ההסתדרות הציונית העולמית The World Zionist Organization
THE OFFICE OF THE COMPTROLLER
ANNUAL REPORT for 2012
to THE ZIONIST GENERAL COUNCIL
XXXVI/4
Jerusalem, November 2013
The Office of the Comptroller: 14 Hillel St., P.O.B. 7063, Jerusalem 9107001 Tel: 972-2-6204500 Fax: 972-2-6204545 [email protected]
Members of the Zionist General Council,
I am honored to submit to the Zionist General Council (XXXVI/4) an Annual Report on the activities of the Office of the Comptroller for the year 2012.
The volume includes reports that were discussed at the Subcommittee for Control of the Zionist General Council Standing Committee for Budget and Finance. The response of the Chairman of the Zionist Executive to the reports is included.
The Comptroller's recommendations should be thoroughly reviewed by the controlled bodies and implemented thereafter in order to improve ways of management, use of human resources, and funds allocated to them.
I would like to thank Chairperson of the Control Subcommittee and the members of the Subcommittee for their assistance in pursuing the implementation of my recommendations, as well as the Controlled bodies for their cooperation. Thanks go also to my staff for their thorough work.
Asaf Sela Comptroller
Jerusalem, November 2013 2
Message of the Chairperson of the Subcommittee for Control The World Zionist Organization Standing Committee for Budget and Finance
1. The Comptroller of the National Institutions examines the activities of the World Zionist Organization. Since the 36th Zionist Congress and following the election of the present Chairman of the World Zionist Organization, the Comptroller and his staff have been working to provide the members of the Subcommittee for Control and the World Zionist Organization with reports that include findings and recommendations for discussion and conclusion with the reviewed entities.
2. The Subcommittee for Control regards the work of the Comptroller and his staff as an important auxiliary tool for proper management of the various institutions and organizations and emphasizes this stand in its meetings. Also, the Subcommittee, together with the Comptroller and in coordination with the reviewed bodies, follows up on the implementation of the recommendations specified in the Comptroller's reports.
3. The Subcommittee expresses its appreciation of the thorough on going work of the Comptroller and his staff in conducting the examinations and preparing the reports, while constantly aspiring to improve the activities of the World Zionist Organization.
4. I thank the members of the Subcommittee for Control for their cooperation and all those involved in this important endeavor.
Baruch Levy, Ph.D.
November 2013
Table of Contents
Activities of the Office of the Comptroller ...... 111 During the Period Covered by the Report List of Reports Prepared in the Years 2003–2013 ...... 115
Comptroller's Reports: The Hagshama Movements – Use of World Zionist Organization Allocation ...... 119 Introduction ...... 121 Hagshama Movements – General Background ...... 124 The Allocation Giving Process ...... 127 Conduct of the Movements vis-à-vis the World Zionist Organization ...... 134 Response of the Chairman of the Executive ...... 155
The Zionist Council in Israel ...... 157 Introduction ...... 159 General Background ...... 162 The Associations of the Zionist Council in Israel ...... 170 Management of the Council Budget ...... 178 Procurement and Payments ...... 185 Previous Audits ...... 187 Postscript ...... 190 Response of the Chairman of the Executive ...... 191
Center for Religious Affairs in the Diaspora ...... 193 Introduction ...... 195 The Purpose and Activities of the Center ...... 196 Personnel ...... 197 Budget and Finance ...... 198 Short Shlichut ...... 199 Productions, Publications and Educational Kits ...... 103 Seminars Abroad ...... 104 Seminars in Israel ...... 106 Aid for Communities and Organizations ...... 106 Miscellaneous ...... 107 Response of the Chairman of the Executive ...... 109
The Human Resources Division ...... 111 Background ...... 113 Introduction ...... 114 Activity of the Division ...... 115 Staff Composition and Employment Framework ...... 117 Acceptance of New Employees ...... 121 Employees with Pension Supplement ...... 123 Daily Workers ...... 124 Employee Attendance and Overtime ...... 125 Response of the Chairman of the Executive ...... 129
Keren Kayemeth LeIsrael – Forest Contractors ...... 131 Introduction ...... 133 General Background ...... 136 Procedures and Directives ...... 141 Initiating Tenders in the Regions ...... 145 The Work Process with the Contractor ...... 155 The Computer Systems ...... 162 Response of the Chairman of the Executive ...... 167
Keren Kayemeth LeIsrael – Short-term Shlichuyot ...... 169 Introduction ...... 171 Data ...... 172 Management of the Short-term Shlichuyot ...... 173 Short-term Shlichuyot of KKL Employees ...... 175 Approval of the Application Form for a Short-term Shlichut ...... 175 Conditions of Travel ...... 180 Accrual of Points in the Frequent Flyer Club ...... 189 Per Diem Payment and Reimbursement of Work-Related Expenses ...... 189 Procedures ...... 202 Updating Human Resources Department about the Short- term Shlichut ...... 204 Security Briefing ...... 204 Summary of Activity Report ...... 205 Half-yearly Report ...... 206 Short-term Shlichuyot of Executive Members at KKL ...... 208 Introduction ...... 208 Approval of the Short-term Shlichut ...... 208 Preparation of an Annual Travel Schedule ...... 214 Travel Conditions ...... 215 Updating of the Human Resources Department and Holding a Security Briefing ...... 219 Accrual of Points in the Frequent Flyer Club ...... 220 Per Diem Allowance and Reimbursement of Work-Related Expenditures ...... 221 Summary of Activity Report ...... 232 Half Yearly Report ...... 234 Updating of the Procedure ...... 236 Response of the Chairman of the Executive ...... 237
Keren Hayesod – Payment Security ...... 239 Introduction ...... 241 General Background ...... 242 The Information Systems ...... 243 Application of the Separation of Functions Principles ...... 245 Transfer of Payments to Beneficiaries ...... 249 Handling of Suppliers' Master Files ...... 251 Payments by Cheque ...... 258 Payments by Electronic Means ...... 262 Response of the Chairman of the Executive ...... 265
Keren Hayesod – Salaries and Human Resources ...... 267 Introduction ...... 269 General Background ...... 272 Staff Recruitment Process ...... 276 The Attendance System ...... 282 Salary Calculation in Israel ...... 289 Overtime Hours ...... 292 Salary Calculation Overseas ...... 294 Response of the Chairman of the Executive ...... 301
Statutes of the Comptroller and the Control Office, The World Zionist Organization ...... 303
Activities of the Office of the Comptroller During the Period Covered by the Report 12 Activities of the Office of the Comptroller During the Period Covered by the Report
Functions of the Comptroller
The authority of the Comptroller of the Word Zionist Organization is drawn from Article 60 of the WZO Constitution, which determines the independent status and main functions of the Comptroller. Detailed provisions on the functions and mode of operation of the Comptroller can be found in the Statutes of the Comptroller and the Control Office, as passed at the Zionist General Council, (brought below, in the last section of this book).
It is the Comptroller's task to conduct an independent review of the WZO departments, the National Funds – Keren Kayemet LeIsrael, Keren Hayesod and other bodies, as defined in Clause 10 of the Statutes, in order to ascertain whether they operate within the desirable legal norms, budgetary discipline, financial accountability, administrative propriety and efficiency, and moral integrity. The Office of the Comptroller also deals with complaints from the public concerning the bodies coming under its purview.
The control findings, together with the Responses of the Chairman of the Executive, are debated in the Standing Committee for Budget and Finance of the Zionist General Council, which has set up a special sub-committee for this purpose. The Reports ins this volume have been debated by the sub- committee.
The WZO Comptroller, who is elected according to the Constitution by the Zionist Congress, may also serve as Comptroller of the Jewish Agency, if so elected by the Board of Governors of the Agency. This linkage of roles has existed in practice for many years.
13 One Office of the Comptroller – Several Entities Under Purview
It is important to stress that the Office of the Comptroller functions as one unit controlling the gamut of activities of the National Institutions. Thus it achieves flexibility in placing control teams in the various controlled entities and creates a possibility of implementing lessons drawn from control of one entity to the other.
14 Reports Prepared by the Office of the Comptroller of The World Zionist Organization in the Years 2003 - 2013
Arranged according to the year of publication
The World Zionist Organization 2005 The 34th Zionist Congress 2005 Allocation to the World Zionist Unions 2005 The Zionist Federation in France 2006 The Department for Zionist Activity 2006 The Hagshamah Department – Payments to the Hagshamah Movements 2006 Center for Religious Affairs in the Diaspora 2007 Allocations for Reform and Conservative Religious Services 2007 The Human Resources Division 2008 Herzl Center – Museum and Zionist College 2008 The Central Zionist Archive 2010 The Finance Department 2010 Short Term Shlichuyot at the World Zionist Organization 2010 The Zionist Council in Israel 2012 The 36th Zionist Congress 2012 The World Zionist Unions – Use of WZO Allocation 2012 The Building at 17 Kaplan Street, Tel-Aviv 2012 Department for Diaspora Activities, Herzl Museum 2012 The Unit for Zionist Shlichut - The Shlichim Set up
51 2013 The Hagshama Movements – Use of WZO Allocation 2013 The Zionist Council in Israel 2013 Center for Religious Affairs in the Diaspora 2013 The Human Resources Division
Keren Kayemeth LeIsrael 2003 Information Systems Division 2005 Water Reservoirs 2006 Maintenance Division 2006 The Ben Shemesh Land Policy and Land Use Research Institute 2007 Land Development Authority, Land Reclamation Projects and Roads 2008 Hemnuta Co. Ltd. – The Process of Letting Properties and Handling the Maintenance Costs 008 Land Development Authority – Forestry Division, Fire Prevention 2008 Land Development Authority – Arrangements with Land Bed Haulage Contractor in the Southern District 2010 Communications and Public Relations Division 2010 The Shaar Hagay Khan (Carvansary) 2010 The Resources Development Division – Contribution Funded Projects 2012 Voluntary Retirement in 2009 2012 The Education & Youth Division 2913 Forest Contractors 2013 Short Term Shlichut
51 Keren Hayesod 2003 Communications and Marketing Division 2006 Missions and International Events Unit 2007 Human Resources and Emissaries Administration 2008 Legacies and Funds 2012 Procurements and Contracts 2012 High Priority Projects 2013 Payment Security 2013 Salaries and Human Resources
51
51
The Hagshama Movements Use of World Zionist Organization Allocation
Response of the Chairman of the Executive
20 The Hagshama Movements
Use of World Zionist Organization Allocation
1. Introduction
1.1 In accordance with the work program of the Office of the Comptroller of the World Zionist Organization, we examined the subject of the allocations for the Hagshama Movements (hereinafter: the Movements).
1.2 The audit encompassed the following areas:
- Work interfaces between the World Zionist Organization Finance Department and the Movements, including current reports of the Movements and their quality.
- The existence of procedures regarding the Hagshama Movements and work according thereto.
- Control over the reports of the Movements.
1.3 The audit was conducted in the months of January – April 2012 at the offices of the World Zionist Organization in Jerusalem and at the offices of the Movements.
In the course of the audit, meetings were held with the advisor to the Chairman of the World Zionist Organization, the director of the World Zionist Organization Finance Department, the director of a unit in the Department for Diaspora Activities and with other employees, all as we saw fit. During March and April, we also met with representatives of all the Hagshama Movements.
21 1.4 The audit goals: a. Review of the existing processes and controls in the matter of budgeting of the Movements. b. Examination of the procedures in the matter of budgeting of the Movements, their enforcement and the extent of their efficacy. c. Examination of how the Movements meet the terms of their letters of commitment.
1.5 Main documents used in the audit: The letters of commitment of the Hagshama Movements. The work program submitted by the Movements. Reports on activities undertaken during 2011 by the Movements. Authorizations of accountants regarding the uses made of the allocation funds. The Movements' accounts for 2011 in the World Zionist Organization books. Trial balances of the Movements accounts for 2010 and 2011. Expenditures of the Hagshama Movements for hagshama activities undertaken in 2011. Audited financial statements of the Movements for 2010. Documentation and payment invoices with respect to hagshama activities undertaken in 2011. Position papers and timetables for hagshama activities carried out by the Movements in 2011. Specific documents received on request.
22 1.6 The audit methodology: Review of the existing procedures and examination as against actual conduct. Holding of meetings and talks with office-holders at the World Zionist Organization with responsibility for the activity being examined. Holding of meetings and talks with the directors of the Hagshama Movements and with professional bodies in some of the Movements regarding matters that were examined. Review of the allocation approval and payment process. Examination of the integrity and propriety of the documents that were submitted to the World Zionist Organization for the purpose of obtaining allocation funds. Examination of the control exercised over the documents submitted. Examination of the correspondence between the conduct of the Movements and the terms of the letters of commitment. Review of the hagshama activities undertaken by the Movements in 2011 and examination as to the existence of documents supporting the performance and cost of those activities. Summary of the findings. Drafting of audit report, including drawing conclusions and making recommendations.
23 2. Hagshama Movements – General Background
2.1 A hagshama movement is a non-profit-making association whose purpose is performance of Zionist activities designated for the younger generation in the Diaspora in order to strengthen the Jewish identity of the youth and their bond with the State of Israel. The various movements operate representatives in overseas Jewish communities who organize Zionist activities, such as: festival activities, Independence Day and inviting speakers from Israel for lectures.
2.2 The Hagshama Movements are independent associations maintaining a reciprocal relationship with the World Zionist Organization because of their ability to undertake Zionist activities that match the credo of the World Zionist Organization. Because of the identity of purposes between the World Zionist Organization and the movements and the operational capabilities of the movements, the World Zionist Organization makes an allocation available for the activity of the Hagshama Movements for Jewish youngsters throughout the world.
The allocations budget of the World Zionist Organization for the movements varies in the region of USD 1 million a year.
24 2.3 Eleven Hagshama Movements are currently budgeted by the World Zionist Organization, as specified below (in NIS): / 2011 In Name of the Movement Budget Remitted (*) percent Tagar Student Olim 926,892 942,942 69% Movement PZC Hagshama 582,247 729,492 55% Bama Magshimim of Zionist 968,224 967,289 87% Youth Tamar – Reform Movement 247,695 994,257 87% Tehila – Volunteer Movement for religious 992,495 64,957 87% aliyah Merom Association of 499,828 962,276 85% Traditional Magshimim Atid – International partnership of Zionist 797,799 289,559 82% pluralistic youth movements Kidma Annilewich 989,422 955,998 86% Maccabi World Movement 964,698 952,247 28% World Bnei Akiva Alumni 744,646 469,268 66% Herut Magshimim 992,245 958,999 69% Total for 2011 4,084,974 3,083,955 -
(*) According to the books of the World Zionist Organization, correct as for February 2012.
The Office of the Comptroller examined the reciprocal relationships between the World Zionist Organization and the Movements, with the emphasis on checking the existence of conflicts of interests and looking at the allocation process.
The audit findings:
The World Zionist Organization allocates funds to various bodies and movements, some of the heads of which serve as members of the Executive of the World Zionist Organization. The Executive makes decisions about "distribution of the cake" and the amounts of the
25 allocations to the various bodies. For example: In the case of the Hagshama Movements, the chairs of two Hagshama Movements (P.Z.C. and Marom) serve as members of the World Zionist Organization Executive. It is recommended that the existence of a conflict of interests in these cases be looked into.
No procedures were found for the receipt of allocation process, such as: the definition of Zionist activities which are recognized for the purpose of receiving the allocation, the dates for receipt of the allocation, the dates for submission of activity reports, the format of the reports that are to be submitted, confirmation of an accountant, identification of the required documentation for receipt of the allocation, application of sanctions against movements that do not meet the conditions of the allocation and so on. Currently, there is only a letter of commitment and the allocations are given on the basis of non-uniform reports which do not reflect the activity – see further on this below.
The Office of the Comptroller found that the World Zionist Organization Finance Department does not have an orderly list of the Movements, containing: names of the Movement representative, up-to-date bank accounts, up-to-date addresses and the dates of the last financial statements of the Movements.
The audit recommendations
It is recommended that an allocations procedure be formulated that will arrange the process of remitting the funds to the Hagshama Movements, in accordance with what is specified below:
1. The procedure will specify the documentation required in order to receive an allocation, such as: a work program and factual report on activity in the previous year (including the report format), a detailed financial implementation report, audited financial statements, confirmation of an accountant and so on.
26 2. The procedure will determine a uniform format for submitting documents.
3. The procedure will determine rigid report dates and dates for transfer of the money.
4. Controls and samples will be defined that are to be carried out on a current basis in order to check the quality and reliability of the reports.
5. Sanctions will be defined to be activated if the Hagshama Movements do not meet the conditions of the letter of commitment and of the procedure.
It is recommended that an orderly list be formulated of the Hagshama Movements containing the following particulars: name of the Movement, the association number, addresses and telephone numbers, authorized signatories, bank particulars and contact personnel.
3. The Allocation Giving Process
3.1 The process of receiving the allocation prior to 2010
In the past, the distribution of the allocations among the Hagshama Movements was carried out in accordance with the weighting of a number of parameters, which are specified below:
1. The number of olim in the Hagshama Movement. 2. The number of olim in long-term programs in Israel. 3. The number of olim in short-term programs in Israel. 4. The number of participants in seminars held overseas.
27 Upon completion of each activity year, the Hagshama Movements are required to submit detailed reports to the World Zionist Organization identifying the olim during the year amongst members of the Movement and the number of participants in the activities of the Movements in Israel and overseas. In order to verify the data provided, the World Zionist Organization Hagshama Department performed various control actions, such as: telephone conversations with participants in the activities and visits to the activities of the Movements overseas. Upon completion of the checks, the budget for support payments was distributed to the Hagshama Movements in accordance with the weighted mark they obtained.
Because of the large amount of paper work these control activities require and the load imposed on the Hagshama Movements, it was resolved at a meeting of the Zionist Executive with the representatives of the Hagshama Movements in February 2011 to change the system for distribution of the funds to the Movements, as specified below:
a. The Hagshama Movements were defined for the purpose of receipt of an allocation (as detailed above).
b. Commencing with 2010, the budgetary distribution to the Hagshama Movements will be based on the average of the allocations each Movement received between the years 2007 and 2009.
c. Use of the allocations is to be made with complete transparency in a way acceptable to the World Zionist Organization Finance Department.
d. A Hagshama Movement that is not included in the list of Hagshama Movements for the purpose of an allocation but is interested in being such, may put forward its candidacy once in four years, not later than one year prior to the date of the Zionist Congress. In the course of the year, the candidacy of this
28 movement will be examined and a decision made during the Congress as to the recognition of the movement as a Hagshama Movement.
3.2 The Department for Diaspora Activities:
Because of the dismantling of the World Zionist Organization Hagshama Department, it was decided to transfer the Hagshama Movements for the attention of the Department for Diaspora Activities since a Hagshama Movement's main activity is in the Diaspora.
The audit finding
The Department for Diaspora Activities disavowed responsibility for performance of controls over the uses of the allocation funds and, currently, the allocations are remitted to the Movements almost without any control.
The audit recommendation
As part of the new procedure which will define the content of the reports which the Movements have to submit and the scale of the controls which have to be carried out, it is recommended that a body be set up that will take responsibility for management of the budgets of the allocations to the Movements and that it be the one to carry out the controls regarding the uses made of the allocations. Either way, no allocation should be awarded to the Movements without a demand for presentation of clear documentation regarding the uses made of the allocation funds.
3.3 The current process of receiving the allocation:
At the beginning of each year, a Hagshama Movement interested in receiving an allocation is required to sign the letter of commitment,
29 which contains the terms for receipt of the allocation, as specified below:
1. The Hagshama Movements will submit work programs for the approval of the Department for Diaspora Activities, specifying the Zionist activities planned for the coming year.
2. The Hagshama Movements must submit implementation reports to the Department for Diaspora Activities, listing the expenditures with respect to the activities which were approved at the beginning of the year.
The accountant auditor of the Movement will sign the report in confirmation of its correctness.
3. The Hagshama Movements undertake to cooperate with any control activity on the part of the World Zionist Organization to examine the uses made of the allocation funds, including making available for audit all the relevant data and records.
4. If it is determined that a Hagshama Movement did not make proper use of the allocation funds or that it is not cooperating with the audit process as noted above, it will be required to return the allocation funds to the World Zionist Organization, with the addition of interest and linkage from the date of receipt of the allocation.
5. Prior to receipt of the allocation, the Hagshama Movements must submit for the perusal of the World Zionist Organization, audited financial statements as well as authorizations as to the proper management of the association.
After the letter of commitment is signed and the statements submitted, the allocations are remitted to the Movements by the Finance Department.
30 The Office of the Comptroller reviewed the letters of commitment and the accompanying documentation and checked the dates of their submission, their propriety and also the information presented in them.
The audit findings
There is no insistence on submission of letters of commitment and work programs of the Movements at the beginning of the year and, as a generalization, they are presented only close to the date of allocation application. Some of the Movements that did submit letters of commitment, did not date them while others are unsigned. For example, the Herut Movement submitted a signed letter of commitment only at the end of May 2011, on which occasion they requested that the allocation funds be remitted to their account urgently. The Atid Movement, Tagar and Tamar submitted undated letters of commitment, lacking the association stamp. In the opinion of the Office of the Comptroller, submission and presentation of the letter of commitment in the course of the year, sometimes without a date, while applying pressure on the World Zionist Organization Finance Department to remit the allocation funds does not permit the performance of proper control as to the uses made and to be made of these monies.
The work programs which are submitted for the perusal of the World Zionist Organization Finance Department are not in a fixed format such that it is difficult to discern from them what the planned activities are and it is also hard to assess the reasonableness of the expenditure with respect to these activities. For example: in the Tehila Movement submitted a table with three activities planned for implementation throughout the year, where the cost of the activity of one of the programs, termed "pilot tours" and intended for 120 participants, comes to a sum of USD 5,000, while the cost of the second activity, termed "tours in Israel" and intended for just 45 participants is USD 20,000. In
31 other words, even after studying the work program, it is not clear to the reader of the program what the nature of the activities mentioned is, and what the reason for the great difference in costs, sometimes in reverse proportion to the number of participants.
The accountants' authorizations submitted for World Zionist Organization perusal are not produced in a fixed format and, in a large number of cases, the authorizations do not actually permit a proper indication of the uses made of the allocation funds. For example: in the authorization of the accountant for the P.Z.C. Movement (Reg. Ass.), it is written: "In our opinion, the activities report for the program of the annual budget for the Zionist activity program for 2011 matches from all substantive points of view what is entered in the books of accounts of the Association." In other words, the accountant confirms that the activity costs were entered into the books of the Association, but he does not express an opinion on the issue of whether the Association actually carried out these activities.
From a perusal of the implementation reports and accountants' authorizations submitted to the World Zionist Organization, it follows that a considerable part of the allocation funds given to the Hagshama Movements is transferred by them to "sister" movements such that these movements are in effect "implementation sub-contractors" of the Hagshama Movement. For example, the authorization of the accountant as to the uses made of the allocation funds for the Atid Hagshama Movement lists the amounts and the identity of the sister movements to which the allocations were transferred by the Atid Movement. In the opinion of the Office of the Comptroller, the reference is actually to budgeting of the sister movements by the Hagshama Movements.
Contrary to Clause 11 in the letter of commitment, which determines that the Movements undertake to provide the World
32 Zionist Organization with a balance sheet audited by an accountant prior to the signing of the agreement, we find that the Hagshama Movements did not submit audited financial statements for the perusal of the World Zionist Organization as they had undertaken with the signing of the letter of commitment.
The audit recommendations
It is recommended that the Movements be required to submit the letters of commitment and their work programs at the beginning of the year but not later than the end of January each year. The allocation of a Hagshama Movement which does not submit these documents in time will be gradually reduced, in accordance with the length of the delay, in steps to be determined by the Executive. Presentation of these documents at the beginning of the year will enable reasonable control as to the propriety of the letters of commitment and the work programs.
It is recommended that a fixed format be built of a work program and that the reporting be possible only according thereto. The format will contain a table in which the Movement will specify all the planned activities, the exact activity dates, number of participants, anticipated costs, with a column for comments, in which the nature and necessity of the activity will be stated.
It is recommended that the opinion of the accountant be submitted in a standardized formulation such that any deviation therefrom will constitute a qualified opinion, as the result of which the matter of the allocation will be considered at the World Zionist Organization. The opinion has to follow the instructions of the manifesto of the Institute of Certified Public Accountants in the field.
It is recommended that the nature of the "recognized" activities that earn World Zionist Organization support be defined in the
33 procedure and also that it be determined what the conditions are that permit a Hagshama Movement to transfer monies to a sister / daughter association, in return for implementation of an activity.
The stipulations and provisions of the letter of commitment should be insisted on, including a requirement that the Hagshama Movements submit audited financial statements as they are submitted for any other statutory body (the Registrar of Associations). It is recommended that it be stipulated that the transfer of the allocation to the Hagshama Movement is to be dependent on presentation on these financial statements.
Response of the Director-General of the Finance Department 1. Importance is attributed to writing down and carrying out procedures in the matter and the subject will be checked.
2. Thought has to be given to the matter of "sister" or "complementary" movements in terms of policy and from a legal point of view.
4. Conduct of the Movements vis-à-vis the World Zionist Organization
The Office of the Comptroller looked into a number of topics, across- the-board for all the movements, as specified below:
Meeting the requirement for submission of the work programs and letters of commitment for 2011.
Meeting the requirement for submission of an accountant's authorization regarding the uses made of the allocation funds for 2011.
Examination as to actual implementation of the hagshama activities as the movement declared and checking the existence of
34 documentation testifying to the implementation and cost of the activities.
Below is a review of the findings for each Hagshama Movement separately: a. Atid - International Partnership of Pluralistic Zionist Youth (Reg. Ass.) General data Head Office of the Jerusalem movement Salaried employees 1 Countries in which the USA, England movement is active Activities of the Seminars, bringing graduates for a trial association year in Israel, camps for IDF conscripts…
Financial data 2011 * 2010 Annual income ** 296,986 9,924,448 Salary costs 974,229 949,725 Vehicle costs 72,757 78,297 Expenditures for activities *** 892,489 594,956 Administration & General Expenses 98,506 59,231 Annual surplus 31,139 94,699 Accrued surplus 365,36 675623
* Unaudited trial balance. ** Of which NIS 454,000 and NIS 455,000, from the World Zionist Organization allocation, for 2011 and 2010, respectively. *** Of which NIS 313,000 and NIS 332,000, with respect to support of the Movement for affiliated movements, for 2011 and 2010, respectively.
The audit findings
The Movement maintains organizational and conceptual contacts with three other Zionist movements: Young Judea, FZY and the Scouts, with these movements having representatives with voting
35 rights on the executive board of the Hagshama Movement. The Movement undertakes Zionist activity directed at the 18+ age range by funding activities carried out by the affiliated movements, for example: bringing of youngsters to Israel, preparation for service in the IDF of children of Israelis living abroad who choose to enlist, etc. The total allocation received from the World Zionist Organization less 25 percent for overhead costs is transferred to the affiliated movements (NIS 313,000 in 2011) with Atid actually serving as a conduit for the transfers of these funds.
The income of the Movement for 2010 originating with the World Zionist Organization was NIS 455,460 while the expenditures marked as hagshama activities came to only NIS 331,742 (the whole amount having been transferred to the affiliated movements, as stated). In other words, the Movement used 73 percent of the income coming to it from the World Zionist Organization for hagshama activities with the rest of the money going for overhead costs. It is important to note that, despite the percentage of the total allocation permissible for overheads (25%), we did not see costs being reported for its own hagshama activities undertaken within the Movement (all the reported costs were for payments to affiliated movements, as noted) and it would, therefore, seem that there is no real reason for use of all the permissible overhead percentages.
Perusal of the accountant's authorization shows that it only confirms that amounts of money were remitted to affiliated associations, namely: "On November 11, 2011, …. was transferred from the Atid Partnership to the FZY Movement … on September 5, 2011, …. was transferred from the Atid Partnership to the Hadassah Services Association, … during 2011, …. was transferred from the Atid Partnership to the World Tzabar Association. This authorization is given based on confirmations of transfers from the Hadassah Services Association to the Young Judea and World Scouts Tzabar and
36 confirmation from Bank Leumi of the making of a transfer to the FZY Movement." This authorization does not constitute an opinion as to whether the activity of these associations conforms with the purposes of the allocation. In effect, this authorization is meaningless.
The response of the Movement 1. Atid is a long-term partnership of three movements and maintains its activity through those movements.
2. The Movement has its own activity and, therefore, the overhead of 25 percent is reasonable. b. The Reform Hagshama Movement (Reg. Ass.)
General data Head Office of the movement Jerusalem Salaried employees 1 Countries in which the movement Commonwealth of Independent is active States, Europe, Australia and South Africa Activities of the association Conferences, seminars, shlichim abroad, bringing youth from overseas to Israel
Financial data 2011 * 2010 Annual income ** 292,869 259,957 Salary costs 75,979 49,929 Vehicle costs 9 9 Expenditures for activities *** 956,799 942,999 Administration & General Expenses 5,265 24,051 Annual surplus / (deficit) (7,834) 78,599 Accrued surplus 241,596 7345362
* Unaudited balance sheet.
37 The 2011 work program submitted to the World Zionist Organization is incomplete and does not contain all the planned activities, as the Movement itself noted at the end of the program that was submitted.
Contrary to Clause 2 of the letter of commitment, which determines that receipt of the allocation funds is conditional on the transfer of "a content report signed by a representative of the organization and that the performance report be accompanied by an accountant's authorization testifying that, to the best of his knowledge, the expenditures were incurred for the purposes for which they were designated in the work program", the work program and the performance report submitted for the perusal of the World Zionist Organization were not signed by a representative of the Movement.
In addition to the aforesaid, the performance report which was submitted did not include any accountant's authorization as required.
The main activity of the Movement is support for seminars overseas carried out by local volunteers, members of the Movement, and for participation in the costs of airline tickets of shlichim and representatives taking part in these activities. As part of the audit, a number of expenditures in 2011 were sampled, for a total amount of NIS 86,000 out of NIS 278,000 for expenditures on activity. This financial support is not backed up, as a rule, by documentation testifying to the cost of the activities and there is, in effect, a substantial difficulty in establishing the accurate cost of these activities.
No response has been forthcoming from the Movement.
38 c. Bama Zionist Youth Hagshama (Reg. Ass.) General data Head Office of the movement Ramat Efal Salaried employees 0 Countries in which the movement South America is active Activities of the association Conferences, seminars, shlichim abroad, bringing youth from overseas to Israel
Financial data 2011 * 2010 Annual income 978,275 926,999 Salary costs 9 9 Vehicle costs 9 9 Expenditures for activities 969,699 929,999 Administration and General Expenses 3,550 6,000 Annual / (deficit) surplus (27,413) 9,999 Accrued / (deficit) surplus (12,413) 3,5222
* Unaudited balance sheet.
The audit findings
Some of the hagshama activities of the Movement are carried out through an affiliated association called "Zionist Youth", which is the body in contact with the local suppliers. We were shown a sample of invoices for hagshama activities carried out by the Zionist Youth. At the same time, not all the expenditures were accompanied by documentation. The Office of the Comptroller has no way to quantify the expended amounts that were charged without documentation since the charges were entered in bulk and there is no total certainty that all the money was referred for the benefit of the hagshama activity.
Contrary to Clause 2 of the letter of commitment, which determines that receipt of the allocation funds is conditional on the transfer of "a content report signed by a representative of the
39 organization and that the performance report be accompanied by an accountant's authorization testifying that, to the best of his knowledge, the expenditures were incurred for the purposes for which they were designated in the work program", the Movement did not submit a work program as a document accompanying the letter of commitment.
The accountant's authorization about the activity expenditure submitted to the World Zionist Organization does not state to which year it refers and the accountant's authorization submitted may not actually be viewed as a proper authorization answering the requirements of the letter of commitment.
d. Kidma Annilewich (Reg. Ass.) General data Head Office of the movement Ramat Efal Salaried employees 0 Countries in which the Australia, Canada, USA, South movement is active America and the Commonwealth of Independent States Activities of the association Seminars in Israel and overseas, bringing youth for long-term programs in Israel
Financial data 2011 * 2010 Annual income ** 9,929,684 926,276 Salary costs 9 9 Vehicle costs 9 9 Expenditures for activities *** 9,922,924 959,974 Administration & General Expenses 0 37,723 Annual / (deficit) surplus )9,959( )99,992( Accrued / (deficit) surplus 95,34 325934
* Unaudited balance sheet. ** Of which, NIS 127,000 and NIS 172,000 with respect to the World Zionist Organization 2011 and 2010 allocations, respectively. *** There are overhead costs with respect to services received from a sister movement in the amount of NIS 13,000.
40 The audit findings
From the printout of the fax in which the letter of commitment was sent, it follows that the date on which the fax was sent, as appearing on the letter of commitment, is June 2011. Hence, the letter of commitment was submitted six months late.
The work program was submitted for the perusal of the World Zionist Organization only in July 2011, i.e., seven months late.
In the accountant's authorization for the Movement, it is stated: "We can report that the expenditures in 2011 came to an amount of NIS 933,000." In other words, the accountant confirms that expenditures were entered in the books of the association, but he does not express an opinion regarding the correctness of the entry, the existence of the expenditures for activity and the reconciliation of the expenditures to the allocation purpose. It may be noted that an amended accountant's authorization was sent in March 2012.
Invoices from suppliers were found for costs incurred for hagshama activities that were submitted in the name of an affiliated association – Chavatzelet. Cases were found where the names of both associations appeared on the tax invoice and others where the name of the affiliated association was crossed out by hand and that of Kidma Annilewich inserted in its place.
No response has been forthcoming from the Movement.
41 e. Herut Magshimim (Reg. Ass.)
General data Head Office of the movement Ramat Gan Salaried employees 1 – without receipt of a salary Countries in which the Turkey, USA, the Commonwealth movement is active of Independent States Activities of the association Conferences, events with Zionist content overseas, logistical support for olim, bringing youth to Israel
Financial data 2010 * Annual income 989,665 Salary costs - Vehicle costs - Expenditures for activities ** 929,599 Other Expenses 44,787 Annual surplus 97,499 Accrued surplus 425332
* The figures are based on the annual statement submitted to the tax authorities in the USA. ** No reconciliation was found between the income recorded with the Movement in Israel and the amount which the Movement in the USA stated that it had remitted to the account of the Movement in Israel.
The Herut Hagshama Movement operates through two hagshama movements. One is registered in the USA under the name: Magshimey Herut North America, Inc., and the other is registered in Israel under the name World Magshimey Herut (Reg. Ass.). The allocation funds from the World Zionist Organization are transferred to the bank account of the Movement overseas and, from there, most of the money is remitted to the bank account of the Movement in Israel for the purpose of funding hagshama activities. The association files financial statements with the Registrar of Associations in Israel and the tax authorities in the USA, with the income of the association in Israel being the amount remitted from
42 the account of the Movement abroad to the bank account of the Movement in Israel.
Because there are two affiliated hagshama movements, as specified above, and because of the lack of bookkeeping records for 2011, the Office of the Comptroller looked at the activities of the association through a review of the invoices and documentation concerning the hagshama activities. It may be noted that this documentation also served as supporting documentation for receipt of the allocation funds from the World Zionist Organization.
The audit findings
Contrary to Clause 2 of the letter of commitment, which determines that receipt of the allocation funds is conditional on the transfer of "a content report signed by a representative of the organization and that the performance report be accompanied by an accountant's authorization testifying that, to the best of his knowledge, the expenditures were incurred for the purposes for which they were designated in the work program", we found that the Movement did not submit a work program as an accompanying document with the letter of commitment.
From a review of the documentation regarding the hagshama activities, it follows that:
1. It was found that in some countries the expenditures were not backed up with invoices but there were signed declarations of office-holders in the Movement testifying to the monies expended. The activity amounts reported in these statements for 2011 come to NIS 45,000.
2. Most of the invoices with respect to activity in 2011, totaling some NIS 91,000, are from suppliers whose function is to provide organizational services for performance of activities, such as: ground services for groups visiting Iserael. These
43 invoices do not contain details regarding the number of participants and the nature of the hagshama activity. There is, therefore, a substantial difficulty is assessing whether the monies were paid to the suppliers for this purpose reflect the activities that were actually carried out.
The Office of the Comptroller recommends that the number of the participants appears in the invoice in order to improve the level of control.
In the accountant's authorization for the Movement for 2011, it is stated: "We confirm that we have examined the statement of the Movement's Secretary General which is attached hereto and counter-signed by us for the sake of identification. We confirm that, to the best of our knowledge, all the monies expended were used for the purposes of a hagshama activity for which they were designated." In other words, the accountant confirms that a statement was made regarding the expenditures but he does not express an opinion as to whether these expenditures were indeed incurred for a hagshama activity, as is usual in accountants' opinions. In view of the above, the said accountant's authorization is not to be viewed as an opinion within the accepted meaning of the term.
It follows from perusal of the 2010 financial statements of the associations, both of that in Israel and of that abroad, that there is no reconciliation between the amounts remitted from overseas to Israel – a sum of NIS 191,700, and the income entry in the financial statements of the Movement in Israel – a sum of NIS 74,529 only.
Response of the Movement 1. There is a substantial difficulty with obtaining documentation regarding the activity in Belarus and there is, therefore, no other way but to rely on the signed declarations.
44 2. The fact that the suppliers do not usually give details as to the number of participants and the nature of the activity is not something over which the directors of the association have any control.
3. Regarding the results of the 2010 activity, in the light of a further examination we conducted, it turns out that the activity done through the Mizrachi bank account was not included in the report. The association will do its utmost to obtain the data and correct the report. f. Maccabi World Movement (Reg. Ass.)
General data Head Office of the movement Ramat Gan Salaried employees About 17 Countries in which the movement Countries of Europe, North and is active South America, Australia and South Africa Activities of the association Maccabiah, work with commun- ities overseas, operation of the Maccabi Museum
Financial data 2010 Annual income * 99,528,999 Salary costs 9,992,999 Vehicle costs 9 Expenditures for activities ** 6,954,999 Administration, General Expenses & Miscellaneous 3,721,000 Annual surplus / (deficit) )9,986,999( Accrued surplus / (deficit) 3653445222
* Of which, NIS 452,000 with respect to the World Zionist Organization allocation. ** Zionist activity without the use of the Kfar Hamaccabiya hotel. Out of this amount, some NIS 4 million are for hagshama activity.
45 The audit findings
Contrary to Clause 2 of the letter of commitment, which determines that receipt of the allocation funds is conditional on the transfer of "an accountant's authorization testifying that, to the best of his knowledge, the expenditures were incurred for the purposes for which they were designated in the work program". It was found that the treasurer of the Movement gave the "accountant's authorization" because of his personal title of accountant. The requirement of the World Zionist Organization (and of the other budgeting bodies) to receive an accountant's authorization regarding the uses made of the allocation monies is the result of the traditional role of an accountant auditor, who, by definition, is competent to give an opinion about the use of the allocation money, being an external body, independent of the audited body. It is superfluous to state that obtaining an opinion of the treasurer of the Movement constitutes a clear conflict of interests and thus, in effect, the Movement did not submit an accountant's authorization as required.
