* A student from Korea pursuing a course of study towards a doctorate in Political Science at the Hebrew University in Jerusalem, Isreal. This article which is based on a paper he prepared for a seminar on state audit has been received from the SAI, Isreal.
Ever since the State Comptroller of Israel ventured to audit an ideologically sensitive policy of a power company in the first years of statehood, Israel has played a leading role in the development of the field of policy audit among other Supreme Audit Institutions (SAIs) of the world.
In an article published in the Commission on Audit Journal (1985), Mr.Shaul Hirsch, one of the senior officials of the State Comptroller's Office in Israel, declared:
"The question of policy audit at the level of national policy has in Israel passed the stage of theoretical and academic argument, mainly since our State Comptroller, Mr.Tunik has taken a more aggressive stance in state audit."
Thus, policy audit in Israel has a special interest among other SA|s of the world because of its advanced development, both in theory and practice.
The definition of the term "Policy" is essential to a discussion of policy audit, because most of the arguments concerning the appropriate targets of policy audit have arisen from different definitions.
Originally, the meaning of the word "Policy" was connected only to state affairs. The word stems from the Greek "polise", which meant "citizenship" or "state", and this word was translated to "politia" with the meaning of "state" in Latin. In Middle English, the word was written, "policie" which meant "the conduct of public affairs" or "the administration of government". In modern English, however, the meaning of the word was somehow diluted to mean any deliberate course of action taken by whomsoever. In a discussion of policy audit, we may limit its meaning to public affairs only, by returning to the etymological origin.
Prof. Yehezkel Dror defines public policymaking as follows :
"Public policymaking is a very complex, dynamic process whose various components make different contributions to it. It decides major guidelines for action directed at the future, mainly by governmental organs. These guidelines (policies) formally aim at achieving what is in the public interest by the best possible means."
We can derive a definition of "policy" from Dror's definition of public policymaking as follows: A decision or a set of decisions, made by a government or by governmental organs whose purpose is to fulfil the government's or governmental organs' functions and guidelines, aimed at achieving the public interest by the best possible means.
Constitutional and Legal Limits : The list of audited bodies appearing in Paragraph 9 of the State Comptroller Law of Israel illustrates that the Cabinet is not under the purview of state audit.
From the constitutional perspective, it is also reasonable that the State Comptroller, an arm of the legislature, the Knesset, may not audit Cabinet decisions, considering the constitutional framework of Israel in which Cabinet policies stem from the fundamental policy guidelines laid down when the Cabinet was formed and received the confidence of the Knesset. For this legal and constitutional reason, the State Comptroller cannot question the validity of a decision taken by the Cabinet or one of its committees.
In practice, however, Israel's SAI has involved itself in Cabinet decisions or those of its committees. The 1987 Annual Report of the State Comptroller on the Lavi Project provides an example of involvement at Cabinet level. In the audit report, the State Comptroller dealt with the decisions of the Ministerial Defence Committee, one of the Cabinet's sub-committees. The State Comptroller states in the Annual Report:
"In the decision of the Ministerial Defence Committee the building of a single-engined airplane of local production, by the name of the "Lavi", was approved. In the decision, features connected to the aircraft's task, size and cost were not detailed. At the time, there were not even operational requirements or specifications for the Lavi aircraft. In its decision the committee determined that the Ministers of Defence and of Finance would clarify, among other things, the economic implications of the Lavi Project and, that the findings would be brought before the committee. Thus the decision of the Ministerial Committee constitutes no more than approval in principle of the conception that led to the Lavi, and consequently the preparation of an extensive and inclusive study was required, the results of which would be submitted for the committee's approval."
Thus the State Comptroller criticized the decision of the Ministerial Defence Committee, since significant and essential aspects connected to the plane's purpose, size and cost were not considered.
We also find an example of auditing of cabinet decisions and policy in the State Comptroller's Report on the Bank Shares crisis of October 1983. In this report, the State Comptroller criticized the Cabinet for not establishing a clear policy on a fundamental problem of the banking system, the capital market, the play of forces between them, and the role of the government within the whole.
Although for constitutional reasons the cabinet as such may be exempt from the State Comptroller's purview, each minister as a head of an administrative department is not immune from state audit. According to Paragraph 9(a) of the State Comptroller Law of Israel, the government ministries are audited bodies, and departmental policies are subject to the State Comptroller's review. However, if a departmental policy contains a value judgement, the State Comptroller has to deal with the policy with caution.
Another important aspect of the SAI's function is that as an arm of Knesset it may supply the Knesset with detailed information about government policy. At times, the State Comptroller provides a general description of government policy, its implications, and its results, so that the Knesset can improve the formation of policy and strengthen its position vis-a-vis government policy. This information-supplying function of the SAI has been developed further by the United States General Accounting Office (GAO).
