Quality assurance procedure

Latest Update: December 2023

Description of the concept for undertaking quality assurance for published information

MSG must ensure both the quality of the information of payments by companies to the state published in the report and the quality of information on the corresponding government revenues. This is a key requirement of the EITI standard. In the first two D-EITI reports, MSG relied on both sides’ disclosure of payment flows for quality assurance. This EITI standard procedure makes provision for an Independent Administrator to reconcile individual payments reported by companies with the corresponding receipts by government agencies. These did not produce any material differences between payments made and payments received between companies and government agencies.
In agreement with the international EITI secretariat, the 3rd German EITI report for the 2018 reporting period was the first to start with the development and implementation of an alternative quality assurance procedure for the payment flows to the government agencies reported by the extractive industry (“pilot procedure” or “pilot”). For this 6th D-EITI report, the alternative procedure will continue to be applied by the MSG and the IA.
The previous standard procedure included a test of details of the payment flows reported by the participating companies. Inclusion and assessment of the processes and controls associated with the payment flows were not undertaken, meaning that the knowledge gained from the standard procedure was always limited to the payment flows that are examined. The alternative procedure involves replacing the payment reconciliation procedure with a multi-stage system-based approach of obtaining information and the analysis of processes and controls relevant for EITI, in particular on the part of the government agencies in receipt of the payments. The aim is to put the MSG in a position where they can provide a well-founded assessment of whether or not there are sufficient signs of risks to indicate that payment flows to government agencies related to natural resources were not being properly processed during the respective reporting period. Regardless of the result of this risk assessment, a process for making a specific analysis of the companies’ reported payments will then be carried out. Where there are no sufficient indications for possible risks in respect of the correctness of the relevant (payment) processes and controls, the last step of quality assurance is an assessment of the plausibility of the reported payments, which is based on analyses of key indicators and further analytical considerations.

Explanation of the nature and extent of the work of the Independent Administrator

The work of the Independent Administrator encompasses the performance of investigative measures as per the International Standard on Related Services (ISRS) 4400, “Engagements to Perform Agreed-Upon Procedures”. The investigative measures carried out by the Independent Administrator do not constitute a (final) examination or audit review of the payment flows reported by the companies in accordance with the professional standards for auditors accepted in Germany or recognised internationally. Therefore, the Independent Administrator did not submit an overall judgement (neither with sufficient nor with limited judicial certainty) regarding the reported payment flows. The Independent Administrator did not undertake any specific investigations to verify the correctness, completeness, and reliability of the payment data, in particular with regard to the data notifications of the participating companies and/or of the government agencies. In addition, the objectives of the investigative measures carried out were neither to uncover errors nor to detect violations on the part of the participating companies or government agencies.

Identification of companies

The first step was to identify the companies that were relevant for the 6th D-EITI report. Here the Independent Administrator used a database analysis1  to select all the companies which are mainly active in the extractive industry, and which are allocated to the lignite, potash/salts, crude oil/natural gas and quarried natural resources sectors. The classification criterion was the allocation of the companies to sub-sections 05 to 08 pursuant to Regulation 1893/2006/EC of December 2006 (cf. chapter 10.a.ii.). In the second step, these companies were filtered according to the size criteria stipulated by the HGB for “large” companies. The Independent Administrator manually expanded the group of these provisionally identified companies by including groups of companies in which a potential “consolidated tax group infection” caused by “active” subsidiaries existed (for details, see chapter 10.a.ii.). The following aspects are unchanged from the previous D-EITI report and must be addressed:
  • Companies the main activities of which are allocated to the storage (e.g. construction and operation of cavern storage facilities for the storage of natural gas) of natural resources underground are not considered, since the extraction of natural resources is not their primary activity, despite their being allocated to sub-sections 05 to 08;
  • All the companies identified and allocated to sub-section 07 (ore mining) do not actively engage in extractive mining in Germany and are therefore not considered.
Against the background of the legal requirements (cf. §§ 341 q et seq. HGB) and the resulting interpretation possibilities, a final identification of all the companies obliged to report payments pursuant to HGB is not ensured, even with regard to this D-EITI report. Nevertheless, on the basis of the payment reports for 2021 that have been published in the meantime, it can be stated that the companies identified using the methodology described above are very largely the companies that have actually published a payment report to date.
It is evident that the selection criteria specified by the MSG ensured a prominent level of coverage for the lignite, crude oil and/or natural gas, potash and salts/industrial brine sectors (cf. chapter 10.b.i.). These are solely free-to-mine natural resources. They contain comparatively few, but relatively large business operations. On the other hand, quarried natural resources are extracted by a very high number of business operations with many extraction facilities and/or mines.
According to analyses by the German Building Materials Association – Quarried Natural Resources (bbs), a total of approx. 3,400 companies belonged to the building materials and minerals industry in Germany in 2021, with more than 81% of these companies employing fewer than 50 people. These smaller companies account for around 42% of sales in the building materials, bricks and mortar industry. The small-scale nature of the sector is also due to the widely varying capital intensity of production. Corporations and larger SME are more strongly represented in capital-intensive sub-sectors such as cement production than in the extraction of natural resources. The size structure of the sector has hardly changed over the past decade2.
As a result, it must be assumed that a number of companies and/or consolidated companies (which are already among the 25 largest providers in this sector) do not fulfil the size criteria in chapter 10.a.ii. so that they are not identified by the selection criteria adopted by the MSG. As a result of the high number of non-identified small and medium-sized enterprises in the quarried natural resources sector, the coverage of this sector clearly lags behind that of the other sectors.

