The State Comptroller's report published today (Tuesday) addressed the situation in the Israel Post. The postal deficit jumped by 44% between 2018 and 2019 and reached NIS 229 million. The gross profit of the post office decreased in 2017-2019 from 8% to 4.95% The number of letters sent by the post office decreased by 45% between 2013 and 2020.
The State Comptroller refers to the report he published
Despite the implementation of the state's retirement plan, funded by the state at NIS 477 million, in addition to the total number of jobs, which dropped to 5,050, the company's salary expenses were on the rise between 2016-2019 (the date of signing the agreement with the state was 2015 ).
From NIS 1.08 billion in 2016 to NIS 1.13 billion in 2019, while hurting the company's profitability.
The auditor notes that the post office has not completed the registration process of more than 70% of its assets - a fact that could lead to a violation of its rights.
The post office also did not implement Amendment 11 from 2012, so that no structural separation was made between the postal company and the postal bank and the areas of activity of the postal bank were not 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.
Also, 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).
The State Comptroller noted testified to a deteriorating trend in the company's financial and financial results over the years.
He further noted that the post office suffers from a lack of material accounting information in various areas of the company's operations.
The auditor recommended that the Postal Company, the Companies Authority and the Ministries of Communications and Finance work to correct the deficiencies in the report and to examine the implementation of the recommendations accordingly.
The roof agreements did not help urban renewal
The report refers to the roof agreements signed with the local authorities and indicates that only a third of the land that the local authorities were supposed to be marketed for construction - was actually marketed. About 7% of the land for trade and employment included in the plans in the roof agreements (in terms of built-up square meters).
The Comptroller notes that despite the need to establish 200,000 housing units for the ultra-Orthodox population in 2035-2016, as of the end of the audit, no ultra-Orthodox neighborhood has been marketed in any heterogeneous city for which an agreement was signed. Budgets in the Ministry of Finance have not yet formulated a system of incentives for the inclusion of neighborhoods for the ultra-Orthodox population within the framework of the umbrella agreements.
Construction site, archive, photo: Ami Shumen
The Comptroller notes favorably that thanks to the plans, a cumulative saving of approximately NIS 152 million (approximately 24%) has been achieved from the estimated cost of the works.
According to the comptroller, "difficulties and barriers throughout the planning, development and marketing stages make it difficult for the authorities to keep up with the marketing pace."
He adds that "a significant addition of housing units without a sufficient addition of additional sources of income, and in particular business property taxes, may impair the ability of the authorities to provide services at an adequate level to the residents in the future."
It is also recommended that the Ministry of Construction, RMI and the Ministry of Finance, in cooperation with the Ministry of the Interior, examine individually the effects of the implementation of the roof agreements on the authority's financial condition and its ability to provide residents with adequate municipal services. Due to the implementation of the umbrella agreement. "
Encourage competition in the devices market
The report's reference to the Standards Institute shows that it constitutes a powerful monopoly in the field of standards in Israel. Adjustment of import documents in Israel and the duration of the procedure are $ 307 and 64 hours, more than 3 times the OECD average for the cost of adjusting the documents ($ 98) and 8 times more during the procedure (8 hours). Worse, according to the auditor, the situation is only deteriorating over the years.
In addition, the Commissioner for Standardization 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.
Standards Institute,
Despite the acute crisis in the field, in 2020 there were 54 jobs in the Standards Administration, of which only 36 were staffed (one third unmanned).
The number of reviews for enforcing official standards in 2019 was slightly more than half of the recommendations of testing laboratories that year.
It also shows that the number of inspections to enforce official standards has dropped dramatically over the years from about 2,300 in 2017 to about 1,700 in 2019, and that the commissioner does not impose financial sanctions on an importer who violates provisions of the Import and Export Ordinance.
The high cost is passed on to consumers, who are forced to pay a total of more than a billion shekels a year due to the unrivaled standard market.
According to the comptroller, creating competition 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.
Bank of Israel: The highest foreign exchange reserves in the world
The Bank of Israel holds significantly higher foreign exchange reserves than in the world. In Israel, at the time of the auditor's inspection in February this year, they stood at more than $ 185 billion, which is 68% of Israel's GDP, compared to the world's standard of 15% -22% of GDP. As a result, the bank does not enjoy returns on this capital and for more than two decades it has not transferred profits to the state treasury.
Bank of Israel, Photo: Reuters
The State Comptroller, Matanyahu Engelman, stated in the report that most of the deficiencies found in the previous report were corrected, but nevertheless the significant increase that occurred in the last decade in the level of foreign exchange reserves held by the Bank of Israel led to a $ 75 billion deviation in February 2021. This move increased the investment risks and created large liabilities in the bank's balance sheet amounting to about 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 about NIS 70 billion, as of December 2020. The auditor recommends that a contingency plan be prepared, for examination by the Monetary Committee, for the effective implementation of the excess balances effectively in the appropriate circumstances.
According to the Comptroller, the Bank of Israel's acquisition policy has not been able to direct inflation to the set target - between 1% and 3% and it remains at a lower level than that.
If this is the auditor, it is possible that without the Bank's policy, the inflation target may be even further away and it is possible that the shekel would have strengthened even more against the leading currencies.
