In Israel legislatural requirements for financial management and control are detailed in two Basic Laws adopted by Israel's parliament (the Knesset) and two other laws, "Principles of the Budget" and the "State Comptroller Law". Provisions of Basic Laws are designed to be incorporated in a future Constitution of the State of Israel. The annual budget is adopted in the framework of an annual Budget Law.
The Basic Law on the State Economy was passed by the Knesset in 1975. It provides that taxes and other compulsory payments shall not be imposed, and rates shall not be changed, save by and under law. Transactions in State property, and acquisition of rights and assumption of liabilities on behalf of the State shall be effected by a person empowered in that behalf by or under law.
The national budget in Israel is called the State Budget. In Israel there is no intermediate level of regional government between the State of Israel and the local authorities. The State Budget shall be prescribed by law. The Budget is an annual one and sets out the expected and planned expenditure of the Government. The Budget Bill is to be accompanied by an estimate of the sources for financing the Budget. Provision is made, in case of necessity, for the Government to bring in a Supplementary Budget Bill during the financial year and, when it appears to the Government that the Budget Law will not be adopted before the beginning of the financial year, an Interim Budget Bill. Under an amendment adopted in 1982, the Budget Bill must be tabled no later than sixty days before the start of the financial year. The law also provides for inspection by the State Comptroller (Israel's SAI).
The Basic Law on the State Comptroller was passed by the Knesset in 1988. The original State Comptroller Law was passed in 1949, shortly after the establishment of the State of Israel and was, in fact, one of the Knesset's very first enactments; it has since been re-enacted in a consolidated version and further amended. By granting constitutional status to the Office of the State Comptroller, the Basic Law reinforces the independence and autonomy of the SAI.
The Basic Law states that the State Comptroller shall "inspect the property, the finances, the obligations and the administration" of the State and of Government ministries. He is to examine the "legality, moral integrity, orderly management, efficiency and economy of the inspected bodies, and any other matter which he deems necessary". Inspected bodies are required to provide him with "information, documents, explanations, or any other material" which he deems necessary for the purposes of inspection. The law provides that the State Comptroller shall be elected by the Knesset for a term of five years and eligible for no more than two terms of office. To ensure the independence of the position, it specifies that "in carrying out his functions, the State Comptroller shall be responsible only to the Knesset and shall not be dependent upon the Government". The State Comptroller is to submit to the Knesset reports and opinions within the scope of his functions, and to publish his reports, in the manner prescribed by law.
The Law setting forth the Principles of the Budget (in this section, the Law) was adopted in 1985; until then all provisions relating to the State Budget were included in the annual Budget Law. The law also contains some new provisions designed to increase budget control.
The Law stipulates in detail the structure of the annual budget; the manner in which it may be updated and/or otherwise changed in the course of the financial year and the instances in which the approval of the Finance Committee of the Knesset must be obtained and the manner of dispersal of contingency funds included in the budget (hereinafter, reserves). In addition, the Law places limitations on the borrowing power of the local authorities and other restrictions on them and on institutions directly or indirectly supported out of the State Budget, thus strengthening Government control over their finances, manpower and wages.
The Law restricts the right of the Government to borrow from the Bank of Israel (hereinafter, the central bank; see section 3.3 below) and from other banking institutions.
In a declared effort to enforce stricter compliance with budgetary ceilings, the Law calls for cessation of activities started, cancellation of contracts signed and dismissal of workers hired where adquate coverage in the budget is lacking, and it makes it a disciplinary offence for civil servants not to abide by the restrictions set in the annual Budget Law. It also requires that the source of financing be explicity designated in all bills tabled in the Knesset and in all administrative regulations issued, or in their accompanying explanatory notes, if the bill or regulation entails additional budget expenditure or a reduction in State revenue.
Within six months after the end of the fiscal year, the Minister of Finance is required to present to the Knesset a report on actual receipts, expenditures and manpower employed. This report shows comparisons with receipts, expenditures and manpower ceilings in the approved budget.
The Minister of Finance is responsible for the implementation of the Law. He is empowered to draw up regulations and administrative directives on all matters pertaining to the execution of the budget, including the manner in which the accounts are to be drawn up, detailed breakdowns of the expenditure and revenue items appearing in the budget, the information to be delivered and the manner of its delivery. In most instances, the Minister of Finance is authorised to delegate the authority vested in him under the Law.
1.1 FINANCIAL PROCEDURE
Most matters relating to financial procedure are the prerogative of the Ministry of Finance. The Accountant General a senior official of the Ministry of Finance-issues regulations to the various ministries pertaining to financial procedures, and the Accounting Officers in those offices are his subordinates.
All Government receipts from taxes and other revenues, with the exception of National Insurance fees and receipts from loans returnable before the close of the financial year, are entered into the budget. Receipts from earmarked funds appear as such, and receipts of Government Business Enterprises (such as the Postal Bank and the Government Printing Office) are recorded in the budget in a separate schedule.
Pensions to civil servants are budgeted as paid out and not out of pension funds (with the exception of Government Business Enterprises). Cash and deposits are set forth in the Statement of Current Assets and Liabilities accompanying the report on the implementation of the budget.
The National Insurance Institute operates as an independent agency outside the State Budget. The excess of receipts-mainly from compulsory National Insurance fees and from Government contributions to some of the programs it administers over expenditures is deposited with the central bank and made available to the Ministry of Finance as a loan, which is listed as such in the State Budget.
The budget is considered the Knesset's supreme instrument for control of the Government's economic policy and order of priorities. The proceedings on the budget bill, as determined each year by the House Committee, have in recent years been generally as follows. In the first-reading stage, a comprehensive review of the national economy is delivered by the Minister of Finance and this is followed by a seven-to ten-hour debate, which may begin a week after the Minister's speech in order to enable members to first study the proposed budget and the voluminous explanatory notes. The bill is referred to the Finance Committee and the Knesset proceeds, concurrently with the detailed considerations in the Finance Committee, to debate the policy and operation of each Ministry after hearing a review by the Minister concerned. After the Finance Committee has reported back, the Budget Bill is given a second reading in which amendments are considered; the time allowed for this stage is usually a total of six to nine hours. Since the third and final reading must be held before the beginning of the financial year, the floor debates on the Ministries are in part held over and dispersed through the rest of the session and may each terminate with a vote.
