State Comptroller: Not enough protection on Rav-Kav user information

In the field of economic development and infrastructure

Knowledge-intensive industry -

Small and Medium Business Assistance Program - In January 2017, the Ministry of Economy began to formulate a plan to increase productivity in small and medium-sized businesses while integrating an assessment and measurement mechanism (by way of random allocation to some applicants). It emerged that although Government Resolution 2262 was published on 8.1.17 the Small and Medium Business Plan was published on 21.12.17, the random allocation mechanism set out in this plan reduced the scope of budgetary implementation in the plan. The budgetary utilization of this plan was NIS 10 million out of the NIS 30 million allocated and the random allocation data were not gathered for research purposes.

Tourism

Allocation of a budget for the development of public infrastructure - The budget for the development of public infrastructure in the Northern District in the government decision of NIS 50 million, determined in accordance with the Ministry of Tourism's assessment of budget utilization in previous years and did not reflect the Northern District's preference. 2018 to the Northern District and the budget was lower than the aid actually transferred in each of the years 2015 and 2016 (NIS 57 million and NIS 65 million, respectively). In the north (56 and 20 million NIS) and the aid rates in relation to the whole country (26% and 8%) are low and that in 2019 to which the government decision 2262 did not refer, the amount of aid to the northern district increased and its rate compared to the other districts. It emerged that Government Resolution 2622 for 2017 and 2018 did not increase aid to the Northern District.

Ministry of Tourism Policy for Infrastructure Development in the North - In the Public Tourism Infrastructure Development Procedure of the Ministry of Tourism (Appendix A to the procedure) there is no mention in 2017 and 2018 of promoting tourism in the Northern District. The Northern District Promotion.

Public Opinion - In a meeting held as part of the public participation process, with officials from the private and public sector in the northern region, the following main barriers were raised - lack of tourism leadership in the northern district, lack of proper care for tourism infrastructure, lack of supply of accommodation in major cities.

Energy

Support for remote natural gas consumers - In the readers' votes published by the Ministry of Energy in 2017 and 2018, no preference was given to the Northern District and no requests were submitted to connect remote consumers in the Haifa and northern areas. As a result, NIS 35 million allocated in Government Resolution 2262 in favor of support for remote gas consumers in the Northern District was not realized.

Establishment of gas stations with natural gas - In March 2018, the Ministry of Energy published a call (51/2016) for proposals for a program that combines grants and a safety net for the establishment of gas stations with compressed natural gas; No preference was given to gas stations in the Northern District. Also, out of 37 stations that received grants by virtue of the call issued by the Ministry of Energy in March 2018 for the construction of gas stations with compressed natural gas, one station in the Haifa district met the requirements and as of the end of the audit all other winners, including 5 stations in Haifa and the north did not meet the requirements. To be abolished and the construction of gas stations with natural gas will not be promoted.

Deployment of the distribution network and connection of consumers - a significant part of the route of natural gas distribution north of the Tiberias - Tzfat - Kiryat Motzkin air line was not established in practice, although the original schedules for its establishment were in 2015-2019. Out of 168 potentials) it is the lowest of the distribution areas (except for the Jerusalem area where there was no consumption), as well as the cumulative consumption as of 2020 in the northern region (36.6 million cubic meters).

Allocation of a budget for the upgrade of the natural gas distribution network - As part of these calls, a total budget of NIS 283 million was set for the entire country and milestones were set for implementation, with NIS 99 million of which was allocated for the upgrade of the distribution network in the northern region (Haifa And the Galilee) - As of the date of completion of the audit, approximately NIS 42 million of the NIS 99 million associated with the northern region were paid, according to milestones set by readers' votes.

Transport

Development of transport infrastructure and increasing transport accessibility - The development of transport infrastructure in the Northern District is the issue with the highest budget scope - NIS 12 billion in Government Resolution 2262. However, these projects were in various stages of planning before the government decision, and were even mentioned in the work plans. The Ministry of Transportation and Neti's five-year plan, and partly in the state budget for 2017 and 2018. Also, in the matron's line development project in the Haifa metropolitan area, one of the six planned branches belongs to the Northern District and it also emerged that there are delays in completing 6 of the 11 transportation projects.

Public Opinion - From the public participation process it emerged that on the one hand the residents noticed major improvements, on the issue of roads and transport and public transport infrastructure but at the same time, most residents feel that there is no significant improvement in working time, major roads or medical centers.

Strategic Steps for the Development of the Northern District - Government Resolution 2262 sets out the steps listed below as strategic steps for economic development in the Northern Region: Examining the relocation of IDF camps to the Northern District; Existing industrial areas and establishment of new areas in the Northern District; examination of the construction of a supplementary airport for Ben Gurion Airport in the Northern District and recognition of projects amounting to NIS 400 million as "national projects". The government decision did not include operational measures. The audit did not complete the examination of the relocation of IDF camps to the Northern District, no action was taken to examine the relocation of government companies of a technological nature and large employment to the Northern District, and a final decision has not yet been made on the location of the complementary airport to Ben Gurion Airport and the projects recognized as "national projects". At end of the audit, NIS 37.5 million out of NIS 400 million allocated in the government decision for projects recognized as "national ventures" were used. These strategic measures could have been the drivers of change and growth are required in order to substantially improve the situation in the Northern District, and as a result lead to improvement in all areas of life as well, but these steps have not been sufficiently advanced.

On the up side, it was noted that the development of transportation infrastructure and increasing transportation accessibility in the Northern District was the issue with the highest budget scope in Government Resolution 2262 and it amounted to approximately NIS 12 billion.

State Comptroller Englman recommends that government ministries re-examine the situation of the Northern District in relation to the other districts and the effectiveness of the actions included in the government decision to examine their impact and promote a continuation plan to that set out in Resolution 2262 to reduce gaps between the Northern District and other districts.

Investment management among various entities

The management of the investments of various entities from the public sector (institutional bodies, government companies, statutory corporations and local authorities) may have an impact on their financial stability and day-to-day operations. These entities are required, among other things, to implement a comprehensive investment policy that will deal with the way in which the entity's money will be invested in a way that suits its characteristics, its exposure to risks and its business strategy, along with how to manage liquidity risk. The investment funds are used by the entities for different time periods, and are invested according to the needs of the entity or the purposes for which the funds are intended.

The State Comptroller's Office examined the aspects of managing financial investments in several institutional bodies, government companies, statutory corporations and local authorities with a considerable volume of investments. The investments can be current equity (nostro) or investments intended to cover pension obligations. The inspection was carried out by the following entities: Kent - Fund for Natural Damage Insurance in Agriculture Ltd., Karnit - Fund for Compensation for Road Accident Victims, Israel Foreign Trade Insurance Company Ltd. (Ashra), IEC, Haifa Port, Ashdod Port, Airports Authority, The Quarry Rehabilitation Fund, the Ministry of the Interior and 50 local authorities, the Government Companies Authority and the Insurance and Savings Capital Market Authority, the Center for Local Government and the Local Government Economy and Society.

The value of the current investments (as of 30.6.2020) of the institutional bodies, government companies and statutory corporations was approximately NIS 9.4 billion. The value of long-term investments of the local authorities examined in the audit (as of 30.6.2020) was approximately NIS 4.9 billion.

Regarding public institutional bodies - Kent, Karnit and Ashra:

The composition of the investment portfolios of the institutional entities - there is a difference between the portfolio portfolios of the entities examined - Kent, Karnit, Ashra. Government institutional entities invest 69% - 79% of their assets in bonds and do not invest in an alternative channel of investment funds.

The return on investment portfolios - there are differences between the returns of the institutional bodies in the period between 2017 and June 2020, and between them and the study funds and other traded indices. These differences are due to differences between the portfolio compositions and their different risk profile, which is reflected, among other things, in the percentages of exposure to the various assets and in the different investment horizon required according to the cash flow needs of each body. Below are the yield data of the various entities.

The average annual return between the years 2017-2019 of current investments in government companies and statutory corporations examined was 3.83.
%. The average annual return between 2017-2019 of long-term investments of the local authorities examined was 2.4%.

Responsible investments ESG - The institutional bodies examined in the audit did not incorporate ESG rules in the investment policy. Also, since they are not defined as institutional investors, a draft circular from the Capital Market Authority on the subject is not expected to apply to them.

Administrative issues in the work of the Investment Committee - both in Kent and in Karnit, the Investment Committee met properly every month - once a month, while in credit the committee met from June 2018 to June 2020 seven times, but not every quarter; In all the bodies examined although there was a quorum required there was an absence of directors on the Investment Committee in a sizable portion of the meetings; A review of the minutes of the various entities shows that the content of the minutes of the credit company is deficient, while in Kent and Karnit it properly reflects the discussions held in the investment committee and allows a good understanding of the considerations underlying the committee's decisions. It was also found that the members of the Investment Committee at a credit company who are employees of the Company do not sign a declaration regarding the avoidance of conflicts of interest regarding their activities in the Investment Committee.

Professional issues in the work of the Investment Committee - a credit company in 2020 in the absence of a quorum, did not approve the investment policy of the board of directors; A credit company does not compare the performance of the various portfolio managers with reference to the return in relation to various risk indices; Only in March 2018 was Karnit appointed risk manager; During the period examined, no internal audit was conducted regarding the investments in the credit company.

Regarding government companies and statutory corporations - IEC, Haifa Port, Ashdod Port, the Airports Authority and the Quarry Rehabilitation Fund, it was criticized that:

Composition of investment portfolios - There is a difference between the portfolio compositions of the entities examined in both the current investment portfolios and the pension investment portfolios. However, it should be noted that the percentage of investment of the entities examined in government and corporate bonds ranges from 69% to 98% and that they do not invest in alternative channels such as investment funds.

The return on current investment portfolios - there are differences between the returns of government companies and statutory corporations in the period between 2017 and June 2020, and between them and the study funds and other selected indices. These differences are due to differences between the portfolio compositions and their different risk profile, which is reflected, among other things, in the percentages of exposure to the various assets and in the different investment horizon required according to the cash flow needs of each body.

It also emerged that the Airports Authority and the Quarry Rehabilitation Fund do not disclose to the public the current returns of their investment portfolios.

Administrative issues in the work of the Investment Committee - In the Airports Authority, the Investment Committee meets at least twice a quarter and at the Port of Haifa, sometimes every month and sometimes once every few months; In the Port of Haifa and in the Quarry Rehabilitation Fund, a quorum was not required at the meetings of the Investment Committee during the period from January 2017 to June 2020; A review of the minutes of the entities shows that, with the exception of the Airports Authority, the content of the protocols of the other entities does not properly reflect the discussions held in the Investment Committee and does not make it possible to understand the considerations underlying the committee's decisions. It was also found that as of the end date of the audit at Haifa Port and the Airports Authority, the members of the Investment Committee had not signed a declaration regarding the avoidance of conflicts of interest, and that at Haifa Port, Ashdod Port and IEC the issue is not regulated in the committee's activities.

Professional issues in the work of the Investment Committee - The Quarry Rehabilitation Fund did not approve the investment policy in the management in 2017 and the IEC does not approve in the company's board the investment policy of the pension investment portfolio, the IEC, unlike the other bodies examined, does not use the services of a financial advisor. Allows this and despite the large investment amounts of the pension investment portfolio. The IEC, the Airports Authority and the Quarry Rehabilitation Fund do not use different risk metrics to compare the performance of their portfolio managers; The IEC and the Quarry Rehabilitation Fund did not conduct a risk analysis of the investment portfolio during the period examined: Haifa Port, the IEC and the Airports Authority did not conduct an internal audit on investments during the period examined.

Regarding the local authorities, the audit revealed that:

The Ministry of the Interior monitors investment management by the authorities - The Ministry of the Interior does not have information regarding the authorities that manage an active portfolio and authorities that do not manage an active investment portfolio. The financial statements reported to the Ministry of the Interior and in the public financial statements do not reflect the activity of the authorities' investment portfolio, and it is not possible to identify the scope of the Authority's investment portfolio, the return received for it and the investment channels of the portfolio.

