Investments of the General Federation of Palestine Workers: Weak Governance and Limited Disclosure

 

-         The General Federation of Palestine Workers was founded in 1954, which is considered one of the foundational bases of the Palestine Liberation Organization (PLO), with the aim of defending workers' rights and building a trade-union institution that contributes to the development and growth of Palestinian civil society, and the federation is considered a historical continuation of the Palestinian trade-union movement that formed in the early 1920s, following the establishment of the (Railway Club) to defend the workers of the Hejaz Railway, and among the independent trade-union bodies and popular organizations that were established in 1923 in Haifa under the name Association of Arab Workers, which extended throughout the homeland.

·        The General Federation of Palestine Workers is one of the largest and most venerable popular federations in Palestine, and the federation owns land, real estate, projects, and investments that it can convert into a more sustainable financial base to serve workers, if ownership is paired with clear institutional management, well-considered investment decisions, full financial disclosure, and effective internal control! These resources are not merely financial and real-estate assets, but represent part of the institution's capacity to continue performing its mission and providing benefits to its members!

-         In this context, the State Audit and Administrative Control Bureau (SAACB) conducted a financial audit of the investments of the General Federation of Trade Unions of Palestine for the fiscal year ending in 2023, and the report revealed a set of material observations related to investment planning, financial disclosure, governance, and the management of a number of projects and assets!

-         It is important to note from the outset that the report also recorded a best practice, represented by the federation's recent orientation to establish projects that provide direct benefit to workers using the funds available and attributable to their entitlements, which can enhance the achievement of the federation's objectives.

-         But this positive aspect does not negate a set of material observations that deserve attention and must be corrected, the most important of which are:

·        Absence of a strategic vision for land management!

-         The State Audit and Administrative Control Bureau (SAACB) indicates the federation's lack of strategic plans for managing its lands, and the failure to prepare clear programs to implement projects such as parceling land, connecting services, or establishing projects that achieve the maximum benefit from these resources. This is not merely a matter of inadequate planning, but concerns the federation's ability to convert its real-estate assets into sustainable resources that help finance its activities and serve workers.

·        disclosure: the picture is incomplete!

-         One of the most prominent observations in the report is that the federation's financial statements do not include comprehensive disclosures about a number of assets, properties, and investments, including the wedding hall, the Labor Village project, and the Beit Safafa apartments!

-         Disclosure is not a mere accounting formality; it is one of the foundations that enable the institution's members, oversight bodies, and stakeholders to understand the nature of the assets, their value, and their legal and investment status.

-         The report also pointed to the failure to disclose in the financial statements the legal obstacle that prevented registering the piece of land in the Sarta/Nablus area in the federation's name, despite the settlement of the former treasurer's account in 2016 through the relinquishment of the land in favor of the federation!

·        No documented investment policy!

-         Another material observation is the absence of a general documented investment policy that defines the federation's investment objectives, selection criteria, and orientations that should govern investment decisions.

-         The absence of this policy means that the investment decision may not always be based on written criteria that can be referred to and used to hold management accountable, which may weaken the ability to make trade-offs between different investment alternatives.

-         This is evident in the investment (in the Beit Safafa apartments in Jerusalem), where the bureau pointed to the lack of pre-established objectives and the type of investment, whether residential or commercial, which prevented having an approved reference for comparing alternatives!

·        deposits: resources that do not yield sufficient return!

-         The report records a decline in the value of deposits during the years 2021–2023 as a result of the stoppage of transfers coming from the "Histadrut", which is the Israeli body that governs workers in Israel, in addition to using deposit assets to settle obligations!

-         It also shows that the yield from bank deposits covered only 11% of the federation's expenses in 2022, and only 2.8% in 2023!

-         These figures reveal the limited contribution of this investment to financing expenditures, and the issue here is not merely a decline in return, but relates to how available resources are managed in light of the federation's need for permanent financial resources that enable it to continue its activities!

·        Purchase of Al-Mas'oudiya Park: an investment decision without prior study!

-         One of the clearest observations in the report concerns the purchase of (Al-Mas'oudiya Park), where the bureau indicates that the purchase was made without engaging an appraiser or preparing a feasibility study and prior technical reports, despite the age of the park's facilities and their need for rehabilitation at a cost of 465,931 dinars!

-         This observation raises a fundamental question about the soundness of the investment decision: how can a decision be made to purchase an asset that requires rehabilitation at a large cost without a prior technical and financial evaluation that determines its real value, operating cost, and expected feasibility?

·        The Labor Village: the most prominent link in governance!

-         The observations related to the Labor Village project may more clearly reveal the importance of governance and internal control; according to the report, the project was executed without direct involvement from the federation in selecting the implementing company or defining its technical specifications, and a lawyer executed the project in return for a percentage of sales proceeds, amid weak financing, lack of technical expertise, and contractors' failure to respond to the project's requirements!

-         More sensitive is that the report indicated that the lawyer implementing the project collected sales proceeds into his personal bank accounts, then remitted only the agreed share of the federation to the bank account designated for that purpose, instead of depositing the full amounts to the federation and then paying the lawyer's share according to the approved mechanism!

-         According to the bureau's record, this practice weakens the financial transparency of the project's cycle and limits the federation's ability to directly monitor revenue movements!

-         The report also indicated that the project's internal regulations did not stipulate a clear mechanism for disposing of or allocating its revenues in a way that achieves the federation's objectives and activities, which represents a significant gap in resource management!

·        From oversight to reform

-         The report does not stop at recording observations, but presents a clear set of corrective measures: setting strategic and executive plans for managing lands and real estate, adopting a documented investment policy, improving disclosure in the financial statements, conducting feasibility studies and appraisals before investing, obtaining multiple offers for comparison, and working to register the Sarta land in the federation's name and disclose the legal obstacles related to it.

-         The bureau also recommended exploiting the federation's resources in projects that achieve permanent revenues, and reexamining the viability of continuing the Al-Mas'oudiya project.

-         According to what is stated in the report, the federation's management response was positive and indicated its readiness to work on rectifying the situation in accordance with the observations raised.