Comptroller: Lack of Budget Hampered Israel’s COVID Response

Israel’s management of its financial and budgetary needs during the coronavirus pandemic was unsatisfactory, due in part that the country didn’t have a working budget at the time, a report by the state comptroller’s office released on Tuesday found.

The report revealed that the lack of a state budget for 2020 resulted in the government acting on the basis of the 2019 budget, which was finalized in March 2018. The state needed much more agile mechanisms to make decisions, an OECD report, as well as a report by the Bank of Israel from April 2021, had found previously.

As the severity of the crisis began to become clear in February and March 2020, the countries of the world adopted a wide range of economic assistance programs. Israel took a four-pronged approach to assistance programs, targeting immediate response, social safety net, business continuity, and acceleration programs. The total cost of all these programs in 2020, as well as financial decisions regarding credit and cash flow, totaled approximately NIS 202.3 billion, the comptroller said.

The report criticized the Finance Ministry’s total non-preparedness for the epidemic and the fact that programs for economic assistance to the public and businesses were taken in part without proper staff and without making proper distinctions. In addition, the ministry’s lack of advance preparation made it difficult to present to decision-makers the expected economic consequences of possible measures, especially during the first months of the crisis. The comptroller recommended that government ministries formulate an economic “contingency plan” to prepare for the economic consequences of a future outbreak based on lessons learned from the current crisis.

“The audit found deficiencies regarding the preliminary economic preparation for epidemic risks, the ability to formulate economic assistance plans to deal with the crisis, implementation of the plans, and consideration of economic factors when making decisions,” wrote state comptroller Matanyahu Englman. “All bodies must act to correct the deficiencies related to the budgetary conduct during the management of the Corona crisis and examine the implementation of the recommendations included in this report for the purpose of improving their activities and preparing for the future. ”

Meanwhile, government grants to businesses were given in uneven and inefficient ways, the Comptroller’s office found. Application processes were complicated, rules were unclear, qualifying factors changed between different rounds of grants, and different administrations had a hard time making the necessary distinctions between needy businesses.
The rate of acceptance of applications for state-guaranteed loans was also low compared to that provided in most other developed countries, the report found.

“Business owners and the self-employed are among the big losers in the coronavirus,” Englman said. “Government ministries should have done everything to make it easier for them to exercise their rights and ensure that aid reaches businesses in need. It is recommended that the Finance and Interior Ministries do everything necessary to increase the exercise of the rights of eligible businesses. Action must be taken to correct the deficiencies that arose in the audit and to set guidelines for future assistance programs, if necessary.”

Regarding employment, the comptroller found increasing levels of disconnect between relevant government bodies. Thus, for example, claimants for unemployment benefits were required to complete a double registration procedure, filling out forms with Israel Employment Services as well as Bituach Leumi, a process which could delay payments and create problems in the transfer of information between the two offices. Until December 2020, there was no unified form for unemployment claims.

That also translated into large inefficiencies in benefit payments. More than NIS 1 billion in unemployment benefits was paid to people who weren’t entitled to it, largely because no one was checking up each month on whether people had found jobs.

Israel’s generous economic safety net package, as well as the high unemployment rate and the limited number of job vacancies available, created a negative incentive for people to accept the jobs that were offered them. This may make it harder for such people to rejoin the labor market in the future, creating a situation of chronic unemployment, the report said.

“The coronavirus crisis and the actions taken in its wake have led the State of Israel to one of the most difficult employment crises in its history,” Englman said. “It is recommended to pool the resources of the bodies that deal with employment under one organizational roof, in order to increase cooperation and improve the effectiveness of government bodies.”