Last week, the IDF published a report on how badly it dropped its guard during the October 7 massacre in 2023. It really was lamentable. Many warning signs were ignored with tragic results.
Imagine a boxer in a ring who inexplicably drops his fists and opens himself up to his opponent. In that case, the boxer’s trainer will yell at him from outside the ring to put his fists back up. It seems that the IDF is like a boxer without a trainer.
How can the IDF prevent a future repeat of the Yom Kippur War or the October 7 massacre? The IDF should get its act together by learning from Wall Street.
The Sarbanes–Oxley Act of 2002, a US federal law, contains safeguards put into place after grave financial scandals erupted in the US around that time. These safeguards are relevant to all big organizations, such as IBM and the IDF. The secret is to have ongoing internal check procedures.
What is Sarbanes–Oxley?
The Sarbanes–Oxley Act (SOX) followed a series of corporate and accounting scandals of corporations, including Enron, Tyco International, Adelphia, Peregrine Systems, and WorldCom. These scandals cost investors billions of dollars when the companies’ share prices collapsed, shaking public confidence in the securities markets.
According to the American Institute of Certified Public Accountants (AICPA), SOX created responsibilities for companies and auditors that were intended to help protect investors and restore investor confidence.
Section 404 of SOX requires Securities and Exchange Commission-listed corporations to include in their annual reports an internal control report, which shall: (1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and (2) contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
To make sure, each accounting firm involved that prepares or issues the audit report for the corporation shall attest to, and report on, the assessment made by the management of that corporation.
How is SOX achieved?
A so-called COSO (Committee of Sponsoring Organizations regarding internal control) framework calls for five main principles: control environment, risk assessment, control activities, information and communication, and monitoring.These principles seem broadly relevant not only to large corporations but also to the IDF.
The main principle at stake: Internal check
Internal control is intertwined with internal check, i.e., carving up the functions in a corporation so that more than one person is needed to execute an act. This is a safety measure. If one person can do everything, it is easier for that person to commit wrongdoings and conceal them.
Having two people involved reduces the chance of wrongdoing, and having three people further reduces the chance, because most people don’t want to collude in a bad act. Having someone checking their work further strengthens the safeguard needed; that is the internal check.
For example, in the Israel tax Authority and most tax authorities around the world, there are people to assess tax due, but different people collect the tax. Others oversee both the assessors and the collectors, i.e., internal check again.
What the IDF needs
We respectfully propose the IDF set up (or step up) its own internal check unit to examine whether the other units of the IDF are doing their job of safeguarding the nation’s defenses. In short, the left hand should check what the right hand is doing.
The work of the IDF internal audit unit should then be subject to an annual external audit – perhaps by the State Ombudsman. Or should it be quarterly?
Presumably, most internal check procedures can be done electronically by monitoring whether the IDF systems and generals are properly functioning. That way, IDF personnel can get on with their work, and the nation can stop worrying about the next October 7.
Doesn’t the IDF have its own procedures? Who knows, we can only look at the failed results every 50 years or so.
Conclusion: Had an ongoing IDF internal check system existed on October 7, 2023, it might have prodded IDF reinforcements into action when alerts came from the female lookouts at the Nahal Oz base. The same applies to analysis of warning signs. A boxer needs a trainer to yell out what needs to be done.
As always, consult experienced professional advisers at an early stage in specific cases.
leon@hcat.coThe writer is a certified public accountant and tax specialist at Harris Consulting & Tax.