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25 May 2023

Public Finances

Frequently asked questions about spending reviews

Our FAQs answer the most important questions about performance budgeting and spending reviews.

What does performance budgeting mean?

Performance budgeting is an approach in which the focus of budget management is on the desired outcomes and objectives. Public sector revenues and expenditures must be geared towards accomplishing these objectives.

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Why are spending reviews important?

Spending reviews are an instrument to ensure that public funds are used effectively and efficiently. The process can create fiscal space for new measures and improve the services offered by the public sector.

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What is a spending review?

A spending review is a subject-specific budget analysis that complements the government’s internal top-down budget preparation process. It examines what the objectives of a government measure are, to what extent these objectives are actually achieved, and whether this is done in an economic way. The aim is to improve performance budgeting – in other words, to make Germany’s federal budget management more focused on targets and outcomes.

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What is the government’s internal top-down process?

At the beginning of the top-down budget preparation process, the Federal Ministry of Finance determines the requirements for the following budget year and the fiscal planning period, based on the overall economic conditions at the time as well as forecasts for the future and in line with constitutional and other budgetary provisions. On this basis, it drafts a benchmark figures decision (to be adopted by the cabinet), which sets the financial frameworks for the individual ministry budgets as well as key revenue and expenditure items. Then, the ministries draft their budget requests within the parameters set by the benchmark figures decision, and the Federal Ministry of Finance prepares the draft budget.

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Who conducts spending reviews?

Spending reviews are conducted jointly by the Federal Ministry of Finance and the federal ministries responsible for the relevant policy areas.

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Who chooses the subjects of the spending reviews?

The federal cabinet selects the subject of the spending review.

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How long does the spending review process take?

Each spending review cycle lasts approximately one year.

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What is the coordinating office for spending reviews?

The coordinating office for spending reviews is part of the division for “Issue-specific budget analyses” within the budget directorate-general at the Federal Ministry of Finance.

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How can I find out what measures, funding programmes, statutory benefits and horizontal tasks of the federal administration have undergone a spending review?

The Finance Ministry publishes the final reports after each spending review is completed. The reports are available for download on the Finance Ministry’s website.