Inventory of the Public Petroleum Authority’s Warehouses in Palestine, End of 2021

·       Episode No. (1)

-       The 2022 annual report of the State Audit and Administrative Control Bureau (SAACB), one of the reports of the General Directorate for Economic Oversight, included a report on the inventory of warehouses of the Public Petroleum Authority at the end of 2021, where the SAACB participated in the committee to inventory the fuel warehouses affiliated with the Public Petroleum Authority as an observer member, and it reviewed the records on the Bisan program and prepared cards with the receipts submitted to the SAACB from the companies supplying fuel and gas.. without conducting document auditing....! The following was recorded:

-       Differences in warehouse balances: there were differences in the balances of some items in the warehouses, identified by comparing the warehouse balance as of 31-12-2021 with the actual warehouse balance as of 31-12-2021.

-       Accuracy of fuel balances: the Authority did not adjust the difference between the actual physical inventory balance of fuel quantities in some warehouses and the fuel balance recorded on the "book balance" program on an ongoing basis, which resulted in inaccurate fuel balances and, consequently, cumulative differences that will affect the accuracy of the balance in subsequent years, thereby affecting the accuracy of the Authority's financial data...!

-       As for responding to the SAACB’s report, the Public Petroleum Authority did not respond to this report of the State Audit and Administrative Control Bureau (SAACB)... !

-       I wonder here about the SAACB’s role in the issue of inventorying the warehouses of the Public Petroleum Authority in 2021, and why it participated in the committee as an observer? In addition, why it did not perform document auditing in matching the records and documents in this inventory..!

-       The State Audit and Administrative Control Bureau (SAACB) knows that the Public Petroleum Authority often does not respond to the recommendations and observations addressed to it by the SAACB... as reflected in reports and recommendations contained in all previous annual SAACB reports.. The Authority’s noncompliance with the SAACB’s observations and recommendations continues to recur and increase!... If the Public Petroleum Authority does respond to SAACB reports, it is nothing more than a formality, as there is no tangible practical evidence relied upon to achieve a change in the operation of the financial system and to adopt practical procedures to implement it in the manner the SAACB sees fit, and to eliminate some of the Authority’s practices for which the SAACB’s observations and recommendations were written...

-       It is true that the State Audit and Administrative Control Bureau (SAACB) operates within its mandates and according to the powers granted to it.. but among its objectives is to seek to contribute to making an impact by helping the government and the state improve performance, enhance transparency, ensure accountability, preserve credibility, raise citizens’ trust in administration, and consolidate the effective and efficient use of public resources for the benefit of citizens..

●      The SAACB’s observations on the inventory of the Public Petroleum Authority’s warehouses and on maintaining accounts are recurrent; no annual SAACB report is free of observations and recommendations directed to the Public Petroleum Authority.. Throughout the SAACB’s successive annual reports on the Public Petroleum Authority, the last prior to this 2022 report was the SAACB’s 2020 report, titled: Report on the Public Petroleum Authority’s activities for the years 2018 -2019.

●      The inventory of the Public Petroleum Authority’s warehouses in Na'alin, which appears in the SAACB’s 2020 annual report on page 63, included many topics—more than the SAACB’s report on the gas warehouse inventory for 2021—covering various audit subjects, whether the Authority’s warehouse inventories such as the inventory at Na'alin, or the Authority’s indebtedness which discloses liabilities of the Authority to others, the Authority’s purchases and sales of fuel, gas, and other petroleum derivatives, the credit ceilings granted to fuel stations by the Authority, the balances of accounts receivable and payable, book inventory balances, bank reconciliations, commissions resulting from purchases of fuel and gas, the Authority’s procedures for granting fuel station licenses, etc...!

●      The 2019 inventory at Na'alin recorded quantities of fuel lost at the Na'alin warehouse and at the discharge point in the Gaza Strip during 2019, in addition to differences between purchase quantities recorded on the Bisan program from supplier companies and the quantities of fuel received in the receipts for 2019, as well as the failure to record the inventory balance on the Bisan program and to reconcile merchandise balances for all warehouses. The Authority also did not inventory the gas warehouses in Na'alin for 2018 -2019.....!

●      The regulatory record and the Public Petroleum Authority’s history of noncompliance with the SAACB’s recommendations and observations are contentious, especially since the Public Petroleum Authority is a government authority on the one hand (as stated in the SAACB’s report that year).. and the existing situation at the time, considering the Authority an integral part of the Ministry of Finance, does not fit its nature as a government business enterprise, since it conducts commercial activities. The Authority is subject to the financial system for ministries and public institutions, the Public Debt law, and the Public Procurement Law, which causes the Authority to carry out some of its related tasks in an unorganized manner, based on employees’ discretion, resulting in many deficiencies and errors in the Authority’s operations due to the absence of a special system that takes into account the commercial nature of the Authority’s activities to determine the competent entity to license stations, transfer ownership, and close them. Likewise regarding the Authority’s work in scheduling debts and contracting with supplier companies, consumer prices, subsidies (tariff), and relations with stations. It should be noted that the Council of Ministers issued in 2018 a decision to form a Board of Directors for the Authority, in addition to issuing several decisions to work on separating the Authority as an independent government business enterprise that conducts commercial activities in accordance with specific laws and regulations that organize its work.

●      The Public Petroleum Authority does not issue monthly reports on its results for decision-makers and entities responsible for planning and monitoring the government’s financial position, even though the Authority channels part of its expenditures through the budget and its liabilities are considered part of the public debt and its financial data are disclosed in the government’s final accounts. Since the Authority conducts commercial activities that are different in nature from government services, it must issue monthly reports showing its financial position, results of operations, and cash flows on a monthly basis to measure the Authority’s financial performance and inform decision-makers of monthly results in addition to annual reports.

●      The Public Petroleum Authority’s increasing indebtedness, with liabilities to others whether to local banks and financial institutions, public funds, or supplier companies, etc., makes it necessary to address its situation, for instead of providing cash flows to the government from its fuel trading (purchase and sale), we find that its indebtedness data to others are worrying. The Palestinian Council of Ministers, in the absence of a Legislative Council to oblige entities subject to the SAACB’s oversight to implement its observations and recommendations, should have played the role of addressing the situations of authorities and centers of public responsibility that suffer from imbalances revealed by the SAACB’s recommendations in its reports... for it is unreasonable that the role of this Bureau appears to be merely formal...!