The Movement reports on the hagshama activity (the B'kef Hagshama, Tamar North and Tamar South programs) for the period of an academic year rather than of a calendar year. The total activity reported for the year 5771 came to NIS 4.6 million. A sample of documents was examined – propriety was found.
No response has been forthcoming from the Movement.
46 g. Tagar World Students Movement (Reg. Ass.)
General data Head Office of the movement Jerusalem Salaried employees 0 Countries in which the movement Australia, France, countries in is active South America and South Africa Activities of the association Conferences, seminars, overseas shlichim, bringing youth from abroad to Israel
Financial data 2011 * 2010 Annual income 946,949 289,754 Salary costs 9 9 Vehicle costs 9 9 Expenditures for activities 986,989 267,676 Administration & General Expenses 33,178 21,517 Annual deficit )72,928( )44,699( Accrued deficit )9,5333( )635439(
* Unaudited balance sheet.
The audit findings
The hagshama activities of the association are carried out both through joint activities with an affiliated association at a total cost of some NIS 120,000 in 2011 and through the transfer of funds to the shlichim of the Movement overseas for the arrangement of seminars overseas, in a sum of some NIS 53,000 in 2011. The Office of the Comptroller examined a sample of documents with respect to the holding of seminars abroad and found that, as a rule, invoices are sent to the Movement evidencing the holding and cost of the seminars.
In relation thereto, the association has very little activity of its own. The requirement of the Movement for recognition of overhead costs totaling NIS 68,538 (26 percent of the total
47 World Zionist Organization allocation) in 2011 would seem prima facie unreasonable, particularly in view of the fact that this expenditure is entered as one amount against the entering of a liability in favor of the affiliated movement, i.e.: the overhead is paid to the affiliated movement.
No response has been forthcoming from the Movement.
h. PZC Hagshama (Reg. Ass.)
General data Head Office of the movement Ramat Efal Salaried employees - Countries in which the movement USA, Canada, South America, is active Europe, Ukraine, Africa Activities of the association Workshops, seminars, conferences, weekly meetings
Financial data 2011 * 2010 Annual income ** 2,892,429 4,654,999 Salary costs 422,999 429,999 Vehicle costs 140,344 9 Expenditures for activities 2,423,753 4,158,000 Administrator & General Expenses 970,088 265,000 Annual surplus / (deficit) )272,824( 92,999 Accrued surplus 6295623 4975222
* Unaudited balance sheet. ** Of which, NIS 14,000 and NIS 641,000 are with respect to the World Zionist Organization allocation for the years 2010, 2011, respectively.
48 The audit findings
From the date on the letter accompanying the letter of commitment, it follows that the letter of commitment was submitted only in July 11.
Contrary to Clause 2 of the letter of commitment, which determines that receipt of the allocation funds is conditional on the transfer of "an accountant's authorization testifying that, to the best of his knowledge, the expenditures were incurred for the purposes for which they were designated in the work program", it is written in the accountant's authorization for the Movement: "In our opinion, the activities report for the annual budgetary program for the Zionist activities project for 2011 matches from all the substantive points of view what is recorded in the books of accounts of the association." In other words, the accountant confirms that the activity expenditures were entered in the books of the association, but he does not express an opinion as to whether the association actually carried out these activities and that the activity matches the purposes of the allocation.
In addition to the aforesaid, the work program of the Movement for 2011 was submitted without particulars of the anticipated costs, such that it is not possible to examine actual performance in relation to the program.
Response of the Movement The letter of commitment was signed late as there was a discussion with the World Zionist Organization regarding its wording until close to the date for its submission.
49 i. Merom Association of Traditional Magshimim (Reg. Ass.)
General data Head Office of the movement Jerusalem Salaried employees 4 Countries in which the movement Uganda, Hungary, Australia, is active South America Activities of the association Seminars, bringing trainees to Israel for leadership conferences, activities overseas through shlichim
Financial data 2011 * 2010 Annual income ** 9,559,249 9,992,652 Salary costs 286,522 296,299 Vehicle costs 9 9 Expenditures for activities *** 9,495,889 9,829,869 Administration & General Expenses 97,921 77,926 Annual surplus / (deficit) )999,929( 998,289 Accrued surplus / (deficit) 435793 3465636
* Unaudited balance sheet. ** Of which NIS 271,000 and NIS 327,000, are with respect to the World Zionist Organization allocation, for 2011 and 2010, respectively. *** There is an overhead expenditure with respect to services received from a sister movement of negligible amount.
The audit findings
Contrary to Clause 2 of the letter of commitment, which determines that receipt of the allocation funds is conditional on the transfer of "a content report signed by a representative of our organization and that the performance report be accompanied by an accountant's authorization testifying that, to the best of his knowledge, the expenditures were incurred for the purposes for which they were designated in the work program", the Office of the Comptroller did not find in the scanned documents on the World Zionist Organization computers, a 2011 work program as
50 a document accompanying the letter of commitment. It may be noted that the association did show the Office of the Comptroller a work program which, it was claimed, was sent for World Zionist Organization perusal in 2011.
In addition to the above, the Movement did not submit an accountant's authorization regarding the uses made of the allocation funds in 2011.
Overseas seminars for alumni of the youth movements, at a total cost of some NIS 180,000 in 2011, were carried out through volunteers of the Movement overseas who receive a budget from the Hagshama Movement for performance of activities and it is they who are in touch with the local suppliers. As a rule, there is no requirement on the part of the Hagshama Movement of these volunteers to provide documents testifying to the actual cost of the activity and, for that reason, there is no way to verify the expenditure amounts that were recorded with respect to these activities.
No response has been forthcoming from the Movement.
51 j. Alumni of World Bnei Akiva (Reg. Ass.)
General data Head Office of the movement Jerusalem Salaried employees 0 Countries in which the movement Australia, France, countries in is active Latin America and South Africa Activities of the association Conferences, seminars, activities through shlichim, bringing youth from abroad to Israel
Financial data 2010 Annual income 488,298 Salary costs 9 Vehicle costs 9 Expenditures for activities 488,999 Administration & General Expenses 4,120 Annual deficit )2,924( Accrued deficit )25373(
The audit findings
The Movement carries out all its activities through an affiliated company – "BeTarmil Uvemaqel" (With back-pack and stick), with the latter charging the Movement periodically for costs with respect to provision of these services. The Office of the Comptroller sampled a number of hagshama activities carried out through this company and checked for the existence of documentation with respect to these activities - propriety was found.
Perusal of the documents at the World Zionist Organization shows that there is an unsigned 2011 letter of commitment but apparently no work program was presented for that year as a document accompanying the letter of commitment.
52 The accountant's authorization that was provided is of the usual standard formulation in which it is noted that the activity was done by the "BeTarmil Uvemaqel" company - propriety was found.
Response of the Movement The Movement signed the letters of commitment and submitted an annual work program as required. k. Tehila – Volunteer Movement for Religious Aliyah (Reg. Ass.)
General data Head Office of the movement Jerusalem Salaried employees 0 Countries in which the movement Israel, USA is active Activities of the association Pilot tours in Israel for potential olim, seminars, tours in Israel for new olim
Financial data 2011 2010 Annual income * 65,999 492,772 Salary costs 9 96,922 Vehicle costs 9 9 Expenditures for activities 942,789 978,492 Administration Expenses 34,293 39,083 Annual surplus / (deficit) )28,572( 929,994 Accrued deficit )32957,6( )335,22(
* Of which, NIS 81,000 with respect to the allocation of the World Zionist Organization.
53 The audit findings
The 2011 work program submitted to the World Zionist Organization does not contain activity dates.
Contrary to Clause 2 of the letter of commitment, which determines that receipt of the allocation funds is conditional on the transfer of "a content report signed by a representative of our organization and that the performance report be accompanied by an accountant's authorization testifying that, to the best of his knowledge, the expenditures were incurred for the purposes for which they were designated in the work program", we found that a performance report and accompanying accountant's authorization were not conveyed for World Zionist Organization perusal but, nevertheless, the allocation funds were transferred to the Movement.
No response has been forthcoming from the Movement.
July 2012
54 Response of the Chairman of the Executive to the Comptroller's Report on The Hagshama Movements - Use of World Zionist Organization Allocation
In accordance with Paragraph 18b of the Statutes of the Comptroller and the Control Office of the World Zionist Organization, following is my response to the above referenced Audit Report:
The Comptroller has prepared a detailed report on the World Zionist Organization Allocations to the Hagshama Movements.
The audit reviewed the entire scope of relationships between the World Zionist Organization and the Hagshama Movements, including the issue of conflict of interest and the process of granting the allocations. In addition the audit carried out a cross examination of all the Hagshama Movements focused on their meeting the World Zionist Organization requirements regarding the submission of work schedule and accountant's authorization as well as conducting hagshama activities and documenting them.
The World Zionist Organization allocates substantial sums of its budget to the Hagshama Movements. We are therefore obligated to make sure that the handling of the allocation, its utilization and the reports on its execution are orderly and transparent, allowing control over the use of the funds for the designated purposes.
The audit report was of great assistance in formulating a new procedure relating to the allocations to the Hagshama Movements.
55 As of the beginning of 2013, the allocations to the Hagshama Movements are handled according to the new procedure.
The Zionist Executive will deal with the conflict of interest issue, in the near future.
We thank the Control Office.
(-) A. Duvdevani
Jerusalem, October 2013
56
The Zionist Council in Israel
Response of the Chairman of the Executive
58 The Zionist Council in Israel
1. Introduction
1.1 In accordance with the work program of the Office of the Comptroller of the World Zionist Organization, we examined the activity of the Zionist Council in Israel (hereinafter: the Zionist Council or the Council), including the activities of the associations which give effect to the vision of the Council: The Osim Zionism Association and the Association of the Zionist Council in Israel will be termed hereinafter for the sake of convenience: the Associations).
1.2 The audit contained examination of the following spheres:
- Examination of the statutory status of the Zionist Council's Executive and of the Associations.
- Examination of the mode of management of the budget of the Council and of the Associations, including the reciprocal relationships between them.
- Examination of proper management of the Council and of the Associations.
1.3 The audit was conducted in the months from March to June 2012 at the offices of the Council in Jerusalem and at the Ami-Chay preparatory course at Kibbutz Keramim.
In the course of the audit, meetings were held with the chairmen of the Associations at the Council, the director-general of the Council, the principal of the preparatory course, the director of the Tzameret Youth Movement, employees of the Associations and other workers, all as we saw fit.
59 1.4 The goals of the audit:
a. Examining whether the Zionist activities performed by the Associations match the work programs laid down by the Council's Executive.
b. Looking at the decision taking processes and their implementation in practice.
c. Examination of the budgetary conduct at the Associations and the use of the funds of the Council.
d. Locating weak points in the processes and in the control and making recommendations for improvements.
1.5 Main documents used in the audit:
Minutes of the Executive of the Zionist Council for 2009 – 2011.
Financial data from the World Zionist Organization books regarding the budget of the Zionist Council.
Minutes and written resolutions of the various committees at the Associations.
Financial statements of the Associations for 2009 – 2010.
2010 trial balances of the Associations.
Work and procurement procedures of the Associations.
2010 work programs of the Associations.
Reports on budgets as against actual expenditure, 2011.
60 Contractual agreement of the preparatory course with Kibbutz Keramim.
In-depth audit report carried out on behalf of the Registrar of Associations upon conclusion of 2010.
Draft articles of the Zionist Council.
Founding documents of the Associations, including the articles.
List of members of the Associations, directors of the Associations and their functions.
The guiding criteria for distribution for grants to Druze students.
List of tuition grant recipients.
A sample of documents and invoices regarding expenditures entered in the books of the Associations.
Specific documents obtained upon demand.
1.6 The audit methodology:
Reading of existing procedures and their examination as against actual conduct.
Holding of meetings and talks with the office-holders in charge of the activity examined and with additional employees, as we saw fit.
Examination of the legal status of the Zionist Council Associations vis-à-vis the Zionist Council and the binding force of Council resolutions vis-à-vis the Associations.
Examination of the founding documents of the Associations and whether the nature of their activity matches the purposes of the Associations.
61 Review of resolutions passed in the committees of the various Associations, including the taking of minutes at these committees.
Review of the defects which came up in the in-depth audit which the Registrar of Associations conducted at the Osim Zionism Association at the end of 2010, and a look at the rectification of the defects that arose in this audit.
A visit to the Ami-Chay preparatory course to look at the conditions "on the ground" and the performance of educational activities.
Review of the expenditure lines and examination of the reasonableness of these expenditures.
Examination of a sample of expenditures entered into the books of the Associations, including looking at the procurement process and the existence of supporting documentation for incurring the expenditures.
Examination of reports on the budget as against actual expenditure for 2011, including the mode of performance of controls and handling of deviations.
Summary of the findings.
Preparation of audit report, including the drawing of conclusions and making of recommendations.
2. General Background
a. The Zionist Council in Israel
The Zionist Council in Israel was established in 1970 and constitutes an activity arm of the World Zionist Organization in Israel, its main purpose being deepening the Jewish-Zionist character of the State of Israel.
62 The Council was intended to be a federation of Zionist communities and a joint roof organization for all Zionist bodies in Israel. This is a pan-Israeli, voluntary framework, Zionistic and non-partisan, incorporating representatives of different organizations and institutions in Israel, representatives of local authorities, youth movements, educational institutions, women's organizations, economic organizations, authors and thinkers.
The activity of the Council takes place in seven districts: Jerusalem, Gush Dan, Haifa and the north, Hadera and the Sharon, the Negev, Judea and Samaria, South Dan and Ashdod. Each district is headed by a chairman who is a public figure and a director who is responsible for the current organizational work of the Council's activity. Each district has a public executive, representing the different sectors, and which guides the activities of the Zionist Council in the district.
The articles of the Zionist Council in Israel arrange the modus operandi of the Council, as specified below:
1. The Council will act as an arm of the World Zionist Organization and will work to realize the Jewish-Zionist character of the State of Israel.
2. The Council will operate through the Council's Executive.
3. The Council will be run by a director-general appointed by the World Zionist Organization.
4. The Council will operate through the associations which are under it.
5. The Zionist Council's Executive will convene at least four times a year.
63 6. Members of the Council's Executive will be appointed for a period of four years and for not more than two terms of office. b. Organizational structure
Zionist Council Executive
Osim Zionism The Zionist Council Association Association
Shnat Sherut Ami-chay Preparatory
Tzameret Youth Brith Achim Movement
Zionist College
*The head office of the Zionist Council is located in the building of the Zionist Archives in Jerusalem and it includes the offices of the Zionist Council Associations, the Tzameret Youth Movement and the Shnat Sherut project. In 2010, the Zionist Council Associations had 30 employees, as specified below:
The Zionist Council, Reg. Ass. Osim Zionism Number of employees (*) 8 22 The Ministry of Education, the Main source of financing The World Zionist Ministry of Defense and Keren for the salaries budget Organization Avichai Salary costs in NIS 950,016 5,0,5,091
(*) After deduction of temporary employees. The salary of the director-general of the Zionist Council is paid out of the budget of the Zionist Council Association.
64 c. The Zionist Council's Executive
The Council has an elected Executive which represents the various bodies active under its aegis. The Executive meets on a regular basis, with its main functions being:
1. Laying down the conceptual and operational path of the Zionist Council.
2. Appointment of board members for the Associations which are subject to the Council.
The representatives of the Council are members of the institutions of the Zionist Movement, the Zionist Congress and the Zionist General Council.
The of the Zionist Council's Executive comprises 41 public figures, 25 of whom are elected by the chairman of the Zionist Council with the remaining 16 being elected by the Executive of the World Zionist Organization.
The Office of the Comptroller reviewed the minutes of the meetings of the Council's Executive, the subjects with which the articles of the Council deal and the degree to which the provisions of the articles are implemented by the Council.
The audit findings:
We read a number of minutes of meetings of the Zionist Council's Executive from the years 2009 – 2012 in order to examine the validity of the articles and of the forum in which they were approved and we found that the Council's Executive held discussions regarding approval of the articles but no minute or document were found testifying that the articles were accepted and approved by the Council's Executive in any final way.
65 Response of the director of the Zionist Council in Israel At its next meeting, the Council's Executive will adopt and approved the final articles. The operative purposes of the Council will also be emphasized and clarified.
The draft articles of the Zionist Council in Israel have no details of the operative purposes of the Council but engage mainly in the operational arrangements of the Council, arrangements for its convening and modes of appointment of its directors. In our opinion, the articles of a public body, such as the Council, should include details of the purposes of the Council, like associations and other public bodies.
Contrary to the provisions of the draft articles, according to which the Council's Executive is to convene four times a year, in 2011 it met once only – at the end of the year. In the opinion of the Office of the Comptroller, in a situation where the Council's Executive convenes just once a year, it cannot determine modi operandi and concepts for the associations subordinated to it and follow up on the implementation during the year.
The 2010 work program was presented to the Council's Executive only in mid-March 2010, i.e., just prior to the second quarter of the year. Similarly, no minute was found noting whether the work program had been approved or not.
Further to the above, perusal of the minutes from meetings of the Zionist Council's Executive did not show that detailed work programs had been presented and/or approved for 2011 – 2012.
The audit recommendations:
It is recommended that an agreed and final text be formulated of the articles of the Council and that this be brought for the approval of the Council's Executive at an early opportunity.
66 It is recommended that the operative purposes of the Council be added to the draft articles of the Zionist Council, such as: implementation of the Zionist Youth Congress, operation of Shnat Sherut projects, putting across Zionist content through operation of a pre-military preparatory course and so on. The definition of clear purposes will enable the Council to follow up on their realization and effectively supervise the educational and operational agenda of the Associations.
It is recommended that action be taken, in accordance with the provision of the articles, regarding the frequency with which the Council's Executive convenes and it be called at least four times a year. d. The connection between the Council and the Associations subordinate to it
As noted above, the Zionist Congress realizes its vision through activation of two affiliated Associations:
1. The Association of the Zionist Council in Israel.
2. The Osim Zionism Association.
The Associations are not subsidiaries of the World Zionist Organization but their managerial and conceptual supervision vis-à- vis the Council and the World Zionist Organization is anchored in the articles of the two Associations, through the three articles specified below:
a. Article 3 of the Associations, dealing with purposes, specifies that one of the purposes is: "Promotion and reinforcement of Zionist education, awareness and vision among youth and the younger generation in Israel, according to the purposes of the Zionist Council in Israel" (the emphasis does not exist in the original).
67 b. Article 8.2.1 of the Zionist Council Association emphasizes: "The number of committee members will be determined by the general assembly in consultation with the Zionist Council's Executive (the emphasis does not appear in the original). Article 10.2.1 of the Osim Zionism makes a similar provision.
c. Article 9.1 of the Zionist Council Association emphasizes that: "Members of the committee are to be the chairman of the committee, a treasurer and secretary who are to be elected at the general assembly in consultation with the Executive of the Zionist Council in Israel" (the emphasis does not exist in the original). Article J.1.of Osim Zionism makes a similar provision.
The Office of the Comptroller reviewed the status of the Associations in relation to the Zionist Council, in accordance with the articles of the Council and of the Associations.
The audit findings:
Article 3 of the Associations, dealing with the purposes, emphasizes that the purposes of the Association are to be derived from those of the "Zionist Council in Israel". Since no purposes are stated in the draft articles of the Council, as noted, it is not clear what purposes are meant in the articles of the two Associations. Furthermore, the articles of the Associations do not restrict the introduction of a change in the purposes of the Associations, although any change of this sort should be explicitly subject to the purposes of the Zionist Council.
Response of the director of the Zionist Council in Israel There will be a clarification and look at the "wishy-washy", insufficiently clear terms regarding the obligation of the Associations vis-à-vis the Zionist Council.
It follows from a perusal of the articles of the Associations, and particularly of Articles 8.2.1 and 9.1 of the Zionist Council
68 Association and Articles 10.2.1 and J.1 of Osim Zionism that the managerial subordinancy of the Zionist Council and Osim Zionism Associations is expressed through consultation of the general assembly of the Associations with the Zionist Council's Executive in the matter of the appointment of committee members. It may be noted that, contrary to the lax wording in the articles of the Associations regarding the legal relationships between the Council and the Associations, the draft articles of the Council are more resolute and it is emphasized there, in Article 5e, that: "the Zionist Council's Executive will appoint the members of the Associations' executive committees".
The audit recommendations:
It is recommended that the extent of the "official" impact which the World Zionist Organization is interested in maintaining in relation to the Zionist Council and Osim Zionist Associations be examined. Should the World Zionist Organization wish to clearly anchor its link with these Associations, it is recommended that action be taken to amend the articles in the manner specified below:
a. It should be explicitly clarified that the purposes of the Associations are derived from the purposes of the Zionist Council of the World Zionist Organization and which should be specified in the articles of the Zionist Council.
b. It is recommended adding in the articles of the Associations that the resolution about composition of the executive committee is to be made in conjunction with the Zionist Council's Executive and that it will have a veto right with respect to these appointments.
c. It is recommended that it be determined in the articles of the Associations that any change in the purposes is subject to the purposes of the Zionist Council.
69 3. The Associations of the Zionist Council in Israel
a. The Zionist Council in Israel Registered Association:
The Zionist Council Association was set up in 1998 and began its activity in 1999. The main purposes of the Association, as set out in its articles, are as follows:
a. Promotion and reinforcement of Zionist education, awareness and vision among youth and the younger generation in Israel.
b. To act for expansion of the Zionist and educational activity of the Zionist Council in Israel in secondary schools, universities and community centers throughout the country, for encouragement and identification with the State of Israel as a Jewish and Zionist democratic state.
c. To act for closeness of the ties between settlements in Israel and Jewish communities in the Diaspora.
d. The Association will activate, under its auspices, youth aged 14 – 18 in all the frameworks and in all the Zionist movements in Israel.
The Office of the Comptroller looked at the activity of the Zionist Council Association in relation to its purposes and to its work programs.
The audit finding:
The Zionist Council Association has no orderly work program for 2011 and 2012 specifying clear goals, various and special activities and quantitative indexes enabling a check as to attainment of these goals.
70 The audit recommendation:
It is recommended that an orderly work program be carefully prepared at the beginning of each year, containing goals and activities which the Association is interested in carrying out during the year, alongside a listing of the cost of performing these activities. The work program will also state indexes that will examine whether these goals were met and will be approved in an orderly fashion at the executive committee prior to the start of each year.
Response of the director of the Zionist Council Association The pre-military preparatory course has a work program which is actually the Jewish calendar specifying the activities in the course of the year.
Ami-Chay pre-military preparatory course:
The Ami-Chay pre-military preparatory course (hereinafter: the Preparatory Course) was established in 2000 by the Zionist Council in Israel and worked out of Moshav Argaman in the Jordan Valley. The Preparatory Course was set up with the aid of Keren Avichai, the Jordan Valley Regional Council (Bikaat Hayarden) and the Zionist Council. In 2008, the Preparatory Course moved to Kibbutz Keramim in the northern Negev.
The target population of the Preparatory Course is high school graduates, both secular and religious, who postpone their military service by one year to devote this time to learning and study of Biblical sources and their ramifications for the present, something which contributes to a deepening of the students' Jewish identity.
Furthermore, during the study year, those taking the Preparatory Course undertake volunteer activities in the community, this
71 being part of the underlying concepts of the Preparatory Course which advocates mutual responsibility and communal involvement.
As stated above, the current location of the Preparatory Course is at Kibbutz Keramim in the Negev and it has entered into a lease with the Kibbutz for use of the areas and facilities of the Kibbutz. The Preparatory Course is at this time in the process of expansion and is dedicating a new area of activity at Kibbutz Keramim containing four pre-fabricated buildings for the students to sleep over as well as a further pre-fabricated building which is used as a classroom. In addition to the new area, the Preparatory Course also has a caravan which is used for an office and another guest room, both located at the former site of the Preparatory Course. The pre-fabricated buildings placed in the new Preparatory Course area were rented from the Jewish Agency for a symbolic monthly payment.
The Office of the Comptroller reviewed the living conditions at the Preparatory Course, the state of the buildings and also the activities being carried out in relation to the annual work program. The activities were found to be implemented in an orderly timetable.
The audit findings:
The Preparatory Course had to house eight students (out of a standard of 45) in the old area at the Kibbutz because of a lack of pre-fabricated buildings for housing in the new area. The distance between the areas is 200 – 250 meters and this separation makes it difficult to run the daily routine of these students and to permit control by the management of the Preparatory Course over what is taking place.
Response of the director of the Zionist Council in Israel Extensive efforts are currently being made by the Settlement Division, the Bnei Shimon Regional Council
72 as well as by the head of the Preparatory Course and the director-general of the Association to arrange additional buildings for the Preparatory Course which will resolve the problem of the "dispersion" and of the distance between the buildings.
A caravan rented from Kibbutz Keramim serves as the office of the Preparatory Course. The caravan is old, not connected to the water and sewer infrastructures and its physical condition makes staying in it and managing the administrative affairs of the Preparatory Course on a current basis hard.
The audit recommendations:
It is recommended that ways be found to pay for an additional pre-fabricated (or other) structure for the Preparatory Course so that all the students can be concentrated in one area, thus enabling better control and contributing to an esprit de corps amongst the students.
It is recommended that resources be allocated for renovation of the office caravan of the Preparatory Course and that it be connected to the water and sewer infrastructures.
Brith Achim:
The Zionist Council works for integration of the Druze and Circassian citizens of the State of Israel in the fabric of life of the country, in cooperation with the Druze Zionist Council and the local councils of Druze settlements.
The main activity of the Council in this sphere is the giving of study grants for Druze students, with the grants being awarded in accordance with criteria set by the Council.
73 Following are details of the criteria for obtaining the grant:
1. The grant is intended for Druze and Circassian students studying at academic institutions recognized by the Council for Higher Education.
2. The recognized studies are in the following disciplines: engineering, sport, theater, music, literature, arts, cinema, medicine and law.
3. Preference is given to students engaging in the research of Zionism or in academic and research fields associated with Druze – Jewish relationships.
4. Priority is given with the award of the grants to women, students from bereaved families and low-income families.
5. The award of a grant for boys is conditional on military service, unless an exemption has been given.
The Council awarded some 130 grants in 2009 and 2010 in amounts of NIS 428,000 and NIS 480,000, respectively.
The Office of the Comptroller looked at grant distribution process in general and at compliance with the criteria set in this matter.
The audit findings:
There is no orderly procedure regarding distribution of the grants. The sheet of directives dealing with the criteria and priorities for distribution of the grants does not state the weight of each criterion in relation to the other criteria and what amount of discretion the committee has when deciding on the identity of the award recipients.
74 In contradistinction to the criteria, according to which it is determined that only students in the disciplines of engineering, sport, theater, music, literature, arts, cinema, medicine and law are eligible for a grant, of the 71 award recipients in 2011 some 15 were found to be taking subjects not included in the above academic disciplines, for example: students with identity numbers 201137114, 031416902 and 02337160, attending courses in social sciences, received grants despite the fact that they do not meet the criteria for eligibility for receipt of a grant.
The audit recommendations:
It is recommended that an orderly procedure be written regarding the grant distribution process, specifying the eligibility criteria for receipt of a grant, the weight of each criterion in relation to the other criteria, the composition of the committee examining the eligibility of the students for a grant and so on.
It is recommended that a grant not be awarded to a student who does not meet the criteria specified in the sheet of directives. Should the committee see fit to deviate from the written rules and award a grant to a student who does not entirely meet the entitling criteria, the committee will ensure that grounds are given in writing for this exception and that they be attached to the documentation accompanying this grant. Further to the aforesaid, it is recommended that an orderly list be kept containing grounds for awarding the grant or rejecting the application. b. The Osim Zionism Association
The Osim Zionism Association was associated in 1990 under the name "The Aryeh Tzimuki Foundation". In 1997, the Association changed its name to Osim Zionism.
The main purposes of the Association, according to its articles, are:
75 a. Promotion and reinforcement of Zionist education, awareness and vision among youth and the younger generation in Israel.
b. To act for expansion of the Zionist and educational activity of the Zionist Council in Israel in secondary schools, universities and community centers throughout the country.
c. To act for closeness of the ties between settlements in Israel and Jewish communities in the Diaspora.
d. To assist local authorities and various public organizations to initiate and arrange different Zionist events.
e. Organization and running of seminars, study days, symposia, public conferences and the like, in conjunction with organizations for a deepening of Zionist awareness.
Tzameret Youth Movement:
Tzameret is a youth organization belonging to the Zionist Council in Israel. The organization was founded in 2005 following the unification of two organizations: Youth for Youth and the Zionist Youth Council.
Tzameret works for the development of a young and socially involved Zionist leadership with an emphasis on strengthening Jewish-Israeli identity and internalization of the Zionist concept among the youngsters. Tzameret encourages joint activities of youth from different groups in the population so as to increase the sense of cohesiveness and unity in the people. This concept finds special expression in the joint activity of religious and secular people.
The Tzameret members participate in varied and variegated educational activities, aimed at strengthening personal and group identities, acquaintance with the land of Israel and the Jewish people and development of leadership qualities. Throughout the year, the members take part in activities throughout Israel including trips, seminars and summer camps.
76 Tzameret Shnat Sherut Group:
Tzameret is a Shnat Sherut group of the Zionist Council and World Zionist Organization which is supported by the Ministry of Defense and by the Ministry of Education. The group is mixed boys and girls, religious and secular, from all parts of the country. It has 36 volunteers and is active in Safad, Arad, Jerusalem and Beit Shemesh amongst youth from Grades VII – XII and amongst olim from Ethiopia.
The purpose of the group is voluntary practical Zionism by young people who postpone military / national service in order to volunteer in the community. The Shnat Sherut volunteers do so in the field of education in formal and informal frameworks in different cities and are also figures for emulation for youth.
The Zionist College:
The Zionist College is an educational framework the purpose of which is to nurture and deepen Jewish Zionist awareness of relevance for contemporary Israeli society. The College offers a wide variety of educational programs for youth and adults, with the educational activities being carried out by group leaders on behalf of the College in schools throughout the country.
The Office of the Comptroller looked at application of the articles and performance of the activities with Tzameret youngsters and the Shnat Sherut groups in relation to the purposes of the Osim Zionism Association.
The audit findings:
The 2011 work program for the Osim Zionism Association determines that, on all matters to do with the activity of adults, action is to be taken "to renew and enlarge the branches" but it does not contain any performance indexes for the work program.
77 In contradistinction to Article 4.3 of the Association, which emphasizes that "the number of members of the Association shall not exceed seven at any time", perusal of the list of members of the Osim Zionism Association shows that the number of members of the Association is 15.
The audit recommendations:
It is recommended that the work program of the Association include agreed performance indexes that will enable giving some indication as to whether the Association is meeting the goals that it set for itself at the beginning of the year.
It is recommended that Article 4.3 be updated or, alternatively, that the number of members of the Association be restricted to seven.
Response of the director of the Zionist Council in Israel At the coming meeting of the Association, the number of members of the Association will be amended and arranged and/or, alternatively, Article 4.3 of the Association will be amended.
4. Management of the Council Budget
The draft articles of the Zionist Council in Israel emphasize that, in accordance with the operating principles of the Council: "The Council will act in coordination with the Council's Executive, the Executive's directives and in accordance with its budget."
The World Zionist Organization allocates to the Zionist Council each year an amount of some USD 890,000, while the use of this money and its division for all the activities of the Zionist Council is determined by the director-general of the Zionist Council.
78 These financial allocations are intended for the payment of salaries, mainly for the Osim Zionism Association but also for the performance of other Zionist activities.
Following is a report of budget as against actual expenditure for 2012, according to the World Zionist Organization books:
Budgetary item Budget in USD Actual in USD Actual as a percentage Activities 0 0 0% Salaries 506,921 559,650 65% Rent 90,000 90,000 500% Communication 51,000 55,90, 21% Insurances 5,,901 5,,901 500% Miscellaneous 5,000 092 02% Total 808,888 820,828 08%
Budgets of the Associations:
Before the start of the activity year, the budgets of the Associations are approved by their general assembly:
- The budget of the Preparatory Course in the Zionist Council Association is shown for a year, from September of the current year until August in the following year, in accordance with the norm in educational institutions.
- The budget of the Osim Zionism Association is shown for a calendar year, from January to December.
79 Following is a summary of the statements of profit and loss of the Associations for 2010 (in NIS):
Line The Zionist Council The Osim Zionism Association Association Income Ami-Chay 612,666 Income of the 5,090,0,2 Prep. youth Brith Achim ,,0,5,0 organization Congresses Entered as Income of the income from Shnat Sherut 909,550 charges project Income from 06,,659 Zionist College Income from Brith Achim 50,000 Income from heritage and 51,000 folklore
Total 5,,00,5,5 Total 0,011,620 Income from part. Income from fees 995,010 part. fees 550,550
Total income 1,0,2,801 2,122,1,2 Costs for activities including salaries – cost of running the youth 5,69,,990 5,600,005 organization and operation of activities Management and general costs 99,505 ,0,,559 Financing costs ,,15, 50,656 Deficit from activity )22,,8,2( )1,1,0,0( Special income - World Zionist Organization allocations 9,9,065 569,620 Surplus for the year 00,2,, 22,2,1
80 Charging Participation Fees:
The Associations of the Council hold activities for which they charge a participatory fee.
Following is the collection process:
1. The student remits the amount of money in cash to the counselor, usually in figures of tens of Sheqels.
2. The counselor remits the monies accumulated with him to the activity coordinator, together with the list specifying the names of the students who paid and the amount each of them paid.
3. The bookkeeper of the Associations issues orderly receipts for the students in accordance with the list received.
The Office of the Comptroller looked at the budgetary conduct of the Council and the Associations, including: the budget approval process, follow-up on implementation, controls exercised, mode of entering in the books, percentage of utilization and correct allocation of resources.
The audit findings:
The final budget for 2012 shown above substantially differs from the original budget which was approved, mainly in the activities line which was originally budgeted as some USD 566,000, while actual expenditure, in the final resort, was zero. Similarly, the insurances line was not budgeted in the original although it is one of the only lines where there is actual expenditure of a substantial amount. An erroneous budget from the beginning of the year, in such substantive lines and amounts, is tantamount to a situation of no distribution into expenditure lines at all.
81 The 2010 overhead costs were loaded almost entirely on the Osim Zionism Association (NIS 36,000 in the Zionist Council Association as against NIS 405,000 in the Osim Zionism Association, rather than equally between the two Associations as might have been expected considering that the head office and staff of the head office service both Associations.
Perusal of the income-expenditure cards of the World Zionist Organization in the books of the Associations for 2010 shows that the income of the Associations originating in the World Zionist Organization comes to some NIS 2,027,000. On the other hand, perusal of the income-expenditure cards of the Zionist Council in the World Zionist Organization books shows that the latter apparently transferred an amount of NIS 2,294,000 to the Associations, i.e., there is a discrepancy of NIS 267,000 which were transferred to the Associations or paid for activity of the Associations but not entered in the books of the Associations.
Following on the above, as regards management of the budget of the Associations, the expenditures which the World Zionist Organization pays directly to suppliers who provided a service for the Associations are not conducted as part of the income and expenditure lines in the budget.
The Zionist Council and the Associations have no clear procedures regarding the performance of current budgetary controls and it is not clear whether such controls are performed on a current and consistent basis. For example: the report of budget as against actual expenditure for 2011 (the 5771 academic year) at the Ami-Chay Preparatory Course specifies the implementation of the budget only for the first seven months of the budgetary year and there is no budget as against actual expenditure report for the whole year. Further to the aforesaid, the report points to a string of budgetary deviations, even though, as noted, it relates to seven months only. Examples of deviations are: in the bussing of students line –
82 utilization of 130 percent and, in the office expenditures line – utilization of 180 percent.
From the 2010 financial statements of the Associations, it follows that the current income of the Associations does not cover the expenditures, as can be seen from the above table (for example: the Zionist Council Association ended with a deficit of some NIS 240,000). In the final resort, the World Zionist Organization has to remit funds to cover the deficit and this is recorded in the books as special income and it is not clear whether the Associations will be able to operate in the future without the support from the World Zionist Organization.
The general assembly of the Zionist Council Association held on December 29, 2010, approved the budget of the Preparatory Course for the 5771 academic year but it did not approve the complete budget of the Zionist Council Association. Further to the above, the budget of the Preparatory Course was approved some four months late, since the academic year begins in September. Late approval of the budget makes reasonable budgetary follow-up difficult, if not impossible.
The 2012 activities budgets for the two Associations were approved by the general assembly (joint for the two Associations) which convened only on February 23, 2012, i.e., the 2012 budget of the Associations was approved some two months late (and, in relation to the activity of the Preparatory Course – six months late). Further to the above, perusal of the minutes of the general assembly and the figures accompanying the minutes found no work paper detailing the division of the budget for activities and it is not clear what budget was approved.
83 The audit recommendations:
It is recommended that the budget of the Zionist Council be constructed in accordance with the planned budgetary utilization by the various associations, at the level of the lines, so that the current budgetary follow-up will have some meaning.
It is recommended that the overhead costs be divided between the two Associations in accordance with agreed keys such that the loaded expenses indeed reflect the actual consumption of each of the Associations.
It is recommended that all income originating in the World Zionist Organization receive some expression in the books of the Associations and in the budget-actual statements they keep. This should include cash-equivalents, for example: payments by the World Zionist Organization directly to suppliers who have undertaken an activity for the Associations.
It is recommended that a budget control procedure be written, engaging in all aspects of management, operation and follow-up on the budget, such as: date of submission of a budget for approval, the approving body, definition of budgetary controls, frequency of the controls, the required actions when a budgetary deviation comes to light, reporting to the general assembly regarding the rate of utilization of the budget and compliance with the framework of the budget. As part of the procedure to be formulated, a preventive control should be determined when a budgetary deviation occurs.
It is recommended that the budgets of the Associations be approved on time, prior to activation of the budget. In other words, the budget of the Zionist Council Association should be approved not later than the end of August of the current year while approval of the Osim Zionism Association budget should be not later than December of the current year. It is also recommended that the board of the Association present to the general meeting the lines of the budget in
84 a detailed way and the amount of the total budget and that the approved budgets of the Associations be attached to the minutes of the general assembly which approved the budget.
Response of the director of the Zionist Council in Israel 1. As of 2011, the overheads have been loaded in accordance with the scale of the actual activity.
2. As of 2011, all the income from the World Zionist Organization is given full expression in the books.
3. At the coming meeting of the committee, a budgetary control procedure will be submitted.
4. Every effort will be made to submit a budget for approval of the general meeting, following its approval by the World Zionist Organization.