Identification of government agencies

The total number of government bodies that generate revenues from the extractive industry in Germany stem directly from the payment flows that were defined for this 6th D-EITI report. However, due to the federal structure of the administration in Germany, no central recording of the relevant payment flows is possible. The following individual government agencies are responsible for:
  • Corporate tax: the responsible tax offices at the respective headquarters of the companies
  • Mining and extraction royalties: the responsible mining authorities of the Federal States in which the approved/licensed site is located
  • Trade tax: the municipalities in the territory of which the taxable operating facilities are located
  • Lease payments and payments to improve the infrastructure: government agencies at State or municipal level, depending on the type of payment 

Managing tax secrecy

The EITI reporting encompasses tax data, viz. payment flows relating to corporate tax and trade tax, which are subject to tax secrecy pursuant to §§30ff. of the German Tax Code (AO) (cf. the comments in Tax secrecy). In the course of the preparation of the EITI report, the payment flows reported by the companies and received by government agencies were prepared and disclosed. This usage of tax-relevant data is only permissible if the taxpayer, i.e. the respective company, expressly agrees (§ 30 (4) No. 3 AO). Data collection templates ensure that this consent is obtained from each company for the purpose of publishing the data in the context of EITI reporting.

Measures for safeguarding confidential data

All project-related data were stored in an ISO 27001 and ISO 9001-certified data centre in Germany. A platform was specifically made available for the exchange of project-related data, and companies could use this to upload data (several times where required). Uploaded data could not be changed for security reasons. Measures were taken to prevent any company from gaining access to the data of other participants. The administration of the data exchange, storage and e-mail service was the responsibility of the EITI Secretariat in Berlin.

Templates and notes on data collection

In accordance with the decisions made by the MSG regarding the shaping of the contents of the D-EITI reporting process, the Independent Administrator has developed an Excel-based template to collect the relevant data from the companies. In addition to the data collection templates, the Independent Administrator has also created further “Notes on data collection within the framework of the EITI process”. These notes will give companies practical tips and help them to understand and use the data collection templates.

The data collection template is not only used by the MSG to record the actual payment flows for the reporting year, but also to communicate with the participating companies in a flexible manner. At the request of the MSG, additional queries on beneficial owners within the meaning of the Money Laundering Act and on the existence of politically exposed persons (PEPs) were included in the current report.

Quality of data provided by companies

Companies in Germany are subject to comprehensive, legally-regulated

  • accounting,
  • disclosure and
  • auditing obligations.
These obligations depend on the company’s size, legal form and activity. Limited companies and limited liability partnerships within the meaning of § 264 a (1) of the HGB must draw up an annual financial statement with notes and (where required) a management report at the end of each fiscal year. The obligation to carry out the annual audit is regulated in particular in the HGB (§§ 316 et seq. HGB). The HGB stipulates a statutory audit obligation (inter alia) for “medium-sized” and/or “large” companies, whereby two of three criteria for grouping into the size classes must be met within a given period, pursuant to § 267(2) and (3) HGB).
The statutory audit must at least include the annual accounts (balance sheet, profit and loss account and notes), plus the management report and the accounting records. The auditor must determine whether or not the accounting is consistent with the underlying accounting principles and with any other legal basis such as the Articles of Association or the deed of partnership (compliance/regularity audit). Furthermore, it must also be determined whether the respective financial statements and the associated management report provide an accurate picture of the company’s position as a whole. An assessment of whether or not the opportunities and risks of future development are presented accurately in the management report must also be carried out. The result of the audit is summarised by the auditor in the auditor’s report (see § 322 HGB). In the case of statutory audits, the auditor’s reports must be disclosed with the annual financial statements and the management report in accordance with § 325 HGB through an electronic filing in the Federal Gazette and these are therefore always available to the public3. The shareholders of a subsidiary can refuse to disclose the annual financial statements of the subsidiary, if the parent company’s consolidated group financial statement which includes the subsidiary concerned is disclosed, the parent company has already agreed to implement obligations entered into by the subsidiary up to the balance sheet date in the following financial year and other prerequisites exist. However, these cases must be made transparent via the electronic Federal Gazette or the enterprise register.
In contrast to the annual financial statements, the (consolidated group) payment reports pursuant to §§ 341 q et seq. HGB, however, are not yet subject to statutory audit obligations. However, as part of their duty to report in accordance with § 321(1) sentence 3 HGB, auditors must report in the report addressed to the legal representatives and those responsible for monitoring the company if they have discovered during the audit work that no (group) payment report has been prepared or disclosed despite the legal obligation to do so.
The legal representatives and those responsible for monitoring corporate activity are generally supported by an Internal Audit team as they carry out their respective duties. Even where there is no explicit statutory obligation in Germany to set up such a process-independent function, the fact that such a function is in place corresponds to the principles of good corporate governance (see the German Government’s Public Corporate Governance Code). This is particularly true for those companies that are a part of large, complex and/or internationally active corporations. At the same time, these organisational structures also increasingly reflect efforts on the part of legal representatives to set up effective compliance management systems that aim to comply with legal regulations but also to observe the ethical rules of the company or corporate group. As a rule, an integral part of these systems is also formed by external contacts contracted by the company or corporate group to whom whistleblowers can report possible breaches of legal regulations or ethical rules.