The Gradation of Policy: When government decisions are not subject to state audit for constitutional and legal reasons, we need to demarcate other types of limits on the policy audit by the criteria of grading policies or their characteristics.
Dr. Benjamin Geist tries to distinguish between grand or high-level policies and administrative or lower-level policies. He states :
"We ought to distinguish between what I would like to call policy with a big P and policy with a small p. Policy with a big P is grand policy, national policy which, without a doubt continues to remain outside the purview of state audit. Most aspects of foreign policy belong in this category; so do most matters of defence policy; basic questions of economy (capitalist, socialist or mixed economy); of religion (state religion, religious education in schools, but not decisions concerning the building of houses of worship, f.e.); of society and culture (marriage and divorce, legalizing abortion); of party politics."
Thus Dr. Benjamin Geist attempts to define what are the appropriate targets of audit by describing certain issues as outside the auditor's purview. In practice, however, Israel's SAI seeks to involve itself in national policy decisions. In the 1987 Annual Report, the State Comptroller reviewed the decision-making process related to the Lavi Project, which is without doubt a national policy, and faulted the government units which participated in the decision making process, in that many consequential decisions concerning the Lavi Project were made on the basis of information that was inadequate, tendentious and lacking proper cost estimates.
About two months after the Annual Report's publication, the Cabinet decided to scrap the Lavi Project by the narrowest of majorities -12 votes against 11, with one abstention. Several days after the Cabinet decision, the Jerusalem Post stated in an editorial:
"The State Comptroller, Yaakov Maltz, next delivered a body blow of his own to the Lavi, by revealing the horrendously irresponsible decision-making that set the jetfighter on its fateful course."
Thus, the Report of the State Comptroller on the Lavi Project almost certainly influenced the Cabinet decision, in which the Cabinet members were divided into two camps that fiercely confronted each other. The policy audit on the Lavi Project has special interest because of the controversial nature of the issue, and because this kind of policy audit may damage the Comptroller's alleged impartiality.
Political confrontation was already evident at the stage of the publication of the report on the Lavi Project. The Knesset State Audit Affairs Committee had decided not to publish the Report, by a majority of six against five, prior to the Cabinet decision. But two days after the decision of the Committee, the Jerusalem Post criticized the decision in an editorial:
"Reports on the State Comptroller are all fit to publish unless withholding publication can be justified on grounds of state security or protection of Israel's foreign trade. That's the theory. In practice, it now transpires, a majority of the Knesset State Audit Affairs Committee may deny the people their right to know what is in such a report if the majority considers this to be politically advantageous, or simply less injurious than publication."
It is not an easy task in practice to satisfy the two contradictory conditions of avoiding criticism of basic government policy, while also relating, meaningfully and in time, to sensitive matters which are important in the public's eye, as Geist suggested.
Although Geist's distinction has drawn criticism both from political scientists and practitioners, I must agree with him that there should be a distinction between the most important and sensitive policies which are more ideological, basic and political, and lower-level policies which are more administrative and within the state auditor's purview. It is unthinkable that state audit should concern itself with matters of war and peace, or the fundamentals of the social and economic policy of the state.
Mr.Shaul Hirsch suggests another kind of solution to the difficulties of the demarcation of the bounds of policy audit, derived from a different angle. He states:
"Coming back to the original question how to distinguish between subjects under our jurisdiction and subjects beyond our jurisdiction, I'd like to add to my rule of thumb another important provision, namely, there is no need to make the distinction in advance, in the planning stage of the audit or in its implementation. State audit is entitled to, or rather has the duty to review every aspect of activity of the government and or all the entities subjected to state audit by law. The question of jurisdiction with regard to the subject of review arises only in the stage of arriving at conclusions - there may be legitimate conclusions, and conclusions which are under certain circumstances, ultra vires. There is generally no such thing as having to decide in advance - shall I do policy audit or not."
His suggestion of the solution to the question of jurisdiction is based upon the last clause of para 10(A) of the State Comptroller Law which says that the Comptroller, within the scope of his functions, shall examine "any such matter as he may deem necessary". But I am not sure that we can interpret the clause so broadly. -
In any case, ever since state audit has moved beyond the traditional fields of regularity and purely financial matters towards performance, effectiveness and policy audit, state auditors have encountered inevitable difficulties. As long as the state auditor deals with policy issues, he must cope with these difficulties, and the operational wisdom of Shaul Hirsch may be one of the solutions, along with the help of tried and true techniques of auditing. This wisdom can make the state auditor's position more flexible, and when high quality auditing is achieved through advanced audit methodologies and techniques, the state auditor can defend his territory from zealous politicians. More specific bounds of policy audit related to the policy-making process and audit standards will now be discussed.