Pressure of time on the Knesset in its considerations of the budget has been particularly acute in certain years when differences between Ministers over allocations have delayed its tabling. To prevent such occurrence, the above-mentioned amendment to the Basic Law on the State Economy was adopted in 1982, requiring the Government to table the annual State Budget Bill at least sixty days before the beginning of the fiscal year. The Basic Law also provides that where it appears to the Government that the Budget Bill will not be adopted before the beginning of the financial year, it may introduce an Interim Budget Bill.
Until 1991 Israel's budget year started on the first of April and ended on the thirty-first of March. Beginning with 1992, the budget year will coincide with the calendar year (January-December) to bring it into line with a similar change previously made in the tax year. In the interim, a special law was adopted to allow for a 9 month budget year for the period of April-December 1991.
2.1 APPROPRIATION PROCEDURES
The budget, as noted, is referred to the Finance Committee (in this section, the Committee). The only exceptions are the Defence Budget, which is handled by a statutory joint committee of the Finance Committee and of the Foreign Affairs and Security Committee, and the details of which are not tabled in the Knesset, and the Knesset's own budget, which is referred to a joint committee of the House Committee and the Finance Committee. Because of time constraints the Committee starts its deliberations immediately after the budget is presented by the Minister of Finance, even before the Knesset completes the first reading. It meets six days a week, sometimes twice a day, and holds hearings with representatives of the various Ministries and with representatives of the Ministry of Finance's Budget Division. Sometimes delegates from the public (such as delegations from the Israel Manufacturers' Association and the agricultural sector) are heard by the Committee. However, since coalition discipline is stringently applied in budgetary matters, few real changes are ever made in Government proposals, either in the Committee or on the floor of the legislature. The appropriations decided upon in their final form by the Committee are grants to various institutions; in recent years the annual budget lists the names of the institutions and the amounts to be budgeted to each one.
As pointed out in section 1, the Government is authorised to introduce a Supplementary Budget Bill. Other changes in the course of the year are subject to approval of or notification to the Committee, which, in effect, deals with the budget schedules throughout the financial year. The changes include: transfers of appropriations from one sub-head to another; designation of the use of appropriations out of "Reserve" items in the budget; updating expenditure because of inflation (when inflation was rampant), in addition to changes in liabilities on account of future budgets and in manpower ceilings set in the budget. Proposed changes must be submitted to the Committee not later then one month before the expiration of the financial year. Until 1974, a subcommittee of the Finance Committee also filled the role of a public accounts committee, but in that year a separate State Audit Affairs Committee was set up.
Since 1977 Government commitment on account of future expenditure for certain credit subsidies-viz. commitment to cover linkage provisions (To consumer price index or to foreign exchange rates.) in extra-budgetary loans by financial institutions that served in effect as a substitute for loans from the Development Budget-requires the approval of the Committee when the amount or credit exceeds a sum stipulated in the annual budget law; previously such commitments made by the Ministry of Finance had not been subject to the Committee's approval.
2.2 APPROPRIATIONS-BRIDGING FINANCE
As pointed out in Section 1, the Basic Law on the State Economy provides for for the possibility of adopting an Interim Budget Law when it appears to the Government that the annual Budget Bill will not be enacted before the start of the new fiscal year. When Interim Budgets were enacted, they were for a period of three months.
The provision for authorisation within the framework of the Budget Law to incur obligations was designed to make possible a budget based on medium and long-term planning without relinquishing control over financial obligations that are in effect commitments on future budgets, and to present to the Knesset a complete picture of the burden on future budgets involved in undertaking medium and long-term projects.
Perennial inflation, which has characterised the Israel economy since the establishment of the State, has made it necessary to seek ways of adjusting the budget in the course of the financial year. There were years of galloping inflation that threatened to render the annual budget deliberations meaningless; in 1983, for example, when inflation was over 40%, planned and estimated expenditure were no longer realistic even as they came before the Knesset for approval. Two methods of securing budgetary flexibility in a period of high inflation were used and later incorporated in the Law: the first-in the budget laws for the years 1979-83, and the second-in the budgets of the following two years.
Under the first method a clause was inserted in the annual Budget Law providing that if it appears to the Finance Committee that receipts from revenues and borrowing will exceed the forecast of receipts for the fiscal year, it might, on the proposal of the Government, authorise allocation of these additional amounts to cover cost increases (or reduce the national debt). This provision aroused much criticism from the Opposition as circumventing open debate in the Knesset on Government expenditure, since it enabled an overall increase in the budget without requiring passage of a Supplementary Budget Law.
The method used in 1984 and 1985 enabled the Minister of Finance to update the budget each quarter, taking revenues and the various aspects of inflation into account. Items were updated at different rates; e.g. wages and salaries of the Civil Service in accordance with changes in wage contracts and in the cost-of-living increment, and outlay in foreign currency in accordance with changes in the rates of exchange (see section 7.5). Increased expenditure was covered by an increase in estimated receipts from taxes or loans and/or cuts in various items of expenditure. These changes too, were subject to approval by the Finance Committee only and not by the Knesset.
2.3 EMERGENCY EXPENDITURE
Inflation, large-scale immigration, wars, unemployment and other developments have over the years required large-scale deviation from the original budget. As pointed out earlier, in case of necessity the Government is authorised to introduce a Supplementary Budget Bill. There have been years when two Supplementary Budgets were adopted.
During the years of rapid inflation-1981 to 1985-the provisions for updating the budget described above made it possible to make adjustments in authorised expenditure with less recourse to Supplementary Budgets than would have been the case otherwise.
Another way of adjusting expenditures to changes that occur in the course of the year is to include, in the expenditure budget, "Reserve" items-a "General Reserve" and "reserves" in some of the departments; for example, reserves in the Ministry of Immigrant Absorption in a year, such as the current one, when large-scale immigration is expected, without it being possible to predict the exact number of immigrants. Transfer from the Reserve items to specific items in the Budget, above a certain sum, requires prior approval of the Finance Committee.
2.4 CONTINGENCY FUND
As pointed out, contingency funds are provided for in the budget. There is no extra-budgetary contingency fund in Israel.
Under Israel's parliamentary system the Government-the Ministers-are members of the Knesset, coming to power and retaining office by winning a vote of confidence in the Knesset. In all matters relating to financial accountability and management, the Government-through its Minister of Finance and his Ministry-plays a dominant role.
