REPORT FROM THE COMMISSION on the investigation related to the manipulation of statistics in Austria as referred to in Regulation (EU) No 1173/2011 of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area (Commission Decision of 3 May 2016)
Date: 2017-02-22
Institutions: European Commission, Eurostat
Subjects: Austria, EU control, EU statistics, Salzburg, budget deficit, budgetary control, euro area, national statistics, public debt, sanction (EU)

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 22.2.2017  COM(2017) 94 final   REPORT FROM THE COMMISSION on the investigation related to the manipulation of statistics in Austria as referred to in Regulation (EU) No 1173/2011 of the European Parliament and of the Council on the effective enforcement of budgetary surveillance in the euro area (Commission Decision of 3 May 2016) {SWD(2017) 105 final}  
 
 
Contents 

Executive summary ........................................................................................................................ 3 

1. 

Introduction ........................................................................................................................ 8 

1.1. Background .................................................................................................................. 8 

1.1.1. Relevant provisions and principles of EU law ................................................... 8 

1.1.2. Facts and procedure ........................................................................................... 9 

1.2.  The formal Commission investigation into suspected manipulation of statistics in 

Austria as referred to in Regulation (EU) No 1173/2011 .......................................... 11 

2. 

Main findings .................................................................................................................... 14 

2.1. An overview of the financial positions of Land Salzburg: 2002-2012 ....................... 14 

2.2. Institutional responsibilities in Land Salzburg ........................................................... 20 

2.2.1. Granting of powers .......................................................................................... 21 

2.2.2. Internal monitoring .......................................................................................... 23 

2.2.3. Monitoring by the LRH ................................................................................... 24 

2.3. Financial Management of Land Salzburg in the period 2002-2012 ........................... 25 

2.3.1. The four-eye principle ..................................................................................... 25 

2.3.2. Forging of signatures and falsification of documentation ............................... 26 

2.3.3. Extra-budgetary Accounts ............................................................................... 27 

2.3.4. Lending from the OeBFA to Land Salzburg ................................................... 29 

2.3.5. Recording of securities (liabilities) .................................................................. 32 

2.3.6.Financial derivatives ......................................................................................... 32 

2.4. Description of the events in the period between May 2012 and December 2012 ...... 34 

2.5. December 2012 to October 2013: the facts as recorded by STAT ............................. 36 

2.5.1. Information of the Commission ....................................................................... 38 

3. 

Assessment of findings .............................................................................................. ….  41 

3.1. Conclusions regarding the main actors involved in the events described .................. 41 

4. 

Conclusions ....................................................................................................................... 45 

Endnotes ......................................................................................................................................... 46 

2 

 
 
EXECUTIVE SUMMARY 

On 3 May 2016, the European Commission launched a formal investigation into the possible 
manipulation of statistics in Land Salzburg1, Austria. That Decision was taken in accordance 
with  Article  8(3)  of  Regulation  (EU)  No  1173/2011  of  the  European  Parliament  and  of  the 
Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the 
euro area in conjunction with Commission Delegated Decision 2012/678/EU of 29 June 2012 
on  investigations  and  fines  related  to  the  manipulation  of  statistics,  as  referred  to  in 
Regulation (EU) No 1173/2011. 

The investigation aimed at assessing whether the serious indications  of misrepresentation of 
debt and deficit data in 2012 and previous years could be confirmed and, if so, whether it was 
the result of intent or serious negligence. 

This  report  presents  the  findings  of  the  Commission  in  the  light  of  the  investigation 
conducted,  together  with  the  key  facts  supporting  those  findings.  The  written  observations 
submitted by the Republic of Austria on the Commission preliminary findings, are attached in 
a Commission Staff Working Document accompanying this report, and the observations have 
been  duly  taken  into  account  when  considered  relevant2.  The  report  contains  a  detailed 
description  of  the  main  reasons  for  the  revisions  of  the  government  debt  of  Austria  in  the 
April  2014  EDP  Notification,  amounting  to  EUR  1  192  million  euro  for  2012,  EUR  879 
million  for  2011  and  EUR  523  million  for  2010,  on  the  basis  of  an  analysis  of  the 
compilation, control and reporting of financial transactions in Land Salzburg. 

The main conclusions are that severe irregularities took place in the compilation, control and 
reporting  of  financial,  as  well  as  non-financial,  transactions  in  Land  Salzburg  for  several 
years, notably through the concealment of bank accounts, assets and the required financing of 
these, which ultimately led to the concealment and misreporting of Maastricht debt3 relevant 
liabilities.  By  serious  negligence,  public  accounting  rules  were  not  followed,  control  was 

1  When  mentioning  'Land  Salzburg'  in  this  report,  the  Commission  is  not  referring  to  the  Austrian  State  of 
Salzburg as such or to its population, but rather to the entities involved in the direct or indirect compilation of 
deficit and debt data, namely the State Office of Land Salzburg, and the State Government of Land Salzburg 

2 It should be pointed out, that any cross-reference in the written observations to a page number would be the 
page number of the preliminary findings.  

3 According to Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the 
excessive deficit procedure annexed to the Treaty establishing the European Community, OJ L 145, 10.6.2009, 
p. 1, the indicator is defined as consolidated general government gross debt at nominal (face) value, outstanding 
at the end of the year, in the following categories of government liabilities (as defined in ESA 2010): currency 
and  deposits,  debt  securities  and  loans.  The  general  government  sector  comprises  the  subsectors:  central 
government, state government, local government and social security funds.  

3 

 
 
 
                                                            
 
lacking,  financial  and  non-financial  transactions  were  not  appropriately  reported,  and 
recommendations from the Austrian Court of Audit were ignored. In addition, documentation 
was intentionally falsified and misleading information  was intentionally sent to the national 
statistical authorities as well as to the Austrian Court of Audit (RH).  For at least five years, 
therefore, it resulted in Austria reporting a lower level of government debt to the Commission 
(Eurostat)  than  the  actual  correct  one,  amounting  to  misrepresentation  of  debt  data  relevant 
for the application of Articles 121 or 126 TFUE, or for the application of Protocol 12 annexed 
to  the  TEU  and  to  the  TFEU  (i.e.  to  a  misrepresentation  of  the  Maastricht  debt  of  the 
Republic  of  Austria)  under  Article  8(1)  of  Regulation  (EU)  No  1173/2011.  The 
misrepresentation of the government debt of Austria was, by the end of 2012, equal to EUR 1 
192 million4.  

The report establishes that, from the year 2002, the executive and legislative powers in Land 
Salzburg  respectively  acted  and  legislated  in  a  way  that  granted  unlimited  powers  to  the 
Financial Department of Land Salzburg, to enter and conclude high-risk financial transactions 
with  credit  institutions,  for  unlimited  time  and  unlimited  amounts.  At  the  same  time,  the 
Financial Department was, by decree, exempted from being monitored by the Internal Audit 
of  Land  Salzburg  which,  according  to  the  RH  findings  of  9  October  2013  audit  report,  is 
"contrary  to  the  usual  rules  in  public  administration"  and  "contributed  to  the  existence  of 
severe control gaps in financially relevant areas". 

The  report  establishes  that  the  State  Office  of  Land  Salzburg  (Amt  der  Salzburger 
Landesregierung) and the State Government of Land Salzburg (Salzburger Landesregierung) 
played a key role in the events surrounding the non-recording and non-reporting of financial 
transactions and stocks.  The involvement of other institutions, namely the regional Court of 
Audit  (Salzburger  Landesrechnungshof),  Statistics  Austria  (Statistik  Austria),  the  Austrian 
Central  Bank  (Österreichische  Nationalbank)  and  the  Austrian  Federal  Financing  Agency 
(Österreichische Bundesfinanzierungsagentur), is also discussed in the report.  

Other  key  findings  are  also  presented  in  this  report.  Even  if  in  the  April  2014  EDP 
notification Maastricht Debt was revised for years 2010-2012, it appears that the misreporting 
of debt, as well as possibly deficit, may have started at least from 2008 onwards, and that the 
level  of  Maastricht  debt  presented  by  the  Austrian  statistical  authorities  for  the  years  2008 
and 2009 is still underestimated. 

Finally, the report concludes that whereas the Commission (Eurostat) was only informed of 
this case on 10 October 2013, the Austrian statistical authorities were aware of the possibility 
of misrepresentation of the accounts of Land Salzburg since, at least, 6 December 2012. The 
report also concludes that both Statistics Austria and the Austrian Central Bank were aware of 
sizeable inconsistencies in the data reported by Land Salzburg, before the so called 'financial 
scandal' became public at the end of 2012. 

4 As well as a minor amount of 7 million euro as far as the misrepresentation of government deficit is concerned 

4 

 
 
                                                            
Based on the findings in this report, regarding the behaviour of the authorities of the Member 
State  in  the  period  from  the  entry  into  force  of  Regulation  (EU)  No  1173/2011  on  13 
December  2011  until  the  launch  of  the  investigation  on  3  May  2016,  the  Commission  has 
decided  to  adopt  a  recommendation  to  the  Council  to  impose  a  fine  on  the  Republic  of 
Austria, as foreseen in Regulation (EU) No 1173/2011. 

5 

 
 
 
List of acronyms used 

Acronym 

German 

English 

EDP 

ESA 

Verfahren bei einem übermäßigen Defizit 
(VÜD) 

Excessive Deficit Procedure 

Europäische System Volkswirtschaftlicher 
Gesamtrechnungen (ESVG) 

European System of Accounts 

LRH 

Landesrechnungshof 

State Court of Audit (in this document the 
Land Salzburg’s Court of Auditors) 

BMF 

Bundesministerium für Finanzen 

Austrian Ministry of Finance 

OeNB 

Österreichische Nationalbank 

Central Bank of Austria 

OeBFA 

Österreichische Bundesfinanzierungsagentur 

Austrian Federal Financing Agency 

RH 

Rechnungshof 

STAT 

Statistik Austria 

Austrian [Federal] Court of Audit 

National Statistical Institute of Austria 

SLH 

VRV 

Salzburger Landes - Hypothekenbank AG 

- 

Voranschlags- und 
Rechnungsabschlussverordnung 

Austrian Regulation on Budget and Closed 
Accounts of State and Local Governments 

6 

 
 
 
 
List of tables and charts 

Table 1: Maastricht liabilities of Land Salzburg for years 2002-2012 

Table 2: Interest receivable and payable of Land Salzburg for years 2002-2012 

Chart 1: Cash flows in the accounts of the State Office of Land Salzburg (EUR million) 

List of attached documents 

Commission  Staff  Working  Document:  Observations  of  the  Republic  of  Austria  on  the 
preliminary findings of the investigation related to the manipulation of statistics in Austria 

7 

 
 
 
1. 

INTRODUCTION 

1.1.  Background 

1.1.1. Relevant provisions and principles of EU law 

1.  Member States are obliged to report their annual deficit and debt data to the Commission 
(Eurostat),  in  full  compliance  with  European  statistical  rules  and  procedures  (European 
System of Accounts, ESA5).  

2.  According to Article 16 of Council Regulation (EC) No 479/2009 on the application of 
the  Protocol  on  the  excessive  deficit  procedure  annexed  to  the  Treaty  establishing  the 
European Community6, “Members States shall ensure that the actual data reported to the 
Commission (Eurostat) are provided in accordance with principles established by Article 
2  of  Regulation  (EC)  No  223/2009.  In  this  regard,  the  responsibility  of  the  national 
statistical authorities is to ensure the compliance of reported data with Article 1 of this 
Regulation and the underlying ESA 2010 accounting rules”. 

3.  Under Article 3 of Council Regulation (EC) No 479/2009, Member States shall report to 
the  Commission  (Eurostat)  their  planned  and  actual  government  deficits  and  levels  of 
government debt twice a year, the first time before 1 April of the current year  (year  n) 
and  the  second  time  before  1  October  of  year  n.  The  data  provided  in  year  n  concern 
years n-1, n-2, n-3 and n-4. 

4.  Since 13 December 2011, Regulation (EU) No 1173/20117 on the effective enforcement 
of  budgetary  surveillance  in  the  euro  area,  empowers  the  Commission  to  launch 
investigations if there are serious indications of manipulation of statistics, intentionally or 
due to serious negligence. Certain criteria, procedures, and rules relevant for the exercise 
of  that  mandate  have  been  laid  down  in  Commission  Delegated  Decision  2012/678. 
According  to  Regulation  (EU)  No  1173/2011,  such  investigations  may  lead  to  a 
recommendation  from  the  Commission  to  the  Council  to  the  effect  that  the  Council 
should impose a fine on the Member State. The fine to be recommended is calculated by 
the Commission but the Council has the final say on its imposition and size. If it is found 
that  the  Member  State  has,  intentionally  or  by  serious  negligence,  misrepresented  its 

5 The relevant reporting described in the current case was made under Council Regulation (EC) No 2223/96 of 
25  June  1996  on  the  European  system  of  national  and  regional  accounts  in  the  Community,  OJ  L  310, 
30.11.1996, p. 1, (ESA 95). Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 
May  2013  on  the  European  system  of  national  and  regional  accounts  in  the  European  Union,  OJ  L  174, 
26.6.2013, p. 1, (ESA 2010) is applicable from 1 September 2014. 

6  Council  Regulation  (EC)  No  479/2009  of  25  May  2009  on  the  application  of  the  Protocol  on  the  excessive 
deficit procedure annexed to the Treaty establishing the European Community, OJ L 145, 10.6.2009, p. 1. 

7  Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the 
effective enforcement of budgetary surveillance in the euro area, OJ L 306, 23.11.2011, p. 1. 

8 

 
 
                                                            
deficit and/or debt data, the Council may decide to impose a fine of up to 0.2% of GDP 
on that Member State. 

5.  The Commission considers, in general, that serious negligence can consist in the patent 
breach  of  the  duty  of  care  of  a  person  responsible  for  the  production  of  general 
government  deficit  and  debt  data,  as  mentioned  in  recital  10  of  Commission  Delegated 
Decision  2012/678,  but  could  also  consist  in  serious  deficiencies  in  the  organisation  of 
the  data  flows  between  public  entities  and  the  statistical  authorities,  including 
arrangements regarding the responsibility of national officials and staff involved in these 
workflows, the central verification of accounting data by Member States at all levels of 
general government, and robust and effective supervisory and control systems at national 
level. 

6.  Finally, the Court of Justice of the European Union has consistently held that a Member 
State cannot plead conditions existing within its own legal system in order to justify its 
failure to comply with  obligations resulting from EU law. While each Member State is 
free  to  allocate  areas  of  internal  legal  competence  as  it  sees  fit,  the  fact  remains  that  it 
alone is responsible towards the European Union under article 258 TFEU for compliance 
with obligations arising under EU law 8. 

7.  On  a  similar  note,  it  is  settled  case-law  of  the  Court  of  Justice,  in  the  area  of  Member 
States’ liability  for making good loss  and damage  caused to individuals by breaches  of 
EU law for which they can be held responsible (e.g. failure to transpose directives), that 
the  state  liability  applies  to  any  case  in  which  a  Member  State  breaches  EU  law,  " 
whatever  be  the  organ  of  the  State  whose  act  or  omission  was  responsible  for  the 
breach"9.  Thus,  "[a]  Member  State  cannot  [...]  plead  the  distribution  of  powers  and 
responsibilities between the bodies which exist in its national legal order in order to free 
itself  from  liability  on  that  basis"10.  Similar  principles  shall  apply  by  analogy  to  the 
Member  States’  liability  for  manipulation  of  statistics,  and  it  is  therefore  sufficient  to 
establish  such  liability  that  the  misrepresentation  of  data  is  the  result  of  intent  or 
negligence somewhere in the government sector. 

1.1.2. Facts and procedure 

8.  At the end of 2012, the Austrian Federal Court of Audit (hereinafter "RH") launched an 
audit  into  the  financial  management  of  Land  Salzburg.  The  audit  undertook  a  more 
detailed scrutiny of the internal control systems and of the financial management of Land 
Salzburg,  addressing  the  recording  of  transactions  in  public  accounts,  their  risk  profile 
and their related cash management, and followed up on the press conference by officials 

8 Case C- 33/90, Commission of the European Communities v Italian Republic, [1991] ECR I- 05987 ,paragraph 
24. 

9 Joined Cases C-46/93 and C-48/93, Brasserie du pêcheur/Factortame, [1996] ECR I-01029, paragraph 32. 

10 Case C-302/97, Konle, [1999] ECR I-03099, paragraph 62. 

9 

 
 
                                                            
of  Land  Salzburg  on  the  alleged  unlawful  actions  by  the  Head  of  the  Budget  Unit. 
Furthermore,  the  audit  involved  an  inventory  exercise  with  regard  to  open  financial 
transactions  of  Land  Salzburg  as  of  31  December  2012  and  to  the  results  of  the  early 
termination of financial operations, occurring in the last quarter of 2012. 

9.  On  9  October  2013,  the  RH  published  its  report  on  the  financial  situation  of  Land 
Salzburg11 which pointed to a series of irregularities in the compilation, monitoring and 
reporting  of  financial  transactions  in  the  State  of  Salzburg,  having  taken  place  over 
several years. Following the RH findings, the Commission (Eurostat) immediately took 
contact with Statistics Austria (hereinafter “STAT”), which provided further information 
during  the  following  days.  However,  beyond  an  overall  analysis  of  the  possible 
magnitude of the impact it was not possible for STAT and the Commission (Eurostat), at 
such short notice, to analyse the statistical impacts of the findings. As a consequence, the 
Commission  (Eurostat),  in  its  Excessive  Deficit  Procedure  (hereinafter  “EDP”)  news 
release of 21 October 2013, expressed a reservation on the quality of the data reported by 
Austria.  

10. On  10  March  2014,  STAT  provided  the  Commission  (Eurostat)  with  the  results  of  its 
internal  analysis  of  the  statistical  implications  of  the  RH  findings  and  announced  that, 
after the incorporation of the new data for Land Salzburg, the general government debt of 
the  years  2010,  2011  and  2012  would  be  revised  upwards  (+0.2pp  of  GDP  in  2010, 
+0.3pp  in  2011,  +0.4pp  in  2012).  The  Commission  (Eurostat)  required  further 
clarifications, which STAT promptly provided in written form on 28 March 2014. In its 
EDP news release of 23 April 2014, Eurostat withdrew its reservations on the quality of 
the data reported by Austria, since the necessary revisions had been introduced by STAT 
in the reported deficit and debt data.  