5. Procurement and Payments
The process of procurement and payment to suppliers at the Zionist Council is anchored in a procedure, the main points of which are listed below:
A procurement in the amount of NIS 5,000 or more (at the Osim Zionism Association, the threshold is NIS 10,000), necessitates obtaining price estimates from at least three suppliers.
Once every six months, a re-pricing process will be held.
With long-term contracts, there is to be a re-examination of the contractual arrangement at the end of the contract period.
Every invoice reaching the Zionist Council shall be forwarded to the logistic coordinator who will approve it and note to which division the charge belongs. Once a month, the bookkeeper will go over the invoices in order to make the payments, in accordance with the charge dates.
85 In addition to what is stated above, there are services, mainly in the spheres of overnight stays and catering, the procurement for which is carried out by the World Zionist Organization itself, because of the lower prices the World Zionist Organization obtains from these suppliers. This is offset vis-à-vis the Associations through the income- expenditure card of the Zionist Council in the World Zionist Organization books. For example: payments to hotels which the World Zionist Organization makes on behalf of the Zionist Council are deducted from the balance of funds for transfer to the Zionist Council.
The Office of the Comptroller took a sample of 15 expenditures in a cumulative amount of some NIS 100,000 and looked at the compliance of the Associations with the procurement procedures, primarily from the aspects of:
- Obtaining price estimates from suppliers in contractual arrangements above the amount of NIS 5,000.
- Backups of payments to suppliers with appropriate approvals and documentation.
The audit finding:
Contrary to the provisions of the articles requiring that price estimates be obtained from at least three suppliers, an expenditure was found at the Zionist Council Association of NIS 32,000 for hosting a Shabbat Hagadol event at the Regency Hotel in Jerusalem in March 2010, incurred without obtaining additional price estimates.
The audit recommendation:
It is recommended that there be insistence of carrying out the provisions of the procedure for every contractual arrangement above an amount of NIS 5,000 (NIS 10,000 at the Osim Zionism Association) that price estimates be obtained from three suppliers.
86 6. Previous Audits
An in-depth audit was carried out by the Registrar of Associations at the Osim Zionism Association
In 2010, the Registrar of Associations conducted an in-depth audit at the Osim Zionism Association, in the framework of which a number of defects were found, the main ones of which are listed below:
a. The Association appointed an authorized signatory who was not from among the members of the Association, something which is contrary to the articles of the Association which require that an authorized signatory be a member of the Association.
b. The current transfers of the monthly payments to the salary institutions were found to be in arrears.
c. The audit committee submits an annual recommendation for approval of the financial statements without reference to various subjects.
d. An executive committee was appointed at the Association contrary to the provisions of the articles of the Association, inasmuch as the articles emphasize that the committee should comprise three to five members, amongst them the chairman of the Association, the secretary and the treasurer but, contrary to this provision, the treasurer of the Association is not amongst the members of the executive committee.
The Office of the Comptroller reviewed the findings that arose in the in-depth audit and checked whether these defects had been corrected.
87 The audit finding:
Contrary to the provisions of the articles which emphasize that the authorized signatories at the Association are to be appointed from amongst the members of the Association, of the three authorized signatories currently serving at the Osim Zionism Association, one is the director-general of the Association, who is not a member of the Association. That being so, he cannot serve as an authorized signatory according to the articles. It may be noted that this defect was also found at the Zionist Council Association..
The audit recommendation:
It is recommended that the provisions of the articles be strictly upheld and that a situation not be permitted where authorized signatories of the Association are not members of the Association. Alternatively, the articles can be amended so that the director- general of the Association can serve as an authorized signatory.
Response of the director of the Zionist Council in Israel The articles will be amended or, alternatively, the authorized signatory who is an employee of the Association will be removed.
Previous audit by the Comptroller of the World Zionist Organization
In the second half of 2008, the Comptroller of the World Zionist Organization conducted an audit at the Zionist Council, in the course of which a number of defects were found, as follows:
- The articles of the Association were not fully passed by all members of the Zionist Council.
- Most of the budget of the Council was referred for the payment of salaries at the Osim Zionism Association, in a way that left a limited budget for activities.
88 - In 2007, the executive of the Zionist Council met only three times rather than four times as instructed in the articles.
- According to the articles of the Association, in the event of dissolution, the assets of the Association will be transferred to the Zionist Council or to a public institution within the meaning of Section 29 (2) of the Income Tax Order rather than to the World Zionist Organization.
The audit findings:
A perusal of the defects which arose in the audit of the World Zionist Organization Comptroller as against the situation on the ground today shows that the defects to which the Comptroller pointed have not been corrected and there does not appear to be any process for rectification of the defects, at the World Zionist Organization or at the Associations.
The audit recommendations:
The Office of the Comptroller recommends that an orderly process take place of following up on rectification of the defects at the Zionist Council, the function of which will be correction of the defects which arose in the various audits done at the Council, including the audits of external bodies conducted at the Associations.
Response of the director of the Zionist Council in Israel An orderly follow-up will be held at the Associations on the defects that arose in the audits.
February 2013
89 Postscript
The WZO Audit Subcommittee convened on July 30, 2013.
The Chair of the Department for Zionist Activities in Israel reported to the Subcommittee as follows:
1. The Zionist Council's Executive approved the Council's articles of association as approved by the Zionist Executive in 2010.
2. The Chair of the Department for Zionist Activities in Israel also serves as Chair of the two associations – Osim Zionism and the Zionist Council Association.
3. Both associations have one joint Director General.
4. The management of "Brit Achim" was transferred to the Osim Zionism Association. The Zionist Council Association operates the "Ami Chai" pre-military course, only.
5. The remaining recommendations of the audit were addressed and will be strictly implemented.
90 Response of the Chairman of the Executive to the Comptroller's Report on The Zionist Council in Israel
In accordance with Paragraph 18b of the Statutes of the Comptroller and the Control Office of the World Zionist Organization, following is my response to the above referenced Audit Report:
The Zionist Council in Israel has been functioning for over 40 years and serves as an operational section of the World Zionist Organization. In recent years, the activities of the Zionist Council have significantly increased in scope and in country wide spread.
At the beginning of 2010, the Zionist Executive approved the Zionist Council's articles of association specifying its objective, principles of activity, institutions and mode of operation.
The affiliation of the Associations – "The Zionist Council" and "Osim Zionism" with the World Zionist Organization and the Zionist Council in Israel is explicit, among others, in the articles of each of the associations.
In accordance with the audit's recommendation, the Zionist Executive will, in the near future, examine the affiliation between the World Zionist Organization and the associations and the influence of their activities.
Following my instruction, the Chair of the Department for Zionist Activities in Israel is acting to implement the audit's recommendations so as to improve the administrative and financial processes in the associations.
We thank the Control Office.
(-) A. Duvdevani
Jerusalem, July 2013
91
Center for Religious Affairs in the Diaspora
Response of the Chairman of the Executive 94 Center for Religious Affairs in the Diaspora
Introduction
The Center for Religious Affairs in the Diaspora (hereinafter: the Center) has been operating at the World Zionist Organization since January 1998.
The Center for Religious Affairs in the Diaspora is headed by a chairman and a director. The chairman is a representative of the Mizrahi Movement on the Executive of the World Zionist Organization.
The purposes of the Center for Religious Affairs in the Diaspora are to strengthen and cultivate the connection of Diaspora Jewry to the State of Israel, the Jewish People and the Jewish heritage and to strengthen Jewish identify, particularly of the youth.
To achieve these aims, the Center holds Torah activity among rabbis and leaders of Jewish communities in the Diaspora (further study courses, study days and conferences) and supports the activity of Torah organizations working in Israel and overseas.
In 2011, the (net) budget of the Center was set at USD 620,000 while actual expenditure came to USD 640,000.
The (net) budget for 2012 was set at USD 670,000 and actual expenditure came to USD 624,196.
Our audit was conducted at the end of 2012 and related primarily to 2011 and 2012.
The audit was based on meetings with those in charge of the matter at the World Zionist Organization, and on examination of procedures and processes, examination of records in the financial system and a perusal of relevant documents.
95 A previous audit by the Office of the Comptroller of the Center for Religious Affairs in the Diaspora was made in 2005 and related to the activity in 2003 and 2004.
That audit report was contained in the Annual Report of the Comptroller, submitted to the 35th Zionist Congress which convened in Jerusalem in 2006.
The Purposes and Activities of the Center
The Center for Religious Affairs in the Diaspora at the World Zionist Organization has set for itself two main objectives:
a. Cultivation of the tie to the Jewish heritage and strengthening the bond to the Jewish People and the State of Israel.
b. Creation of a connection with, and cultivation of, the small Jewish communities in the world.
In order to attain these objectives, the Center holds a variety of activities abroad and in Israel, as follows: - Training and further study for rabbis in Israel and overseas. - Regional conferences. - Sending of rabbis to communities in the Diaspora. - World assembly of the orthodox leadership, the Orthodox General Assembly (OGA). - Ben Ami shlichim for counseling in Jewish communities overseas. - Support for Torah colleges for women and batei midrash for rabbis. - Provision of Jewish ritual objects, basic books on Judaism, publications, journals, books and educational kits. - Jewish communications through the internet site of the Center for Religious Affairs in the Diaspora.
96 The Office of the Comptroller notes that all the activities of the Center for Religious Affairs in the Diaspora are directed at the Jewish communities abroad. The Center participates in the financing of activities held in Israel and which are intended primarily for representatives of overseas communities.
Personnel
The Center employs four people: the chairman, the director, one full-time employee and another employee, part time (daily worker).
The Office of the Comptroller notes that the director of the Center is not paid his salary from the budget of the Center for Religious Affairs in the Diaspora. Since November 1, 2011, he receives a salary for another function that he fills at the same time, as director of the Teaching in the Diaspora Shlichut Unit.
In 2011, the budget and actual expenditure for salaries and accompanying costs came to USD 390,000, and, in 2012, the budget was set at USD 280,000. The decrease in the budget for salaries and accompanying began as the result of deduction of the salary of the director and another employee from the Center for Religious Affairs in the Diaspora budget and the debit of their salaries in other budgetary lines of the World Zionist Organization.
In addition to the aforesaid, the Center for Religious Affairs in the Diaspora employs daily workers and lecturers when required and shlichim for short- term shlichuyot, mainly of the Ben Ami project (see below).
97 Budget and Finance
Following are details of the budget and actual expenditure for 2011 and 2012, as entered in the financial system of the World Zionist Organization (in Dollars):
1122 1121 Budget Actual Budget Actual Administration and organization Salaries and accompanying 000,333 046,700 045,133 011,000 Shared expenditures 00,333 00,077 00,031 00,030 Office requirements and post 00,333 01,000 07,501 00,073 Telephone and communications 00,033 57,007 04,333 56,700 Computer services 53,333 0,751 0,333 0,035 Refreshments 6,333 7,631 0,333 5,700 Insurances - - 0,333 0,505 Miscellaneous 7,333 7,503 7,033 6,057 Total administration and organization 804,811 011,101 348,011 388,113 Activities Rabbis conference (net) 4,531 7,414 - 0,000 Short shlichuyot 00,440 10,461 40,033 45,533 Income - - )011( )016( Printing, advertising and educational kits 00,001 00,454 40,071 40,114 Ritual objects 0,733 0,007 55,051 53,030 Overseas seminars 0,063 0,063 54,001 16,842 Seminars in Israel 5,333 5,506 07,333 01,650 Aid for communities and organizations 5,513 5,503 15,031 06,650 Internet site 0,305 0,303 - - Eliner library 03,333 03,333 - - Miscellaneous ______- ______- 0,501 0,530 Total activities 212,811 238,808 143,011 194,203 Grand total 811,111 834,088 891,111 818,208
The Office of the Comptroller notes that, in 2011, there was no substantive deviation from the budget, as against the actual expenditures. The 2012 budget was set at USD 50,000 more than the 2011 budget. The growth in the 2012 budget derived from the increase in the lines for overseas travel, printing, advertising, educational kits and seminars in Israel and abroad.
In 2011, some 80 percent of the total budget was designated for administration and organization costs. In 2012, some 60 percent of the total budget was designated for administration and organization costs.
98 In other words, in 2012, there was a rise in the expenditures for activities as against 2011 and a drop in the administration and organization costs. As noted, the decline in administration and organization costs stems mainly from deduction of the salary of the director from the budget of the Center.
The Office of the Comptroller notes that, in 2012, there was no conference of rabbis and no financial support for the Eliner Library, as there had been in 2011.
The Office of the Comptroller notes that the Eliner Library has a separate budget which is not part of the budget of the Center. It was explained to us that the Center sometimes purchases books from the Eliner Library and pays the full price for them.
Short Shlichuyot
The main activity of the Center for Religious Affairs in the Diaspora is carried out by short shlichuyot to many countries in the world. Employees of the Center, lecturers and consultants, rabbis and counselors travel on these shlichuyot.
The purposes of the shlichut are participation in study days, seminars, further study, to visit centers of community activity and to officiate at ceremonies for the High Holydays and Pesach.
In response to our question, it was explained that most of the shlichuyot occur at the behest of the Jewish communities with their partial or full funding.
In 2011, a budget was determined for the short shlichuyot in the amount of USD 43,889, constituting some 36 percent of the budget for all the activity of the Center. Actual expenditure that year came to USD 59,875, constituting some 44 percent of all expenditure on activities. In other words, there was a deviation of some USD 16,000 from the budget that had been determined.
99 There were that year 31 shlichuyot to the different countries in the world, and 320 shlichut days were recorded in the shelach system.
In 2012, the budget for short shlichuyot was set at USD 82,200. That was an increase of some 70% in comparison with the previous year. Actual expenditure came to USD 81,100.
From an examination of the figures which were given to the Office of the Comptroller, it follows that, during 2012, there were 35 short shlichuyot to 17 countries and 448 shlichut days were recorded in the shelach system.
The shlichuyot lasted from two days to 29 days per shlichut. There was also one shlichut that continued for 71 days. This was the shlichut to Toulouse as a result of special circumstances. The Office of the Comptroller checked the authorization of the shlichut committee. Propriety was found.
Of all the shlichuyot in 2012, ten were of employees of the Center (the chairman and director) and the remainders were of rabbis, consultants, Ben Ami project counselors and lecturers.
The shlichuyot of the chairman and the director-general lasted for 77 days out of a total of 448 shlichut days. In 2012, 94 per diem expenditure days were recorded for a short shlichut for all the shlichim. Of these, 77 per diem days were for employees of the Center (the director-general and the chairman).
Outside shlichim (not employees of the Center) do not receive payment for the shlichut days. In most cases, the communities pay for their stay at the shlichut location. The budget of the Center covers only the cost of the flight tickets and the insurance.
The shlichut destinations included the following countries: Belgium, Switzerland, Germany, Poland, Ukraine, Italy, USA, Finland, Sweden, Denmark, Norway, Bulgaria, Turkey, Czechia, Austria, Portugal and Hungary.
100 In January 2011, the World Zionist Organization published a short-term shlichut procedure. The processes and provisions regarding a short shlichut are set out in the procedure.
The procedure relates to employees of the World Zionist Organization and also "an outside body sent on behalf of the World Zionist Organization, acting in the name of the World Zionist Organization and representing the World Zionist Organization in the framework of a short-term shlichut overseas.
It is determined in the procedure that a short-term shlichut is limited to up to 12 days and the annual quota is set at 50 days. Directives are not stated in the procedure for exceptional or special cases permitting a short-term shlichut for a period exceeding 12 days.
From the data obtained from the Shelach system, it follows that, in 2012, 15 short shlichuyot lasted for more than the 12 days defined in the procedure. In other words, about half of the short shlichuyot of the Center for Religious Affairs in the Diaspora exceeded the quota of days defined in the procedure.
In the opinion of the Office of the Comptroller, rules should be defined in the procedure with respect to authorizing a shlichut exceeding 12 days.
In answer to our question, it was explained that all the shlichim set out only after approval of the World Zionist Organization shlichuyot committee which approves all details of the shlichut.
The Office of the Comptroller checked the records in the bookkeeping unit and found that a shaliah to the Ukraine (Kharkov) was on shlichut from April 4, 2012, to April 15, 2012, without approval of the shlichut committee.
The cost of the shlichut came to some USD 1,400. The airline tickets for him were purchased via the Flights Section of the Jewish Agency, contrary to the directives laid down in the procedure.
101 In answer to our question, it was explained that because of the shorter than usual timetable until the shlichut, they did not manage to discuss it at the shlichut committee and to act according to the process set in the procedure.
In the opinion of the Office of the Comptroller, things should be done only in accordance with the existing procedure.
The Office of the Comptroller checked on a random basis the approvals of the shlichut committee of 15 shlichim. From the examination, it followed that all these shlichim had obtained the approval of the shlichut committee as required.
Our audit did find that the director of the Center exceeded the quota of annual shlichut days, which is set at 50 days according to the procedure. He had done 58 days of shlichut in 2012. In answer to our query, an authorization was shown of the chairman of the World Zionist Organization shlichut committee permitting the chairman of the Center a deviation from the annual quota for 2012, on a one-off basis because of "special circumstances".
The head of the Center for Religious Affairs noted that some of the journeys of the director of the Center were for his function as director of the Teaching in the Diaspora shlichut Unit.
The Office of the Comptroller notes that, in this case, some of the overseas trips of the director of the Center should be ascribed to the budget of the teachers' unit.
The procedure does not specify how to deal with a deviation from the annual quota of shlichut days.
In the opinion of the Office of the Comptroller, the procedure should contain a reference to dealing with a deviation from the annual quota of shlichut days.
102 Approvals and documents were checked on a random basis of eight out of 24 shlichim in 2012. Of these, four were employees of the Center and four were outside shlichim. Propriety was found.
The Office of the Comptroller notes that there is no direct connection between the Shelach system and the financial system.
Nor is it possible to compare the particulars of the short-term shlichut between the Shelach system and the financial system since the record in the financial system is insufficiently detailed and so does not permit a comparison between the systems.
The Office of the Comptroller recommends that all the particulars of each of the shlichim be included in the financial system so as to enable proper auditing and control between the systems.
The Finance Department advised in response that it accepts the recommendation.
Productions, Publications and Educational Kits
This line contains printings of Pesach Haggadot, educational kits for festivals, purchase and publication of books, pamphlets and so on according to the following breakdown:
Budget Actual 2012 2012 Productions 00,333 30,804 Publications 00,011 34,846 Educational kits 56,453 56,031 Total 83,265 82,855
The Office of the Comptroller notes that there was an increase of 87% percent in this budgetary line as against the previous year.
The productions line contains mainly expenditures for books and pamphlets produced by the Center. The main costs in this line are for printing and
103 graphic design. The Center has been working for seven years with one graphic designer who won a tender in 2005.
The Office of the Comptroller recommends that a tender be held on the matter of graphic design at an early opportunity to examine other possibilities.
The Finance Department advised in response that it accepts the recommendation.
The publications line includes mainly expenditures for books, publications and greeting cards bought in shops and sent to the Jewish community in the world. The Office of the Comptroller notes that the purchasing is done at a number of shops and that there is no one main supplier.
The educational kits line includes mainly expenditures for specially produced CDs which are sent to overseas communities.
In this case, also, the Center has been working with one supplier for many years without a tender.
The Office of the Comptroller recommends that a tender be held on the subject of the production of compact disks so as to check the most suitable possibility.
The Finance Department accepts the audit recommendation.
The Office of the Comptroller examined the records and invoices by a random method to the tune of USD 10,000. Propriety was found. Seminars Abroad
In 2012, a sum of USD 18,345 was allocated to this line. Actual expense amounted to USD 16,842. Following are details on seminars held abroad and the expenses entered in this line for each of them:
In Cologne, Germany, a rabbinical conference was held. Participation of the Center in the costs of the seminar came to USD 7,500.
104 A "Sowing Zionism" seminar was held in Germany. Participation of the Center in the costs of the seminar came to USD 6,800. A seminar was held in Basel (Switzerland). In contradistinction to the above two seminars, the Basel seminar was organized and run by the Center itself. The organization included booking the venue, overnight, meals and lectures. The Center was also responsible for collecting the participatory fee from the rabbis. 15 rabbis from different countries took part in the seminar. The cost of the seminar for the Center came to some USD 4,000. Participatory fees were collected in the amount of USD 617. The Office of the Comptroller was not shown a list of the participants at this seminar nor a list of the rabbis who paid the participatory fee. In the opinion of the Office of the Comptroller, orderly lists of seminar participants with a note as to the amount of the participatory fee each of them paid must be insisted upon. Similarly, each participant should be given a receipt. The Finance Department accepts the audit recommendation. The head of the Center for Religious Affairs noted that, as a rule, the audit recommendation is carried out but that the Basel seminar was an exception. During the audit, a sample of records and documents associated with overseas seminars was checked in the amount of some USD 8,000. The material looked at included requests for support, contents of conferences and seminars, lists of participants (apart from the Basel seminar) and paid invoices. Propriety was found. The Office of the Comptroller notes that there are five lines in the financial system relating to overseas seminars. In the opinion of the Office of the Comptroller, the activity involved in the conferences and seminars should be brought together in one line with insistence on accurate details of the amounts and items within the line.
The Finance Department accepts the audit recommendation.
105 Seminars in Israel
In 2012, a sum of USD 36,000. Actual expenditure came to USD 35,714.
The expenditures line for seminars in Israel includes payments for holding the seminars directly to the suppliers for transportation, meals, tours, advertising and preparing materials for the conferences and seminars. It was explained to the Office of the Comptroller that the World Zionist Organization does not remit direct support to the organizations holding the seminars but only pays the suppliers directly.
The Office of the Comptroller sampled records and invoices to the amount of some USD 13,000. All the invoices checked were approved by the director of the Center. Propriety was found.
Aid for Communities and Organizations
In 2012, a sum of USD 51,305 was allocated to this line and actual expenditure had come to USD 47,714. Expenditures are entered in this line for support of communities and organizations according to the following breakdown (in US Dollars):
Name of the organization Budget Actual 2012 2012 Ben Ami 00,301 00,371 Torah miZion 53,301 0,000 Women's College and Bat Ami 7,333 0,123 Aid for communities 11,175 0,507 Total 02,310 89,928
The Office of the Comptroller checked and found that all the payments and support payments were made directly to suppliers for the seminars or the communities in accordance with a detailed program and a list of the participants which was attached to the support request.
The Office of the Comptroller looked at documents and records to a scale of some USD 20,000. Propriety was found apart from an entry of the
106 expenditures for a shaliach to the Ukraine which were recorded in the "Aid to communities" line instead of "Overseas travel", in the amount of NIS 5,227. We have detailed this in the chapter on overseas travel, above.
In the opinion of the Office of the Comptroller, every expenditure should be carefully entered in the appropriate line in the financial system to enable supervision and control over the budgetary performance.
The Finance Department accepts the audit recommendation.
Miscellaneous
The financial system has three lines named "Miscellaneous" and the total expenditure entered in them is USD 9,346. The budget set for this line was USD 29,470. Following the Comptroller's comment it was reduced to USD 9,025.
The audit showed that expenditures which were entered in the "Miscellaneous" lines include expenditures for which a line exists in the budget of the Center, such as advertising, overseas travel, translations and so on. There is no justification for entering these expenditures under the "Miscellaneous" line.
The Office of the Comptroller recommends sorting through the "Miscellaneous" line and entering each expenditure in the appropriate budgetary line. Recording in the "Miscellaneous" line distorts the expenditure classification as laid down in the budget and obviates proper supervision and control over performance of the budget.
The Finance Department advised that it will check the matter.
The Office of the Comptroller notes that a similar comment was contained in the previous audit report which related to 2003 and 2004.
February 2013
107
108 Response of the Chairman of the Executive to the Comptroller's Report on The Center for Religious Affairs in the Diaspora
In accordance with Paragraph 18b of the Statutes of the Comptroller and the Control Office of the World Zionist Organization, following is my response to the above referenced Audit Report:
The Center for Religious Affairs in the Diaspora has been active in its present form in the last fifteen years, while previously, in the course of about thirty years since 1968, the activity was carried out in different organizational frameworks.
The activity of the Center is of unique importance since it is the major means for initiating and maintaining contact between the leadership and rabbis in the diaspora and the State of Israel.
The Center operates in a different organizational framework compared to that of the Reform and Conservative Streams, since it is an integral part of the organizational and financial framework of the World Zionist Organization.
The Audit Report relates to the Center's activities in the years 2011 and 2012. The Finance Department has informed the Comptroller that the recommendations with respect to financial issues are accepted and that instructions were given to expedite their implementation.
The Comptroller's recommendations regarding additions to the short term shlichut procedure, are accepted.
901 The audit points out the lack of interface between the "Shelach" system and the financial system. An instruction was given to look into the matter as part of the examination being conducted with the intention of making the short term shlichut more efficient.
We thank the Control Office.
(-) A. Duvdevani
Jerusalem, February 2013
990
The Human Resources Division
Response of the Chairman of the Executive 111 The Human Resources Division
Background
The Human Resources Division is a head office unit providing services in the field of the management of human resources for all the departments and units at the World Zionist Organization.
Our audit was conducted in the first half of 2012 and refers to 2010, 2011 and the beginning of 2012.
The Office of the Comptroller held meetings with those responsible for the subject at the World Zionist Organization and Jewish Agency, examined the procedures and processes, personal files of the employees and perused written material and documents related to the subject.
At the time of the audit, the Division had two employees at one and a half posts dealing with 155 employees of the World Zionist Organization who are engaged in 147 posts and with 23 day employees.
The salary cost for the employees of the World Zionist Organization, including accompanying costs, came to some USD 10.9 million (not including shlichim) in 2010 and, in 2011, the salaries of World Zionist Organization staff, including accompanying costs, came to some USD 13.9 million. This amount constitutes some 30 percent of the World Zionist Organization budget.
A previous audit was done in 2006 at the Human Resources Division of the World Zionist Organization for 2004, 2005 and the first half of 2006.
113 Introduction
The Human Resources Division works in accordance with the “Procedures and Work Rules Folder” of the Jewish Agency.
The first folder of procedures was published in 1972 and has been updated occasionally. The last update was made in September 2005.
The folder contains procedures relating to all the employees of the Jewish Agency and World Zionist Organization.
The work procedures are based on the 1934 Labor Constitution which arranges the labor relations between the Jewish Agency and World Zionist Organization and their employees.
The last update to the Labor Constitution was in April 1990.
The Labor Constitution applies to all employees of the Jewish Agency and World Zionist Organization, apart from those employed by virtue of other collective agreements or employees whom the Constitution itself excludes from its incidence.
The Office of the Comptroller notes that on the cover of the Procedures and Work Rules Folder there is no reference to the World Zionist Organization but only to the Jewish Agency.
Some of the procedures in the Folder do refer to the World Zionist Organization, but not all of them.
The Office of the Comptroller notes that this situation prevailed at the time of the previous audit report in 2006 and has not changed since.
111 Activity of the Division
16. As noted, the Human Resources Division has two employees: the director of the Division, who is employed part-time with a pension supplement, and a full-time employee.
The main roles of the Division are:
- Absorption and placement of new employees of all categories in accordance with the standard posts and approved budget: tenured employees, temporary employees and employees on a special or personal agreement.
- Changes in the status of the employees, such as: grade promotion, shortening of the time between grade promotions, changes in the travel quota (kilometers) and so on.
- Management of records and follow-up on attendance and absences with respect to vacations, sick days, further study days and so on.
- Dealing with termination of employment and retirement.
The Division is assisted by personnel management software which is also used by the Jewish Agency.
At the beginning of 2012, new and more advanced staff management software was introduced, with more functions and direct connection to the salaries and financial systems. The Office of the Comptroller notes that the recommendation on this matter was made in the previous audit report of 2006.
The software contains all the information received at the Division, such as: the names of the employees, personal particulars, job and position descriptions, ascription to a department or unit, the status of the employee, grades and date of change of the various parameters.
115 The Pensions and Salaries Division of the Jewish Agency also handles the salary payments for the employees of the World Zionist Organization. The Division prepares the necessary material for the salary payment to be made and transfers it to the Pensions and Salaries Division of the Jewish Agency.
The Human Resources Division opens a file for each employee of the World Zionist Organization. The Pensions and Salaries Division also has a file for every employee.
The list of documents and forms to be included in the employee file is specified in the procedures without distinction between the file in the Human Resources Division and that in the Pensions and Salaries Division.
The Office of the Comptroller recommends that the documents which are to be included in the personal files in each of the filing systems, in the Human Resources Division and that in the Pensions and Salaries Division, be defined.
The director of the Human Resources Division advised that only documents relating to the salary of the employee are kept in the employee file in the Pensions and Salaries Division. The personal file of the employee with Human Resources contains all the documents on all relevant matters.
The Office of the Comptroller examined 37 employee files in the filing system of the Human Resources Division. The files were found to be orderly and contained all the requisite documents.
The logo of the Jewish Agency features on most of the forms used by the Human Resources Division.
The director of the Human Resources Department advised that the forms intended for the use of employees of the World Zionist Organization with the logo of the World Zionist Organization can be found on the Jewish Agency internet site.
111 In the opinion of the Office of the Comptroller, there should be insistence on maintaining a separate system of forms for the World Zionist Organization since it is an independent organization, distinct from the Jewish Agency. The Office of the Comptroller notes that this recommendation was included in the previous report that related to the years 2005 and 2006.
Budget of the Human Resources Division – According to the data in the financial system of the World Zionist Organization, Mankal 2000, the 2010 budget of the World Zionist Organization came to USD 187,700 while actual expenditure was USD 229,000.
In 2011, the budget and actual expenditure came to some USD 196,000, according to the following:
Employee salaries and accompanying 161,600 Shared expenditures (with the Jewish Agency) 14,340 Costs of computerization and Lalan 12,320 Office requirements and sundries 7,740 Total 196,000
Staff Composition and Employment Framework
To the date of our audit, March 2012, the World Zionist Organization had 155 employees in 147 posts. Also to the date of our audit, 23 temporary employees and seven National Service girls were employed.
The World Zionist Organization also employs daily workers, as needed, in the position of interviewers, discussion leaders and counselors.
117 Following are particulars of the staff composition by employment framework in accordance with the data obtained from the Division, updated to March 2012:
Number of Percentage employees Tenured employees 94 53 Contract employees 54 30 Pensioners (employees with pension 7 4 supplement) Total standard posts 155 87 Daily workers 23 13 Total 178 100
The Office of the Comptroller notes that since the previous audit in 2006 there has been an increase of 13 standard posts. There has also been an increase in the employment of staff on a contractual basis as against those with tenure and a decrease in the employment of staff on pension supplement.
Following is a breakdown of the employees at the World Zionist Organization at the time of our audit (March 2012) by department (not including daily workers):
111 No. of Department Posts employees The Settlement Division 07 10.76 The Department for Activity in Israel 17 17.77 The Finance Department 17 10.11 The Department for Activity in the 11 11.77 Diaspora Office of the Chairman and Vice- 11 7.17 Chairman of the Executive Spiritual Services 1 6.60 The Human Resources Division 1 1.10 Legislative Institutions Bureau 1 1.77 Office of the Secretary-General of the 1 7.11 Zionist Executive Employee in transfer * 1 7.60 Total 155 146.72
* The employee in transfer had belonged to the Department for Zionist Activity which was closed in 2011. He has been employed on pension supplement since 1986 and actually works at the Eytz Association of the Zionist Council in Israel. He is a member of the management board of Eytz, an authorized signatory and secretary of the Association.
It was explained to the Office of the Comptroller that, although the said employee was in a World Zionist Organization post, he did not receive a salary out of the World Zionist Organization budget.
In the file of the said employee, many documents were found written by the director of the Human Resources Division to the effect that the employee had terminated his work at the World Zionist Organization and should be removed from the staff standard accordingly. There was also a document in the file confirming the fact that the Workers' Union of the Jewish Agency has been paying the salary of the employee out of its budget since 2008. The Office of the Comptroller verified this finding with the Pensions and Salaries Division.
119 Despite the facts stated above and the last letter dated August 2, 2010, regarding removal of the said employee from the World Zionist Organization standard, this had not been done by the date of our audit in March 2012.
In the opinion of the Office of the Comptroller, the situation described above is unacceptable and immediate action should be taken to rectify it. An employee who is engaged in some association should not be on the World Zionist Organization standard and receive a salary from the Workers' Union.
The Office of the Comptroller recommends examining whether there are further cases in the organization of the employment of staff who are employees of the Workers' Union whose salary is funded by the Workers' Union.
The director of the Human Resources Division advised that he intends to instruct that the employment of this employee be terminated and that employment of employees not be permitted with the funding of the Workers' Union or in any other way not on the basis of the existing procedures. The Human Resources Division is not aware of similar cases.
The acting Chairman of the Workers' Union organization advised in June 2012 that it funded the employee's salary in the context of its policy to undertake joint activity with affiliated bodies such as the Zionist Council in Israel / Brith Haim. In view of the change in the current policy of the Workers' Union it had advised of termination of the work of the employee with its funding.
117 Acceptance of New Employees
Between the beginning of 2010 and February 2012, 32 new employees were accepted for work at the World Zionist Organization. During the same period, 29 employees terminated their employment at the World Zionist Organization.
The process of accepting a new employee at the World Zionist Organization starts when the director of a department contacts the director of the Human Resources Division about the need for a new employee and attaches a description of the role and the requisite qualifications.
The director of the Human Resources Division checks whether there is an available post for the employee in that department and starts the process of recruiting the requested employee.
According to the "Staffing of Positions" Procedure, the recruitment of a new employee for a vacant position is usually done through an internal or external tender.
The Office of the Comptroller examined the files of all the new employees and showed that, of the 32 new employees, only eight had been accepted via a tender according to the requirements of the procedures.
Seven other new employees were accepted on the "agreed minute" system. According to this system, the director of the department proposes that a specific candidate who is suitable for the post as he understands it be accepted. Agreed minutes are then drawn up and signed by the representative of the Workers' Union, the head of the department who recommended the employee and by the director of the Human Resources Division. On the basis of a signed minute, an employment contract for a year is drawn up for the new employee.
The Office of the Comptroller notes that the above system is anchored in the "Staffing of Positions" Procedures only for exceptional instances. The
121 Office of the Comptroller wonders whether seven out of 32 employees were indeed exceptional instances.
Also during the same period, three heads of departments were accepted, having being selected for the position by the Zionist Executive.
The remaining 14 new employees were accepted on the method of "position of trust". This method is not included in the "Staffing of Positions" Procedures and is a matter of custom.
According to this method, the director of the department himself determines the new employees. Their employment is not conditional on the consent of any other factor in the organization.
The Office of the Comptroller notes that half of the new employees accepted for work in the years audited, 2010 and 2011, were accepted in the "position of trust" method.
In the opinion of the Office of the Comptroller, the procedures are to be followed in the matter of "position of trust" or they should be changed accordingly. Similarly, the number of employees accepted in the "position of trust" method should be limited.
The director of the Human Resources Division advised that the position of trust is a necessity in the current reality and this custom should be included in the "Staffing of Positions" Procedures. Employment of an employee in a position of trust comes to an end upon conclusion of the role of the person who appointed him/her unless the new direct person in charge asks the employee to continue his work in the position of trust framework.
All the new employees who are accepted for work sign an employment agreement in which the terms of their employment, the period of their employment and the specifics of their function are detailed.
111 As a rule, the labor agreements which the employees sign upon acceptance for work are valid for a year. Thereafter, extension of the agreement period is through a letter from the person responsible in the department in which the employee is engaged and with the approval of the director of the Human Resources Division.
The Office of the Comptroller checked the files of all 32 new employees and found that all the labor agreements had been signed on time. The Office of the Comptroller notes that, in this respect, there was a substantial improvement over the situation that had existed at the time of the previous audit in 2006.
The audit showed that no approval was found in the personal files of four employees for extension of the labor agreement.
The Office of the Comptroller recommends insistence on approval of agreement extensions in writing as required in the agreement and in the procedures.
The Human Resources Division accepts the audit recommendation.
Employees with Pension Supplement
On the basis of the data the Division provided, seven employees with pension supplement were employed at the World Zionist Organization at the time of our audit. These employees are pensioners of the World Zionist Organization who are engaged for up to half a post in various roles in the different departments. The procedures folder contains no reference to the framework of their employment.
According to a September 2003 opinion of the Legal Department, the employee – employer relationships should be severed for a period of six months after the retirement of an employee before he is engaged in a pension supplement framework.
123 This is referred to as a "cooling off period". The cooling off period of six months is required according to internal provisions of the income tax authorities in order to preserve the tax exemption granted for the severance pay an employee receives upon his retirement. This is also applicable to the compensation under Section 8 of the pension code of the Jewish Agency and World Zionist Organization employees.
A break in employee – employer relationships is also required in accordance with the labor laws to prevent a continuity of rights.
Our audit showed that the World Zionist Organization is meticulous in observing the cooling off period as required.
In the opinion of the Office of the Comptroller, formulation of a procedure arranging the engagement of employees in the pension supplement framework and that will specify the terms of their employment, the scope of their position and the period of their employment is recommended. We note that this recommendation was also contained in the 2006 audit report.
The director of the Human Resources Division advised that the Human Resources Division – in principle – will not engage employees in a pension supplement framework. Currently, employees are engaged with a pension supplement in the Settlement Division at its request.
Daily Workers
According to the definition in the procedures "a daily worker is engaged on temporary work for a period not exceeding 12 months".
According to the Labor Constitution (Sections 26 and 27) "workers on a daily wage can be employed only for temporary jobs for a period not exceeding six months".
111 In February 2012, 23 workers were employed at the World Zionist Organization on a daily wage. Of these, 12 workers had been employed for less than a year and the remaining workers were engaged for short and non- consecutive periods.
The employment of daily workers for long periods constitutes a circumvention of the quota of posts set for the departments.
A clarification we made at the Human Resources Unit of the Jewish Agency found that a start had been made on signing up the daily workers on a special collective agreement for employment of staff on a monthly basis for a set period.
The director of the Human Resources Division notified the directors of the departments and units at the World Zionist Organization, in June 2012, that Section 26 of the Labor Constitution is to be followed and daily workers are not to be engaged for more than six months. The directors were requested to notify the Human Resources Unit immediately upon conclusion of the work of a daily worker.
Employee Attendance and Overtime
The provisions in the procedures folder on "Reporting overtime and attendance" discuss the recording of attendance at the beginning and end of the work day, recording exits during work hours and reporting on absences from work. The provisions are binding for all employees, irrespective of grade, function or mode of employment. It is determined in the procedure: "Employees of the Jewish Agency and World Zionist Organization are required to stamp an attendance card in the computer upon their arrival at the place of work and upon their departure therefrom at the end of the work day. Stamping the attendance card may be done by the employee only in person ….".
It is further determined in the procedure that, in exceptional cases which are specified in the procedure, the card may be signed by hand.
125 Employees, the nature of whose work requires being out of the office on a daily basis, may, exceptionally, record the actual start and finish of their work by hand. They must, first, obtain prior, written approval from the Human Resources Division to report their work hours manually.