Quality of data on government revenues

The basis for showing revenues received by government agencies is the corresponding data on the payments by companies for the current year under review.
In the D-EITI reports for the 2016 and 2017 years under review, the corresponding revenues are levied by government agencies and an immediate (payment) reconciliation is made with the payments reported by the companies for which there were no or no noteworthy differences (test of details or case-by-case approach). Building on these findings, in contrast to the original course of action the processes and controls or control mechanisms were analysed for the third and this current 5th German EITI report. These processes and controls are set up by government agencies to ensure that the respective payment flows are collected properly (debit position) and processed (payment) (system-based approach). The term “correctness” refers to EITI’s objective and means
  • that sufficient processes or procedures are in place at the relevant government agency to ensure that the debit position of payments is legally compliant and timely,
  • that processes and controls are in place which ensure any differences between the debit position of government agencies and payments by companies can be clarified in a timely way,
  • that there are adequate controls at the level of superior government agencies and
  • that a check of the controls by independent auditors is ensured.
The entirety of the processes, procedures and controls set up must be viewed as an internal control system used to assist the defined objective of proper collection of the relevant payments. In Germany, this system is based on an interaction between the legal basis (e. g. civil service law, budget legislation, criminal law, administrative regulations), the structure and organisation of the authorities (e. g. via rules of procedure, schedules of responsibilities, establishment of segregation of duties, the dual-control principle) and additional monitoring of processes and controls (e. g. via in-house audit offices and other independent auditors). This system-based approach was continued in this 6th German EITI report.
The wider official environment of these government agencies and the relevant statutory framework are necessarily also considered alongside the analysis of processes and controls set up on the part of government agencies. A comprehensive description can be found in the brochure “Die Steuerverwaltung in Deutschland” (Tax administration in Germany), 2018 edition (bundesfinanzministerium.de). Annex c also contains schedules showing the organisational structure and the processes and controls relevant for the investigation in respect of the corporate tax and the mine site and extraction royalties.
As in the previous years, the Independent Administrator analysed documents received from the MSG, publicly available reports, descriptions of various public entities or institutions and discussions with representatives of the MSC or responsible agencies to get a picture of the processes and controls that have been established. The insights gained were compared to the regulations from the framework concept of the US Committee of Sponsoring Organisations of the Treadway Commission (COSO) This framework concept has gained widespread international acceptance. Its basic principles reflect the Standards for Internal Control in the Federal Government of the United States Government Accountability Office, which means that it can also be applied to government agencies. At the same time, this framework concept forms the basis for the Audit Standard 261 – “Determination and assessment of error risks and responses of the auditor to the evaluated error risks” issued by the Institute of Independent Auditors in Germany (IDW) that has been routinely applied for statutory audit reviews in Germany in 2021.
According to COSO, the components of an internal control system include the control environment, risk assessments, control activities, information and communication, and monitoring of the internal control system. The IA has applied these components to the relevant payment flows for corporate tax and mine site and extraction royalties.
In addition to this, the knowledge gained from the previous payment reconciliations as part of the first and second D-EITI report has been included in the IA’s analysis and assessment as a case-by-case confirmation of the effectiveness of the processes and controls set up. Therefore, the system-based approach and the knowledge obtained to date from the payment reconciliations complement each other and together form the basis for the IA’s assessment.
As a result, the IA considers that the concept developed in the scope of the alternative quality assurance procedure is well suited to satisfy the requirements of the EITI Standard regarding the reliable disclosure of the payments from the extractive industry. Therefore, it can be considered as an alternative procedure when compared to the original procedure of an extensive reconciliation of all material payment flows during a year under review within the context of tests of details.

Based on the sources of information available to it and the information provided by members of the MSG, the IA has also assessed for the current reporting period whether there are indications of irregularities of

  • Mine site and extraction royalties
  • Corporate taxes and
  • Trade taxes.
Details of this assessment process are presented below. The work subsequently carried out by the Independent Administrator to make plausibility checks of the data reports of participating companies has led to the assessment that, the MSG can use the system-based approach for quality assurance purposes in accordance with Requirement 4.9 of the EITI standard.
The Independent Administrator’s work carried out to date under the alternative payment reconciliation procedure has been described in a comprehensive work report4.

General information on the control environment in relation to the government agencies relevant to D-EITI

The control environment of the relevant government agencies such as the tax authorities (corporate income tax) is characterised by a strictly hierarchical structure, which is defined by the Financial Administration Act (FVG)5. However, the organisation of the mining authorities is the responsibility of the respective Federal State; the Federal Mining Act (BBerG) does not contain any detailed provisions governing this subject.
The respective organisational structure is clearly governed through rules of procedure (e. g. the rules of procedure for tax offices, see the link in the footnote), schedules of responsibilities, job descriptions and administrative instructions within the relevant government agencies. Whereas the responsibilities of the job holder concerned within the assigned administrative processes result from the internal administrative job descriptions or schedules of responsibilities, the supervision obligations and authority to give instructions of the respective line managers are derived from the rules of procedure and administrative instructions. Within the administrative organisation special attention is paid to strict compliance with the principle of dual control as part of administrative processes, on the one hand, and the organisational segregation of assessment and collection processes, on the other, i.e. the enforcement of payment claims by the relevant government agencies and the receipt of payments due from the parties liable to pay. Besides this, the control environment of the relevant government agencies is largely shaped by German civil service law6 and parliamentary budgetary law and the associated control processes.
German civil service law is a separate field of law, which governs the rights and obligations of civil servants. On the one hand, civil servants have an obligation to be neutral when carrying out their work, they are banned from striking and they are required to uphold the constitution: on the other, they have the right to life-long employment with appropriate pay and retirement benefits.
Breaches by civil servants of the obligations that result from the relevant employment relationship are subject to disciplinary law, a sub-area of civil service law which governs how to proceed in the event of possible breaches of obligations and what the consequences may be for the respective civil servant if they are found to be culpable. Because of their special legal status civil servants have an obligation to act with integrity, in particular regarding adherence to and/or implementation of legal regulations, and to act in a way that observes values derived from civil service law, including the requirement to uphold the law and the constitution. This also includes explicit release from any other existing obligation to maintain secrecy in accordance with § 37(2) sentence 1 No. 3 of the German Civil Service Status Act (BeamtStG), if a civil servant reports a suspicion of a corruption offence backed up by facts to the highest administrative authority in accordance with §§ 331 to 337 of the German Penal Code.
Furthermore, the relevant control environment is largely shaped by the current budgetary law and the associated primacy of parliament on the Federal, the Federal State and the municipal level. Parliament passes a resolution on the budget law and so the budget in question is approved and thus gains its democratic legitimacy. At the same time, the executive is empowered via the budget law and is also under an obligation to implement the budget thus legitimised in the relevant budget year. Depending on the significance of the revenues for the (State) budget, the payment flows relevant for D-EITI are also shown separately in the budget planning and or the budget law. After the end of the budget year, the executive accounts to parliament for the “budget submission”. The budget submission is also subject to control by the relevant audit office, which reports to parliament on the results of its audit.

