Israel entered the Iron Sword war without a clear understanding of whether its civilian compensation system could withstand a large-scale conflict, according to a critical report published Tuesday by State Comptroller Matanyahou Englman.
The report, titled “Preparation of the Compensation System during the First Year of the Iron Sword War,” finds that the state failed to properly assess the financial resilience of its compensation fund before the outbreak of the war in October 2023.
According to the findings, the compensation fund paid out 18.8 billion shekels in direct and indirect damages between October 2023 and the end of December 2024, despite having only 17.7 billion shekels available on the eve of the war.
The comptroller described the resulting deficit as avoidable, noting that the Finance Ministry had failed for years to present war scenarios and cost assessments to the Knesset Finance Committee, as required.
The report estimates total damage to Israel’s home front at 36.2 billion shekels, roughly double the size of the fund, meaning the state entered the war without adequate knowledge of the mechanism intended to compensate affected citizens. In just one year, the fund paid out nine times more than the total compensation distributed since the 2006 Second Lebanon War.
Englman also criticized the fund’s investment policy, calling it underperforming. He estimated that had the fund adopted an investment strategy similar to that used for state deposits at the Bank of Israel, it could have generated an additional 2.8 billion shekels in interest—an option that was never seriously examined.
The report further points to failures in public outreach. While citizens are able to purchase optional insurance coverage for property damage up to one million shekels, very few have done so due to insufficient public information campaigns. Between 2019 and 2023, only around 50 families per year took advantage of the program.
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Finally, the comptroller highlighted serious gaps in technological preparedness. Despite decisions made as early as 2015 to equip field teams with wartime-ready systems, no operational management or control platform was in place when the war began.
The findings present a severe indictment of state preparedness, oversight, and risk management at a time when citizens expected robust financial protection in the face of unprecedented national challenges.