The Office of the Comptroller checked the attendance cards of 25 employees in January and February 2012. Propriety was found apart from the fact that the attendance sheet was headed "The Jewish Agency" without any mention of the World Zionist Organization, and this is also the case with most of the forms belonging to employees' remuneration, such as reports about overtime and so on.
In the opinion of the Office of the Comptroller, the name of the World Zionist Organization should be properly noted on all documentation and forms.
The computerized attendance record also contains, apart from the entry to and exist from work, an automatic daily calculation of the number of overtime hours of the employee.
At the beginning of the year, every director of a department is supposed to report to the Human Resources Division the quota of overtime hours approved for each of the employees in his department. The overtime hours quota is monthly and is updated in the attendance records of the employees.
The Office of the Comptroller checked the attendance reports and payment for all the employees who were paid for overtime in January and February.
From the examination, it follows that:
70 out of the 150 employees of the World Zionist Organization received payment for overtime in January 2012 and 61 did so in February 2012.
111 From the January 2012 attendance records, it follows that the overtime quotas of nine employees did not match the quota stated in the approvals of the directors of the departments.
Furthermore, four employees were paid for overtime in excess of the quota. In response to our question, we were told that an oral authorization had been received for these employees.
Two employees were paid for overtime in February 2012 although no overtime quota had been set for them. It was explained, in answer to our question, that permission had been given for overtime for these two employees but the quota had not been updated in the report. Written authorization for this was given following the clarification conducted by the Office of the Comptroller.
The Office of the Comptroller recommends insisting on obtaining written authorizations for all the employees regarding overtime quotas and that the reports be updated before the date of payment.
The director of the Human Resources Division advised that the matter had been arranged and that a quota for overtime had been set for these employees.
According to the Work Hours and Rest Law, it is forbidden to engage an employee for more than 60 overtime hours in a month.
In the months which were checked, there was one employee who was paid for 134 overtime hours in January and for 122 hours in February 2012.
It was explained, in answer to our question, that the employee is a driver for the Chairman and so payment is approved for him for overtime hours without restriction.
127 The Office of the Comptroller checked the attendance sheets of this employee for the months of January and February 2012. The stampings were as required and the number of overtime hours reported matched the attendance report.
In the opinion of the Office of the Comptroller, since no exceptions are mentioned in the Work Hours and Rest Law on the matter of a restriction on the overtime, the conduct of the World Zionist Organization in this matter is contrary to the law binding all employers and all employees without exception.
June 2012
111 Response of the Chairman of the Executive to the Comptroller's Report on The Human Resources Division
In accordance with Paragraph 18b of the Statutes of the Comptroller and the Control Office of the World Zionist Organization, following is my response to the above referenced Audit Report:
The Comptroller prepared a detailed report on the World Zionist Organization, Human Resources Division.
The World Zionist Organization employees a staff of over 150 people (not including shlichim and employees abroad). The audit checked, among others, the employment frameworks of the staff, their recruitment process, attendance reports and payment of overtime.
The processes in which the World Zionist Organization has been involved in the last three years demands special attention to various administrative issues that are being carried out in coordination and affiliation with the Jewish Agency.
We accept the Comptroller's recommendations, outlined along the findings, and find them very helpful.
We thank the Control Office.
(-) A. Duvdevani
Jerusalem, September 2013
921
Keren Kayemeth LeIsrael
Forest Contractors
Response of the Chairman of the Executive 231 Keren Kayemeth LeIsrael
Forest Contractors
1. Introduction
1.1 In accordance with the work program of the Office of the Comptroller of the World Zionist Organization, we examined the contractual arrangements Keren Kayemeth LeIsrael (hereinafter: KKL) made with forest contractors for the performance of various forestry actions.
Our audit included examination of the following work processes:
- The process of contracting with the forest contractors, from the stage of preparation of the tender until completion of the work.
- Examination and comparison of the work methods in the different Regions.
1.2 The audit was done at the offices of the different regions at KKL and also at the KKL Head Office during the months of July – November 2011.
During the audit, meetings were held with the director of the Land Development Authority, the director of the Budgets Department, deputy directors of the Regions, timber production engineers, liaison officers at KKL responsible for management of the tenders in the sphere being examined as well as other employees, all to the extent we saw fit.
1.3 The audit goals were:
a. Examination of the contractual arrangement procedure with the forest contractors in the Regions, including the mode of selection
233 of the contractor, the length of the arrangement, the division of the work and so on.
b. Checking for the existence of proper internal audit procedures and the degree of efficacy of the existing procedures and processes.
c. Finding weak points in the processes and in the control and providing recommendations for improvements.
1.4 Main documents used for the audit:
The Land Development Authority procedures.
The contractual arrangement procedure of KKL.
Report on the budget as against actual expenditure for forestation activities in 2010 – 2011.
Publications in the daily press regarding forestation tenders.
Summary of proposals for various tenders.
Minutes of contractors' tours.
Summary of hearings for the winning forest contractors.
Work journals of the forest contractors.
Proposals for tender and agreements signed with forest contractors.
Report on the budget as against actual expenditure from the forestry system.
Invoices from forest contractors that were submitted for payment.
Specific documents obtained upon demand.
231 1.5 The audit methodology was:
Reading of existing procedures (to the extent relevant for the subject being audited), reading of internal directives and examination vis-à-vis actual conduct.
Holding of meetings and talks with the office-holders responsible for the activity in the spheres being audited (in each district – usually the deputy director of the district and the relevant liaison officer) and with other staff as we saw fit.
Review of the information systems supporting the subject being audited, including cross-checking of data between the systems.
Review of the data transfer process as regards forest contractors between the various Regions.
Review of the process of choosing the contractor and the directives of the Region on the matter.
Checking the existence of controls for performance of the work on the ground during implementation of the project and examination of the efficiency of these controls.
Sample examination of tenders regarding forestry activities, including examination of the integrity of the documents that were submitted.
Review of the process of payments at KKL, as far as concerns forest contractors.
Sample examination of payments to forest contractors and payment to KKL by the forest contractors, including correspondence of the payment to what was agreed in the contract.
Checking the existence of a lesson learning process upon completion of project implementation.
231 Summary of the findings.
Preparation of an audit report, including drawing of conclusions and giving of recommendations.
2. General Background
2.1 Introduction
Keren Kayemeth LeIsrael was founded in 1901 by resolution of the Fifth Zionist Congress in Basel, with one of its declared aims being the purchase and redemption of lands in the Land of Israel for the sake of the Jewish People.
In 1961, a convention was signed between the State of Israel and KKL which arranged the division of responsibility between the Israel Lands Administration and KKL as well as redefining the tasks of KKL, with the main change being expressed in that KKL was to be primarily responsible for forestation activities in the Land of Israel and would also be responsible for the conservation and development of the forests.
KKL is currently responsible for some 1,500,000 dunams of planted forest and natural forestland throughout the State of Israel. Over the years, KKL has planted over 240 million trees on 920,000 dunams.
Furthermore, KKL is responsible for caring for 400,000 dunams of natural forestland and for the fencing and arrangement of some 400,000 dunams of pastureland.
2.2 Forestation activity and development of the forest:
KKL carries out various forestation activities through its foresters and through sub-contractors, as specified below:
1. Planting and preparation for planting to enlarge the forested areas in the country.
231 2. Pruning and sanitation – forest thinning where required and cutting back of trees that have dried out.
3. Fire protection activities, such as keeping fire-fighters on call and look-outs for warnings of the outbreak of a fire.
4. Construction and current maintenance of picnic sites for vacat- ioners.
2.3 Land Development Authority:
The Land Development Authority is responsible for development and forestation at KKL. The head office of the Land Development Authority is situated in a building at 6 KKL Street, Jerusalem, close to that of the National Institutions building, and its branch offices are located in the Regions of KKL, North (Pas HaYarak in Kiryat Bialik), Center (Eshtaol) and South (Gilat).
2.4 The organizational structure of the Land Development Authority:
Management
Supervision
Develop- Forestry Regions Planning Administr- ment Division & Strategy ation and Projects Division Finance Division Division
North Center South
231 The Land Development Authority employs, at its head office and in the Regions, some 600 people.
It may be noted that employees from the district finance departments as well as local foresters, who belong organizationally to the Regions rather than to the Land Development Authority, are also involved in the work process with forest contractors.
Work plans:
The forestation plans in the various Regions of KKL are built from needs arising from the ground level. The Regions have five-year plans, which are updated each year. The work plans are submitted for approval of the Forestry Division and, subsequently, for that of the Government Forestation Officer. The various Regions operate in accordance with the approved work plans.
Computer systems:
The Land Development Authority is assisted by two main computer systems (see also Chapter 6 of this Report):
- Manof systems (hereinafter: Forestry System), which is a task- oriented system which keeps the information about forest care.
- A financial system – ONE.
Following are figures for the budget as against actual expenditure for the various Regions in the forest upkeep line (without plantings) for 2010 and 2011:
Year / North Center South Period Budget Actual Percent Budget Actual Percent Budget Actual Percent For the first 11 117151 217111 38 217231 217371 51 217127 237171 11 months of 2011 For 217377 217711 55 217277 217121 273 17117 277111 231 2010
231 Note
The budgets of the Regions grew dramatically in August 2011 following the addition of a special budget for the creation of fire breaks and forest restoration.
The Office of the Comptroller examined the budgetary supervision carried out through the computerized system.
The audit findings were:
It follows from a perusal of the table that there were significant budgetary deviations in the Southern Region in 2010, deriving from plantings out of a need to stake a claim to nationally-owned lands. These plantings had a special budget, coming from the Israel Lands Administration which was the actually initiator of these plantings, that was not debited. The budget is normally given very late and is shown as a special budget rather than as an addition to the regular budget. Debiting of the regular budget in lines where there is maximum utilization is done through journal entries over which there is no budgetary control. From the above, it follows that presentation of the budget against actual expenditure report with the forest upkeep lines is incorrect and even misleading since some of the expenditures do not feature in the correct budgetary lines.
Response of the audited body The regional budget officer did not have time at the end of the year to amend the entries in the financial system – crediting the regular budget and debiting the special budget because of closure of the system at year end.
The budgetary control undertaken currently is incomplete and contains loopholes enabling an additional budgetary debit in a line that is already fully utilized, even though the system should not allow going into deficit.
235 The budget that is kept in the forestry system does not match the budgetary debits and the balances of the budget shown in the financial system. This is because of budgetary changes and budgetary transfers which are not updated in the forestry system as well as from differences in the mode of recording the liability between the systems (see also in Chapter 6), for example: The total actual expenditure at the Gilat Nursery for 2010 as shown in the financial system is NIS 2,899,000 as against actual expenditure of NIS 3,694,000 in the parallel line in the forestry system. It follows from this that there is no possibility of relying on the forestry system for construction of an annual work program and budget vis-à-vis actual follow-up since the budget shown is not updated.
Response of the audited body The budget differences derive from the nature of the professional system that should show a clear picture of expenditures and ensure that the expenditures are made in the context of the overall budget of the Region for forestry. Furthermore, the budget system was not budgeted in full for the whole year but only 1/12 each month as against the professional system which was fully budgeted.
The audit recommendations:
It is recommended that budgetary debits deriving from exceptional jobs be made through the special budget so that a correct picture can be shown in the budget vis-à-vis actual report.
It is recommended that a deficit not be permitted in the forestry system, apart from special cases to be defined in a procedure, for the purpose of the deficit approval process and mode of entry in the books.
Response of the audited body The recommendation is unacceptable because the forestry system has to operate in accordance with requirements on the
217 ground, reflecting actual expenditures rather than budgetary control, which is carried out in the financial system (ONE). The duty of the Land Development Authority is to ensure that the work is within the overall budget for forestry or, alternatively, to arrange an increment to the budget as necessitated and with the approval of the Management.
It is recommended insisting that a reconciliation be made between the financial system and the forestry system, that the situation be checked at the end of each month and that corrections be made in real time, to the extent possible.
Response of the audited body As a matter of routine, a reconciliation between the budgetary system and the forestry system is made at the end of each year. We accept the audit recommendation for a reconciliation report between these systems each quarter.
3. Procedures and Directives
The process for contractual arrangements with forest contractors at KKL is anchored in two procedures:
Contract regulations – A general procedure which lays down the rules for contractual arrangements of KKL with suppliers and outside contractors, the main points of which are:
a. KKL will not contract for performance of a transaction in goods or purchase of services other than by tender.
b. A supreme tenders committee will be set up and will determine procedures to the extent required by the contract regulations and will oversee the activity of the district committees.
c. The authority to grant an exemption from a tender shall be given to the exemptions committee.
212 d. It is to be ascertained, with contractual arrangements, that there are guarantees for compliance with a contract (at the stage of submitting the tender, to make sure that the winning bidder indeed signs the contract) and guarantees for contract performance (to ensure, inter alia, that the work is carried out as required). The date of expiry of the guarantees should be one month after the date anticipated for signing the contract or completion of the job and, if there is a delay in the planned dates, the guarantee period is to be lengthened.
Manual for activation of contractors – The manual lays out the conditions for the contractual arrangement with forest contractors, and its main points are:
a. Forestation activity is to be carried out in accordance with the approved annual work program.
b. The area engineer and local forester will formulate the program and summarize the details regarding the required forestry work.
c. The director of the region will approve the program for performance of the work.
d. The contractors will be chosen after publication of a public tender.
e. Contractors interested in participating in a tender will take part in a contractors' tour prior to the submission of their bid.
The audit findings:
The manual for contracting with forest contractors was written over a decade ago. It has not been updated since and it does not, therefore, relate to the gamut of matters currently being carried out in the work process with the contractors, for example:
1. The holding of a hearing for a forest contractor after winning, to clarify his ability to carry out the work.
211 2. Signature of the contractor on minutes of the contractors' tour.
3. Threshold conditions – nowadays KKL requires threshold conditions, such as: experience of a number of years in the field, employees with work permits in Israel and so on. These matters are not mentioned at all in the manual for activation of forest contractors.
4. The procedure does not relate at all to work with the forestry system and does not touch on matters of implementation of performance reports and accounts to the forestry system.
5. The procedure does not deal with the process of authorizing payment for the contractor, does not specify the identity of the liaison officers who are responsible for approving the payment nor of the documentation required for approval of payment to a contractor.
The directives of the procedure run counter to some of the activities currently being performed, for example: a non-updated rate for purchase of the tenders booklet or a prohibition on publication of the dates of the contractors' tour in press announcements, things that are totally not done nowadays.
According to Section H, handing the job to the contractor is to be accompanied by completion of a form for handing work to a contractor. Not all the regions insist in practice on completion of the form, for example: in Tender Number 565/10, no use was found to have been made of this form. The Office of the Comptroller is of the opinion that filling in the form is important since it details the nature of the job, the very putting into writing of which will obviate future disputes.
In Tender Number 468/11, we found that the winning contractor did not attend the signing of the contract yet, contrary to the contracts procedure, the guarantee for upholding the tender was not foreclosed since it had expired.
213 The audit recommendations:
It is recommended that the manual for activation of contractors be updated and rewritten, such that it will deal with the areas carried out nowadays in the forest contractor activation process, such as:
1. Specification of threshold conditions for activation of a forest contractor.
2. The signature of the contractor on the minutes of the tour.
3. Undertaking a hearing for the contractor.
4. Specification of the job in the forestry system, with an emphasis on inputting performance reports.
5. Detailing the identity of the liaison officers and of the required documentation for approval of payment to a forest contractor.
The other sections of the manual should also be examined and updated where such is required, such as: the rate for obtaining the tender forms and publication in the press of the dates of the contractors' tour.
Response of the audited body KKL accepts the audit recommendations and has set up a team to work on updating the manual.
It is recommended that there be insistence on completion of the form for handing of a job to a contractor in order to obviate possible misunderstandings in the future.
It is recommended that periodic checks be made with respect to the guarantees, that the data be managed in the computerized system and that it warn when a guarantee is nearing its expiration date so as not to be faced with a situation where relevant guarantees are not valid.
211 4. Initiating Tenders in the Regions
4.1 Promoting the forest activities performance process
There are three regions in KKL: North, Center and South. Each region is divided into three areas and each area into three sub-areas. Each area has an area engineer who is responsible, together with the local foresters and in accordance with the approved work program, for initiating the publication of tenders for performance of forestry work.
The area engineer and the foresters put together the technical specifications and formulate the relevant data for the forestry work, such as: the number of trees to be dealt with, the area in question and the estimated costs.
4.2 The process of issuing a tender:
1. The area engineer and the local forester summarize the basis for issuing the tender in conjunction with the management of the region.
2. An assessment is made of the estimate and a timetable set for the dates of work commencement and project duration.
3. The region applies to the tenders committee to obtain approval for issuing the tender and receipt of a tender number.
4. The tender is published in two daily newspapers.
5. As part of the participation conditions, the region holds a contractors' tour and minutes are drawn up of each contractors' tour.
211 6. The contractors submit the signed proposals for the tender including, inter alia, a price estimate form, a signed tender and a proposal letter.
7. Opening of the envelopes, formulation of the recommendations of the region as to the winner and subsequent approval by the tenders committee.
8. Invitation of the winner to a hearing and the signing of the transaction contract.
The Office of the Comptroller looked at the process of issuing a tender, with the sampling of 25 engagements gements with contractors. The examination included: checking publication of the tender in the daily press, checking the existence of a contractor's tour, including the drawing up of minutes of the tour, examination of the integrity of the documentation and of the proposals submitted by the contractor and checking the holding of a hearing for the winning contractor.
The audit findings:
Section 32.1.5 in the KKL Contracts Procedure specifies that other considerations are to be taken into account beyond the financial, when contracting with a contractor, such as: quality of work and previous experience. From examination of the tender documents on the subject of forest contractors, it follows that there is no mechanism of weights and criteria grading the proposals of the contractors for the purpose of determination of the winning contractor and the only consideration for accepting the proposal of the contractor is the price he asks for the job or the total payment the contractor offers to KKL if he purchases cut-off tree parts. The Office of the Comptroller is of the opinion that there are other important parameters which should be taken into account when determining the winner, such as: work history with KKL, availability, work quality and meeting of timetables, etc. The lowest estimate will not always bring the optimal result for KKL.
211 Response of the audited body Most of the tenders published by KKL are closed tenders because the size of the job does not exceed NIS 350,000. In a closed tender, considerations of quality are taken into account before contacting the contractors and, therefore, the only consideration remaining at the time of the opening is the price and whether the contractor meets the threshold conditions.
Response of the Chairman of KKL In the response to the draft report, the Chairman of KKL instructed the acting director-general to set up a professional team to put together additional criteria for choice of a winner in a tender, apart from the financial aspect.
Our check as to whether minutes were prepared for the contractors' tour showed that in none of the tenders sampled originating in the North Region were minutes drawn up as required. Preparation of minutes for a contractors' tour is part of the contractual documentation between the contractor and KKL and, since participation in the tour currently constitutes a threshold condition in the process of submitting the tender, the minutes have a legal importance.
Response of the audited body We accept the audit recommendation with respect to the writing up of minutes. Furthermore, the obligation to take minutes is mentioned in Section 29.1.10 of the new Contracts Protocol of KKL, which was updated in March 2012.
From a sample of the tender files examined, it follows that there is a no uniform policy in matters of taking the tour minutes, for example: In the Center Region, the contractors sign the tour minutes but in the South Region they do not do so.
211 In the Center and South Regions, there are orderly lists of forest contractor tenders carried out, including: tender number, name of winner, nature of the tender, overall cost and dates of the tender. The reference is to a not-inconsequential number of tenders and the lack of such a list makes it difficult to receive an up-to-date picture of the tenders in progress and those planned, something that could cause a delay in the work program and decision taking processes. There is only a partial list which does give a response to these needs.
No full list was found of forest contractors from which are selected those contractors to which closed tenders are referred.
The Forestry Division does not have a shared data base concerning, inter alia, cumulative information about contractors who bid in tenders or of contractors who work in different areas simultaneously, which data is essential to examine the availability of the contractor and his history with KKL, at the stage of deciding on the winner in the tender.
The Office of the Comptroller found there to be no inbuilt process of information sharing between the different regions, including information about the quality of work forest contractors. This is done occasionally, but only on the personal initiative of a liaison officer in a region rather than as an inbuilt process.
From a sample of the tender files examined, only in four was a notation found of the tender number of the proposals for the tender. The proposal form and accompanying agreement constitute a part of the documents according to which future control will be exercised and the omission of basic data could prejudice the control and identification of the tender.
211 The audit recommendations:
It is recommended that directives be written up specifying the gamut of criteria and considerations for examination, when selecting a forest contractor, including details of the weighting of each criterion. It is recommended that the criteria contain, at least: the years of work of the contractor in the field, history of his work with KKL, references, work quality, expertise and price proposed.
It is recommended that there be insistence on taking minutes of a contractors' tour, that the minutes be distributed to all the participants and that the document be filed in the tender file. It is recommended that participation in the contractors' tour be considered as a threshold condition for participation in the tender.
It is recommended that a document be drawn up specifying all the tenders carried out that year, containing the following particulars: tender number, name of winning contractor, amount of proposal, date for commencement of work, planned date for completion, date on which the contract was signed, amount of the performance guarantee, date of expiration of the guarantee, amounts and dates of payments and any other particular which the regions see fit.
It is recommended that a list be prepared of all the currently active forest contractors, including the following data at least: name of contractor, years in the field, area of specialty, previous experience with KKL, exceptional events, if any, and so on.
Response of the audited body The recommendation is acceptable to us and we intend to update the contractors' ledger.
It is recommended that a computerized data base be constructed that will contain all the topics of relevance for work for the forest contractors and that it be shared between all the regions. The data
215 should contain, inter alia, reports and feed-back about contractors, particulars of the job, the duration of the work, projects carried out at the same time, problems that arose during the job and their resolution, and so on.
Insistence is recommended on keeping a full and accurate record of the relevant particulars for a tender, including the number of the tender in question.
4.3 The number of forest contractors and the number of tenders carried out in 2010 – 2011:
The number of forest contractors currently working in all regions is some 25. Of these, 10 forest contractors are working on a current basis with each region, such that a number of contractors overlap for several regions.
Following are particulars of the number of forest contractors in the different regions in 2010–2011: North Center South Number of tenders in the first eight 37 28 * months of 2011 Number of tenders in 2010 17 50 * Total 54 78
* Despite our request, the figures were not received prior to the date of issuing the Report.
The audit findings:
From a perusal of the above data, it would seem that the number of optional contractors for participating in a tender on forestry work is low in relation to the number of tenders carried out each year and the paucity of the contractors recognized by KKL in the field of forestry
217 possibly forces the forestry division to make its requirements more flexible on occasion. For example: employment of one contractor on a number of projects at the same time despite delays that may be expected because of the load on the contractor.
The audit recommendation:
Initiated actions are recommended to increase the pool of contractors, while finding contractors who do not work with KKL on a current basis. It is recommended that these contractors, and only they, be tried in tenders for small jobs, to prepare them for participation in large jobs in the future.
Response of the audited body The subject of enlarging the poll of the forest contractors has been on the mind of KKL for a long time since the number of contractors is on the decrease. Furthermore, there is a problem of marketing forest wood products. KKL is considering different ways for resolving the problem. Over the years, a number of possibilities have been raised, including an undertaking to supply wood to saw mills in the country so as to create a market for this industry. At the present time, consultations are being held with a delegation from the American Forestry Service to find solutions for this problem.
Response of the KKL Chairman In the response to the draft report, the Chairman of KKL instructed the acting director-general to set up a professional team to be in charge of writing a forest contractors ledger, inter alia, so as to enlarge the pool of contractors.
212 4.4 Estimate of costs:
The basis for cost estimating is derived from the following parameters:
- Labor costs.
- Accumulated experience regarding actual costs in similar site conditions.
- The price of wood in the market place, at the point in time when the tender was issued.
- The weight of the wood that can be extracted from the specific area.
The cost estimate is used for an appropriate budgetary allocation as well as for examination of the reasonableness of the proposals submitted for the tender and even for its disqualification if all the proposals deviate significantly from the estimate.
The Office of the Comptroller examined the process of setting the estimate and the actual results in relation to the proposals submitted, in a sample of tenders that were looked at.
The audit findings:
In a considerable number of tenders looked at, the estimates of costs or of revenues made by the KKL Regions do not give a correct indication for the actual costs or revenues and sometimes the estimates were hundreds of percent away from the actual costs or revenues. For example: In Tender No. 530/10, the cost estimate was for a payment of NIS 174,000 to the contractor, while the proposal which won the tender in the end was for income of NIS 203,724 to KKL, i.e., a difference of NIS 377,724 between the estimate and the winning proposal.
211 Sometimes, large differences between the estimates and the proposals submitted result in cancellation of the tender and a delay in performance of the job, as happened for example with Tender Number 740/10.
Response of the audited body It is difficult to estimate the cost of a forestation tender, for many reasons:
1. Work in a forest is done in varying terrains and changing forest conditions (within a short distance).
2. The alternatives the contractor has for utilization of the personnel at his disposal change his financial proposals from one day to the next.
3. It is difficult to estimate the value of the timber in a forest because of the changing terrain and forest conditions and the varying market conditions.
The income / expenditure estimate does not contain a reference to the price of wood in the market at the time of the tender, that is to say: tenders are not brought forward or held back because of an expectation for changes in the market price of the wood, the timing of the tender issue is not impacted by this important datum although correct timing of the condition of the market could save KKL hundreds of thousands of Sheqels a year, i.e., if more tenders were issued when there is a demand in the market for timber, the total receipts obtained would grow and, of course, total payments would decrease (see example of a possible difference in the previous finding).
213 Response of the audited body The way a forest is treated and the paucity of contractors necessitate continuous work throughout the year without consideration for seasonal cost of the value of the timber in the forest.
The subject of timber output is not just economic but has an ecological significance out of a desire to ensure the health of the forest. Moreover, activity in the forest requires consideration on the basis of the weather also. The goal is forest-oriented and not just economic.
There is no uniformity on the tender cancellation policy where the reason for the cancellation lies in financial differences between the cost estimate and the proposals of the contractors, for example: there were two tenders (101/10 and 740/19 in the South Region) where the differences in costs between the estimate and the proposals of the contractors were similar but, nevertheless, Tender Number 101/10 went ahead while Tender 740/10 was postponed.
Response of the audited body The tenders committee discusses, on a case by case basis, each instance where there is an unreasonable difference between the estimate and the proposal. The conditions for cancellation of a tender vary from one case to the next.
A further consideration of the tenders committee is the urgency of the work and the chance of obtaining a different outcome in a repeat tender.
The audit recommendations:
It is recommended that consideration be given to a new model basis for determination of the estimate in these tenders that will also contain the timber price at the time of tender issue and at the time when the actual job is done. The model will take into account any
211 anticipated increase / decrease in the timber price in accordance with the seasons and in accordance with expected supply and demand in the years ahead.
Response of the audited body We feel that there would be a difficulty formulating a model since there are many variables impacting the price at any given time point and with respect to we have no information and over which we have no control.
It is recommended that uniform criteria be set for tender cancellation where the results of the tender differ significantly from the estimate determined. Flexibility should be allowed in certain situations with a directive for detailed documentation of the reasons.
Response of the audited body This recommendation is accepted and is included in the updated contracts regulations.
5. The Work Process with the Contractor
5.1 Commencing work in the forest:
The contractor who wins the tender is invited for a hearing in the Region at which all the particulars regarding starting the job, the job requirements and the exact payment dates are summarized. Upon the occasion of the hearing or close thereto, the contractor signs the contract with KKL and goes on a tour with the regional engineer, who shows him in detail the requisite forestry actions. Through the period of the job performance, KKL instructors and foresters accompany and supervise the work of the contractor.
At the end of the job, the regional engineer fills in a feedback form as to the satisfaction of the Region with the work of the contractor.
211 The Office of the Comptroller looked at 25 contractual arrangements with contractors and examined the process of signing the contract with the contractor and the match with the minutes of the hearing held close to the time of the contract signing.
The audit findings:
There were eight cases where either the contract date was not found or was erroneous. The date on which the contract was signed is an important datum for punctiliousness in meeting timetables and it is of legal significance.
From perusal of a number of contracts shown to us, it follows that there are differing parameters for contracts in the various Regions and no uniformity regarding the milestones set for the contractors for the purposes of the payments. Likewise, where payments are made by the contractor to KKL, the terms of payment vary substantially from one contract to the next, for example: In Tender 330/11 a spread of ten equal payments is set from the start of the job while in Tender 571/10 it is determined that the contractor should pay 50% up front and the balance in two equal payments.
Our audit found that, according to what is written in the contract for Tender 331/11, the contractor has to remit an advance payment in the amount of 50 percent of the cash value of his proposal to KKL before starting work. But, from a perusal of the summary of the hearing it follows that the contractor had to pay KKL through a spread of payments over the months of the job. The Office of the Comptroller is of the opinion that contradictory agreements dealing with the core conditions of the contract could result in many difficulties down the road, should there be a dispute between the parties.
211 An opposite case was found in the contract for Tender 570/10 where, according to the contract, KKL has to remit the payment to the contractor with respect to the work at the end of the job. Contrary to this, however, the actual payment to the contractor was made with progress in performance of the job.
The control process regarding the work of the contractor is made through the feedback form at the end of the performance of the job. In practice, the feedback is put aside and nothing is done with it. The purpose of having feedback is to draw lessons for the future, both in connection with working with the contractor and the handling in this sphere in general, something which appears not to have been done in an inbuilt and documented way.
The audit recommendations:
It is recommended that contracts signed by the various regions in KKL be correctly dated, this being to obviate any appeal over their validity.
It is recommended that action be taken to adopt a uniform policy on all aspects of payments to a contractor and/or collection of payments from a contractor, this being to allow better budgetary control and supervision.
It is recommended insisting that the terms of payment in relation to the signed contract not be changed. If the parties agree, as part of the hearing, to change the conditions, the contract should be amended accordingly and signed anew.
It is recommended that the feedback forms about all the contractors be centralized, filed in an orderly fashion in a designated folder, that the feedback findings be summarized and submitted to the tenders committee during discussions over a tender in which contractors about whom there is already some feedback are participating. It is recommended that inclusion of
211 the feedback results be considered as a parameter for determination for the quality of work of the contractor, as part of the process of choosing the winning contractor.
Response of the audited body The audit recommendations are accepted. The rules for collection of money from contractors will be updated as a part of the new manual for activation of contractors.
5.2 The payment to the contractor
Upon completion of the job, the forest contractor submits an invoice for payment to the Region. The contractor attaches to the invoice a copy of the report of the local forester to the Region with the quantitative data for what was done. The payment to the contractor is conditional on the local forester and the regional engineer signing the invoice, confirming that the job was indeed completed. Before approval for payment, the budgeting division in the Region checks that the data on the job done and the rates charged with respect thereto have been input into the forestry system and that they match the amount for payment the contractor submitted and also that the requested payment matches the conditions in the contract. If everything is proper, the director of the Region approves the payment with his signature and the report goes to the head office in Jerusalem for the actual payment to be made.
The audit findings:
The control process for checking the charges is made differently in the regions. The approval process in the Center Region also contains management of a computerized record in the Excel program regarding the physical areas in question, so as to obviate duplication of entry and payment for the same area. This is contrary to the other regions which do not keep similar records. The additional control which is carried out using the Excel program is required because the forestry system permits the
211 duplicate inputting of a job in the same land area. In view of the quantity of reports in large projects, a situation of double reporting with respect to the same area is possible.
Response of the audited body The controls of the forestry system do not allow duplicate inputting of the same job, in the same area of land, on the same day. Likewise, the system is based on data it receives from the work journals. The system does not allow the recording of a job for a number of dunams exceeding what exists in the defined land area. The system is intended for documentation of the work taking place but is not intended for use as a control over payments. Hence, the controls are intended to prevent errors in good faith.
Where a partial payment has been made to a contractor, the only control regarding the percentage of the partial payment is the signature of the engineer, without any further check or backup of the forestry system regarding the rate of progress in the job. The Office of the Comptroller is of the opinion that a partial payment without further control in connection with the rate of progress in the job could result in over-payment.
A number of invoices were found with respect to Tenders 327/111(sic) and 78/11 which had been paid to the contractor, although not signed by the local forester and the regional engineer.
The audit recommendations:
It is recommended that a further control be effected so as to ascertain that the invoices submitted for payment do not contain charges for jobs paid in the past.
215 It is recommended that the control over partial payments be done by a quantitative scheme of the size of the work done in relation to the total job. The data will be taken from the forestry system.
It is recommended that there be insistence on full implementation of the approval process for invoice payment, so that an invoice will be approved for payment only with the addition of the signatures of the regional engineer and of the local forester.
5.3 Payment to KKL:
Some of the projects undertaken by the forest contractor end with a payment by the contractor to KKL with respect to the timber he receives. The start of the work of the contractor is conditional on payment of an advance and each transition to an additional stage in performance of the job is conditional on further payments of the contractor to KKL. The bookkeeping unit of the Region issues an account for the forest contractor at the beginning of the job and the local workers in the area where the forest work is being carried out are those who are to follow up on the payments of the contractor through implementation of the job.
The audit findings:
The payment of money to KKL which is conditional on progress in performance of the work is not collected through computerized notices or other control process and the process is the result of a report initiative from the local offices. We were told that, as a result of this way of working, it had happened more than once that the local workers did not diligently issue another payment demand for the contractor nor did they report the percentage of work performed entitling KKL to further payment. Thus, the contractor continues working but does not remit additional payments with respect to progress of the job.
217 Response of the Chairman of KKL In the response to the draft report, the Chairman of KKL instructed the acting director-general to reinforce the supervision over the work of the contractors in real time.
The Office of the Comptroller found there to be no uniform policy on everything to do with the spread of payments from forest contractors, the forms of the payment, the mode of reporting on the payment dates of the contractors, signatures and required documentation confirming completion of the work of the contractor and the eligibility for payment. Two examples follow:
- The director of the Finance Department in the South Region follows up on the dates of payment through receipt of warnings from the Outlook program, while in the other regions updates are requested periodically from the Region.
- There is no uniformity between the regions regarding the form of payment of the contractor to KKL in large projects. Payment can be made by post-dated cheques or by bank transfer on the agreed dates. The absence of orderly directives could cause lateness in payments on the part of the contractor and even extreme instances of non-payment of debts. For example: In Tender Number 365/11 of the South Region, the payment spread for the contractor was a payment of NIS 15,300 by bank transfer, undertaken on the first of the month for the months during which the forest work was being carried out, as against Tender 330/11 of the North Region, at the start of the work on which the contractor gave ten post-dated cheques, each for NIS 3,700, which were paid out over the months of implementation of the forest work.
From the above, it follows that the process of paying to KKL for forest work is unregulated and that this situation results in late collection of money from the forest contractors and
212 could even cause a loss of income because of the delay in the collection process.
The audit recommendation:
It is recommended that reporting procedures be formulated regarding the rate of progress in forest work where KKL is entitled to a payment. At the same time, action should be taken so that the forest system will receive computerized notifications.
It is recommended that orderly directives dealing with the manner of KKL accounting vis-à-vis the contractors be formulated and that they be uniform for all the Regions. The directives will contain a reference to the form of payment, manner of the spread of the payment, the mode for reporting and control procedures.
Response of the audited body We accept the recommendation. The Land Development Authority Management will lay down a policy and principles for receipt of a payment from contractors that will enable flexibility with the approval of the director of the Region.
Response of the Chairman of KKL In the response to the draft report, the Chairman of KKL instructed the acting director-general to recommend a uniform policy in relation to payments / receipts from the contractors and to introduce it.
6. The Computer Systems
The main computer systems supporting the work process with forest contractors are the forestry system and ONE – the financial system.
The forestry system – is a data base of the forestry division and stored in it are all the data regarding the handling of forests in the different
211 KKL Regions. The input of the data regarding the forest handling is done on the basis of manual reports of the local forester for the area and it contains a listing of the forest jobs implemented in the last period.
Also input into the forestry system is the forestation budget which is divided into areas and the various forestry activities. Payment to a forest contractor automatically reduces the budget of the forestation activities. The accounting with the contractor is fed into the system which produces a report giving all the particulars of the job and the account number.
The financial system – This system is responsible, inter alia, for management of the budget of the Forestry Division and for all the financial accounting vis-à-vis the forest contractors. When a Region issues a tender, it has to show the tenders committee that it has earmarked a suitable budget for the purpose of the payments with respect to the tender and that the budgetary earmarking is entered under the heading of "Required budget".
When a payment is made to a forest contractor, the liaison officer in the Region inputs the account number from the forestry system and the particulars of the contractual arrangement are automatically fed into the financial system. Approval of the account for payment in the financial system closes the accounting vis-à-vis the contractor in the forestry system.
The Office of the Comptroller examined the support of the computerized system for the forest work processes.
The audit findings:
The forestry system is primarily a computerized system into which data are fed but with a fairly low ability for all aspects of control and analyses. Thus, for example, the system is unable to block a duplicate input of a job for the same parcel of land and for the same dates.
213 The forestry system is unable to quantify in percent or to implement a scheme of land parcels in which forest work has or has not been carried out. There is, therefore, no computerized control over the rate of progress of the contractor and whether the percentage of the payment demanded by the forest contractor is proper.
The reports from the local foresters on all aspects of forest work are not sent on a day-by-day basis to the area offices. It, thus, often happens that forest jobs are input to the system with a delay of days up to weeks. As a result of the late reporting, the performance reports which the Management requests on a current basis do not give an up-to-date picture of the situation regarding progress with forest work.
Future financial commitments are not input to the forestry system as they are in the financial system. The ability to draw conclusions from it, therefore, about the size of the budgetary balance for utilization is limited.
Response of the audited body Future commitments can also be received in the forestry system, it requires much work and is convoluted, necessitating control at the time of reporting on implementations to obviate duplication.
The financial system does not automatically change payments to the forest contractor which have already been made from the status of "required budget" to that of budget "being implemented" and the change is made manually. It follows from the above, that, pending the manual correction, the data shown by the system regarding actual utilization of the budget and the balance of the budget are incorrect, since the same invoice is entered in this way such that it shows a double utilization of the budget, once with the status of "required" and a second time following the entry in the expenditure lines.
211 The financial computerization system does not block payment to a problematic contractor such that it could happen that a forest contractor who is behind in delivery of a job in one area will receive a payment for his work in another area.
From all of the aforesaid, it follows that the process of implementing forest work is not properly supported by the computerized system and that basic controls and barriers are not installed in these systems.
The audit recommendations:
It is recommended that the forest system be upgraded with the addition of a number of built-in controls and barriers, as specified below:
- The system will block the inputting of identical forest work for the same land parcel on similar dates or adjoining periods.
- The system will permit the inputting of the particulars of the planned forest work before the work starts and that all actual implementation be recorded in a separate cell, with the system calculating the balance of the job remaining for implementation in quantities and in percentages.
- Controls will be added to the system to warn about deviations from the job delivery date.
