Today, Matanyahu Engelman, State Comptroller and Ombudsman, publishes the sixth release of the audit reports on the failures surrounding Operation Iron Swords: management of the Social-Economic Cabinet, economic preparedness for emergencies before the war, and preparation of the 2023-24 war budgets and their execution
• Operation Iron Swords – Economic and Budgetary Aspects
The State Comptroller and Ombudsman, Matanyahu Engelman, today releases the sixth in a series of audit reports on the failures surrounding the events of October 7 and Operation Iron Swords. This release includes reports on the conduct of the Social-Economic Cabinet during the war and the period preceding it, on economic preparedness for emergencies before Operation Iron Swords, on preparation of the war budgets for 2023-2024 by the Ministry of Finance, and on their execution at the war’s outset.
Ministers Didn’t Attend Discussions
The audit of the Social-Economic Cabinet’s functioning revealed a sharp decline in the number of decisions taken by the Cabinet over 20 years. From 2003 to 2023, the number of decisions fell by roughly 90 percent. The Comptroller found that ministers' participation in Cabinet meetings during the 36th and 37th governments was partial, and at times very limited.
“In reviewing Cabinet operations before the war, the audit found that the Chairs of the Social-Economic Cabinet — Finance Minister in the 36th government Avigdor Liberman and Prime Minister in the 37th government Benjamin Netanyahu — did not engage with the Cabinet’s emergency-preparedness agenda, despite our recommendations and those of professional bodies,” said Comptroller Engelman.
After the outbreak of Operation Iron Swords, Finance Minister Bezalel Smotrich was authorized to head the cabinet, set its agenda, and conduct its discussions for decision-making purposes, including the establishment of a civilian command center, which ultimately failed to materialize. However, the State Comptroller found that Minister Smotrich did not exercise these powers. “Given that cabinet meetings ceased as early as December 2023, and since it did not operate throughout the long months of the war, Prime Minister Benjamin Netanyahu should have intervened to ensure that civilian affairs during the war were handled fully and effectively. But this was not done,” State Comptroller Engelman emphasized. “The cabinet’s failure to fulfill its duties during the war was reflected, among other things, in its avoidance of providing a comprehensive, systemic response in advance to the frontline communities and their residents,” he added.
The State Comptroller concluded that the Chair of the Cabinet — the Prime Minister — and his deputy, the Minister of Finance, must act to exercise the cabinet’s authority and ensure that it functions as a leading governmental forum, supported by continuous, coordinated staff work to obtain up-to-date information, conduct situation assessments, and make decisions addressing all evolving needs."
No Emergency Reserve
The audit revealed significant shortcomings in the government’s economic management during the war. “The Ministry of Finance did not allocate a designated emergency reserve item in the state budget that could be immediately utilized in the event of an emergency,” said State Comptroller Engelman. “After the outbreak of the war, in November 2023, the Accountant General’s Department conducted a mapping that ostensibly indicated that the balance of budgetary reserves in the state budget amounted to approximately NIS 30 billion. However, the Budget Department informed the audit team that the effective reserve in the state budget was zero. In practice, therefore, there were no budgetary reserves available for immediate use upon the outbreak of the war, necessitating the identification of alternative funding sources.”
The State Comptroller recommended that the Minister of Finance “conduct a periodic review, involving all relevant professional bodies within and outside the Ministry of Finance, regarding the necessary steps to strengthen the state’s economic resilience, including measures to encourage growth that will improve Israel’s fiscal position and reinforce its commitment to meeting its debt obligations.”
Oversight of All Levels
Days after the October 7th massacre, the State Comptroller set out on a series of visits to communities in the Gaza Envelope, the south, and the north. He met with evacuees accommodated in hotels in Eilat, the Dead Sea, Jerusalem, the center, and the north of the country.
On January 7, 2024, the Comptroller announced the commencement of audits covering about 60 different subjects, to be examined by approximately 200 audit managers within the State Comptroller's Office. The Comptroller emphasized three key milestones for the audits:
- The audit will be critical of all levels — political, military, and civilian.
- In the core audits and in additional audit areas, personal accountability will be assigned to those responsible for the failures.
- Once a state commission of inquiry is established, the State Comptroller will determine the division of responsibilities with it.
The initial intention had been to publish, within a few months, the reports dealing with the core failures that enabled the October 7th massacre. However, an interim injunction — which was lifted only a few weeks ago following understandings reached between the State Comptroller’s Office, the IDF, and the Israel Security Agency (Shin Bet) — delayed these audits for approximately 15 months. It should be noted that the State Comptroller’s Office is now in the midst of conducting audits on these core issues as well.
In light of the situation that has arisen, State Comptroller Engelman decided that, given the considerable importance of the reports dealing with civilian matters, these will be published as their preparation is completed. This publication, as noted, is the sixth in the series of audit reports on Operation Iron Swords, and it addresses issues relating to the political echelon.
It goes without saying that the public is entitled to answers to the difficult questions surrounding the gravest failure in Israel's history. The State Comptroller will not rest until he provides answers regarding these failures, which will be published upon the completion of the audit work.
The Swords of Iron reports that have been published until now:
- Mental Health Treatment Following the Events of October 7 and the Swords of Iron War (11.2.2025)
- The Operation of Resilience Centers in the Confrontation Line Localities since the Outbreak of the Swords of Iron War (11.2.2025)
- The Regulation of the Community Emergency Response Teams Before the Swords of Iron War and their Operation since the Beginning of the War (11.2.2025)
- The Provision of Aid to the Victims of Hostile Activity since the Events of October 7 (11.2.2025)
- The Rehabilitation Processes of the Western Negev Settlements (24.2.2025)
- Government Response to the Needs of Northern Communities During the Swords of Iron War: Civil-Economic Front (10.6.2025)
- Economic Assistance to Small Businesses in the Initial Months of the Swords of Iron War (10.6.2025)
- the government handling of the civilian sphere during the Swords of Iron War (3.9.2025)
- The City of Elat's Tourism Promotion and Economic Development in Light of the Swords of Iron War (16.9.2025)
- The Agricultural Sector during the Swords of Iron War (16.9.2025)