In Germany a series of further regulations over and above the stated regulations exist and these ensure the integrity of the actions of public authorities. In respect of corruption prevention, particular reference is made to the Directive on corruption prevention in the Federal administration, which contains important measures for a prevention strategy such as 

  • Identification of areas of work at particular risk of corruption,
  • the cross-check principle and
  • the creation of a contact person
and a Code of Conduct for employees and guidelines for managers and the management of authorities. The purpose of the additional recommendations on corruption prevention in the Federal administration is to help to implement these guidelines. Various legal and administrative regulations exist at Federal State level to prevent unlawful and unfair effects on administrative actions (cf. in NRW, for example, see the Anti-corruption Act of 16 December 2004).

General information on the process of identifying and assessing risks

At the level of the relevant government agencies, a distinction must be made between risks in the assessment process and risks in the collection process.

Assessment process

The mine site and extraction royalties are based on self-assessment by those who have an obligation to pay, in other words the units mining the resource and/or the respective levy payers. The provisions in the relevant statutory arrangements are that the party with an obligation to pay first calculates the amount due to be paid and informs the government agency of this.
It is possible that the parties due to make the payments may make mistakes in the self-assessment procedure. This can range from a clerical or input error when entering the data in the self-assessment form or unintended incorrect interpretation of the relevant legal rules to a deliberate failure to observe the legal regulations. Accordingly, all relevant government agencies have extensive auditing rights to carry out inspections to ascertain whether the information provided by the taxpayers is correct and complete.
In contrast, there is no self-assessment in relation to income taxes (corporate tax/trade tax). The companies liable to pay tax have a statutory obligation to file income tax declarations that must be submitted every year because of period taxation. The information provided is then checked by the tax authorities responsible for the area and the nature of the tax. Once the authorities have approved the income tax declarations submitted, income tax assessment notices and thus the amount to be paid are sent to the companies. At a later point in time, tax declarations may be audited as part of company audits.
The result of the assessment process forms the basis for the collection process, i.e. the actual payment flow, which was assessed in the original quality assurance procedure (payment reconciliation) as part of a test of details. However, the requirements of the EITI Standard do not extend to the assessment process.

Collection process

A distinction must be made between the risks in the assessment process and risks in connection with the collection of payments, in other words, in the collection process. These risks can result from the concentration of tasks with staff who play an integral part in both the assessment and collection process. This risk is dealt with by strict segregation of functions within the relevant government agency between the party responsible for the assessment and the party responsible for collection. Besides the party liable to pay can settle what they owe using cashless payment, i. e. a cash payment is not possible. The segregation of duties ensures that

  • the civil servants who undertake the assessment do not have access to the relevant government agency’s (bank) accounts to which the taxpayers make the calculated and estimated payment via bank transfer and
  • that no one person handles the case in its entirety.

Dealing with differences between the payment due and the payment received

Any differences between the estimated payment due (target position) and the actual payment received (actual receipt) are clarified by the relevant collection office.
If payments of corporate tax are too low, automatic reminders are sent in accordance with the statutory regulations or these payments are recovered by the enforcement office (as a special part of the collection office) within the framework of current legal regulations. If payments are too high, they are initially held safely (suspense account) and offset against any possible other open positions owed by the taxpayer from other kinds of tax or other periods. If any difference remains after this, the taxpayer is reimbursed.
Comparable processes are established for the collection mine site and extraction royalties. No automated reminders are sent to the payers because the number of companies that pay royalties is considerably smaller. Instead, reminders are handled by administrators on a case-by-case basis. For trade tax, the specific process design depends on the respective municipality, whereby the number of employees working in the processes varies with the size of the municipality. Basically, the responsibility for clarifying any discrepancies between payments owed and payments received lies with the competent cash offices or the tax offices.

General information on monitoring processes and controls within government agencies

Implementation of the monitoring function for both corporate tax and mine site/extraction royalties is ensured by methods such as the internal audit units. For trade tax, this monitoring function is implemented through local audits.
The Internal Audit’s planning for audits is based on a systematic and targeted approach for determining risk factors where the scope of possible negative effects of administrative actions and the likelihood that they occur may play a role. The results of Internal Audits are intended for the audited department itself and the relevant managers. According to the current legal position, the Freedom of Information Act always applies to official information in documents within the internal audits carried out for national and Federal State authorities, assuming the Federal States have adopted the appropriate regulations in the Federal Government’s Freedom of Information Act. Access to information can be limited in individual cases when there is a risk that the advisory role of the internal auditors could be disrupted by the publication of the audit report. In this case, the internal auditors can no longer entirely fulfil their role as contacts for employees working in public authorities.

Corporate tax

According to information provided, the regional tax directorate or the State Finance Ministries carry out controls for corporate tax in the form of business audits on an annual basis. These audits relate to both the areas of fixing and collection. As part of these controls, cases are selected for auditing, and these are then audited to ensure that they have been processed correctly.
In addition, a separate “Internal Audit” unit is set up as a rule at the level of the State Finance Ministries and this unit is reports directly to the management of the authority. The work undertaken by the Internal Audit unit is based on the recommendations on standards for Internal Audits in the administration of the Federal State of Hesse (“Empfehlungen über Standards für Interne Revisionen in der Hessischen Landesverwaltung”), e. g. in the Federal State of Hesse.  These standards form a uniform and cross-departmental work and legal basis for the work of the internal audit departments. They are based on the auditing standards of the German Institute of Internal Auditing (Deutsches Institut für Interne Revision e.V., DIIR) and the recommendations of the German Federal Ministry of the Interior for Internal Audits (“Empfehlungen des Bundesministeriums des Innern für Interne Revisionen”). The Internal Audit undertakes independent auditing and control functions by examining the administrative actions for discrepancies and irregularities. It also makes suggestions on how to rectify these as well as how to avoid these in the future and assists the efficiency and effectiveness of administrative actions.
The Internal Audit unit produces an audit report on their work. A copy of this report is always submitted to the management the authority in change of the organisational unit that has been audited for approval. The audited organisational unit is given a copy of this report. The Internal Audit unit submits a written report on their activities to the management of their authority at least once a year. The reports on audits issued over the year are not affected by this.
§ 19 of the Tax Administration Act (FVG) states that the Federal Ministry of Finance can take part in the external tax audits of the Federal States’ tax authorities via the Federal Central Tax Office (Federal Tax Inspection). In this way the Federal Ministry of Finance is made aware of matters such as tax developments that may be significant for legislative measures or administrative regulations.