At a certain stage in the Budget preparation process (see section 7.3) the Government approves a skeleton Budget containing overall expenditures, total expenditures by Ministries, changes in revenue policy (changes in tax laws also require Knesset approval) and receipts from loans. At a later stage, the detailed budget prepared by the Budget Division of the Ministry of Finance is brought before the Government for deliberation and approval before it is tabled in the Knesset. However, traditionally, the Government as a whole and Israel's Prime Ministers in particular, have over the years, been more occupied with other matters, largely defence, foreign affairs and immigrant absorption in periods of mass immigration. Budgetary matters, when discussed, have often been influenced by coalition considerations; since the State was established, Israel's governments have been dependent on a coalition of parties. Matters of overall financial accountability and management have become the almost exclusive prerogative of the Minister of Finance (and of the State Comptroller); on the minor role played by the Ministry of Economics and Planning, see section 3.2 below.
A Ministerial Committee on Co-ordination and Management makes recommendations to the Government on matters of internal audit and how to apply Knesset recommendations with respect to the findings of the SAI
A public committee of enquiry composed of former senior civil servants and academics that conducted an overall examination of the public service at the request of the Government, recommended in 1989 that the Government as a whole, and the Prime Minister in particular, be provided with the tools to play a more effective role in matters of administrative and fiscal management.
3.1 THE MINISTRY OF FINANCE
The Ministry of Finance occupies a dominant role in overall financial accountability and management. The Budget Division plays a leading role, not only in planning and preparing the budget, but also in supervising its overall execution once it has been approved by the Knesset, since all changes require its approval.
The Accountant General releases budget funds to the Ministries in the course of the year and, theoretically at least, is in complete charge of their accounting systems, since the accounting officers in each of the Ministries are his employees. As discussed later, his office draws up the national accounts which are submitted to the Knesset and the SAI, and is directly responsible for the payment of wages, salaries and pensions of all civil servants. Among his other functions are management of loans received by the Government, other than those managed by the central bank.
The State Revenue Administration is in charge of tax collection and management. Other functions performed by administrative bureaus of the Ministry of Finance include management of wage agreements affecting not only the civil service but also the remainder of the public sector, regulation of the local capital, savings and insurance markets, regulation of wholly or partially-owned Government corporations, and supervision of the Civil Service.
3.2 OTHER CENTRAL AGENCIES
When the Ministry of Economics and Planning was created, certain functions previously performed by units in the Ministry of Finance were transferred to it. In practice, it plays only a minor role in financial accountability and management. The Economic Planning Authority, which was transferred to this Ministry from the Ministry of Finance (it had originally been set up in the Prime Minister's Office), draws up medium and long-term economic plans. The Economic Planning Authority jointly with units in the Ministry of Finance and the central bank, also draws up the annual "National Budget" which is tabled in the Knesset with the State Budget (see Section 7.4 (b)).
The Office of the Inspector General, which was also transferred to the Ministry of Economics and Planning from the Ministry of Finance, is responsible for co-ordinating the annual work plans of the internal auditors of the various Ministries and receives from them the Ministries' replies to SAI findings and follow-up reports on actions taken by them to correct deficiencies noted in the past in SAI reports.
The Public Administration Efficiency Board, which also operates in the framework of the Ministry of Economics and Planning, has as its function the preparation of plans for increasing efficiency in the public sector and coordination between Government, local authorities, and Government companies.
3.3 ROLE OF THE CENTRAL BANK
As the agent of the Ministry of Finance, the central bank issues medium and long-term bonds to the public and to saving institutions to recycle domestic debt and fund the Government deficit, and administers repayment schedules. It also issues bonds to the National Insurance Institute against its deposits.
The central bank also helps draft the annual "National Budget" (see section 7.4 (b)). The Governor of the central bank acts as the chief economic adviser of the Government.
In recent years changes have been made in the Law of the Bank of Israel (Parallel changes were made in the Principles of Budget Law.) with regard to the use of loans from the central bank-in effect, printing money to finance the budget. To bridge the difference in timing between receipts and expenditures during the year, the Government has always been, and still is, permitted to take provisional advances during the financial year from the central bank, within limits set by law, provided they are returned before the close of the financial year. When the Government found that it could not return the entire amount of the advances at the end of the budget year, either because expenditures exceeded the estimates or because the full amount of receipts had not been realised, special legislation was required before the Government could convert the provisional advance into a long-term loan. This long-term loan was then included in a Supplementary Budget Bill together with the additional expenditures it was designed to finance. There were also years when a loan from the central bank was included in the Original Budget Bill as part of estimated receipts to finance the Capital Budget.
Under statutory restrictions now in effect the central bank may not make a loan to the Government to finance its expenditures except for the following:
3.4 PRIVATISATION
Following are the main areas of Government functions, intervention and control that the Government has attempted to transfer, in one way or another, to private hands.
It is the declared policy of the Government to encourage the development of a private capital market in Israel that would take over some of the functions of the Government in the field of investment and financing. Some steps have been taken in this direction, but at a rate slower than planned.
An attempt is being made to absorb the large wave of immigration from the Soviet Union with a minimum of intervention as to their geographic location and the type of housing provided. In the past large waves of immigration were directed to geographic locations set by the Government and housed in Government-built housing projects.
The Government decided recently to authorise licensing of private employment exchanges, thus ending the official monopoly of the State Labor Exchange. It has also authorised the licensing of cable television, ending the official monopoly of Government television broadcasting. Further, a Government- appointed committee has recommended the introduction of private competition in the field of telecommunications.
A Government-appointed Public Commission of Enquiry into the functioning and efficiency of the Public Health System in Israel recommended its reorganisation, the increase in the use of "private services" in public hospitals, the changing of the status of Government hospitals, which now operate as administrative units of the Ministry of Health, and the reduction of health services provided directly by the Ministry of Health. Plans are underway to sell or lease one of the Government hospitals and to convert the others to public corporations. Similarly, the shares of private banks, purchased in 1983 and in subsequent years under special arrangements by holding companies acting in effect for the Ministry of Finance, are now in the process of being sold.
As early as 1978 a Ministerial Committee decided in principle to reduce the Government's holdings in companies under its control, either by selling shares held by the Government or by selling the company outright or, in the case of companies completely owned by the Government, allowing them to "go public", i.e. issuing shares for sale on Israel's stock market. In 1988 the Government approved a masterplan for privatisation of some of the companies owned by it in full or in part. The plan was drawn up by the Government Companies Authority in the Ministry of Finance with the aid of a large American investment bank and called for the outright sale, or sale of shares to the public, of twenty-six Government-owned companies over a period of five years. A start was made in 1988 when Government shares in a large petroleum products firm under its control were sold for $95 million and a large Jerusalem development company, which had been owned outright by the Government until it started issuing shares to the public a year earlier, was sold for $55 million. A number of other wholly-owned Government companies have begun to issue shares for sale to the public, including the telecommunications company, and the sale of a number of other companies is under active consideration.