- Upon commencement of a job, performance contracts approved for payment will be defined in the system and that any deviation from them will automatically block the system for approval of the payment.
211 It is recommended that directives be given so that the reports of the local foresters about the performance of forest work will be transferred at fixed and adjacent time periods to the extent possible and that maximum time period for a report shall not exceed two weeks.
Response of the audited body The local foresters are required to transfer all the data for input once a week.
It is recommended that the financial system be upgraded so that it will make automatic status changes with respect to payments made between the status of "required budget" to that of "in implementation" in order to present the report of the budget as against actual expenditure correctly. It is also recommended that a possibility be defined for notifications and even barriers against contractors who are in arrears with work or late in payments.
Response of the Chairman of KKL In the response to the draft report, the Chairman of KKL instructed the acting director-general to look into the computerized systems, the synchronization between them, and ascertain continuous inputting of the data in both systems.
November 2012
211 Response of the Chairman of the Executive to the Comptroller's Report on Keren Kayemeth LeIsrael Forest Contractors
In accordance with Paragraph 18b of the Statutes of the Comptroller and the Control Office of the World Zionist Organization, following is my response to the above referenced Audit Report:
The audit focused on Keren Kayemeth's (hence: KKL) contractual arrangements with Forest Contractors for performing forestation activities.
KKL's forestation activities are spread over vast areas of about 1.5 million dunams with a financial scope of tens of millions of shekels. Tens of tenders are issued annually for the performance of these activities.
The Audit Report is detailed and includes many recommendations most of which are accepted by the audited entities.
The Audit indicated that the financial control over the budget is not complete and stated in its report that its recommendation in the matter has not been accepted.
We have examined the matter, together with the Chairman of KKL's Board of Directors and concluded that KKL will look into the subject with the intention of executing complete budgetary control that will provide up to date data, as much as possible, to those dealing with the subject.
The Audit recommended considering to establishing a new model for setting estimations for the tenders. The audited entities pointed to the difficulties involved in establishing such a model.
761 Due to the number of tenders and their financial scope, there is great importance to establishing such a model.
We thank the Control Office.
(-) A. Duvdevani
Jerusalem, February 2013
761
Keren Kayemeth LeIsrael Short-term Shlichuyot
Response of the Chairman of the Executive 071 Keren Kayemeth LeIsrael Short-term Shlichuyot
Introduction
A short-term shlichut is the shlichut of a KKL employee or outside body traveling for work overseas on its behalf for a period of up to 14 days and not more than 45 days in a year.
The director of the Shlichim Section in the Projects, Signs and Tourism Department, which is part for the Fundraising Division, handles the short- term shlichuyot of KKL employees, Executive members, directors and public figures. She books the flights and the hotels through two travel agents. The financial aspect is dealt with by the Finance Department in the Finance and Economics Division, in accordance with the expenses report and work expenditures which the director of the Shlichim Section forwards to it for examination and implementation.
The Shlichim Section is required to produce a half-yearly report with details of the employee's shlichuyot and the costs. In practice, the report is made by the secretary of the Projects, Signs and Tourism Department in the Fundraising Division .
The short-term shlichut overseas for fundraising and general purposes procedure describes the process of handling the short-term shlichuyot of KKL employees. The procedure was updated in June 2004.
The handling of short-term shlichut of Executive members is described in another procedure, "Expenditures of Executive members", which was updated in October 1999.
In November 2006, a management decision was taken to transfer to the director-general the power to approve short-term shlichuyot of members of the KKL Executive, rather than the chairman of the Board of Directors.
070 Our audit was conducted in the first half of 2012 and looked at the handling of short-term shlichuyot at KKL in the years 2010-2011 and the first quarter of 2012.
In the audit report, we raised findings where the actual implementation differed from the provisions of the procedure. We also saw room to add recommendations from the experience we have accrued from similar audits at other bodies in the National Institutions.
Upon completion of the writing of the audit report, the director of the Fundraising Division told us that a start had been made on a process of updating the procedures regarding short-term shlichuyot, both of KKL employees and of Executive members, and they will be combined into a single procedure. He advised that, the recommendations in this audit report will be included in the updated procedure.
Data
Following are figures for the number of short-term shlichuyot at KKL:
The Shlichim 0202 0200 0-210200 KKL employees 34 56 00 Executive members, Board of Directors and 13 14 04 public figures Total 76 88 02
Following are the costs of the short-term shlichuyot from data prepared by the Fundraising Division (in USD):
Costs 0202 0200 0-210200 Number of shlichuyot 57 88 13 Per diem days 610 691 001 Per diem allocation 184357 344401 54895 Work-related expenses 004034 114031 44514 Hotels 194074 664560 74510 Airline tickets 964301 0084010 474147 Total 072,062 026,020 33,026
071 Management of the Short-term Shlichuyot
The director of the Shlichim Section summarizes the handling of the short- term shlichuyot through an Excel table. In the list of those going out on shlichut, the following details are recorded: name of the shaliach, the destination, the funding body, the shlichut approval number and the approval date, the number of shlichut days, the dates of travel and signature on a declaration regarding the prohibition on the use of frequent flyer points.
The audit found that the 2011 list of travelers was incomplete and inaccurate. For example:
Some short-term shlichuyot which took place in November 2011 were not recorded in the list of the Shlichim Section:
a. A shlichut of the KKL director-general to the USA on November 20, 2011.
b. A shlichut of the KKL director-general to Switzerland on November 30, 2011.
c. A shlichut of an employee of the Land Development Authority to Italy on December 15, 2011.
To ensure complete supervision and proper current handling for all the short-term shlichuyot, the Office of the Comptroller recommends that the Shlichim Section be punctilious in recording all shlichim going on a short-term shlichut in the list of those traveling. There should also be insistence on adding a note to those whose shlichut was cancelled.
The audit found that the travel dates of a number of shlichim who went on a short-term shlichut in the first quarter of 2012 were not updated in the list of those traveling.
074 The Office of the Comptroller recommends that the Shlichim Section be careful about updating the list of those traveling with the updated travel dates to ensure health insurance and per diem payments in accordance with the actual days of the shlichut.
For supervision and control to be possible over the whole gamut of handling the short-term shlichuyot through the Excel table, we recommend adding to the table a column for health and luggage insurance, to note whether the shlichut is on "conference terms" as well as adding a column about completion of the accounting with the shaliach regarding the per diem allowance.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
During the audit, we suggested to the director of the Projects Department and to the director of the Shlichim Section that they look into the possibility of purchasing computerized software for management of short-term shlichuyot, instead of the records currently kept in the Excel table.
The director of the Shlichim Section advised in response that she had raised the proposal before her superiors and that meetings were being held at that time with respect to a decision as to whether to purchase such software for management of the short-term shlichuyot at KKL.
The director of the Fundraising Division advised in response that the Division had looked at off-the-shelf software for management of shlichuyot and examination of the proposals between the two companies which had developed a suitable product would be held soon.
073 Short-term Shlichuyot of KKL Employees
Approval of the Application Form for a Short-term Shlichut
The Short-term Shlichuyot Overseas Committee
There is an "Application form for short-term shlichut " at KKL. The form records particulars of the shaliach, the destination country, the purpose of the shlichut, the dates of the shlichut, the duration of the shlichut in days and the budgetary line to be debited for the costs of the shlichut.
The application form is sent to the director of the Shlichim Section for her attention after the shaliach has filled it in and signed it and it has been approved by the relevant bodies, with their signatures.
In accordance with the June 2004 procedure, the director-general and the director of the Fundraising Division are the bodies which approve short- term shlichuyot for fundraising purposes.
It is determined in the procedure that general purpose short-term shlichuyot are to be approved by the director-general, the director of the Fundraising Division and the director of the division / department requesting the shlichut.
In addition, as stated above, the KKL Executive determined in December 2006 that the director-general would approve the short-term shlichuyot of the directors of divisions (instead of the chairman of the Board of Directors).
The "Short-term shlichut overseas for fundraising and general purposes" procedure determines that an application for a short-term shlichut of KKL employees will be discussed by "The short-term shlichuyot overseas for fundraising and general shlichut committee". The chairman of the committee is the director-general and committee members are the director of the Fundraising Division and the director of the relevant division / department that asked for the shlichut. The coordinator of the committee is the director of the Shlichim Section.
076 According to the procedure, the shaliach himself submits the application to the committee at least 14 days prior to the planned travel date, it being duly signed and approved by all the relevant bodies, and it is then discussed at the committee.
Our audit found that the "short-term shlichuyot committee" does not actually convene.
Nor does the Office of the Comptroller see any point in holding a discussion at a committee whose members are the bodies approving the request for the shlichut.
The Office of the Comptroller recommends evaluating the function of the committee in the process of approving short-term shlichuyot and that the procedure be changed accordingly.
The director of the Fundraising Division advised in response that the need for the short-term shlichuyot committee has become redundant in its present format, and that the procedure to be updated will redefine its modus operandi.
The Office of the Comptroller examined a sample of short-term shlichuyot and below are the findings:
Signatures
An employee of the Education Department went on shlichut to France in January 2012. The audit found that the director of the Fundraising Division and the director-general approved the shlichut without the employee having signed the shlichut application form.
The director of the Fundraising Division advised in response that he accepts the audit comment. At the same time, he explained that the shaliach handed in the application for approval only 10 days prior to the shlichut date, by email, and, therefore, his signature does not feature on the shlichut application form.
075 An employee of the Land Development Authority went on shlichut to the USA in October 2012. The audit found that the director-general approved the application for the shlichut without the director of the Land Development Authority having signed off on the application form.
The director of the Fundraising Division advised in response that the director of the Land Development Authority had recommended that the shlichut be approved but unintentionally did not sign his recommendation.
An employee of the Land Development Authority attended a conference on fire-fighting in South Africa in May 2011. The audit found that the application form for the short-term shlichut was not signed by the director- general.
The Office of the Comptroller recommends looking into how this short- term shlichut was handled without the director-general having signed the application form for the shlichut.
The director of the Overseas Contacts Department travelled to the Conference of the Parties (COP17) of the United Nations Convention on Climate Change, in South Africa in November 2011. The audit found that the short-term shlichut application form was signed by other persons rather than the director of the Fundraising Division and the director-general.
The Office of the Comptroller recommends that the Shlichim Section ascertain, before starting to deal with the shlichut, that all the competent bodies, and they alone, had signed the short-term shlichut application form. We also recommend that, in instances where an urgent approval is required, the reason for the urgency
The director of the Fundraising Division explained that, in the case of the trip to the UN Conference, the Ministry of Foreign Affairs had demanded an immediate response for the trip for immediate ticketing, before the ticket price went up.
He added that he had now instructed the Shlichim Section to make reservations associated with a short-term shlichut, prior to receipt
077 of the approval for the journey, only if the reservations did not create any liability for KKL and did not entail cancellation charges.
Deferment of the Shlichut Date
The audit found that, when a shlichut is deferred to another date, the shaliach does not fill in a new application form.
The Office of the Comptroller recommends, that when there is a change in the shlichut date, documentation supporting the change be attached to the application for the shlichut.
Shlichut Approval
It is determined in the "Short-term shlichut overseas" procedure that the director of the Fundraising Division should approve the short-term shlichuyot of KKL employees (together with the director-general).
Each division at KKL has a separate application form for a short-term shlichut. The audit found the text in the application forms for shlichut (apart from the form of the Fundraising Division) does not mention that the approval of the director of the Fundraising Division is required.
Each division at KKL has a separate application form for a short-term shlichut. The Office of the Comptroller recommends adding to the shlichut application forms the requirement that the director of the Fundraising Division also approve the short-term shlichut, as required in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit comment and, therefore, that a uniform form for approval of a short-term shlichut is being prepared.
Missing Documents and Particulars
The Office of the Comptroller recommends that the following particulars be stated on the application form for a short-term shlichut: the identity certificate number of the shaliach, whether he is a KKL
078 employee or from an outside body, whether the journey includes attendance at a conference and the number of days on "conference per diem" terms.
We also recommend requiring that the shaliach attach the travel itinerary (including a list of all travel destinations and a travel timetable) as well as the invitation to the conference to the application form for the shlichut.
The director of the Fundraising Division advised in response that the possibility will be considered of integrating the audit recommendations in the procedure that is to be updated.
Duration of the Shlichut
In the "Short-term shlichut overseas" procedure, it is determined that the journey time shall not exceed 14 days. In exceptional cases, a trip of up to 21 days may be authorized, with the approval of the chairman of the Board of Directors.
The audit found that short-term shlichuyot of longer than 14 days were not sent for the approval of the chairman of the Board of Directors. For example:
Where employed Destination Date of Days of Purpose travel shlichut Land Development USA and 04.0.00 08 Lectures on Authority Canada forestry Land Development USA 08.7.00 11 Forestation Authority course Land Development USA 08.7.00 11 Seminar Authority
The Office of the Comptroller recommends that the Shlichim Section deal with shlichuyot of longer than 14 days only after the chairman of the Board of Directors has approved the exception, as determined in the procedure.
079 We also recommend adding a section in the shlichut application form in which the shaliach give grounds for the request for a deviation exceeding the 14 days set in the procedure.
The Office of the Comptroller looked at the length of stay overseas in 2010 and 2011 and did not find any exception to the quota of 45 days of shlichut as determined in the procedure.
At the same time, we recommend that the Shlichim Section state on the application for a short-term shlichut the cumulative shlichut days of the shaliach in the current budgetary year so that there be no deviation from the annual quota.
Conditions of Travel
Travel Agents
The director of the Shlichim Section handles reservations for flights, hotels, car hire, dealing with passports, visas and purchasing of health and luggage insurance – through travel agents.
The agreement with the travel agents was signed in April 2010 for two years. According to the agreement, KKL has an option to extend the period of the agreement for a further year, with a 30-day prior notification, at its exclusive discretion.
It is stated in the agreement with travel agent A that a discount will be given to KKL on the services of the travel agent at a rate of 6 percent to 10 percent.
It is stated in the agreement with travel agent B that a discount will be given to KKL on the services of the travel agent at a rate of 4.25 percent to 11.5 percent.
Our audit found that the agreement with the two travel agents expired on April 26, 2012, but in practice the contractual arrangement with them was
081 continued, without KKL advising of extension of the agreement for an additional year.
Following the audit comment, in May 2012, the director of the Projects, Signs and Tourism Department in the Fundraising Division began dealing with the holding of a new tender for contracting with travel agents.
The Office of the Comptroller notes that the agreement with the two winners, chosen in the tender, was signed late, on August 26, 2012, i.e., four months after the validity of the agreement with them had expired.
The Office of the Comptroller recommends that KKL insist on holding tenders on time, before the validity of the existing agreement expires.
It was determined in the agreement signed in 2010 with the two travel agents that a discount would be given to KKL employees who booked private trips. Travel agency A undertook a discount of 3 percent for flights and 7 percent for ground arrangements. Travel agency B undertook a discount of 5 percent.
In response to our question, the Shlichim Section told us that KKL employees were apparently not aware that they were entitled to a discount on their private travels.
The Office of the Comptroller is of the opinion that KKL employees should be advised of their entitlement to a discount for their private travel. We recommend that the employees be updated about the discount in accordance with the terms of the new agreement to be signed with the travel agents who win the tender.
The director of the Fundraising Division advised in response that the director of the Shlichim Section had in the past reported the discount entitlement on private trips to the Staff Committee but the Committee disclosed no interest in this arrangement since cheaper prices can be found on the internet.
080 Medical and Luggage Insurance
The director of the Shlichim Section arranges the purchase of the medical and luggage insurance for the shaliach. According to her, before every departure for shlichut, she questions the shaliach about his medical condition. If, in her opinion, expanded insurance is required, she suggests to him that he arrange the insurance himself, through the kupat cholim at which he is insured and receive financial reimbursement from KKL.
In our opinion, the questioning of the shaliach by the director of the Shlichim Section is insufficient. During the audit, we recommended that the Shlichim Section obtain the signature of the shaliach on a "Medical declaration" form prior to every departure for a shlichut. This form will constitute a basis for the purchase of an insurance policy matching the medical condition of the shaliach.
Following our recommendation, the director of the Projects, Signs and Tourism Department and the director of the Shlichim Section, in conjunction with the Legal Department, drew up a draft "health declaration prior to going on a short-term shlichut " form.
Following are our comments to the draft health declaration:
The Office of the Comptroller recommends that KKL specify in the health declaration form that the insurance policy does not cover an existing medical condition and that medical expenses deriving from an existing condition (including a chronic illness) and a previous illness, i.e., illness or accident or health condition with respect to which the shaliach has received or should receive any medical care, hospitalization, emergency room treatment, operation or medical clarification during a period of six months prior to completion of the declaration and to the date of travel for the shlichut. This is also the case with respect to a medical condition and/or any examinations or surgery as well as a medical condition for which he takes drugs on a permanent basis. Pregnancy is not covered either as part of the ordinary medical insurance policy.
081 It should be stated on the "health declaration" form that if one or more of the above alternatives exist or if the shaliach is 65 years old or above, an expanded insurance policy is required.
We also recommend that it be clarified on the "health declaration" form that failure to provide full particulars or concealing medical information could nullify insurance cover in the case of a medical event.
In the draft health declaration, it was stated that a shaliach suffering from certain illnesses would be asked to purchase medical insurance himself, through the kupat cholim at which he is insured.
We recommend that, in such an instance, the shaliach should declare that he undertakes to purchase medical insurance suitable for his medical condition, for the whole of the shlichut period and also that KKL will not be responsible for payment of any expenditure caused as a consequence of failure to purchase proper medical insurance.
We also recommend that the shaliach declare that he undertakes to notify the insurance company of any change in the medical condition that he has declared prior to the date of his departure for the shlichut.
The director of the Fundraising Division advised in response that the draft health declaration will be examined once more at a meeting in which the KKL insurance officer and the KKL staff doctor will be invited to participate.
Sometimes, the shaliach adds private vacation days to the shlichut. The director of the Shlichim Section told us that she does not purchase medical and luggage insurance with respect to the days during which the shaliach is on vacation abroad.
The Office of the Comptroller is of the opinion that there is some risk when an employee goes on shlichut on behalf of KKL and is not insured during his stay overseas.
084 From a clarification we conducted, it follows that the insurance companies do not agree that the insurance policy should begin when the traveler is already abroad and so the shaliach cannot insure himself independently with respect to the vacation days.
The Office of the Comptroller recommends that the Shlichim Section purchase medical and luggage insurance for the shaliach for the overseas vacation days and set-off the cost of the insurance with respect to the vacation days from the per diem and reimbursement of expenses due to him.
The director of the Fundraising Division advised in response that he accepts the audit recommendations and that the matter will be arranged in the procedure that is to be updated, in consultation with the KKL insurance officer.
Hotels
In most cases, a room is booked at the hotel by the travel agent, at the request of the director of the Shlichim Section. Sometimes the travel agent arranges the payment in advance and sometimes the shaliach receives an advance for payment of the hotel and, at the end of the shlichut, he submits a receipt for completion of the accounting.
In the "Short-term shlichut overseas" procedure, it is determined that the Shlichim Section will reserve rooms at hotels of a reasonable level, as far as is possible, at the request of the shaliach and in accordance with the customary definitions at KKL.
We did not find out what the customary definitions at KKL regarding levels of hotels are. We recommend specifying what "a reasonable level" of hotels is and who is competent to approve a hotel at a higher level should no hotel of the requisite level be available.
083 The director of the Fundraising Division advised in response that in the procedure, to be updated, the level of hotels will be defined, based, inter alia, on the overnight rates in effect in the civil service.
It should also be stated in the procedure that receipt of a financial reimbursement with respect to payment to the hotel should be against submission of an original receipt only.
Adding Private Vacation Days to a Short-term Shlichut
Linking a private vacation overseas to the short-term shlichut could often reduce the cost of the airline ticket, particularly if the extension of the stay includes Friday-Saturday.
At the same time, a situation should be avoided where the planning of a private vacation overseas or a private event overseas constitute a cause for planning a trip for a work shlichut.
Hence, we recommend setting criteria for approval of a private vacation linked to a work-related trip and laying down in the procedure which is the competent body to approve linkage of the vacation.
We further recommend considering that, a shaliach who is not a KKL employee who links private vacation days above the number of days defined, shall participate in part of the cost of the airline ticket.
So that the director of the Shlichim Section will set-off the cost of the medical insurance for the private vacation days overseas from the per diem allowance of the shaliach, we recommend that the application form for a short-term shlichut require every shaliach to state whether he is linking vacation days, the number of the days, and also to attach approval for the vacation from the competent body.
The director of the Fundraising Division advised in response that the subject will be examined in depth and anchored in the procedure that is being updated.
086 Adding a Family Member to the Short-term Shlichut
The "Short-term shlichut overseas" procedure does not relate to the possibility that a KKL employee or shaliach who is not a KKL employee will add a family member, at his expense, to his trip as part of the short-term shlichut .
There is a reference in the procedure only to exceptional instances where the presence of the spouse is necessary.
The Office of the Comptroller recommends that KKL lay down a policy in the matter of adding a family member to a work-related journey and that it be anchored in the procedure.
The director of the Fundraising Division advised in response that rules will be laid down in the procedure being updated for adding a companion to a shaliach on behalf of KKL.
The Costs of a Passport and Inoculations
The audit found that in the "Short-term shlichut overseas" procedure there is no reference to the matter of payment of a reimbursement for expenses with respect to the issue / renewal of a passport, either for a KKL employee or for a shaliach who is not a KKL employee.
Similarly, there is no reference in the procedure to the matter of cover for costs with respect to required inoculations in preparation for shlichut in the relevant destinations.
The Office of the Comptroller recommends that KKL set a policy in the matter of expenditures for shlichim with respect to the issue / renewal of a passport and with respect to inoculations and that this be anchored in the procedure.
The director of the Fundraising Division advised in response that it will be stated in the procedure being updated that KKL will not pay any reimbursement for the issue of a passport. He added that, in the context of updating the procedure, it would be considered whether
085 to include reimbursement of costs with respect to inoculations, since the reference is to rare cases at KKL.
Travel Costs
The audit found that there is no reference in the "Short-term shlichut overseas" procedure to the matter of reimbursements of travel costs.
The Office of the Comptroller recommends laying down a policy in the matter of reimbursement of travel costs by urban and interurban transportation in exchange for receipts, including travel to the airport in Israel and abroad.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be included in the procedure being updated.
We also recommend laying down a policy regarding eligibility to car rental abroad (including GPS, parking, fuel, border fees and so on) and that this be anchored in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
Overtime
It is not customary at KKL to pay overtime to an employee who is on shlichut overseas.
The Office of the Comptroller recommends anchoring in the procedure the custom not to pay overtime for shlichut days overseas.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be included in the procedure being updated.
087 Per Diem and Salary Rate for Outside Bodies
Our audit showed that there is no reference in the "Short-term shlichut overseas" procedure to the matter of the per diem rate to be paid to a shaliach who is not a KKL employee, whether he does or does not receive salary during his shlichut.
The Office of the Comptroller recommends arranging the matter of payment of the salary and the per diem rate for shlichim who are not KKL employees, going for a short-term shlichut on its behalf in the procedure.
The director of the Fundraising Division advised in response that a shaliach who is not a KKL employee does not receive any salary with respect to his shlichut. The per diem rate he receives is identical to that which a KKL employee receives. At the same time, he noted that, in the procedure being updated, the subject of the payment to a professional outsider who goes on a short-term shlichut on behalf of KKL will be arranged.
Luggage
Our audit showed that there is no reference in the "Short-term shlichut overseas" procedure to the reimbursement of expenses with respect to payment for suitcases, charged on domostic flights. Similarly, there is no reference to the matter of payment for overweight suitcases.
The Office of the Comptroller recommends setting a policy in the matter of suitcases and anchoring this in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be included in the procedure being updated. There will also be a reference to the carrying of gifts for donors and of marketing material for seminars.
088 Accrual of Points in the Frequent Flyer Club
The aviation companies grant flight points to a passenger who has opened a private account in the frequent flyer club.
The amount of points accrued from each flight depends on the flight destination and the ticket type.
Accrual of points enables the issue of a free flight ticket to the passenger, a "bonus" or upgrading to business class.
The "Short-term shlichut overseas" procedure determines that the shaliach must sign a "waiver of rights" form at the frequent flyer club before the flight.
In the declaration which KKL drew up in February 2012, the shaliach is required to sign for one of three possibilities.
The Office of the Comptroller is of the opinion that the requirement to sign on one of three possibilities enables a shaliach, in certain situations, to make personal use of the points.
We recommend, therefore, changing the form of declaration in the matter of the use of frequent flyer club points and adopting the text of the declaration used at government ministries (Form 13.10.14). We further recommend that KKL adopt the recommendations of the internal audit conducted at KKL on this subject in December 2009.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
Per Diem Payment and Reimbursement of Work-Related Expenses
A shaliach going on a short-term shlichut receives an advance payment for per diem (food, drink and overnight) due to him, according to the country of destination and the number of per diem days approved for him in the
089 framework of the shlichut. If the hotel payment is not arranged in advance through the travel agency, the advance also includes estimated hotel costs.
At the end of the shlichut, the shaliach submits a "Per diem and expenditures report on the short-term shlichut" to the Shlichim Section, signed by him, together with receipts. The director of the Shlichim Section draws up a final shlichut account and determines whether the shaliach has a credit or debit balance.
Per Diem Rates for KKL Employees
The short-term shlichut procedure determines that the per diem allowance to be paid to the shaliach going on a short-term shlichut shall be in accordance with the rate which the Inter-ministerial Committee for Civil Servants of the Accountant-General publishes from time to time.
The table specifies the rate for food and drink and also the rate for overnights in each country.
The audit found that, until March 2012, the director of the Shlichim Section paid the shlichim a per diem according to old rates, because she used a table from June 15, 2005. It may be noted that, since then, the Inter-ministerial Committee has updated the food, drink and overnight rates three times: on September 1, 2007, on September 1, 2009 and on February 2, 2011.
The Office of the Comptroller recommends that the director of the Shlichim Section check from time to time the updated rates for per diem through the internet site of the Ministry of Finance.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and has instructed the Shlichim Section accordingly.
When the short-term shlichut takes place under "conference conditions" (in other words, the shaliach receives three meals a day as part of the
091 conference), the shaliach receives the per diem allowance at a rate of 20 percent only.
The director of the Shlichim Section told us that the "conference per diem" at the rate of 20 percent is calculated from the full per diem rate – that is, including overnights. The Office of the Comptroller notes that, in addition to that, the shaliach is paid for overnights in full.
The Office of the Comptroller notes that, according to this method of calculation, there is a double payment for overnights. The 20 percent calculation should be from the rate for food and drink only rather than from the full per diem rate which includes overnights.
The director of the Fundraising Division advised in response that the Shlichim Section used an old table for the per diem rate which gave the food and drink and overnights together. He added that the matter will be amended and, from now on, the reimbursement at the rate of 20 percent will be made from the food and drink allowance, without the overnight allowance.
The audit showed that payment of "conference per diem" allowance, at the rate of 20 percent when the shlichut is on "conference conditions" – is not anchored in the short-term shlichut procedure.
The Office of the Comptroller recommends anchoring payment of the "per diem in conference conditions" as well as 20 percent calculation based on the food and drink component only, in the "short-term shlichut" procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be incorporated into the procedure being updated.
As noted, since 2007 the Inter-ministerial table has distinguished between the food and drink component and the overnight component.
090 The Office of the Comptroller recommends, therefore, that the text of the procedure be updated accordingly regarding the per diem allowance, with reference to the distinction between the food and drink component and the rate for overnights.
The short-term shlichut procedure determines that, for flight days, the shaliach is eligible for reimbursement of expenditures at 50 percent of the per diem costs.
On the other hand, the director of the Shlichim Section told us that the criterion according to which she pays the per diem allowance on flight days is: whether the shaliach spent the night abroad or in Israel.
The Office of the Comptroller recommends that the Shlichim Section insist on paying the 50 percent of the food and drink component on flight days, as required in the procedure.
Similarly, following the distinction between the food and drink component and the overnight component, we recommend stating in the procedure that calculation of the 50 percent of the per diem allowance on flight days will be made only out of the food and drink component.
The director of the Fundraising Division advised in response that in the procedure that is being updated it will be determined that the shaliach will be paid 50 percent of the food and drink component for flight days. Upon completion of the accounting to be drawn up at the end of the shlichut, expenditures will be reimbursed to him, subject to the provision of receipts.
The Office of the Comptroller notes that, since the overnight cost is according to the price which the hotel sets, the overnight rate recorded in the table of the Inter-ministerial Committee is not binding and constitutes only an estimate.
091 As stated, sometimes the hotel is paid in advance, through the travel agent, and sometimes the shaliach pays the hotel and receives a full cash reimbursement against presentation of the receipt.
Advance Payment to the Shaliach
As stated, shlichim going on a short-term shlichut receive an advance payment on account of the per diem allowance and, upon completion of the shlichut, a final accounting is made with them.
The director of the Shlichim Section estimates the requisite amount of the advance payment for the per diem allowance and work-related expenditures (for the hotel, for example) and asks the Finance Division to prepare the money in cash in the requisite currency. She notes the budgetary line for debiting in the letter.
The director of the Shlichim Section receives the cash and keeps it in the safe in the office pending its being handed over to the shaliach shortly before the date of departure for the shlichut.
Shortly before leaving for the short-term shlichut, the shaliach receives the advance payment, in cash, from the director of the Shlichim Section and signs a special form in which he confirms that he received the advance on account of the per diem and work-related expenditures, and notes whether the payment is in cash or travelers' cheques.
Since the advance payment is given to the shaliach in different currencies, in accordance with the shlichut destination (US Dollar, Euro, Canadian Dollar) – we recommend that the form be changed to permit the recording of the type of currency in which the advance payment is being given (sometimes more than one type of currency).
We further recommend stating the shlichut destination and travel dates so that it will be possible to associate the form with the signature for receipt of the advance with the relevant shlichut.
094 The director of the Fundraising Division advised in response that the text of the form has recently been changed accordingly and, currently, it contains the audit recommendation.
Per Diem Report
As stated, upon conclusion of the shlichut, the shaliach is required to submit a "Per diem and expenses report on short-term shlichut overseas" in which are specified all the work-related expenditures he had as part of the short- term shlichut and also the payment he received as an advance.
The director of the Shlichim Section prepares the final accounting and records the balance (credit or debit). She writes to the Finance and Economics Division and notes the amount for debiting or crediting the shaliach.
A worker in the Finance and Economics Division receives the per diem report together with the receipts for the work-related expenditures and, after examination, she sends a cheque to a shaliach who has a credit balance or receives from the Shlichim Section the cheque of the shaliach who had a debit balance.
The Office of the Comptroller recommends that the shaliach sign a form so confirming when he receives the cheque with respect to completion of the financial accounting.
We also recommend that the Finance Division update the Shlichim Section regarding completion of the accounting with the shaliach.
The director of the Fundraising Division advised in response that he accepts the audit recommendations and they will be incorporated into the procedure being updated.
As part of the audit, we looked at a sample of per diem reports and reimbursement of work-related expenditures and our findings follow:
093 A KKL employee went to the USA on shlichut in July 2011. Upon completion of the shlichut, a balance remained to his credit of NIS 8 but it was not paid to him because the director of the Shlichim Section asked the Finance Division to close the account since the amount was miniscule.
The Office of the Comptroller recommends that the Shlichim Section and the Finance Division pay the shaliach the full amount he is entitled to receive as per diem allowance and work-related expenditures.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
Three outside shlichim went, through KKL, for a short-term shlichut in South Africa in May 2011 with funding of the "Aerial fire-fighting fund": they received an advance payment of USD 300. At the end of the shlichut, they submitted a per diem report and an accounting was done with them for work-related expenditures such as registration fees, travel and internet use.
The audit found that the three shlichim did not sign the per diem report.
The Office of the Comptroller recommends that the Shlichim Section insist on drawing up the end of shlichut account only after the shaliach has signed the per diem report.
The Office of the Comptroller also recommends that the right to receive a financial reimbursement with respect to use of the internet be arranged in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be incorporated into the procedure being updated.
Three KKL employees went on a short-term shlichut to South Africa in May 2011. For the purpose of approval of the shlichut, the director of the Land Development Authority wrote to the director-general that the "Aerial fire- fighting fund" would fund the shlichut of Employee A and Employee B for
096 a conference on fire-fighting. KKL would pay only for the shlichut of Employee C.
The audit showed that, according to the shlichuyot report which the Fundraising Division drew up, in the first stage KKL paid the costs of the shlichut of Employee A.
The Office of the Comptroller notes that, on the expenditures account of the "Aerial fire-fighting fund", it is impossible to identify the nature of the expenditures and it is, therefore, unclear whether, at the end of the shlichut, KKL debited the budget of the fund with respect to the cost of the shlichut of Employee A.
It may also be noted that the cost of the shlichut of two further outside shlichim who attended the fire-fighting conference in South Africa through KKL in May 2011 cannot be identified in the account. It is thus unclear whether KKL debited the fund for the cost of the shlichut of both of them.
The Office of the Comptroller recommends that the Finance and Economics Division check whether KKL charged the "Aerial fire- fighting fund" for the shlichut of Employee A and of the two outside shlichim to the fire-fighting conference held in South Africa in May 2011.
A KKL employee went on shlichut to Canada in June 2011. Upon his return from the shlichut, he was paid a reimbursement of expenditures with respect to the purchase of a gift for a donor.
The Office of the Comptroller recommends that it be arranged in the procedure who is competent to purchase a gift for a donor and in what amount. It should also be determined who approves this expenditure and what budgetary line should be debited with respect to gifts for donors.
095 The director of the Fundraising Division advised in response that he accepts the audit recommendation and that KKL will write a procedure dealing with the matter of gifts and presents.
As part of the reimbursement of work-related expenses, the above shaliach was paid a reimbursement of expenditures with respect to hosting.
The Office of the Comptroller notes that Section 5.4.4 in the "Short-term shlichut " procedure refers to hosting costs overseas but it is not clear because it refers to the per diem allowance table which does not deal with hosting costs at all.
The Office of the Comptroller recommends that the eligibility for reimbursement of expenditures for hosting be arranged in the procedure and that Section 5.4.4 of the procedure be reworded.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be incorporated in the procedure being updated.
Payment of Reimbursement of Expenses and Per Diem Allowance
A KKL employee went to shlichut to South Africa in November 2011. According to the per diem report, she received a reimbursement for work- related expenditures with respect to telephone calls.
The Office of the Comptroller notes that it is determined in the procedure that a shaliach may not receive a cellular phone but there is no reference to the matter of telephone expenses.
The Office of the Comptroller recommends that the reimbursement of expenditures for work-related telephone calls be arranged in the procedure.
097 The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be incorporated in the procedure being updated.
As part of the sample we examined, we found a number of shlichuyot that included a conference, for which the shlichim were paid the per diem allowance at the full rate, rather than at 20 percent for the conference days.
The Office of the Comptroller recommends that shlichim going to attend a conference be required to append the invitation and to state whether the conference includes meals, so that the Shlichim Section will be able to calculate the per diem allowance accordingly.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be incorporated in the procedure being updated.
An employee of the Land Development Authority went on shlichut to South Africa in May 2011. According to the per diem report he submitted, he received a reimbursement of expenditures for a tour.
A KKL employee attended a seminar in the USA in May 2012. We found that he was paid a reimbursement of expenditures for a suitcase and for lunch on the flight.
The Office of the Comptroller recommends that the body competent to approve payment of a financial reimbursement for special expenses incurred during the course of the shlichut be arranged in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be incorporated in the procedure being updated.
098 The procedure determines that when a shaliach does not submit a receipt for a work-related expenditure, he makes a declaration about it and will receive a reimbursement at the rate of 50 percent only.
The audit found that, in a number of cases, the Shlichim Section paid a full reimbursement despite the shaliach not having submitted receipts.
The Office of the Comptroller recommends that the Shlichim Section insist on paying a reimbursement of work-related expenses at the rate of only 50 percent of the amount the shaliach declares, as required in the procedure.
The director of the Fundraising Division advised in response that in the procedure being updated it will be determined that every request for payment of a reimbursement of expenses which is not accompanied by a receipt will have to obtain approval of the "Exceptions Committee" which is to be anchored in the procedure.
A KKL employee went on shlichut to the USA in July 2011 in order to take part in a seminar on forestation and management of protected areas. The application form has 20 per diem days but the director-general approved only six per diem days.
The audit showed that, although the director-general approved only six per diem days, the director of the Shlichim Section paid him a per diem allowance for the 20 days of the shlichut.
The Office of the Comptroller recommends that the Shlichim Section make sure to pay the per diem allowance in accordance with the number of days approved by the director-general.
The director of the Fundraising Division advised in response that the director-general had erroneously approved only six per diem days, rather than 20 per diem days.
099 It is determined in Section 5.8.4 of the "Short-term shlichut" procedure, that the shaliach has to submit the per diem report within 30 days of his return to Israel, otherwise all the advance payments he received in Israel and overseas will be deducted from his salary and he will not be given approval for a new trip.
The audit found that a KKL employee submitted the per diem report on December 7, 2011, although he had returned from the shlichut on August 6, 2011, in other words, four months after his return.
The Office of the Comptroller recommends that the Shlichim Section follow up on receipt of the per diem report from the shlichim and send them a reminder soon after their return from the shlichut.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
The audit showed that the said employee did not sign the per diem report but that somebody else signed in his name.
The Office of the Comptroller recommends that the Shlichim Section insist that the shaliach himself sign the per diem report he fills in.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
A KKL employee went on shlichut to France and took part in the conference of KKL presidents. His end of shlichut account came to NIS 183 to his credit.
The audit found that the payment order has an unidentified signature without the name of the person signing.
The Office of the Comptroller recommends that the Finance Division implement the payment order only if an authorized signatory has signed it.
111 The director of the Fundraising Division advised in response that he accepts the audit recommendation.
Instructions Sheet for the Shaliach
The audit found that the shlichim lack important information prior to their departure for the short-term shlichut.
The Office of the Comptroller recommends that the Shlichim Section prepare an instructions sheet for a shaliach going on a short-term shlichut and give him the following information before his trip:
a. The shaliach is entitled to a reimbursement of expenses for a journey to and from the airport in Israel and abroad, against presentation of an original receipt.
b. The shaliach has to submit to the Shlichim Section a per diem report within 30 days of his return from the shlichut, together with receipts with respect to work-related expenditures and a receipt from the hotel.
c. On completion of the shlichut, he has to submit a "Summary of shlichut report", specifying the places, dates, meetings and activities held during the shlichut. It should be defined to whom the shaliach has to submit the report and this should be stated on the instructions sheet.
d. An explanation about the arrangement of medical insurance suitable for the health condition of the shaliach.
e. Attachment of the medical and luggage insurance policy and an explanation to whom he should turn when necessary.
f. An explanation regarding the prohibition on using the frequent flyer club points.