With regard to the bounds of policy audit, Mr.Abraham Tal writes as follows:
"One can distinguish several approaches which State Audit developed on policy issues:
According to Tal, state audit can deal with questions of policy only by describing the policy adopted, so that the public shall be informed of the aims, the performance and the results of the policy; by inspecting the performance of the policy in order to find out any deviations from the standards of state audit; by demanding the adoption of a policy, when the absence of such has undesirable results. He continues to state that policy, as such, should not be questioned by state audit, unless it conflicts with the law, is incompatible with accepted moral standards, affects detrimentally the regularity of administrative operations or creates unwarranted extravagance.
The State Comptroller has another function of providing information to the Knesset as mentioned earlier. Mr.Tal argued that it is the duty of the State Comptroller. This information providing function of the State Comptroller can contribute to parliamentary control over the executive as regards specific policies.
In the early years of Israel's statehood, the State Comptroller examined the subject of "the unification of afforestation activities of the Ministry of Agriculture and the Jewish National Fund", and delivered his findings in the Annual Report No. 10. The inquiry ranged from the British mandatory era to May 1959, and described the decisions and steps taken as regards afforestation. As a result of the State Comptroller's findings, the Knesset was able to discuss the shortcomings in coordination between the Ministry of Agriculture and the Jewish National Fund, and to attempt to rectify them. Although there was no legal necessity for the State Comptroller to investigate the afforestation program, the information he provided was crucial for the Knesset's own assessment of policy. The State comptroller stated in the Report:
"As no violation of the law :3 under discussion in this case, state audit is not obliged, in the State Comptroller's opinion, to decide whether the arguments against the early transfer outweigh those in its favour, yet it does regard the early transfer as an act that the Knesset should debate, should it consider parliamentary scrutiny necessary."
Here, the State Comptroller did not audit or criticize the policy of unification of afforestation activities but limited itself to its function of providing information to the Knesset.
When the State Comptroller deals with an implemented policy, he has to clarify, at first, whether the policy stands up to the standards of state audit regularity, legality, economy, efficiency, effectiveness and moral integrity, or not.
If the expected results were not achieved, the state auditor has to clarify the causes for this failure. The causes may be one or more of the following : the program was undertaken on incomplete, or incompletely evaluated information; the preparation for its execution was inadeuqate, or the necessary resources were simply unavailable; the execution was not properly managed. Sometimes there occurs a change of circumstances which had not been or perhaps could not have been envisaged in advance, and the program was not properly monitored for timely adjustments.
With regard to the standards of policy audit, Gutman goes further and argues as follows :
"Results of policy and programs have to be evaluated and adjustments and even radical changes have to be made in the light of the evaluation; sometimes programs should be discontinued."
In a recent State Comptroller's Annual Report (No.37 of 1987), the State Comptroller reviewed the NIS 600 million in aid given to distressed enterprises such as Solel Boneh (construction company) Kupat Holim Clalit (health fund) and the farming sector following the July 1985 introduction of the economic stabilization program. The State Comptroller faulted the Agriculture Ministry because, in handling requests of the Kibbutzim and Moshavim (collective and cooperative farms), the Ministry accepted the lumpsum demanded by the farmers before a detailed analysis of their needs were made. According to the Annual Report, that made it hard for the Treasury, which had to work without adequate financial figures and ended up depending on the data provided by the bodies asking for aid. When the assistance was finally extended, it was directed through the banks whose high interest rates had been one of the first causes of the agricultural sector's ills in the first place. The Treasury also worked under pressure from the political level to hurry the aid, the Comptroller said.
Thus, the State Comptroller made use of the audit standards of regularity and effectiveness in this policy audit, and examined whether implementation and results were consistent with the policy objectives. He also investigated the causes of the failure to attain the policy's objectives. The State Comptroller does not argue with the objectives of the policy, but examines whether implementation and results are consistent with the policy objectives.
In practice, however, the State Comptroller sometimes asserts that the policy objectives already chosen are not adequate. For example, in the Annual Report No.36, the State Comptroller found fault with Israel's Prison Authority for not doing enough to provide inmates with employment that is profitable both in remuneration and in its potential for training in useful skills.
The State Comptroller may check whether at the various levels of decision-making there was judicious use of expert advice, sufficient data and the full presentation and analysis of alternative courses of action, and consideration of their implications.