Distribution of holdings in the investment portfolio by division of the authority cluster - there is a significant gap between the authorities with a high socio-economic rating and the authorities with a low socio-economic rating. Thus, for example, 82% of the high-ranking authorities hold an active investment portfolio, while the low-ranking authorities held an active investment portfolio only 28%. It was also found that the average long-term investment portfolio in the authorities in the upper deciles (excluding the Tel Aviv-Yafo municipality) was about NIS 113 million, compared with NIS 30 million in the authorities in the lower deciles.

Long-term investment portfolio return - the average cumulative return of the authorities for the years 2017-2019 amounted to about 2.4% and was low compared to the return of the study funds and central compensation funds, which were about 5% -6% in the said period. These differences are due to different portfolio compositions and different risk profiles.

Administrative issues in the work of the Investment Committee - 34% of the authorities examined (17 out of 50) did not have an active Investment Committee on 31.12.2019. In addition, 22% to 33% of the authorities whose long-term investment portfolio did not hold meetings of the Investment Committee with the required frequency in 2017-2019.

Ministry of the Interior guidelines - Despite the professional benefits, the Ministry of the Interior has not established guidelines regarding the authorities' obligation to create a marker portfolio and / or contract with a professional financial advisor for the purpose of determining policy, managing and examining the performance of their investment portfolios. In addition, the ministry did not set guidelines regarding the supervision and control required of the budgetary pension funds of the employees of the authorities.

Controls on the activities of the Investment Committee - In 2017-2019 78% of the authorities surveyed had an active investment portfolio (14 out of 18 authorities), did not hold a discussion with the Authority's management on the activities of the Investment Committee, although until publication 02/2020 Also, despite the risk and considerable financial volume of the authorities' investment portfolios, only in 4 of the 50 authorities that responded to the questionnaire - the Authority's auditor audited the activities of the Investment Committee. In addition, the Ministry of the Interior does not carry out an initiated audit of the activities of the investment committees in the local authorities in order to examine broadly and fully the compliance of the authorities with its guidelines on the subject. In addition, the ministry did not examine the monitoring and control of the authorities' investment committees on pension funds.

On a positive note, in most of the government entities examined, the investment policy is approved by management once a year, there is a procedure that regulates the activities of the Investment Committee, and there is also the use of a marker file to compare the performance of investment portfolios.

State Comptroller Englman noted in the report that the findings emerging from this report indicate that there are deficiencies in the administrative and professional aspects of the activities of the investment committees in these entities. Increasing the supervision and control of the investments of these entities, inter alia through investment committees and through intelligent risk management, is of paramount importance in times of crisis, when volatility in the capital market may erode the investment portfolio.

Investment management in the Lottery

The Lotto holds lotteries in accordance with a permit from the state that is given to it for gambling. Mifal Hapayis allocates its profits to assist local authorities in financing projects in the fields of health, education, welfare, culture and the arts. The Lottery accumulates, on an ongoing basis, profits intended for projects approved by the local authorities and the Ministry of Finance, but in practice, have not yet begun their realization or are in the process of realization that lasts several years according to the pace of project progress. The amounts, which in essence are the Lottery's liabilities for those projects, are managed through the Lottery and are invested in accordance with the policy approved by the Lottery. The amount of funds managed by Mifal Hapayis ranges from NIS 3 billion to NIS 4 billion and originates from Mifal Hapayis' gambling profits. These funds and the annual returns they generate support the financing of such projects.

The State Comptroller's Office examined the manner in which Mifal HaPais' investment portfolio was managed, examined the activities of the trusts on the policy outline and its actual implementation, and examined the existence of supervisory and control mechanisms for investment management in Mifal HaPais.

In the review:

Reference to the management of investments in the permit issued to the Lottery by the Ministry of Finance: The Ministry of Finance did not include in the permit reference to the investment management rules, to examine the management of the investment portfolio .

Investment Committee: It was raised that although the investment portfolio of Mifal Hapayis amounts to NIS 3-4 billion, there is no designated investment committee in Mifal Hapayis and that the Finance Committee also serves as an investment committee, as permitted by the permit. Investments, the issue of managing the investment portfolio - which, as stated, amounts to NIS 3-4 billion, is another issue in the Finance Committee's deliberations and not a major issue in them. It also emerged that although members of the Investment Committee appointed members with financial qualifications and professional experience from among the members of the Board of Directors, the Mifal HaPais Board of Directors' procedure stipulated that most members of the Finance Committee would be able to read and understand financial statements.

The investment mix and the return on the portfolio: The Lottery's investment portfolio is characterized by traditional instruments, and it has hardly changed over the years. The portfolio returns indicate that in periods of financial market difficulties it generated large losses compared to the benchmark portfolio returns examined - which were positive in most entities (loss of 1.18% - to the Lottery, versus a range of 2.46% - to profits of 2.57% at educational institutions High, provident funds and study funds), and in periods of market boom it presented low results compared to the returns achieved in the said benchmark portfolios (profit of up to 7.73% compared to positive returns of up to about 15% in the comparison bodies). It should be noted that these returns are derived from Mifal Hapayis' policy regarding the composition of the investment portfolio based on low risk appetite, and in particular regarding the percentage of investment in shares, as opposed to the policy adopted by universities, study funds and provident funds examined.

Responsible Investments (ESG): There were no discussions at the Lottery regarding the adoption of Responsible Investment Rules (ESG). In addition, the permit issued by the Minister of Finance to the Lottery does not address this issue.

Conflict of interest arrangements: Members of the Finance Committee, in their capacity as members of the Investment Committee, who determine the policy of the investment portfolio and are responsible for selecting and replacing portfolio managers and banks advising on investment management, have filled out a conflict of interest questionnaire. Which regulates the conflicts of interest with the elected bodies for investment management.

Risk management: The semi-annual reports submitted by the risk manager to the Lottery management do not include a reference to the risk arising from the investment management.

Management of the investment portfolio during the Corona period: The issue of investments was discussed at six of the nine committee meetings held in 2020; In the first half of 2020, when there was great volatility in portfolio returns, the committee discussed two of the four meetings convened on investment. In March 2020, during the large decline in the portfolio's yield by about 5%, the Finance Committee did not convene.

On a positive note, Mifal Hapayis conducted an internal audit report on investment management in September 2017, which examined the supervision and control of the current investment activity. The recommendations of the audit report were implemented in the investment procedure.

State Comptroller Englman noted in the report that engaging in investments requires professional understanding, orderly and structured work based on proper controls, risk analysis and transparency between the various factors involved in the management of the Lottery's investment portfolio. The Lotto must correct the deficiencies and examine the recommendations raised in this report in order to optimally manage the financial investments available to it.

The benefits of implementing the new gas system

In 1999 and 2000, in the Mediterranean Sea, off the coast of Ashkelon, the natural gas reservoirs "Mary B" and "Noa", which are included in the "Yam Tethys" project, were discovered, which were about 34 BCM, and from which gas was produced until 2019. In 2009-2013 Additional natural gas reservoirs were discovered in Israel's economic waters, including: "Tamar", "Tamar Southwest", "Dalit", "Whale", "Shark", and "Crocodile". In order to regulate the state's share of gas profits, an oil taxation law was enacted in April 2011, stipulating that a gas venture would pay a levy on oil profits. The state's share in the gas profits consists of royalties imposed on the revenues from the sale of the gas, the levy of oil profits and the income tax applicable to the profits of the rights holders in the gas reservoirs. Given the minority of entities that held the rights to explore and produce natural gas, and their need to cooperate due to the high investment costs required, cross-costs were created on the gas reservoirs and monopolies in holding the gas rights. In the years 2011-2015, the Competition Authority acted with the holders of the rights to search for and produce the gas, in order to reach an agreement on the restrictions that would apply to them and so that competition in the field would not be harmed. In these years, in view of the lack of such consent and the lack of regulatory certainty, the "whale", "shark" and "crocodile" reservoirs were not developed. Government Resolution No. 476 of 2015, approved "an outline for increasing the amount of natural gas produced from the Tamar natural gas field and rapid development of the natural gas fields. This outline regulated, among other things, the schedules for the development of the reservoirs, the assurance of redundancies in the gas supply and the structural change regarding ownership of the gas rights and gave the holders regulatory stability.

The State Comptroller's Office examined the implementation of the gas outline and the benefits achieved following its implementation. The audit examined various activities of the Ministry of Energy, the Competition Authority and the Tax Authority, the Ministry of Finance in the Accountant General's Division, the Bank of Israel, the Ministry of Justice, the Israel Electric Company Ltd., the Electricity Authority, the Government Companies Authority and natural gas production companies.

The review revealed that:

Purchase of gas from other suppliers by IEC following the "Whale" agreement - the Competition Authority did not comment on whether the agreement between IEC and the "Whale" partnership is a prohibited restrictive arrangement, which violates competition law or does not meet the conditions set out in the gas outline. Therefore, the agreement between HHI and Leviathan came into force.

Gas outline and development of the "Tamar South-West" field - About two years after the mediation agreement between the state and the rights holders in the reservoir, the parties are in negotiations regarding the state's share in the proceeds from the sale of the gas to be produced. There is cooperation between the Electricity Division and the Ministry of Energy regarding the engineering field involved in the development of the reservoir. To deal with the collection of the State's share.

The country's share of revenues from gas discoveries - international comparison - In December 2018, the team headed by the Director General of the Ministry of Energy completed an examination of developments in the Israeli gas economy over the five years since the government decision, and conducted a re-examination of natural gas supply and demand. However, it was not found that the team examined developments in the world in recent years on the subject of taxation and did not examine the position of the State of Israel in this matter compared to existing in the region countries in particular and the world in general.

Handling of gas projects in the Tax Authority - The Assessing Officer for Large Enterprises Tel Aviv (PSMG) deals with the Natural Profit Taxation Law, examining horizontal issues in the gas project. Sometimes the horizontal issues affect the income tax assessment of all the rights holders in the audited venture and in the other ventures. Separating the holders of rights in gas reservoirs between different tax officials requires additional resources in training, guidance and transfer of findings. It emerged that all the holders of the rights in the "Levitan", "Shark" and "Tanin" databases were grouped into the PSMG, but not all the holders of the rights in the "Tamar" database were grouped and that one of the holders of the rights was taxed regarding the taxation of his income by the Haifa assessee.

Submission of information between the Ministry of Energy and the Tax Authority - The Taxation of Profits from Natural Resources Law stipulates four issues in which the Assessing Officer is required to consult with the Commissioner of the Ministry of Energy, before determining various determinations that have significance for the tax coefficient. It was found that until the end of the audit date, the manner in which the information was provided was not arranged between the Ministry of Energy and the Tax Authority. The Ministry of Energy did not take the necessary steps to provide the information and cooperation between them despite requests from the Tax Authority during the years 2016-2020. In addition, the Ministry of Energy did not submit a written document to the Tax Authority Holding as well as information requested by the Tax Authority regarding one of the holdings. All of these may have an effect on the determinations relevant to the calculation of the levy coefficient and on the date and extent of the levies that the venture will be required to actually pay.

Date of announcement of discovery and possession of gas discoveries - Although in late 2010 the results of the "Whale" drilling were published to the public, the Ministry of Energy set the date of discovery for January 2014. This required the Tax Authority to consider setting a different date for the end of the search period. In the gas reservoirs, and demanded the sorting and classification of the expenses reported by them into search expenses and construction expenses. Incorrect classification and classification of expenses harms the state's revenues from gas receipts. It should be noted that during the deferral period between 2013 and 2014, the holders of the rights in "Whale" spent hundreds of millions of shekels, which are considered their position until they are held under the Natural Profits Law as expenses eligible for benefits associated with the search period.

