Concept and Historical Development of Extraordinary Expenditures
Extraordinary expenditures are a central instrument of public budget law. They refer to financial outlays in the public budget that are not provided for in the respective budget plan or are explicitly not covered by the budget plan. These expenditures typically arise unexpectedly or as a result of unforeseeable events and require separate legal consideration and approval within the budgeting process.
The legal provisions for extraordinary expenditures are found in particular in the budget regulations of the federal government, the states, and municipalities. The objective of these regulations is to ensure the binding effect of the budget plan and the legislature’s control over the use of public funds.
Legal Basis and Standardization
Federal Law
The central federal provision regarding extraordinary expenditures is Section 37 of the Federal Budget Code (BHO). According to this, expenditures may only be made if they are covered by the budget plan and are necessary (principle of budget regularity).
If the planned expenditure is not included in the budget plan, an extraordinary expenditure is only permitted under strict conditions. It must be unavoidable and the need cannot be postponed until the next supplementary budget. In such cases, not only the approval of the competent ministry is required, but in certain circumstances also the approval of the Federal Ministry of Finance. In addition, the Budget Committee of the German Bundestag must be informed.
State Law
The budget regulations of the states largely follow the model of the Federal Budget Code in their provisions. They regularly contain comparable prerequisites and procedural rules for extraordinary expenditures. However, the exact design (for example, possible approval requirements of the state parliaments and their committees) varies depending on state law.
Municipal Law
At the municipal level as well, extraordinary expenditures are only permitted under certain statutory conditions. Municipal budget regulations generally require prior approval from the municipal representative body (e.g., city council, municipal council) or the mayor if urgency is present. Afterwards, there is a comprehensive obligation to inform the representative body.
Requirements and Procedures for Extraordinary Expenditures
Unavoidability
The essential requirement for extraordinary expenditures is unavoidability. This means that an expenditure may only be treated as extraordinary if it is urgent and its necessity does not permit delay until the next adjustment of the budget plan. Typical cases include natural disasters, court decisions with immediate financial effect, or damage incidents of significant magnitude.
Coverage and Authorization
For each extraordinary expenditure, it must be verified whether coverage—for example, through savings in other budget items—is possible. The coverage arrangements must be clearly documented and approved.
Authorization under budget law is generally required to grant an extraordinary expenditure. The decision-making authority lies with the budget-managing bodies and, depending on the individual case, with the highest state or federal authorities or elected bodies.
Subsequent Approval and Supplementary Budget
If, due to urgency, an extraordinary expenditure is made initially without prior approval, the approval of the responsible parliamentary committee or the respective representative body must mandatorily be obtained retrospectively. In certain cases, the expenditure and its coverage are included in the next supplementary budget.
Documentation and Notification Obligations
Extraordinary expenditures must be comprehensively documented. This particularly includes outlining the unavoidability, coverage arrangements, as well as the information and involvement of the supervising authorities.
Distinction from Excess Budgetary Expenditures
Within budget law, the distinction between extraordinary and excess budgetary expenditures is of great importance.
- Extraordinary expenditures: Expenditures that are not provided for at all in the budget plan.
- Excess budgetary expenditures: Expenditures that are basically provided for in the budget plan but exceed a specific budget allocation.
Both forms are subject to strict legal restrictions, but differ in their origin, procedures, and approval requirements.
Consequences and Oversight of Extraordinary Expenditures
Budgetary Oversight
Control over extraordinary expenditures is carried out by independent audit authorities, such as the Federal Audit Office and the State Audit Courts. They retrospectively examine the legality, compliance with budgetary regulations, and the proper handling of public funds.
Sanctions for Breaches of Duty
Violations of budgetary regulations concerning extraordinary expenditures can result in disciplinary and criminal consequences for the responsible officials. In addition, personal liability may exist in cases of gross negligence or intent.
Transparency and Parliamentary Accountability
Extraordinary expenditures are an expression of the budgetary principle of fiscal fidelity and constitute an exception to the binding effect of the budget plan on executive actions. Transparency towards parliament and complete accountability are central principles.