The policy audit on the Lavi Project investigated the decision-making process using the above mentioned standards from 1967 to 1986. In the special 40-page report on the Lavi Project, the State Comptroller faulted the defence establishment, for making decisions on the basis of inadequate information, as discussed above. He also criticized defence ministers and other members of the Ministerial Defence Committee who participated in the decisions, as they did not consider the alternative of producing an American aircraft here. Nor did they have details regarding cost, export potential and other aspects of the program. Nor did the ministers consider the plane's purpose, size or cost. The State Comptroller also criticized the defence establishment, because the plans it prepared were not based on studies of the future battlefield, nor estimates of what weapons were likely to emerge. The State Comptroller summarized the decision-making processes on the Lavi Project as follows :
"During most stages of the "Lavi" project, especially during the early stages, which lasted several years, there were no suitable controls which might have warned of deviations from estimated costs and objectives. For a long period, the final specifications for the plane had not been determined and reporting to decision-makers was incomplete. As a result, it was only in 1985 that information was presented to the decision-makers that, in effect, excesses of more than 100% in the cost of the project had already accumulated. It became clear in retrospect that the project was two-two and a half billion dollars more expensive than the alternative F-16 plan."
Another feature of policy audit is that if state audit discovers an absence of coherent policies, the State Comptroller discloses it to the public and demands the adoption of a suitable policy. We find an example of this kind of audit in the State Comptroller's Annual Report No.36. The State Comptroller faulted the Ministry of Health and the National Insurance Institute for the absence of coherent policy for geriatric care. They were blamed for not planning adequately to exploit capital accumulated in response to a levy enacted several years earlier, with the result that there was a substantial gap between the need for services, and those actually provided. Thus, the audit criticized the bodies for failing to formulate a suitable policy of geriatric care.
Also in the State Comptroller's Annual Report (No.37,1987) on the activities of the West Bank and Gaza Strip's Civil Administration, the Comptroller criticized the Civil Administration for not having a clear West Bank policy governing development and building, which had led to confusion and delays in the approval of up-to-date municipal and regional plans.
The SAI of Israel has pioneered the field of state policy audit, as we have seen. The Israeli State Comptroller's office has involved itself extensively and vigorously, with important and sensitive policies. Especially in the 1980's, the frontiers of policy audit have expanded remarkably.
If so, what factors contributed to the development of policy audit in Israel? One of the explanations of the question may involve the unique societal structure of Israel. Unlike other western capitalist countries, the government of Israel is extensively involved in its country's social and economic problems. With its heavy defence burden, and considerable aspirations in social programs, Israel's governmental and quasi-governmental expenditures have exceeded the country's Gross National Product. While the government's activities are so widespread, the expansion of the State Comptroller's activities is unavoidable.
Another reason of the extensive policy audit conducted by Israeli SAI, derived from the first reason, may be its relatively advanced technique of policy auditing.
The broad involvement by the government in economic and social problems, the huge volume of the government's and quasi-government organizations' expenditures have provided the Israeli SAI with much fertile ground and opportunity for using its technical methodological experience, ever since the SAI was established.
Thirdly, the extensive involvement of Israeli SAI in governmental policies is probably based on the economic adversity of Israel, mainly in the 1980's. The rather precarious situation of its national economy, with high inflation, large budget deficits and a rising foreign debt, prompted the Israeli SAI to involve itself in governmental economic policies.
Fourthly, the expansion of the frontiers of the state audit of policy is perhaps based upon the transformation of the Israel political system, described by Allan E. Shapiro as under:
"With no changes in the formal mechanisms of government, the political system of Israel has been undergoing a major transformation. While the national's parliamentary, party and election system have remained the same, there has been a major shift in the centres of power and the way decisions are made and implemented. Long before the unity government took office there had been a shift of power to elements of government regarded as apolitical, and who were, in fact, barred by law from active participation in the political arena."
He argues that the combination of interest-group pressures from organizations, bureaucracies and wage earners, with populist politics making decision-making processes irrational, had obvious consequences for the policy decisions that ensued. While the'SAI is proud of its apolitical objectivity and rational thinking, it may be tempting for the SAI to become involved in the decision-making process itself.
Fifthly, the increasing involvement by the SAI in policy matters probably stems from the initiatives of the State Comptrollers of Israel in their vigorous policy auditing. Mr.Abraham Tal concedes that matters of policy audit largely rely upon the personal consideration of the State Comptroller, because the State Comptroller Law of Israel does not explicitly refer to the audited bodies that are subject to policy audit nor does it define policy audit itself.
In the 1980's, Mr.Yitzhak Tunik, the then Israeli State Comptroller, extended the frontiers of his organization's involvement in the audit of policies beyond that pursued by his predecessor. He encountered the sharp opposition of senior staff members who argued that he was going too far, and risking the organization's standing with the Knesset and other policymakers. This extension of the frontiers of policy auditing has drawn both applause and criticism. A number of his proposals have been adopted and promoted by the Knesset Committee on State Audit Affairs.
The vigorous pioneering of the new frontiers in the policy auditing with the breakthrough in methodology and techniques may be justified, as in the words of Dr.I.E. Nebenzahl, former State Comptroller of Israel:
"Sometimes, if the supreme audit institution refrains from dealing with important topics, no one else will."