110 g. The name and telephone number of a contact person at KKL whom he should contact if there is a change in, or cancellation of, the flight or a problem with the reservation of the hotel.
The director of the Fundraising Division advised in response that the shaliach does receive an oral explanation. At the same time, he accepts the audit recommendation for preparation of a sheet of directives for the shaliach.
Procedures
The short-term shlichut overseas procedure came into effect in June 2004. The audit found that the director-general of KKL is not a signatory to the procedure.
The Office of the Comptroller recommends insisting that the director- general of KKL sign the short-term shlichut overseas procedure.
The director of the Fundraising Division advised in response that when the procedure is updated it will be sent for the signature of the director-general.
We further recommend determining in the procedure the body responsible for updating the short-term shlichut overseas procedure.
The director of the Fundraising Division advised in response that KKL has a special procedure arranging the way of dealing with changes in an existing procedure.
In October 2004, KKL drew up a draft for the "Participation of KKL employees in courses, seminars and conferences" procedure. The procedure was not published.
In September 2006, the draft procedure was updated but that, too, has not been published so far.
111 It is to be noted that the responsibility and authority at KKL for writing, approving and distributing procedures is that of the Organization and Methods Department in the Human Resources Division.
The Office of the Comptroller wonders why the draft procedure prepared eight years ago and updated again six years ago has still not been published.
The director of the Fundraising Division advised in response that the Division has asked a number of times for the procedure to be published.
There are sections in the draft procedure dealing with short-term shlichuyot abroad and there is, therefore, some parallel with the "Short-term shlichut abroad" procedure.
The Office of the Comptroller thus recommends that KKL update the draft of the "Participation of KKL employees in courses, seminars and conferences" procedure in accordance with our recommendations regarding the "Short-term shlichut abroad" procedure.
We also recommend ensuring correlation between these two procedures.
We did not examine the draft of the procedure as part of the audit, but did find that there is no reference in the procedure to the special rate for the per diem payment when the shlichut is on "conference conditions".
The Office of the Comptroller recommends that it be determined in the draft of the "Participation of KKL employees in courses, seminars and conferences" procedure that, when the stay is on conference conditions (i.e., includes three meals a day), the per diem allowance will be paid at 20 percent of the rate set by the Inter-Ministerial Committee.
The director of the Fundraising Division advised in response that he accepts the audit recommendations.
114 Updating Human Resources Department about the Short-Term Shlichut
It is determined in the "Short-term shlichut" procedure that: "With receipt of the short-term shlichut approval, the Shlichim Section will advise the Unit for the Individual in the Human Resources Department with respect to the stay of the employee overseas. The notification will contain the name of the employee, the date of departure and the estimated date of return, including actual delays if any (if there were delays, they are to be reported at the end of the shlichut).
The audit found that the Shlichim Section does not notify the Human Resources Department at all about the stay of the employee overseas.
The Office of the Comptroller recommends that KKL make sure to update the Human Resources Department about the stay of the employee overseas.
The director of the Fundraising Division advised in response that that he has instructed the director of the Shlichim Section to update the Human Resources Department immediately upon the departure for the short-term shlichut. He added that in the procedure being updated it will be determined that the employee also has an obligation to update the Human Resources Department about the actual dates of the shlichut.
Security Briefing
In the "Short-term shlichut" procedure it is determined that the Shlichim Section shall advise the Security Unit of employees and public figures going abroad on behalf of KKL for a short-term shlichut. It is determined that at least one month prior to the date of the flight, the Section will send to the Security Unit a list of names of the shlichim, their identity numbers, the
113 organizational ascription and function, the shlichut destination, the purpose of the shlichut and the dates of departure and return.
The procedure determines that it is the responsibility of the Shlichim Section to ensure that those going abroad for a short-term shlichut will receive a security briefing while coordinating the date of the briefing with the Security Unit.
The audit found that the Shlichim Section does not notify the Security Unit about employees and public figures going abroad on behalf of KKL for a short-term shlichut. We also found that the shlichim do not receive a security briefing.
The Office of the Comptroller recommends that KKL ensure implementation of the procedure in the matter of holding a security briefing for the shaliach and updating of the Security Unit about shlichim going abroad or that it consult with the Security Unit and consider changing the requirement in the procedure.
The director of the Fundraising Division advised in response that from now on the Shlichim Section will update the Security Unit on a current basis. He added that in the procedure to be updated the requirement for holding a security briefing will be addressed.
Summary of Activity Report
The "Short-term shlichut overseas" procedure determines that the shaliach must submit a "summary of activity report" within 30 days of his return to Israel, specifying in it all the places, dates, meetings and activities held during the overseas shlichut.
Before the departure for the short-term shlichut , the shaliach signs a form regarding the points in the frequent flyer club in which he undertakes to give
116 a "shlichut report" to the direct superior, immediately upon his return from the shlichut.
The audit found that, as a rule, there is no systematic follow-up on completion of the "Summary of activity report". The director of the Projects, Signs and Tourism Department told us that he sometimes reminds shlichim whom he happens to meet, after their return from shlichut.
The Office of the Comptroller recommends that KKL lay down in the procedure to whom the shaliach has to submit the summary of activity report and who is the body responsible for ensuring that the shlichim submit the report.
We recommend that in the instructions sheet for the shaliach, which we recommended above, it be noted to whom the shaliach has to submit the "Summary of activity report" immediately upon his return from the shlichut.
The director of the Fundraising Division advised in response that the procedure that is to be updated will detail the requirement to hand in a summary of activity report immediately upon the return from the shlichut.
Half-yearly Report
The "Short-term shlichut overseas" procedure determines that once in every six months the Shlichim Section shall produce, upon the instruction of the director-general or the director of the Fundraising Division, a report in which shall be detailed the shlichuyot of the employee and expenditures.
It is actually the secretary of the Projects, Signs and Tourism Department who prepares the report.
The audit found that the director of the Projects, Signs and Tourism Department receives every six months the report in which the shlichuyot are listed. At the same time, the half-yearly report does not contain details of the
115 expenditures incurred with respect to the short-term shlichuyot. We were told that, only at the end of the year, a report is drawn up which also includes the expenditures with respect to the shlichut.
The Office of the Comptroller recommends that the expenditures also be detailed in the half-yearly report for each of the shlichuyot (airline ticket, per diem allowance, hotel, reimbursement of work-related expenditures, entry visas and health and luggage insurance), and so on.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and will act according to the procedure.
Additionally, since the director-general approves the short-term shlichuyot, we recommend that the half-yearly report also be sent to the director-general every six months.
The director of the Fundraising Division advised in response that it will be determined in the procedure to be updated that the bodies authorizing the short-term shlichut are the chairman and co- chairman and that it will also be required for the half-yearly report to be sent to them.
The audit found Executive members, such as: the director of the land arrangements, the director of the Land Development Authority and the director of the Education Department and the Legal Advisor, who do not feature in the chapter of "Executive members" but are entered in the chapter on employees.
The Office of the Comptroller recommends that the chapter of Executive members in the half-yearly report include the shlichuyot of all Executive members.
As part of the audit, we looked at the data in the half-yearly report.
117 The audit found that the data about the short-term shlichuyot and their costs in 2010, 2011 and 2012 were incomplete and inaccurate.
The Office of the Comptroller recommends insistence that the data on the costs of the short-term shlichuyot in the half-yearly report be complete and accurate.
Short-term Shlichuyot of Executive Members at KKL
Introduction
A short-term shlichut is a shlichut of an employee of KKL or an outside body going for activity on its behalf overseas for a period of up to 14 days and not more than 45 days in a year.
In 2012, there were 24 short-term shlichuyot of Executive members, directors and public figures. In 2011, there were 23 short-term shlichuyot and, in the first quarter of 2012, there were 13 short-term shlichuyot.
Approval of the Short-term Shlichut
Travel Authorization
The October 1999 procedure "Expenditures of Executive members" describes the handling of short-term shlichuyot of Executive members.
The Executive members who were defined in the procedure are: the chairman of the Board of Directors, the co-chairman, the vice-chairman, director-general, director of the Land Development Authority, directors of divisions and the Legal Advisor.
The procedure determines that journeys of Executive members are to be approved by the chairman of the Board of Directors. Travel of the chairman is to be approved by the co-chairman.
118 In November 2006, the KKL Executive resolved to transfer to the director- general the authority to approve short-term shlichuyot of directors of divisions, rather than the chairman of the Board of Directors.
It is determined in the procedure that each request for a short-term shlichut of a member of the Board of Directors shall be brought for a special discussion of the chairman of the Board of Directors and the co-chairman.
The Office of the Comptroller is of the opinion that holding a discussion by the chairman of the Board of Directors and the co-chairman is insufficient. The body competent to approve the travel for a short-term shlichut of members of the Board of Directors should be set in the procedure.
The audit found that there is no reference in the "Expenditures of Executive members" procedure to approval of short-term shlichuyot of public figures.
The Office of the Comptroller recommends that the body competent to approve a short-term shlichut of public figures be determined in the procedure.
The director of the Fundraising Division advised in response that it will be stated in the procedure to be updated that the chairman of the Board of Directors and the co-chairman, jointly, are the bodies competent to approve travel for a short-term shlichut of Executive members, members of the Board of Directors and public figures.
KKL has a "travel authorization" form for a short-term shlichut intended for public figures, directors, vice-chairmen and director-general – which is sent to the chairman of the Board of Directors to be signed .
In June 2012, a change was made in the "travel authorization" form and, instead of the note that the co-chairman may also approve the short-term trips, place was designated for the signature of the co-chairman alongside that of the chairman of the Board of Directors. This followed the co- chairman taking up his position.
119 The Office of the Comptroller notes that the "Expenditures of Executive members" procedure does not grant the co-chairman authority to approve short-term shlichuyot. The authority is given to the chairman of the Board of Directors only.
The Office of the Comptroller recommends that the requirement for obtaining the signature of the co-chairman be deleted from the "travel authorization" form. Should it be resolved to grant him also the authority to approve short-term shlichuyot, this should be determined in the procedure.
The director of the Fundraising Division advised in response that, in the procedure being updated, it will be stated that the chairman of the Board of Directors and the co-chairman, jointly, are the competent bodies for approving the short-term shlichuyot of Executive members. The "travel authorization" form will be updated accordingly.
A new section was added to the June 2012 "travel authorization" form: "Number of days approved".
The Office of the Comptroller notes that the reference is to the per diem days which the chairman of the Board of Directors is supposed to approve for the short-term shlichut. We recommend, therefore, that the text be changed and that it be noted in the "travel authorization" form: "Number of per diem days approved". We recommend that this clause appear near the signature of the chairman so that it can be understood that the chairman fills in the number rather than the actual member of the Executive.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
The budgetary line to be debited with respect to the cost of the short-term shlichut has to be stated on the "travel authorization" form.
101 The Office of the Comptroller recommends that the body competent to determine which budgetary line is to be debited with respect to short- term shlichut of Executive members, directors and public figures should be determined in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
We also recommend that the director of the relevant division / department approve the charging of the expenditures when they are made from his budget.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
It is also determined in the procedure that a member of the Executive shall specify the destination of the travel, its purpose and dates, at the maximum level of detail, in his request.
The audit showed that the information given in the form is not always detailed. We recommend, therefore, requiring Executive members, members of the Board of Directors and public figures to specify the timetable overseas in their request for each journey.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be incorporated into the procedure to be updated.
When the shaliach attends a conference, in the framework of which three meals are served per day, the shaliach is entitled to a per diem allowance of only 20 percent.
We recommend, therefore, adding a section to the "travel authorization" form in which the shaliach will note the number of days out of the shlichut days which are on "conference per diem" conditions and also that he should attach the invitation to the conference.
100 Furthermore, we recommend that the shaliach give his identity certificate number in the "travel authorization" form to make identification of the shlichut easier for supervision and control purposes.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
Duration of the Shlichut
The procedure determines that a short-term shlichut shall not exceed 14 days. In exceptional cases, and with the approval of the chairman, the shlichut can continue for up to 21 days. It is also determined that the number of days of stay abroad of a member of the Executive shall not exceed 45 days in a year. Ten additional days are possible in the case of urgent needs and according to the request of the chairman of the Board of Directors or of the co-chairman.
The Office of the Comptroller recommends that a section be added to the "travel authorization" form in which the shaliach be required to give grounds as to why he is asking for an extension beyond the 14 days determined in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation. He added that, in the procedure to be updated, the maximum period will be determined for a short-term shlichut and for also the mode of authorization of a shlichut exceeding the number of shlichut days determined in the procedure.
Furthermore, the Office of the Comptroller recommends that it be determined in the procedure that the length of the trip for a short-term shlichut and the quota of days spent overseas per year also relate to members of the Board of Directors and to public figures.
101 The director of the Fundraising Division advised in response that he accepts the audit recommendation.
As part of the audit, we checked the number of days spent overseas by Executive members in 2010 and 2011 and found there to have been no deviation from the quota of shlichut days determined in the procedure.
At the same time, we recommend that the Shlichim Section note on the "travel authorization" form the cumulative days spent abroad so far in the year for Executive members, directors and public figures – before the form is sent for the approval of the chairman of the Board of Directors.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
Change in the Shlichut Dates
The audit found that, in a number of cases, there is no correspondence between the travel dates featuring in the "list of travelers" of the Shlichim Section and the actual dates of travel.
The Office of the Comptroller recommends that the director of the Shlichim Section be punctilious about updating the "list of travelers" with the updated times of the short-term shlichut whenever there is a change in the shlichut dates so as to ensure proper payment of the per diem allowance and medical insurance cover.
The Office of the Comptroller recommends that, when there is a substantive change in the shlichut dates, a new "travel authoriz-ation" form should be filled in with the updated travel times and sent anew for approval.
The director of the Fundraising Division advised in response that, the mode of treatment, when there is a change in the shlichut date
104 that has already been approved, will be arranged in the procedure to be updated.
Preparation of an Annual Travel Schedule
The procedure determines that Executive members shall submit an annual travel schedule to the chairman of the Board of Directors by the last week of December each year for the ensuing year.
The travel schedule is flexible and can be altered after submission for approval of a request for a change not later than 14 days prior to the requested date of the change.
It is further determined in the procedure that a travel request shall be submitted for approval at least 14 days prior to the planned date of departure and will be approved within three days but not later than a week before the date of the flight, this being on condition that there is no deviation from the annual schedule.
The audit showed that Executive members do not submit an annual travel schedule to the chairman of the Board of Directors. The chairman of the Board of Directors and the co-chairman travel, inter alia, for fundraising events according to a schedule of events which the Fundraising Division prepares in advance.
The Office of the Comptroller recommends that the chairman of the Board of Directors insist that Executive members submit an annual travel schedule to him, in December, as required in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
103 Travel Conditions
Preface
The "Expenditures of Executive members" procedure determines the travel conditions of Executive members going on a short-term shlichut. For example: the quota of days spent abroad in a year, the flight class, addition of a spouse, payment of the per diem allowance and so on.
The audit found that there is no reference in the procedure to the travel conditions of members of the Board of Directors and public figures going for a short-term shlichut .
We recommend adding directives to the procedure regarding the travel conditions of members of the Board of Directors and public figures going for a short-term shlichut .
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
Flights and Hotels
The procedure determines that the chairman of the Board of Directors and the co-chairman may take all their journeys in business class. Flights of Executive members are in tourist class. They may fly in business class on transatlantic flights.
The procedure also determines that the "handling of work-related travel overseas, including the booking of flight tickets, shall be done by the Shlichim Section. The travel itineraries shall, as far as possible, be chosen according to the cheapest itinerary and the Shlichim Section will arrange for stays at hotels of a reasonable standard.".
The audit found cases where flights and hotels were booked directly with the travel agent and not through the KKL Shlichim Section. In other cases,
106 changes in flights which had been booked by the Shlichim Section were also made directly with the travel agent and not through the KKL Shlichim Section.
The Office of the Comptroller notes that booking flights and hotels directly with the travel agent and not through the Shlichim Section is irregular and contrary to the provisions of the procedure. The authority and responsibility for doing so is in the hands of the Shlichim Section and it is supposed to insist on performance of the provisions of the procedure within the sphere of its handling.
We recommend, therefore, insisting that the contractual arrange-ments with the travel agents be made only by the director of the Shlichim Section. There should also be insistence that any required change in the matter of the shlichut be done only through the Shlichim Section.
The director of the Fundraising Division advised in response that trip coordinations made directly with the travel agents are reported to the Shlichim Section. At the same time, he added that from now on there will be insistence on carrying out the provisions of the procedure.
We further recommend that criteria be determined for the purpose of the definition of "reasonable standard" of hotels and also that it be defined who is competent to approve a hotel of a higher standard whenever necessary.
The director of the Fundraising Division advised in response that in the procedure to be updated the standard of the hotels will be defined based, inter alia, on the overnight rates customary in the civil service.
Addition of Spouse
It is determined in the procedure: The spouse of a member of the Executive may not join her husband at KKL expense. If she comes at her own expense,
105 KKL will cover the costs of an additional person in the room at a hotel and breakfast. In exceptional cases, when there is a need for the attendance of the spouse in the interests of KKL, authorization is to be obtained from the chairman of the Board of Directors or from the co-chairman.
The Office of the Comptroller recommends that the formulation of the clause be amended to include the husband of a female member of the Executive.
In our assessment, when the spouse joins at his/her expense and KKL pays the costs of the hotel and breakfast of the spouse, some body at KKL should know and approve of this in advance.
Since KKL is paying the costs of the spouse for the hotel and breakfast, we recommend that in the "travel authorization" form Executive members be required to state if their spouse is coming at their expense. Thus, the chairman of the Board of Directors can relate to this request also when he approves the short-term shlichut.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and that it will be incorporated into the procedure that is being updated.
The CEO of the International Center for the Study of Bird Migration was invited by the JNF of Australia to assist in the Blue Box Campaign and fundraising events in Australia and New Zealand.
It is determined in the procedure that "the addition of a spouse of a shaliach who is not a KKL employee is to be approved by the senior management (i.e., the chairman of the Board of Directors, the co-chairman, vice- chairman and director-general).
The audit found that the wife of the shaliach joined the trip at the expense of KKL but that the request for the shlichut was approved only by the chairman of the Board of Directors and the co-chairman.
107 The Office of the Comptroller recommends that the Shlichim Section be careful to deal with shlichuyot in which an external body takes a spouse for the shlichut only after the senior management has approved the addition of the spouse for the shlichut, as required in the procedure.
The director of the Fundraising Division advised in response that the matter will be arranged in the procedure that is being updated.
The Office of the Comptroller further recommends that the policy regarding taking the spouse of the chairman of the Board of Directors and the co-chairman be arranged in the procedure.
The director of the Fundraising Division advised in response that the matter will be arranged in the procedure that is being updated.
Subjects Omitted from the Procedure
In the "Expenditures of Executive members" procedure, there is no reference to a gamut of subjects regarding the travel conditions in the short- term shlichut framework.
The Office of the Comptroller recommends that the following matters be arranged in the "Expenditures of Executive members" procedure:
- Obtaining the signature of Executive members, directors and public figures on a medical declaration prior to each departure so that the Shlichim Section can purchase for them a medical insurance policy appropriate for their medical condition (see particulars, above). If the Executive member purchases the insurance himself, he must undertake to purchase a policy suitable for his medical condition for the whole of the period of the shlichut. The shaliach has to be insured for the whole of the period of his stay abroad and the cost of the insurance with respect to vacation days appended to the short-term shlichut has to be set off from the per diem allowance.
108 - Arrangement of authorization for appending private vacation days to the short-term shlichut and recording the vacation on the "travel authorization" form.
- Arrangement of payment of the reimbursement of expenses with respect to passport renewal and inoculations.
- Arrangement of payment of the reimbursement of expenses with respect to the purchase of medical and luggage insurance on his own against a receipt.
- Arrangement of payment of the reimbursement of expenses with respect to travel by public transport and rented vehicle.
- Arrangement of payment of the reimbursement of expenses with respect to luggage: payment for overweight and for suitcases (on inland flights).
- Arrangement of payment of the reimbursement of expenses with respect to the purchase of gifts for donors.
- Arrangement of payment of the reimbursement of expenses for hiring evening wear for participation in formal functions.
The director of the Fundraising Division advised in response that he accepts the audit recommendations and they will be incorporated into the procedure being updated.
Updating of the Human Resources Department and Holding a Security Briefing
The Office of the Comptroller notes that there is no requirement in the "Expenditures of Executive members" procedure to update the Unit for the Individual in the Human Resources Department with respect to the overseas stay. Nor is there any requirement that they undergo a security briefing before their departure for the shlichut. As noted, this requirement appears in
109 the "Short-term shlichut overseas" procedure in reference to KKL employees.
The Office of the Comptroller recommends that a policy be laid down in the matter of updating the Human Resources Department and the security briefing for Executive members and directors and public figures, and that it be anchored in the procedure.
The director of the Fundraising Division advised in response that he had instructed the director of the Shlichim Section to update Human Resources with respect to every shlichut. He also advised that from now on an obligation to report to the security officer will apply and a security briefing will be held for Executive members going for a short-term shlichut, at the discretion of the security officer.
Accrual of Points in the Frequent Flyer Club
Waiver of Rights
In the procedure, it is determined: "Every benefit, including in the frequent flyer program, added to the work-related trip – shall be transferred to KKL. The traveler will not personally enjoy these benefits.".
In 2010, 2011 and to the first quarter of 2012, KKL did not use the frequent flyer club points accrued in the accounts of Executive members, directors and public figures.
The director of the Flights Section told us that the only instance where use was made of points was in 2009 for the purchase of an airline ticket to Australia for the chairman of the Board of Directors.
The Office of the Comptroller recommends determining in the "Expenditures of Executive members" procedure that every Executive member and every member of the Board of Directors sign a letter of undertaking in which he waives the rights that he could have from his
111 trips which are funded by KKL and he transfers them to it and he undertakes not to make use of these points.
As noted, we recommended in the body of the above report that the formulation of the declaration be changed and that the text in use by the government ministries be adopted.
Per Diem Allowance and Reimbursement of Work-Related Expenditures
Payment of Increased Per Diem, Refreshments and Work-Related Entertainment
The "Expenditures of Executive members" procedure determines that the per diem rate (food, drink and overnights) to be paid to a shaliach shall be in accordance with the table which the Inter-ministerial Committee at the Ministry of Finance publishes for civil servants.
The audit found that, until March 2012, the director of the Shlichim Section paid Executive members a per diem allowance according to old rates because she referred to a table from June 2005.
The Office of the Comptroller recommends that the director of the Shlichim Section check from time to time if the rates have been updated, through the internet site of the Ministry of Finance.
The director of the Fundraising Division advised in response that he has instructed the director of the Shlichim Section to check each month whether the rates have been updated.
It is usual at KKL to pay "incremented per diem" to members of the Executive, the directors and directors-general (divisional directors). Executive members and directors receive an increment of 25 percent to the rate of the per diem allowance determined in the Inter-ministerial Committee table. Divisional directors receive an increment of 20 percent to the rate in the table.
110 In addition to the "incremented per diem", it is usual at KKL also to pay a refreshments allowance to Executive members, directors and divisional directors. Members of the Executive and directors receive an increment of USD 25 for each day. Divisional directors receive an increment of USD 20 for each day.
The audit found that the payment of the two increments: "incremented per diem" and "refreshments", which are in excess of the per diem rate which the Inter-ministerial Committee set, is not anchored in the procedure.
The Office of the Comptroller recommends that KKL reconsider the justification for paying a larger per diem as well as refreshments to members of the Executive, directors and divisional directors, in excess of the per diem rate which the Ministry of Finance has set.
It is determined in the procedure that members of the Executive are entitled to reimbursement of expenditures with respect to "work-related entertainment", together with receipts, and they have to state the purpose of the entertainment and the participants.
As part of the audit, we looked at a sample of receipts with respect to "work-related entertainment" which members of the Executive submitted and we found that they are not diligent about recording the purpose of the entertainment and the names of the participants.
The Office of the Comptroller recommends that the directive that the purpose of the entertainment and the names of the participants be stated on the receipt be refreshed for Executive members.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and there will be a reminder of the procedure. He added that, sometimes, stating names could entail an invasion of privacy, particularly when the reference is to donors and so, whenever there is no obstacle to so doing, the names of the participants will be given.
111 It is determined in the procedure: "Other personal expenditures as part of the stay at the hotel will be paid directly by the Executive member when departing from the hotel.".
We found that there are Executive members who attach to the per diem report a receipt from the hotel which includes "extras". KKL paid the "extras", contrary to the procedure.
The Office of the Comptroller recommends that it be clarified to members of the Executive that they have to pay for the "extras" themselves.
The director of the Fundraising Division advised in response that he accepts the audit recommendation to prepare a sheet of directives for the shaliach, including the financial issues regarding the short-term shlichut .
We further recommend that the director of the Shlichim Section and the Finance and Economics Division check the components of the expenses listed on the receipt from the hotel and ensure that KKL pay only the expenses to which the shaliach is entitled according to the procedure.
The Office of the Comptroller is of the opinion that, when members of the Executive submit a receipt with respect to "work-related entertainment" there is a double payment for that meal. This is because, at the same time, an incremented per diem is paid to them as well as an increment of USD 25 a day for "refreshments".
The Office of the Comptroller recommends that it be determined in the procedure that, when a member of the Executive submits a receipt and obtains a reimbursement of expenses with respect to "work-related entertainment", the relative amount should be set off from the per diem allowance paid to him: 10 percent for breakfast, 45 percent for lunch and 45 percent for dinner.
114 The director of the Fundraising Division advised in response that he accepts the audit recommendation and it will be incorporated into the procedure being updated.
The audit found that sometimes, as part of the "work-related entertainment", KKL employees who receive a per diem allowance take part in the meal. In other words, here, too, there is a double payment for the one meal.
The Office of the Comptroller recommends that, when preparing the end of shlichut account, a financial reimbursement not be paid for the meal of the KKL employees since the per diem allowance has already been paid for this meal.
The Office of the Comptroller recommends determining in the procedure that directors are entitled to a reimbursement of expenditures with respect to "work-related entertainment", against submission of a receipt.
The director of the Fundraising Division advised in response that the matter will be anchored in the procedure to be updated.
We also recommend determining in the procedure which is the body that is competent to approve exceptional expenditures of members of the Executive which are recorded in the per diem report they file at the end of the shlichut.
The director of the Fundraising Division advised in response that the matter will be incorporated in the procedure to be updated.
Reimbursement for "Work-Related Expenditures"
It is determined in the procedure that rental of a cellular telephone for a member of the Executive will be possible in accordance with the availability of the appliances.
113 The Office of the Comptroller recommends that the section in the procedure dealing with the rental of a cellular phone be updated because it is no longer relevant.
The director of the Fundraising Division advised in response that the subject of reimbursement of expenditures with respect to the use of a cellular phone will be anchored in the procedure to be updated.
According to the per diem report which members of the Executive submit, we found that they were paid a reimbursement of expenses with respect to internet use.
The Office of the Comptroller recommends that the reimbursement of expenditures with respect to internet use be arranged in the procedure.
The director of the Fundraising Division advised in response that the subject of reimbursement of expenditures with respect to internet use will be anchored in the procedure to be updated.
The audit found that there is no reference in the "Expenditures of Executive members" procedure to the per diem allowance rate on the day of the flight. It is to be noted that it is determined in the "Short-term shlichut" procedure that the shaliach is entitled to 50 percent of the per diem on flight days.
Since the inter-ministerial table which was published in February 2011 distinguishes between the rate for "spending time" (food allowance) and the overnight rate, we recommend amending the clauses in the procedure that speak about "per diem allowance" and refer to the new terms, accordingly.
It should also be clarified in the procedure that on flight days the shaliach is entitled to 50 percent of the "spending time" allowance only rather than the full rate which includes the overnight. As noted, the reimbursement for overnights is made separately, in accordance with the receipt from the hotel.
116 The director of the Fundraising Division advised in response that he accepts the audit recommendation and that it will be incorporated in the procedure to be updated.
The procedure determines that Executive members who take part in seminars at which three meals a day are served are entitled to a reimbursement of 20 percent.
The Office of the Comptroller recommends that it be determined in the procedure that the directive regarding payment of the "conference per diem" allowance at the rate of 20 percent also be in effect for members of the Board of Directors.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and that it will be incorporated in the procedure to be updated.
The audit showed that the Shlichim Section has been calculating the 20 percent from the full per diem allowance, including overnights. This is in addition to payment for the overnights.
The Office of the Comptroller notes that, according to the method of calculation of the Shlichim Section, there is a double payment for the overnights.
We recommend that the Shlichim Section calculate the reimbursement at the rate of 20 percent of the "spending time" amount only and that the mode of calculation be clarified in the procedure.
The audit found a number of cases where the full per diem rate was paid to members of the Executive and the Board of Directors although they participated in seminars which were on conference terms and they were, therefore, entitled to only 20 percent of the per diem amount.
115 The Office of the Comptroller recommends that the Shlichim Section ensure payment of the per diem at the rate of 20 percent only where the shlichut is on conference terms.
The director of the Fundraising Division advised in response that it is not always possible to know in advance whether the seminar includes meals. It will, therefore, be stated in the procedure to be updated that for any shlichut for the purpose of a seminar, the food and drink allowance will be paid in advance at the rate of 20 percent. If it turns out that the shaliach himself paid for all the meals, at the end of the shlichut he will attach the receipts to the per diem report and the balance of the food and drink allowance will then be paid to him accordingly.
Payment Order
The signature of the superior of the shaliach is required on the payment order which the Shlichim Section prepares in accordance with end of shlichut account.
The Legal Advisor went on a short-term shlichut to the USA in March 2012. The end of shlichut account came to a credit balance of NIS 1,189.
The Office of the Comptroller notes that there is a signature on the payment order but it is unclear who signed it. It is to be noted that the director of the Finance Division did not sign the payment order.
Similarly, there is an unidentified signature without a name on the payment order of the director of Lands who went on a shlichut to Romania in January 2012.
The Office of the Comptroller recommends that the Finance Division insist that the name of the superior of the shaliach who signs the payment order shall appear on the payment order.
117 The Office of the Comptroller was told that the Finance Division will insist on identification of the name of the signatory on the payment order. Moreover, the procedure will be refreshed.
The director of the Finance and Economics Division went on a short-term shlichut to Romania in February 2012. His end of shlichut account came to a credit balance of NIS 985.
Since the director of the Finance and Economics Division cannot sign for himself on the payment order, the amount of the balance was paid to him without anyone signing the payment order.
The Office of the Comptroller recommends that it be determined in the procedure who is the body with signatory rights at KKL who is competent to sign the payment order for the payment to the director of the Finance Division.
The director of the Fundraising Division advised in response that he accepts the audit recommendation and that it will be incorporated in the procedure to be updated.
The Finance Division should also look into how an unsigned payment order was paid.
Authorization and Examination of "Work-Related Expenditures"
The procedure determines that expenditures of Executive members shall be approved by the chairman of the Board of Directors. Expenditures of the chairman shall be approved by the co-chairman.
The audit found that none of the "work-related expenditures" of Executive members and directors is sent for the approval of the chairman of the Board of Directors. Similarly, the "work-related expenditures" of the chairman are not sent for the approval of the co-chairman.
118 The Office of the Comptroller recommends that the Shlichim Section and the Finance Division insist on dealing with the per diem report of members of the Executive only after the chairman of the Board of Directors has approved the work-related expenditures they had during the shlichut, as determined in the procedure.
We also recommend determining in the procedure that the per diem reports of members of the Board of Directors and of public figures be sent for the approval of the chairman of the Board of Directors.
The director of the Fundraising Division advised in response that in the procedure to be updated a check will be required by a professional body in the Fundraising Division, followed by a further control of the Finance and Economics Division.
The procedure determines that the expenditure reports of members of the Executive shall be sent for checking of the director of the Finance Division.
The audit found that this provision of the procedure is not implemented.
The Office of the Comptroller recommends that the director of the Finance and Economics Division perform a check up of the expenditure reports of members of the Executive, as required in the procedure.
We also recommend determining in the procedure that the director of the Finance and Economics Division should perform a check up of the expenditure reports of members of the Board of Directors and public figures going on shlichut on behalf of KKL.
The director of the Fundraising Division advised in response that he accepts the audit recommendations.
Signatures
In the sample we looked at, cases were found where the shaliach did not sign the per diem report or where someone else signed in his place.
119 The Office of the Comptroller recommends that the Shlichim Section ensure that the shaliach, and only he, sign the per diem report he submits.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
Over/under Payment
The director of the Fundraising Division went on a short-term shlichut to Latin America in August 2011. According to the balance in his end of shlichut account, he has to return a sum of NIS 4,869.
The Office of the Comptroller recommends that the Shlichim Section ensure that the advance given to the shaliach before he departs for the shlichut reflect as far as possible the anticipated expenditures so that the balance (to his debit) at the end of the shlichut will not be large.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
A member of the Board of Directors went on a short-term shlichut to South Africa in December 2011. The end of shlichut account had NIS 39 to her credit. The director of the Shlichim Section instructed the Finance and Economics Division to close the account as the amount was so small.
The Office of the Comptroller recommends to the Shlichim Section and to the Finance Division that shlichim should be paid the full amount due to them.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
We further recommend examining in the Finance Division why the instruction not to pay the shaliach the credit balance was carried out.
141 It is determined in the procedure that if a member of Executive does not submit the per diem report within 30 days of his return to Israel, all the advance payments he received in Israel and abroad will be deducted from his salary and he will not be given authorization for a new shlichut.
In the sample, we found that an Executive member went on short-term shlichuyot abroad in 2012, despite the fact that for a long time he had not settled his debts from previous shlichuyot.
The Office of the Comptroller notes that the Shlichim Section sent him two letters in which he was asked to settle his debts forthwith.
As part of the audit, we found that an external consultant went on a shlichut to France in January 2012. From the documents in the shlichut file, it follows that he was not paid a per diem allowance for this shlichut.
The director of the Shlichim Section told us that the reason for that is that he has a debt of NIS 1,003 with respect to four short-term shlichuyot between August and October 2011.
In other words, since he had not settled his debts from August 2011 on, no per diem allowance was paid to him for the January 2012 shlichut to France.
The Shlichim Section wrote him a letter on December 25, 2011, in which he was asked to settle his debt.
Although he did not settle his debt, the external consultant went on three additional short-term shlichuyot between January and July 2012.
The Office of the Comptroller notes that the said debt was settled only after the financial reckoning drawn up with him on July 17, 2012.
The Office of the Comptroller recommends determining in the procedure that a reasonable time span be given to an Executive member, director or public figure to settle his debt and the sanction will be applied if he does not settle the debt.
140 We further recommend that, when an Executive member, director or public figure does not settle his debt within a reasonable time, the handling should be transferred to the chairman of the Board of Directors and to the director of the Finance and Economics Division.
The Office of the Comptroller recommends that the chairman of the Board of Directors insist on holding up the departure for a shlichut of an Executive member, director or public figure who has not settled his debt with respect to a previous shlichut.
We further recommend determining in the procedure the body responsible for continued follow-up on the debt settlement of members of the Executive.
We likewise recommend that the Finance Division advise the Shlichim Section of conclusion of the accounting with the member of the Executive, whether a cheque is sent to him when his balance was in credit or whether he settled his debt when his end of shlichut account had a debit balance.
The director of the Fundraising Division advised in response that he accepts the audit recommendations and that they will be incorporated in the procedure to be updated.
Summary of Activity Report
The "Expenditures of Executive members" determines that every Executive member must submit a "Summary of activity report" within 30 days of his return to Israel. In the report, all the places, dates, meetings and activities held during the overseas shlichut must be detailed.
The members of the Executive are required to sign the report personally and send it to the chairman of the Board of Directors. The chairman of the Board of Directors has to send his report to the co-chairman.
141 We were told that members of the Executive and the chairman of the Board of Directors report on their journeys orally, at meetings of the Executive, but the Office of the Comptroller notes that they do not submit a summary of activity report at the end of the shlichut.
We found that only the director of the Fundraising Division normally writes a summary of activity report at the end of the shlichut but he submits it to the director-general rather than to the chairman of the Board of Directors.
The Office of the Comptroller recommends determining in the procedure the body to be responsible for carrying out a follow-up on submission of a summary of activity report of Executive members to the chairman of the Board of Directors.
At the bottom of the form of declaration in the matter of the frequent flyer club points, there is a note about the summary of activity report: "I confirm that I will give a shlichut report to the direct superior immediately after returning from the shlichut, as required according to the directives of the KKL Executive.".
The Office of the Comptroller is of the opinion that the shlichim do not read this clause and think that the form deals only with the use of frequent flyer club points.
We recommend, therefore, asking the shlichim to sign a separate form dealing with the matter of submission of a summary of activity report or emphasizing this clause in the form in some other way so that the reader will understand that the same form contains a declaration about the frequent flyer club points and about the summary of activity report.
The director of the Fundraising Division advised in response that he accepts the audit recommendation to prepare a separate form regarding submission of a summary of activity report.
144 Half-yearly Report
The "Expenditures of Executive members" determines that every Executive member who has been on a short-term shlichut will receive a half-yearly report from the Shlichim Section. This report will reflect the current situation of his account and will contain all the expenditures incurred for him abroad. The Executive member has to check the report, confirm it with his signature and return it to the Shlichim Section.
The audit showed that the Shlichim Section does not give members of the Executive a half-yearly report about the expenditures they had in each of the shlichuyot.
The Office of the Comptroller recommends that the Shlichim Section prepare a half-yearly report on the shlichuyot, including the costs, and obtain the signature of the Executive members on the report, as required in the procedure.
The director of the Fundraising Division advised in response that he accepts the audit recommendation.
The procedure determines that the director of the Finance Division will prepare an annual summary report about the travel days and costs entailed therein of members of the Executive for the perusal of the Audit Committee of the Board of Directors.
The secretary of the Projects, Signs and Tourism Department prepares a report at the end of each year of all the short-term shlichuyot of employees and members of the Executive, including the costs.
The audit showed that no annual shlichuyot report of Executive members and their costs is submitted to the Audit Committee of the Board of Directors.
143 The Office of the Comptroller recommends that the director of the Finance Division ensure preparation of the annual shlichuyot report of members of the Executive, including the costs, for the Audit Committee of the Board of Directors.
The director of the Fundraising Division advised in response that, as part of the updating of the procedure, the subject of reporting on the short-term shlichuyot will be examined anew.
The audit also showed that the data in the half-yearly report are incomplete and inaccurate.
For example: the expenditures for the hotels which were paid by the local JNF offices do not feature in the report.
Also when the hotel is paid for through the conference, the expenditure for the hotel does not feature in the half-yearly report.
When the invitation to the conference comes via the Ministry of Foreign Affairs, KKL pays the cost of the hotel but the expenditure is not recorded in the half-yearly report.
The director of the Fundraising Division advised in response that, in future, care will be taken over the accuracy of the data appearing in the half-yearly report.
