Financial and Administrative Irregularities in Dar Al-Yateem Al-Arabi Association's 2022 Activities

·        Episode No. (19)

·        The State Audit and Administrative Control Bureau (SAACB) conducted an audit of the association's work for the fiscal year ended 2022, and it was found that there are a number of material, administrative and governance observations as follows:

·        General overview of the association: Dar Al-Yateem Al-Arabi Association was established in 1961 under the Jordanian Associations and Social Bodies Law, with the aim of practicing charitable and social activity and housing orphans, and its scope of work covers all governorates of Palestine.

·        Material financial observations:

1-     Imbalance of the financial statements:It was evident that there is a difference of (23,400 shekels) between assets and liabilities in the statement of financial position for 2022!

2-     Inaccuracy of bank disclosure:The financial statements showed that the association has an account at the British Bank of the Middle East, contrary to what appeared in the official bank confirmations!

3-     Undocumented share ownership:The association's ownership of (51 shares) in Jordanian Oil Factories Company was recorded based on a certificate dated 14/9/1984, without documents proving the continuation of its ownership to date!

4-     Inappropriate inventory adjustment:The external auditor adjusted the inventory value at year-end to match the physical count, without following the accepted accounting procedures!

5-     Absence of fixed assets records: The association does not maintain detailed fixed asset registers in terms of quantity, purchase date and value, which makes the calculation of annual and accumulated depreciation inaccurate!

6-     Duplication in recording in-kind donations:It was observed that in-kind donations in the amount of (8,465 shekels) were recorded twice in the 2021 and 2022 statements, contrary to accounting principles!

7-     Errors in end-of-service provisions:End-of-service provisions for employees were not calculated accurately in accordance with the adopted standards!

·        Governance and management:

1.     Irregularities in membership and voting:The association grants the right to vote immediately upon payment of membership fees, without adhering to membership criteria and controls, which affects the integrity of the board of directors' selection.

2.     Conflict of interest:Some board members exploited their positions to appoint first-degree relatives within the association.

3.     Conflict in audit duties:The association engaged the same external auditing firm to perform internal auditor duties, which conflicts with the principles of segregation of duties and independent oversight.

·        Regulations and policies and procedures :

1-     Absence of regular bank reconciliations by the financial department!

2-     Lack of segregation of financial authorities, as accounting undertakes collection, disbursement, deposit, recording and cash desk custody simultaneously, contrary to sound financial control principles!

3-     Income tax: The association's administration did not deduct income tax from the salaries of employees and workers, nor remit it to the Ministry of Finance in accordance with the legal procedures!

·        Organizational structure and personnel affairs:

1-     Absence of an approved organizational structure, despite successive boards of directors, without preparing a structure that defines responsibilities and authorities!

2-     Non-compliance with formal recruitment procedures, such as advertising vacancies or conducting interviews and examinations!

3-     Double appointments, as it was found that employees occupy two positions at the same time and receive two salaries in the same place!

4-     Appointment of unqualified employees, where some workers' qualifications do not match their job titles!

·        Recommendations :

·        The State Audit and Administrative Control Bureau (SAACB) report revealed the existence of material financial and administrative violations in Dar Al-Yateem Al-Arabi Association that affect the integrity of the financial statements and the integrity of governance, alongside weakness in the internal control system, absence of an organizational structure, and lack of sound administrative procedures, and it recommends the necessity of rectifying the financial and administrative situations and strengthening the principles of disclosure, accountability in accordance with the applicable laws and regulations!