Roundtable: Accountability and Transparency in Managing the Defense Budget

The Israel Democracy Institute | 4 Pinsker Street, Jerusalem

In the wake of the summer's social protests, Israel's defense budget has come under unprecedented pressure.  But public debate on Israel's budgetary priorities has been inhibited by a relative lack of transparency and accountability when it comes to security matters.  Are reforms to the defense budget necessary?

On Wednesday, January 11, 2012, IDI's George Shultz Roundtable Forum brought together the Minister of Finance, Dr. Yuval Steinitz, and a panel of experts to discuss the following major issues related to the allocation and management of Israel's defense budget:

  1. Does the allocation of the budget between the defense system and the civil systems adequately consider the needs of civil society and the connection between investing in civil causes such as education and the quality of Israel's security?
  2. For several years, Israel has adopted a multi-year security budget but a two-year general budget.  This lack of symmetry in budgetary planning raises questions about the effects of economic shocks on the ability to provide adequate services to citizens.  Who bears the burden of these risks?  And if the burden is divided between the different systems, will this not impact security in the end?
  3. Accountants in the Ministry of Finance responsible for monitoring the implementation of the defense budget are exposed to much, but not all, data.  Similarly, Ministry of Defense accountants report that they do not have adequate access to information about future contracts and wages.  Does keeping such information from accountants indeed contribute to national security and to the efficient use of the defense budget?

Former Defense Minister Prof. Moshe Arens

Dr. Shmuel (Muli) Ben-Zvi, Former Head of the Ministry of Defense Budget Department

IDI President Dr. Arye Carmon

IDI Senior Fellow Dr. Momi Dahan

Former National Security Advisor Major General Giora Eiland

Attorney Eyal Gabbay, Former Director General, Prime Minister's Office

IDI Vice President of Research Prof. Mordechai Kremnitzer

Former Meretz Party Chairman and MK Haim Oron

Sever Plocker, Economic Analyst, Yediot Aharonot

Israeli Finance Minister Dr. Yuval Steinitz

Prof. Asher Tishler, Tel Aviv University Faculty of Management

Former Director General of the Defense Ministry Gen. (Res.) Amos Yaron

Additional participants in the event included Dr. Avi Simhon, chairman of the Advisory Committee to the Minister of Finance; General (res.) Eitan Ben Eliyahu; Ms. Smadar Elhanani, former Economic Advisor to the Finance Committee of the Knesset; Prof. Asher Tishler of Tel Aviv University's Faculty of Management; Dr. Michal Tamir of the Shaarei Mishpat College; Researcher and former combat pilot Dr. Colonel (res.) Shmuel Gordon; Senior Economist Mr. Amnon Neubach; and, Dr. Shmuel (Muli) Ben-Zvi, former Head of the Ministry of Defense Budget Department.

Who should decide how much money should be allocated to the Israeli army and what those funds should be spent on - the army or the government?  On January 11, 2012, at a meeting of IDI's George Shultz Roundtable Forum entitled "Accountability and Transparency in Managing the Defense Budget," Finance Minister Dr. Yuval Steinitz lambasted the conduct of the Israel Defense Forces and the Defense Ministry, asserting that the army is "almost a black hole" to which the state allocates funds upon request, without transparency and without external supervision - a practice that creates "a distortion that is very problematic both in terms of democracy and in terms of security."

The Finance Minister asserted that it is easier to monitor the Mossad, the Shin Bet, and the Israeli Atomic Energy Commission than it is to monitor the defense budget, and avowed that the Defense Ministry and the IDF broke the law for over 60 years, creating a state within a state.

In his estimation, the murky conduct of the Defense Ministry and the IDF costs the State of Israel billions of dollars a year.  "The defense establishment is conducted without transparency and without external control," he cautioned, claiming that the situation is one in which "the damage outweighs the usefulness, and ultimately hurts the military."

Minister Steinitz cited three different avenues of reform that he has begun to implement:

  1. Raising the pension age for non-combat soldiers in the IDF
  2. Having the Finance Ministry submit the Defense budget to the Knesset, rather than the Defense Ministry
  3. Passing a government decision requiring transparency and supervision of the IDF

According to the Minister, the relationship between the military and the government that existed before he took office was part of "an unbearable and remarkably harmful situation for all the systems involved."  He asserted, "If you ask me today in my capacity as Minister of Finance... if I can tell you where the budget allocated to the IDF the Ministry of Defense goes to, I have a very, very general and inaccurate picture....  It's as if there is almost a black hole that the money enters and we don't know where it goes from there."

"Any system, even the best, that does not have transparency and external monitoring, is a system that will be less efficient, and more wasteful by definition," he continued.  "Even the best system can not supervise itself."

According to Major General (Res.) Amos Yaron, former Director-General of the Defense Ministry, the Finance Ministry does not have the tools for monitoring the defense budget.  He therefore proposed assigning the supervision of the budget to a "tiny body" that will be established within the National Security Council.  In his view, the Finance Ministry has taken over the budgeting process in a way that essentially stripped ministers of responsibility for the conduct of their ministries.

Adv. Eyal Gabbay, former Director-General of the Prime Minister's Office, explained that the Prime Minister of Israel can devote only a small fraction of his time to matters that are not related to politics or security. In his view, there is definitely room to require transparency in the financial conduct of the defense system, at least with regard to the parts of the budget that are not related to armament and operations.

"Israeli PM Orders Real-Time Oversight of Defense Budget" by Barbara Opall-Rome (DefenseNews, January 11, 2012)