Arab Women’s Union Society: Numbers Reveal Governance and Transparency Challenges

 

Since the founding of the Arab Women’s Union Society in Nablus in 1921, its venerable name has been associated with Palestinian charitable and civic work, and its activities have evolved to include a number of centers, the most prominent of which was the Union Women’s Hospital. The State Audit and Administrative Control Bureau (SAACB) report for 2025 points to the existence of best practices in the hospital, including the availability of financial and administrative manuals and systems, and comprehensive medical protocols for various departments and units.

But the report, conversely, reveals a wide range of observations relating to the financial statements, governance, internal control, cash management, revenues, contracts with physicians, and tax liabilities—observations that deserve examination because of their impact on disclosure, the accuracy of financial information, and the hospital’s financial sustainability! We set out the most important of them as follows:

Qualified opinion on the financial statements

The most prominent finding recorded by the Bureau is that it issued a qualified opinion on the financial statements. It concluded that the Union Hospital’s statements do not present revenues fairly, as the finance department reduced annual revenues by the physicians’ shares through reversing journal entries!

According to the report, the total of these reductions amounted to 11.536 million shekels, while the revenues reported in the financial statements amounted to 17.304 million shekels; that is, the reduction exceeded 66% of the reported revenues, which the Bureau considered to affect the fairness of presentation and financial disclosure!.

It also pointed to the failure to present anesthesia and resuscitation fee revenues fairly, due to their reduction against external service expenses, which resulted in presenting a net revenue lower than the actual value, and an inaccurate balance declared in the financial statements!.

Governance and internal control

In the area of governance, the Bureau indicated that none of the board members assigned to the hospital committee is specialized in the medical field, which may affect their ability to perform the tasks entrusted to them.!

More importantly, despite the hospital being one of the many activities and centers of the Society, there is no employee specialized in internal control at the hospital. The Bureau believes that the absence of this position deprives management of an important tool to monitor the performance of the executive management, detect deviations if any, and provide the necessary recommendations to improve performance!.

It also found that no provision was calculated for doubtful debts for 2023, and that the amount of 639,580 shekels shown in this regard is an accumulated amount transferred from previous years, contrary to commonly accepted accounting principles!

The report also recorded unjustified differences between the Society’s consolidated financial statements and the totals of the financial statement items for its three centers: the hospital, the college, and the Society center, which could affect the fairness of presentation and disclosure!

Cash, disbursement and segregation of authorities

The end-of-service provision at 31 December 2023 amounted to approximately 4.615 million shekels, yet the Bureau noted the absence of a separate bank account for employees’ entitlements, which may affect the hospital’s ability to meet its obligations upon termination of service, especially given the lack of sufficient reserve balances in other accounts!

It also found that there was no segregation between the duties of the main cash treasurer, the physicians’ fund treasurer, and the petty cash fund treasurer, as all were entrusted to a single employee. This concentration of authority places internal control at risk of errors occurring and not being detected in a timely manner.!

Another notable observation was the high value of cash payments to physicians, as 10.482 million shekels were paid in cash to them during 2023, in addition to funding the physicians’ fund from the main revenue fund. The Bureau considered that this contravenes accepted practices and weakens one of the control tools over physicians’ expenditures.!

Old receivables and a limited accounting system

The report showed the existence of patient receivables from previous years amounting to 639,435 shekels, dating back to debts before 2012, without sufficient details about them, and without taking the necessary measures to address them according to proper procedure, which may affect the presentation of net assets at fair value!

The accounting system used also does not include cost centers to record revenues by medical departments, which deprives management of clear data and statistics on the performance of each department independently, thereby limiting the information necessary for development decisions!

Physicians’ contracts and operating loss

The Bureau indicated that outpatient clinic physicians receive 70% of gross revenue before deducting operating expenses. Total outpatient clinic revenues in 2023 amounted to 1.100 million shekels, while the hospital’s share was 321,614 shekels before deducting expenses, with the hospital bearing administrative expenses, medical consumables, and others!

On the contracting file, it was shown that the hospital contracted with eight physicians under special contracts that include monthly salaries and percentages of departmental revenues. However, the audit revealed that the same standards were not applied to all physicians; in some cases the monthly salary is deducted from the physician’s entitlements, while other physicians receive the salary in addition to a share of revenues!

According to the report, this led to a decline in the hospital’s net profits and an operating loss of 627,356 shekels during 2023!

Incentives and tax compliance

Another important observation relates to income tax. The Bureau pointed out that tax was not calculated on the incentives that physicians receive from hospital department revenues, nor were they disclosed to the Tax Department!

The value of incentives from which income tax was not withheld amounted to 1,157,599 shekels during 2023, and the Bureau estimated the tax due on these amounts at approximately 115,756 shekels, noting that this resulted in the loss of funds due to the State Treasury, and stressing the necessity of compliance with the provisions of the Income Tax Decree-Law No. (8) of 2011!

Bureau recommendations

The State Audit and Administrative Control Bureau (SAACB) made a number of recommendations to address these observations, most notably appointing an internal auditor who reports directly to the Board of Directors, strengthening segregation of authorities, and preparing annual and strategic plans and a comprehensive evaluation of the hospital’s performance.

It also recommended reconsidering physician hiring policies, disbursing their entitlements through banking channels, adhering to accounting principles and standards in preparing the financial statements, full disclosure of the hospital’s activities, revenues and expenses, including physicians’ shares, and developing the accounting system to show revenues by medical departments.

The recommendations also included allocating a separate bank account for end-of-service entitlements, addressing old patient receivables, and complying with the provisions of the Income Tax Decree-Law and withholding tax on all amounts due to physicians and remitting it according to procedure.

According to the report, the Society’s management response was positive, and it expressed its readiness to work on correcting the observations contained therein.

But the true value of any oversight report does not stop at recording observations or announcing readiness to address them. The real test begins after the report is issued: do the recommendations turn into concrete actions? And can the results of corrective measures be measured and followed up?

Governance is not completed by the mere existence of manuals and systems, and transparency is not achieved simply by preparing financial statements; rather it appears in the accuracy of disclosure, the independence of internal control, the proper segregation of authorities, the management of resources according to clear rules, and the practical response to the observations of oversight bodies!