Treasury hiding billions in budget reserves, state comptroller finds

Tel Aviv light rail to be delayed, a report issued Wednesday also found.

Knesset chairman Yuli Edelstein receiving the 2018 State Comptroller Report (photo credit: HILLEL MEIR/TPS)
Knesset chairman Yuli Edelstein receiving the 2018 State Comptroller Report
(photo credit: HILLEL MEIR/TPS)
The Finance Ministry came under damming criticism from a public watchdog on Wednesday for squirreling away billions of shekels in surplus “reserves.”
In its annual report, State Comptroller Joseph Shapira slammed the Finance Ministry’s Budget Division for how it manages annual reserves that aren’t directly allocated by the Knesset and are possibly not fully spent.
The investigation indicates “problems in the level of transparency vis-a-vis the Knesset and the public, which impair the ability of decision-makers to audit and implement the budget.”
Total reserves in the state budget come to around NIS 20 billion – or around 5% of annual expenditures. Around 45% of the reserves are not known to the public and not approved by the Knesset.
The report added: “The existence of a reserve that is not visible to the Knesset at the stage of approval of the state budget undermines the transparency of the budget approval.”
In the report, the comptroller warned that the budgetary reserves for each ministry are much higher than what is deemed necessary. The budget division also uses the reserves for questionable purposes, including financing budget cuts along with hastily doling out money at the end of the fiscal year.
Another problem facing the budget division is that its authority to manage the funds is concentrated in too few hands.
The comptroller’s audit was conducted from November 2016 to March 2017, according to Globes, and it found more than a dozen reserves – for price increases, adjustments and development expenses. Some of the reserves had no specified methodology, labeled miscellaneous.
Some are concerned that the Finance Ministry can take funds from the various reserves and transfer them for other purposes, without oversight and proper accountability. It is possible that other ministries can then be pressured politically.
The Finance Ministry pushed back against some of the comptroller’s claims, saying the use of reserves was legitimate and smaller than expected.
“The use of budgetary reserves is an accepted management tool for the purpose of managing risks and maintaining flexibility in budget management,” a Finance Ministry representativeness said in a statement.
“According to the State Comptroller’s Report, the scope of reserves in the state budget is about 4% to 5% of the total budget, which we believe is reasonable by any possible standard,” the Finance Ministry added.
Meanwhile, the ongoing Tel Aviv light rail construction is projected to suffer from cost overruns and additional delays, according to the report.
The NTA – Metropolitan Mass Transit System is responsible for constructing the light rail. The first section, the Red Line, runs from Bat Yam in the south, through Tel Aviv to Petah Tikva, with some of its 33 stations underground. Two other lines, the Green Line and Purple Line, are scheduled to be built afterward.
The comptroller said that the government company has been operating without a proper framework agreement for the transfer of funds and employees. In other words, the state allegedly continues to fund the NTA to the tune of NIS 6 billion without the proper paperwork.
Last year, Dutch auditor Aegis – which is responsible for probing the project – warned that the Tel Aviv metropolitan light rail opening date of October 2021 was highly optimistic.
The project is necessary for alleviating massive congestion and traffic in the heart of the country, as Israel has more cars per paved kilometers of roads than any other Organization for Economic Co-operation and Development country.