Mine site and extraction royalties

The processes in the field of collecting the mine site and extraction royalties are monitored via the Internal Audit at the level of the State of Lower Saxony’s Ministry of Finance. The Internal Audit unit is responsible for monitoring the procedures and controls within the Chief Cashier’s Office of Lower Saxony that processes the mine site and extraction royalties.
In addition, the Internal Audit unit carries out significant controls in relation to current budget management at the level of the respective State budget. The receipts are allocated to the corresponding budget item within the budget implementation system (e. g. in Lower Saxony) and allow the administrative unit responsible for the budget to reconcile the receipts planned in the budget with the amounts received. As is appropriate for the significance of the mine site and extraction royalties for the respective budgets, a comparison can be made between the planned receipts from mine site and extraction royalties and the subsequent actual amounts even across periods. Ultimately, this allows interested members of the public to undertake a control function via the usual processes for political participation. After the IA’s collection, the mine site and extraction royalties are currently shown separately in the budget plans of the Federal States of Lower Saxony, Schleswig-Holstein, Rhineland Palatinate and Bavaria and can be accessed by members of the public who are interested in this subject.

Monitoring by independent audit offices

The administrative units relevant for the D-EITI are subject to auditing by municipal audit offices (e. g. NRW municipal audit office), Federal State audit offices or the Federal Audit Office (hereinafter referred to as audit offices).
Due to the Federal State structure in Germany, there are independent, state-owned audit offices to control the budgetary economy at both Federal and Federal State levels. The jurisdiction of the German Federal Audit Office is restricted to the sphere of the Federal Government’s financial practices7; it has no legal supervisory rights or right of direction over the States’ audit offices. The audit offices are independent, supreme authorities at the Federal and the Federal State levels. Their tasks, position and powers are derived from the Basic Law (Article 114 GG) or the constitutions of the Federal State, which are defined in detail by Federal and Federal State budgetary regulations.
Financial control at the level of the Federal Government and States through the audit offices (guaranteed institutions) has its equivalent at municipal level in the form of a two-stage control system made up of local and supra-local auditing. Those auditing units locally monitor the financial practices of the administrations managed by mayors. The local audits are carried out by the municipality’s own office as a form of in-house control so that certain dependencies in terms of regulations governing public services necessarily exist because of the local audit units are a part of the local authorities. Local auditing of accounts is based on regulations in the local bylaws and the tasks are performed by persons/offices who vary in different cases, depending on the relevant municipal regulations (see, as an example, §§ 102 to 104 of the NRW local bylaws).
Supra-local auditing of accounts is carried out by a state or association-based audit office. It is an independent, supra-municipal external audit in relation to the municipalities to be audited. Implementation lies with own municipal audit offices (e.g. NRW’s municipal audit office) or the Audit Offices of the Federal States or the offices for auditing accounts at district level. One of the purposes of the audit is to support local authorities in efficiency and organisational matters by providing advice in a manner appropriate to self-government. In particular, suggestions for improvement are made to the audited organisations and comparisons (including comparisons of key figures) are used for this purpose.
The following overview also shows the supra-local audit office (audit agency/State audit office) responsible for each of the 20 government agencies that received the highest trade tax payments for the year under review (2021):

Responsible supra-local audit office

Receiving municipality

President, State Audit Office for Lower Saxony

City of Hanover

Municipality of Großkneten

Municipality of Dötlingen 

City of Meppen 

NRW municipal audit office

Town of Frechen

Town of Rheinberg 

Town of Wesel

Town of Lengerich

Town of Geseke

Town of Arnsberg

Baden-Wuerttemberg municipal audit office

Town of Heilbronn

Town of Bad Friedrichhall

President Hessian audit office

City of Wiesbaden

Thuringian audit office

Municipality of Niederorschel

Audit office of Rhineland-Palatinate

Municipality of Göllheim

Municipality of Kirchheimbolanden

Town of Neuwied

State Audit Office of Saxony-Anhalt

Town of Salzwedel

Audit Office at the Berchtesgadener Land District Office

Town of Bad Reichenhall

Town of Berchtesgaden

The following principles apply as a standard of review for the auditing of state and municipal budgetary and economic administration:

  • the regularity of the execution of the law and administrative action, as well as
  • economic efficiency and economical practices in budgetary and economic administration
The principle of regularity includes (inter alia) the accounting correctness (proper and legal calculation, justification and booking) of the individual invoice amounts. The respective audit office is solely responsible for the content, scope, and frequency of the auditing procedures.
The results of the audit offices’ work are made known to the relevant government agencies in the form of audit reports. The audit office may communicate the audit result to agencies other than those reviewed if it considers this action necessary for particular reasons. Selected audit results are nevertheless summarised in annual reports that are accessible to the public.8
The German accounting offices support the implementation of International Standards of Supreme Audit Institutions (ISSAIs) developed by the International Federation of Supreme Audit Institutions (INTOSAI). The audit offices of the individual Federal States are involved in international exchange and discuss current standards and applied audit methods regularly in the context of the European Organisation of Supreme Audit Institutions (EURORAI). The maintenance of high auditing standards at both national and sub-national level can therefore be regarded as given.