Wealth Fund Income Forecast - Contrary to the forecast given in 2013 by the then Governor of the Bank of Israel, for the start of the Wealth Fund's operations in 2018 (after an accumulation of NIS 1 billion) and for the forecast that by the end of 2022 the fund will accumulate about $ 3.9 billion. In the fund as of June 2021, NIS 741 million.

On a positive note, during 2022, 3 gas reservoirs are expected to be connected to the Israeli economy through 3 separate infrastructures, held by three groups with different ownership vehicles in a manner designed to reduce to some extent the concentration in the gas economy and improve redundancies.

State Comptroller Englman noted in the report that during the audit period according to the principles set out in the gas outline there are still cross-holdings between the rights holders in the gas reservoirs and there is one operator for the two reservoirs, which could lead to breach of competition law exemptions. As of June 2021, an amount of NIS 741 million (as of 2019 - NIS 474 million) has accumulated in the Wealth Fund, compared with the Bank of Israel forecast issued in 2013, according to which NIS 1.7 billion is expected to accumulate by the end of 2020. The gas economy has a significant impact Israel's economy, industry, energy security and political resilience, so the Ministry of Energy, the Tax Authority, the Competition Authority and others must work together in the relevant fields to ensure the realization of the potential inherent in this resource, including to increase the wealth of the public coffers.

Reform in the field of standards

A large part of the Israeli economy is based on imports of products and services, the state trades in a wide variety of products and imports a large part of the inputs for production, consumer goods and investment assets.

In 2000, the Ministry of Finance and the Ministry of Economy and Industry identified that the original Israeli standard creates non-tariff barriers to the import of goods into the country, thereby harming competition, reducing the range of products available to consumers and high prices of many products. The institute is a public corporation established by the Standards Law, and alongside it operated in 2020 three recognized laboratories that provide compliance testing services of imported goods in the requirements of the official standards applicable to them.

The State Comptroller's Office has reviewed the reform in the field of standards. The audit was conducted in the Standards Administration of the Ministry of Economy, the Standards Institute, the Ministry of Finance, the Competition Authority and the Tax Authority.

In the review:

Efficiency of importing goods in Israel in relation to OECD countries - in the indices of matching documents and customs inspections in imports, import times and their cost in Israel were several times higher than the OECD average; In other words, in Israel, importers need more time to import goods and the cost of inspections in the import process is higher. Moreover, Israel's relative position relative to the OECD average deteriorated between 2015 and 2020: for example, in 2015 the costs of import inspections to Israel were 250% higher than the costs of import inspections to OECD countries, and in 2020 the gap widened to 300%.

Improving the service to importers - the standardization commissioner does not have data on the time periods that elapse from the moment applications are submitted by importers to laboratories until the end of their processing, or on the time periods required for laboratories to process importers' requests. In addition, the Commissioner did not find any documentation for the examinations performed by him regarding the quality of the service. Although from May 2017 to May 2019 there was an improvement in the Standards Institute of about 10% in the rate of execution of orders within a week, and the average number of days until the order was reduced from 10 to 9. However, it should be noted that the percentage of execution at the Standards Institute of orders within two days in 2018/2019 was about 60% of orders.

Adaptation of official national standard to international standard - two and a half years later receives amendment 13, and although the amendment stipulates that the examination of existing official standards regarding compliance with international standards will be completed by August 2019, the treatment of 115 standards has not yet been completed. Applies to them). These standards were submitted for examination by the Commissioner of Import Legality at the Ministry of Economy and he submitted them for approval to the Ministry of Finance. By May 2021, the date of completion of the audit, only one standard had been certified. Since these standards remain national changes that in the opinion of the Ministry of Finance have no place in the official standard, it does not approve them.

RIA report of the Ministry of Economy from 2016 - The Ministry of Finance and the Ministry of Economy did not examine whether the assessments of the RIA report regarding the expected savings for the economy following the amendments to the legislation came true. This examination is important in light of the agreement signed by the Ministry of Finance in 2017 with the institute, in which it undertook to finance 80% -90% of the early retirement costs of the institute's 300 employees. H, of which the Ministry of Finance financed about NIS 219 million.

Achieving the purpose of the standard reform to increase competition - Although it has been about three years since the imported goods market was opened to competition, the proportion of tests produced by private laboratories is negligible - about 1.1% of all tests and 2% of competition - compared to the Standards Institute. The tests. As of September 2020, the standard reform has failed to achieve the underlying goals.

Activities of the Standards Administration Supervision - In 2020, the Standards Administration had 54 jobs, of which only 36 were staffed. The number of audits for enforcing official standards in 2019 (approximately 1,700) was 0.56% of the number of test laboratory recommendations in that year (more than 300,000). It also shows that the number of inspections to enforce official standards dropped from 2,300 in 2017 to 1,700 in 2019, and that the commissioner does not impose financial sanctions on an importer who violated provisions of the Import and Export Ordinance and that the number of calls for return of published products decreased from 34 in 2017 to about 20 in 2019.

Imposition of financial sanctions - In January 2021, the Ministry of Economy has not yet completed preparations for the imposition of financial sanctions in accordance with the Import and Export Ordinance and the Standards Law, and therefore has not exercised its authority to impose financial sanctions.

Online application process - the "route" system of customs connects it with importers, exporters, customs brokers and government authorities. However, data submitted by importers to the institute via a route are transferred to customs and the supervisor in a locked file in PDF format, which cannot be computerized. This makes it difficult to analyze such risks: in this format, data processing of importers' requests is not possible. Also, private laboratories have not been connected to the customs' "route" computer system, which makes it difficult for the tax authority to conduct a risk assessment analysis to assess which goods it should sample.

Findings of the Public Participation Procedure - Importers and Recognized Laboratories - From the process of cooperation with importers and private laboratories, the following insights emerged: In standards where there is competition between the laboratories, there is an improvement in the service received by the importers; Private laboratories are still not attractive enough for importers, due to various barriers; The standard commissioner should encourage competition and, as far as possible, the entry of additional recognized laboratories into the field; And the institute must invest from its budget in upgrading the equipment and in its technological development.

Promoting new reforms in 2020 - The RIA 2020 report estimates that implementing the proposed changes is expected to save importers about NIS 210 million a year, in a way that is expected to lower prices for the consumer public by an estimated NIS 420 million a year, while preserving the existing situation. Excess cost of about NIS 900 million in consumer terms. At the end of the audit, the Arrangements Law and the state budget for 2020 were not completed, and the reform has not yet been approved.

State Comptroller Englman recommends that the Ministry of Finance and the Ministry of Economy continue to increase competition in the field of compliance testing and increase the market share of testing laboratories, remove barriers to the entry of approved and recognized laboratories, reduce the regulatory burden on importers, reduce the cost of living. At the same time as being vigilant and making sure that all the goods that enter the country's ports will meet official standards and will not endanger the health of the public.

Making public transportation accessible to people with disabilities

Public transportation is essential for people with disabilities, for the purpose of conducting themselves independently, access to employment services, education and health, and living a community life and integrating into it. Adapting the physical and human environment to the physical, sensory, emotional and mental abilities of people with disabilities will contribute to the improvement of their functioning.

The State Comptroller's Office examined the issue of accessibility of public transportation for people with disabilities and, among other things, access to transportation points, accessibility of transportation stations and accessibility by means of transportation. The audit was conducted by the Ministry of Transportation and Road Safety, the Equality Commission for Persons with Disabilities in the Ministry of Justice, Egged, Dan and Israel Railways.

In the leaflet review:

Difficulties in traveling by public transportation - A JDC survey from 2019 shows that most people with disabilities in all types of disabilities (about 60% of them) are not satisfied with the existing accessibility solutions in public transportation. The survey also found that passengers with cognitive or physical disabilities or with visual impairments experience difficulties during most travel on public transportation, while people with hearing or mental disabilities have difficulty getting out of the house, waiting and traveling. Accordingly, the proportion of people with disabilities who use the various transportation services is small, compared to the general population.

Absence of the obligation to make intercity buses accessible in the Equal Rights for Persons with Disabilities Law 5758-1998 - Although the Equality Law was enacted in 1998, until the end of the audit, the law does not yet stipulate a requirement for physical accessibility of intercity buses. The public has come to the conclusion that the sensory accessibility obligation of the buses set forth in the regulations (public address, electronic information) is not fully met and that there are deficiencies in its implementation.

The cost of accessing intercity buses - According to the Ministry of Transportation's estimate, the total cost of accessing intercity buses is about NIS 3.9 billion for 12 years. , That is, on some of the lines or during some hours of bus operation or by prior arrangement, and especially lines that do not have parallel train lines. Partial accessibility is expected to reduce costs.

Accessibility of municipal buses - The Ministry of Transportation survey revealed deficiencies in the accessibility of municipal buses for which accessibility was needed in several main areas: (a) Adapting the service for people with disabilities, including encouraging bus drivers to behave respectfully and considerately. . (B) Ensure the use of means of accessibility such as: stopping as close as possible to the curb, using the lowering and ramps, starting a trip after anchoring a wheelchair and operating public address systems. (C) Ensuring prompt response times of PR operators regarding complaints regarding accessibility of persons with disabilities and ensuring the availability and response of an accessibility coordinator on behalf of PR operators. (D) Reducing the cost of traveling by bus to an escort of a person with a disability. At the end of the audit, the Ministry of Transportation did not prepare a comprehensive and detailed plan to address the issue, and the issue of driver training was not reflected in the Ministry of Transportation's inspection reports.

Accessibility of bus stops and access roads to the stations - in 2019 there were about 27,000 bus stops in the country. As of this year, there are about 13,500 municipal stations that have not yet been accessible and 3,500 stations for intercity service that are not accessible. In approximately 37.5% of the 80 localities examined, not all stations were accessible, and in 22.5% of the localities examined, less than 85% of the stations were accessible. Also, at the end of the audit, about 16 years after the date of the amendment to the Equality Law, the Minister of the Interior had not yet enacted accessible road regulations.

Control of the Ministry of Transportation - The Ministry of Transportation did not require public transport operators to provide information on publicity regarding accessible lines, the installation of static signs and the manner in which public complaints are handled. It was further found that the Ministry of Transport did not require the local authorities to list the accessible bus stops; In addition, the National Public Transport Authority did not produce a semi-annual report regarding bus stations where municipal service is provided, and no reports were received in the Public Transport Accessibility Division of the Ministry of Transportation on these issues.

Israel Railways Accessibility -

Coordination of travel for people with disabilities - According to the train coordination procedure, a person with a disability who wishes to travel by train will coordinate his trip two hours in advance with the company's service center. It has been found that the number of people with disabilities who can travel at the same time is limited by the amount of coordination and the type of disability. It also emerged that in most travel arrangements, the departure stations are at the train stations in the center of the country, while at the peripheral train stations, travel arrangements are small-scale.
Height differences between the platforms and the carriages - There are height differences between the platform and the step that helps the passengers enter the caravan. These differences are significant for passengers moving in wheelchairs as well as for passengers moving around by other means.

Sensory accessibility at train stations - It was found that in six of the eight stations inspected, there is full sensory accessibility in all passenger elevators, at the box office complexes and in other public areas. However, at the Ashdod-Ad Halom and Tel Aviv-University stations it did not operate in two elevators out of the three verbal announcements that help the blind to orient themselves in the space and move between the floors within the station.

Accessible taxis - It was found that licenses were issued in Israel to operate 1,000 accessible taxis, at a ratio of one accessible taxi for 1,600 people with disabilities, compared to one taxi for 340 people without disabilities. In practice, at the end of the audit, about 875 accessible taxis are operating. In addition, although the corporations received a 95% discount on the payment of the fee (NIS 10,000 instead of NIS 240,000), there were deficiencies regarding the collection of high tariffs and the non-management of travel diaries. Complaints have been received that accessible taxis are actually used as shuttle vehicles and therefore not available to people with disabilities who wish to book an accessible taxi. It was further found that the procedure for distributing the licenses was done without any criteria or threshold conditions being set, with each body expressing a desire to obtain such a license receiving the license based on the number of licenses allocated by the Ministry of Transportation.

