Israeli Government Abandoned Religious Councils, Then Paid NIS 110m to Save Them

The councils collapsed financially, but instead of getting to the root of the problem a piecemeal solution was initially undertaken, and the taxpayers continue to pay the price.

Alon Ron

The Religious Services Ministry is currently boasting about the success of its recovery plan for the country’s religious councils. In recent years, the ministry has managed to stanch the financial bleeding at the councils, which were on the verge of total collapse in 2009 – but recovery came at a price, which the ministry now estimates at 110 million shekels ($28 million), not including emergency funding provided before the recovery plan was implemented.

As part of the recovery plan, there were layoffs of religious council staff and the government appointed comptrollers to oversee the councils’ operations at a cost of about 40 million shekels, an average of 7.5 million shekels a year between 2010 and 2014, which was factored into the cost of the plan.

The religious councils, which collectively had a budget last year of 456 million shekels, are responsible for providing religious services in Jewish locales around the country. Established at the initiative of the Chief Rabbinate before Israel’s independence in 1948, they are overseen by the Religious Services Ministry. After Israel was founded, it was decided that they would continue to function as executive and administrative entities. Headed by local rabbis, their services include kashrut and kosher slaughter, marriage and burial services and the operations of mikvaot (ritual baths).

As a result of the recovery plan, the coucils’ cumulative deficit was reduced from 220 million shekels in 2009 to 56 million now. Officials at the Religious Services Ministry contend that most of the country’s 131 existing religious councils have balanced or even positive cash flows, and that their current obligations are the result of past debts and anticipated future obligations.

'Holiday grants' instead of a recovery program

The religious councils are governed by statute and funded by the national government and local authorities. Religious councils have budgets ranging from 1 million to 30 million shekels, depending on the population they serve. In addition to their regular current expenses is added the expense of the comptrollers who were assigned to a large number of the councils between 2010 and 2014, provided by accounting firms following a bidding process for the services five years ago.

Taxpayers would have been spared the cost of these accounting services if the Finance Ministry or the Prime Minister’s Office had noticed that the councils had been incapable of managing their own finances and their situation was deteriorating. But no one was paying attention. In 2004, the Religious Affairs Ministry was abolished, temporarily it turns out. Oversight at the time was supposed to be provided by a committee in the Prime Minister’s Office. In practice, however, between 2004 and 2009 the local religious councils were left to their own devices. Their economic plight worsened, and staff weren’t paid for months.

Instead of developing a comprehensive recovery plan, an original solution in the form of “holiday grants” was devised.

“Every [Jewish] holiday, they would transfer millions of shekels to the councils to settle their past debts, but not for future payments,” a knowledgeable source explained. “No one thought about getting to the root of the problem.”

Religious Affairs Ministry figures show that between 2006 and 2009, a Band-Aid of sorts was provided in the form of 22 million shekels a year in holiday grants, but that didn’t solve the councils’ future problems.

Ultimately the Religious Affairs Ministry director general at the time, Avigdor Ohana, who took office in 2008 when the ministry was reestablished, decided to put a stop to the situation. Holiday grants were halted and a recovery plan for all the councils was announced, based on simple principles: Unnecessary staff would be laid off, while councils in locales where two local authorities had been merged, such as Binyamina-Givat Ada and Yehud-Monosson, would also be combined. The councils would also get a comptroller to oversee a six-year program to balance their budgets and enable the comptroller to direct council staff on proper financial management.

“The situation was awful,” said a source familiar with the recovery plan. “There were councils that were totally incapable of providing financial reports on their condition. Everything had to be begun from scratch.”

The recovery plan was gradually implemented at the various councils between 2010 and 2013. An examination of the 30 accounting firms that were selected to provide comptrollers’ services shows that several of them did very well for themselves financially. Two offices also successfully bid to serve as regional coordinators, and in the process supervise the comptrollers in the area.

The David Zanzuri accounting firm received 772,000 shekels last year for overseeing the southern region, while George Shokair & Co. was paid 657,000 shekels for the same position in the north. Other accounting firms got several tens or hundreds of thousands of shekels, based on the hours that they billed. A new request for bids for future comptroller services will apparently not include regional coordinator positions, meaning that the ministry will only pay for accountants who work directly with individual councils.

'Gradual independence'

A list of 50 councils with comptrollers shows that they, meaning the councils, are scattered around the country, but almost all are in outlying areas away from the center. On the other hand, the accounting firms are concentrated in the Jerusalem, Haifa and Tel Aviv areas. One firm is in Upper Nazareth, one in Kafr Qara (an Arab community in Wadi Ara) and one in Ashkelon on the southern Mediterranean coast, but in general, the accountants were from the major urban areas. No preference was given to accountants outside the big cities.

The Religious Affairs Ministry has expressed pride in the results of the reform plan, saying that now that a new public bidding process is getting underway for accountant services, the time has come to allow the councils to spread their wings and manage themselves. But, ministry officials cautioned, it has to be done gradually once it is clear that a council is able to manage its own affairs over time without again running into trouble.