Notes on the quality assurance process for mine site and extraction royalties

The calculation, fixing and collection of mine site and extraction royalties are always made in accordance with the Federal Mining Act (BBergG) and the Extraction Royalties Ordinance of the Federal States concerned (see Mine site and extraction royalties) in conjunction with the relevant regulations in the German Tax Code (AO). Where mining licenses date back to the time before the current Federal Mining Act came into force in 1982 (“legacy rights”), no mine site and extraction royalties apply (cf. the explanations for this in How are resource extraction projects approved?)

In Germany, the State Office for Mining, Energy and Geology (LBEG) with its main office in Hanover is responsible for by far the highest proportion of income from mine site and extraction royalties (approx. 76% for the 2021 year under review). LBEG is supervised by the Lower Saxony Ministry of Economic Affairs, Employment, Transport and Digitalisation.

Data reported for mine site and extraction royalties according to the government agency.


Betrag lt. Unternehmen


Landesamt für Bergbau, Energie und Geologie, Hannover (LBEG)


LBEG für: Finanzverwaltung Schleswig Holstein, Kiel


LBEG für: Freie und Hansestadt Hamburg


Regierung von Oberbayern, Bergamt Südbayern, München


Landesamt für Geologie und Bergbau, Mainz-Hechtsheim


Sächsisches Oberbergamt Freiberg


Regierungspräsidium Darmstadt, Wiesbaden


Forstamt Pfälzer Rheinauen, Bellheim


Landesamt für Geologie, Rohstoffe und Bergbau im Regierungspräsidium Freiburg


Landesamt für Geologie und Bergwesen Sachsen-Anhalt, Halle




For the 2021 reporting year, the results of the data reports show a significant reduction in the total amount of mine site and extraction royalties paid to the LBEG compared to previous years. The main reason for this development is a reduction in the levy rates for the 2021 levy period to 5% for crude oil and natural gas, which was decided by the Lower Saxony state parliament at the beginning of 2021. The background to this was the planned conclusion of individual agreements between the Federal State of Lower Saxony and said companies to settle a difference of legal opinion, which goes back to a decision taken by the Federal Administrative Court in December 2018 (BVerwG 7 BN 3.18). For further details, please refer to the explanations in the 5th D-EITI report (page 169 et seq.). The levy rate was set at 10% for the collection periods from 2022 to 2030.
As a result, the significantly reduced amounts of mine site and extraction royalties in the 2021 reporting year appear plausible based on the analyses carried out by the IA and the publicly available information, so that there are no indications of an increased risk with regard to the correctness of the payment processes in the area of mine site and extraction royalties.

Notes on the quality assurance process for trade tax payments

With regard to trade tax payments, it should be noted that the upstream processes for the assessment of trade tax are predominantly the responsibility of the tax offices. The decision on the level of trade tax instigated by the tax office is the base decision for the subsequent calculation of the actual level of trade tax by the respective municipality. The municipalities calculate the amount of trade tax owed by applying an individual tax factor to the decision on the level of trade tax. The level of trade tax can therefore vary from municipality to municipality depending on the level of the tax factor that the elected representatives in the respective towns and communities have decided in the parliamentary procedure.
The local bylaws as fundamental elements of local governance law provide a comparable legal framework for the organisation at local authority level. Local bylaws form the basis for work of everyone employed in local government and local politics and contain, among other things, fundamental regulations for the organisation of financial accounting and the processing of payments at the municipalities (see, for example, § 93 of the NRW local bylaws or § 126 of the Lower Saxony local governance law).
For the 5th D-EITI report, the trade tax collection process was analysed in more detail using a questionnaire developed by the IA. This questionnaire was sent to the 20 municipalities that received the highest trade tax payments from D-EITI participating companies for the reporting year 2020. The responses resulting from the questionnaires provided insight into the processes and controls put in place by municipalities of various sizes to ensure the regularity of the collection of trade tax.

The 20 municipalities with the highest trade tax payments for the current 2021 reporting period are listed below.

Receiving municipality

Trade tax payments in 2021 in thousands of €

Taxpayer company

1. City of Wiesbaden


Dyckerhoff GmbH

2. Town of Lengerich


Dyckerhoff GmbH

3. Town of Heilbronn


Südwestdeutsche Salzwerke

4. City of Hanover


BEB Erdgas und Erdöl


Neptune Energy

5. Municipality of Niederorschel


Dyckerhoff GmbH

6. Municipality of Großenkneten


BEB Erdgas und Erdöl


7. Town of Frechen



8. Town of Wesel


Hülskens Holding

9. Municipality of Göllheim


Dyckerhoff GmbH

10. Municipality of Dötlingen


BEB Erdgas und Erdöl


11. Town of Geseke


Dyckerhoff GmbH

12. Municipality of Kirchheimbolanden


Dyckerhoff GmbH

13. Town of Neuwied


Dyckerhoff GmbH

14. Town of Bad Friedrichshall


Dyckerhoff GmbH

15. Town of Meppen


Neptune Energy

16. Town of Bad Reichenhall


Südwestdeutsche Salzwerke

17. Town of Rheinberg


Hülskens Holding

18. Town of Salzwedel


Neptune Energy

19. Town of Berchtesgaden


Südwestdeutsche Salzwerke

20. Town of Arnsberg


Hülskens Holding

The group of municipalities that receive significant amounts of trade tax has changed only slightly compared to the previous year. Therefore, the findings and results from the survey of municipalities conducted for the 5th D-EITI report were also used for the current reporting period. There are no findings to the contrary, e.g. findings of the MSG.

