scope for
innovations, however:
The 1997 "Statute on the Further Development of Budgetary Law" introduced more flexibility into the
management of administrative costs in title management; it enabled the authorities to react quickly to
changes in this field and to set financial priorities on their own responsibility. This meant that the first
step had been taken towards a form of distribution of existing funds that went further towards meeting
needs. Social security expenditure makes up a high proportion of the federal budget (about 50% of total
expenditure) compared to the budgets of the Länder and the local authorities. Personnel costs and
material administrative costs play a comparatively small role by contrast (together accounting for approx.
14 % of total expenditure).
Cost and results accounting has been introduced in Germany in suitable areas. The primary aim here is
to encourage an awareness of costs and performance standards and an efficient use of existing resources.
A pilot project is currently running in Germany in which the purely cameralistic representation of the
budget is supplemented by a product-oriented budget. The product-oriented budget is based on cost and
results accounting, and focuses on the authority's "output".
The authorities taking part in the product budget pilot project include the Press and Information Office
of the Federal Government (BPA), the Federal Statistical Office (StBA), the Federal College for Public
Administration (FH Bund), the Federal Motor Transport Authority (KBA), the Federal Railway
Authority (EBA), and a subsection of the customs administration.
Product budgets in the form of tables were included for the first time as an annex to the respective budget
chapters in the 2001 Federal Budget. In 2001 and 2002 the tables had to be limited to information on the
structure of the product fields and groups; in the meantime, however, all the pilot authorities can back up
their product budgets with figures. In the 2005 Federal Budget, the product-related part was emphasised
and placed at the beginning of the budget chapters for three pilot authorities (BPA, KBA, StBA); the
cameralistic part was shortened. When the 2006 Federal Budget was drawn up for these authorities, an
attempt was made for the first time to conduct the budget negotiations between the respective ministry
concerned and the Ministry of Finance on the basis of the product budget. The pilot project will be
completed at the end of the year. The aim is to clarify by then whether and to what extent product
budgets should serve as a permanent supplement to the present budgetary procedure and where they can
best be used.
The financial planning council
For the most part, the national regulations and procedures for drawing up the budget and implementing
structural reforms described here for the Federation also exist on the Länder level. The regulations of the
Law on Budgetary Procedures and the Federal Budget Code apply either directly in the Länder or are
largely taken over by local provisions.
The necessary coordination of budgetary and financial planning between the various levels of
government is carried out by the Financial Planning Council (FPC), a coordination body at minister
level; alongside the coordinating Ministry of Finance, its members include the finance ministers of the
Länder and representatives of the local authority associations. Among other things, the Financial
Planning Council issues recommendations on budget discipline and decides on an expenditure line as an
orientation for the budgetary planning of the Federation and the Länder. The development of the
expenditure structure and matters of financial-policy strategy are also discussed there (e.g. for Länder
that find themselves in a budgetary crisis or relating to where the new Länder might invest
supplementary federal appropriations to cover special requirements). If actual developments deviate from
the agreed recommendations, the Financial Planning Council discusses the reasons and any necessary
countermeasures. The Financial Planning Council is thus a federal institution which is fundamentally
also able to discuss qualitative aspects of the public budgets in individual cases.