Improvement of financial management and control are among the main objects of the SAI in Israel. The SAI has wide statutory powers regarding the scope and methods of inspection. "Inspected bodies" include not only every Government ministry, enterprise or institution, but also every local authority, "every enterprise, institution, fund or other body in the management of which the Government has a share", and even, under certain circumstances, other bodies as well. In addition to the legality of financial transactions and the promotion of efficiency, economy and ethical conduct in public administration, the SAI may inspect "any such matters" as deemed "necessary". In addition to reports, balance sheets and written surveys, the SAI may demand "information, documents, explanations and any other material" deemed necessary for the purpose of inspection. These powers are set forth in detail in the State Comptroller Law.
The examination of the budget and its implementation, and the examination of other financial accounts of the Government, are major tasks of the SAI. The timetable provided in the Law for the submission of the SAI's annual report to the Knesset, in addition to other details in the report, are given in section 12.1 below. The SAI's written reports are given wide coverage in the media in Israel and accordingly, this institution is well-known to the public.
4.1 RELATIONSHIP OF THE SAI WITH THE PUBLIC ACCOUNTS COMMITTEE OF PARLIAMENT
The public accounts committee of the Israeli parliament is called the State Audit Affairs Committee of the Knesset-hereinafter referred to as the "State Audit Committee". The State Comptroller delivers his annual report to the State Audit Committee at a time fixed by the Law (see section 12.2). The State Audit Committee and the State Comptroller then decide which of the chapters in the SAI report shall be the subjects of its deliberations. Hearings are then held in which the State Comptroller as well as senior civil servants from the relevant Ministries participate. Under a recent amendment to the State Comptroller's Law, "any one" who was employed or served in the Ministry at the time to which the findings refer may be called upon to testify-the intention being to include, for the first time, the Minister himself and where relevant, even the Prime Minister. The State Audit Committee also operates through sub-committees which it establishes.
The Law allows the State Audit Committee up to eight months to submit its conclusions and proposals to the Knesset. The annual Knesset debate and vote on the State Audit Committee's report serve as a forum in which the Knesset members air their views on the findings in the SAI report.
4.2 AUDITING STANDARDS
The SAI formulates auditing standards for its employees and issues such standards in the form of a comprehensive auditing manual. The most recent version, which was completed in 1987, is in effect a codification of auditing standards and is based on practical experience accumulated in the SAI of Israel and of other countries. It stresses the need for independence, objectivity and professionalism on the part of the auditor; the principles of legality, regularity, economy, efficiency and ethical conduct; and contains detailed instruction on how to conduct an audit, i.e. overall planning (choosing the subject to be examined), execution of the audit, determination of findings, audit working papers and documentation, preparation of the audit report, and follow-up arrangements. There are also special sections on audit management and decision-making, the State budget, financial management and other matters.
In Israel there are no additional Knesset committees that deal with financial accountability and management. The role played by Ways and Means Committees in other Parliaments where such committees exist is vested in the all-powerful Finance Committee (see section 2.1 above). This Committee may, in consultation with the House Committee, appoint an ad hoc sub-committee to deal with tax matters, but it has no permanent sub-committees.
The annual Budget Law stipulates the amount of expenditure the Government is authorised to disburse in the course of the financial year. In addition it lists the amount of expenditure out of earmarked funds, manpower ceilings, the budget of Government Business Enterprises and the maximum amount of money the Government may borrow from the central bank. A forecast of receipts from revenues and loans is appended.
In Israel, budget authorisation is permissive, not mandatory, and there are limits set in the Principles of the Budget Law to the use of unused authorisation from previous years.
The Budget is divided into three Schedules:
The First Schedule which is subdivided into three parts : (a) the Ordinary Budget; (b) the Development Budget and Capital Account (hereinafter-Capital Budget), including debt repayment other than to the central bank, and (c) Debt Repayment to the Bank of Israel.
The Second Schedule, called the Business Enterprise Budget, lists receipts and expenditures of Government commercial companies, such as the Government Printing Office and the Postal Bank. These budgets are always presented as balanced, the balancing item being transfers to or from the ordinary budget.
The Third Schedule-"Special Surpluses"-specifies budget programs in which unused authorisations from the previous year's budget which may be carried over into the new financial year even in the absence of an overall surplus in the budget heads in which those programs were included.
The detailed budgets in the First Schedule are detailed in the annual Budget Law as follows (for classification of budget items, see section 6.2 below):
Under the last three columns figures are designated only where relevant. Ordinary receipts, capital receipts and receipts from the central bank are listed in the forecast appended to the Budget as required by Law. The Ordinary Budget and the Capital Budget are always shown as balanced, if necessary by loans from the central bank (on legal limitations as to the purpose and type of such loans, see section 3.3 above). Balance of the Ordinary Budget is usually obtained only by transferring sums from Capital Receipts to Ordinary Receipts.
6.1 DESCRIPTION OF THE BUDGET SYSTEM
In 1976 Israel's budget system was changed from one classified by administrative units and objects to one of fields of operations or activities (programs). A not inconsiderable part of the itemised breakdown of operations of the various Ministries (such as wages and salaries, overtime, procurement, and maintenance) was taken out of the Budget Law, and the Ministry of Finance was authorised to issue budgetary Regulations containing a more detailed itemisation of expenditure than that appearing in the annual Budget Law. This change made possible a considerable reduction in detail of the budget document presented to the Knesset for its approval, without relinquishing central (and ministerial) control over the planning, disbursing and accounting of the details of expenditure.
The change from administrative units to "fields of operation" was to a certain extent a sematic one, as the examples that follow show. The new terminology places the emphasis on the activities carried out by the Government rather than on the bureaucratic structure responsible for carrying them out, without relinquishing control over the administrative units as such.
"Fields of operation" (and in some instances also "program") more or less coincide with administrative units. Thus in the budget of the Minister of Finance, the sub-head "Budgeting Government Activities" represent the budget of the Budget Division, and "Control and Management of Manpower in Government Offices" represents the budget of the Civil Service Commission. The name of the administrative unit responsible for discharging the "field of operation" in each of the Ministries is listed in the Explanatory Notes accompanying the budget of that Ministry (for examples of "fields of operation" and "program" in the ordinary budget of the Ministry of Agriculture, see section 6.2 below).