Furthermore, we found a lack of correspondence between the data in the half-yearly report and the expenditures in the per diem report.
For example: A member of the Executive went on shlichut to Argentina in November 2011. According to the per diem report, he was paid a reimbursement of expenses with respect to the hotel but in the half-yearly report it was noted that the hotel was paid for by the Jewish Agency.
146 The director of the Fundraising Division advised in response that it follows from an examination undertaken that the hotel had been booked by the Jewish Agency but was paid for by the shaliach.
The Office of the Comptroller recommends that the Fundraising Division ensure that the data in the half-yearly report be complete and accurate.
The director of the Fundraising Division advised in response that, in future, care will be taken so that the data in the half-yearly report will be complete and accurate.
Updating of the Procedure
The "Expenditures of Executive members" procedure was written in 1999 and has not been updated since then.
The Office of the Comptroller recommends that the procedure be updated in accordance with our recommendations and that it be determined who is the body responsible for updating the procedure.
The director of the Fundraising Division advised as stated that the Division is currently engaged in updating the two procedures dealing with short-term shlichuyot of KKL employees and of Executive members and they will be combined into one procedure. He added that the body responsible for updating the procedure will be the director of the Fundraising Division, together with the Organizations and Methods Department which is in charge of writing procedures at KKL.
May 2013
145 Response of the Chairman of the Executive to the Comptroller's Report on Keren Kayemeth LeIsrael Short Term Shlichut
In accordance with Paragraph 18b of the Statutes of the Comptroller and the Control Office of the World Zionist Organization, following is my response to the above Report:
The Control Office submitted a detailed report on the subject of Short Term Shlichut in Keren Kayemeth LeIsrael.
The detailed report includes a chapter dealing with the short term shlichut of Keren Kayemeth employees and a chapter on short term shlichut of members of Keren Kayemet's management with reference to the travel of public figures as well.
The Chairman of Keren Kayemeth Board of Directors informed that a process of updating the shlichut procedures into a single procedure encompassing all shlichuyot, is presently being completed. The recommendations specified in the report serve as guidelines in this process of updating the procedure.
Implementation of the audit recommendations results in minimizing the differences between the shlichut procedures prevailing in the National Institutions.
We thank the Control Office.
(-) A. Duvdevani
Jerusalem, July 2013
732
Keren Hayesod Payment Security
Response of the Chairman of the Executive
042 Keren Hayesod
Payment Security
Chapter A – Introduction
1. The Audit Goals
1.1 Examination of application of the separation of functions principle in activities for production of means of payment and setting up supplier master files.
1.2 Examination of the propriety of the work processes for issue of the existing means of payment at Keren Hayesod.
1.3 Review of potential risk exposures and examination of the existing level of control.
2. Method and Scope of the Audit
2.1 Holding of conversations with Keren Hayesod staff in the Finance Administration and in Information Systems.
2.2 Review of the following documents:
2.2.1 Detailed reports by group heads – November 2011. 2.2.2 Process management diagram in "Priority". 2.2.3 Report on suppliers for the period 2008 – 2011. 2.2.4 Report on payments for 2011. 2.2.5 Copies of cheques issued in 2011. 2.2.6 Cancelled cheques in 2011. 2.2.7 Authorized signatories document. 2.2.8 Bank clearing house communications report, June 30, 2011.
042 2.3 It is to be noted that the audit was conducted on the basis of random samples, such that not every defect, if existing at Keren Hayesod, will necessarily be discovered during the audit.
3. Period of the Audit
The audit was carried out in the months of August – November 2011.
Chapter B – General Background
4. Structure of the Finance Division and Definition of Spheres of Responsibility
The Finance Division has three departments, as specified below:
4.1 Income Department – responsible for making payments to beneficiaries.
4.2 Budget and Contractual Arrangements Department – responsible for making payments to suppliers and service providers.
4.3 Logistic Department – responsible for activities vis-à-vis suppliers (contractual arrangements with suppliers, conducting negotiations, placing procurement orders and so on). The activity of this Department was not examined during the audit since it is not directly involved in any actual payment processes.
040 5. Means of Payment
The main means of payment available to Keren Hayesod are: 5.1 Bank clearing house in Sheqalim; 5.2 Bank clearing house in foreign currency (EDI – electronic data interchange); 5.3 Bankers' cheques.
6. Information Systems
6.1 The present information system at Keren Hayesod is of the Priority type, operated and maintained by the director of Information Systems and an outside liaison who provides support services.
Chapter C – The Information Systems
7. General
7.1 As noted, the information system used by Keren Hayesod is of the Priority type which is maintained and operated by the director of Information Systems at Keren Hayesod, with the accompaniment of a liaison from the software company.
7.2 The system has 40 active users through a number of modules, such as the procurement module, the finance module and the projects module.
7.3 The top layer authorization in Priority is defined as "tabula" (hereinafter: Top Layer Authorization). This authorization in fact accords to the holder thereof the ability to make changes in the definitions of the end users.
042 7.4 It should be clarified that every Priority system has one user who has a Top Layer Authorization. It is possible, however, at Keren Hayesod for a number of bodies to have access (through a password) to the Top Layer Authorization.
8. Structure of the Authorization Tree
8.1 The method of allocating authorizations at Keren Hayesod is based on the principle of "group head" (hereinafter: Group Head), which designates identical authorizations for all the users in that group. For example, employees in the Income Department (payments to beneficiaries) are defined as the "income" group, such that every employee of the Department can perform a transaction that is supposed to be carried out in the Income Department.
8.2 The existence of identical authorizations for employees in one group does not, in effect, meet the criterion of the separation of functions principle, because there is no real separation in the transactions that can be carried out in the information system.
9. Giving of authorizations
9.1 The Office of the Comptroller was informed that Keren Hayesod has four employees with access to the Top Layer Authorization. Three of those with access are employees of the Information Systems while the fourth is from the Finance Division at Keren Hayesod
9.2 It is to be clarified that, although there are four employees with a Top Layer Authorization, there is a defined process for granting authorizations to users. According to the work process, the director of a department defines which authorizations are to be given to the employee, the request is conveyed to the director of the information system for implementation.
9.3 The Office of the Comptroller checked whether there was any control by the director of the Information Systems for the purpose of
044 changing authorizations that had been given without prior approval. There was found to be no follow-up log on changes in authorizations, which means that authorizations could have been issued without prior approval.
Recommendations for Chapter C - Information Systems:
a. Control should be exercised from time to time on changes in authorizations with a check as to whether a prior approval exists and is documented for performance of the action.
b. Periodically, a report should be drawn up of contradictions in the authorizations of employees.
Response of Keren Hayesod The recommendations are accepted.
Chapter D – Application of the Separation of Functions Principle
10. Separation of Functions Principle:
10.1 The separation of functions principle is intended to maintain a setup of proper work processes for precluding and restricting a single body from performing a number of stages in the process, without control and approval of another body.
10.2 This principle constitutes a basis for the existence of an effective control system.
042 11. The Means for Application of the Separation of Functions Principle:
11.1 Written definitions
11.1.1 The definition of responsibility and function of each department and the employees.
11.1.2 The definition of detailed work processes in procedures.
11.2 Computerized definitions
11.2.1 Adapting authorizations which match the function and sphere of responsibility of each employee (in accordance with the job definition).
11.2.2 Defined work processes which correspond to basic procedures and restrictions.
12. The Responsibility for Implementation of the Separation of Functions Principle:
12.1 The management of the company is responsible for the definition and application of work processes and internal controls, amongst them the separation of functions principle.
12.2 Examination of the application of the separation of functions principle should be carried out from time to time through an examination and verification of the processes defined in the written regulations and their relative application to Keren Hayesod's Systems.
12.3 One of the common tools for examining authorizations in the Information Systems is by checking contradictions between sensitive access authorizations and assimilation of inbuilt processes in the management of the processes in the Priority.
042 13. A look at the Application of the Separation of Functions Principle at Keren Hayesod
As part of the audit, we looked at the application of the separation of functions principle at Keren Hayesod on two levels, as specified below:
13.1 Procedures and definitions of functions:
13.1.1 We were told that Keren Hayesod does not have documents which define the spheres of responsibility of all the employees. The work is carried out by each employee according to custom alone.
13.1.2 Furthermore, there are no written procedures which define the work processes, inter alia, for making payments to suppliers, payments to beneficiaries, documentation, bank reconciliations and the like.
13.1.3 The finance director advised that a start has been made on issuing procedures but the process has not yet ended.
13.2 Control with computerized tools:
13.2.1 Examination of contradictions in the authorizations tree – there is no computerized tool for checking application of the separation of functions principle as regards the authorizations given to the employees.
The Office of the Comptroller was advised by the Priority system liaison that a task-specific report could be generated through the Priority system which would conduct the check on application of the separation of functions principle and would locate contradictions. To the date of the audit, however, such a request had not been submitted by Keren Hayesod.
042 13.2.2 There was found to be a process for management of orders and supplier invoices, inbuilt in the information system. The process was presented by the director of the Information Systems and the restrictions which had been determined according to the directives of the finance administration.
13.2.3 No use is made of log files for the purpose of internal controls (for example: sequence reports, changes in supplier particulars, setting up a master file and so on).
Recommendations for Chapter D – Application of Separation of Functions Principle:
a. That procedures be written up for the work processes and that spheres of responsibility of all the departments and of the employees be defined.
b. That a report be defined, through the report generator in the Priority system, for checking contradictions in the authorizations tree and for management of inbuilt processes in the financial system.
c. That use be made of control reports through log files.
Response of Keren Hayesod a. The recommendation is accepted.
b. The recommendation is accepted and will be carried out once a year.
c. The recommendation is accepted.
042 Chapter E – Transfer of Payments to Beneficiaries
14. General background
14.1 The Income Department is responsible for making payments to beneficiaries, including handling the payments from the stage of receiving the funds from the different Magbiyot to that of remitting them to their designated recipients.
14.2 The Income Department has a director and three liaison officers who work according to geographical regions. Each liaison is responsible for implementation of all the actions in the designated region defined for him.
14.3 Transfer of the earmarked funds is mainly done through computerized transfers or bankers' cheques.
14.4 There are no procedures regarding the remittance of the payments to the beneficiaries.
14.5 Following is a description of the work method for payments to beneficiaries:
14.5.1 Receipt of funds and notification with directives for the transfer of the funds from the different Magbiyot.
14.5.2 Creation of an income document for the funds received.
14.5.3 Input of the income
14.5.4 Undertaking of checks and approval before remittance of the funds to the beneficiaries.
14.5.5 Sending of the supplier invoice for payment through the bank clearing house - electronic data interchange.
042 14.5.6 Activation of a round of signatures of authorized signatories on the payments file.
14.5.7 Sending of the messages.
15. Project Ascription
15.1 As a part of the internal control, funds are remitted to a beneficiary only if a project exists in the financial system of Keren Hayesod (without a project, an account cannot be associated).
15.1.1 Where there is a project in the system, the expenditure account is associated with it by one of the liaisons as part of the work process.
15.1.2 Where there is no project in the financial system, one has to be set up by another body in the Income Department. From the process described above, it follows that the separation of functions principle does not exist in the Income Department. Moreover, without insistence on the separation of functions, there are actually no adequate controls over the money transfer process, including the setting up of a project.
Recommendations for Chapter E – Transfer of Payments to Beneficiaries
a. A work procedure should be drawn up regarding payments to beneficiaries.
b. Computerized means of control should be defined for follow- up of new projects that are opened.
022 Response of Keren Hayesod a. The recommendation is accepted.
b. Association of the relevant supplier to the project (to which the monies are paid), is made by the only employee who is authorized to do this with a FinPro authorization and he is not an authorized signatory nor is he involved in the payments process.
Chapter F – Handling of Suppliers` Master Files
16. The Process of Setting up a Suppliers' / Beneficiaries' Master File
16.1 In the Priority system, a distinction was defined between supplier categories according to the nature of the supplier through the file number definition. Thus, for example:
16.1.1 Suppliers' files beginning with the digit "6" are employees;
16.1.2 Suppliers' files beginning with the digit "7" are suppliers of goods and services;
16.1.3 Suppliers' files beginning with the digit "9" are beneficiaries;
16.2 Setting up suppliers' files actually consists of two stages:
16.2.1 Logistic setting up – setting up the supplier file without bank account details is done mainly by the staff of the relevant department.
16.2.2 Financial setting up – association of the bank account details with the supplier file. It may be noted that, only after the financial setting up (association of the bank account details) can payments be made to the supplier.
022 16.3 The Office of the Comptroller reviewed, to the audit date, with the director of the Information Systems which bodies are authorized in the Priority for logistic setting up and for financial setting up.
16.3.1 Examination of the bodies with authorization for logistic setting up found that all employees of Keren Hayesod, with the exception of the "household" group (two employees) and the "procurement management" group (one employee) had such authorization.
16.3.2 Examination of the bodies with authorization for financial setting up found that most groups had such.
The implication from the above examination is that most of the Keren Hayesod employees have the ability to set up a supplier filed and to input bank account details. This fact points to a risk in the process in which there is, effectively, no basic separation of functions.
16.4 In January 2012, after the draft audit report was received at Keren Hayesod, a comprehensive examination was carried out by the director of Information Systems to check the existing authorizations in the Priority, and amendments were made in them for association of bank account details, as specified: for most of the groups that had had this authorization, it was revoked and was kept only for the groups: Income, bookkeeping, "Hedva" and financial administration.
In view of these changes, the Office of the Comptroller is of the opinion that the defects have been corrected.
020 17. Examination of the Setting Up of Suppliers' Files in Practice
17.1 The Office of the Comptroller examined, through the suppliers report which was produced at its behest, who are the bodies who actually set up or made changes in the suppliers' files in the period commencing January 2008 until November 2011.
17.1.1 During the period, more than 3,000 suppliers' master files for employees, suppliers of merchandise and services and beneficiaries were set up or changes were introduced in them.
17.1.2 In 2008, 996 transactions were performed out of a total of 2,137 (some 45% of all transactions) with use of the "tabula" (Top Layer Authorization) to set up master files for suppliers.
17.1.3 In 2009, 72 transactions were performed out of a total of 404 (some 18% of all transactions) with use of the "tabula" (Top Layer Authorization) to set up master files for suppliers.
17.1.4 In 2010 – 2011, no use was made of the top layer authorization for setting up suppliers' files.
Use of the top layer authorization constitutes a deviatory use of the top layer authorization since it is unusual to use this authorization for setting up master files.
17.1.5 The Office of the Comptroller was told that the reason for the deviatory use of the top layer authorization in the years 2008 and 2009 derived from an ongoing process of converting data from the old bookkeeping system (which had been used in the past) to the new system.
022 17.1.6 It may be noted that the Office of the Comptroller has no ability to verify this information.
17.1.7 It was also found that the FinPro user who is director of the Income Department edited master files for beneficiaries in the course of the period. It may be noted that this user is not supposed to be involved in the process of setting up master files since he is a central figure in the process of approving invoices for payment.
18. Data Betterment
18.1 Data betterment is a common process which is intended to reduce / diminish suppliers' files which are inactive and/or duplicate suppliers' files.
18.2 The Office of the Comptroller was told that there is no process for undertaking data betterment but that this is done only in cases where the employee identifies a master file of a supplier which is not in use.
18.3 Examination of the suppliers' master file found there to be no inbuilt process for data betterment with respect to master files. In the period 2008 – 2011, only 27 suppliers' files out of 3,000 were changed to the status of "inactive".
19. Updating and Changing Bank Account Details in a Supplier's File
19.1 The bank account details constitute one of the main layers for payments to suppliers through electronic transfers, this being because the payments are made on the basis of the bank account details which are defined on the master file.
19.2 Accordingly, the bank account details of the supplier should be updated or changed in a proper and controlled manner at Keren Hayesod.
024 19.3 From our examination of the current method of work at the financial administration, it follows that:
19.3.1 There is no designated form for suppliers for recording bank account details and the employees of the financial administration make do with receipt of a letter head from the supplier with details of his bank account.
19.3.2 There is no requirement at all that the supplier verify the bank account details on an update or change, by submitting a copy of a cancelled cheque, copy of a bank statement sheet or signed confirmation of the bank.
19.3.3 There is no filing obligation for documents received from the supplier when updating or changing the bank account details.
19.3.4 There is no restriction and/or any control at all by a separate body over the changes made.
19.3.5 The financial administration neither can, nor is required to, trace changes in the bank account details of the suppliers.
19.3.6 Changes in the bank account details are shown and documented on the master file and include the body which made the change, the date of the change and the type of change.
19.3.7 There is no separation of functions between the body that sets up the master file and the body that updates the bank account details.
19.4 The Office of the Comptroller reviewed with the director of the Information Systems which bodies are authorized in the Priority for updating and changing bank account details on master files of suppliers.
022 19.4.1 In the examination of the authorization for making changes in the bank account details, it was found that most of the Group Heads had authorization in the Priority system.
19.4.2 There was no possibility for computerized examination of which changes and who are the bodies who made the changes in the bank account details of suppliers.
20. Written Documentation
20.1 When the Budget and Contractual Arrangements Department opens a supplier file, the following documents are required:
Approval of the procurement director for opening of the supplier account.
A confirmation form that supplier's books are properly kept and an income tax deduction at source form.
Some document containing the particulars of the supplier.
A document from the bank with respect to the bank account details.
20.2 The Office of the Comptroller checked the method of keeping the documents and examined of their actual existence.
20.2.1 From a conversation held with the chief bookkeeper, it follows that it is not customary to keep the documents in a separate folder but, rather, together with the first invoice of the supplier or on the date of the change, together with the invoice for payment.
20.2.2 Additionally, in view of the extensive renovation that took place at Keren Hayesod close to the date of the audit, the folders for documentation had not yet been moved to the
022 financial administration and there was, therefore, a difficulty in conducting the examination.
20.2.3 The Office of the Comptroller reviewed a sample of folders containing payments to suppliers. The review showed that the confirmation form that books are kept and a deduction at source form for income tax were proper.
20.2.4 No approval was found from the procurement director for the opening of a supplier file. We were told that the approval is usually received by email but there is a difficulty locating it because there is no designated filing.
20.3 In light of these findings, the Office of the Comptroller notes that there is a defect in principle in the method of filing the documents which does not allow an effective internal audit to be made. It is to be emphasized that without filed documents, there is a risk of unauthorized changes being made.
Recommendations for Chapter F – Handling of Supplier Master Files: a. A work procedure should be drawn up for the process of setting up master files for suppliers which should contain, inter alia, the following matters: work method, particulars of applicable documents, the main factors in opening a master file, documentation, internal controls on the opening of a master file and responsibility for implementation and for data betterment. b. The possibility for logistic setting up and for financial setting up should be entrusted to tow separate individuals. c. The addition should be examined of a requirement for approval by a further body after changes have been made in the supplier file particulars.
022 d. Data betterment should be done on suppliers' master files.
e. An audit should be conducted once a quarter using log files to trace changes in master file details.
Response of Keren Hayesod a. The recommendation is accepted and will be applied as part of the procedures project that is taking place at Keren Hayesod.
b. The recommendation is accepted. Changes have been made in the authorizations (see Section 16.4 in the Report).
c. The recommendation was looked at – there is a further body which checks the bank clearing house payments and, since the name of an active supplier cannot be altered, there is no justification for the addition of yet another body. There is a full separation between the function associated with the supplier accounts for the project and the authorized signatories.
d. The recommendation is accepted.
e. The recommendation is accepted.
Chapter G – Payments by Cheque
21. General Background
21.1 Payment by cheque as a means of payment is negligible in scope in relation to the other means available to Keren Hayesod.
21.2 Three types of currency are used for payments:
Cheques in Sheqels (NIS) – are used mainly for payments to the tax authorities, local authorities and student grants.
022 Cheques in foreign currency (Euro and USD) are used mainly for employees travelling on shlichut and as cheques that are not actually redeemed.
21.3 The cheques are issued on blank chemical paper sized A4 (including a division into original and copy) using a designated printer which produces the particulars of the cheque and a copy thereof.
The chemical paper contains protection against counterfeiting with the text "Photocopy" at the bottom of the copy of the cheque (where the bank details and cheque number are recorded).
21.4 There is no work procedure for payments by cheque.
22. Sequence Report
22.1 A sequence report about the serial numbers of the cheques produced in a defined period usually serves as part of the means of internal control in finance divisions.
22.2 The finance administration is not in the habit of using sequence reports and so, at the request of the Office of the Comptroller, a sequence report was produced for the purposes of sampling and controls.
22.3 Following are data regarding cheques issued during the period January – June 2011:
Cheques in NIS:
Serial numbers From 2437 to 2601 (total of 165) Number of cancelled cheques 4 Some 2.5% of all the cheques Number of missing cheques 5 Some 2.5% of the series
022 Cheques in USD:
Serial numbers From 748 to 809 (total of 62) Number of cancelled cheques 6 Some 9.6% of all the cheques Number of missing cheques 9 Some 14.5% of the series
Cheques in Euro:
Serial numbers From 1581 to 1618 (total of 38) Number of cancelled cheques 4 Some 10% of all the cheques Number of missing cheques 4 Some 10% of the series
22.4 It was also found that:
22.4.1 Cheque number 1592, a serial number belonging to the cheques issued in Euro, was produced as a cheque in USD.
22.4.2 Cheque number 775, a serial number belonging to the cheques issued in USD, was produced as a cheque in Euro.
23. Cancelled Cheques
23.1 Examination of the sequence report found the following cancelled cheques: Currency Number of cancelled cheques Percentage of all cheques In each currency NIS 4 2.5 USD 6 9.6 Euro 4 10.0
23.2 In the sample with respect to the cancelled cheques, we looked to see whether there was any documentation about the cancelled cheques and cheques marked as cancelled which could not be re- used.
23.2.1 The cancelled cheques were filed consecutively.
022 23.2.2 The cancelled cheques were marked as required in a way that prevented their re-use.
24. Cheques Missing in the Sequence Report:
24.1 Following is a list of the cheques missing from the sequence report and the explanations of the financial administration. Cheque Explanation number NIS denominated cheques 2566 The cheque was crossed out. A copy had been sent to the income tax authority for crediting the account but they demanded the original. 2568 Not printed because the printer was broken. 2569 Not printed because the printer was broken. 2570 The cheque was cancelled and has been filed. 2593 The cheque was printed as an experiment in the move to a new printer. Euro denominated cheques 1592 The cheque was mistakenly printed in the Euro series. 1602 & The cheques were in the transition to a new printed and 1603 there was no order to the numbers. USD denominated cheques 775 The cheque was mistakenly printed in the USD series. 782 It exists in the system as does its cancellation. 797 The cheque was filed as "crossed out". 792, 793, The cheques were sent to the Magbit to the order of 794, 795, donors who receive an annuity at the funds company. 796
25. Cheque Books
25.1 The Office of the Comptroller was informed that, in the past, the financial administration had had cheque books for manual completion but, with the transition to the system of printing computerized cheques, all the cheque books there had been were destroyed.
022 25.2 To the best of the knowledge of the departmental directors and the chief bookkeeper, no cheque books exist.
Recommendations for Chapter G – Payments by Cheque
a. That a work procedure be drawn up for payments by computerized cheques.
b. That periodic sequence reports be issued and controls conducted by a body that is not involved in the payment process (such as: checking the integrity of the cheque number sequence, the propriety of the documentation, the missing cheques, and so on).
Response of Keren Hayesod a. The recommendation is accepted and will be implemented in the framework of the procedures project that is taking place at Keren Hayesod.
b. The recommendation is accepted.
Chapter H – Payments by Electronic Means
26. Electronic Payments Categories
Keren Hayesod makes use of two categories of electronic means of payment, as specified below:
26.1 Bank clearing house – for Shekel denominated payments.
26.2 Bank clearing house (Electronic Data Interchange) for payments in foreign currency.
020 27. Examination of Risks in the Process
27.1 Background – following are details of the risks that exist with payments through a bank clearing house:
Payments to suppliers are made on the basis of the bank account number recorded on the master file of the supplier without matching the name of the supplier.
Input of unauthorized payment in the process of the payment run (prior to issue of the bank clearing house file).
Damage to the payments file after its approval by the authorized bodies, before it is actually sent.
In light of the inbuilt risks in the process, there is great importance to assuring the work processes through the information system of Keren Hayesod.
27.2 The Office of the Comptroller checked to see whether a proper response is given at Keren Hayesod to the inbuilt risks existing with payments by bank clearing houses, as specified below:
27.2.1. Updating and altering the bank account details on the master file of the supplier – as stated in Chapter F, above, there is no effective control over the updating and altering of bank account details and there is, therefore, a risk of unauthorized changes being made.
27.2.2 Input of unauthorized payments – from the review of the processes for authorization of a demand / procurement order and the input of the invoices in the Priority system which was done with the director of Information Systems and examination of the rules for management of the processes, no defects were found.
022 27.2.3 Examination of damage to the payments file before it is sent – the bank clearing house file in Sheqels (MSC.001) which is produced in the work process, is retained on a disk that is not protected and which is accessible to a number of employees at Keren Hayesod and there is, therefore, a risk that unauthorized changes might be made.
With respect to the foreign currency bank clearing house file (Electronic Data Interchange) – the director of the Information Systems was unable to trace the location of the file in the information network of Keren Hayesod.
28. Sample Examination of the Bank Clearing House File
28.1 The Office of the Comptroller looked at the bank clearing house payments file that was sent on June 30, 2011. The Office of the Comptroller sampled six transactions with the largest amounts, for a total of NIS 2,766,477.55.
28.2 It was found that all the transactions have accompanying documents and internal approvals for the purpose of the payments.
May 2012
024 Response of the Chairman of the Executive to the Comptroller's Report on Keren Hayesod Payment Security
In accordance with Paragraph 18b of the Statutes of the Comptroller and the Control Office of the World Zionist Organization, following is my response to the above referenced Audit Report:
The Control Office has prepared a detailed professional report on the subject of Payment Security at Keren Hayesod.
The technological developments in the realm of financial information systems and interfaces with the banking systems facilitate, on the one hand, improved efficiency in transferring funds, but on the other hand, create new risks.
The audit report related, among others, to the issue of authorizations in the information systems, to the separation of functions principle and its implementation, as well as to payments by cheques and payments through electronic means.
Keren Hayesod has accepted the Comptroller's recommendations and began implementing them in the course of the audit.
I found that the findings and recommendations in this report can be of assistance to the World Zionist Organization and have therefore instructed the Director of the Finance Department to study the report and its recommendations.
We thank the Control Office.
(-) A. Duvdevani
Jerusalem, September 2013
562
Keren Hayesod Salaries and Human Resources
Response of the Chairman of the Executive 862 Keren Hayesod Salaries and Human Resources
1. Introduction
1.1 In accordance with the work plan of the Office of the Comptroller, we examined the management of human resources and salary payments at Keren Hayesod - United Jewish Appeal (hereinafter: Keren Hayesod).
1.2 Our audit included examination of the work processes in the following areas:
- The staff recruitment process in Israel and overseas.
- Implementation of salary agreements applying to Keren Hayesod.
- Performance of salary and accompanying payments to employees in Israel and overseas.
1.3 The audit was undertaken at the offices of Keren Hayesod in Jerusalem from November 2011 to February 2012.
During the audit, meetings were held with the Chief Financial Officer (CFO), his deputy, the director of Human Resources, the human resources coordinators, the salaries accountant of the Head Office staff, the salary accountant of overseas shlichim and with additional employees as we saw fit.
1.4 Goals of the audit:
a. Review of the management processes and the staff recruitment process, payments of salaries and accompanying.
862 b. Checking the existence of proper internal control procedures and examination of the degree of efficacy of the existing procedures and processes.
c. Finding weak points in the processes and control and making recommendations for their improvement.
1.5 Main documents used for the audit:
Collective agreements to which Keren Hayesod is a party concerning the payment of salaries and accompanying conditions.
Salary and human resources procedures at Keren Hayesod.
Income tax procedures regarding payment of tax in Israel and abroad.
Salary tables in accordance with the Graduates Scale and the Uniform Scale, as used in government institutions.
Internal directives and minutes of meetings of the Conditions of Service Committee at Keren Hayesod.
List of employees in Israel and abroad and their salary conditions.
List of employees who received reimbursements of expenses for participation of their children in summer camps.
Employee files and salary slips for a sample of 15 employees in Israel and 12 employees abroad.
Attendance records from the Priority System for a sample of employees.
872 Records from the Time-Beat System for a sample of employees.
Documentation and miscellaneous documents from employee files, such as: personal labor contracts, rental contracts for shlichim, correspondence regarding conditions of work and so on.
Specific documents which were received on request.
1.6 Audit methodology
Reading of existing procedures and checking as against actual conduct.
Holding of meetings and conversations with office-holders responsible for the activity in matters audited and with additional employees as we saw fit.
Review of the organizational structure in the Human Resources Department, including spheres of responsibility for the work processes.
Review of the information systems supporting the subjects audited.
Review of the income tax provisions of relevance for the salary payment process and reimbursement of expenses for employees overseas and examination of the position of Keren Hayesod on these provisions.
Receipt of reports and data from the computerized system and their analysis.
Sampling of salary payments to employees in Israel and abroad, including the correspondence of the actual salary payments with
872 the provisions of the collective agreements and personal agreements vis-à-vis the employees.
Review of the personal files of sample employees and checking the existence of appropriate documentation for the worker acceptance and salary conditions process.
Examination of the correctness of the social provisions for the employees.
Examination of attendance reports and their reconciliation with the salary payments.
Review of the process for payment of reimbursements of expenses to the shlichim and checking that they correspond with Keren Hayesod procedures.
Review of the set of permissions at Keren Hayesod regarding setting up an employee in the system, working with the bank clearing house and the system for sending salary payments overseas (E.D.I.).
Summary of the findings
Preparation of the audit report, including drawing conclusions and making recommendations.
2. General Background
a. Introduction:
Keren Hayesod – the United Jewish Appeal is one of the national institutions (the World Zionist Organization, the Jewish Agency, Keren Kayemeth LeIsrael and Keren Hayesod) and its offices are situated in the building of the national institutions in Jerusalem.
878 Keren Hayesod was established in 1920 as a company whose main purposes are to act for realization of the idea of establishment of a Jewish national home in the Land of Israel, as formulated in the Balfour Declaration, inter alia, through obtaining contributions, loans, gifts, inheritances and investment of these funds for establishment of the Jewish community in the Land of Israel.
Keren Hayesod operates in forty-five countries, through fifty-seven local offices, divided into four regions: Europe, Latin America, English-speaking countries and the East.
Keren Hayesod is held in equal shares by the World Zionist Organization (50%) and by the Magbiyot (Campaigns) (50%). The main free income of Keren Hayesod is remitted to the Jewish Agency for its current activity. Some of the monies remitted to the Jewish Agency are designated transfers of donors.
The Keren Hayesod offices in Israel employ a staff of 80.
World-wide, thousands of activists, most of them volunteers, are engaged in Keren Hayesod activity. Keren Hayesod has 30 paid shlichim/ representatives overseas, running the large campaigns.
Numerical data
Following are figures for the staff complement and salary budgets for 2009 – 2010: Department 2009 2010 Staff Budget in Staff Budget in complement NIS thousands complement NIS thousands Head Office 78.0 7,097.60 79 7,973.60 staff Overseas 30.8 5,625.30 30 5,976.80 shlichim (**) Total 108.8 12,722.90 109 13,950.40
(*) The number for the shlichim does not include their spouses. (**) The figures refer to salaries only and not to the reimbursement of expenditures, such as education, rent and so on.
872 b. Human Resources Department
The functions of the Human Resources Department:
The Human Resources Department is responsible for handling employees in Israel and overseas.
Representatives to the campaigns abroad: Responsibility for recruitment and training of the representatives, the subject of salaries (together with the Finance Department) and accompanying terms of service (rental, tuition, vacations and so on).
Employees in Israel: Responsibility for staff recruitment, dealing with the human capital throughout the period of the employment of the staff, including: terms of service and welfare, training and further training, development of workers and managers, management of attendance, management of vacation and sick leave balances, contact with the staff committee and so on.
Organizational Structure:
Director of Human Resources
Staff Coordinator in Coordinator of Overseas Israel Staff
The Human Resources Department is located at the Keren Hayesod Head Office at the National Institutions Building in Jerusalem and it maintains current working relationships both with the employees of Keren Hayesod in Israel and with the shlichim of Keren Hayesod overseas.
872 Employee files
The Human Resources Department keeps a personal file for every employee and for every shaliach, with documentation regarding the hiring process, the education of the employee, the terms of employment and a labor contract if he is engaged through a personal contract. Furthermore, the file contains records on everything to do with the terms of service to which the employee is entitled as well as feedback for evaluation of the employee.
Amendment 24 of the Wage Protection Law:
On February 1, 2009, Amendment 24 of the Wage Protection Law came into effect. This amendment has many ramifications, inter alia, regarding the salary slip, reporting and recording of hours worked and salary deductions. Grave sanctions are laid down in the amendment to the law for employers who do not comply with the provisions of the law, including personal sanctions. The main points in the amendment are: a. The employer must state in the salary slip particulars about the work hours of the employee, the work days, the hourly rate and other details. b. The obligation to keep a complete record of the actual hours worked of all the employees (other than for those holding positions of trust) on a day-by-day basis. c. Transfer of the burden of proof for performance of overtime to the employer. In other words, if an employee demands payment from the employer for overtime, the employer has to prove that the overtime was in fact not worked.
872 3. Staff Recruitment Process
There are two main groups of employees at Keren Hayesod: Head Office staff and the shlichim for overseas, with respect to whom the process is substantially different, as is specified below:
3.1 Recruitment of staff in Israel for the Keren Hayesod Head Office
The recruitment process is started when a need arises to fill a position that has become vacant. In recent years, Keren Hayesod has maintained a standard of 80 workers, with no significant changes.
a. Low grade workers:
If it is necessary to recruit a worker for an office job for which a tender is not required, the recruitment process contains the obtaining of curriculum vitae from the placement companies and interviews with the director of Human Resources and with the immediate superior. Upon conclusion of the interviews, a joint decision is made regarding staffing the position out of the candidates who were looked at.
b. Office workers / management grade:
In contradistinction to the recruitment process for low grade workers, that for office workers of management grade requires a tender.
Following are the stages for recruitment of employees by tender:
1. Issue of an internal tender - Keren Hayesod publishes an internal tender to see if there are any employees who are suitable for the position among its own staff. The position is advertised on the notice boards and by the Keren Hayesod internal electronic mail. An employee who meets the
876 threshold conditions and who is interested in the position submits his candidacy to an "internal tenders committee" for his suitability for the position to be examined. The committee consists of the direct superior, the director of Human Resources and a representative of the Staff Committee. If the committee finds that he is suitable for the position, he is then appointed to the designated post. If no internal candidates are found, Keren Hayesod issues an external tender.
2. Issue of an external tender - Keren Hayesod advertises the job requirements in daily newspapers as well as on internet sites and with placement companies. When curriculum vitae are received, candidates who do not meet the threshold conditions are sifted out in the Human Resources Department. If a large number of curriculum vitae are received, the Human Resources Department carries out a telephone sort to short list candidates with a potential to be accepted for the position and the suitable candidates are invited for a first interview with the director of Human Resources and with the designated immediate superior.
3. Aptitude tests – As well as the initial interviews, the candidate is required to successfully pass trustworthiness tests and a meeting also takes place with an employment psychologist to examine his suitability for the position. A candidate with the best level of suitability for the position is invited for a final interview with the acceptance committee, comprising: the director of Human Resources, a representative of the Staff Committee and the immediate superior and other office-holders are also invited discretionally and in accordance with the designated position. At the end of the interview, the committee formulates its opinion whether to accept the candidate or to continue with the process of searching for another candidate.
877 3.2 Setting the salary, salary updates and staff evaluations
a. The salary of an employee who is accepted on the basis of a personal contract is set according to what is customary in the economy and according to the outcome of the negotiations conducted with him.
b. The salary for an employee in a collective agreement is set in accordance with the scale and grade in the collective agreement customary in the economy.
Salary updates:
Keren Hayesod has two different paths for updating salaries, depending on the employee group to which the relevant employee belongs.
- A worker employed through a collective agreement – for each position there is a range of grades, with the employee being promoted a grade every two years to the top threshold of the range of grades.
- A worker employed by personal contract – if the contract is index- linked it is usual to ask for a salary discussion every three years and, if the contract is not index-linked, then once every two years.
Employee evaluation:
An evaluation is made each year, at the beginning of the year, for an employee. Evaluation of the employee is relevant, inter alia, for candidacy to be awarded the prize for excellent worker and also serves as a parameter in a discussion of a raise in salary request.
872 The Office of the Comptroller looked at the performance of the staff recruitment process, determination of salary and salary updates in accordance with the existing procedures at Keren Hayesod.
The audit finding:
There are employee positions for which the range of grades was reset by decision of the Director-General although Keren Hayesod has no orderly process for resetting a post standard. For example: the grade range for four delegation coordinators (for example, employee number 10297) had originally been 39 – 42 but was recently reset to a grade range of 40 – 43 so that it would be possible to accord them a personal grade of 44. In the opinion of the Office of the Comptroller, resetting grades for a particular sub-group amongst the staff, without clear and unbiased criteria does not sit well with the rules of proper administration.
The audit recommendation:
It is recommended that resetting posts be undertaken on the basis of an orderly procedure that requires meeting and checking clear criteria, such as: the nature and importance of the position, exceptional work load, standard of professionalism and proficiency the position requires and so on. It is also recommended that the decision about resetting the grade range be made by a committee and not by a single person.
Response of Keren Hayesod The recommendation is accepted.
The resetting of the positions derived from the fact that there is no reference in the Keren Hayesod procedures to the matter of re- setting positions and a desire to correct a distortion that had existed for many years at Keren Hayesod. The purpose of resetting the posts did not derive from the need or desire to grant personal grades but so as bring the position of the delegation coordinators into line with other posts, identical from the point of view of amount of work, level of responsibility and nature of the position.
872 3.3 Recruitment of shlichim for overseas:
The process of recruiting shlichim for overseas is more complex and Keren Hayesod invests considerable efforts in it.
The process of recruitment of a new shaliach starts about a year before the end of the contract of the current shaliach.
Following are the recruitment stages:
1. Publication of wanted notices in the press, including threshold conditions, with an emphasis on mastery of the language of the destination country.
2. Initial telephone sifting of candidates out of the tens or hundreds of curriculum vitae received.
3. Evaluation centers – the potential candidates are invited to evaluation centers, each candidate is assigned to a group of candidates. Each group usually comprises 15 candidates who are required to prove social talents through performance of a number of tasks, such as: ability to make a presentation, prioritization exercises, role playing. The forum in charge of the evaluation centers consists of the director of Human Resources, the director of the Region as well as other office-holders as required and at the discretion of Keren Hayesod.
4. The directors of the evaluation centers select the candidates who stood out from among those who took part in the tests and they are invited, together with their spouses, for a joint interview with the director of Human Resources and the director of the Region to which the candidate is slated to be associated.
