State Comptroller whitewashes report on Israel's deficit

Shai Babad and Moshe Kahlon  / Photo: Lior Mizrachi

Matanyahu Englman's report has been massively revised and will include no personal criticism of Minister of Finance Moshe Kahlon and director general Shai Babad, sources inform "Globes."

State Comptroller Matanyahu Englman is whitewashing the report about the state budget deficit. Sources inform "Globes" that the report, scheduled for submission at the end of the month, was massively revised as a result of the responses by those audited. It will be shorter and less detailed, and will include no personal criticism of Minister of Finance Moshe Kahlon and director general Shai Babad.

Parties who saw the report told "Globes" that some of those criticized persuaded Englman that the original criticism of them was unjustified or not covered by the reduced definitions of subjects that the State Comptroller is supposed to address. At the same time, it is believed that in addition to the parts removed from the report after discussion with those audited, substantial parts of it have been toned down, as part of the new State Comptroller's announced more permissive approach. Englman said today that the focus of the report should be on recommendations for improving work procedures at the Ministry of Finance in the future.

The state budget deficit is one of the most difficult and sensitive economic issues that the Ministry of Finance is now addressing. The question of how the deficit was created is disputed by different departments in the Ministry of Finance. Senior personnel in the budget department told Englman about what they perceived as illegitimate pressure exerted on them, and about measures taken simultaneously by the Accountant General department to "arrange" the deficit figures.

There is also bad blood at the Ministry of Finance concerning the events that led to the publication of the deficit forecast for 2019. Minister of Finance Moshe Kahlon objected to publication of the prediction that the deficit would deviate substantially from the target. Ministry of Finance sources allege that he took steps to prevent its publication before the elections to the 21st Knesset. The forecast was eventually published in late January at the insistence of Ministry of Finance budget director Shaul Meridor and legal advisor Asi Messing.

Kahlon hired a private lawyer

Kahlon, who is believed likely to retire from politics in the coming days, hired Adv. Alon Gellert, a private lawyer, to advise him in his contacts with the State Comptroller. Gellert previously advised Kulanu, Kahlon's political party, and specializes in representing people audited by the State Comptroller. The report that Gellert was hired was first published by Galei Tzahal (Army Radio) reporter Nitay Anavi.

Babad, Israel Tax Authority director general Eran Yaacov, and Accountant General Rony Hizkiyahu appeared at the Englman's request, and presented their view of the report. Englman, who entered his position after the draft report had been distributed on July 4, previously decided to delay it, and was criticized because of the report's importance.

The question of how the new government, when one is formed, will elect to reduce the budget deficit has been a focus of much political discussion in recent months, given the opposition to raising taxes by some politicians, and their promises to refrain from doing so.

Englman appeared at the Knesset today, and said that the report itself would be submitted at the end of the month. During the discussion in the Knesset Finance Committee about approval of the budget for the State Comptroller's Office, referring to the report, he commented, "It emerged that the conduct of the departments in the Ministry of Finance was generally within the law. There were deficiencies, and these will be noted. This is an important matter, and should be taken with the appropriate seriousness."

The State Comptroller revealed that he had personally intervened in the work on the report because of internal disagreements in his office. "As for the findings and recommendations, I will say that there was hesitation in the report concerning certain issues. The team said one thing, the legal advisor said something else, and I decided on some of the issues," Englman said.

Professional staff at the Ministry of Finance insisted on publication

The State Comptroller's probe began in early 2019, following suspicion that improper conduct at the Ministry of Finance resulted in a report that the final deficit in the 2018 state budget had not deviated from the target set (2.9% of GDP). This suspicion was supported by the fact that the current deficit figures for the months before December and after it were higher than 3%.

The second part of the State Comptroller's probe dealt with the delay in publishing the deficit forecast for 2019. The forecast was supposed to have been presented to the cabinet in November, but was eventually published in January, after the Ministry of Finance professional staff insisted, despite Kahlon's opposition. The two figures - the 2018 deficit and the revised deficit for 2019 - were published after it was decided to hold elections for the 21st Knesset.

The draft State Comptroller's report was shown to the audited parties in June. In the opinion of sources who saw it, at least, the report created problems for the minister of finance and senior staff in the ministry. Among other things, the draft report indicated that people in the State Comptroller's Office suspected that Kahlon and people on his behalf had intervened in the professional work processes at the Ministry of Finance out of ulterior motives. Englman told the Finance Committee that the report would focus on learning lessons for the future arising from the findings in the draft report. The previous State Comptroller's report, which dealt with the causes of the large budget deficit in 2014, resulted in far-reaching changes in the work by the Ministry of Finance professional staff.

The Finance Committee discussion attended by Englman today, led by committee chairman MK Moshe Gafni (United Torah Judaism), concerned the budget for the State Comptroller's Office. Englman responded to criticism by MK Mickey Levy (Blue and White) of the prolonging of the proceedings for the State Comptroller's Report about the 2018 state budget, and how the budget deficit at the end of that year was portrayed.

Englman said, "Work takes place on all of the reports, including those by the previous State Comptroller. Teams work on them. The report in question is due to be submitted at the end of this month, after work on it is completed in late December."

Published by Globes, Israel business news - en.globes.co.il - on December 9, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Shai Babad and Moshe Kahlon  / Photo: Lior Mizrachi
Shai Babad and Moshe Kahlon / Photo: Lior Mizrachi
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