State Comptroller Englman noted in the report that the adaptation of the physical and human environment to the physical, sensory, emotional and intellectual abilities of people with disabilities conforms to the principles of equal rights for people with disabilities, and is an important tier that enables independent, dignified and equal living in the community. Improving the mobility of people with disabilities will bring far-reaching economic benefits such as social and economic mobility for people with disabilities, new employment opportunities, savings on special transportation, expanding opportunities for essential services, and raising labor productivity in the economy.

The operating agreement with Egged and its structural change

Most public transportation services in Israel are provided by bus service lines - an industry that was previously controlled by two cooperatives, Egged and Dan. In July 2019, Egged Cooperative became a private company - Egged Transportation Company Ltd. Egged operates bus service lines by virtue of orders, agreements and licenses granted to it by the Ministry of Transportation and Road Safety, which is the regulator's body of the public transport system. As part of the reform, several agreements have been signed between the state and Egged over the years. The purpose of the agreements was to enable the gradual removal of the service lines to competition, as well as to enable the incorporation of a period of organization in order to improve its readiness for changes in the industry. Under the agreements, the government subsidizes Egged's excess operating costs from the state budget relative to competitive operators. In November 2018, the state and Egged signed an operating agreement, which was applied retroactively from the beginning of 2016, and is valid until the end of 2029.

The State Comptroller's Office examined the process of signing the operating agreement between the state and Egged, its implementation and the supervision and control of Matah on compliance with its conditions. Egged's financial performance and operational efficiency were also examined. Finance.

In 2019 and 2020, Egged's revenues amounted to approximately NIS 4.037 billion and approximately NIS 2.951 billion (respectively), of which a subsidy (direct to tariffs + subsidies) amounted to approximately NIS 2.591 billion in 2019 and approximately 2.166 billion. NIS in 2020.

In the review:

Bringing Egged lines to competition - The Ministry of Transportation has not yet put into competition lines operated by Egged in accordance with the operating agreement, and there is a risk that it will not be able to put all Egged lines into competition by the end of 2029. By 2030, the Ministry of Transportation will be required to publish more than 20 tenders in the years 2030-2027. In practice, the Ministry of Transportation has in recent years published between two and three tenders a year.

Egged's operational efficiency - Egged did not meet its full obligations and targets set for it in previous agreements. At the beginning of 2019 its operational efficiency was still low compared to the other operators, mainly due to high manpower costs and use of old vehicle fleet, and its operating costs in high urban and interurban clusters. According to the State Comptroller's Office, the cost per kilometer traveled by Egged in 2019 was about 30% higher in the municipal service and about 10% in the intercity service, compared to competitive operators.

Egged's financial performance - In 2016-2017, in which there was no valid agreement between Egged and the state, most of the company's financial performance (profitability, financial soundness and liquidity) was lower than the multi-year average. For example: there was a sharp decline in operating profit and EBITDA; The debt-to-EBITDA ratio in 2016 was 2.6 times higher than in 2010 and 3.2 times higher than in 2019; The immediate liquidity ratio in 2018 was unusually low compared to the average in the period 2010 - 2019. Therefore, Egged received retroactive receipts from the state at the time of signing the operating agreement.

Egged's long-term financial forecast - Egged forwarded to the Ministry of Transportation a forecast for the term of the agreement in which it presented its streamlining route and the effects of the streamlining program and the launch of the lines for competition on its profitability and operating cost. However, the forecast did not present the effects on the balance sheet items and cash flow and did not include sensitivity analyzes.

Involvement of the Ministries of Transport and Finance in preparing Egged's valuation - Although the state is entitled to a payment for 25% of Egged's rights, the Ministries of Transport and Finance were not involved in Egged's preparations for preparing the company's valuation.

Government funding for employee retirement - According to the operating agreement, the government participates in financing the cost of retirement of employees who are supposed to retire to a mandatory pension, and this embodies an additional benefit to the association that does not constitute an incentive for the company to become more efficient. The government's share in financing the retirement costs is NIS 868 million throughout the years of the agreement.

Granting of the Company's shares free of charge to Egged members - At the time of approval of the change in the method of incorporation, Egged members received an undertaking to pay the full value of their shares in the association as well as shares in the company Ltd. free of charge. For 2018. This was done without the involvement of the Ministries of Transport and Finance.

Regulating the use of public transport facilities - The Ministry of Transportation did not issue licenses for transport facilities, which were also supposed to include the conditions for holding and operating the facilities, including the issue of cooperation between operators using them, although these facilities are lacking and necessary to operate public transport services.

The Ministry of Transportation's control of Egged's service level - The Ministry of Transportation calculates for operators a score for measuring their level of service, and it serves as one of the criteria for selecting winners in tenders. For many years Egged was not allowed to access tenders for the operation of service lines, and therefore the indication of operational control had no effect on its chances of winning future tenders; Thus the incentive provided by the score to meet the level of service set for it was weak compared to the competitive operators. This situation is true as long as Egged is not allowed to access tenders for operating service lines. Also, the Ministry of Transportation's control over the level of service that Egged provides along the travel route is inadequate. For example, about 30% of the general bus fleet in the industry has a passenger counting system that allows inspection during travel, but the Ministry of Transportation does not yet use it to control the congestion on buses.

On the positive side, it has been criticized that since the beginning of the reform in the public transport industry, during the last two decades, new operators have entered the public transport industry by bus and entered the new operators industry, which operate service lines by winning competitive procedures. In addition, Egged has become more efficient over the years in certain aspects, including following the retirement procedures of veteran employees and a change in the mix of employees in the company, as well as an increase in the rate of drivers in the company and a decrease in the rate of administrative employees.

State Comptroller Englman noted in the audit that at the end of the audit Egged is still the largest operator in the industry, and its market share in terms of travel in 2020 was 32%. Egged has become more efficient in recent years, but in early 2019 the costs of manpower and operating costs of its service lines were still high compared to competitive operators, and it continues to be dependent on receiving a subsidy from the state which also covers its excess costs. The State Comptroller's Office recommends that the Ministry of Transportation prepare in advance for the release of the rest of the lines operated by Egged to the competition, in order to fully implement the public relations reform in the established schedules. Egged must be prepared so that at the end of the agreement period its expenditure structure will allow it adequate profitability and the ability to compete in the competitive market without the need for the state to finance its excess costs.

Public transportation - use of Rav-Kav card (tracking audit) and payment widgets

In 2019, there were about 891 million trips in all means of public transportation, an increase of about 3.89% compared to 2017. Every year from 2016-2020, there were on average about 3.5 million active multi-line tickets. The amount of the subsidy that the PR operators received from the Ministry of Transportation in 2019 was about NIS 9.2 billion.

The State Comptroller's Office conducted a follow-up audit regarding the correction of the deficiencies specified in the report published in 2017. The current audit also examined the following issues: the Ministry of Transportation's preparation for cyber incidents regarding the multi-line users' data set, It was conducted by the National Public Transport Authority, the Privacy Protection Authority in the Ministry of Justice, the Ministry of Internal Security and the IDF.

Regulation of supervisory and enforcement powers for free or non-valid travel - The 2017 audit report stated that extending the use of open systems (multi-line validation systems not in close proximity to the driver and without his intervention) requires appropriate enforcement mechanisms to ensure valid card validity and completeness of reports. Passenger numbers. The follow-up audit revealed that although legislative proceedings were initiated to amend the Traffic Ordinance in 2018, a legislative regulation of the supervisory and enforcement powers in public transportation regarding travel free of charge or without ticket validity has not yet been completed. The follow-up audit revealed that the deficiency in this issue had been corrected to a small extent.

Setting an increased fare for travel free or without ticket validity - The audit report from 2017 stated that the Ministry of Transportation should examine the possibility of setting different increased fares, and should consider distinguishing between a trip that the passenger did not pay for and a trip paid for, but the ticket is not valid. The follow-up audit revealed that there was no change in the amounts of the increased tariffs imposed by all public transportation operators, compared to their amount at the end of the previous audit. It also remains inconsistent with the distinction between unpaid travel and unpaid travel but not validity. The follow-up audit also revealed that the Ministry of Transportation did not complete the examination of this issue. The follow-up audit revealed that the defect in this matter had not been rectified.

Regulation of the use of Rav-Kav cards - The audit report from 2017 stated that the legislative procedure for regulating the use of Rav-Kav cards lasted for many years, and therefore the Ministry of Transportation must examine how the legislative procedure can be promoted. The follow-up audit revealed that the aforesaid legislative procedure was not completed, and in particular the users 'rights, issuers' activities, enforcement powers and ensuring the protection of the privacy of Rav-Kav card users were not regulated; This is despite the fact that about ten years have passed since the date of the bill on the subject prepared by the Ministry of Transportation (in 2010). The follow-up audit revealed that the defect in this matter had not been rectified.

Protection of the privacy of Rav-Kav card users - The audit report from 2017 stated that the issue of protecting the privacy of multi-line users has not yet been regulated by law, and therefore the guidelines of the Ministry of Justice, Technology and Information (now the Privacy Protection Authority) for the interim period, set in April 2012, still valid for five years. The follow-up audit revealed that the regulation of the applicability of the provisions of the Privacy Protection Law, 1981, to the databases in which information on Rav-Kav card holders is held has not yet been completed, and that the Justice, Technology and Information Authority's directive issued in 2012 is still valid. More than eight years since the publication.

Service center backup - The audit report from 2017 stated that "there is no backup site for the Rav-Kav card system but only for data, which increases the risk of damage to service to passengers and revenue following an attack or malfunction in the service center." The audit report from 2017 also stated that "in a discussion held in June 2016, the director of the authority returned and warned about the importance of establishing a backup site for the service center." The follow-up audit revealed that the issue is being addressed by the Ministry of Transportation, which published a tender in January 2021 to provide services to public transport users who hold a Rav-Kav card.

Rav-Kav card recovery and receipt of refunds - The audit report from 2017 stated that a cardholder who is entitled to a refund or who needs to have his card restored sometimes has to wait 72 hours from the time he applies to the service station so that all operations can be restored. The follow-up audit revealed that passengers can restore the travel arrangements immediately, except for the travel arrangements paid for them in the 72 hours prior to the restoration date. After the end of this period of time, passengers can immediately restore these travel arrangements as well. It follows that this defect has been largely corrected.

Expansion of service stations (service centers) - Since the report was published in 2017, more service stations have been established, including two virtual service stations where multi-line card operations can be performed independently. The deployment of existing charging stations (estimated at thousands) of multi-line tickets across the country has also been expanded.

Payment by mobile phone - The Ministry of Transportation has been working to provide the option of paying for travel by public transport via mobile phone since mid-December 2020, in addition to the existing option for payment by Rav-Kav card.

Validation of security forces' travel - The audit report from 2017 stated that security forces are not required to punch their travel in the IDF, and therefore there is no information on the scope of these trips. And the cops; As for the prison service, no such rules have yet been established. The follow-up audit revealed that this defect has been largely corrected.

State Comptroller Englman noted in the report that the follow-up audit revealed that the Ministry of Transportation corrected about half of the deficiencies that appeared in the 2017 audit report. The Rav-Kav card and the new electronic widgets. This coincides with the institutionalization of the ministry's supervision and control procedures for the proper preservation of the extensive information about the users stored in various databases, so that their privacy is preserved.

Management of foreign exchange reserves at the Bank of Israel - follow-up audit

In October 2012, the State Comptroller published a report on "Managing Foreign Exchange Reserves - Bank of Israel". The report dealt with a variety of issues related to the management of foreign exchange reserves held and managed by the Bank of Israel. In view of the importance inherent in holding reserves, which are used, inter alia, to deal with economic, financial and political shocks in the economy, and due to changes in the level of reserves and management since the date of publication of the previous report, the State Comptroller's Office conducted an audit.