The main results of this survey and system analysis can be summarised as follows:

  • The recording of payments and the reconciliation with the respective receivables due from the companies is mainly automated, although in the case of discrepancies between payments and receivables or incomplete or incorrect information, manual corrections have to be made. The number of employees in the respective municipalities who are responsible for issuing the trade tax assessment notices and collecting the payments varies significantly with the size of the respective municipality. The number of employees in the area of the cash office is always higher than the number of employees responsible for issuing trade tax notices, regardless of the size of the respective municipality. The fact that the assessment processes are closely linked (as described above) has a direct effect on the design of the processes in the municipalities and the issuing of basic notices by the tax offices.
  • The two administrative steps of assessment and collection are strictly separated in terms of personnel so that the basic principle of separation of functions is guaranteed, regardless of the size of the municipality. Unclear payments are always handled by the cash office. In individual cases, coordination with the office responsible for issuing the trade tax assessment notice is necessary.
  • In the context of taxation, so-called equity measures may exceptionally occur. This is understood to mean both the temporary deferral of payments and the final remission of trade tax claims in compliance with the respective regulations on these equity measures. In principle, decisions on this are made within the administration of the municipality. Only in individual cases does the municipality follow the corresponding decisions of the tax administration for corporate income tax. The respective decisions are not made by the cash office and, depending on the importance of the equity measure for the municipal budget, require the involvement of higher-level decision-makers up to the mayor or main or administrative committee (a permanent, representative committee of the municipal parliament or municipal council).
  • The organisational processes and established structures or controls are of comparable quality to the processes and controls of the payment flows of the corporate income tax and mine site and extraction royalties. Equally, the organisation and design of payment processes in the municipalities differ from each other in detail, in particular according to their size.
The following overview shows the number of municipalities that received trade taxes in the reporting year 2021 from the companies participating in D-EITI.



Number of municipalities receiving trade trax payments

BEB Erdgas und Erdöl GmbH & Co. KG






Holcim (Deutschland) GmbH


Hülskens Holding GmbH & Co. KG


MIBRAG Energy Group GmbH


Neptune Energy Deutschland GmbH


Quarzwerke GmbH


Sibelco group


Südwestdeutsche Salzwerke AG


Wacker Chemie AG


*) not evident from data report

**) Number of municipalities with payments exceeding €100 thousand

The overview also shows for the group of companies that take part in D-EITI the 20 government agencies to which the highest trade tax payments in the aggregate were made in the year under review (2021):

Leistendes Unternehmen

Empfangende Kommune

Gewerbesteuerzahlungen in 2021 in (TEUR)

ExxonMobil Central Europe Holding GmbH

Stadt Hannover


Gemeinde Großkneten


Gemeinde Dötlingen


BEB Erdgas und Erdöl 

Stadt Hannover


Gemeinde Großkneten


Gemeinde Dötlingen


Stadt Meppen


Dyckerhoff GmbH

Stadt Wießbaden


Stadt Lengerich


Gemeinde Niederorschel


Verbandsgemeinde Göllheim


Stadt Geseke


Verbandsgemeinde Kirchheimbolanden


Stadt Neuwied


Südwestdeutsche Salzwerke AG

Stadt Heilbronn


Markt Berchtesgarden


Bad Reichenhall


Stadt Bad Friedrichshall


Neptune Energy

Stadt Hannover


Stadt Meppen


Hansestadt Salzwedel



Stadt Frechen


Hülskens Holding 

Stadt Wesel


Stadt Rheinberg


Stadt Arnsberg


A further review and analysis of the available reports from the supra-local audit offices relevant to D-EITI shows that the regularity of the payment processes, together with the associated controls (cash supervision), is also the subject of the supra-local municipal audit by the Lower Saxony State Audit Office, particularly for the state of Lower Saxony. The audit results are presented in the annual municipal reports published by the Lower Saxony State Audit Office and sent to the government and the parliament of the Federal State and the Lower Saxony Association of Towns and Municipalities, among others.
The municipal reports of the State Audit Office of Lower Saxony for 2022 and 2023 show, among other things, that the audited municipalities did not adequately implement requirements for carrying out cash audits and that service instructions did not fully comply with the requirements for ensuring cash security9. According to the reports, the State Audit Office of Lower Saxony already supported the municipalities during the audit by means of a checklist to remedy these deficiencies. In contrast, no findings were made that were relevant to the assessment of the regularity of the collection process itself and the associated payment flows.
The current findings of the audit units have shown that their control function also includes the (sub-)areas of internal organisational structure and processes relevant to the D-EITI. Therefore, the results of the audit units appear to be fundamentally suitable and usable for a risk-based alternative quality assurance procedure. In the IA’s judgement, the review of the audit units’ findings relevant to the D-EITI did not reveal any indications that could give rise to the assumption that the payment processes relevant to the D-EITI in the area of trade tax are not fully compliant.

Inspection of the transparency register and PEP assessment

As part of the 6th German EITI Report for the reporting year 2021, the Independent Administrator inspected the transparency register to find out whether the participating companies had an entry in the transparency register and whether this entry was plausible based on the information available to (and to be obtained by) the Independent Administrator. The Independent Administrator found that there were entries in the transparency register for all companies reporting to the D-EITI and that these are considered plausible. To the extent that the Independent Administrator identified natural persons as beneficial owners in the transparency register, this was also done in accordance with the country-specific categories for politically exposed persons published by the EU10 (PEP for short), on the basis of the information available to the Independent Administrator and to be obtained, as to whether these persons are to be classified as PEPs in this sense. The Independent Administrator considers the available information to be plausible. As a result of the ruling of the European Court of Justice (ECJ) of 22 November 2022 in joined cases C-37/20 and C-601/2011, the transparency register has made the public access for any interested party that existed up to that point in time subject to the existence of a legitimate interest; this restriction continues to apply at the time of publication of this report. Based on such a legitimate interest, the transparency register granted the Independent Administrator access so that the information for the participating companies could be obtained and analysed by the IA; the consent of the participating companies was not required for this.

1 Orbis Europe database of the provider Bureau van Dijk (https://bvdinfo.com/en-gb/). Accessed on 27 October 2023)

2 Cf. 2022 figures of the German Building Materials Association – Quarried Natural Resources: https://www.baustoffindustrie.de/fileadmin/user_upload/bbs/Dateien/Downloadarchiv/Konjunktur/STRUKTUR_DES_WIRTSCHAFTSZWEIGS.pdf (Accessed on 24 November 2023).