6.2 BUDGET CLASSIFICATION
Expenditure is listed under major budget heads (in most cases, the Ministries), major sub-heads ("fields of operation") and minor sub-heads ("programs"), grouped under functional headings.
Expenditure from the Ordinary Budget is grouped under the following functional headings:
Expenditure from the Capital Budget is grouped under the following functional headings:
Development Expenditure-
Major budget heads in the Ordinary Budget, other than the Ministries, are: Pensions and Severance Pay, Grants to Local Authorities, Interest Payments, Reserves, and several types of Subsidies. Major budget heads in the Capital Budget, other than the Ministries, are Higher Education and Water Projects.
7.1 PLANNING
Budget planning begins with the setting of budget aggregates in the light of overall fiscal policy and a forecast of macro-economic developments in the economy. A major analytical tool employed is an econometric model that makes it possible to estimate the effect of alternative budget aggregates on production and GNP, the balance of payments, level of prices and of employment, public and private consumption and investment or savings, and the distribution of income.
Much of the expenditure budget is more or less fixed by existing laws and by contractual obligations. Major expenditure items such as wages, salaries and pensions of civil servants, interest and principal on the national debt and large parts of the Defence Budget are not subject to reduction. Budget planning is therefore concentrated on fixing priorities on an incremental basis.
7.2 ORGANISATION AND ROLE OF BUDGET OFFICE
The Budget Division in the Ministry of Finance plays a leading role in the planning and drawing up of the Budget and in its presentation to the Government and to the Knesset, accompanied by additional Explanatory Notes.
The Budget Division attempts to improve efficiency and economy in government administration through improved budgeting techniques and by increasing the awareness of the importance of budgeting on the part of the Ministries. It is responsible for examining and evaluating proposed projects to be financed out of the Capital Budget. As all changes during the financial year in the authorised budget must first be approved by the Budget Division before they are referred to the Finance Committee of the Knesset, the Budget Division in effect follows up on the implementation of the budget throughout the year.
7.3 BUDGET STEPS
Following are the stages in the budget process, from the planning stage to the adoption of the annual Budget Law by the Knesset. The total time span is about six months-four months until the Budget Bill is tabled in the Knesset and another two months until its enactment into law, usually just before the start of the financial year. Some of the stages are carried out simultaneously by the various factors concerned.
- Budget changes
- Structural changes
- Budget cuts where necessary
The above five stages (2 to 6) following the planning stage take place in the eighth month of the financial year.
7.4 DOCUMENTS PRESENTED TOGETHER WITH THE STATE BUDGET
The State Budget is accompanied by two other documents:
The first volume also contains a survey of principal changes in the operations of the Ministries and summaries of major new projects planned for the budget year. In addition, it includes a section on
Budget Policy, setting forth major budget objectives and the means of attaining them, accompanied by tables and diagrams on expenditures and receipts and on the budget deficit, as compared with parallel figures for the budget of the current year and actual data for the preceding financial year. The deficit here is presented as the excess of expenditure (other than receipts on account of loans made); and net receipts from loans (including loans from the central bank) are presented as the means of financing the deficit.
The explanatory notes on the revenue forecast include proposed changes in tax laws. In accordance with a recent amendment to the Principles of the Budget Law, a forecast is also presented of tax revenue that will not be collected in the coming tax year due to proposed tax benefits. Also included are a section on monetary policy prepared by the central bank and diagrams on developments in the economy as a whole.
The brochures dealing with the individual Ministries contain the relevant budget figures, highlights of the budget, information on the organisational set-up of these Ministries and details on current operations, new projects and work-in-progress on existing projects, in addition to statistical tables comparing the proposed budget with the budget of the current year and actual expenditure for the preceding financial year.
7.5 BUDGETING IN TIMES OF GALLOPING INFLATION
In the early 1980s Israel went through a period of galloping inflation, during which the Consumer Price Index (CPI) rose as much as 20% and more in some months, foreign exchange rates changed rapidly and annual inflation came to more than 100%-at its peak, to over 400%. Since wages and salaries in the Israel economy, including the civil service, are linked to the CPI, this state of affairs (as pointed out in section 2.2 above) threatened to render annual budget deliberations meaningless. During this period a procedure was developed for up-dating the budget during each quarter of the financial year without recourse to additional legislation (Supplementary Budget Law). The Ministry of Finance was empowered to make the necessary changes in expenditure (and in the estimate of receipts), with the approval of the Finance Committee of the Knesset as the only additional requirement. This is still permitted under the Principles of the Budget Law, but has in fact not been resorted to since 1985. Since the relation between the budget and inflation is reciprocal-that is, printing money to finance the budget was in itself one of the major causes of the inflation-one of the steps taken to stop the inflationary spiral was to restrict the power to borrow from the central bank.
7.6 ROLE OF OTHER CENTRAL AGENCIES
There is no other Central Agency, other than the Ministry of Finance, that deals with the Budget.
7.7 PUBLIC DEBT
As set forth in section 6.2 above, medium and long-term borowing are listed as receipts of the Capital Budget and repayments as expenditure, except where the central bank is the lender, in which case borrowing and repayment are presented separately as receipts and expenditure in a special Third Part.
However, in its Explanatory Notes to the Budget, (see section 7.3 above) the Budget Division does include a table separating all borrowing and collections on account of loans from receipts, and all lending and repayment of principal on the public debt from expenditure, and presents them "below the line" under the heading "Financing of the Deficit". In this table, called "Budget Deficit and Its Financing"' the deficit is defined as the excess of expenditure over receipts, excluding the above items.
The Accountant General's Office prepares the budget for payments on account of the public debt-interest, principal and linkage differentials-based on its own records and those of the central bank. The central bank is responsible for the management of State Loans (bonds sold on the Israel Stock Exchange, non-negotiable bonds issued to pension, provident and insurance funds, and Israel Bonds floated abroad), the funds of the National Security Institute, and bank deposits on account of savings funds. Other loans are managed by the Accountant General's Office in the Ministry of Finance. These include loans from foreign governments and financial institutions, and long-term deposits of funds originating in bonds issued by domestic financial institutions to finance Government lending out of the Capital Budget (development loans to sectors of the economy).
The Ministry of Finance, through its Accountant General's Office and the Budget Division referents, continues to play a leading role in budget matters after the adoption of the Budget Law.