11. After an examination of the facts by the Commission (Eurostat), it was assessed that the 
case of unreported debt in the Land Salzburg was serious. The elements that led to that 
conclusion  include,  amongst  other,  the  fact  that  the  RH  had  published  findings12 
indicating the existence of several and severe irregularities in the financial management 
of Land Salzburg, that as a result of those irregularities there was an incorrect reporting 
of  debt  figures  for  non-negligible  amounts,  on  which  the  national  statistical  authorities 
were allegedly not informed during many years and finally, that the regional government 
in Land Salzburg, in exercising its legal powers, seemed to have facilitated the incorrect 
reporting of transactions. 

11  That  report  can  be  found  in  http://www.rechnungshof.gv.at/berichte/ansicht/detail/land-salzburg-finanzielle-
lage-1.html  

12 
http://www.rechnungshof.gv.at/fileadmin/downloads/2013/berichte/teilberichte/salzburg/Salzburg_2013_07/Salz
burg_2013_07_1.pdf  

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12. Consequently, the Commission (Eurostat) assessed that a more thorough analysis of the 
facts  occurred  in  Land  Salzburg  was  needed.  In  that  internal  preliminary  phase  of 
analysis,  it  appeared  that  the  amount  of  misreporting  was  material,  that  there  were 
indications  of  either  serious  negligence  or  intentional  misreporting  and  that  the  events 
were carried out during several years. 

1.2.  The  formal  Commission  investigation  into  suspected  manipulation  of  statistics  in 

Austria as referred to in Regulation (EU) No 1173/2011  

13. On the basis of its internal analysis, the Commission (Eurostat) concluded that there were 
serious  indications  of  misrepresentation  of  statistics  which  justified  carrying  out  a  full 
investigation pursuant to Article 8(3) of Regulation (EU) No 1173/2011. It was therefore 
decided by the Commission to open an investigation into the misrepresentation of EDP 
data in Austria. On 3 May 2016, the Commission launched a formal investigation into the 
possible manipulation of statistics from the Land Salzburg, Austria13. 

14. The Commission investigating team interviewed in separate meetings representatives of 
STAT,  the  State  Office  of  Land  Salzburg  (Amt  der  Salzbuerger  Landesregierung),  the 
regional Court  of Audit  (Salzburger Landesrechnungshof – LRH), the  Austrian  Central 
Bank14  (Österreichische  Nationalbank  -  OeNB)  and  the  Austrian  Federal  Financing 
Agency15  (Österreichische  Bundesfinanzierungsagentur  -  OeBFA).  The  written  records 
of each meeting have been established and signed by all participants. 

15. The quotations that appear in the endnotes (listed as a, b, c…) of this report have been 
taken  from  the  official  records  of  those  meetings  and  reproduce  exactly  the  statements 
made by the representatives of the different institutions interviewed. 

13  Commission  Decision  C  (2016)  2633  final  of  03.05.2016,  on  the  launch  of  an  investigation  related  to  the 
manipulation of statistics in Austria as referred to in Regulation (EU) No 1173/2011 of the European Parliament 
and of the Council on the effective enforcement of budgetary surveillance in the euro area.  

14 The OeNB is currently responsible for the compilation of financial accounts for all institutional sectors, with 
the exception of the government sector. In the past, however, the OeNB also compiled the financial accounts of 
the general government. In 2009, it was agreed between STAT and the OeNB that the former should overtake 
the compilation of the Financial Accounts for the general government (S.13) after a transition period, with the 
view to also use to a maximum possible extent direct data sources for financial accounts compilation. Financial 
accounts  for  the  general  government,  compiled  by  STAT,  were  transmitted  to  Eurostat  for  the  first  time  in 
September 2014. 

15 The Bundeshaushaltsgesetz (Federal Budget Law) empowers the Austrian Ministry of Finance (BMF) to take 
on board loans on the capital market and to on-lend these funds to the Länder and extra-budgetary units. This 
authority has been delegated to the OeBFA by the BMF. Hence, the OeBFA acts on behalf and on the account of 
the  BMF,  i.e.  the  federal  government,  and  in  that  sense  when  the  report  makes  a  reference  to  the  OeBFA 
lending, this is equivalent to federal government lending. Furthermore, the OeBFA provides data and metadata 
to the statistical authorities to be used for the calculation of the interest accrual adjustment and data on receipts 
and debt of the federal government. 

11 

 
 
                                                            
16. This  report  presents  the  findings  of  the  Commission  in  the  light  of  the  investigation 
conducted  in  accordance  with  the  Commission  Delegated  Decision  2012/678,  together 
with the key facts supporting those findings. The written observations submitted by the 
Republic  of  Austria  on  the  Commission  preliminary  findings  are  inserted  in  a 
Commission  Staff  Working  Document  accompanying  this  report,  and  have  been  duly 
taken into account when considered relevant.  

17. It should be noted that when carrying out its investigation into the misreporting of deficit 
and debt, the Commission has aimed to uncover the full extent of the problem and how it 
occurred,  in  the  interest  of  preventing  future  cases.  It  is  therefore  inevitable  that  the 
scrutiny has included facts which occurred before the entry into force of Regulation (EU) 
No  1173/2011  on  13  December  2011.  In  that  regard,  it  should  be  kept  in  mind  that 
misrepresentation  of  EDP  data  was  equally  unlawful  (although  it  carried  no  potential 
penalty) before the entry into force of Regulation (EU) No 1173/2011, in the sense that 
Member States were and are equally required to provide complete and reliable data to the 
Commission  on  the  basis  of  the  pre-existing  rules,  in  particular  Regulation  (EC)  No 
479/2009.  

18. However, for the purpose of applying the special regime of sanction laid down in Article 
8  of  Regulation  (EU)  No  1173/2011,  the  primary  aim  of  the  investigation  has  been  to 
examine whether that misrepresentation of data took place after the entry into force of the 
latter Regulation. The relevant behaviour of the Member State on which the Commission 
may  base  a  recommendation  to  the Council  is  thus  its  behaviour  in  the  period  from  13 
December 2011 until the launch of the investigation on 3 May 2016. 

19. Moreover,  in  the  frame  of  the  written  observations  to  the  Commission  preliminary 
findings,  the  State  Office  of  Land  Salzburg  has  questioned  the  fact  that  the  statements 
made by individual employees of the State Office of Land Salzburg during the meeting 
between  the  Commission  and  that  entity  have  been  considered  statements  of  the  State 
Office of Land Salzburg itself16. In this context it should be recalled that the Commission 
is  empowered  by  article  8  of  Regulation  (EU)  No  1173/2011  to  investigate  putative 
misrepresentations,  and  that  the  modalities  of  these  investigations  are  defined  in  the 
Commission Delegated Decision 2012/678 and include requests for information from any 
government entity, directly or indirectly involved in compiling the relevant data (Article 
3 of the said Decision).  The request for information was organized in meetings in late 
September 2016 with the entities directly or indirectly involved in compiling deficit and 
debt  data  ,  and  the  Commission  must  presume  that  the  opinions  expressed  by 
representatives  and  staff  members  of  the  entities  concerned  during  these  meetings 
necessarily express the view of the those entities.  

16  Section  B,  paragraph  11  of  the  observations  from  the  State  Office  of  Land  Salzburg,  Annex  II  of  the 
Commission Staff Working Document accompanying this report. 

12 

 
 
                                                            
20. In addition, minutes were drawn up by the Commission and sent to all attendees for their 
review. All amendments requested and introduced in the minutes by the attendees were 
accepted by the Commission.  

21. Furthermore,  the  specific  case  of  one  individual,  who  was  an  employee  of  the  State 
Office of Land Salzburg, but a former employee of the LRH is indicated in the footnotes 
of  the  minutes,  and  specific  statements  of  that  individual  in  his  former  capacity  as 
employee of the LRH have not been considered to represent the views of the State Office 
of Land Salzburg. 

22. Finally,  with  regard  to  the  argument  raised  by  Austria  in  its  observations  on  the 
Commission  preliminary  findings17,  it  should  be  noted  that  the  investigation  of  the 
Commission is of an administrative nature and not of a criminal one. The mandate of the 
Commission  to  conduct  investigations  as  laid  down  in  Regulation  (EU)  No  1173/2011 
and  Commission  Delegated  Decision  2012/678  is  completely  autonomous  from  any 
criminal proceedings in Austria and cannot be restricted by the circumstance that certain 
facts  relevant  to  the  Commission  investigation  may  also  be  subject  to  criminal 
proceedings at national level. 

17 Introduction, point 3, first bullet point of the Commission Staff Working Document accompanying this report. 

13 

 
 
 
                                                            
2.  MAIN FINDINGS 

23. This section provides a detailed description of the main reasons for the misrepresentation 
of  the  Austrian  government  deficit  and  debt  that  led  to  upward  revisions,  in  the  April 
2014 EDP notification, for the years 2010 to 2012. That misrepresentation was the result 
of the misreporting by Land Salzburg of data sent to the national statistical authorities at 
least  during  those  years.  Moreover,  this  section  aims  at  ascertaining  the  level  of 
responsibility of different institutions for the misreporting, both at regional and national 
level. 

24. A  considerable  amount  of  liabilities,  as  well  as  other  financial  positions,  had  never 
previously been reported by Land Salzburg in the financial statements it submitted to the 
Austrian statistical authorities. 

25. On  6  December  2012,  the  Finanzereferent18  of  Land  Salzburg,  the  Director  of  the 
Financial Department and the Director of the LRH held a joint press conferencea, where 
it was announced that Land Salzburg had suffered a “mere accounting loss” of EUR 340 
million  in  financial  derivative  investments,  as  the  result  of  the  unlawful  actions  of  the 
Head of the Budget Unit, who had concealed her actions, deceived her supervisors and 
falsified  documentation.  It  was  only  after  that  press  conference  that  the  RH  and  other 
entities  started  to  investigate  in-depth  the  accounts  of  Land  Salzburg,  in  order  to  fully 
unveil the consequences of that misreporting. 

2.1.  An overview of the financial positions of Land Salzburg: 2002-2012 

26. Table  1  provides  an  overview  of  Land  Salzburg's  Maastricht-relevant  liabilities  for  the 

period 2001-2012. 

27. The first row of the table reflects the financial debts (Finanzschulden) of Land Salzburg 
as reported in the balance sheets19 compiled by the State Office of Land Salzburg for the 
years 2002-201220. According to information from STAT, those 'Finanzschulden' should 
at least include both loans and government bonds, but might also include other liabilities 
not relevant for Maastricht debt. In that sense, although one may see Finanzschlden as a 
proxy, further analysis must always be undertaken for the compilation of Maastricht debt. 
Nevertheless, it has finally been ascertained by the Commission, which can be observed 
in Table 1, that in the Land Salzburg case, and for 2012, the stock of Finanzschulden was 
nearly identical to the Maastricht debt.  

18 The Finanzreferent is, in practice, the equivalent to a Minister of Finance of a region. 

19 Vermӧgensrechnung. 

20  Those  balance  sheets  were  sent  to  the  Commission  (Eurostat)  by  the  State  Office  of  Land  Salzburg  on  18 
October 2016. 

14 

 
 
                                                            
28. As can be observed from the table, there is a break in the series from 2011 to 2012. That 
element  demonstrates  that  whereas  Land  Salzburg  managed  to  unveil  the  stock  of 
existing  liabilities  as  of  31  December  2012,  it  has  not  revised  its  balance  sheets 
backwards for the years 2002-201121. In that context, the Commission requested the State 
Office of Land Salzburg to provide data on the financial liabilities of Land Salzburg, as 
the data were known by/available to the Financial Department at the end of 2012, i.e. as 
it would have been effectively reported had this case not been exposed on 6 December 
2012. The State Office of Land Salzburg has argued that such a compilation has not been 
undertaken,  as  in  fact  the  financial  statements  of  Land  Salzburg  for  2012  were  only 
compiled  after  the  in-depth  investigations  of  the  RH  and  private  auditors  were 
undertaken.  Nevertheless,  the  in-depth  analysis  by  the  RH  performed  in  2013  points  to 
the  fact  that  the  medium-term  financial  planning  of  Land  Salzburg,  prepared  on  16 
November 2012, pointed to a total EUR 874 million of debt to be reported by the Land 
Salzburg  as  of  31  December  201222.  In  the  absence  of  more  detailed  information 
provided by the State Office of Land Salzburg, the Commission has to accept this as the 
amount  of  debt  to  be  effectively  reported  as  of  31  December  2012.  It  is  shown  in  row 
(1a) of Table 1. 

29. Row  (3)  of  Table  1  shows  the  contribution  of  Land  Salzburg's  debt  to  the  Austrian 
Maastricht debt, as estimated by STAT on 30 September 2013, i.e. at the date of the last 
EDP  notification  sent  by  the  Austrian  statistical  authorities  before  the  Commission 
(Eurostat)  was  informed  about  the  possibility  that  Land  Salzburg's  debt  could  be 
underestimated. As can be inferred by the comparison of rows (3) and (1) (see row (5)), 
that  estimation  by  STAT  took  into  account  not  only  the  debt  data  as  reported  by  Land 
Salzburg, but also other data sources23. 

21  In  an  electronic  mail  sent  to  the  Commission  (Eurostat)  on  4  November  2016,  the  State  Office  of  Land 
Salzburg  argued  that  to  produce  such  a  backward  revision  would  be  very  expensive  and  inefficient  from  a 
resource allocation point of view. 

22  The  RH  2013  points  out,  in  paragraph  98.1,  page  256  that  "The  Stability  Report  of  Land  Salzburg  was 
prepared on the basis of the figures set out in the estimates and the financial statements. The liabilities, cash 
flows and consequential costs of the financial operations of the Province of Salzburg (see note 40), which were 
already  incomplete  in  the  country's  accounts,  were  not  taken  into  account  in  this  Stability  Report.  The  initial 
value used for the medium-term forecast was based exclusively on the loans reported at the end of 2012 in the 
amount of approx. EUR 874 million, which were shown at nominal value". In the original German version, "Der 
Stabilitätsbericht  wurde  auf  Grundlage  der  in  den  Voranschlägen  und  Rechnungsabschlüssen  dargestellten 
Zahlen  erstellt.  Die  Verbindlichkeiten,  Zahlungsflüsse  und  Folgekosten  der  Finanzgeschäfte  des  Landes 
Salzburg  (siehe  TZ  40),  die  schon  in  den  Rechnungsabschlüssen  des  Landes  nur  unvollständig  ausgewiesen 
waren, fanden auch im Stabilitätsbericht keine Berücksichtigung. Der für die mittelfristige Prognose verwendete 
Ausgangswert beruhte ausschließlich auf den mit Ende 2012 ausgewiesenen Darlehen in Höhe von rd. 874 Mio. 
EUR, die zum Nominalwert dargestellt wurden". 

23 It must be observed (row (5)) that, in fact, for years 2002 to 2005 the contribution of Land Salzburg's debt to 
the  Austrian  Maastricht  debt  as  estimated  by  STAT  is  lower  than  the  Finanzschulden  reported  in  the  balance 
sheets of Land Salzburg. This occurs due to consolidation effects of the so called Innere Anleihe, i.e. the fact that 
15 

 
 
                                                            
30. For  example,  the  estimation  by  STAT  took  into  account  a  considerable  part  of  what  is 
included in the Voranschlagsunwirksame Erläge, i.e. cash transited through the accounts 
of  Land  Salzburg  that  is  owed  to  a  third  entity,  which  was  ascertained  by  STAT24  to 
the  Salzburger 
include 
Landeswohnabaufonds25.  It  was  ascertained  that  for  2011  it  amounted  to  EUR  1  050 
million,  as  can  be 
in 
seen 
Voranschlagsunwirksame Erläge (see section 2.3.4 below). 

(2.b),  and  was  entirely 

the  OeBFA 

included 

lending 

finance 

from 

also 

row 

the 

to 

in 

31. Furthermore, and after receiving information from the OeNB, STAT concluded that Land 
Salzburg  had  financed  itself,  in  2010,  through  the  issuing  of  government  securities 
amounting  to  EUR  300  million.  Even  if  such  an  amount  was  nowhere  visible  in  the 
balance sheets of Land Salzburg, STAT took the decision to follow the direct data source 
of the OeNB (after cross-checking with further indirect data sources) and to include those 
amounts in the debt of Land Salzburg (see section 2.3.5 below).  

32. If, for 2011, the EUR 1 050 million reported under row (2) (and visible in row 2.b) and 
the  EUR  300  million  of  securities  as  disclosed  in  the  OeNB's  security-by-security  data 
base are added to the amount of debt reported under row (1), it would amount to a debt of 
EUR 2 126 million. The difference (EUR 166 million) to the amount of debt estimated 
by  STAT  in  2011  (2  293  million  euro)  is  mainly  explained  by  the  inconsistencies 
reported by the State Office of Land Salzburg regarding the lending from the OeBFA. In 
case  of  discrepancies,  STAT  consistently  chose  to  rely  on  the  information  provided  by 
the  OeBFAb.  Even  if  STAT  has  the  possibility  to  change  the  figures  from  the  data 
sources when compiling national accounts, it does not have the mandate to oblige entities 
to amend the data reportedc (see section 2.3.4 below).  

33. Row  (4)  of  Table  1  reflects  the  contribution  of  Land  Salzburg's  debt  to  the  Austrian 
Maastricht debt, as calculated by STAT on 31 March 2014, i.e. after Eurostat expressed a 
reservation on the Austrian data leading to a joint analysis of Land Salzburg's liabilities 
by STAT and the State Office of Land Salzburg. 

34. Row (7) of Table 1 illustrates the revisions to the Austrian Maastricht debt undertaken by 
STAT  following  the  unveiling  of  the  misreporting  of  debt  in  Land  Salzburg.  It  can  be 
observed  that  debt  data  for  the  years  prior  to  2010  were  not  revised  by  the  statistical 
authorities. In Austria's observations of 25 January 2017 on the preliminary findings of 
the  investigation,  STAT  states  that,  "According  to  the  EDP  Regulation,  the  Member 

the State Office of Land Salzburg borrowed money from  a state fund and repaid it in the same year  or in the 
following year, as explained by STAT on 16 November 2016. 