5. The candidates who are recommended by the director of Human Resources and the director of the Region are referred for an aptitude test and an interview with an employment psychologist
822 to assess the degree of their suitability for the position. At the end of all the recruitment stages, the director of Human Resources and the director of the Region draft their recommendation and, following joint consultation, they decide whether the chosen candidate is to be accepted for a representatives' course.
Salary of the shaliach/representative:
The salary of the shaliach is determined after he successfully passes the previous sorting stages, as detailed above, in accordance with his levels of experience and professionalism, on the basis of the usual grade for this position, as stated in the salary tables of members of the diplomatic personnel of the Ministry of Foreign Affairs.
The practice at Keren Hayesod regarding raises in salary of a shaliach is that, after one year in the job, the shaliach receives a 5% salary increment and, after two years, he is promoted a grade and receives a further increment of 5%.
3.4 Staff recruitment procedures
Keren Hayesod has a detailed file of procedures dealing with all matters associated with handling human capital, from the stage of acceptance of a new employee, via current handling of the terms of his employment and ending with his retirement/end of employment, including the payment of severance pay.
The Office of the Comptroller examined performance of the recruitment process in accordance with the existing procedures.
The audit finding:
The procedures file was last updated in 2001 and does not reflect the practice of Keren Hayesod on all matters of handling the human capital at present. For example, the conditions of
822 employment for a new worker which are given in the procedure contain a payment of global overtime. Currently, however, a new employee hired by Keren Hayesod through a collective agreement is not entitled to receive a payment with respect to global overtime but only a payment for overtime hours as reported.
The audit recommendation:
It is recommended that the procedures be adjusted to the processes as currently carried out at Keren Hayesod and that each case where there has been a change in the process should be examined on its own merits.
Response of Keren Hayesod The recommendation is accepted.
In fact, a company has recently been chosen to assist with the writing up of all the Keren Hayesod procedures. The Keren Hayesod Executive will convey the audit comments to those writing the procedures.
4. The Attendance System
4.1 Handling of attendance reports:
Keren Hayesod employees in Israel are required to swipe an attendance card in the time clock which is linked to the Priority system (hereinafter: Attendance System) at the beginning and end of the work day. At the end of each month, the workers produce an attendance report from the system and obtain the signature of their director on it for approval of the report. Should there be amendments and updates to the attendance sheet, such as: sick days, start and finish hours that were not reported and so on, the employee makes the amendments directly into the Attendance System.
828 The Human Resources Department processes the hours reported and the calculation of overtime, in software called Time Beat (hereinafter: System for Processing Hours) into which reports on hours of the workers are fed the through an interface with the Attendance System. If there are manual corrections, the staff coordinator feeds the manual corrections into the system, before the processing.
The manual update includes the data about use of vacation days and sick leave so that the balances can be updated in the system.
The result of processing the attendance hours including, inter alia, calculation of the entitlement to overtime pay, is forwarded to the salaries accountant to be input in the salaries system.
4.2 Work hours at Keren Hayesod:
The work week at Keren Hayesod comprises 40 hours of work, over five days, as specified below: Days Hours Sundays Day off Mondays 9 Tuesdays, Wednesdays, 8.5 Thursdays Fridays 5.5
822 Following is a table summarizing the Keren Hayesod policy regarding hours of attendance:
Labor Overtime Core hours * Deduction of Work on contract 09:00-15:00 absences from Sundays core hours Personal Not Mandatory Cannot be made No entitled up, deducted from significance vacation days quota Global Global Mandatory Cannot be made Receives free collective up, deducted from hours agreement vacation days quota Collective As Mandatory Cannot be made Receives free agreement reported up, deducted from hours vacation days quota
* Core hours – every employee is required to be at work between the hours of 09:00 and 15:00.
Standard hours are defined for every employee in the computerized system and they vary in accordance with the scope of the post or status of the employee. For example: status of working mother, whose standard hours are less than the usual standard hours.
The Office of the Comptroller examined of management process of the attendance reports at Keren Hayesod, payment of salary on the basis of actual attendance and in accordance with the agreements, deduction for missed hours and the management of vacation days and sick leave.
The audit findings:
There is no interface between the System for Processing Hours and the salaries system (Hilan), from which it follows that the salaries accountant has to input overtime hours manually for a large number of employees. Manual inputting of data directly impacting salary payments is improper and could lead to errors in the making of the salary payments.
822 The System for Processing Hours is an old system resulting in superfluous manual work. Following are a number of examples by way of illustration:
1. The system produces a summary of hours worked and hours absent and overtime hours, noting the number of the hours and the minutes. Because of the decimal language of the salaries system, every such report has to be manually converted for the record in accordance with the decimal system, with the risk of errors. The Office of the Comptroller found such a calculation error in August 2011 for one employee, with the overtime report being an hour short because of the manual calculation. In this instance, the error was corrected before payment of the salary.
2. The report produced on vacation day balances contains employees who left many years previously.
3. There is a lack of synchronization between the employee number of Keren Hayesod and the employee number featuring in the System for Processing Hours. For example: employee number 10483 is recorded in the System for Processing Hours as employee number 483. On the other hand, there are other employees for whom the system has input the appropriate number in full.
The System for Processing Hours erroneously standardizes the hours of work for days when the employee worked partially and asked that the balance of vacation / Sundays be deducted on account of the absence. Incorrect standardization of work hours results in an incorrect presentation of the hours undertaken. For example, the work hours for employee 89 for the 6th, 7th and 27th of July 2011 were recorded both for actual work and for recording of sick leave, with the standard hours for that day having been stated as 9 hours rather than a work day of 8.5 hours, as required, and this resulted in an excess debit of the employee.
822 The deduction of salary / vacation days with respect to absences during the core hours for workers on a personal contract, despite the hours of absence having been fully made up, could expose Keren Hayesod to legal action regarding the lack of a legal basis for this deduction. This is relevant only for employees engaged on a personal contract since there is no reference in the personal contracts to the obligation to attend in core hours.
Work on Sundays of employees who receive overtime according to a report does not entitle them to a payment for those hours and they are accrued for free hours. Non-payment of the additional hours with respect to Sundays, when the employee worked more hours than the monthly standard, could expose Keren Hayesod to legal action.
Perusal of the vacation days balances report shows there to have been a number of employees for whom the accrual of vacation days is negative, to the tune of tens of vacation days. We did not, however, find that any step was taken vis-à-vis the employees for them to repay the debt. For example, employee number 530 accumulated a negative vacation day balance of 80 days and no salary deduction was made.
Perusal of the vacation days balances report shows there to have been 30 Head Office employees with a vacation balance exceeding 50 days. In the opinion of the Office of the Comptroller, unlimited accrual of vacation, days without the workers being required to take a vacation is an improper situation for any organization, and certainly a public organization. We note that in the public sector there is a restriction according to which the maximum accrual permissible is 55 vacation days.
As regards shlichim working overseas, their days of absence in general and vacation days in particular are not managed through a designated computer system but by manual recording in Excel reports, with no interface to the salaries systems, something which is
826 improper and leads to errors. Likewise, their salary slips contain no data about the usage and accrual of vacation days and sick leave.
The audit recommendations:
It is recommended that the System for Processing Hours be upgraded as follows:
1. That an interface be made between the System for Processing Hours and the salaries system in a way that will obviate the need for manual inputting of overtime hours.
2. That the system will know how to convert the records of hours shown in the system at 60 minutes per hour to the decimal system automatically.
3. That the system will know how to produce reports of active employees only.
Response of Keren Hayesod The recommendation is accepted. The subject is being dealt with through the new attendance system which is ready for launching
It is recommended that standardization of the hours be upgraded in the System for Processing Hours in the case of mixed work days (actual work with completion of work hours by reporting on sick leave or vacation time), in accordance with the standard set at Keren Hayesod. There should be horizontal reference to "special" days with different standardizations, such as festival eves, chol hamoed, Memorial Day and so on.
Response of Keren Hayesod The subject has found expression in the new attendance system.
827 It is recommended that a renewed legal examination be conducted as regards the legality and necessity of deducting from employees' salaries with respect to absences during core hours as well as the non- payment of a salary for work on Sundays. It is recommended that the existing exposure be discussed again and that the decisions taken be anchored in writing.
Response of Keren Hayesod The recommendation is accepted. These examinations were carried out as part of the characterization of the new system, according to which no deductions will be made from the salaries of employees in personal agreements, as described above.
It is recommended that it be determined that accrual of negative vacation balances not be possible beyond a limited number of days, that a maximum threshold be set of vacation days for accrual and that employees with high balances be required to utilize vacation days within a year.
Response of Keren Hayesod The recommendation is accepted.
Keren Hayesod will issue a notification to employees that not more than 55 days vacation in a year may be accrued and that unused days exceeding this quota will be deleted.
It is recommended that the vacation days of the shlichim be managed through the salaries system and that the information be shown in the salary slips, as usual.
Response of Keren Hayesod The recommendation is accepted.
822 5. Salary Calculation in Israel
Hiring of an employee
When a new employee is hired at Keren Hayesod, the Human Resources Department sends to the salaries accountant a document containing the terms of employment of the new employee. The document contains particulars of the mode of employment of the employee, by personal contact or a collective agreement and also all relevant particulars for calculation of the salary, such as: grade, seniority and miscellaneous increments.
The salaries accountant sets the employee up in the salaries system (Hilan) and is responsible for inputting the employee's data into the system as specified by the Human Resources Department.
The process of salary calculation
Before the salary is processed and calculated in the Hilan system, the salaries accountant feeds in the data specified below:
Attendance hours – At the end of each month, the salaries accountant pulls the attendance details of all the employees from the attendance system (Priority) into the salaries system (Hilan), with amendments and updates to work hours and overtime being fed in manually in accordance with the directives of the Human Resources Department.
Salary increments – One-time salary increments, such as clothing, convalescence, festival grants, awards for excellence and the like are put into the salary system in accordance with an orderly circular from the Human Resources Department.
822 The payment to the employees
After the salaries are processed, the salaries accountant makes out a salaries order in the Keren Hayesod financial system and prepares the bank transfers for payment. Prior to the payment, the Keren Hayesod bookkeeper checks the calculations and the accuracy of the data and approves the amounts with her signature. The CFO again goes over the amounts for payment and sends the payments to the bank accounts of the employees through the bank clearing system.
Additional payments
In accordance with custom and the salary agreements, Keren Hayesod participates with the employees in a number of expenditures, such as: reimbursements for participation of the employees' children at summer camps, reimbursement of tuition for employees' children and so on. To obtain these reimbursements, the employee has to show Human Resources documentation testifying to performance of the activities and the expenditures incurred.
The Office of the Comptroller looked at the salary payment process and sampled fifteen salary slips (some 20% of employees), checking the total salary and accompanying payments to the employees as against their employment agreements / collective agreements, including: various increments, provisions for pensions and so on – propriety was found.
The files of these employees at the accountancy unit of Keren Hayesod were also checked.
The audit findings:
The salaries accountant is responsible both for inputting the employee's data into the system, amongst them the bank account number for payment, and the salary calculation and preparation for payment. There is no proper separation of functions between the
822 body that sets up an employee in the salaries system and the employee who actually calculates the salary and prepares it for payment. Such separation is essential in any organization and certainly when the reference is to a public organization.
Contrary to Amendment 24 of the Salary Protection Law, which requires recording actual work hours on the salary slips of workers, we found that the salary slips Keren Hayesod produces have no details of these hours as the Law requires. The failure to record on the salary slip the hours worked exposes Keren Hayesod to the risk of the filing of charges by the Ministry of Industry, Trade and Labor and, subsequently, of paying financial fines for failure to meet the requirements of the Law.
In our sample of 15 employee files, as stated, six were found not to contain signed Form 101s for 2011 (employees 10634, 10530, 10083, 10162, 1036, 11041).
The audit recommendations:
It is recommended that a separation of functions be implemented between the stage of inputting the particulars of a new employee in the system / updating particulars and that of preparation of payment of the salary. It is specifically recommended that the bank account details of the employee by input by another party.
Response of Keren Hayesod The recommendation is accepted.
It is recommended that the particulars given on the employees' salary slips be updated and that the number of actual work hours of each employee be stated so as to obviate a possibility of suing Keren Hayesod for this reason.
822 Response of Keren Hayesod The recommendation is accepted and already recently dealt with. Currently the information features on the salary slips apart from those of the representatives.
It is recommended that the signatures be obtained of all the employees on Form 101 at the year's beginning.
Response of Keren Hayesod The recommendation is accepted.
6. Overtime Hours
Keren Hayesod has two arrangements for payment of overtime hours, as specified below:
a. Payment for hours in accordance with the report of hours actually worked, in accordance with an organized mechanism for reporting and approving overtime, as per the salary agreement of the employee.
b. Payment of a permanent increment for special effort according to a labor agreement with the employee. Keren Hayesod has some 30 employees with this status and they are paid for between 45 and 80 additional hours per month, on a permanent basis. This arrangement applies only to employees who were taken on prior to 2001.
The reckoning of the overtime hours with the employees is on a daily level, i.e., if an employee worked less than the standard on a particular day then the shortfall is deducted from vacation hours and, if he worked above the standard on another day (in the same month) then he receives overtime pay.
828 The Office of the Comptroller looked at the processes of reporting and payment for overtime hours.
The audit findings:
There is no orderly process for approval of a monthly / quarterly overtime quota for each employee and there is not actually any restriction on the number of overtime hours an employee can work and for which he can receive payment (for those employees who receive overtime according to a report). The lack of supervision, control and restriction in this matter could result in overtime being undertaken unnecessarily and with deviations from budgetary lines.
Contrary to the provisions of the Hours of Work and Rest Law, which instructs that an employee is not to be engaged for more than 60 overtime hours in a month, there are a number of employees who report 80 global hours of overtime in a month. From the salary slip, a picture emerges as though they were actually worked, as stated in the previous finding. This presentation contravenes the provisions of the Hours of Work and Rest Law.
The audit recommendation:
It is recommended that it be determined in the procedure that a maximum overtime quota be allocated to every employee who is entitled to payment for overtime by report and that its utilization be conditional on prior approval of the immediate superior. Either way, no payment should be made for a deviation from this quota.
Response of Keren Hayesod The recommendation is accepted. The Executive of Keren Hayesod will issue an announcement to the staff about the legal restriction of not more than 60 overtime hours a month and will ask the directors to insist on not approving overtime beyond this quota for their employees.
822 7. Salary Calculation Overseas
A number of parameters impact the size of the salary of the shaliach, as follows:
a. Basic salary – set in accordance with the salary table of the Ministry of Foreign Affairs, there being a basic salary for each country shown in accordance with the local currency in that country. Keren Hayesod does not have to adhere to this table.
b. Grade – set by the Human Resources Department and in accordance with the size of the overseas office and the job description. A higher grade entitles increments in higher percentages to the basic salary.
c. Marital status – A married candidate is entitled to an increment at the rate of 8% of the basic salary.
d. Number of children – Each child entitles the shaliach to an increment at the rate of 4.8 percent of the basic salary.
The salaries accountant weighs all the data of the employee as detailed above, calculates the fixed increments due to the shaliach, such as: 5 percent special increment, reimbursement of telephone costs and compensation with respect to health tax and prepares a dummy slip in order to demonstrate the anticipated cost with respect to the shaliach.
Income tax provisions:
In accordance with the income tax provisions, a resident of Israel on shlichut overseas is liable for tax with respect to his salary and with respect to additional payments made to him from his place of work, including the reimbursement of expenses. The tax charge is progressive, with an exemption of 45 percent of the tax payment being deducted, for a basic monthly salary of up to USD 6,000.
Keren Hayesod views shlichut as a family shlichut. Great importance is to be attributed to the functioning of the spouse and so Keren Hayesod
822 pays a salary for spouses, set at Grade 7 in the tables for Israeli local employees.
Reimbursement of expenses a. Community activity:
The success of a shaliach in fundraising for Keren Hayesod depends to a large extent on personal contacts that he manages to create with potential donors and on the extent of his involvement in the Jewish community where he is located. The basis for the contacts of the shaliach with the donors is through hosting of the donors at restaurants and in his home, the holding of meetings necessitating long journeys and taking part in various community activities. These social activities consume considerable financial resources, most of which are funded by Keren Hayesod through a mechanism for reimbursement of expenditures. b. Subsistence costs:
Shlichim have high financial costs as a result of their move to live abroad.
The approved expenditure items for the purpose of receiving reimbursements from Keren Hayesod are:
- Rent. - Travel by taxi, bus and train. - Bussing to schools. - Tuition. - Flight tickets and staying at hotels. - Internet to a ceiling of USD 50 a month. - Hosting of donors in the home of the shaliach to a ceiling of USD 450 a month.
822 - Gifts for events to a ceiling of USD 40 a month. - Travel for a visit to Israel. - Insurance and registration of a car to a ceiling of USD 1,800 a year. - Membership dues for the community club.
Following are details of the process of payment of the reimbursement of expenditures.
1. Filing of a detailed monthly report to Keren Hayesod regarding expenditures paid for by the shaliach on a month by month basis.
2. Receipt of approval in principle from the Human Resources Department after examination as to whether the expenditure items that were required were indeed approved for the purpose of receipt of a reimbursement.
3. The deputy of the CFO checks that there is no deviatory expenditure and ascertains that there is budgetary cover.
4. The salaries accountant is responsible for ascertaining that the appropriate documentation for all the expenditures required exists.
5. Reimbursement of the money is made to the shaliach by bank transfer.
The terms of service committee:
The committee consists of the director of finance, the director of human resources, the director of the planning and control unit (in the capacity as a former representative) and the director of the relevant region. The committee deals with two main types of request:
a. A request for reimbursement of expenditures which do not belong to the basket of recognized expenditures, for example:
826 reimbursement of a donation to the community on receiving an aliyah to the Torah in the community synagogue. b. A request to deviate from Keren Hayesod procedures where the deviation entails a financial expenditure, for example: payment of tuition for the children of the shaliach at a school which is not Jewish (which is usually more expensive).
Payment of the salary to shlichim:
The salary is remitted to the shaliach at his request to his bank account in Israel or to a bank account in the country where he is serving.
Calculation of the salary is done by the salaries accountant, using the Hilan system, such that it is the salaries accountant who is the one who inputs the particulars of the shaliach and the terms of his salary into the system.
Sending salaries overseas is done by the bookkeeper through the E.D.I. system, after she and the deputy to the CFO have confirmed the correctness of the figures with their signatures.
The Office of the Comptroller did the following checks: a. Examination of the salary payment process. b. Sampling of 12 salary slips (24 percent of all employees) and checking the amount of the salary paid to the employees as against their employment agreements, including social conditions. c. The Office of the Comptroller checked whether the reimbursements of expenditures which the shlichim received are recognized according to Keren Hayesod procedures.
827 d. Checking the files of the employees kept in the accountancy unit.
The audit findings:
The salaries accountant is responsible both for inputting the data of the shaliach to the system, including the bank account number, and for calculation of the salaries and reimbursements of expenditures and there is, therefore, no proper separation of functions between the body that sets up the employee in the salaries system and the employee who prepares the payment.
Section 9.3 in the employment contract of the spouses emphasizes that "the monthly salary includes severance pay". This section is not legal since its implementation is conditional on receipt of approval from the Ministry of Industry, Trade and Labor, and such has not yet been received. The lack of approval for this section exposes Keren Hayesod to a claim for receipt of full severance pay payment.
Two cases were found where the salary set in the contract with the shlichim does not correspond with the payment on the salary slip, as the result of inclusion of the reimbursement of telephone costs twice in the contract, for example: The salary determined in the contract with shaliach number 8021 is for USD 4,200 but it follows, from perusal of the salary slip that the amount the shaliach actually received was only USD 4,000. A clarification with the salaries accountant established that the amount stated in the contract erroneously contained the payment for reimbursement of telephone costs (USD 200) and so the figure in the slip is correct even if contrary to the contract. There was a similar error in the salary slip of employee number 8362.
The reimbursement of expenses for shaliach 8021 for the month of October 2011 were overpaid, because of two errors:
822 - An error in the amount – recording of a reimbursement of NIS 390 instead of NIS 424.
- An error in the currency – payment of USD 390 instead of NIS 424.
In total, the shaliach received an excess reimbursement in the amount of NIS 1,065.
We found that shaliach 8413 received a reimbursement of expenditures in January 2011, with respect to: hosting, bank commissions and car hire in Israel, a total amount of Euro 460, without submitting an entertainment report and appropriate documentation.
Perusal of the file of shaliach 8540 shows that Keren Hayesod started to make provisions of sums of money for the compulsory pension of the spouse only in 2009 although the law requiring provision of a compulsory pension came into effect at the beginning of 2008. The Office of the Comptroller found that Keren Hayesod did not make an all embracing provision of funds for the compulsory pension for spouses of the shlichim throughout 2008.
In the salaries accountant's unit there are no written directives and procedures regarding the process of salary determination, updating, making of calculations (including simulations) and approval of salaries for payment. This process is carried out in accordance with oral procedures that have taken root over the years.
The audit recommendations:
It is recommended that there be insistence on a proper separation of functions between the body setting up the employee in the system and the body which prepares the salary for payment.
822 Response of Keren Hayesod The recommendation is accepted and will be implemented with preparation of a human resources and personnel system which interfaces with the salaries system.
It is recommended to ask for the approval of the Ministry of Industry, Trade and Labor for the employment agreements between Keren Hayesod and the spouses of the shlichim. Alternatively, the full percentage with respect to severance pay can be set aside for the pension funds of the spouses so as to obviate legal action in the future.
Response of Keren Hayesod The recommendation is accepted.
Insistence is recommended, prior to the signing of any salary agreement, that another body in the Finance Division or Human Resources go over the contract and compare the salary tables to ascertain that the figures are correct. The employment agreements of employees numbers 8021 and 8362 have to be corrected.
Response of Keren Hayesod The recommendation is accepted and is being implemented in practice. The reference is to an exceptional instance because the tenured employee went on maternity leave.
It is recommended that a retroactive provision be made with respect to compulsory pension for 2008 for those spouses of shlichim for whom no provision was made in their favor with respect to that year.
Response of Keren Hayesod The recommendation is accepted.
June 2012
222 Response of the Chairman of the Executive to the Comptroller's Report on Keren Hayesod Salaries and Human Resources
In accordance with Paragraph 18b of the Statutes of the Comptroller and the Control Office of the World Zionist Organization, following is my response to the above referenced Audit Report:
The Comptroller has prepared a detailed report on the subject of salaries and human resources in Keren Hayesod.
Keren Hayesod employs over a hundred people, most of whom, about eighty, in its headquarters in Israel and about thirty shlichim around the world. The audit examined, among others, the recruitment process of employees including shlichim, determining their salary and calculating it, the attendance reporting system as well as a variety of aspects relating to overtime and accumulation of vacation days.
Keren Hayesod has accepted most of the audits recommendations, outlined along its findings.
The Comptroller's recommendation regarding "global" overtime, relate to an issue that is being dealt by Keren Hayesod on several levels as well as from a legal point of view. It is proper that actions be taken in the matter, through comprehensive consideration of the special circumstances involved, including aspects of labor relations.
103 I found that the findings and recommendations in this report can also assist in the human resources and salary activities of the World Zionist Organization and have therefore instructed the Director of the Finance Department and the Director of the Human Resources Division to study the report and its recommendations.
We thank the Control Office.
(-) A. Duvdevani
Jerusalem, September 2013
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Statutes of the Comptroller and of the Control Office The World Zionist Organization
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Statutes of the Comptroller and of the Control Office The World Zionist Organization
Adopted by the Zionist General Council at its Session in March 1963, in accordance with Resolution 95 passed by the Zionist General Council at its Session in May – June, 1962, with reference to Section 60, paragraph 8 of the Constitution of the World Zionist Organization. Including the amendments in accordance with the Resolution passed by the Zionist General Council at its Sessions in January 1967, February 21, 1974, July 14, 1976, and June 29, 1986, and further amended as resolved by the Presidium of the Zionist General Council on June 11, 1991.1
A. Definitions
In these Statutes: The Constitution: The Constitution of the World Zionist Organization as adopted by the Zionist General Council at its Session of December 1959 – January 1960 in accordance with the decision of the 24th Congress, as amended. The Congress: The Zionist Congress. The General Council: The Zionist General Council. The Presidium: The Presidium of the Zionist General Council. The Executive: The Executive of the World Zionist Organization. The National Funds: Keren Hayesod – United Israel Appeal and the Jewish National Fund. The Comptroller: The Comptroller of the World Zionist Organization.
1 The Zionist General Council authorized the Presidium, in June 1990, to amend the Statutes in line with Resolution 37 of ZGC of June 1989, and as may be necessary to clarify the procedures concerning the Comptroller’s reports.
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The Finance The Standing Budget and Finance Committee elected by the Committee: Zionist General Council. The Subcommittee A Subcommittee established by the Finance Committee to for Control2 discuss and deal with the Comptroller's findings. Controlled Body: A body within the meaning of Section 10 of these Statutes. Central Zionist An institution within the meaning of Article 46 of the Institution: Constitution.
B. Status of the Comptroller and his Deputy
Election of the 1. The Comptroller shall be elected by the Congress for the Comptroller purpose of conducting the control in the World Zionist Organization (in accordance with Article 14 (e) of the Constitution). Term of Office 2. The term of office of the Comptroller shall be from the day of his election until the end of the next regular Congress. Should the office of the Comptroller become vacant during the period between one Congress and the next, the General Council shall elect a new Comptroller, and in the meantime, the Deputy shall fulfill the duties of the Comptroller. If there is no Deputy Comptroller, the Presidium shall appoint an Acting Comptroller, but the Comptroller shall continue to serve until the Acting Comptroller assumes office. Deputy Comptroller 3. (a) Should it be decided to establish such a post, the Deputy comptroller shall be elected by the Congress or the General Council, after hearing the opinion of the Comptroller. The Presidium may, in urgent cases, appoint a Deputy, such election being subject to the approval of the General Council at its next session. Details of the Deputy Comptroller's authority shall be determined by the
2 Amended by the Presidium Resolution of June 11, 1991.
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body which elects him (in accordance with Article 60, Section 3, of the Constitution). (b) The tenure of office of the Deputy shall be from the day of his election until the end of the next regular Congress, or a shorter term to be decided upon by the body which elects him. Vacancy of office 4. (a) The office of the Comptroller and his Deputy shall become vacant in any of the following circumstances: i. upon the expiration of his term of office; ii. upon his resignation; iii. upon his dismissal from office by a two-thirds majority vote of the General Council; iv. upon his death. (b) The Comptroller may resign by tendering a letter of resignation to the Chairman of the General Council. Independence of the 5. The Comptroller shall not, in the fulfillment of his duties, Comptroller be subservient to any body, and shall be responsible solely to the Congress and to the General Council (in accordance with Article 60, Section 6 of the Constitution). Special Status 6. The Comptroller shall participate in an advisory capacity in the Congress, the General Council, and their committees, including the Finance Committee (in accordance with Article 32. Section 3 of the Constitution). 7. The status of the Comptroller shall be equal to that of a Member of the Executive, and his salary shall be in accordance with that status, and the status of the Deputy Comptroller shall be equal to the status of a Deputy Member of the Executive. Restrictions 8. (a) Neither the Comptroller nor his Deputy shall serve
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on the executive of a controlled body; nor shall they hold any other paid office; (b) Neither the Comptroller nor his Deputy shall during their period of office purchase, lease, or acquire by gift any movable or immovable property belonging to any controlled body, nor shall they receive from such bodies any concessions, grants, or favors, except for land or a loan for the purpose of settlement or housing. (c) Neither the Comptroller nor his Deputy shall take up employment with a controlled body within three years of leaving office. Secrecy 9. The Comptroller and his Deputy shall be bound to observe secrecy of all information, documents, or reports to which they have access in the course of their work.
C. Scope of Control
Controlled Bodies 10. The following are the bodies subject to control by the Comptroller: (a) All departments, enterprises, and institutions of the World Zionist Organization, both in Israel and in the Diaspora. (b) The National Funds and every other fund of the World Zionist Organization, including their departments, enterprises, and institutions, both in Israel and in the Diaspora. (c) Every company, enterprise, fund or other body in whose capital or budget the World Zionist Organization and/or the National Funds, together or separately, participate to an extent of 50 percent or more, or in which they have at least 50 percent of the voting rights. (d) Every company, enterprise, fund or other body in whose capital or budget the World Zionist
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Organization and/or the Funds mentioned in sub- section (b), together or separately, participate to an extent of less than 50 percent, provided that the right of examination was a prior condition agreed upon with such bodies. The extent of such control shall be determined by agreement between the Executive and the Comptroller. (e) Every body subsidized by the World Zionist Organization, or other body, the examination of which is imposed upon the Comptroller by decision of the Congress, the General Council, the Finance Committee, or the Executive. The extent of such control shall be determined by agreement between the Executive and the Comptroller.
D. Functions of the Control
Details of Control 11. The Comptroller shall examine the administration of the controlled bodies, the condition and administration of their finances, their accounts, and their property, with respect to their legality, order, efficiency, economy, and integrity, and shall examine: (a) Whether the controlled body functions in accordance with the Constitution and the directions of the Central Zionist Bodies; (b) Whether the expenditure of the examined bodies was made within the scope of their budgets, as approved by the competent institutions, and for the purposes for which they were intended; (c) Whether the procedures of the controlled body regarding receipts and payments is satisfactory; (d) Whether the methods of safeguarding monies and property and the state of cash and supplies are satisfactory, and whether the accounts and balance sheets are accurate and prepared at the proper time;
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(e) Whether the controlled bodies operate economically and efficiently in all aspects of their work, while adhering to legal and moral principles; (f) Whether the auditing of accounts, if conducted by an auditor, is done at the proper time, and whether the controlled body complies with the auditor's directives. Investigating 12. The Comptroller shall investigate complaints submitted Complaints to him by the public against any body or person subject to his control, as set forth in Section 10 above.
E. Control Procedure
Submission of 13. A controlled body shall be obligated to submit its Budgets by detailed budget to the Comptroller immediately upon its Controlled Bodies approval by the competent institutions, to inform the Comptroller of any changes in the budget, and to submit to him all documents pertaining to it. Submission of 14. (a) Every controlled body shall be obligated to submit Statements and to the Comptroller an interim report on its income Balances by and expenditures for each fiscal year no later than Controlled Bodies four months after the end of such year, and six months after the end of the year, but not later than nine months, a balance sheet showing assets and liabilities as at the end of the fiscal year. (b) Every controlled body shall submit to the Comptroller a report and opinion presented to it by an auditor and a copy of its remarks on such report or opinion. Cooperation 15. (a) The controlled body shall be obligated to render on the its full assistance to the Comptroller and to his part of the staff in the performance of their tasks, and to allow Controlled them unlimited access to all books, files, accounts, Body documents, ledgers, card indices, and all other material belonging to the controlled body. The
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controlled body shall similarly be required to submit all information, documents, explanations, and other materials required by the Comptroller or his staff for the purposes of the examination. (b) Any body or person against whom a complaint is investigated, as stated in Section 12 above, shall furnish the Comptroller, at his request, with all the sources of information noted above within a reasonable period of time or within a period of time determined by the Comptroller, according to the circumstances.
F. Results of the Examination
Submission of 16. (a) Should the examination reveal any shortcomings Examination in the work or activities of any controlled body, Findings the Comptroller shall inform the controlled body thereof in writing and require rectification of such shortcomings within a reasonable time. (b) If the matter is intended for inclusion in a Report under Chapter G, the Comptroller shall present a summary of the examination to the head of the controlled body in order to receive explanations and clarifications regarding the findings of the examination, and if he should deem it necessary, he shall submit a copy thereof to the Chairman of the Executive or to the Treasurer, as appropriate. The Comptroller may set a final date by which such explanations and comments are to be given.3 (c) If the examination reveals any deviation from or disregard of the directions of the competent institutions of the World Zionist Organization, or a breach of the law or of integrity on the part of a controlled body, the Comptroller shall bring his findings to the notice of the head of such
3 Amended by the Presidium Resolution of June 11, 1991
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controlled body for appropriate action and shall notify the Chairman of the Executive and the Legal Counsel.4 (d) The Comptroller may submit a summary of the examination to a body controlled in accordance with Section 10 (e) in order to receive necessary explanations, with a copy to the body that requested the examination. Results of 17. (a) The Comptroller may inform a body or person Investigation subject to his control of the results of the of Complaints5 investigation of a complaint which has been investigated by him, as laid down in Section 12, above, and he may add his opinion and/or recommendations regarding the steps which should, in his view, be taken to resolve the individual complaint and/or to rectify various shortcomings revealed in the course of the said investigation. (b) The Comptroller may at any time ask the said body or person to inform him of their position and of the steps which have been or will be taken in the matter which was the subject of the complaint. A controlled body shall answer the Comptroller within a reasonable period of time or within a period of time determined by the Comptroller, according to the circumstances. (c) At the conclusion and/or during the course of the investigation, the Comptroller shall furnish the complainant with a pertinent reply which shall, in the Comptroller's opinion, be an appropriate and satisfactory. reply under the circumstances.
4 Amended by the Presidium Resolution of June 11, 1991 5 Amended by a Resolution passed by the Zionist General Council at its Session on February 21, 1974.
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G. Reports6 The Separate Reports 18. (a) Upon completion of an examination of a body subject to his control under section 10, of a specific subject, the Comptroller may submit a separate Report on the said body or subject. The Report shall be submitted to the Chairman of the Finance Committee, the Chairman of the Subcommittee for Control, the Chairman of the Executive, the Treasurer, and the Head of the Controlled body. (b) The Chairman of the Executive shall make his comments on the Report and forward them to the Chairman of the Finance Committee and of the Subcommittee not later than two months from the receipt of the Report (Executive's Response). (c) The Subcommittee for the Control or the Finance Committee shall discuss the Report within two months of the receipt of the Executive's Response. Should there be no Executive's Response within the period set in subsection b), the Committee may discuss the Report without a Response. Representatives of the Executive, as determined by the Committee, shall be invited to attend the Committee's meeting which is to deal with a Comptroller's Report. (d) The Separate Reports, or their main points, as the Comptroller may decide, shall be included in the Comptroller's subsequent Annual Report to be prepared and submitted under Section 19. (e) Upon completion of its discussion of a Separate Report, the Committee shall draw up its summaries and conclusions, including its requests
6 This Chapter, which lays down the procedures for the submission, publication and handling of the Comptroller’s Reports was amended by Resolution of the Zionist General Council on June 29, 1986, and further amended by Resolution of the Presidium of June 11, 1991.
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for correction of deficiencies, and shall communicate them to the Chairman of the Executive, to the Head of the Controlled body and to the Comptroller. (f) The Chairman of the Zionist General Council will receive a copy of each Separate Report, of the Executive's Response thereto and of the Committee's Conclusions. (g) If necessary, the Comptroller may make an interim report to the Finance Committee. The Annual Report 19. The Comptroller shall prepare once a year an Annual Report. The timing of the Report shall be such that it be submitted to the Chairman of the Zionist General Council and its members one month before the Council's regular annual Session. The Comptroller's Annual Report shall comprise: (a) A general summary of his activities and the activities of his Office during the year; (b) A list of the bodies and their main units controlled during the period of the report; (c) A list of the separate Reports submitted by the Comptroller according to Section 18.; (d) The separate Reports themselves or their main points as the Comptroller's may deem appropriate. If a Separate Report is included in the Annual Report, the Executive's Response shall also be appended. If the Separate Report had been discussed in the Committee, the Committee's conclusions shall be included in the Comptroller's Annual Report. (e) After consultation with the Chairman of the Sub- Committee or the Committee, the Comptroller may include in the Annual Report a separate Report not yet disposed of by the Committee, whereupon: (1) The Committee's Conclusions, once they are
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determined, shall be distributed to the members of the Zionist General Council. (2) In the following Annual Report these Conclusions shall be presented, along with a precis of the Report, and, if possible, with a brief follow up on the relevant points. (f) Concurrently with the submission of the Annual Report to members of the Zionist General Council, the Comptroller may release the Report for publication. (g) Should the Comptroller believe, upon consultation with the Chairman of the Executive and the Chairman of the Committee, that publication of a certain subject or of certain details included in the Report, may be detrimental to the World Zionist movement, or to its activities in some countries, he may exclude such a subject or such details from the published Report. The Chairman of the Zionist General Council together with the Chairman of the Committee may decide – on the recommendation of the Comptroller, of the Executive or at their own discretion, that certain parts of the Committee's conclusions should be excluded from the published Report. (h) The Comptroller may make public a Separate Report prior to the time that the next Annual Report is prepared and published, if he believes it necessary and after consultation with the Chairman of the Committee and the Chairman of the Zionist General Council. Discussion by 20. The Presidium of the Zionist General Council may Zionist determine whether and how the Comptroller's Annual General Council Report shall be discussed by the Council. In any event, the agenda of the Council shall include an oral report of the Chairman of the Finance Committee or of the Sub-committee for Control on control activities,
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and – if necessary – a report of the Chairman of the Executive on steps taken to rectify deficiencies. Report to the 21. Close to the convention of the Zionist Congress the Zionist Congress Comptroller shall prepare a comprehensive report referring to the period since the previous Congress. The provision of sections 19-20 above shall apply mutatis mutandis.
H. The Control Office
22. The Comptroller is the head of the Control Office, through which he shall carry out his duties under these Statutes. 23. The rights and duties of the employees of the Jewish Agency – World Zionist Organization will be applicable to the Director-General and the staff of the Control Office. They shall, however, be appointed, employed, and dismissed by the Comptroller in line with the labor agreement governing employees of the Jewish Agency – World Zionist Organization, and shall be subject solely to the Comptroller or any person designated by him. 24. The restrictions noted in Section 8 above shall apply to all employees of the Control Office concerned directly with control. As to the restriction contained in Section 8 (c), the period of prohibition prescribed in this section for employees of the Control Office shall be two years or less, as decided by the Comptroller. The restrictions set forth in Section 9 shall apply to all employees of the Control Office. 25. The budget of the Control Office shall be a special budget determined on the proposal of the Comptroller, by the institution that approves the budget of the World Zionist Organization in the current year, without connection to other expenditure budgets. Such budget shall be spent in accordance with the Comptroller's instructions.
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26. The Comptroller shall submit a financial statement at the end of each year for the approval of the Finance Committee.
I. Miscellaneous
27. Should the General Council not decide to establish a Finance Committee, the provisions of these Statutes that refer to such committee shall apply, mutatis mutandis, to the General Council itself or to such institution as the General Council shall charge with the carrying out of its functions in budgetary and financial matters. 28. Upon the approval of these Statutes, the Statutes of the Control Office as adopted by the 24th Congress shall become null and void. Decisions of the Central Zionist Institutions regarding the Comptroller and the Control Office, apart from the provisions of the Constitution, shall likewise become null and void.
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