In the review:

The desired level of foreign exchange reserves in an international comparison - the level of reserves in the Bank of Israel (which stands at about 46% of GDP as of February 2021) is higher than the desired level according to all accepted estimation approaches (averaging about 15% to 22% of GDP), and high From the average level of balances among the comparison countries in all accepted indices. It should be noted that the average level of balances among the comparison countries is also higher than the desired level and indicates a tendency to hold a higher level of balances than it.

Level of Foreign Exchange Reserves in the Bank of Israel - As of February 2021, the total foreign exchange reserves held by the Bank of Israel were estimated at $ 185.1 billion, compared to the desired level, which stands at $ 70 billion to $ 110 billion. The desired level set by the Governor of the Bank of Israel (in the amount of approximately 68% as of the end of February 2021.) This deviation indicates the holding of surplus balances and may impose a goodwill risk on the Bank of Israel.

The cumulative deficit in the Bank's capital - holding foreign exchange reserves in the amount of NIS 557 billion over the years has created liabilities amounting to NIS 555 billion, most of which are attributed to the accumulation of reserves, and reduced the Bank's capital to a cumulative capital deficit of about 70 NIS billion, as of December 2020. The audit revealed that in addition to the Bank of Israel, two other central banks out of the nine that belong to the comparison group to the State of Israel (Czech Republic and Thailand) have negative capital. Although the transfer of profits is not one of the Bank's objectives or functions listed in the law, a continuous deficit in the bank's capital since 1999 (in which it transferred about NIS 9 billion to the government following a profit recorded in 1998) prevented the transfer of profits to the government.

Use of balances to achieve monetary policy targets - It is clear that foreign exchange purchases are adjusted for fluctuations in the exchange rate of the shekel and the dollar. The deflationary pressures that the economy has been facing in recent years It is possible that without the Bank of Israel's intervention in the foreign exchange market, the appreciation of the shekel and the deviation from the inflation target would have been higher.

Update of the "Procedure for Execution of Investments and Financial Transactions by Bank Employees and for the Prevention of Conflicts of Interest" - the procedure was last updated on 18.8.15, despite raising the risk profile and even expanding the types of assets in which the reserve portfolio was invested in recent years.

Bank of Israel Risk Survey - Although according to the Markets Division, it works to update the various risks on an ongoing basis, the Bank of Israel has not conducted a risk survey since August 2013. This is despite significant changes in the level of reserves, External portfolio managers.

Estimating the quality of active management - The comparison between the return on active management and the basic marker, presented to the public in the annual report published by the Bank of Israel, does not allow for an optimal estimate of the quality of the portfolio management. This is because the underlying marker represents a risk-free and attractive portfolio with a lower return expectation relative to investment-approved assets determined in the asset allocation process. In addition, the use of the Information Ratio (IR) alone, which examines the excess return in a portfolio relative to its standard deviation, to examine the risk-adjusted return, does not provide an optimal picture and is not informative when the portfolio return is negative, as was the case in 2018.

Presenting portfolio management internally and externally - Over the years, following the increase in portfolio volume and the expansion of investment into more risky assets aimed at yielding returns, the use of external management has expanded. As of the end of the audit, nine external managers managed approximately 21% of the portfolio, amounting to approximately $ 39 billion, of which: approximately 15% of the portfolio, Mortgage-Backed Security (MBS) securities in the United States About 2% of the portfolio and corporate bonds in the European market and in the United States, about 2% of the balances in each market. However, the Bank of Israel's annual report does not present a separate presentation of assets managed under external management.

Use of balances during the Corona crisis - No evidence was found that during the Corona crisis, and in particular in March 2020, the Bank of Israel considered a move to sell foreign currency, while the exchange rate of NIS to the dollar peaked at NIS 3,862 to $ 1. It should be noted that during 2020 the level of balances in the Bank of Israel increased greatly relative to all comparable countries to the State of Israel, both in billions of dollars and at the rate of change (a gap of about $ 29.8 billion from the average of comparable countries and a gap of 24.5% of the average rate of change in these countries).

Correction of deficiencies that arose in the previous audit - Most of the deficiencies mentioned in the previous report were corrected, including a lack of procedures for regulating activities, including the creation of investment guidelines, a distinction between compliance and investment rules, the numbered calculation procedure and the information and cyber security procedure. This is in addition to handling risks in the reserve portfolio in general and in extreme cases in particular (as detailed in the table of follow-up audit findings).

Activity of the Markets Division at the Bank of Israel - Given the significant significant deviation of foreign exchange reserves from the desired level, the State Comptroller's Office notes the work of the Markets Division to update investment targets, the composition of the currency marker, how to measure the holding yield and update the portfolio's risk profile.

State Comptroller Englman noted in the report that most of the shortcomings found in the previous report were corrected, but the significant increase in the level of foreign exchange reserves that the Bank of Israel holds in the background of global economic developments led to a $ 75 billion deviation in February 2021. , Increased investment risks and created large liabilities in the Bank's balance sheet amounting to approximately NIS 555 billion, most of which are attributed to the accumulation of balances, along with reducing the Bank's capital to a cumulative deficit of approximately NIS 70 billion, as of December 2020. To return to the desired level And to reduce the risk of goodwill imposed on the Bank, it is advisable to prepare a contingency plan, for examination by the Monetary Committee, for the realization of the excess balances effectively in the appropriate circumstances.

Aspects of Yad Vashem Activities - Holocaust Martyrs 'and Heroes' Remembrance Authority

To deal with the challenges of commemorating the Holocaust today, some 75 years after the end of World War II, Yad Vashem has created a multidimensional and learning environment built on four key components: documentation, research, education and commemoration. Yad Vashem serves as the public trustee for the achievement of the goals set for it in the Holocaust Remembrance and Heroism Law. Yad Vashem is part of the public service, and is subject to public law obligations. The State Comptroller's Office examined several issues concerning the core of Yad Vashem's activities, including the museum's activities, including registration, storage and preservation of collection items and their display on the Yad Vashem website, Holocaust research activities, fundraising activities, aspects of administrative institutions' activities, and current budget balancing. Yad Vashem.

In the review:

Preventive Preservation - The Museums Regulations, 1984, and the Archives Regulations (Conditions for Approval of Public Archives and Arrangements for Their Management), 1957, stipulate that a museum must carry out "preventive preservation" operations. Preventive conservation includes a variety of actions without handling the items themselves, designed to limit the damage factors to the items through control of environmental conditions, and especially temperature, humidity and light. The following are the findings of the review on this topic:

Radiation and Lighting - Yad Vashem uses fluorescents that produce ultraviolet radiation. Contrary to the preservation conditions set for museum spaces where it is better to block radiation completely, the ten fluorescent bulb storage spaces were not covered. In addition, three exhibition spaces were found in which a higher-than-determined level of lighting was measured in the guidelines of the Museums Division.

Humidity - more than 80% of the measurements made in the years 2016 - 2019 in archives containing paper information, a deviation from the desired humidity was found, of up to 59%. It also shows that in the photo warehouse, in this period, about 6.6% of the measurements exceeded the permissible humidity, which reached about 140%.

Temperature - In the years 2016-2019, a deviation from the permissible temperature in the photo warehouse was found in about 4.9% of the measurements, an exception that reached about 396%. It was also found that during this period, in about 66% to 73% of the temperature measurements in archives containing paper, a deviation from the permissible temperature was found, an deviation that reached 20% to 30% in the various warehouses.

It was also revealed that there is no flood warning system in the storage spaces.

It should be noted that Yad Vashem has begun to establish the "Collection Center", where the items will be housed in storage conditions that will allow for preservation.

Fundraising - in the years 2016 - 2019 about 1% of the donors at Yad Vashem donated about 79% of the amount of donations (about $ 111 million out of a total of about $ 140 million). In those years between 26% and 39% of the donations received by Yad Vashem Received from only a few donors - so about one-sixth of Yad Vashem's budget depends on donations from several donors. Receiving donations in a large amount from a small number of donors sharpens Yad Vashem's dependence on fundraising. The main fundraising activity of Yad Vashem is through direct contact with donors, and in 2019, during the audit period, Yad Vashem began staffing to examine fundraising through the network, social networks, mass fundraising, etc. It emerged that this staff work Not yet completed.

Raising donations from d entering into agreements with fundraisers. Yad Vashem did not hold a tender before contracting with two service providers for fundraising, and no minutes of the Tenders Committee or other documents were found stating that the contract with the two service providers and its extensions were exempt from tender. It should be noted that the amount of the contract with the two fundraisers is approximately NIS 1.9 million per year.

Yad Vashem's Current Budget Balance - According to Yad Vashem's financial statements for 2020, the annual deficit from current operations was NIS 25.6 million, and the amount of contributions to current operations is less than NIS 101 million in 2019 to NIS 80 million in 2020. Although 2020 was an exception due to the corona plague, according to a five-year forecast prepared by Yad Vashem in 2019 and presented to the Finance Committee in March 2020, a current annual deficit of approximately NIS 10 million was expected in 2020. According to the five-year forecast, the cumulative annual deficit from current operations for the years 2020-2024 will be approximately NIS 81 million. For the financial statements for 2020 at Yad Vashem, the balance of net assets for which there is no limit designated by the management in the amount of approximately NIS 97 million.

Managing Institutions - In recent years, there have been developments and changes regarding the adoption of corporate governance rules, which was reflected in the criteria set by the Council for Public Corporations. The Yad Vashem By-Laws stipulated the establishment of three administrative institutions, but the bylaws did not clearly define the body whose role is to outline policy and oversee the activities of management, nor defined the roles of the CEO and its subordinate active management. 93 members served on the public council, the appointment of 83 of them expired as the ministers and funding bodies did not extend it. It was also revealed that in November 2020 the proportion of women among council members was less than a third.

The State Comptroller's Office notes positively the Yad Vashem activity for making the collections of names, document files and documentation pages of the survivors' testimonies in the network accessible.

State Comptroller Englman noted in the audit that Yad Vashem holds large collections of objects and documents of unique historical value designed to help commemorate the memory of the Holocaust. The audit findings indicate the need to improve the management of these collections, to ensure their preservation for future generations. This includes Yad Vashem improving the registration and cataloging of the items, managing the conservation operations in a computerized manner and working to complete them before the condition of the items deteriorates, ensuring compliance with standards regarding temperature, humidity and lighting that will conform to current museum standards. Yad Vashem must pay attention to the annual deficit from current operations, and therefore the management of Yad Vashem is required to act to balance the annual budget.

Financial aspects of the activity of the Israel Postal Company

The Israel Postal Company is a state-owned state-owned company, which began operating in March 2006 under a license granted to it under the provisions of the Postal Law. The company is subject to the supervision of the Government Companies Authority and in certain areas of its activities it is also subject to the supervision of the Ministry of Communications. The company has been facing financial difficulties in recent years. As part of this audit, a multi-year examination of the data in the Company's financial statements was performed.

The State Comptroller's Office examined various financial aspects of the postal company's activities. We examined, among other things, the trends and risks that appear in light of the findings of the financial statements, the development of the company's growth engines, as well as the operational and financial information systems on which, among other things, the data in the reports are based. This audit also examined the supervision and control arrangements of the Government Companies Authority and the Ministry of Communications over the company in this field.

In the review:

Working capital deficit - The company has a working capital deficit of NIS 229 as of December 31, 19, an increase of 44% compared to its rate as of December 31, 188. At the end of 2020, there was a further deterioration in the working capital deficit parameter - at the said date. NIS 519 million.

Gross and operating profit ratio - During the years 2017 - 2019, there is a trend of a reduction in the company's gross profit ratio from 8.06% to 4.95%, which indicates a continuous erosion in the financial results of the company's business activity in the years examined. The company's operating profit rate in 2019 was 2.53% and is small compared to what is accepted in postal companies worldwide by about 20%.

Cash flow - At the end of 2019, the company had a positive cash flow from operating activities in the amount of NIS 46.2 million, compared with NIS 95.5 million at the end of 2017. A decrease of more than 50%. Prolongation of this situation will impair the Company's ability to maintain adequate ongoing operating capacity and make new investments without resorting to external sources of financing.