24  STAT  has  discussed  that  issue,  by  electronic  mail,  with  the  then  Director  of  the  Financial  Department,  the 
Head  of  the  Budget  Unit  and  one  of  its  employees.  An  official  from  the  OeBFA  was  also  in  copy  of  those 
electronic mails exchanged on 27 September 2012. 

25 The Landeswohnbaufonds is a public fund, classified inside the general government sector in the national 
accounts, which purpose is to finance and support the construction and acquisition of social housing. 

16 

 
 
                                                                                                                                                                                         
States are obliged to notify data for the years n-4 to n. In the notification of April 2014, 
therefore,  only  data  for  the  years  2010  to  2014  were  to  be  communicated.  The 
notification of changes to data on previous years is mandatory only on the basis of other 
EU regulations26." The Commission understands from that statement that years prior to 
2010  had  not  been  subject  to  any  investigation,  either  regarding  deficit  or  debt. 
Notwithstanding  that  statement  by  STAT,  the  Commission  concludes,  based  on  its 
meetings  with  Austrian  authorities  in  the  frame  of  the  investigation,  notably  with  the 
State Office of Land Salzburg, that the misreporting of data may have started at least as 
early as 2008d. 

35. Finally, row (6a) reflects the difference between the calculation of Land Salzburg's debt 
taking  into  account  all  data  sources  available  in  March  2014  (row  (4))  and  the  debt 
effectively  reported  by  Land  Salzburg  (row  (1a))  for  those  years,  under  the 
Finanzschulden. This means that, if other indirect data sources had not been used in the 
compilation of Land Salzburg's contribution to the Austrian Maastricht debt, the impact 
of the revisions to the Austrian Maastricht debt would not only have amounted to 0.4% 
of GDP in 2012, but rather to 0.9% of GDP in that year. 

36. In  Austria's  written  observations  to  the  Commission  preliminary  findings,  the  Austrian 
authorities suggest that the actual amount of Maastricht debt for 2012 as finally reported 
in  the  April  2014  EDP  notification,  i.e.  including  the  corrections  that  followed  the 
unveiling of the misrepresentation of debt, was lower than the amount of the Maastricht 
debt  of  2012  as  reported  during  the  2012  EDP  notifications  27.  On  this  basis,  Austria 
claims that there was no misrepresentation of debt in the contested EDP notifications.  

37. It is important to clarify that the deficit and debt reported in the 2012 EDP notifications 
regarding  year  2012  consists  of  planned,  rather  than  actual,  data.  Planned  data  are  not 
actual  figures  but  consist  of  forecasts  provided  by  Member  States'  governments. 
Forecasts  cannot  be  assimilated  to  actual  figures  provided  by  Member  States  to  the 
Commission  and  in  this  sense  be  compared,  in  terms  of  relevance,  accurateness, 
completeness and reliability, to actual data, i.e. to liabilities effectively incurred.  

38. Council Regulation (EC) No 479/2009 on the application of the Protocol on the excessive 
deficit  procedure  annexed  to  the  Treaty  establishing  the  European  Community28  is 
absolutely clear in establishing that, in the EDP context, the Commission assesses  only 

26 In the German version: "Die Mitgliedstaaten sind gemäß VÜD-Verordnung verpflichtet, Daten für die Jahre 
n-4 bis n zu notifizieren. Im Rahmen der Notifikation vom April 2014 waren daher ausschließlich Daten für die 
Jahre 2010 bis 2014 mitzuteilen. Die Mitteilung von Änderungen von Daten über frühere Jahre ist nur aufgrund 
von anderen EU-Verordnungen  verpflichtend." 

27  Table  1  of  section  1.3  of  the  introductory  statements  of  the  Commission  Staff  Working  Document 
accompanying this report. 

28 Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive 
deficit procedure annexed to the Treaty establishing the European Community, OJ L 145, 10.6.2009, p. 1. 

17 

 
 
                                                            
the quality of actual data. Furthermore, it is the absence of quality of actual data that may 
ultimately lead the Commission to either express a reservation or to amend those data.  

39. Moreover it is the opinion of the Commission that the amount of debt for 2012 reported 
as planned data in the October 2012 EDP Notification was in fact also underestimated by 
the EUR 1 192 million of debt that was unveiled in April 2014. Any other interpretation 
would suggest that the statistical authorities were already aware, in October 2012, of the 
existence of such unreported Maastricht-relevant liabilities, which is nevertheless not the 
conclusion of this Commission investigation.      

18 

 
 
Table 1: Maastricht liabilities of Land Salzburg for years 2002-2012  

19 

MEUR20022003200420052006200720082009201020112012Vermögensrechnung  Finanzschulden(1)4544544334334344314314976547763,507    as reported by Land Salzburg (and RH)a(1.a)454454433433434431431497654776874  Voranschlagsunwirksame Erläge(2)1922982743565626491,1561,5121,4951,227546National Accounts compilation by STAT  as of 30.09.2013(3)3473393463784716061,1131,1801,9292,2932,318   Land Salzburg(2.a)3473393463784014075214601,0691,2431,268     of which on-lending by ÖBFA0000191197423359580755780   Wohnbaufonds(2.b)0000701995927208601,0501,050     of which on-lending by ÖBFA0000701995927208601,0501,050  as of 31.03.2014(4)3473393463784716061,1131,1802,4513,1723,509   Land Salzburg(3.a)3473393463784014075214601,5912,1222,459     of which on-lending by ÖBFA0000191197423359580755780   Wohnbaufonds(3.b)0000701995927208601,0501,050     of which on-lending by ÖBFA0000701995927208601,0501,050(5) = (3) - (1)-106-114-86-55381746826831,2741,516-1,189(6) = (4) - (1)-106-114-86-55381746826831,7972,3963(6a) = (4) - (1a)-106-114-86-55381746826831,7972,3962,635   as % of GDPb--------0.6%0.8%0.9%(7) = (4) - (3)000000005238791,192   as % of GDPb--------0.2%0.3%0.4%Note: all amounts are depicted in nominal valuea according to RH 2013, the amount of laibilities to be reported by Land Salzburg in the end of 2012 was of EUR 874 millionb as of GDP reported on the 31 March 2014 
 
  
2.2.  Institutional responsibilities in Land Salzburg 

40. Land Salzburg has, like all Austrian States, a Parliament (Landtag), a State Government 
(Landesregierung),  a  Governor  (Landeshauptmann)  and  a  State  Office  (Amt  der 
Landesregierung). 

41. The  Landtag  is  responsible  for  legislating  in  non-federal  matters  for  the  Land,  for 
monitoring the execution of the laws and for electing the State Government. The Landtag 
also has the LRH under its supervision. 

42. The LRH is headed by a Director, who is appointed by the Landtag for a term of twelve 
years;  re-appointment  is  not  permitted.  The  LRH  is  responsible  for  monitoring  the 
management of Land Salzburg and of other legal entities controlled by the Land, as well 
as of those who receive public sponsorship and of the local entities with a population of 
less than 10 000 inhabitants. The audits of the LRH focus on compliance with the laws, 
on the correct calculation of figures, and on the economic efficiency and effectiveness of 
the  financial  management  of  the  State  Office.  Reports  produced  by  the  LRH  include 
main  findings,  suggestions  and  recommendations.  A  follow-up  review  of  whether  the 
suggestions  and  recommendations  have  actually  been  implemented  by  the  respective 
units can also be carried out. There is, however, no possibility for the LRH to enforce the 
implementation of suggestions and recommendations – the main power of the LRH lies 
in the publicity of its reports. 

43. The  Landtag  nominates  the  State  Government,  which  is  headed  by  a  State  Governor 
(Landeshauptmann)  and  which  holds  executive  power.  In  Land  Salzburg,  the  State 
Government  is  composed  of  seven  members,  each  holding  under  his  or  her  (political) 
responsibility  some  departments  of  the  State  Office.  In  particular,  the  member  of  the 
State  Government  responsible  for  the  financial  affairs  (Finanzreferent)  is  the  supreme 
decision-making  person  regarding  financial  affairs,  being  responsible  for  ensuring  the 
good functioning of his or her area of competence and bearing the ultimate responsibility 
for all the activities, outputs and outcomes of the financial management of the Land. 

44. Furthermore,  the  State  Government  appoints,  subject  to  the  approval  of  the  Federal 
Government,  the  Landesamtsdirektor,  who  is  the  head  of  the  State  Office  of  Land 
Salzburg.  The  State  Office  of  Land  Salzburg  is  the  administrative  support  of  Land 
Salzburg and is divided into several departments, including the Abteilung 8: Finanz– und 
Vermögensverwaltung  (hereinafter, 
the 
Directorate-General  (Landesamdirektion)  also  includes  the  Internal  Audit29  (Interne 
Revision), a central division (Stabstelle). 

the  Financial  Department).  In  addition, 

29  The  role  of  the  Internal  Audit  of  Land  Salzburg  is  to  check  the  internal  control  procedures  and  the  risk 
management, as well as to ascertain if the control mechanisms in the State Office are well established. 

20 

 
 
 
                                                            
45. The Budget Unit (Referat 8/02 – Budgetangelegenheiten), which played a central role in 
the  events  (see  sections  2.2  and  2.3),  is  a  Unit  of  the  Financial  Department.  Amongst 
other, that unit had under its responsibility the medium and long-term financial planning 
and  the  management  of  debt  and  investment.  In  addition,  the  Budget  Unit  had  a  great 
influence on the bookkeeping of the financial assets and financial transactions carried out 
in  the  Voranschlagsunwirksame.  Until  July  2012,  that  unit  had  a  head  of  unit,  one 
employee and one secretary. 

46. In  addition,  in  the  context  of  the  financial  management  of  Land  Salzburg,  a  Financial 
Advisory Board (Finanzbeirat) was established in 2007, with the objective of supervising 
and  defining  the  strategy  for  the  Financial  Department.  That  Advisory  Board  did  not 
have  decision-making  powers  and  was  mainly  responsible  for  an  annual  review  of  the 
financial and  risk  strategy  of  Land  Salzburg,  and  in  particular  for  the  evaluation  of  the 
adequacy of the risk limits relative to the risk capacity and for the appropriateness of the 
introduction of further risk limits. The Board based its deliberations on the information 
prepared by the Budget Unit. In addition to the head of the Financial Department, who 
chaired  that  Board,  it  also  included  two  consultants  from  the  private  sector  and  two 
employees of the Budget Unit (the latter having no voting rights). 

47. Finally,  the  Accounting  Unit  (Referat  8/04  –  Landesbuchhaltung)  was  included  in  the 
Financial  Department  and  was  responsible  for  the  recording  of  the  budgetary  accounts  
(Voranschlagswirksame) 
accounts 
(Voranschlagsunwirksame).  Until  the  beginning  of  2007  that  unit  was  a  Department 
(Abteilung 14 –Landesbuchhaltung)30. 

extra-budgetary 

as  well 

the 

for 

as 

2.2.1. Granting of powers 

48. In 2006, the Landtag adopted the State Budget Law, the Article IV of which states that, 
“The  State  Government  is  empowered,  to  meet  the  current  demand  of  money,  to  take 
earmarked  reserves,  to  borrow  cash  to  incur  debts  and  to  make  derivative  financial 
transactions to generate additional income, if from these actions it expects an economic 
advantage for the State; this includes the active management of financial assets for the 
Landeswohnbaufonds31.” According to the information provided to the Commission, that 
legal provision was introduced at the specific request of the Head of the Budget Unit, and 
the Landtag agreed to that requeste. 

49. Furthermore,  it  was  established  in  a  report  from  the  RH  that  full  powers  had  de  facto 
been granted to the Budget Unit already in 2002 to use the financial resources of Land 

30 This report uses the term 'Accounting Unit' to refer to both the Accounting Unit or the Accounting Department 

31  Original  German  version:  "Die  Landesregierung  ist  ermächtigt,  zur  Deckung  des  laufenden  Geldbedarfes 
zweckbestimmte Rücklagen in Anspruch zu nehmen, Kassenkredite aufzunehmen, Umschuldungen vorzunehmen 
sowie  zur  Erzielung  von  Zusatzerträgen  abgeleitete  Finanzgeschäfte  durchzuführen,  wenn  diese  Maßnahmen 
einen  wirtschaftlichen  Vorteil  für  das  Land  erwarten  lassen;  dies  schließt  die  aktive  Verwaltung  des 
Finanzvermögens für den Landeswohnbaufonds mit ein.." 

21 

 
 
                                                            
Salzburg, as well as those of the Landeswohnbaufonds, with a view to obtain economic 
advantages for Land Salzburg32. At that time, the Finanzreferent granted the Director of 
the  Financial  Department,  the  Head  of  the  Budget  Unit  and  an  employee  of  that  unit, 
single  signature  powers  of  attorney  for  engaging  in  financial  transactions  through  the 
Salzburger  Landes  -  Hypothekenbank  AG33  (SLH)  concerning  a  vast  number  of 
operations.  Moreover,  on  6  February  2003,  the  Finanzreferent  granted,  to  the  same 
persons,  powers  of  attorney  to  enter  and  conclude  high-risk  financial  transactions  with 
other  credit  institutions,  for  an  unlimited  time  and  unlimited  amounts.  Those  three 
individuals  were  also  given  the  power  to  open  and  close  bank  accounts.  Those  powers 
were effective until mid-July 2012, when the Finanzreferent of Land Salzburg at the time 
withdrew those powers from the Head of the Budget Unit34. 

50. During  the  Commission  investigation,  it  was  furthermore  explained  by  State  Office 
officials that the powers conceded specifically to the Head of the Budget Unit were never 
questioned due to her high reputationf. 

51. Likewise, the  Guidelines  for  the  Financial  Management  of  Land  Salzburg35,  created  by 
the  Finanzreferent  and  valid  from  4  June  2007,  stated  that  the  goal  of  financial 
investments on derivatives was not only to incur savings on interest expenditure but also 
the provision of additional income to government.36  

32 Paragraph 15.1, page 84, of the report prepared by the RH in 2013,  Land Salzburg – Finanzielle Lage. The 
original  German  version  states:  "Der  Finanzreferent  Wolfgang  Eisl  stellte  mit  28.  Februar  2002  eine 
„Vollmacht  für  Handelsgeschäfte  mit  Firmen  und  Institutionen“  für  die  Hausbank  des  Landes  Salzburg,  die 
Salzburger  Landes–Hypothekenbank  AG,  aus.  Jeweils  einzelvertretungsbefugt  waren  der  Leiter  der 
Finanzabteilung, die Leiterin des Budgetreferats und ab 5. Juli 2002 auch ein Mitarbeiter des Budgetreferats. 
(…)" 

33  Salzburger  Landes  -  Hypothekenbank  AG  is  classified  in  the  Financial  Corporations  sector  (S.12).  Land 
Salzburg  holds  a  10%  participation  in  SLH  through  Land  Salzburg  Beteiligungen  GmbH,  which  is  a  Land 
Salzburg’s  holding  corporation,  100%  controlled  by  Land  Salzburg  and  also  classified  in  the  Financial 
Corporations sector (S.12). 

34 Paragraph 15.1, page 86, of the report prepared by the RH in 2013, Land Salzburg – Finanzielle Lage, of the 
original German version, states: "Mit 6. Februar 2003 erteilte der Finanzreferent (…) eine weitere Vollmacht, 
die  —  im  Gegensatz  zur  gegenüber  der  Salzburger  Landes–Hypothekenbank  AG  geltenden  Vollmacht  —  an 
einen  unbestimmten  Kreis  von  Kreditinstituten  und  anderen  Institutionen  gerichtet  war.  Diese  Vollmacht  war 
inhaltlich an die Vollmacht aus dem Jahr 2002 angelehnt und enthielt auch die Berechtigung zur Erteilung von 
Untervollmachten.  Ebenso  waren  Konto  –  und  Depotöffnungen  bzw.  –  schließungen  durch  die  drei 
Bevollmächtigten  (Leiter  der  Finanzabteilung,  Leiterin  des  Budgetreferats,  Mitarbeiter  des  Budgetreferats) 
möglich,  wobei  jeweils  zwei  Bevollmächtigte  gemeinsam  vertretungsbefugt  waren.  In  weiterer  Folge  wurde 
diese  Vollmacht  Kreditinstituten  und  Institutionen,  mit  denen  das  Land  Salzburg  Finanzgeschäfte  vornahm, 
vorgelegt." 

35 Richtlinien für das Finanzmanagement 

36 Paragraph 17.2, page 90, of the report prepared by the RH in 2013, Land Salzburg – Finanzielle Lage, of the 
original German version, states: " Der RH wies — wie bereits 2009 — kritisch darauf hin, dass die Richtlinien 
22 

 
 
                                                            
2.2.2. Internal monitoring  
52. In a memo dated 2 February 200437, the Finanzreferent of Land Salzburg decided that, 
from  that  day  onwards,  the  Budget  Unit  would  stop  reporting  their  recordings  on  the 
Voranschlagsunwirksame38  to  the  Accounting  Unit,  and  in  particular  would  stop 
reporting the financial investments undertaken by the Budget Unit in the context of the 
management  of  the  VuF  (Versorgungs-  und  Unterstützungsfonds,  a  pension  provision 
fund of Land Salzburg)39. However, as confirmed during the Commission investigation, 
the information to be reported by the Budget Unit to the Accounting Unit was "necessary 
for carrying out a proper accountingg". 

53. That decision was partly changed only in 2008. However, as stated by the State Office of 
Land Salzburg during the Commission investigation, on 28 September 2016, "(…) some 
transactions were still exempted from the reporting obligations" even after 2008.  

54. According  to  a  statement  given  in  the  course  of  the  Commission  investigation,  the 
decision  from  2004  was  necessary  given  that  the  investments  engaged  by  the  Budget 
Unit,  notably  in  the  VuF,  were,  at  the  time,  providing  a  considerable  income  to  Land 
Salzburgh, and  its  complex transactions  needed a quick reaction from the Budget Uniti. 
Moreover,  the  staff  of  the  Accounting  Unit  was  not  capable  of  monitoring  those 
transactions due to their complexityj. 

55. Also,  the  Commission  ascertains  that  not  only  was  the  Budget  Unit  exempted  from  its 
obligation  to  report  to  the  Accounting  Unit,  but  the  staff  of  the  latter  was  under  the 
instructions  of  the  Head  of  the  Budget  Unit.  As  a  foreseeable  consequence  of  that 
organisational set-up, the Accounting Unit would accept the data as provided. k 

für das Finanzmanagement des Landes Salzburg ausdrücklich auch die Erzielung von zusätzlichen Erträgen aus 
Derivaten als Ziel der Finanzgeschäfte definierten, und betonte das damit verbundene Risiko. Er verwies darauf, 
dass die zur Ertragsoptimierung abgeschlossenen Derivate mit der Aufgabenerfüllung einer Gebietskörperschaft 
nicht vereinbar waren." 

