Analysis

Where Were Israel’s Watchdogs When It Needed Them?

They weren’t there to stop the alleged shenanigans in Case 3000 (submarines) or Case 4000 (Bezeq) before they got the police’s attention

Israeli Prime Minister Benjamin Netanyahu climbs out after a visit inside the Rahav, the fifth submarine in the fleet, after it arrived in the Haifa port January 12, 2016
\ BAZ RATNER / REUTERS

When the dust settles and we find out if Benjamin Netanyahu will survive the corruption allegations swirling around him, some hard questions will still remain. Such as, why didn’t the government’s checks and balances kick in? Why didn’t the Defense Ministry watchdogs prevent the alleged improprieties in the procurement of submarines from Germany (Case 3000)? How could officials at the Communications Ministry not block the prime minister – in his capacity as communications minister – from allegedly arranging sweetheart conditions for the Bezeq telecommunications company, controlled by his friend Shaul Elovitch, in exchange for cheerleading coverage by Walla, a news website Bezeq owned (Case 4000)?

A lot of questions arise from the limpness at the defense and communications ministries, which failed to thwart alleged corruption taking place right before their eyes. The questions pertain to their directors general, their legal counsels and, just as pertinently, to their internal auditors.

In fact the question about internal auditors is especially relevant because it’s not being asked.

“The internal auditors deal with technical issues, not substance,” says a high-ranking government official responsible for internal auditors. “They have no weight.”

Boaz Aner, a former official at the State Comptroller’s Office and today a lecturer at Bar-Ilan University, attests that he personally knows the internal auditor at the Communications Ministry and he’s actually one of the bolder ones. “But what can you expect of internal auditors in enforcing integrity when they aren’t given the tools,” Aner says.

All agree, including at the association of internal auditors, that the status and functioning of internal auditors at the ministries is lacking. In fact their helplessness has been an open secret for years. Two interministerial committees, in 2006 and 2014, convened with the express purpose of strengthening the auditors’ status.

At least some of the recommendations of the second committee were implemented in a new civil service procedure. With that, the civil service at least attempted to bridge the gap in the law. Israel enacted the Internal Audit Law in 1992, becoming one of the first countries to do so, but for it to have teeth, the Justice Ministry would have had to put regulations in place.

Twenty-six years later, nothing. In 2012, a High Court petition was filed precisely because of the absence of regulations. The state’s answer to the court was that setting regulations was the privilege of the justice minister, not his duty.

The Justice Ministry’s contemptuous answer to the High Court beautifully demonstrates the state’s attitude towards its internal auditors: They’re disposable. Perennially low in rank (they’re not even graded as deputies to the director general) and chronically short of resources, they naturally have no professional independence, either. Even though the 1992 law theoretically defends the independence of the internal auditors, in practice they depend on the people they’re supposed to inspect: the ministries’ directors-general.

The auditors are subordinate to the ministry director-general. He approves their working plans. (The law explicitly states: “The internal auditor shall submit a proposed annual or periodic work program for approval by the superior said in Section 5, and the superior shall approve it with the changes he deems appropriate.”) The director general also allocates their resources.

A state comptroller’s report from 2013 about the functioning of internal auditing at the ministries noted the auditors’ dependence on the directors general as one of their worst difficulties. Few auditors criticize their own directors general; they perceive themselves as an arm of the director-general, not his auditor.

These are not the only weak points. Conversations with top people in government reveal that many of the internal auditors are bureaucrats advanced in age, with tenure for life, who would prefer not to rock the boat. They perceive their jobs as administrative-procedural, meaning they critique the processes of decision-making at the ministries only from the technical aspect. Even though the law allows them to delve into the substance of decisions – to check whether they are efficient, and of course to expose corruption – few of the internal auditors do so. When we asked the State Comptroller’s Office how many of its exposes stemmed from materials received from ministerial internal auditors, an embarrassing silence ensued. Apparently, there were too few such cases.

Even before the question of exposing corruption, it bears examining the extent to which internal auditors are effective even within their narrow sphere: improving the ministries’ efficiency. The state comptroller’s 2013 report revealed that one-third of the directors-general didn’t trouble themselves to discuss every audit report, only those that piqued their interest (though they had approved the work plan of auditors at the start of the year). Apparently, there was no follow-up for about a third of the audit reports.

Sources at the State Comptroller’s Office told Haaretz that some internal auditors do have clout, in the sense that the ministry management uses them to make work more efficient, and heeds the auditor’s recommendations. The auditors specifically cited the defense establishment – the army, the Shin Bet security service and the Mossad – for the importance they attribute to the recommendations of their auditors. Moreover, there are other active comptrollers, for instance at the Health Ministry, and at some of the government hospitals. But those seem to be the exception, not the rule, and in most cases not even the directors general show them respect.

The feebleness of auditing in government stands out all the more against the developments in auditing in the business sphere. Internal auditors at the big companies have prestige, resources, broad legal authority and independence. They are subject to an independent audit committee, not to the CEO.

In government, conversely, the auditors stay subject to the directors-general and even the two committees, from 2006 and 2014, recommended it stay that way. The committees did recommend that the independence and professionalism of the internal auditors be strengthened by establishing a body to supervise them at the Justice Ministry. Just as the ministerial legal counsels have a mommy in the form of the attorney general, and ministerial accountants have a mommy in the form of the accountant-general at the Finance Ministry, internal auditors need one too, to guide and protect them. The Justice Ministry agreed to accept the recommendation after the 2014 committee but hasn’t actually done anything about it.

Other recommendations of the 2014 committee were implemented, one being that the rank of the internal auditors was upgraded to deputy director-general; their term in office was set at eight years; they are now appointed by a special civil service committee; more positions were created for audit workers; and now the civil service determines how many auditors each ministry needs to have (as opposed to the director general determining it). Auditors were posted in divisions that hadn’t had any before, though there are still some large government statutory units with none.

So there has been some progress, but it’s far from enough. Doron Cohen, a former director general at the Finance Ministry and today chairman of the Internal Auditors Association, claims the relative weakness of the government auditor can change. All of the 2014 recommendations should be implemented, he says, including establishing an external audit body at the Justice Ministry. And auditors should be subject to a committee, not the director general, like in the business sector.

Unless this is done, disgraces like Cases 3000 and 4000 – which show how far internal auditing has to go in government – are likely to recur.