Segment reporting - Segment reporting shows that the company decreased profitability in all segments of its activity in 2019. In the activity of the postal and retail segment, its annual losses reached NIS 69.5 million and its profits from the trading and financial services sectors decreased from NIS 67.5 million in 2018 to NIS 37 million in 2019.

Traditional postal services - As part of traditional postal services, the number of letters sent through the company decreased from 521 million letters in 2013 to 286 million letters in 2020, a decrease of 45%. Revenues from this area of ​​activity decreased from NIS 912 million in 2013 to NIS 632 million in 2020, a decrease of 31%.

Implementation of full structural separation between the Postal Company and the Postal Bank Company (Amendment 11 to the Postal Law) - Amendment 11 from 2012 has not yet been implemented, no structural separation has been made between the Postal Company and the Postal Bank and the areas of activity of the Postal Bank have not been expanded. This harms the development potential of the Postal Bank and its revenue potential and perpetuates the mix between the realm and the financial realm. It should also be noted that in the opinion on the financial statements for 2019, the external accountant expressed reservations that the Post Bank Company attributed all its revenues to the Israel Post Company Ltd. (the parent company).

Salary expenses in the company - Despite the implementation of the retirement plan in the company, which was funded by the state in NIS 477 million, and the total number of jobs dropped to 5,050, the company's salary expenses were on the rise in the four years 2016-2019 (date of signing the agreement with The state was in 2015) from about NIS 1.08 billion in 2016 to about NIS 1.13 billion in 2019, while hurting the company's profitability.

Registration of the Company's assets - According to the Company's reports for 2019, registration in the Land Registry of 240 (approximately 71%) of the Company's 339 assets has not yet been completed, and the legal registration procedure has been completed in full for only 99 (approximately 29%) of the assets. The complete non-registration of 71% of the company's real estate assets in its name may infringe on the company's rights.

Preparations for the privatization of the company - At the end of the audit (December 2020), about six years after the government decision on the matter was made, the Companies Authority has not yet begun to conduct an economic examination to assess the company's value and the company's privatization has not yet been completed.

On a positive note, the company first began reporting by operating segments in its 2019 reports.

State Comptroller Englman noted in the report that the report indicates a deteriorating trend in the company's l and financial results over the years. The report also indicates a lack of material accounting information in various areas of the Company's operations and details additional deficiencies related to the Company's financial operations. It is recommended that the Postal Company, the Companies Authority and the Ministries of Communications and Finance act to correct the deficiencies that arise in this report and to examine the implementation of the recommendations accordingly.

Mekorot Water Company Ltd. - Financial Audit

Mekorot Water Company is a government company whose goal is to develop water sources in Israel and provide water to its residents. The government decision of February 2019 set out several steps to strengthen the financial strength of Mekorot and streamline the water economy, due in part to a situation that requires significant investments in the water economy. The State Comptroller's Office examined financial issues related to Mekorot's consolidated financial statements - which include the subsidiaries that are almost wholly owned by Mekorot. The topics examined are: presentation of the consolidated financial statements, analysis of material items from the balance sheet and consolidated income statement, financial ratios from the consolidated financial statements, analysis of the differences between recognized costs and sources in its actual costs, budget analysis versus actual execution, and status of implementation of measures. The audit was conducted at Mekorot, the Water Authority, the Ministry of Finance, the Ministry of Water Resources and the Government Companies Authority.

In the review:

Debt coverage ratio: In 2015-2016, Mekorot's debt coverage ratio was over 10% and reached 14.6% in 2016. From 2016, there was a sharp decrease in the debt coverage ratio to a rate of 4.5% in 2018, which reflects a decrease in the company's debt repayment capacity. Through the annual cash flow from operating activities. In 2019, there was an increase of 7.2%. According to source reports from December 2020, this ratio is 8.6%. It should be noted that Mekorot's debt coverage ratio is low compared to this average ratio in 2016-2018 in infrastructure companies in Israel and around the world, where the ratio is about 10-18%.

Leverage ratio: Since 2017, there has been a consistent increase in the leverage ratio, and it reached a rate of 69% in 2019. According to source reports from December 2020, this ratio stands at 70.6%. The higher the leverage ratio, the more the company relies on external capital to finance its activities and less on its equity. It should be noted that the leverage ratio of Mekorot is high compared to the average leverage ratio in 2016-2018 in infrastructure companies in Israel and around the world, where the ratio is about 60%.

Reporting of activity segments: The sectoral reporting in the source books does not distinguish between the activities according to the different types of water as separate profit centers - desalinated water, fresh water from nature, effluent water and brackish water - as required by Government Decision 2318.

Investments in the Budget of Innovations and Improvements (Monthly) - In the years 2015-2019, the annual depreciation of waterworks was approximately NIS 525 million on average. The development budget in those years was about NIS 843 million on average, and the monthly budget was about NIS 153 million on average, and corresponded to the maximum investment amount defined in the rules. However, the average budget for innovations and improvements (monthly) was The average annual depreciation is about 4 times lower in these years and about 3 times the annual depreciation in 2019. The data indicate that most of the company's investments are in new plants and not an upgrade or improvement of existing plants, due to the need to establish new water plants to expand the supply network. To increase the amount of water that can be transferred, water supply reliability and connection of areas that are not yet connected to the system.

Actual interest costs versus recognized interest costs: Mekorot's actual interest costs in 2015-2019 were higher than the interest costs recognized for it in the tariff, due to the weighted collection of bonds in the weighted (average life expectancy) of about 12 years, higher than the recognized mortgage in the tariff ( Ten years). And in 2019 the gap was NIS 80 million. This gap and its expansion may harm the company's compliance with its financial soundness targets.

Collection of water fees from private producers: Until the end of the audit, December 2020, no charges of NIS 245 million were collected from the private producers. NIS 115 million was recognized as income from water fees, even though Mekorot did not actually collect it. With regard to the obligations of private producers, by the end of the audit, the Water Authority Council has not yet amended the outline of such recognition.

Implementation of the provisions set forth in Government Resolution 4514 from 2019 to strengthen the financial strength of Mekorot: Until the end of the audit, the following steps included in the government decision were not completed - the transfer of rights in Mafar Properties Others (the effluent issue is a condition for the transfer and realization of Mafar assets). The implementation of these measures is among the conditions for promoting the programs essential for improving Mekorot's financial relations and meeting the goals set by the Financial Stability Team according to Government Resolution 4514, including a plan to register Mafar assets in Mekorot books. And a plan for the improvement and sale of lands and assets of Mekorot.

Plan for improvement and sale of land and properties: Mekorot has located four real estate properties for sale, of which the company's board of directors has approved two for sale. Their sale is expected to improve the debt coverage ratio and leverage ratio. It was decided to sell them in a tender procedure.

Sale of restoration plants that Mekorot must sell: Due to the dispute between the Water Authority and Mekorot regarding the mechanism of selling six effluent plants to private effluent suppliers, Mekorot did not complete the sale of these plants, although it was decided by the government and agreed to sell no later than 31.10.19

The financial targets set for the sources: The financial strength team, acting in accordance with Government Resolution 4514, set for the sources the following financial targets: (a) the debt coverage ratio that in the years 2020 to 2025 will not be less than 8%; In the years 2026 to 2029 will not be less than 9%; And from 2030 will not be less than 10%.(b) a maximum leverage ratio not to exceed 70% from 2022, with the aim of reaching 65%. In light of the findings of this report and the existing barriers to the consolidation of the glorious assets indicated in the source books, there is a concern that the company is not expected to reach all the set goals.

State Comptroller Englman noted in the report that given the importance of Mekorot's financial strength for the success of the development program and the national importance of this program, which is also intended to prepare for extended periods, the Ministry of Energy, to which the Ministry of Water Resources, Water Authority, Companies and Company Disputes and act to remove the barriers that prevent the implementation of these measures.

Maintenance of intercity roads - follow-up report

Netivei Israel - The National Transportation Infrastructure Company is a government company responsible for the planning, development and maintenance of the intercity road network in Israel, as well as for the development of railway tracks. Transport infrastructure is of great importance for the proper and efficient functioning of the state economy, hence the great importance of road maintenance and prevention of neglect. The road network serves as an essential infrastructure for all residents of the country, and especially for residents of the periphery, and maintenance activities contribute to maintaining road safety.

In 2017, the State Comptroller published a report on "interurban road maintenance" detailing these shortcomings: reduction of the budget for road maintenance at NTI, lack of supervision by the Ministry of Transportation on road maintenance, maintenance of roads not according to a central plan and more.

The State Comptroller's Office conducted an audit of the previous audit report, which examined the actions taken by Netivei Israel to correct the deficiencies in the previous audit report and the degree of improvement that occurred after the amendment.

In the review:

The company's road maintenance budget: In the previous audit report, the State Comptroller's Office recommended, among other things: "The Ministry of Transportation and the Ministry of Finance, in cooperation with the company, check whether the allocation of funds for road maintenance meets the needs." The follow-up audit revealed that the actual updated road maintenance budget of Nati in 2017 and 2018 was in the budget summary from 2016, and was even higher; while the budget in 2019-2021 (those years) is significantly lower than the budget planned according to the 2016 summary - From about NIS 1,375 million on average, to about NIS 1,106 million on average in these years (a decrease in rates ranging from 4.72% to 34.4%). It appears that this defect has not yet been corrected at the end of the follow-up audit.

Road maintenance and road stratification: The previous audit report found: "In 2015-2016, the company carried out stratification work on 168 sections of roads, which is only about 6% of the roads that do not meet the normal travel indices, according to travel surveys conducted by the company. The requirements of the road network, and many sections of road that need maintenance, are not included in the annual work plan. " In addition, the company stated in the previous report that it sought to invest NIS 550 million in stratification, but in practice only NIS 238 million was approved for it. The follow-up audit revealed that the volume of road stratification (km) carried out by the company in 2020 decreased by about 37% compared to 2017 - from about 655 km to about 410 km - and that the main reason for this is the lack of budget for stratification of roads. This is expected to continue in 2021, when the decline in 2021 is expected to be even sharper - at a rate of about 91% compared to 2017, from about 655 km to only about 60 km - in accordance with the total budgets allocated for this until the end of the audit It appears that this defect has not yet been corrected at the end of the follow-up audit.

Supervision and control of the Ministry of Transportation on the maintenance of bridges: The previous audit report reads as follows: "The Ministry of Transportation did not deal with the maintenance of bridges and did not give instructions for their maintenance. . The follow-up audit revealed that the Ministry of Transportation has not yet prepared or initiated the preparation of guidelines and procedures governing the maintenance of the bridges. It should be noted that in the areas of lighting and road marking, the Ministry of Transportation has established guidelines and procedures. Indicates that this bug has not yet been fixed at the end of the follow-up audit.

Maintenance of illumination methods: The previous audit report stated: "According to the company's data, the last survey on the subject was conducted in 2014, and showed that 580 junctions and more than 1,200 sections are still not illuminated in accordance with these guidelines [according to Ministry of Transport guidelines 1996] ". The follow-up audit revealed that the company handles road lighting in accordance with the budget approved for it each year, and that the updated budget for the maintenance of lighting equipment in 2020 decreased by about 27% compared to the updated budget for maintenance of lighting equipment in the previous year.

Road markings on roads: In the previous audit report, it was found that in November 2014, the Transport Planning Division of the Ministry of Transportation issued guidelines for the selection and placement of standard materials for road marking. In accordance with these guidelines, Netivei Israel is required to use two-component marking materials with a long lifespan, or fixed sheets whose durability is estimated at three to five years. The previous audit report further states: The follow-up audit shows that after the follow-up audit, the company continued to use single-component ("simple") marking materials, mainly to renew the old existing markings. However, the company Is working to the extent possible to use some of the new projects with two-component marking materials. The follow-up audit has revealed that this defect has been corrected to a small extent, mainly due to the lack of budgeting for the painting operation.