37 That memo was provided to the Commission (Eurostat) by the State Office of Land Salzburg, in the meeting 
held between the two institutions on 28 September 2016. 

38  In  the  original  memo:  "  Für  Aufträge,  die  unmittelbar  von  der  Abteilung  8  veranlasst  wurden,  trägt  die 
Abteilung  14  keine  Verantwortung.  (…)  Für  sämtliche  von  der  Abteilung  8  in  Anspruch  genommenen 
Instrumente im Rahmen des Liquiditäts- und Portfoliomanagements besteht nur eine eingeschränkte Prüfpflicht 
der Abteilung 14." 

39 In the original memo: " Darüber hinaus ist die Geschäftsführung des Versorgungs- und Unterstützungsfonds 
der Abteilung.8 (Referat 8/02) übertragen. Dieser unselbständige Verwaltungsfonds veranlagt auch Geldmittel 
des Landes. Diese Veranlagungen und Geldmittel stehen nicht zur Deckung des allgemeinen Liquiditätsbedarfes 
des  Landes  zur  Verfügung,  sondern  sind  zweckgebunden  zu  verwenden.  Der·  Abteilung  8  obliegt  die  gesamte 
Gestlonierung des Fondsvermögens und ihr gehen auch alle Kontoauszüge betreffend diesen Verwaltungsfonds 
zu." (Versorgungs- und Unterstützungsfonds, is a pension provision fund of Land Salzburg) 

23 

 
 
                                                                                                                                                                                         
56. Moreover the Commission ascertains that the internal accounting and the public accounts 
produced by the State Office of Land Salzburg, and notably by the Financial Department, 
were  exempted  from  being  monitored  by  the  Internal  Audit  from  1999  onwardsl. 
According  to  the  RH,  that  state  of  affairs  was  "contrary  to  the  usual  rules  in  public 
administration"  and  ultimately  "contributed  to  the  existence  of  severe  control  gaps  in 
financially relevant areas"40. 

57. Summing up, the increase in powers conceded to the Budget Unit of Land Salzburg was 
not  accompanied  by  a  parallel  increase  of  the monitoring  of  the  actions  of  that  unit. In 
fact, the increase in the powers granted to the Budget Unit was rather accompanied by a 
decrease in the reporting obligations of that unit to other units of the State Office of Land 
Salzburg. 

2.2.3. Monitoring by the LRH 

58. The LRH has the responsibility of auditing, amongst others, the financial management of 
the State Government of Salzburg and its funds, focusing on legal compliance and on the 
correct calculation of figures. Nevertheless, it appears that the Financial Department (and 
financial statements) of Land Salzburg were never subject to a detailed audit by the LRH 
in the period between 2002 and 2012m.  

59. According to both the present and the former Heads of the LRH, such detailed audits of 
the  financial  management  of  Land  Salzburg  were  not  conducted  due  to  lack  of  staff, 
insufficient resourcesn and the lack of specific training of the staff at that time on how to 
audit those transactionso.  

60. Nevertheless,  as  can  be  seen  from  LRH’s  audit  reports  concerning  the  financial 
statements  (‘Rechnungsabschluss’)  of  Land  Salzburg41  for  the  years  2008-2011,  their 
conclusion was invariably the same:  “The tests conducted by the LRH revealed that the 
accounting  records  and  financial  statements  were  duly  made  and  complete.  The  cash 
balance  is  correct  and  proven  by  bank  statements”42.  However,  the  Commission 
in  fact  not  madep. 
concluded 
Consequently, that statement in the conclusion of the LRH reports was not correct.  

that  cross-checking  with  bank  statements  were 

40 Page 27, of the report prepared by the RH in 2013, Land Salzburg – Finanzielle Lage, in the original German 
language  version,  states:  "  Entgegen  den  sonst  üblichen  Regelungen  in  der  öffentlichen  Verwaltung  war  die 
Interne  Revision  des  Landes  Salzburg  per  Erlass  des  Landesamtsdirektors  ausdrücklich  von  der  Prüfung  der 
leitete  daraus  auch  die 
Gebarung  und  des  Rechnungswesens  ausgenommen.  Die  Interne  Revision 
Unzuständigkeit  für  die  Kontrolle  des  Finanzmanagements  ab.  Dies  führte  zu  Kontrolllücken  in  finanziell 
relevanten  Bereichen,  die  dazu  geeignet  waren,  fehlerhaftes,  unwirtschaftliches  Handeln  bzw.  in  letzter 
Konsequenz strafrechtlich relevante Sachverhalte nicht zu entdecken." 

41 http://www.salzburg.gv.at/pol/lt-rechnungshof/lrh-berichte/lrh-archiv.htm  

42 Original German language  version: “Der LRH stellte fest, dass der Rechnungsabschluss ordnungsgemäß und 
vollständig erstellt wurde. Der Kassenabschluss war korrekt und der buchmäßig ausgewiesene Geldbestand 
wurde dem LRH durch Bankauszüge nachgewiesen.“ 

24 

 
 
                                                            
61. Finally,  it  is  the  understanding  of  the  Commission  that  such  detailed  audits  to  the 
financial  management  of  Land  Salzburg  were  also  not  an  immediate  concern  of  the 
Landtag at that timeq. 

2.3.  Financial Management of Land Salzburg in the period 2002-2012 

62. This  section  provides  a  description  of  some  of  the  irregularities  that  occurred  in  the 
financial management of Land Salzburg in the period between 2002 and 2012 focusing 
on  the  key  role  of  the  Financial  Department  of  Land  Salzburg  in  those  events,  and 
notably of the Budget Unit. Furthermore, this section aims at clarifying the participation 
of  other  regional  and  national  institutions  on  the  monitoring  of  Land  Salzburg,  on  its 
financing, as well as on the compilation of the national accounts. 

2.3.1. The four-eye principle 

63. The four-eye principle is a fundamental accounting principle, which entails that a certain 
action, i.e. a decision, transaction, etc., must be approved by at least two people in order 
to  be  taken.  That  controlling  mechanism  is  used  to  facilitate  delegation  of  authority,  to 
increase transparency and to make it harder for an individual acting alone to defraud an 
organization. 

64. As  mentioned  earlier,  in  2002  the  Finanzreferent  granted  single  signature  powers  of 
attorney  to  three  employees  of  the  Financial  Department  to  engage  in  financial 
transactions with the SLH. Those powers were further extended in 2003 for an unlimited 
period  of  time,  unlimited  amounts,  and  without  any  restrictions  on  number  of 
transactions or credit institutions with whom they could deal.  

65. As  also  mentioned  earlier,  in  2004  a  memo  from  the  Finanzereferent  exempted  the 
Budget  Unit  from  providing  any  sort  of  information  to  the  Accounting  Unit.  That 
decision was significantly detrimental to the respect of the four-eye principle, given that 
a considerable amount of the financial transactions engaged on behalf of Land Salzburg 
were  undertaken  by  the  Budget  Unit.  Due  to  the  fact  that  single  signature  powers  had 
been granted two years before, that memo implied that financial transactions were neither 
checked a second time internally by the Budget Unit nor checked by the Unit in charge of 
compiling the final accounts of Land Salzburg. Likewise, it became apparent during the 
Commission investigation that the Head of the Budget Unit was able to interfere in the 
bookkeeping records43. 

66. If  the  Internal  Audit  had  not  been  exempted  by  decree  from  monitoring  the  Financial 
Department in 1999, it is likely that it would have been able to point out those failures of 
the internal control procedures. 

43 See endnote k. 

25 

 
 
                                                            
67. Even  though  the  decision  in  the  memo  from  2004  was  finally  changed  in  2008,  some 
transactions were still exempted from the reporting obligations44, notably the transactions 
between  the  core  budget  of  Land  Salzburg  and  the  funds,  namely  the  VuF  and  the 
the 
all 
Landeswohnbaufonds, 
Voranschlagsunwirksame (see section 2.3.3). 

transactions 

as  well 

recorded 

under 

as 

68. In  addition,  the  Head  of  the  Budget  Unit  was,  simultaneously,  also  responsible  for  the 
financial  issues  of  the  Landeswohnbaufonds,r  which  meant  that,  when  transactions 
existed between the two institutions, the Head of the Budget Unit of Land Salzburg was 
the only person involved acting and recording amounts on both sides. That state of affairs 
was also a clear violation of the four-eye principle. 

69. Finally, several statements by the State Office of Land Salzburg indicate that the four-eye 

principle was not respected in the reporting of information flows either45.  

70. Hence,  the  Commission  concludes  that  since,  at  least,  2002,  Land  Salzburg  did  not 
comply with the four-eye principle in the context of the financial management of Land 
Salzburg,  in  several  respects.  That  principle  is  paramount  in  ensuring  sound  financial 
management46.  The  Commission  considers  that  Land  Salzburg's  failure  to  comply  with 
that principle constitutes serious negligence. 

2.3.2. Forging of signatures and falsification of documentation 

71. During  the  Commission  investigation,  the  State  Office  of  Land  Salzburg  informed  the 
Commission  that  many  signatures  were  forged  by  the  aforementioned  Head  of  the 
Budget Unit as a direct consequence of the memo of 2008 introducing the need for some 
of the financial transactions to be signed by two employeess. 

44 See endnote g. 

45 See endnotes  r, s, t and u 

46 For example, the second paragraph of page 24, of the report prepared by the RH in 2013, Land Salzburg  – 
Finanzielle  Lage,  states  that,  "In  financial  management,  the  separation  of  frontoffice  (trade)  and  backoffice 
(settlement and control) is an essential ICS principle which contributes to the quality assurance, making it more 
difficult to act improperly, and ensures compliance with the regulations and the traceability of the transactions." 
The  original  German  version:  "  Im  Finanzmanagement  ist  die  Trennung  von  Frontoffice  (Handel)  und 
Backoffice  (Abwicklung  und  Kontrolle)  ein  wesentliches  IKS–  Prinzip,  das  zur  Qualitätssicherung  beiträgt, 
dolose Handlungen erschwert und die Einhaltung der Vorschriften sowie die Nachvollziehbarkeit der Geschäfte 
gewährleistet." 

Furthermore,  paragraph  9.1,  page  72,  of  the  report  prepared  by  the  RH  in  2013,  Land  Salzburg  –  Finanzielle 
Lage, states that, " Due to the lack of the possibility of observing the four eyes principle, internal control was 
inexistent. Therefore, possible errors could not be detected". In the German version: " Aufgrund der fehlenden 
Möglichkeit, das Vier–Augen–Prinzip einzuhalten, war eine interne Kontrolle nicht gegeben. Dadurch konnten 
mögliche Fehler nicht entdeckt werden." 

26 

 
 
                                                            
72. Furthermore,  when  requested  to  explain  how  it  was  possible  that  some  bank  accounts 
could be concealed from the RH when that entity undertook audits of the State Office of 
Land  Salzburg  (see  section  2.3.3),  the  State  Office  of  Land  Salzburg  explained  that 
minutes and financial statements had also been falsified by the Head of the Budget Unitt. 

73. Similarly, the reports drawn up on the basis of the information prepared by the Budget 
Unit and presented by the Financial Department to the Finanzbeirat were falsified. It was 
ascertained  by  the  Commission  that  that  falsification  might  have  started  from  years 
2005/2006u.  

2.3.3. Extra-budgetary Accounts  

Chart  1:  Cash  flows  in  the  accounts  of  the  State  Office  of  Land  Salzburg  (EUR 
million)47 

74. Chart 1 above shows the recording of cash flows in the accounting of the State Office as 
regards  the  budgetary  accounts  (voranschlagswirksame  Gebarung)  and  extra-budgetary 
Accounts  (voranschlagsunwirksame  Gebarung),  for  the  years  2006  to  2011.  As 
explained above, for the years under analysis, the recording in the voranschlagswirksame 
was  under  the  responsibility  of  the  Accounting  Unit  and  the  reporting  in  the 
voranschlagsunwirksame  was  under  the  responsibility  of  the  Budget  Unit,  even  if,  in 

47 As in page 203 of the report prepared by the RH in 2013, Land Salzburg – Finanzielle Lage  

27 

 
 
 
 
                                                            
principle,  the  bookkeeping  of  both  sets  of  accounts  should  have  been  under  the  sole 
responsibility of the Accounting Unit48. 

75. As can be observed from that chart, at least for the years 2006 to 2011 the growth in the 
inflows  (EIN)  and  outflows  (AUS)  in  the  extra-budgetary  accounts  was  considerably 
higher than the one in the budgetary accounts. 

76. Based on the statements of the State Office of Land Salzburg, the Commission concludes 
that  the  Financial  Department  of  the  State  Office  of  Land  Salzburg  started  to  conceal 
bank accounts under the voranschlagsunwirksame49 from 2003 onwardsv. Even if those 
accounts should only include transition items (flows), stocks of assets and liabilities were 
also  includedw  x,  i.e.  the  debt  of  Land  Salzburg  was  concealed  under  that  accounting 
framework, possibly from 2003 onwards. 

77. Notwithstanding  their  considerable  volume,  the  voranschlagsunwirksame  were  not 
effectively and efficiently monitored by the Accounting Unit of Land Salzburg during the 
years 2002 to 2012y. It would appear that, had those accounts been correctly monitored 
by the Accounting Unit, the irregularities could have possibly been unveiled before 2012. 

78. Furthermore,  those  irregularities  were  only  possible  because  not  all  the  information 
requested by the RH in the context of its audits was provided by the Head of the Budget 
Unitz.  

79. Finally,  the interest  flows  concerning  those  financial  instruments  were  also  recorded  in 
the  voranschlagsunwirksame  and  consequently  were  not  visible  in  the  financial 
statements of Land Salzburgaa. 

80. Table 2 shows the interest payable and receivable in the Austrian national accounts, as it 

was provided to the Commission (Eurostat) by STAT. 

48 This, as shown in section 2.2, was not the case. 

49 See endnote t 

28 

 
 
                                                            
Table 2: Interest receivable and payable of Land Salzburg for years 2002-2012

81. Firstly, it is the understanding of the Commission that the interest payable should have 
been  revised  by  STAT  at  least  also  for  years  2010  and  2011,  along  with  the  revisions 
undertaken to the debt (see Table 1). In a letter sent by STAT to Eurostat on 28 March 
2014 it was stated regarding revisions to years 2010 and 2011: "As one outcome of our 
bilateral  meeting  with  officials  from  Land  Salzburg  it  can  be  taken  for  sure  that  no 
additional  resources  will  be  dedicated  to  further  clarify  earlier  years.  That  means  that 
our estimates will remain unchanged". 

82. Furthermore,  it  is  the  understanding  of  the  Commission  that,  following  the  fact  that  it 
was ascertained that debt is underestimated for years prior to 2010, consequently interest 
payable  may  also  be  misrepresented,  and  as  may  therefore  be  the  Austrian  government 
deficit for those years. 

2.3.4. Lending from the OeBFA to Land Salzburg 

83. As  can  be  observed  in  Table  1,  from  2006  onwards  Land  Salzburg  started  to  obtain 
financing  through  the  lending  from  the  OeBFA.  As  it  was  concluded  from  the  data 
provided  by  STAT,  the funds  lent  by  the  OeBFA  to  Land Salzburg  for  which  the  final 

29 

MEUR20022003200420052006200720082009201020112012National Accounts compilation by STAT  as of 30.09.2013D.41 receivable2828433338413236384071   Land Salzburg2727423231271718151546   Wohnbaufonds11117141517222525ESA D.41 payable567912222119263330   Land Salzburg557911191615162118   Wohnbaufonds0000135491212EDP D.41 payable567912222119263330   Land Salzburg557911191615162118   Wohnbaufonds0000135491212  as of 31.03.2014D.41 receivable2828433338413236384072   Land Salzburg2727423231271718151547   Wohnbaufonds11117141517222525ESA D.41 payable567912222119263376   Land Salzburg557911191615162163   Wohnbaufonds0000135491212EDP D.41 payable567912222119263323   Land Salzburg557911191615162111   Wohnbaufonds0000135491212RevisionsD.41 receivable00000000000   Land Salzburg00000000001   Wohnbaufonds0000000000-1ESA D.41 payable000000000045   Land Salzburg000000000046   Wohnbaufonds00000000000EDP D.41 payable0000000000-7   Land Salzburg0000000000-7   Wohnbaufonds00000000000 
 
 
beneficiary  was 
in 
Voranschlagsunwirksame Erläge50, in the balance sheet of Land Salzburg. 

the  Landeswohnbaufonds  were 

recorded 

the 

item 

84. In a meeting held on 8 September 2010 between STAT and the Budget Unit of the State 
Office of Land Salzburg, STAT explained that all the funds lent by the OeBFA should be 
reported  for  ESA  and  EDP  purposes  as  loan  assets  of  the  federal  government  and  loan 
liabilities  of  the  state  government  concerned.  That  recording  de  facto  also  leads  to  an 
increase  of  the  Finanzschulden,  as  defined  according  to  the Austrian  public  accounting 
guidelines51.  Furthermore,  STAT  informed  the  Budget  Unit  of  Land  Salzburg  that  the 
Voranschlagsunwirksame  is  aimed  at  including  only  transition  items  (transactions, 
flows)52, not a 'permanent' stock of assets and liabilities. 

85. The  recording  of  the  majority  of  the  funds  on-lent  to  the  Landeswohnbaufonds  in  the 
Voranschlagsunwirksame Erläge cannot be considered as a case of misreporting, as it did 
not  affect  the  debt  of  the  Republic  of  Austria,  due  to  the  consolidation  exercise 
undertaken by STAT. Nevertheless, as a general observation, the fact that this item of the 
financial  statements  was  used  to  record  stocks  of  liabilities reflects a  serious  misuse  of 
the accounts and it is surprising that such an easily detectable misuse of the accounts was 
not unveiled by any of the monitoring entities. 