Together with the Ministries, the Budget Division prepares a more detailed breakdown of the Budget which is issued at the beginning of the new financial year in the form of Budget Regulations, which the Minister of Finance is authorised to issue under the Principles of the Budget Law. These Regulations are issued in the form of volumes for each of the Ministries which contain a detailed breakdown of the amounts and number of employees (manpower ceilings) authorised in the Budget-in effect, for each administrative unit-by items such as wages and salaries, overtime, purchases and transportation expenses.
All changes in the budget require approval of the Budget Division, which, in turn, is responsible for informing the Finance Committee of the Knesset and obtaining its approval where the law so requires. The referents deal with the budget throughout the financial year in consultation with their counterparts, the budget officers of each Ministry.
The statutory authority of the Minister of Finance to supervise the legality of disbursements out of the budget, to ensure compliance with the limits set in the approved budget, and to issue rules and regulations with regard to financial management and accounting, as defined in the Principles of the Budget Law, is delegated each year to the Accountant General. This officer maintains control over budget implementation through the Accounting Officers in each Ministry, who are assigned to those Ministries but are directly responsible to him and administratively subordinate to him; they are considered employees of the Accountant General's Office.
The Accounting Officer's signature is mandatory for the legality of all disbursements made and all financial obligations incurred (contracts signed) by the Ministries. Without this signature, such transactions will not hold in a court of law.
In addition, the calculation and payment of wages and salaries to all persons employed in the Civil Service, and of pensions to those retired from the Civil Service, are the exclusive prerogative of the Accountant General's Office, payment being effected by crediting the bank accounts of the recipients. The Accountant General thus maintains control over this important expenditure item.
The Accountant General sets book-keeping and auditing standards for all the Ministries. The "Finance and (Government) Economy Regulations" (hereinafter, the Financial Regulations) issued by him deal with the handling and control of moneys, book-keeping and accounting and details of Government "housekeeping" and office management. The Financial Regulations are legally binding. They contain detailed directives as to who is authorised to deal with changes in the budget, draw up financial plans, sign a wide range of obligations-order, contract, cheque, advance payment-record transactions in the ledger, handle petty cash, draw on current bank deposits, draw up accounts and financial reports. Many of these transactions require the co-signature of the Accounting Officer who, as noted above, is directly responsible to the Accountant General and administratively subordinate to him.
Following are some of the subjects dealt with in the Financial Regulations:
Implementation of the budget by the various Ministerial units : monthly financial plan, changes in the budget, obligations, contracts.
Disbursements : advance payments, examination of bills, the way in which payment is to be effected, payments in foreign currency, control, use of lines of credit.
Inspection and control : reporting to the Accountant General, authorisation to borrow, handling of petty cash, management of bank accounts, inventory control.
Procurement of goods and services, standards of issuance offenders, price offers, allocation of government office accommodation, standards for purchase and hire of vehicles.
8.1 ROLE OF MINISTRIES IN SPENDING AND CONTROL
The Accounting Officer is required to submit to the Accountant General a monthly financial plan, showing the approved budget of his Ministry, the funds received since the opening of the financial year, a forecast of the funds needed for the current month, an estimate of disbursements until the end of the financial year, and changes in the budget agreed upon with the Budget Division, but not yet approved.
As noted earlier, the budget officers in the various Ministries operate in coordination with the Budget Division in the Ministry of Finance on all matters relating to changes in the Budget. The treasurers operate under Regulations set by the Accountant General, and all contracts, other financial obligations and disbursements require the signature of the Accountant General. A computerised record of monthly and even daily transactions is transmitted to the office of the Accountant General.
This centralised control has been criticised in the case of management of Government Hospitals operating under the budget of the Ministry of Health. Under recommendations made recently by a governmental Commission of Enquiry on the Functioning and Efficiency of the Public Health System and adopted by the Governmental Commission of Enquiry on the Functioning and Efficiency of the Public Health System and adopted by the Government, there will be less centralised control over the financial operations of the hospitals and more local responsibility. It is hoped that in this way there will be a greater awareness of economic management, introduction of costing techniques, and more follow-up on implementation-in short, greater efficiency.
8.2 INTERNAL AUDIT
As employees of the various Ministries and responsible to the Director General, the findings of the internal auditors are not published. Under Rules and Regulations issued by the Civil Service Commissioner, and Regulations issued by the Accountant General, a sample inspection by internal audit is conducted in each governmental unit within the framework of a systematic annual work-plan.
The internal auditor concerned reports directly to the head of the unit inspected on failures and defects, with the findings then being presented to the Director General (and even to the Minister in some cases, under the Civil Service Commissioner's Instructions). To follow up on the findings of the internal auditor (and of the SAI), relevant committees are set up in each Ministry, with the legal advisor of the Ministry, the Chief Accountant and the internal auditor participating.
As internal audit sections are often understaffed, investigations are largely confined to administrative matters, manpower usage and office directives rather than financial transactions carried out in the particular Ministry. Although there is as yet no statutory requirement for the employment of internal auditors, under pending legislation the setting up of internal audit units in every department (as well as every other public body as defined in the relevant bill) will be mandatory, thus enhancing the status and independence of the internal audit function. In each case the internal auditor will report to the Minister concerned and will be authorised to demand access to all relevant information and documentation, including all data stored in the computerised data base of the particular Ministry. The bill requires that internal auditors be professionally competent and, to ensure their independence, protects them from arbitrary dismissal. This bill was drawn up by the Audit Committee of the Knesset, which in the past dealt only with SAI findings, after it was authorised by a change in the Knesset rules in 1989 to include certain aspects of internal audit. The change was brought about following the Audit Committee's deliberations on findings and recommendations of the State Comptroller on the subject of Internal Audit and the Status of the Internal Auditor in Government.
As in the case of budget planning and implementation, the Ministry of Finance plays a leading role in budget reporting. Through the Financial Regulations, auditing and accounting and auditing standards are set for the other Ministries which transmit on-line updated information on every budgetary transaction.
9.1 ROLE OF THE MINISTRIES
In each Ministry the accounts are drawn up in accordance with instructions and rules by the Accountant General and are transmitted directly to him through the new EDP system described in section 10 below. The Accounting Officer of each Ministry who, as indicated previously is an employee of the Accountant General, is responsible for drawing up the accounts.