Road maintenance project transferred from local authorities to the company's responsibility: In the previous audit report it was found that the company did not use the full budgets allocated for this project in 2012-2016. -35%, respectively). The follow-up audit revealed that the company fully utilized the budget allocated for the maintenance of roads transferred to its responsibility from local authorities in 2018-2020, but there is a decrease in the annual budget - from about NIS 55 million in 2018, to about NIS 15 million in 2020.

Defects that have been corrected in Netivei Israel since the previous report in accordance with the budgets allocated to it for carrying out maintenance operations:

A. Adapting the bridges suitable for earthquake resistance.

B. Increasing lighting at intersections and dark road sections; Publication of a tender for the replacement of road lighting with LED lighting, which is more environmentally friendly and has great savings potential.

C. Utilization of budgets for the treatment of roads transferred from local authorities to the responsibility of the company and on roads that it is not clearly defined who is responsible for maintaining them.

D. Activities to improve the company's overview and feedback on its maintenance operations.

State Comptroller Englman noted in the report that the Ministry of Transportation and the Ministry of Finance, in cooperation with the company, should check whether the allocation of funds for road maintenance meets the needs, especially in light of the new maintenance model developed by the company in 2017. These actions are essential to enable the company to improve areas where there is still a gap between what is desired and what is found, especially in the area of ​​travel, layering, road markings and road lighting. The company must also act to correct the deficiencies in the maintenance project for the Hadera area according to the PFI model and consider the feasibility of expanding it.

Extraction of tax benefits in the tax authority - extended monitoring

"Non-take-up" is a phenomenon in which those who are entitled to certain benefits and rights do not exercise them. Studies in different countries indicate a problem of non-exercising of rights in the areas of social security, such as receiving unemployment insurance benefits, receiving tax benefits, securing income and compensation due to work injury and more. As for the extraction of tax benefits, it should be noted that certain tax benefits can be enjoyed in the first place by only part of the public, inter alia due to the amount of their income or the manner in which the benefit is provided.

An annual report from 2015 dealt with the extraction of tax benefits at the Israel Tax Authority. The State Comptroller's Office examined the Tax Authority's correction of the deficiencies raised in the previous report and the implementation of the staff's recommendations for exercising rights established by the Tax Authority following the publication of the report, as well as other issues related to the exercise of tax rights.

In the review:

Collection of information and making estimates for the purpose of exercising rights and providing tax benefits - The previous report stated that although the authority has information on the income of the taxpayer public, it does not have information from it on how it realizes the tax benefits to which it is entitled, and that the authority did not review the barriers facing the public preventing them exercise their rights. The follow-up findings show that the defect was corrected to a small extent, and that the Tax Authority did not act to obtain the full information that would allow it to exhaust the rights of all taxpayers, including taxpayers who are not required to file an income tax return.

Collection of tax on other tenants - The previous report stated that even when the Authority had information regarding financial harm to citizens who did not exercise their right, it did not act on its own initiative to return these amounts, nor did it inform citizens that according to its data they are entitled to a refund. It also emerged that the cumulative amount of excess tax paid over the years by employees who worked in two jobs in the same tax year is estimated at several hundred million NIS. H. The follow-up findings further revealed that hundreds of thousands of overpaid families do not file tax return reports at all and therefore do not exercise their right. In addition, the follow-up findings show that as of February 2021, according to the Tax Authority's calculations for the 2013-2019 tax years, it owes about 2 million cases (individuals who do not have to submit an annual income tax report) a total amount estimated at about NIS 3.6 billion. These include, for example, employees who reported working in two or more jobs, paid the maximum tax rate but did not make a tax adjustment; employees who worked part of the tax year and did not file an overpaid tax return report. , In which it sent about 1,700 letters to alleged beneficiaries who paid more tax, the authority did not act every year to refund the tax amounts it collected in excess.

Extracting the tax benefits involved in the pension savings deposit - The previous report revealed that the method of calculating the benefits for the pension savings deposits is complex, employees who do not understand the nature of the benefit offered to them are not expected to utilize it and the Authority has not developed computerized tools. The follow-up findings indicate that the deficiencies were not corrected, including that when submitting a tax refund report, the Authority did not provide the public with tools to assist it in recording family cell deposits to pension funds in a tax return report, which would improve the family cell The tax liability). In addition, the Authority has not developed computerized tools to present the full potential of tax savings from deposits to provident funds that will assist taxpayers in submitting the report.

Locating citizens with credit balances - The previous report showed that sometimes the tax authority does not transfer to individuals (citizens who are not required to submit a report) credit balances accumulated by it. If due to lack of updating bank account details, and if due to the need to act to locate those eligible. Follow-up findings suggest that the defect has been slightly corrected. However, the Tax Authority informed the State Comptroller's Office that in 2020 it refreshed the directive regarding the obligation to enter the tax account details of the bank account specified by the submitter of the tax return, especially when the bank account details of the submitter of the report are not in the authority's. Also, although the tax authority has verified over a million bank accounts, there are about half a million accounts that have not yet been verified, and therefore it does not have up-to-date information regarding the account numbers of all citizens.

Handling of credit balances of those entitled to a work grant - As of March 2021, 3,831 people entitled to a work grant for the 2013-2019 tax years have not yet received the grant amounts to which they are entitled, due to the fact that their bank account was not updated in the Tax Authority computers. It should be noted that at the beginning of 2021, the Tax Authority updated the data on the bank accounts of 856 (18%) of those entitled and thus made it possible to transfer the grant to their account. It also appears that as of March 2021, a credit balance of NIS 9.7 million is available to bank account holders.

Exercising the rights of pensioners - The follow-up findings show that the Authority has not completed the establishment of an advisory body that allows clarifiers to clarify which taxation alternatives are available to them regarding pension savings, and therefore many retirees are not aware of these alternatives.

Tax loss due to the statute of limitations for the tax year - about 380,000 individuals or families who are not required to submit an annual income tax return lost a total of about NIS 670 million for the 2014 tax year because they did not file a tax refund report. Based on 2014 data, Public losses (individuals or families who are not required to file an annual income tax return) amount to billions of NIS over the years. It also shows that as of 2021, 435,546 families have not yet submitted an income tax report for 2016. The tax refund that these families are entitled to is estimated at NIS 803 million. In accordance with the law, if they do not submit a tax refund report for this year by the end Tax year 2022, families will lose this amount.

Implementation of the recommendations of the Committee for the Exercise of Rights in the Tax Authority - As of March 2021, the Tax Authority has implemented 19 (37%) of the 51 recommendations of the Committee for the Exercise of Rights in the Tax Authority reviewed by the State Comptroller's Office. It was also found that 14 (28%) of the recommendations were only partially implemented, and 18 recommendations were not implemented at all.

On the positive side, it was noted that the Tax Authority worked to promote the exercise of the rights of Holocaust survivors and parents of a disabled child. In addition, the follow-up findings regarding the time limit for choosing an alternative to the retirement grant show that the defect was corrected in 2017. In Amendment 232 to the Income Tax Ordinance, section 9 (7a) (g1) was added, according to which a retired employee Him as if he had applied to the principal for an annuity sequence, unless he asked otherwise.

Regarding aspects of the exercise of rights and tax benefits, criticism arose:

Promoting social goals by providing tax benefits - In 2018 and 2019, the rate of employees whose income was lower than the tax threshold (do not pay taxes due to their low income and personal data) was about 57%, while the rate of self-employed whose income is lower than the taxable income threshold was about 40%. It also emerged that the income of about 67% of women is lower than the tax threshold, while the income of 44% of men is lower than the tax threshold. As a result, they may to be unable to enjoy tax benefits.

Tax Coordination online - It has emerged that there are taxpayers who cannot perform tax coordination through the Internet, but only through the Regional Assessment Office. For example: a person who applies for special tax relief, including an exemption from an annuity (pension); A person who has reached the age of entitlement to a pension before the entry into force of Amendment 190 to the Ordinance and is liable to tax on all his income; Newcomer; Returning resident; A person who has been granted tax benefits such as a person with a 100% disability or a blind person; A person who has received a credit for donations to a recognized institution.

Tax benefits due to a consolidated calculation for the family unit - Regarding spouses who are not required to submit an annual income tax report, it was stated that the authority does not perform a retroactive calculation to ensure that the family unit received the full tax benefits to which it is entitled. Also, after receiving the employers' reports, the authority does not perform a calculation to find out whether the tax benefits have been exhausted, and to determine the reporting route that will benefit the family unit - a separate report or a consolidated report. In addition, the Authority does not inform taxpayers whether they are entitled to a tax refund due to overpayment of tax, thus not allowing them to exercise their right by submitting a tax refund report.

Extraction of credit points for new Olim and returning residents - The audit shows that the Authority does not have data on the number of new Olim and returning residents who are entitled to credit points, and on the percentage of eligible people who did not use them. As a result, it is also not possible to inform the beneficiaries that they have not exercised their entitlement, and the authority, for its part, cannot grant them credit.

Realization of tax benefits in pension savings deposits by deciles - Employees in the lower deciles do not reach the tax threshold and cannot realize the benefits involved in pension savings deposits.

Extraction of tax benefits in donations - In each of the years 2015-2019, a maximum of 54 employers, out of the employers registered with the Tax Authority, exercised their administrative right as employers (prerogative) each year and allowed their employees to receive a tax credit for donations to recognized public institutions. It was further raised that the simulator installed on the Authority's website does not show the assessee that the amount of donations entered as his or her spouse's donations does not provide the optimal tax benefit, which can be obtained by splitting the donations between the spouses.

Commencement of entitlement to tax benefit in localities with national priority - due to non-publication of the peripheral index on the date set by law in January 2017, there was a significant delay in the entry into force of entitlement to tax benefits in two hundred localities eligible for benefits. The fact that their eligibility came into effect only from 2018 and not from 2017.

Active method for exercising rights - The Authority does not have an active method for exercising social rights that has direct interfaces with the target populations. If it had such a mechanism at its disposal, it would be able to establish a procedure for providing a service, the main point of which is to reach out (Reaching Out) its services to the target populations.

On the positive side, the audit noted that prior to the 2020 tax year, the Tax Authority sent about 300,000 employees automatic approvals for tax coordination for the new year, thus saving them the need to coordinate a new tax themselves. The Authority also sent a letter to about 73,000 retirees who determined their rights in calculating the pension benefit regarding an update of the exemption rate they are entitled to for their current monthly pension.

State Comptroller Englman noted in the report that the audit findings indicate, among other things, that the Tax Authority does not fully initiate the granting of rights to those who are entitled to them. Among other things, the Authority does not act to provide the public with full and transparent information in its possession, and in particular information on the very existence of the right to exhaust various tax benefits and the conditions for receiving them.

The Tax Authority must regulate in its activities the exercise of the rights of citizens in an initiated and forward manner, under supervision and control. In this regard, it is proposed that the authority examine the extent of those not exercising their rights, and which barriers cause this.

Prevention of pollution and salinization of water sources, monitoring and purification

Groundwater in the world is a top strategic water source: it provides the world population with about half of the drinking water and about 40% of the water for agriculture. The main source of fresh natural water in the water economy in Israel is groundwater. In Israel, there are two main groundwater aquifers - the coastal aquifer and the Yarkon Taninim aquifer (also known as the mountain aquifer). Israel's natural water sources, especially groundwater, are at risk of contamination and increasing salinity, as a result of industrial activity, fuels, agricultural activity and over-pumping of the various aquifers, which leads to lower levels and the ingress of saline water into them. The Government Water and Sewage Authority is responsible for preserving the quality of natural and unnatural water sources, their rehabilitation, their improvement and the prevention of their pollution.

The State Comptroller's Office examined the actions of the Government Water and Sewerage Authority and the Ministry of Environmental Protection, the Ministry of Defense, Netzer Hasharon and the Ministry of Finance to monitor Israel's natural water sources, prevent and rehabilitate them, focusing on groundwater reservoirs and the Ministry of Health.