86. However, a part (EUR 166 million; see section 2.1) of the funds lent by the OeBFA to 
Land Salzburg were in fact not reported in any item of the balance sheet53. Even if STAT 
included  those  amounts  in  the  Austrian  Maastricht  Debt  in  accordance  with  their 
consolidations practices54, the absence of those amounts in the balance sheet of the State 
Office  of  Land  Salzburg  amounts  to  a  case  of  false  statement  from  the  State  Office  of 
Land Salzburg to the Austrian statistical and monitoring entities.  

87. Furthermore, it should be stated that consolidation practices do not only involve using the 
most reliable data when realizing that a considerable discrepancy exists, as was done by 
STAT during those years. The best consolidation practices should also concern informing 

50 It, as explained in section 2.1, is meant to include the cash transited through the accounts of Land Salzburg 
that is owed to a third entity. 

51 As can be observed in Table 1, which is based on the balance sheets of the Land Salzburg and which, for 
2012, include those liabilities under the item Finanzschulden, 

52 See footnote 50. 

53  It  follows  from  the  electronic  mail exchange of 27  September  2012  between STAT  and  the  State  Office of 
Land  Salzburg  (namely  the  Head  of  the  Budget  Unit  and  the  Director  of  the  Financial  Department,  with  a 
representative from the OeBFA in copy).  

54 I.e., in case of discrepancies between the information reported by the OeBFA and the information reported by 
Land  Salzburg  concerning  the  on-lending  of  funds,  STAT  used  the  information  reported  by  the  former  in  the 
compilation of the Maastricht debt, as it is considered to be the most reliable information. 

30 

 
 
                                                            
the relevant authorities of the existence of such discrepancies, given that misreporting in 
one item may imply misreporting in other items55.  

88. Likewise, the OeNB has informed the Commission that the compilation practices of the 
OeNB, in the compilation of the financial accounts, involved comparing the raw data on 
lending  received  from  the  OeBFA  with  the  consolidated  information  as  provided  by 
STATbb.  Good  practices  for  consolidation  should  involve  the  comparison  of  two 
independent sets of raw data, rather than the comparison of one set of raw data with an 
output resulting from those same data. In case of the latter, it is improbable that there will 
be inconsistencies as one dataset is derived from the other.  

89. The  role  of  the  LRH  in  the  recording  and  use  of  the  lending  from  the OeBFA  remains 
unclear to the Commission56. On one side, the OeBFA has stated that the cross-checking 
of  the  information  regarding  these  funds  is  the  responsibility  of  the  LRHcc,  but  on  the 
other  side  the  LRH  has  stated  that  that  cross-checking  is  the  responsibility  of  the 
OeBFAdd. Hence, the Commission concludes that, for the period between 2006 and 2012, 
neither the OeBFA nor the LRH monitored the use of the funds or the recording of such 
funds in the accounts of the State Office of Land Salzburg.  

90. Furthermore, on 12 October 2012, after receiving a table from STAT57 that showed the 
debt of Land Salzburg from 2011 onwards, as compiled by STAT (see Table 1, row 3), 
the RH requested further information on the EUR 1 050 million of debt of the 'funds'58, 
asking  more  specifically  to  what  funds  STAT  was  referring.  Whereas,  as  explained  in 
this section, those loans should be recorded in the balance sheet of Land Salzburg as the 
debt  of  Land  Salzburg,  the  Commission  has  not  received  information  on  further 
correspondence exchanged between the two entities on this issue, i.e. the Commission is 
not aware that the RH, in face of that misuse of the accounts of Land Salzburg, further 
raised the issue either with STAT or the State Office of Land Salzburg. 

91. As  mentioned above,  the incorrect reporting of  the lending from  OeBFA did  not  affect 
the debt of the Republic of Austria, due to the standard procedure consolidation exercise 
undertaken  by  STAT.  Nevertheless,  it  is  important  to  stress  that  had  the  statistical  and 
monitoring  authorities  given  more  attention  and  undertaken  active  follow-up  to  these 
inconsistencies  in  due  time,  this  would  automatically  have  led  to  a  closer  and  deeper 

55 In Austria's observations of 25 January  2017 on the preliminary findings of the investigation, STAT claims 
that it has always informed the relevant entities about the consolidation and the adjustments carried out for the 
ESA/EDP compilation purposes. 

56 In Austria's observations of 25 January 2017 on the preliminary findings of the investigation, the OeBFA has 
reiterated that one of the responsibilities of the LRH is to monitor the recording and use of the loans provided by 
the OeBFA to the Länder. 

57 Sent on 2 October 2012 

58 Landesfonds 

31 

 
 
                                                            
analysis  of  the  totality  of   financial  statements  of  the  State  Office  of  Land  Salzburg. 
Thereby  such  an  action  would  have  certainly  unveiled  the  misreporting  at  an  earlier 
stage, given that as explained in section 2.3.3, the debt of Land Salzburg was concealed 
under  the  extra-budgetary  accounts.  As  established  in  this  report,  the  extra-budgetary 
accounts were never subjected to exhaustive analysis. 

2.3.5. Recording of securities (liabilities) 
92. In 2011, STAT was informed by the OeNB59 that the State Office of Land Salzburg had 
borrowed money through the sale of bonds amounting to EUR 300 million in 2010. As 
discussed internally by STAT60, those securities were  not visible in the accounts of the 
State  Office  of  Land  Salzburg  reported  to  STAT.  Even  if  such  an  amount  was  not 
reported  in  the  balance  sheets  of  Land  Salzburg  (in  any  liability  item),  STAT  took  the 
decision to follow the direct data source of the OeNB and hence to include them in the 
debt of Land Salzburg. 

93. When the RH61 inquired into the differences between the debt reported by Land Salzburg 
(Finanzschulden)  and  the  table  produced  by  STAT  depicting  the  debt  of  each  of  the 
Länder, STAT explained to the RH that, among others, the difference included EUR 300 
million regarding securities "that we found nowhere in the Rechnungsabschluss". 

94. This clarification by STAT could have justified an immediate follow-up from the RH, for 
example  by  starting  a  new  audit  procedure.  The  Commission  is  not  aware  that  any 
immediate and urgent follow-up to this issue was undertaken by the RH.  

2.3.6. Financial derivatives 

95. In the written observations to the Commission preliminary findings, Austria argues that 
in  accordance  with  Regulation  (EC)  No  479/2009,  liabilities  arising  from  financial 
derivatives are not part of public debt 62. Although this statement is correct strictu sensu, 
the reason why it is relevant to address the issue of the financial derivatives relates to the 
fact  that  Land  Salzburg  had  to  incur  debt  to  finance  its  investments  in  financial 
derivatives. This is the same debt that was misrepresented in Land Salzburg’s deficit and 
debt data.  

59 Such information included in the security-by-security database of the OeNB was not from the accounts of the 
State Office of Land Salzburg but from the counterpart (i.e. the lender). 

60 Electronic mail of 21 September 2011, provided to the Commission (Eurostat). 

61 Electronic mail of 31 August 2012. 

62 Introduction, point 1.5 of the Commission Staff Working Document accompanying this report. 

32 

 
 
                                                            
96. In  July  2009,  the  RH  issued  an  audit  report63  making  a  comparative  review  of  the 
financing  and  investment  of  the  Federal  Government  and  of  several  Länder  and 
Gemeinde64,  focusing  on  each  of  the  inspected  entities,  among  which  Land  Salzburg. 
That audit report covered the period from 2002 to 2006, but some major developments in 
2007 and 2008 were also taken into account. 

97. Its  Executive  Summary  reads  that,  “Land  Salzburg  carried  out  derivative  transactions 
with  high  volume  and  risk,  without  having  been  adequately  informed,  over  the  entire 
period,  about  the  risks  involved  and  the  overall  risks  of  its  financing.  Detailed  written 
guidelines  as  well  as  ongoing  risk  analysis  and  comprehensive  reviews  of  the  entire 
portfolio  were  introduced  only  around  five  years  after  the  start  of  this  type  of 
transactions. The realised gross income from derivative transactions was equal to EUR 
210,38 million, of which  EUR 65,04 million were transferred to the State budget.”65 

that 

those 

included 

investments  were 

98. In fact, the investment in financial derivatives was undertaken by the Budget Unit in the 
context  of  a  global  policy  of  Land  Salzburg  and  all  the  relevant  concerned  institutions 
were  informed  that  the  Budget  Unit  was  investing  in  such  transactionsee.  It  was  also 
known 
the  Voranschlagsunwirksamen 
Gebarung.66  Notwithstanding  this,  the  Commission  is  not  aware  of  efforts  from  any  of 
the relevant institutions in  Land Salzburg  (Landtag,  LRH, State  Government, and State 
Office) to closely follow up on the recommendations of the RH and it has also concluded 
in  this  report  that  in  fact  the  Voranschlagsunwirksamen  Gebarung  was  not  effectively 
monitored.  Had  Land  Salzburg’s  relevant  institutions  closely  followed  up  on  the 
recommendations  of  the  RH  to  monitor  the  use  of  such  financial  instruments,  the 
Voranschlagsunwirksamen  Gebarung  would  have  been  the  target  of  effective  control, 
and consequently the misrepresentation of debt would most certainly have been avoided. 

in 

99. Finally, and taking into account partly the publicity of the reports from the RH, partly the 
fact  that  sizeable  cross-currency  swaps  existed  between  OeBFA  and  Land  Salzburg,  as 
well  as  other  Länder,  the  Commission  is  surprised  to  find  that,  for  the  years  under 
analysis,  no  flows  or  stocks  of  financial  derivatives  were  reported  in  national  accounts 

63 Finanzierungsinstrumente der Gebietskörperschaften mit Schwerpunkt Land Salzburg, 
http://www.rechnungshof.gv.at/fileadmin/downloads/2009/berichte/teilberichte/salzburg/sbg_2009_03/Sbg_200
9_3_2.pdf  

64 Local municipalities 

65Original  German  language  version:  Das  Land  Salzburg  führte  Derivativgeschäfte  mit  hohem  Volumen  und 
Risiko  durch,  ohne  über  den  gesamten  Zeitraum  über  die  damit  verbundenen  Risiken  und  die  Gesamtrisiken 
seiner  Finanzierungen  ausreichend  informiert  gewesen  zu  sein.  Ausführliche  schriftliche  Richtlinien  sowie 
laufende Risikoanalysen und umfassende Bewertungen des gesamten Portfolios wurden erst rd. fünf Jahre nach 
Aufnahme der Geschäfte eingeführt. Das erzielte Bruttoergebnis aus Derivativgeschäften von 210,38 Mill. EUR 
wurde in Höhe von 65,04 Mill. EUR dem Landeshaushalt zugeführt. 

66 See endnote t. 

33 

 
 
                                                            
for  the  whole  S.1312  sector  (state  government  sector),  even  if  OeBFA  would  most 
certainly have informed the statistical authorities about these cross-currency swaps. 

2.4.  Description of the events in the period between May 2012 and December 2012 

100.  According to the internal communications that the RH had access to and as confirmed 
by  the  Commission  during  its  investigation  in  Austria  between  the  26  and  the  28  of 
September 2016, the events unfolded as follows: 

  According to the RH report published on 9 October 2013, the Director of the Financial 
Department informed the head of the Staff Department in May 2012 that the Head of 
the Budget Unit had acted against the State Office’s policy and service instructions;  

  On  17  July  2012,  the  Finanzreferent  was  informed  of  those  facts,  withdrew  the 
powers of attorney of the Head of the Budget Unit for the conduction of transactions 
and cancelled some transactionsff. In addition, from that day onwards, the Head of the 
Budget Unit took leave until 12 September 2012; 

  On 23 August 2012, Land Salzburg sent its opinion on the follow-up report of the RH 
to the RH. None of those revealed facts67 were mentioned in that opinion from Land 
Salzburg to the Austrian Federal Court of Auditorsgg hh; 

  On  1  September  2012,  the  Finanzreferent  and  the  Director  of  the  Financial 
Department hired a new employee68 to investigate further the financial statements of 
Land Salzburg; 

 

 

In  early  October  2012,  the  Director  of  the  Financial  Department  informed  some 
employees of the Financial Department that the portfolio analysed by them was in fact 
just a part of the total portfolio, i.e. that a part of the portfolio had been concealedii; 

In  the  second  half  of  October  2012,  the  Finanzreferent  and  the  Director  of  the 
Financial  Department  jointly  decided  on  the  termination  of  foreign  currency 
transactions and other transactionsjj. The new employee hired on 1 September 201269 

67 I.e., that the Head of the Budget Unit had acted against the State Office’s policy and service instructions, that 
the powers of attorney of the Head of the Budget Unit had been withdrawn and that some transactions had been 
early terminated. 

68 That employee was a former employee of the Deutsche Bank who had arranged financial transactions between 
the Deutsche Bank and Land Salzburg since 2002. 

69 Page 34, of the report prepared by the RH in 2013, Land Salzburg – Finanzielle Lage, the original language 
version," Der zuständige Finanzreferent Mag. David Brenner und der Leiter der Finanzabteilung vereinbarten 
am 15. Oktober 2012 die Auflösung der meisten Fremdwährungsgeschäfte und eines großen Teils der übrigen 
Geschäfte  ohne  Nachteil  für  den  Rechnungsabschluss.  Protokolle  über  diese  Vereinbarung  sowie  über 
Gespräche  mit  dem  Finanzbeirat  konnten  nicht  vorgelegt  werden.  Der  Vereinbarung  lag  keine  schriftliche 
Strategie  zugrunde.  Von  Oktober  bis  Dezember  2012  beendete  das  Land  rd.  300  Finanzgeschäfte  (davon  245 
34 

 
 
 
                                                            
was  mandated  to  undertake  such  early  cancellation  of  transactions  and  positions. 
Among others, financial derivative positions with the Deutsche Bank were cancelled, 
resulting in a loss of EUR 56 million for Land Salzburg70; 

  On  23  October  2012,  the  Director  of  the  Financial  Department  reported  to  the 
Financial  Advisory  Board  the  existence  of  additional  financial  transactions  that  had 
not hitherto been mentioned in the portfolio report addressed to that board. 

  On early November 2012, the Head of the Budget Unit denied having been involved 
in  risky  transactions  on  behalf  of  Land  Salzburg  when  questioned  by  the 
Finanzreferent,  the  Director  of  the  Financial  Department  and  the  Head  of  the  LRH. 
She declared her non-involvement again before the Landtagkk; 

  On 26 November 2012, the Head of the Budget Unit acknowledged to her immediate 
superiors to have hidden a book loss of EUR 340 million in financial investments and 
was consequently dismissed71; 

101.  On  6  December  2012,  the  Finanzreferent  of  Land  Salzburg,  the  Director  of  the 
Financial  Department  and  the  Head  of  the  LRH,  announced  in  a  press  conference  that 
“we  have  been  deceived”  ("Wir  sind  getäuscht  worden").  In  summary,  they  announced 
that Land Salzburg suffered a “purely accounting loss” of EUR 340 million in financial 
derivative investments, namely by means of currency and interest rate swap contracts. It 
was also made clear in the press conference that state and federal monitoring mechanisms 
had failed.72 

102. 

In  the  morning  of  the  same  day,  i.e.  6  December  2012,  the  follow-up  report  was 
published  by  the  RH73  and  presented  in  a  press  conference74.  Because  relevant 

Derivate) vor Ablauf ihrer Fälligkeit. Die Abwicklung und Entscheidung über die Auflösung der Einzelgeschäfte 
lag im Ermessen eines einzelnen Mitarbeiters." 

70 Pages 166-167, of the report prepared by the RH in 2013, Land Salzburg – Finanzielle Lage, 

71 Page 67, of the report prepared by the RH in 2013, Land Salzburg – Finanzielle Lage 

72 http://www.salzburg.com/nachrichten/salzburg/politik/sn/artikel/finanzskandal-in-salzburg-340-mill-verlust-
durch-spekulationen-38965/  

73 Finanzierungsinstrumente der Gebietskörperschaften in den Ländern Burgenland und Salzburg; Follow-up-
Überprüfung , http://www.rechnungshof.gv.at/berichte/ansicht/detail/finanzierungsinstrumente-der-
gebietskoerperschaften-in-den-laendern-burgenland-und-salzburg-follow-up-ueberpruefung-1.html 

74 This follow-up report concluded that, "The Land Salzburg implemented almost all the recommendations of the 
RH.  However,  it  continued  to  deal  with  complex,  risky  derivative  transactions  to  generate  additional  income. 
However, the risk positions were significantly reduced by the conclusion of additional hedging transactions." In 
the German version: " Das Land Salzburg setzte fast alle Empfehlungen des RH um. Es schloss jedoch weiterhin 
komplexe  -  mit  Risiko  behaftete  -  Derivativgeschäfte  ab,  um  dadurch  zusätzliche  Erträge  zu  erwirtschaften. 
Allerdings wurden durch den Abschluss zusätzlicher Sicherungsgeschäfte die Risikopositionen stark reduziert." 

35 

 
 
                                                                                                                                                                                         
information had been concealed from the RH, the follow-up report was misleading as to 
the real state of affairs.  

103. 

It appears therefore that from May to December 2012 (i.e., for more than 6 months) 
the State Government of Land Salzburg, which at that stage was at least partly informed 
of the facts, concealed relevant information that it was obliged to provide at least to the 
RH, the statistical authorities and possibly to other bodies. Instead, from the second half 
of October about 300 financial investments were terminated early by the administration 
and government of Land Salzburg75, at the discretion of one member of the staff. 

104. 

It  was  only  on  22  January  2013  that  the  State  Office  of  Land  Salzburg  and  STAT 
officially discussed  the issue of the existence of  manipulations in  the accounts of Land 
Salzburg.  

105.  The  Commission  concludes  that  the  concealment  of  relevant  information  by  the 
officials of the financial management area and the government of Land Salzburg to the 
RH  between  May  2012  and  December  2012  was  also  the  cause  for  the  incorrect  and 
incomplete conclusions of the RH 2012 follow-up report, which was ultimately published 
on 6 December 2012. 