Conclusion
Extraordinary expenditures serve as an important instrument for responding to unforeseeable and unavoidable needs in public budgeting. They are closely tied to high legal hurdles, comprehensive documentation requirements, and a strong oversight function by parliaments and audit authorities. Their proper application ensures both the flexibility of government action and the preservation of budgetary order and parliamentary control.
This article provides a comprehensive legal overview of the term ‘extraordinary expenditures’ in German budget law and takes into account current legal standards as well as the relevant provisions from federal, state, and municipal law.
Frequently Asked Questions
Who is authorized to initiate extraordinary expenditures?
In principle, extraordinary expenditures may only be initiated by the organs or persons expressly authorized to do so within an organization, body, or authority. In the public sector, this authorization is regularly limited by budgetary regulations, such as those laid down in Section 37 of the Federal Budget Code (BHO). There it is stipulated that extraordinary expenditures require the approval of the Ministry of Finance or the competent budgetary authority. Within companies, the authorization to make extraordinary expenditures may be specified in rules of procedure, authority regulations, or internal guidelines. In both cases, it is mandatory to ensure that expenditures are not made unilaterally or without prior approval to avoid liability risks and violations of budget law or internal governance rules.
Under what conditions are extraordinary expenditures legally permissible?
Legally, extraordinary expenditures are only permissible if they are unforeseeable and unavoidable, so that a prior provision in the budget plan was not possible. Unforeseeability means that the triggering event could not have been reasonably anticipated during the budget planning process. Unavoidability requires that omitting the expenditure would lead to significant disadvantages for the institution or to a breach of legal obligations. In the public sector, extraordinary expenditures must be reported and approved in a timely manner and generally be subsequently included in the budget plan or recorded as a supplementary budget. The relevant approval and notification procedures must be strictly observed because non-compliance may result in budgetary, administrative, or even criminal consequences.
How is the approval of extraordinary expenditures carried out?
Approval of extraordinary expenditures is generally handled through a formal procedure. In the public sector, this is done in accordance with the relevant budgetary regulations, such as the Federal Budget Code or corresponding state laws. The application must justify why the expenditure is unavoidable and unforeseeable, as well as explain why alternative financing (e.g., by reallocating within the budget) is not possible. The decision is then made by the relevant supervisory or financial body—usually the treasurer or the Ministry of Finance. In companies, the decision is generally made by management or by an expressly authorized person. The decision and its reasoning must be documented to ensure compliance with internal and external audit requirements.
What legal risks exist for unauthorized extraordinary expenditures?
Unauthorized extraordinary expenditures can lead to significant legal consequences. In the public sector, a violation of budgetary regulations can constitute breach of trust and be subject to disciplinary or criminal prosecution. In companies, exceeding expenditure authorization, especially within the framework of signatory powers, may result in the personal liability of the acting individuals. Furthermore, failure to comply with required approval processes may render expenditures contestable, result in the recovery of funds, or cause the loss of funding entitlements. Compliance with legal requirements is therefore essential to avoid such risks.
Do extraordinary expenditures have to be subsequently recorded in the budget plan?
Yes, in the public sector it is mandatory to record extraordinary expenditures retrospectively in the budget plan. This is usually accomplished by submitting a supplementary budget plan that formally approves and reports these expenditures. This ensures transparency and traceability in budget management. In companies, a corresponding post-control is usually carried out via internal reporting and budget adjustments. Here, too, proper documentation is necessary for internal control and for audits by external auditors.
Are there legal differences between extraordinary and excess budgetary expenditures?
Yes, in both the public and private sectors, legal differences exist: Extraordinary expenditures are those for which the budget or financial plan contains no budget item or appropriation. Excess budgetary expenditures, on the other hand, relate to an existing budget item but exceed the allocated budget. The prerequisites, approval procedures, and possible consequences differ legally; in particular, regarding how necessity and permissibility must be justified and documented. Both cases, however, are subject to strict approval and notification requirements, non-compliance with which may have legal ramifications.