In the review:

Regulation of fuel contamination originating from tank farms - Despite the importance of fuel tank farms, and in view of the potential for great damage, including high-grade fuel contamination, the installation of regulations regarding the prevention of contamination from fuel farms has not yet been completed.

Monitoring and mapping of contaminants in natural water sources - In 98 (approximately 24%) of the 408 monitoring sites, rehabilitation operations were carried out or are being carried out and only at 12 sites (approximately 3%) did the purification operations end. At 48 (about 12%) of the sites, the Water Authority was present to know that no pollution had been found that required further action. The other 262 monitoring sites - 64% of all monitored sites - indicate an existing contamination or suspected contamination.

Monitoring of the Yarkon aquifer and the rest of the aquifers compared to the monitoring of the coastal aquifer - Most of the industrial monitoring is carried out in the coastal aquifer (21 industrial areas out of 157 located above the coastal aquifer). In recent years, and all 21 monitored industrial areas are located above the coastal aquifer.

Monitoring of pollution from fuels - In 69% of the monitored sites, 203 in number, contamination was detected in the water source, and in 36% of the monitored sites, severe and very serious infections were found. It also shows that monitoring operations at 295 sites in 1999-2020 covers 13.5% of all known sites and that although fuel farms are responsible for the bulk of pollution from fuel facilities, 17 tank farms out of 35 farms have not yet been monitored. This means that the potential for severe pollution (fuel lenses) from fuels may be much higher than the known extent.

Industrial Pollution Monitoring - 12 years have passed since the date of the IDF report which indicated 23 industrial areas as having a high potential for pollution; up to the date of the audit, not even two industrial areas were monitored. Out of the 253 industrial zones in Israel, about 21 high-risk industrial zones (about 8.3% of all industrial zones) are monitored.

Purification of fuel contaminants in natural water sources - Out of approximately 261 fuel sites - where restoration operations were required or may be required, restoration operations were completed at 8 (approximately 3%) of only 261 sites. As for the other 253 sites, 77 (about 30%) of them are currently undergoing restoration operations. This means that in addition to the low monitoring rates, the rehabilitation rates among the sites that have already been monitored are low and do not provide a solution to the existing and potential levels of contamination from groundwater fuels. Also, the water authority does not have a plan to rehabilitate the polluted sites.

Treatment of sites where groundwater pollution is due to the activities of IMI and the defense system - 12 of these 14 sites have not yet been rehabilitated, despite the large pollution to 1.4 billion cubic meters and the types of hazardous pollutants, and it has been a long time since the investigation began. Contamination and monitoring and detection of contaminants, while in the main contamination centers, where contaminated water volumes of more than 1.2 billion cubic meters were discovered - Ramat Hasharon IMI, Givon IMI, Magen IMI and Nahal Arab IMI, the contamination was discovered ten years or more ago, and IMI Nof Yam, Tirat IMI The Carmel, and the Tel Hashomer NCO, the contamination was discovered five years ago and more. It also appears that no preliminary investigation was carried out at four of the 14 sites and there is no source of funding for its implementation.

Use of the Water Authority in issuing a distorted order - The Water Authority rarely uses the mechanism of issuing the distorted order that allows it to order the person who caused the contamination to do everything necessary to stop the water contamination, including restoring the contamination by restoring the condition before the contamination is caused and preventing recurrence. The water and it does not allocate in its budget appropriate amounts for the treatment of pollution - although it is supposed to collect these amounts from those responsible for the pollution. Over the past decade, two orders for the repair of distorted industrial complexes have been promoted, even though there are dozens of large-scale, high-severity hotspots that have not been treated and some were discovered more than 15 years ago.

Streamlining the use of nitrates - Although the concentration of nitrogen in Israel in the coastal aquifer is on the rise and Israel is in a high position in the average amount of nitrogen per area relative to OECD countries, the relevant bodies - the Ministry of Agriculture, Ministry of Environment and Water Authority - have not yet formulated a plan to reduce nitrates. Failure to take action may lead to further contamination of the pollutants and the closure of additional water wells.

On the positive side, the Water Authority is working to monitor the industrial areas of Kiryat Arieh and Ramat Siv, which were defined about 12 years ago as having a high potential for pollution. In addition, a joint tender committee was established for the Accountant General, the Ministry of Water Resources and the Water Authority, to promote the international tender for the construction and operation of a polluted groundwater treatment facility to be pumped at the IMI pollution centers in Ramat Hasharon.

State Comptroller Englman noted in the report that past activities of the defense industries and IDF camps are the main source of pollution of the coastal aquifer, which is an essential source of fresh water supply to the Israeli water sector. Resulting from the activities of the defense industries and IDF camps, have not yet completed the implementation of rehabilitation operations to treat the pollution. The relevant bodies must act to correct the deficiencies listed in this report and examine the implementation of its recommendations, including the formulation of a multi-year plan for the treatment of pollution, the allocation of sources for financing in accordance with the priorities set and the removal of pollutants from the various aquifers.

Debt management at the Israel Electric Company

The Israel Electric Company is a government and public company, and about 99.85% of its shares are held by the Israeli government. The company generates electricity and supplies it to all sectors of the economy in Israel. At the beginning of the previous decade, HHI was in a serious crisis following the cessation of gas supply from Egypt. The crisis reached its peak in 2012 and was one of the causes of a significant deterioration in the company's financial situation: In her financial situation. In 2018, two agreements were signed in the electricity sector - an arrangement of assets between the state and the electricity company and an agreement for a structural change in the electricity sector (hereinafter - the reform in the electricity sector). The State Comptroller examined the management of the debt in HHI. Among other things, the actions taken by

Debt management at the Israel Electric Company

The Israel Electric Company is a government and public company, and about 99.85% of its shares are held by the Israeli government. The company generates electricity and supplies it to all sectors of the economy in Israel. At the beginning of the previous decade, HHI was in a serious crisis following the cessation of gas supply from Egypt. The crisis reached its peak in 2012 and was one of the causes of a significant deterioration in the company's financial situation: In her financial situation. In 2018, two agreements were signed in the electricity sector - an arrangement of assets between the state and the electricity company and an agreement for a structural change in the electricity sector (hereinafter - the reform in the electricity sector). The State Comptroller examined the management of the debt in HHI. Among other things, the actions taken by

Debt management at the Israel Electric Company

The Israel Electric Company(IEC) is a government and public company, and about 99.85% of its shares are held by the Israeli government. The company generates electricity and supplies it to all sectors of the economy in Israel. At the beginning of the previous decade, HHI was in a serious crisis following the cessation of gas supply from Egypt. The crisis reached its peak in 2012 and was one of the causes of a significant deterioration in the company's financial situation: In her financial situation. In 2018, two agreements were signed in the electricity sector - an arrangement of assets between the state and the electricity company and an agreement for a structural change in the electricity sector (hereinafter - the reform in the electricity sector). The State Comptroller examined the management of the debt in HHI. Among other things, the actions taken by IEC and the regulators to reduce the debt and reduce its costs were examined. The tests were conducted at the IEC, the Electricity Authority and the Government Companies Authority.

In the review:

IEC risk level - Despite the improvement in IEC's financial situation between 2012 and 2019, the company's risk is perceived as high compared to that of similar electricity companies in Europe.

Factors in the decrease in HHI's debt - the decrease in debt and the improvement in HHI's financial situation in the last decade were achieved mainly due to tariff refunds for the fuel crisis and advances received by the company from the Electricity Authority (total 61% of the decrease). , And the sale of the Alon Tavor power plant, which resulted in a decrease of 6%. These operations together contributed to a total of 84% of the total decrease in debt. The rest of the decrease is explained by actions taken by the company, From events of a one-time nature and not marches in the routine of the company's ongoing operational activities.

Interest rates in the Company's bond series at the end of 2019 - 12% of the Company's bonds bear interest higher than 7% - interest rate much higher than the rate of the Company's raising interest rate at the end of 2018, which has decreased over the years due to improvement in the Company's financial position Thanks to the relatively low interest rate prevailing in the markets, half of the company's debt bears interest at a rate of over 5%, double the rate of the marginal raising interest rate in 2018. Causes of a decrease in HHI's debt - the decrease in debt and the improvement in HHI's financial situation in the last decade Obtained mainly due to tariff refunds for the fuel crisis and advances received by the company from the Electricity Authority (a total of 61% of the decrease), the property arrangement that contributed 17% of the decrease in debt, and the sale of the Alon Tavor power plant which resulted in a 6% decrease. These actions together contributed to a total of about 84% of the total debt reduction. The rest of the decline is explained by actions taken by the company, most of which came at the expense of the development of the electricity sector. This means that the decrease in debt is mainly explained by events of a one-time nature and not marches in the routine of the company's current operating activities.

Interest rates in the Company's bond series at the end of 2019 - 12% of the Company's bonds bear interest higher than 7% - interest rate much higher than the rate of the Company's raising interest rate at the end of 2018, which has decreased over the years due to improvement in the Company's financial position Thanks to the relatively low interest rate prevailing in the markets, half of the company's debt bears interest at a rate of more than 5%, double the rate of the marginal rise in interest rate in 2018.

Resources invested by IEC to improve its financial situation in 2012-2019 and the development plan for the years 2022-2018 - The volume of investments planned for the years 2022-2018 averages NIS 3.2 billion per year. These volumes are lower than the average investment volume planned for 2017-2013, which averaged NIS 5.09 billion per year (in the maximum investment alternative) and slightly higher than the minimum investment alternative planned for an average investment of NIS 2.9 billion per year. It should also be noted that in practice, in the years 2017-2013, the volume of investments was partial, so that the annual average was only NIS 1.8 billion. There is also concern that the company is expected to meet the goals set for it in the framework of the reform and the goals set by the board of directors, also through the postponement of important projects.

IEC's Security Pad - The five-year financial planning approved by the IEC Board of Directors, which presents the components of the company's sources and uses by which the scope of recruitments is also determined in the five-year plan, does not reflect a ratio of 1.2, but a lower ratio.

Normative CPI of the CPI debt - The Electricity Authority has established a normative CPI for debt raising that reflects a preference for medium-term capital raising (7.1 years). The debt, which increases the company's recycling risks and on the other hand reduces capital costs and prevents an increase in the tariff.

IEC's self-credit rating - the self-rating (bb) is 4 notches lower than its overall rating (BBB) and belongs to the category Below Investment Grade. The rating indicates a high level of risk in the absence of government backing that the company receives.

Risks for continued improvement in the company's financial situation - There are real changes in the electricity economy, especially with regard to the government's target from July 2020 for electricity generation from renewable energies of 30% in 2030, involving significant investments, totaling NIS 20 billion according to an initial estimate. On the other hand as an essential service provider and as a monopoly in the transmission segment. The changes may affect the company's financial position and its ability to meet the goals dictated to it as an essential service provider.

On a positive note, in the years 2012-2019, there was an improvement in the financial condition of IEC, which was reflected in a decrease of approximately NIS 16 billion in its financial debt and the level of leverage, as well as an improvement in the company's liquidity. Thus, the company's recruitment conditions improved, and the marginal recruitment rate in 2018 was 2.5% and is the lowest since the company began raising.

State Comptroller Englman noted in the report that an analysis of the factors that led to a decrease in IEC's debt shows that most of the improvement is mainly explained by events of a one-time nature and not acts of the company's usual operating activities. The operational actions taken to reduce the level of debt contributed to 16% of the debt reduction, and among other things they were made at the expense of investments in the development of the electricity network. The audit also revealed that there is a concern that some of these needs will not be addressed even in the updated development plans for the coming years. At the same time, the electricity economy is undergoing significant changes and they require many investments. This jeopardizes the continued improvement in the company's financial situation, and solutions will be required to implement these changes without deteriorating the company's situation. HHI and government agencies must provide for the needs of the electricity sector while maintaining the company's financial strength.