2.5.  December 2012 to October 2013: the facts as recorded by STAT 

106.  According  to  internal  STAT  communications  and  to  statements  provided  by  the 
concerned entities to which the Commission was given access during its investigation in 
Austria between the 26 and the 28 of September 2016, it has been ascertained that: 

 

In the context of the press conference of Land Salzburg on 6 December 2012, STAT 
became aware of potential problems with the data in Land Salzburgll; 

  During  the  Commission  investigation  STAT  stated  that,  for  the  period  between 
December  2012  and  May  2013,  no  information  was  exchanged  between  Land 
Salzburg and STAT on the issuemm; 

  From  10  December  2012,  STAT  started  receiving  questions  by  the  BMF  on  the 

accounts of Land Salzburg, notably on its debt; 

  On 22 January 2013, the State  Office  of Land  Salzburg  and STAT exchanged  some 
electronic mails. In one of these electronic mails, STAT states: "For our part, we are 
very interested in the interim reports on the finances of Land Salzburg in order to get 

75 Page 34, of the report prepared by the RH in 2013, Land Salzburg – Finanzielle Lage, in the original German  
language version, states: "Von Oktober bis Dezember 2012 beendete das Land Salzburg rd. 300 Finanzgeschäfte 
(davon 245 Derivate) vor Ablauf der Fälligkeit ohne konkrete schriftliche Strategie." 

36 

 
 
                                                            
a picture of the changes/revisions that have come to us, or to what misreporting and 
manipulations we have been exposed76." 

  On 30 January 2013, STAT proposed to have a meeting with the State Office of Land 
Salzburg, in STAT's premises, albeit stating that that meeting could be no earlier than 
on the first week of March 2013; 

  On 31 January 2013, after having read in the press about the material use of financial 
derivatives in the Austrian Länder, Eurostat took the initiative to contact STAT. The 
issues  discussed  in  that  conversation  concerned  the  generic  accounting  treatment  of 
financial  derivatives  in national  accounts.  In  that  context,  the  Länder Lower  Austria 
and Salzburg were mentioned by STAT as Länder using such financial instruments. In 
that  conversation,  STAT  informed  Eurostat  that  meetings  with  those  Länder  were 
being  prepared  to  discuss  general  issues,  including  the  use  of  financial  derivatives. 
However,  at  no  point  during  the  conversation  was  there  any  mention  of  the  alleged 
unlawful  behaviour  of  Land  Salzburg  officials  or  of  misreporting  of  operations 
(hidden  bank  accounts  or  debt)  of  Land  Salzburg  or  the  existence  of  previously 
unreported financial derivatives;  

  On 5 March 2013, there was a bilateral meeting between STAT and the State Office 

of Land Salzburg in Vienna; 

  On  27  March  201377,  the  State  Office  of  Land  Salzburg  informed  STAT  that, 
following a report by an external independent private auditor, it had been ascertained 
that  the  consolidated  liabilities  of  Land  Salzburg  amounted  to  EUR  3  507  million, 
although  no  breakdown  of  that  amount  could  be  provided.  The  Commission  is 
unaware  of  any  specific  urgent  and  proportionate  follow-up  having  taken  place  in 
order to ascertain the real amount and nature of these liabilities; 

 

In  April  2013,  Eurostat  and  STAT  discussed,  under  the  regular  request  for 
clarification, the April 2013 EDP notification regarding Austria, where again Eurostat 
took the initiative to enquire on the general recording of financial derivatives on the 
Austrian  Länder.  In  its  replies  to  Eurostat's  questions,  STAT  once  again  did  not 
mention the alleged unlawful behaviour of Land Salzburg officials or misreporting of 
operations.  Furthermore,  STAT  wrote  that  it  could  not  provide  any  quantitative 
information, but that it did not expect major revisions to the EDP debt data regarding 
the use of derivatives in the Austrian Länder. 

76 In the original German language version: "Wir unsererseits waren sehr interessiert an den Zwischenberichten 
über die Finanzen des Landes Salzburg, um uns ein Bild zu machen von den Änderungen/Revisionen die auf uns 
zukommen, bzw. welchen Machinationen und Manipulationen wir da aufgesessen sind." 

77 Four days before the April 2013 EDP notification. 

37 

 
 
                                                            
  On  7  May  2013  a  meeting  took  place  between  STAT  and  the  State  Office  of  Land 
Salzburg.  In  that  meeting,  STAT  recognized  that  there  might  be  problems  with  the 
recording  of  derivatives  and  debt  in  Land  Salzburgnn.  STAT  and  the  State  Office  of 
Land  Salzburg  agreed  that  a  full  set  of  public  accounts  data  for  2012  should  be 
transmitted to STAT at the end of August 2013oo 

 

 

In August 2013, Land Salzburg transmitted only flows (no stocks) to STATpp; 

In  September  2013,  still  in  the  absence  of  annual  data,  STAT  used  quarterly  data 
provided by Land Salzburg to compile the ESA/EDP data qq; 

  For  the  whole  period  between  6  December  2012  and  9  October  2013  there  was  no 
communication  between  the  RH,  which  was  already  investigating  the  issue,  and 
STATrr; 

  On 9 October 2013 the RH published, its report "Land Salzburg - Finanzielle Lage"; 

  On 10 October 2013, the issue is brought to the attention of Eurostat for the first time, 

i.e. ten months after the issue had been brought to the attention of STAT; 

  On  11  October  2013,  STAT  sent  its  first  comments  to  Eurostat  on  the  RH  report, 

published on 9 October 2013, on the financial situation of Land Salzburg; 

  On 21 October 2013, Eurostat published its News Release on government deficit and 

debt, expressing a reservation on the quality of the data reported by Austria78; 

  On 31 March 2014, STAT reported the April 2014 EDP notification to Eurostat. The 
level  of  Land  Salzburg's  contribution  to  Maastricht  debt,  for  2012,  was  revised 
upwards by EUR 1 192 million to EUR 3 507 million, i.e., exactly the amount which 
had been signalled by the State Office of Land Salzburg to STAT on 27 March 2013; 

  On 23 April 2014, Eurostat withdrew its reservation on the Austrian data. 

2.5.1.  Information of the Commission 

107.  The  chronology  of  events  shows  that  STAT  informed  the  Commission  (Eurostat) 
about the misreporting in Land Salzburg only on 10 October 2013. Nevertheless, it has 
been ascertained that STAT was gradually informed about those facts from 6 December 

78 "Eurostat is expressing a reservation on the quality of the data reported by Austria, due to uncertainties on 
the statistical impact of the conclusions of the Federal Audit Office's report on the Land Salzburg, published on 
9 October 2013. The report revealed deficiencies with regard to financial management and to completeness of 
the  public  accounts  of  the  Land  Salzburg.  The  statistical  implications  of  the  audit  for  EDP  data  are  being 
investigated by Statistics Austria in collaboration with Eurostat, in order to clarify the precise impacts on 2012 
and also on preceding years. It is possible that this will lead to an upward revision of government debt of up to 
half a percent of GDP, with more minor revisions to the government deficit, based on the information available 
at this point." 

38 

 
 
                                                            
2012  onwards.  In  particular,  it  was  clear  to  STAT  at  least  since  22  January  2013  that 
"misreporting and manipulations" had occurred in Land Salzburg. 

108.  Even  if  in  Austria’s  observations  of  25  January  2017  on  the  preliminary  findings  of 
the investigation STAT has argued that it informed Eurostat about the misrepresentation 
in  Land  Salzburg  on  31  January  201379,  the  records  prove  that  this  statement  is 
inaccurate. Firstly, such communication occurred at the initiative of Eurostat, and not by 
STAT  pro-actively  informing  Eurostat.  The  records  also  show  that  the  information 
shared by STAT contained no information or insight on the alleged unlawful behaviour 
of  Land  Salzburg  officials  or  on  the  misreporting  of  operations.  In  fact,  it  simply 
followed up on the press conference by the RH of 6 December 2012 – not on the one by 
Land Salzburg on the same day – regarding the publication of the RH's follow-up review 
on the use of financial derivatives in the Austrian Länder, which for the reasons already 
explained contained no insight or information on the misrepresentation in Land Salzburg. 

109.  Moreover, on the basis of information provided by the State Office of Land Salzburg 
concerning  the  results  of  an  independent  external  audit,  it  should  have  been  clear  to 
STAT, at least since 27 March 2013, that the level of debt of Land Salzburg could in fact 
be considerably larger than previously estimated by STAT. Given that STAT would, four 
days later, report data to Eurostat in the context of the April 2013 EDP notification, it is 
the opinion of the Commission that an immediate and urgent practical follow-up should 
have been undertaken by STAT after receiving that information from Land Salzburg. It 
appears  that  such  steps  were  not  taken.  Furthermore,  even  if  in  such  a  short  period  it 
would not be possible to give the issue a comprehensive follow-up, since it may not have 
been absolutely clear to STAT what kind of financial instruments were included in this 
amount,  it  is  the  opinion  of  the  Commission  that,  under  the  principle  of  due  diligence, 
STAT  should  have  informed  Eurostat  immediately  after  27  March  2013  about  the 
amount provided by the State Office of Land Salzburg to STAT.  

110. 

Informing Eurostat could have served the purpose, at least, to bilaterally discuss how 
to  proceed  with  that  issue  and  whether,  in  the  absence  of  more  detailed  information, 
either to use the quantitative information provided by Land Salzburg as a proxy for the 
necessary  correction  of  the  Maastricht  debt  or,  on  the  other  side,  to  lead  Eurostat  to 
express a reservation on Austrian data due to the uncertainty involved. 

111.  The  argument  of  STAT  that  it  had  fully  informed  Eurostat  at  least  from  31  January 
2013  is  inconsistent  with  its  statement  that  it  had  not  exchanged  any  information  with 
Land  Salzburg  before  May  2013.  On  the  other  side,  STAT's  statement  that  it  had  not 
exchanged  any  information  with  Land  Salzburg  before  May  2013  is  incompatible  with 
the  information  it  exchanged  with  the  State  Office  of  Land  Salzburg,  at  least,  on  22 
January and 27 March 2013. 

79 Paragraph B.18 of the observations from STAT, Annex II of the accompanying Commission Staff Working 
Document. 

39 

 
 
                                                            
112.  Additionally,  even  when  enquired,  during  the  April  2013  EDP  notification,  about 
further  information  regarding  the  use  of  financial  derivatives  in  the  Austrian  Länder, 
STAT decided not to share with Eurostat the quantitative information it had received on 
27 March 2013 from the State Office of Land Salzburg. 

113.  Finally, even if STAT states that on 7 May 2013 it had recognized that there might be 
issues with the reporting of EDP debt from Land Salzburg, it again decided not to share 
that  information  with  Eurostat  –  which  ultimately  only  happened  in  October  2013. 

40 

 
 
3.  ASSESSMENT OF FINDINGS 

114.  This report shows that severe irregularities took place in the compilation, control and 
reporting  of  financial,  as  well  as  non-financial,  transactions  in  Land  Salzburg  over  a 
significant period of time. Public accounting rules were not complied with, control was 
lacking, the four-eye principle was not respected, financial and non-financial transactions 
were  not  appropriately  reported,  recommendations  from  the  RH  were  ignored, 
documentation was falsified, signatures were forged and misleading information was sent 
to the national statistical authorities as well as to the RH, leading to the misreporting of 
the financial accounts, and hence to the misreporting of the debt data for Austria at least 
from 2008.  

115.  The  misreporting  of  financial  transactions  and  the  concealment  of  bank  accounts 
started  in  2003.  The  granting  of  powers,  in  2002,  to  the  Director  of  the  Financial 
Department  and  to  two  employees  of  the  Budget  Unit,  led  to  a  situation  where  it  was 
possible  to  conclude  high-risk  financial  transactions  and  to  open  hundreds  of  bank 
accounts which were concealed in the accounting systems of Land Salzburg. 

116.  During  the  same  period  of  time,  the  Internal  Audit  and  the  Accounting  Unit  in  the 
State  Office  of  Land  Salzburg  were  exempted  by  decree  or  barred,  respectively,  from 
analysing the transactions of the Budget Unit and from analysing the recording of those 
transactions in the financial statements.  

117.  Similarly,  between  2002  and  2012,  neither  the  LRH  nor  the  RH  conducted  any 
effective in-depth audit of the financial accounts of Land Salzburg. In particular, they did 
not  audit  the  voranschlagsunwirksame  Gebarung  which,  as  shown  in  Chart  1  and  in 
section  2.3.3.,  reached  more  than  EUR  26  billion  of  inflows  and  outflows  in  2011  and 
included  de  facto  all  the  unreported  transactions  and  stocks,  while  in  principle  they 
should have included only extra-budgetary flows and not Maastricht-relevant liabilities. 

118.  Those irregular practices were made public in 2012, following a press conference held 
on 6 December 2012 by the Finanzreferent, the Director of the Financial Department and 
the Head of the LRH of Land Salzburg. This report also shows that the facts could have 
been  unveiled  earlier,  had  relevant  information  been  made  fully  available  by  the  State 
Office of Land Salzburg to the monitoring, judicial and statistical authorities. 

119.  Furthermore, this report also demonstrates that the Commission (Eurostat) could and 

should have been informed by STAT several months earlier about those facts. 

3.1.  Conclusions regarding the main actors involved in the events described 

120.  The main actors involved in the events described in this report are the State Office and 
in  particular  its  Budget Unit,  the  State  Government,  the  Landtag and  the  LRH  of  Land 
Salzburg,  the  RH,  the  OeBFA,  the  OeNB  and  STAT.  The  representatives  of  all  the 
entities  interviewed  have  been  helpful  and  fully  cooperative  with  the  Commission 

41 

 
 
investigation  team,  providing  the  Commission  all  requested  information  which  was 
necessary for the investigation. 

121.  The State Office of Land Salzburg, which has under its responsibility, among others, 
the  Internal  Audit,  the  Accounting  Unit  and  the  Financial  Department  (notably  the 
Budget Unit), should be considered as the main responsible for the fact that financial and 
non-financial accounts were misreported since, at least, 2008. 

122.  On  the  one  side,  the  Internal  Audit  of  the  State  Office  of  Land  Salzburg  failed  to 
check  the  internal  control  procedures  and  the  risk  management  of  the  Financial 
Department.  On  the  other  side,  the  Accounting  Unit  failed  to  control  the  bookkeeping 
records, both for the budgetary accounts and for the non-budgetary accounts. 

123.  The findings of the report demonstrate that the Financial Department, and notably the 

Budget Unit: 

 

Ignored  the  recommendations  of  the  RH80,  concerning  the  risky  investments  being 
undertaken; 

  Did not respect the four-eye principle in the course of its activities, namely concerning 
the opening of bank accounts and other financial positions, as well as in the context of 
the financial management of the Landeswohnbaufonds;  

  Forged signatures when entering into financial transactions; 

  Failed to follow basic accounting principles; 

  Falsified the minutes of the  Finanzbeirat meetings sent to the RH in order to give a 

better impression of Land Salzburg’s financial situation; 

  Falsified  the  financial  statements  sent  to  the  RH  in  the  context  of  the  audits  of  the 

latter of the financial management of Land Salzburg; 

  Concealed bank accounts since, at least, 2003; 

 

 

Incorrectly compiled the financial statements of Land Salzburg, notably by showing, 
in 2012, in the Finanzschulden, an amount of liabilities of EUR 874 million, whereas 
the actual amount was of EUR 3 507 million; 

Incorrectly depicted the financial statements sent to the statistical authorities, leading 
to the concealment of EUR 1 192million in debt in 2012; 

80 Finanzierungsinstrumente der Gebietskörperschaften in den Ländern Burgenland und Salzburg; Follow-up-
Überprüfung , http://www.rechnungshof.gv.at/berichte/ansicht/detail/finanzierungsinstrumente-der-
gebietskoerperschaften-in-den-laendern-burgenland-und-salzburg-follow-up-ueberpruefung-1.html  

42 

 
 
                                                            
  Provided  false  declarations  to  STAT,  notably  concerning  the  borrowing  through  the 
issuance of securities. Furthermore, it insisted with STAT that such financial positions 
should not be included in the debt of Land Salzburg; 

  Manipulated  Land  Salzburg’s  accounts  for  several  years,  concealing  and/or 
misreporting  revenues,  expenditures,  financial  transactions,  financial  positions  and 
cash movements. 

124.  The  role  of  the  Landtag  of  Land  Salzburg  in  the  events  described  consisted  in 
adopting  article  IV  of  the  State  Budget  Law  of  2006,  which  essentially  gave  the 
permission  to  the  financial  management  of  Land  Salzburg  to  engage  in  high-risk 
financial  transactions,  where  an  economic  advantage  for  the  State  could  be  expected. 
Furthermore, the Landtag did not appear to follow the recommendations regarding high-
risk  financial  transactions  made  in  2009  by  the  RH,  nor  did  it  encourage  the  LRH  to 
undertake in-depth audits of the accounts of Land Salzburg. 

125.  The role of the State Government, and more specifically that of the Finanzreferenten, 
consisted  partly  in  granting  powers  of  attorney  to  three  employees  of  the  Financial 
Department  to  engage  in  high-risk  investments  from  2002  onwards  and  partly  in 
exempting the activities of the Budget Unit from being audited by the Internal Audit, in 
particular  related  to  the  internal  accounting,  public  accounts  and  internal  control 
procedures, and the Accounting Unit of Land Salzburg. Moreover, powers were granted 
to  the  Head  of  the  Budget  Unit  to  undertake  financial  transactions  on  behalf  of  the 
Landeswohnbaufonds,  which  meant  that  whenever  that  fund  entered  into  transactions 
with  the State Office, the same employee was acting  on behalf of both  entities  without 
being  monitored  by  other  persons  or  entities.  Those  powers  are  to  be  considered  as, 
possibly,  the  most  important  factor  contributing  to  the  development  of  the  situation 
described in this report.  

126.  Furthermore, from May to December 2012, the State Government and the State Office 
of  Land  Salzburg  were  informed  that  irregularities  in  the  financial  management  had 
occurred, and were internally investigating the issue. Nevertheless, those entities did not 
inform the RH, which at the time was concluding its follow-up on an audit report to Land 
Salzburg, or the judicial or the statistical authorities about those events and findings.  

127.  Additionally,  during  that  period,  the  State  Government  of  Land  Salzburg  decided  to 
terminate  hundreds  of  financial  investments  early,  which  had  not  previously  been 
recorded  in  the  accounts.  In  order  to  accomplish  the  early  terminations,  a  former 
employee of Deutsche Bank was hired. That same person had for several years been the 
counterpart of the Budget Unit of Land Salzburg in the high-risk investments which were 
undertaken with the Deutsche Bank. 