In addition, the auditor notes favorably the activities of the Markets Division at the Bank of Israel.
The actions taken to reduce the IEC's debt are one-time
The State Comptroller's report later referred to the IEC. Despite the improvement in the company's financial situation between 2012 and 2019, its risk was perceived as high compared to that of similar electricity companies in Europe. One of the reasons for this is the expensive interest the company pays on its debts.
IEC branch in Petah Tikva, Photo: Yehoshua Yosef (Archive)
The price was paid by the electricity sector, among other things, by a decrease in the volume of investments planned for the years 2022-2018, which average NIS 3.2 billion per year. These volumes are lower than the average investment volume planned for the years 2017-2013, which averaged NIS 5.09 billion per year, and slightly higher than the minimum investment alternative planned for an average investment per year of NIS 2.9 billion. 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. Hence, the volume of investments planned in the coming years does not compensate for the sub-investments that were in the previous development plan and it is doubtful whether the current development plan provides a satisfactory solution to the needs of the electricity sector.
State Comptroller Engelman noted in the report that an analysis of the factors that led to a decrease in HHI's debt shows that most of the improvement is mainly explained by events of a one-time nature and not marches in the routine of the company's current operating activities.
The operational actions taken to reduce the level of debt contributed to 16% of the debt decrease, 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.
Mekorot does not upgrade existing plants
Israel Water Company - Mekorot works with higher leverage than usual in the field of infrastructure in Israel and around the world.
This ratio reached more than 70%.
Mekorot is also paying more on its debts than it was allocated to it, as it has raised 12-year bond loans instead of 10 years.
In the week in which the report was published, it was announced that the Ministry of Justice had written off a debt of more than NIS 65 million to the Dead Sea factories, for the use of self-production of water.
The Comptroller further states that in the library the company 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 the government decision.
The company also did not meet the allocation of funds in favor of innovations and improvements between the years 2015-2019.
Mekorot Company, Photo: Moshe Shai
The average budget for innovations and improvements was almost 4 times lower than the average annual depreciation 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 in upgrading or improving existing plants. This is, among other things, due to the need to establish new water plants to expand the supply network, increase the reliability of water supply and connect areas that are not yet connected to the system.
The Comptroller further notes that by the time the audit was completed, the following steps included in the government decision had not been completed - the transfer of rights in Mafar Properties (Government Company Mekorot HaMovzi HaArtzi and Properties Ltd.), the sale of the effluent plants and the establishment of two other effluent plants. The implementation of these measures is one of the conditions for advancing the essential plans for improving Mekorot's financial relations and meeting the goals set by the financial strength team in accordance with Government Resolution 4514, including a plan to register Mafar assets in Mekorot's books and a plan to improve Mekorot land and properties. .
The portfolio returns of the Lottery are low
The State Comptroller's report found that as of the end of June 2020, the value of government entities' investments was NIS 9.6 billion. One third of them, 6.4 billion, are intended for pensions. -50 local authorities.
According to the auditor, 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. It was also found that the Ministry of the Interior does not monitor the existence of an active investment portfolio in the various authorities. In addition, the financial data reported to the Ministry of the Interior and in the public financial reports 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.
Unsurprisingly, there is a significant gap between the strong local authorities, with a high socio-economic rating, and the authorities with a low socio-economic rating. In addition, the average cumulative return of local authorities for the years 2017-2019 amounted to about 2.4% and was low compared to the return of study funds and central funds for compensation, which were about 5% -6% in the said period. These differences are due to different portfolio compositions and different risk profiles. It also shows that 34% of the authorities surveyed (17 out of 50) did not have an active investment committee as of the end of 2019. In addition, 22% to 33% of their authorities did not hold long-term investment portfolios in 2017-2019, frequent meetings of the investment committee Required.
"The findings from this report show that there are deficiencies in the administrative and professional aspects of the activity of the investment committees in these entities," the auditor stated, adding: "Increasing the supervision and control of these entities' investments In which volatility in the capital market could erode the investment portfolio. "
Mifal Hapayis booth, Photo: Dudu Greenspan - Archive
At the same time, the auditor focused on a separate report on the investment policy of Mifal HaPais, which alone manages investments of NIS 3-4 billion, which originate from legal gambling funds of the public. According to the State Comptroller, In addition, the Ministry of Finance did not include in the permit a reference to the rules of investment management, to examine how to manage the investment portfolio and to implement the guidelines of the Board of Directors and the Investment Committee, to monitor portfolio management, to present an individual account of the investment portfolio.
The investments in question are profits intended for projects that have been 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.
These funds and the annual returns they generate support project financing.
According to the auditor, Mifal Hapayis' investment portfolio has hardly changed over the years.
The portfolio returns indicate that during 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, against a range of 2.46%, to profits of 2.57% at educational institutions High, provident funds and study funds).
During periods of market boom, the portfolio 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, which is based on a low risk appetite, and in particular regarding the percentage of investment in shares.
In March 2020, during the large decline in the portfolio's yield by about 5% due to the eruption of the corona in Israel, the Finance Committee of the Lottery did not convene.
The auditor notes favorably that Mifal Hapayis decided not to invest in the bonds of a controlling shareholder who did not repay the debt to lenders ("haircut"): Of the Lottery. "