3 The financial statements of all companies participating in the report are available on the portal of the Federal Gazette: https://www.unternehmensregister.de/ureg/ (Accessed on 24 November 2023).

4 You can find the Independent Administrator’s work report here: https://d-eiti.de/mediathek-dokumente/

5 A detailed overview of tax administration in Germany, including the differences between the Federal States, can be found in: “Die Steuerverwaltung in Deutschland” (Tax administration in Germany) (BMF 2018).

6 In some cases, employees who are not subject to civil service law are hired in the responsible agencies. They, too, have an obligation to the common good and must also perform their services in an objective and unbiased way in accordance with the law. However, at least one civil servant is always involved in the decision-making process.

7 Federal Audit Office. URL: https://competition-policy.ec.europa.eu/state-aid_en (Accessed on 24 November 2023).

8 Federal Audit Office. URL: https://www.bundesrechnungshof.de/SiteGlobals/Forms/Suche/Berichtssuche/Berichtssuche_Formular.html
(Accessed on 24 November 2023).

9The municipal reports of the State Audit Office of Lower Saxony can be found at https://www.lrh.niedersachsen.de/startseite/veroffentlichungen/kommunalberichte/ (Accessed on 24 November 2023).

10See https://eur-lex.europa.eu/legal-content/DE/TXT/PDF/?uri=OJ:C_202300724 (Accessed on 14 December 2023).

11 See Beneficial Ownership for more details


In Federal States in which legislation does not include an excavation law and the State-level Nature Conservation Law does not apply to the extraction of non-energetic, ground-based natural resources in the context of dry excavations, this type of natural resource extraction falls within the scope of the relevant state building regulations.

Legal limitations also exist: State building regulations apply to the excavation of solid rock (limestone, basalt, etc.), for example, in quarries with an area of up to 10 hectares (ha) in which no blasting is carried out. In the event that this area is exceeded, or if water bodies are formed after completion of the extraction operations, the German Federal Immission Control Act (BImSchG) and/or Water Resources Act (WHG) are applicable.
In Bavaria and North Rhine-Westphalia, the above-ground excavation of non-energetic, ground-based natural resources in the context of dry excavations is determined at state level by the existing excavation laws (AbgrG). For the excavation of solid rock (limestone, basalt, etc.) in quarries where blasting does not occur, the AbgrG applies to sites with an area of up to 10 ha. In the event that this area is exceeded, or if water bodies are formed after completion of the extraction operations, the German Federal Immission Control Act (BImSchG) and/or Water Resources Act (WHG) are applicable. In the other Federal States, this type of natural resources extraction is regulated by the respective state building regulations or by the state-level nature conservation laws.

In general, the AbgrG applies to those raw materials the excavation of which is not directly subject to mining law or the mining authorities. These raw materials include (in particular) gravel, sand, clay, loam, limestone, dolomite and other rocks, bog mud and clays. However, the jurisdiction between AbgrG and mining law can vary from case to case in the case of certain raw materials, such as quartz gravels. The requested authority must always verify its own jurisdiction in each case. The AbgrG also encompasses surface area usage and the subsequent rehabilitation of the area.
The German Federal Immission Control Act (BImSchG) is the most important and practice-relevant law in the field of environmental law. It constitutes the basis for the approval of industrial and commercial installations. In the natural resources extraction industry, quarrying companies must have approval to extract stones and earth. Every quarrying area of 10 hectares or more must undergo a full approval procedure, including public participation and UVP (environmental impact assessment). A more simplified approval procedure is used for quarrying areas of less than 10 hectares.

The sphere of responsibility for the legal immission control approval procedure is fully specified in the Immission Control Acts of the Federal States. The Federal States are tasked with the administrative enforcement of the approval procedure. Each individual state’s Environment Ministry – the highest local immission protection authority – usually bears the responsibility for this procedure. Subordinate authorities include regional councils, district authorities and lower-level administrative authorities. Administrative jurisdiction generally lies with the lower-level administrative authorities.
The GDP measures the value of goods and services produced domestically (creation of value) within a given period (quarter, year). The Federal Office of Statistics calculates the GDP as follows: production value minus intermediate consumption = the gross value added; plus taxes on products and minus subsidies = GDP
The gross value added is calculated by deducting intermediate consumption from the production values, so it only includes the value added created during the production process. The gross value added is valued at manufacturing prices, i.e. without the taxes due (product taxes), but including the product subsidies received.

During the transition from gross value added (at manufacturing prices) to GDP, the net taxes (product taxes less product subsidies) are added globally to arrive at an assessment of the GDP at market prices’. Source: Destatis
The planning approval procedure under mining law is used for the approval procedure of a general operating plan for projects which require an environmental impact assessment (§§ 52(2a), in conjunction with 57 a of the BBergG).
There are different definitions and methodological approaches at the international as well as at the national level as to what subsidies are and how they are calculated. According to the definition of the German government’s subsidy report, this report considers federal subsidies for private companies and economic sectors (ie grants as cash payments and tax breaks as special tax exemptions) which are relevant to the budget. Subsidies at the federal level can be viewed via the subsidy reports of the federal states (see Appendix 5 of the German government subsidy report).
In compliance with § 68(1), Water Resources Act (WHG), the excavation of landowners’ natural resources such as gravel, sand, marl, clay, loam, peat and stone in wet extraction operations requires a planning approval procedure. The reason for this is that groundwater is exposed in wet extraction, resulting in above-ground water. The planning approval procedure is implemented by lower-level water authorities.

The procedural steps of the planning approval procedure are governed by the general provisions of §§ 72 to 78 of the Administrative Procedures Act (VerwVfG). Within the meaning of § 68(3), nos. 1 and 2 of the WHG, the plan may only be established or approved if an impairment of the common good is not to be expected and other requirements of the WHG as well as other public-law provisions are fulfilled.