128.  The  LRH  failed  to  effectively  and  efficiently  audit  the  activities  of  the  Financial 
Department and hence the accounts of Land Salzburg. Even if it has been argued that, at 
the time, the LRH did not have the necessary capacity to undertake in-depth analysis of 

43 

 
 
the  accounts  of  Land  Salzburg,  it  would  have  been  possible  to  undertake  some  simple 
basic  checks,  notably  a  cross-check  between  information  on  lending  provided  by  the 
OeBFA and the information published in the balance sheets of Land Salzburg. Moreover, 
it  has  been  established  in  section  2.2.3  that  the  reports  published  by  the  LRH  on  the 
accounts  of  Land  Salzburg,  for  the  years  2008  and  2011,  contained  some  incorrect 
statements. 

129.  After 31 August 2012, the RH failed to effectively follow up on the discrepancies it 
had found in the accounts of Land Salzburg as pointed out by STAT concerning the EUR 
300 million in securities that were not reported in the balance sheets of Land Salzburg. 

130.  The OeNB failed to report financial derivatives to the Commission (Eurostat), in the 
transmission of the Austrian financial accounts81. Furthermore, its consolidation practices 
regarding the financial accounts were ineffective82. 

131.  The role of STAT in the events described concern both its responsibilities as the main 
Austrian statistical authority as well as its reporting duties to the Commission (Eurostat). 
Firstly,  at  least  from  2010,  STAT  acknowledged  the  existence  of  discrepancies  in  the 
accounts  of  Land  Salzburg,  namely  concerning  the  comparison  of  Land  Salzburg's 
balance sheets with lending information from the OeBFA and with securities information 
from  the  security-by-security  database  provided  by  the  OeNB.  Even  if  STAT  correctly 
implemented  in  the  context  of  the  EDP  notifications  the  necessary  changes  to  the  data 
provided by the State Office of Land Salzburg, it is the opinion of the Commission that, 
under  the  principle  of  due  diligence,  other  relevant  Austrian  entities,  notably  the  BMF 
and the RH, should have been informed. 

132.  Secondly, and more importantly, even if STAT was fully informed, at least since 22 
January 2013, that misreporting and manipulation had occurred in the accounts of Land 
Salzburg, it failed to immediately inform the Commission (Eurostat) of those facts. As a 
result, Eurostat approved without any reservation the figures covering years 2009 to 2012 
provided  in  the  context  of  the  April  2013  EDP  notification,  although  they  were  in  fact 
incorrect. 

81 In Austria’s observations of 25 January 2017 on the preliminary findings of the investigation the OeNB states 
that  it  has  no  legal  obligation  to  report  data  to  Eurostat,  either  under  European  or  national  legislations. 
Nevertheless, the reporting of the Austrian ESA Table 27 to Eurostat was de facto undertaken by the OeNB until 
September 2014. Furthermore, all questions in the context of the verification of ESA Table 27 made by Eurostat 
were  answered  by  the  OeNB,  showing  that  the  OeNB  had  an  effective  and  operational  responsibility  for  that 
table. 

82 See section 2.3.4. 

44 

 
 
                                                            
4.  CONCLUSIONS 

133.  On the basis of all the facts and reasoning described in this report, it can be concluded 
that  the  LRH  and  State  Office  and  State  Government  of  Land  Salzburg,  i.e.  entities 
within the general government sector of the Republic of Austria, were seriously negligent 
in not ensuring appropriate compilation controls and reporting procedures. Thereby those 
entities  facilitated  the  fact  that  the  Budget  Unit  of  the  State  Office  of  Land  Salzburg 
could misrepresent and conceal financial transactions, leading to the misrepresentation of 
the actual data in the EDP notifications of 2012 and 2013 of Austria’s debt data regarding 
2008-201283 to Eurostat, i.e. after the entry into force of Regulation (EU) 1173/2011. 

134.  Although  the  conclusions  regarding  the  main  actors  in  section  3.1.  above  would 
indicate that the Budget Unit of the State Office of Land Salzburg had a clear intent to 
conceal  and  falsify  information,  the  Commission  does  not  find  that  those  actions  were 
undertaken  with  the specific intent of  manipulating the EDP deficit and debt  indicators 
presented  to  the  Commission  (Eurostat).  Therefore  the  Commission  considers  that  the 
behaviour  of  Budget  Unit  of  the  State  Office  of  Land  Salzburg  amounts  to  serious 
negligence. 

135.  Finally,  the  report  concludes  that  whereas  the  Commission  (Eurostat)  was  only 
informed of this case on 10 October 2013, the Austrian statistical authorities were aware 
of the possibility of misrepresentation of the accounts of Land Salzburg since, at least, 6 
December  2012.  In  addition,  the  report  concludes  that  both  Statistics  Austria  and  the 
Austrian  Central  Bank  were  aware  of  sizeable  inconsistencies84  in  the  data  reported  by 
Land Salzburg, before the so-called 'financial scandal' became public at the end of 2012. 

136.  As  a  result,  the  data  sent  by  Austria  to  Eurostat  in  the  context  of  the  EDP  2013 
notification exercises were incomplete, insofar as significant amounts of liabilities were 
not reported, leading to the revision of the reported government Maastricht debt by EUR 
1  192  million  in  the  April  2014  EDP  notification  exercise,  for  the  year  2012, 
corresponding to 0.4% of GDP. 

137.  Based on the findings in this report and regarding the behaviour of the authorities of 
the  Member  State  in  the  period  from  13  December  2011  until  the  launch  of  the 
investigation on 3 May 2016, the Commission has decided to adopt a recommendation to 
the Council to impose a fine on the Republic of Austria, as foreseen in Regulation (EU) 
No 1173/2011. 

83 Namely the aggregated number of reported years for the reporting in 2012 (for years 2008-2011) and in 2013 
(for years 2009-2012), following the formula that data provided in year n concern years n-1, n-2, n-3 and n-4.  

84  The  statistical  authorities,  according  to  the  knowledge  of  the  Commission,  have  never  analysed  if  those 
inconsistencies were based on purely conceptual issues. In fact, the Commission has established that a material 
amount of such inconsistencies actually did not relate to such differences in concepts between Maastricht debt 
and national debt definitions. 

45 

 
 
                                                            
ENDNOTES 

a For the video of that press conference see: http://www.salzburg.com/nachrichten/salzburg/politik/sn/artikel/finanzskandal-
in-salzburg-340-mill-verlust-durch-spekulationen-38965/ 

b In the meeting held between the Commission and STAT on 26 September 2016, 

Commission: "In April 2014 you notified an increase of debt of around Euro 1.2 billion, which means that STAT 
was estimating the debt of Land Salzburg at around Euro 2.3 billion. However, Land Salzburg was reporting in 
its  balance  sheet  only  around  Euro  1.4  billion  of  debt.  How  could  STAT  estimate  this  without  knowing  the 
figures?" 
STAT:  "We  had  the  information  on  the  Rechtsträgerfinanzierung  from  OeBFA  and  we  know  that  the 
Wohnbaufonds  received  a  part  of  the  amounts  provided  via  the  Rechtsträgerfinanzierung.  We  used  the 
information provided by OeBFA and not the information directly provided by Land Salzburg." 
Commission: "Do these figures include only the debt of Land Salzburg as an institutional unit or did they also 
include the debt of other units that compose the 'Salzburg State' in National Accounts?" 
STAT: "The Euro 2.3 billion also included the debt of the Wohnbaufonds.  
Commission:  "Where  is  the  Wohnbaufonds  classified  in  national  accounts?  How  are  considered  in  national 
accounts the loans provided by OeBFA and passed through the State Office (core budget) to the Wohnbaufonds 
(extra-budgetary unit)" 
STAT:  "The  Wohnbaufonds  is  classified  in  the  government  sector  and  the  amounts  provided  via  the 
Rechtsträgerfinanzierung are directly allocated to the Wohnbaufonds." 
STAT: "The data provided by the reporting units are checked with the data coming from OeBFA and in case 
these data do not match we adjust it to reflect the OeBFA side." 
Commission: "And for the years in question, 2002-2012, did STAT ever notice relevant discrepancies between 
the data reported by OeBFA and the data reported by Land Salzburg." 
STAT: "Yes, always." 

c On the meeting held between the Commission and STAT on 26 September 2016, when asked what the powers 
of  STAT  are  regarding  the  accuracy  and  completeness  of  data  reported  by  the  entities,  STAT  replied  that:  " 
There is the legal obligation to provide the requested data and STAT is compiling the national accounts data, 
amongst other things, on the basis of these data. The deadline for sending the data to STAT is the end of May 
and  until  mid  of  July  it  is  possible  to  clarify  open  questions  with  the  data  providers  or  to  update  the  data 
transmissions. If there are doubts concerning the data transmitted, it is possible to check with the entities and to 
use  data  of  previous  years.  Until  the  16th  of  September  the  reporting  units  can  provide  data  updates  and 
additional explanations. STAT has also the possibility to change the data, although it does not have the power to 
impose changes in data to the entities.  (…)The Gebarungsstatistik (i.e. the public finance statistics) is an input 
to  the  compilation  of  national  accounts  data.  The  state  governments  can  compile  data  on  the  basis  of  their 
rules/procedures  but  this  does  not  have  an  impact  on  national  accounts  since  the  latter  are  compiled  on  the 
basis  of  ESA  and  are  under  the  responsibility  of  STAT.  The  Länder  can  express  their  doubts  on  some 
compilation  results  which  are  also  reflected  in  the  discussions  of  the  national  stability  pact  but  this  does  not 
affect the compilation done by STAT. " 

d During the meetings with the State Office of Land Salzburg, the Commission enquired whether, it would be 
possible that the underreporting started even earlier than 2010. The State Office of Land Salzburg replied: "We 
do  not  have  this  information  since  we  were  not  able  to  reprocess  the  previous  accounting  statements.  The 
Federal  Court  of  Auditors  has  asked  us  to  correct  the  previous  accounting  statements.  However,  from  a 
practical point of view this is not possible (…)" and therefore, "(…) we cannot exclude that for years prior to 
2010 liabilities were unreported." 

Furthermore, when asked as of when the hidden bank accounts of Land Salzburg were set up, the State Office of 
Land Salzburg replied: "Since 2003." 

Finally,  when  asked  whether  the  RH  had  found  indication  of  these  hidden  bank  accounts,  the  State  Office  of 
Land Salzburg replied that: "Whereas [the Head of the Budget Unit] was likely to have provided all information 

46 

 
 
                                                            
 
 
 
 
 
requested concerning years 2007 and 2008 for the audit completed [by the RH] in 2009, this was not the case 
for  the  follow-up  audit  in  2011.  For  the  latter  audit  [the  Head  of  the  Budget  Unit]  did  not  provide  all 
information that was requested. Thus, it may be concluded that there was no hidden accounting before 2007." 

e During the meeting with the LRH, when asked to comment on the inclusion of such legal provision in the State 
Budget Law, the Head of the LRH argued that: "For the state government of Salzburg the speculative part of the 
portfolio is now closed. [The Head of the Budget Unit] was responsible (…) for including article IV in the State 
Budget Law 2006. [The Head of the Budget Unit] wanted this and at that time the Landtag did whatever [the 
Head of  the  Budget  Unit]  wanted  to do.  The  State  Office  of  Land  Salzburg also  agreed  with  this. Due  to  this 
change  it  was  possible  to  use  the  financial  assets  of  the  Landeswohnbaufonds  for  carrying  out  derivative 
transactions.  [the  Finanzreferent  of  that  time]  created  the  Versorgungs-  und  Unterstützungsfonds  (VuF), 
primarily for tax purposes. It was possible to collect money in this fund and to generate income without paying 
taxes for this income. Nevertheless, such transactions had de facto started already in 2002." 

f When asked to comment on the extension of power conceded to the Head of the Budget Unit throughout the 
year,  the  State  Office of  Land  Salzburg  stated  that:  "[The  Head  of  the  Budget  Unit] had  a high  reputation  in 
Austria. [The Head of the Budget Unit] was a member of the VR committee and was highly valued. Therefore, it 
had never been questioned why she had received such an amount of power." 

g When asked about the decision to let the Budget Unit not report to the Accounting Unit, the State Office of 
Land Salzburg stated that: "In 2003 and 2004 there have been difficulties between the units 8/02 and 8/04 on the 
required details to be provided by unit 8/02 that were necessary for carrying out a proper accounting in the unit 
8/04.  The  background of  these  difficulties  was  the  establishment  of  a  new extra-budgetary  fund,  the  so  called 
"VuF" (a pension provision fund) in 2003. Unit 8/04 asked for specific information on this new fund in order to 
correctly record the related transactions in the accounting system. The Finanzreferent took then a decision that 
the responsibility for this fund would be completely in the hands of unit 8/02 and unit 8/04 should not interfere 
with the VuF and should not ask any information on that. All accounting related issues should be carried out by 
unit 8/02 or as mandated by unit 8/02. There is an internal memo (Aktenvermerk) dated from 14 February 2008 
stating that the four-eye principle was not being respected in this circumstance. It was clarified in this memo 
that the four-eye principle had to be respected in the future and that unit 8/04 – previously department 14 – is 
responsible  for  the  monitoring  of  the  payment  execution.  However,  internal  expenditures  and  revenues,  i.e. 
payments between the core budget and the fund (Innenumsätze) were still exempted from the application of the 
four-eye  principle.  This  memo  corrected  the  previous  memo  dated  from  2  February  2004.  In  2002  the 
accounting  unit  of  the  Land  Salzburg  was  an  independent  department.  In  the  course  of  an  organisational 
restructuring the department 14 was allocated to department 8 and received the status of a unit (8/04) within 
department 8. In fact, the set of accounts of VuF were not being recorded or monitored by the accounting unit 
between the years 2004 and 2008." 

h The State Office of Land Salzburg stated in the meeting with the Commission on 28 September 2016 that: "The 
success of the VuF was very desired. The results of this fund made it possible to transfer a considerable amount 
to the budget each year." 

i The State Office of Land Salzburg stated in the meeting with the Commission on 28 September 2016 that, "The 
aforementioned  memo  which  dates  from  2004  was  necessary  since  the  operations  had  reached  a  certain 
dynamic,  of  short-term  and  fast  transactions.  For  this  kind  of  operations  it  was  necessary  to  carry  out  quick 
decisions which made it necessary to take such a decision (the memo of 2004)." 

j    When  in  the  meeting  with  the  Commission  on  28  September  2016  the  former  Director  of  the  Accounting 
Department of the State Office of Land Salzburg (and Head of the LRH for years 2007-2012) was asked about 
his general concerns surrounding the swap operations he replied that, "The first swap operations were probably 
carried out in 2003. The unit 8/04 wanted to reconstruct the related cash flows. This was, however, impossible, 
due to the complexity of these transactions and due to the lack of qualification of the staff that worked in unit 
8/04 – it was very difficult to check these activities and extremely time consuming. The unit 8/02 complained to 
the hierarchy that the business processes would be blocked due to the questions asked by unit 8/04. There were 
stormy  meetings  with  the  Finanzreferent  and  the  Director  of  the  Financial  Department.  The  Finanzreferent  – 
(…) – thus decided that the success of the VuF was a priority and therefore it was considered vital that unit 8/02 
could  work  efficiently.  Hence,  it  was  decided  that  unit  8/04  should  not  block  the  activities  of  unit  8/02  with 

47 

 
 
                                                                                                                                                                                         
 
 
 
 
 
 
questions.  This  and  the  new  division  of  tasks  between  unit  8/02  and  8/04  was  also  put  into  writing  in  the 
aforementioned memo dated 2 February 2004." 

The former Director of the Accounting Department further stated that: "Albeit trying to resist to such a situation, 
unit 8/04 was forced to accept that a separate accounting entity, i.e. the VuF, existed, which was excluded from 
the monitoring tasks of unit 8/04. In this separate accounting entity, investment operations were carried out and 
questions  on  these  operations  were  regarded  as  undesirable.  It  was  considered  that  the  explanation  of  these 
operations by unit 8/02 was too time-consuming. I understand that there were a number of transactions which 
were considered as internal transactions. Unit 8/02 also carried out investment operations. However, when the 
decision was taken in 2004 that unit 8/04 should not examine these operations, we had to stop asking for more 
information on them." 

k  According to the State Office of Land Salzburg, the essential bookkeeping activities were effectively directed 
by the Head of the Budget Unit and the staff in the accounting unit always carried out her orders, even if she was 
not formally the head of the Accounting Unit. Furthermore, it was explained that the Head of the Budget Unit 
was also able to work herself in the bookkeeping system. 

l When asked whether there had been any internal directive to exclude the Budget Unit from being audited by the 
Internal Audit, the State Office replied that, "(…) According to [its] knowledge, there was no specific directive 
stating that unit 8/02 did not have to be audited. In fact, the "Internal Audit" did not have the task to audit the 
whole State Office of Land Salzburg  from 1999 onwards." 

m Excerpt of the introductory statement of the Head of the LRH during the meeting with the Commission on 27 
September 2016,  