9.2 BUDGET EVALUATION
There is a growing awareness in Israel, with its large public sector, of the potential importance of budget evaluation as a management tool. Sporadic evaluation is undertaken by various agencies-mainly the Budget Division, which examines proposed Government projects before their inclusion in the budget and, in the case of multi-year projects, during the stages of execution. Further, the SAI frequently evaluates individual governmental projects after they are already in operation (see section 12.1 below). However there is as yet no systematic program of governmental operations in Israel and no unit within the Government, or organisation outside the Government, that deals specifically with this matter.
An expert Commission of Enquiry appointed by the Government to conduct an overall examination of the Government Service recently recommended that small units of experts be set up in each of the Ministries to advise the Director General on management and budgetary policy, and that one of the tasks of these units should be to promote systematic program evaluation. Following these recommendations, the State Comptroller requested the Ministers in 1989 to promote the use of program evaluation as a management tool in their respective Ministries . At the same time, the SAI of Israel undertook a joint research project on self-evaluation with the SAI of Holland.
10.1 DESCRIPTION OF THE NATIONAL ACCOUNTING SYSTEM
Following the operation in the past of a decentralised accounting system, and then of a centralised system that was based on a mainframe computer at the Ministry of Finance, the National Accounting System is now being transformed into a distributed accounting system, based on a modern network of telecommunication that connects the computer in every Ministry with the mainframe in the Ministry of Finance.
Following is a schematic list of inputs to the new EDP system of accounting and financial management and control:
1. Financial Management System (for additional details see diagram that follows)
- Implementation of the budget
- Accounting
- Management of property and inventory
The new system, which links the accounting offices of the various Ministries with those of the Accountant General, is designed to streamline financial management and control in the Ministries and to provide on-line, up-dated, detailed information on financial operations carried out at three organisational levels of government:
Following are the major objectives the new system is designed to achieve:
The new system will also enable the SAI to access the computer of the Accountant General and thus obtain detailed data on the implementation of the budget and on the assets and liabilities recorded in the Statement of Assets and Liabilities.
10.2 TYPE OF ACCOUNTING SYSTEM
Receipts and expenditures are recorded in the accounts on a cash basis, i.e. at the time of actual receipt or disbursement, with two exceptions:
Until 1976 budgetary expenditure was recorded on a modified cash basis which allowed for additional entries up to two months after the closing day of the financial year.
10.3 SPECIFIC LEGISLATION
Major classification of expenditure (by budget head, "field of operation" and "program") and of revenue is included in the annual Budget Law approved by the Knesset.
10.4 ANY SUPPLEMENTARY REGULATIONS
The Principles of the Budget Law empowers the Minister of Finance (or the person to whom he delegates this authority) to issue regulations requiring a further itemisation of the sub-heads in the budget. The Budget Division, to which this power has been delegated, issues such regulations every year, and submits to each of the Ministries a brochure containing the additional itemisation (that had been agreed on previously and on which the budget totals had been based). In addition to expenditure authorisations for items-such as wages and salaries, overtime pay, procurement, maintenance and publications-the Budget Regulations contain certain quantitative restrictions-mainly manpower ceilings on the maximum number of overtime hours. The annual regulations also contain an itemised breakdown of the amount of obligations on account of future budgets that may be incurred, in accordance with the ceilings set in the approved budgetary allocation for the relevant sub-heads.
10.5 ACCOUNTING STANDARDS
The Accountant General sets accounting standards for all the Ministries of the State of Israel (see section 8 above).
11.1 STEPS IN THE ACCOUNTING PROCESS
The new EDP system described in section 10 above has made obsolete many of the steps once needed to arrive at the national accounts. The coordinated data system has eliminated the need to reconcile financial operations by the Ministries with the Accountant General's accounts, with those of the regional office under the Ministries' jurisdiction, with other Ministries, and with Government Business Enterprises (such as the Government Printing Office) where accounts are kept on an accrual basis while the Ministries' accounts are on a cash basis.
A number of Ministries have more than one Accounting Officer; in the twenty-three Ministries there are a total of more than fifty Accounting Officers. This is due mainly to different functions being carried out by the same Ministry or to different budget heads for which one Ministry is responsible. Thus the Ministry of Finance has nine separate Accounting Officers, including one each for its Pension Division and for the revenue-collecting function and the disbursal function of each of the two tax divisions.
Prior to the new EDP system, the need for reconciliation of accounts often caused a lag of as much as two months in the closing of the accounts, making it impossible to know in time whether it was necessary to ask for additional budgetary authorisation for specific sub-heads of the budget before the close of the financial year. And it was virtually impossible to determine whether the authority to incur obligations on account of future budgets had been exhausted.
Further, the Accountant General had difficulties with certain accounts- debt repayment- for which he himself was responsible. The classification of the budget accounts-interest and principal payments by type of lender and by type of currency-was different from the classification in the Debt Statement and in the Repayment Schedules. The Accountant General would debit the budget during the financial year with lum-sum expenditures including principal, interest and linkage payments, and only after the close of the financial year- when it was too late to ask for additional authorisation-would he discover that in some of the specific budgetary items expenditure had been greater than authorisation.
11.2 SCOPE OF THE PUBLIC ACCOUNTS
The public accounts consist of the budget accounts-the components of the approved budget in its final form and data on the implementation of the budget as against the approved budget as well as two financial statements: a Statement of Current Assets and Liabilities and a Statement of Monetary Assets and Liabilities, as detailed below.
The Accountant General prepares three separate Statements of Current Assets and Liabilities,-one for the accounts of the Accountant General, a second for the accounts of the Ministries, and third consolidated account of the previous two, which represents the Current Assets and Liabilities of the State.
Monetary Assets are mainly outstanding loans made, investment in company shares, and commercial inventories held by Government Business Enterprises. Monetary Liabilities are mainly outstanding loans received (domestic and foreign) and outstanding linkage differentials on extra-budgetary loans.
Since part of the expenditure in the Capital Budget has been disbursed on grants-in-aid and, furthermore, since outstanding liabilities on account of loans payable are considerably higher than outstanding assets on account of loans receivable (partly because Government borrowing was linked to the Consumer Price Index or was in foreign currency, whereas in the past unlinked loans were granted to encourage investment), there is a large balancing item called "monetary deficit" which sum will have to be paid out of future budgets. Until 1983 borrowing and lending balances were not presented in a comprehensive Statement, and the "monetary deficit" was not perceived as such.
Another cause of the deficit is that non-monetary assets financed out of loans in the Capital Budget- such as investment in infrastructure, land, government buildings and equiptment, and non-commercial inventories-are not included. However, neither does the Statement include an actuarial estimate of liabilities on account of pension and severance pay to Government employees.
