GERMANY: Portfolio management in the German financial administration

10.12.2024

The financial administration as part of Germany’s public administration is responsible for assessing and collecting taxes. In the Federal Republic of Germany, this task falls into the remit of both the federal government and the federal states. Financial administration bodies rely on their IT and use numerous complex and tailored IT applications.

The Federal Revenue Administration (FRA) generally outsources its IT services to the ITZBund, the central IT service provider of the federal administration. From €136.5 million in 2018 to €357.4 million in 2023, the FRA's spending on services for IT, e. g. for developing software, nearly tripled.

Expenditure on Services for IT is increasing

The FRA's expenditure on services for IT, e. g. for developing tailored software, has increased continuously for years.

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Figure: Bundesrechnungshof; Source: Federal Ministry of Finance.

The Bundesrechnungshof has identified challenges and significant delays in the development of IT applications for the FRA. We examined how the FRA, as the client of the ITZBund, implemented its IT project and portfolio management.

IT Project Management

Lessons learned from numerous previous software development projects are included into frameworks for IT project management. Adequate project and organisational structures contribute to the successful implementation of new IT applications. It is therefore mandatory for the federal administration to develop new IT applications within a project management framework.

The Bundesrechnungshof observed a lack of basic project management structures at the FRA. In some cases, the FRA was not even managing significant and substantial IT development activities in the form of projects. Hence, the FRA was unable to take advantage of a structured IT project management approach. This increases the risk that IT development activities will not be successfully completed and that resources will not be used efficiently. The FRA pledged to improve its IT project management organisation.

Portfolio Management

Portfolio management refers to the coordination of several projects within an organization. It should help ensure that

  • transparency about projects and their respective status is maintained,
  • resources are optimally planned, selected and deployed, and
  • risks and opportunities in projects are identified, assessed and necessary activities are planned and initiated.

The Bundesrechnungshof has examined the portfolio management at the client side. We focused on the Federal Central Tax Office (FCTO) and made the following findings:

  • The FCTO has established a Project Management Office (PMO). However, in many cases, the FCTO did not involve its PMO in the decision whether an IT development activity should be implemented as a project.
  • How the FCTO allocates resources to individual development projects is not transparent.
  • The IT steering board is responsible for managing the use of IT at the FRA. It makes the final decision as to which development projects are allocated which resources. However, it lacks key management information, such as the total budget or the duration of individual IT projects.

The FCTO intends to strengthen its PMO. Additionally, the Federal Ministry of Finance plans to establish a portfolio management for the FRA and to set up corresponding controlling structures.