"With the implementation of the "Landesrechnungshofgesetz", the LRH has been organized as an independent 
and supreme audit unit since 1993. The LRH follows the rule of the Law although the Landtag also reserves the 
right to ask for specific audits. As well, local government institutions can give hints to the LRH on specific issues 
for monitoring. The subjects of the audit which can be carried out by the LRH are defined in chapter 6 of the 
"Landesrechnungshofgesetz". Among others, the following main areas for audits are: the financial management 
and  compliance  ("Gebarung")  of  the  state  government  of  Salzburg  and  its  funds,  foundations,  corporates  or 
other entities; the recipients of public sponsorship and the financial management and compliance  of the local 
governments with less than 10.000 inhabitants. The responsibility for local governments with 10000 and more 
inhabitants  is  with  the  RH.  With  respect  to  the  "Gebarung",  the  audit  of  the  LRH  is  focusing  on  whether 
compliance with the law is assured or on whether the figures are calculated correctly and/or on its economic 
efficiency and effectiveness. For entities in which the state government of Salzburg holds more than 25 percent 
of  the  equity,  an  audit  is  possible.  As  well,  any  institution  or  individual  receiving  public  sponsorship  is  a 
potential target for monitoring. However, the LRH is free in its decision on whether the entity is to be audited or 
not. The LRH mentions in his reports the main findings, its suggestions and recommendations. A further review 
on whether the suggestions and recommendations have been implemented by the respective unit can be carried 
out. There is no possibility to enforce the implementation of suggestions and recommendations. The power of the 
LRH lies in the publicity of its reports. The LRH is independent and there is no reciprocal monitoring between 
the RH and LRH (see also article 127 (1) of the Austrian Constitutional Law which established that the LRH is 
not subordinated to the RH). The financial statements of the state government of Salzburg have not been subject 
to  a  clear  audit  competence  until  1  April  2012.  This  means  that  the  LRH  was  not  obliged  to  audit  but  could 
decide  to  carry  out  audits  under  specific  circumstances.  Between  2005  and  2008  there  was  an  initiative  for 
carrying out voluntary audits since there were no clear rules for such a procedure. In 2009 the LRH started with 
the first self-initiated audit of the financial statements of the state government of Salzburg for the reporting year 
2008. However, there was no clear audit procedure and [there was] a lack of legal regulations for this [kind of] 
audit, and in addition the available knowledge for carrying out an audit of financial statements was limited. The 
financial  statements  of  2009  and  2010  were  audited  within  the  same  limited  framework.  The  financial 
department itself was never subject to a detailed audit by the LRH in the period between 2002 and 2012. This 
was  also  a  result  of  the  coordination  between  the  RH  and  LRH.  The  RH  has  the  right  to  audit  the  state 
government of Salzburg and it has also the right to receive and audit the financial statements (see article 18 and 
20  of  the  "Landesrechnungsgesetz"  dated  from  1930  and  last  amended  on  30  August  2010).  During  all  these 
years, [the Head of the Budget Unit] was, in substance, both trading and making the accounting and no one was 
really  checking  what  she  was  doing.   In  2010  the  LRH developed  an audit procedure  and discussions  started 

48 

 
 
                                                                                                                                                                                         
 
 
 
 
 
with the Parliament to provide a legal basis for a mandatory audit. The 2011 Rechnungsabschluss was the first 
mandatory audit by the LRH on the accounts of Land Salzburg. There was coordination between RH and LRH. 
Basically, as the LRH knew that the RH was doing the audits to Land Salzburg, it did not do them." 

n When asked what was audited by the LRH at the time of the events in question, the former Head of the LRH 
explained that: "The LRH had only a limited number of staff and resources. For the period 2008 to 2011, the 
"Rechnungsabschluss" was analysed by the LRH. The data are transmitted to the LRH at the end of March or at 
the beginning of April. The LRH had the obligation to provide a report to the Parliament within 4 weeks. We 
had  two  auditors  which  checked  the  data  and  after  that  we  had  to  wait  for  the  comments  of  the  financial 
department. These two auditors have only four or five weeks to carry out their checks. This means that we can 
carry  out  only  random  checks;  only  checks  between  the  years  and  that  we  have  to  concentrate  on  structural 
breaks.  The  Parliament  knew  that  the  analysis  done  by  the  LRH  was  not  comparable  with  the  work  from 
accounting  firms  and  that  this  analysis  is  not  equivalent  to  a  certificate.The  LRH  regulation  does  only  allow 
carrying  out  audits  and  therefore  we  had  to  name  as  'audits'  these  economic  analyses.  We  were  not  able  to 
analyse the entire portfolio of the state government of Salzburg. This was also part of the agreement with the R. 
in connection with the coordination of the audit projects." 

o The present Head of the LRH has explained that: "The point is that the LRH had a lack of know-how on how to 
audit such transactions at that time." 

p  During  the  meeting  with  the  State  Office  of  Land  Salzburg,  the  Commission  asked  the  former  Head  of  the 
LRH  on  the  whether  the  conclusion  drawn  in  the  reports  of  the  LRH  for  years  2008  to  2011,  "The  tests 
conducted  by  the  LRH  revealed  that  the  accounting  records  and  financial  statements  were  duly  made  and 
complete.  The  cash  balance  is  correct  and  proven  by  bank  statements"  meant  that  a  cross-checking  of  bank 
statements  was  de  facto  done,  stressing  that such  closing  lines  are  commonly  only  added  when  an  internal  or 
external audit has been performed. To this question, the former Head of the LRH stated that: "We did not do this 
cross-checking." 

q  During  the  meeting  with  the  State  Office  the  former  Head  of  the  LRH  was  also  asked  questions  by 
Commission relating to his previous capacity as Director of the Accounting Department of the State Office of 
Land  Salzburg.  More  concretely  the  Commission  asked,  why  –  given  his  experience  in  the  financial 
management of Land Salzburg and his general concerns - he decided to make an economic analysis rather than 
an audit in the context of LRH's 2008-2011 audits of the financial management of Land Salzburg. The former 
Head of the LRH explained that: (…) in cooperation with the President of the Salzburg Landtag, it was decided 
to  avoid  discussion  on  less  important  details  and  that  we  should  provide  analyses  that  show  the  major 
developments surrounding the financial statements." 

r  Asked  during  the  Commission  investigation  who  was  the  responsible  person  for  the  financial  issues  of  the 
Landeswohnbaufonds, i.e. the person had effectively made the transactions and the accounting on behalf of,the 
Landeswohnbaufond, the State Office of Land Salzburg replied: "[the Head of the Budget Unit]" 

s  Asked  during  the  Commission  investigation  how  it  was  possible,  in  practice,  to  comply  with  the  four-eye 
principle in a unit with only three employees, the State Office of Land Salzburg replied that: " (…) the Director 
of department 8 [Financial Department] was also authorized to sign" and that "Of course the four-eye principle 
could not be assured. Furthermore, many times signatures were forged." 

t Asked during the Commission investigation whether hidden accounts had already been established in the years 
2002 and 2003, the representative from the RH replied: "No information on hidden bank accounts was known in 
the two audits of the "Regional Funding Instruments" in the years 2009 and 2012. It was only during the audit, 
which culminated in the October 2013 report, that bank accounts were scrutinized." 

The  State  Office  of  Land  Salzburg  supplemented  the  statement  by  the  RH,  explaining  that:  "Everything  was 
shown  in  the  "Voranschlagsunwirksamen  Gebarung"  and  the  RH  assumed  that  the  swap  and  derivative 
49 

 
 
                                                                                                                                                                                         
 
 
 
 
 
 
 
transactions  were  linked  with  underlying  transactions.  In  addition,  [the  Head  of  the  Budget  Unit]  presented 
falsified minutes to the RH." 

u  Asked  during  the  Commission  investigation  about  the  tasks  of  the  Finanzbeirat,  the  State  Office  of  Land 
Salzburg  explained  that:  "The  Finanzbeirat  had  the  task  to  report  to  the  person  in  the  state  government 
responsible for financial affairs (i.e. the Finanzreferent)." And furthermore that: " The guidelines were signed 
by the "Finanzreferent" at the beginning of year 2006. Following that, [the Head of the Budget Unit] prepared 
the reports for the Finanzbeirat. However, the reports provided by [the Head of the Budget Unit] did not include 
all transactions; this misreporting to the Finanzbeirat started around the years 2005/06." 

Moreover, when asked to comment on how it could have been possible that the audit carried out by the RH in 
2011/2012 found no incongruences in the financial statements, the State Office of Land Salzburg explained that: 
"The indicators that had been sent to the RH by [the Head of the Budget Unit] were all wrong." 

v When asked during the Commission investigation as of when the unreported bank accounts were set up, the 
State Office of Land Salzburg replied “Since 2003." 

w When asked during the Commission investigation what the "Voranschlagsunwirksame Gebarung" contains and 
why  was  that  part  of  the  "Gebarung"  not  checked,  the  LRH  explained:"  In  this  part  of  the  budget,  normally, 
transition items are recorded. Nobody was suspicious that also balances were recorded in this part. Now, the 
"Voranschlagsunwirksame Gebarung" is intensively reviewed." 

x When asked during the Commission investigation what was recorded in the hidden bank accounts, the State 
Office of Land Salzburg explained that: "(…) Clearing accounts were in some instances used for the settlement 
of financial transactions, containing both outflows and inflows (…). For these bank accounts no information on 
the debt was available. This information was generated with the support of the banks involved. We sent letters to 
the banks to clarify the accounts. From the answers to these letters we could generate the stock of debt.  (…)." 

y  When  asked  during 
the 
"Voranschlagsunwirksamen Gebarung" had never been monitored, the State Office of Land Salzburg explained 
that: "The pooling of tasks and the availability of personnel to check all this information resulted in [a situation 
of] "impermeability". 

the  considerable  movements 

investigation  why 

the  Commission 

in 

The former Head of the Accounting Unit and of the LRH explained that: "The accounting unit and the Regional 
Court  of  Auditors,  then  led  by  myself,  indeed  raised  questions  on  the  huge  amounts  recorded  in  the 
"Voranschlagsunwirksamen  Gebarung".  However,  [the  Head  of  the  Budget  Unit]  explained  that  the  amounts 
were related to interest rate swaps which were concluded. For example, if they concluded an interest rate swap 
for  an  amount  of  Euro  10  mn  (fix  in  to  variable)  the  amounts  presented  in  the  "Voranschlagsunwirksamen 
Gebarung" will sum up to Euro 20 mn (10mn for fix and 10 mn for variable) without any impact on the revenue 
and expenditure (cash flows)." 

z Asked during the Commission investigation if  the RH did not find any indication of the existence of hidden 
bank accounts, the State Office of Land Salzburg replied that “Whereas [the Head of the Budget Unit] was likely 
to have provided all information requested concerning years 2007 and 2008 for the audit completed [by the RH] 
in 2009, this was not the case for the follow-up audit in 2011. For the latter audit [the Head of the Budget Unit] 
did not provide all information that was requested. (…)." 
aa When asked during the Commission investigation if even the interest related to the unreported loans was not 
reported, the State Office of Land Salzburg explained that: "The interest was not reported since for these loans a 
net accounting was carried out." 

50 

 
 
                                                                                                                                                                                         
 
 
 
 
 
 
 
bb When asked during the Commission investigation if  during the consolidation processes the OeNB used one 
raw data source and one output of that same raw data source, even if two raw data sources were available, the 
OeNB replied: "Yes" 

cc  When  asked  during  the  Commission  investigation  what  actions  are  undertaken  and  what  information  is 
exchanged with the LRH if the information regarding lending from the OeBFA is not identical to information 
reported by the Länder, the OeBFA replied: "This information sent to the LRH is part of the works on the closing 
of  accounts  done  by  the  LRH.  In  this  sense,  the  cross-checking  is  the  role  of  the  LRH,  and  not  the  role  of 
OeBFA, which means we do not cross-check these data. As well, we have never received any feedback from the 
LRH stating that there were discrepancies in the data." 

dd  When  asked  during  the  Commission  investigation  what  kind  of  information  the  LRH  received  from  the 
OeBFA and how that information was used, the representative of LRH explained that: "OeBFA was receiving 
the financial statements from Land Salzburg so they should have cross-checked. (…)." 

ee When asked whether [the Head of the Budget Unit] had conducted interest rate swaps, the former Head of the 
LRH  and  former  Director  of  the  Accounting  Department  replied  that:  "  Everybody  knew  that  these  complex 
swap transactions were being carried out, namely the courts of audit and the state parliament." 

ff During the Commission investigation on 28 September 2016, the State Office of Land Salzburg explained: "In 
July 2012 the Head of Department 8 [the Financial Department] investigated some financial positions and some 
transactions were cancelled." 

gg When asked during the Commission investigation if the RH could provide information on on-going audits to 
STAT,  the  RH  explained:  "The  RH  conducts  its  audits  according  to  national  and  international  standards. 
Regarding the process of the compilation of a report, at first each report is generated and discussed internally. 
Then the audited institutions get the chance to comment within 3 months on the suggestions the RH pointed out 
in  his  report.  Those  comments  are  acknowledged  and  displayed  in  the  final  reports  and  themselves  again 
commented by the RH. This was also the case with the follow-up report of the RH concerning the Land Salzburg. 
The  final  report  which  was  published  on  6  December  2012  included  the  replies  and  comments  of  the  Land 
Salzburg.  The  comments  from  Land  Salzburg  did  not  include  anything  that  would  point  out  to  the  issues  that 
were later revealed, on the press conference by the State Office of Land Salzburg on the 6 December 2012. After 
the revelation of these issues, a new audit was launched by the RH and resulted in the RH report of October 
2013." 

hh  When  asked  during  the  Commission  investigation  about  the  procedures  followed  by  the  RH  between  the 
finalisation of a report and its publication, the RH explained: "The investigated institution gets the report on the 
same day it is published. The main stakeholders get the report a few days before."  

Furthermore, the LRH explained that: "The whole procedure is tightly regulated. For example, the audited entity 
has  three  months  to  provide  comments.  The  provisional  report  was  sent  to  the  "Amt  der  Salzburger 
Landesregierung" for comments before August 2012. There were no comments provided by "Amt der Salzburger 
Landesregierung", although they knew that there was an issue. Some persons did know about the issue but they 
decided not to inform the RH." 

ii During the Commission investigation on 28 September 2016,, the State Office of Land Salzburg stated that: "It 
was  not  until  October  2012  that  [the  Director  of  the  Financial  Department]  informed  us  at  a  Finanzbeirat 
meeting that the portfolio which was being examined by us was in fact only a part of the total portfolio of Land 
Salzburg"  and  that  "  The  indicators  that  had  been  sent  to  the  Finanzbeirat  by  [the  Head  of  the  Budget  Unit] 
were all wrong." 

51 

 
 
                                                                                                                                                                                         
 
 
 
 
 
 
 
 
jj When asked during the Commission investigation why the issue of misreporting remained an internal one to 
State Office of Land Salzburg between May 2012 and 6 December 2012 and more specifically why RH, LRH 
and  Statistics  Austria  were  not  informed,  the  State  Office  of  Land  Salzburg  explained:  "[the  Director  of  the 
Financial  Department]  did  not  intervene  in  the  transactions  that  had  been  carried  out  by  [the  Head  of  the 
Budget Unit]. [the Director of the Financial Department] employed instead [a former employee of the Deutsche 
Bank]  which  had  the  necessary  experience.  It  was  only  when  [the  former  employee  of  the  Deutsche  Bank] 
gained  an  overview  of  the  transactions  -  this  happened  in  the  second  half  of  October  2012  –  that  certain 
problems became apparent. It was hence decided to find a solution to these problems." 

kk On the same question posed to the State Office of Land Salzburg, i.e. why the issue of misreporting remained 
an internal to the State Office of Land Salzburg between May 2012 and 6 December 2012 the former Head of 
the  LRH  stated  that:  "As  head  of  the  LRH  I  did  not  receive  any  official  information,  although  I  heard  some 
rumours. From September onwards [the Head of the Budget Unit] was sick and the State Office was looking for 
a new employee. On 1 September the State Office was able to recruit a new employee. In November 2012, [the 
Head of the Budget Unit] was asked [by the Finanzreferent and the Director of the Financial Department, in my 
presence] whether  there  were  any  risky  transactions  incurred by  Land Salzburg and [the  Head of  the  Budget 
Unit]  answered  negatively.  [the  Head  of  the  Budget  Unit]  repeated  this  in  the  state  parliament  during  the 
budgetary discussions." 

ll In an introductory statement to the meeting with the Commission on 26 September 2016 STAT said amongst 
others:  "  (…)  that  after  STAT  became  aware  of  potential  problems  with  the  data  in  the  Land  Salzburg  (6 
December 2012 press conference), there were major problems to meet the relevant persons in Land Salzburg to 
clarify the situation and to get the required data from the Land Salzburg" 

mm  When  asked  during  the  Commission  investigation  whether  STAT  brought  up  the  press  conference  on  6 
December  2012  in  the  electronic  mails  exchanged  with  Land  Salzburg  in  the  context  of  the  April  2013  EDP 
notification, STAT explained: "We did not mention anything about this in the emails during the first months of 
2013. We got in contact with the Land Salzburg only after the April 2013 - Notification (…)." 

nn When asked during the Commission investigation when STAT first understood that there were irregularities in 
the data transmitted by Land Salzburg and how STAT was been informed about it, STAT explained: "We read 
the press on 6 December 2012. In this context, we had a first meeting with representatives of the Land Salzburg 
in May 2013. From this we recognized that there might have been issues with the reporting of derivatives and 
EDP debt (reporting of loans). Finally, in October 2013, we identified that around Euro 2.1 bn of debt were not 
reported by the Land Salzburg in its balance sheet in the past. In this connection we also had a meeting – as you 
well know – with Eurostat. Before October 2013, Land Salzburg had not officially informed STAT and we did 
not receive updated data (corrections) from them. They provided only the quarterly debt data according to the 
existing  reporting  obligations  without  any  further  comments.  The  RH  has  also  never  reported  anything  to 
STAT." 

ooIn  the  introductory  statement  to  the  meeting  with  the  Commission  on  26  September  2016  STAT  stated 
amongst others: "(…) the first meeting[with Land Salzburg] took place only on 7 May 2013. (…) During this 
meeting [the Head of the Financial Department] assured to STAT that the necessary data will be transmitted to 
STAT by August 2013." 

pp In the introductory statement to the meeting with the Commission on 26 September 2016 STAT said amongst 
others:  "(…),  the  Land  Salzburg  transmitted  only  flows  (no  stocks)  in  August  2013  to  STAT.  STAT  used  this 
information to compile the national stability pact reporting transition tables (6/7 September 2013). At that time 
the  Land  Salzburg  had  the  right  to  comment  on  the  "estimations"  carried  out  for  the  Salzburg  data.  For  this 
purpose the transition tables on deficit and debt were transmitted to Salzburg on 17 September 2013." 

qq  During  the  meeting  with  STAT  on  26  September  2016,  the  RH  representative,  who  in  July  2013  was  an 
employee of STAT, stated: “As final annual data on the closed accounts of the Land Salzburg for the year 2012 
were  not  available  for  the  calculation  of  ESA  National  Accounts,  STAT  used  quarterly  data  to  compile  the 
National Accounts (…)." 

52 

 
 
                                                                                                                                                                                         
 
 
 
 
 
 
 
rr When asked during the Commission investigation whether there was a contact between STAT and the RH or 
the LRH before the report on Land Salzburg was published by the RH, STAT replied: "There was no contact 
with the RH. During this time there was still no Memorandum of Understanding between STAT and the RH." 

Furthermore, the RH explained that: "Issues and reports related to ongoing audits are not shared with third 
parties. There is no legal possibility for the RH to inform other persons or institutions in case of an ongoing 
audit." 

53