11.3 FORMAT OF THE PUBLIC ACCOUNTS
The Public Accounts are issued by the Accountant General in two volumes. The first volume, presented to the Knesset-and to the SAI six months after the end of the financial year, contains all the data on the budget accounts (components of the Budget and implementation of the Budget) detailed in section 11.2 above, and also the Statement of Current Assets and Liabilities.
The second volume, presented to the SAI nine months after the end of the financial year, contains the Monetary Statement of Assets and Liabilities and supporting tables. In addition, this volume contains a list of guaranteed loans outstanding, made outside the budget with the consent of the Financial Committee of the Knesset, as required by law.
A more detailed breakdown of expenditure out of the budget, as set forth in the Budget Regulations issued to the various Ministries by the Accountant General, is in the form of a computer print-out.
All the material included in the above document, as well as additional breakdowns of their component parts, is also available to the Accountant General and to the SAI on the computerised data base.
12.1 ROLE OF THE SUPREME AUDIT INSTITUTION (SAI)
Ten and one-half months after the end of the financial year, (Since the Accountant General is given up to nine months after the expiration of the financial year to submit to the SAI his Statement on Assets and Liabilities, another deadline is set in the law for the SAI report on this document-three months after it has been submitted, i.e. twelve months after the end of the financial year.) the State Comptroller submits his annual report to the Minister of Economy and Planning. It is the function of the Inspector General attached to this Ministry to prepare, within twelve weeks, its "Observations", which are, in effect, replies of the Ministries to the findings of the SAI. The SAI report is then tabled in the Knesset, referred to the State Audit Affairs Committee
The SAI unit responsible for examining the national accounts conducts a comprehensive audit of the budget accounts and the Statement of Assets and Liabilities. This audit emphasises the manner of presentation and system of accounting rather than the recording of individual transactions, though the latter is examined selectively. Units responsible for examining the individual Ministries also deal frequently with budgetary and other financial transactions, accounting and management.
Conceptually the compliance audit-an audit to determine whether the Administration has acted in accordance with the legal requirements and remained within the budget limits, whether the funds have been spent for the purposes approved, and whether the accounts have been kept properly and accurately ramains an indispensable part of State audit, but its relative importance has declined. Budget regulations are sufficiently flexible to allow alterations in the budget before the close of the financial year. This flexibility and the availability of EDP real time information have resulted in a reduction in the number and amount of open infringements of "regularity".
In Israel the SAI has been given, by law, considerable latitude as to the sphere and scope of inspection (see section 4.1 above) and this has enabled it to conduct substantive investigation of Government financial and other activities. While policy decisions as such are not subject to criticism, the SAI may, and frequently does, point out deficiencies in the decision-making process.
Indeed, not an inconsiderable part of its Annual Report is devoted to the review and evaluation of past projects and financial transactions. Recent examples include neighbourhood rehabilitation projects, water resources management and the sale of Government-owned corporations. Among the programs critically reviewed by the SAI in the past were military weapons systems, hidden subsidies, grants-in-aid, and operations financed outside the budget but involving commitments on future budgets. Following are two examples of SAI findings that eventually brought about changes in existing Government practices.
12.2 PUBLIC ACCOUNTS COMMITTEE-THE STATE AUDIT COMMITTEE
It is through the "Conclusions and Proposals" of the State Audit Committee that are brought before the Knesset for its approval that the findings and recommendations of the SAI are given official sanction.
In the wake of SAI findings on internal audit, the deliberations of the State Audit Committee even resulted in the drawing up of legislation directly by the Committee (see section 8.2 above). In another unusual instance it brought about the setting up of a special Commission of Enquiry. The State Comptroller's Law provides that, in the wake of findings submitted to it by the State Comptroller, the State Audit Committee may, on its own initiative or upon the proposal of the State Comptroller, decide upon the appointment of a Commission of Enquiry, the members of which are to be appointed by the President of the Supreme Court. The sole instance in which such a Commission of Enquiry was set up was in 1985, following the findings of the SAI regarding serious irregularities in the trade in commercial bank shares, which necessitated Government intervention in 1983 to prevent collapse of the prices of these shares on the stock exchange and to avert a threat to the stability of the banking system. Under the arrangements agreed between the Government and the main commercial banks, the central bank and holding companies controlled by the banks made large scale purchases of shares of those banks. These purchases were financed entirely by special allocations from the State Budget. Since the banks involved were not subject to inspection under the terms of the State Comptroller Law, the inspection made by the SAI could not be more than a partial one, which is why the State Audit Committee decided, on the State Comptroller's recommendation, to make use of the provision of the Law enabling the setting up of a Commission of Enquiry.
The Commission held public hearings and issued a report with findings and recommendations to the State Audit Committee in 1986. The State Audit Committee held hearings on the report and made recommendations for a number of changes in the law. The findings of the Commission led eventually to the indictment by the Attorney General of some of the bankers involved.
12.3 OTHER AGENCIES
The Office of the Inspector General in the Ministry of Economics and Planning is responsible under law for submitting the Ministries' replies ("Observations") to SAI findings to the State Comptroller within twelve weeks of the time when he submits his annual report to the Knesset. It is also responsible for submitting to the SAI follow-up reports on actions taken by the Ministries to correct deficiencies and faults noted in past SAI reports. The "Observations" and follow-up reports are formulated by the Ministries and forwarded to the Inspector General through the medium of the relevant internal auditors.
Much progress has been made in the last decade in budget control and accountability in the public sector of Israel. The great strides taken in EDP techniques, and the use of a real-time information system have helped make this possible. The computer has facilitated the standardisation and integration of information systems in ways which have significant implications for planning, scheduling and control functions of Government agencies.
Much remains to be done in the field of evaluation and the improvement of efficiency. The centralised system of control by the Ministry of Finance, originally inherited from the former British Mandate, has been criticised as over-centralised by public Commissions of Enquiry that have investigated management in public administration in Israel. As pointed out in section 3 above, one such Commission recommended recently that the Government as a whole and the Prime Minister's Office in particular, be provided with the means to play a more effective role in matters of administration and fiscal management.
For historic, security, political and other reasons, the public sector in Israel is relatively large, with Government domination or intervention in many fields- social, economic, financial and other. The Government's declared-policy is to privatise some of the functions now performed by Government Ministries or under their direct or indirect control. Some steps have been taken in this direction and further progress is planned.