Ministry of Interior procedures for merger, dissolution and liquidation of associations and civil society

●      Liquidation of 7 associations (from 2000 through 2021), the most important of which: (Al-Ri'aya Medical Association .. and Al-Farh Charity Social Association) , both of which own movable and other immovable funds..)!

●      From the executive summary, the State Audit and Administrative Control Bureau (SAACB) report of September 2022, published on its website, dated 10-11-2022, (which has recorded 123 views to date), about charitable associations and civil society organizations ... it stated that civil society work is a fundamental building block of developing civil society, and the Ministry of Interior is the most competent authority to apply Law No. 1 of 2000 concerning charitable associations and civil society organizations and its executive regulations, especially regarding the dissolution, merger, and liquidation of these associations if necessary ..

●      The State Audit and Administrative Control Bureau (SAACB) conducted an audit of the Ministry of Interior’s procedures — the merger, dissolution, and liquidation operations for charitable associations and civil society organizations, in terms of the legislative, regulatory, and historical environment, as well as the executive procedures that the Ministry of Interior carries out in merger, dissolution and liquidation operations for associations. The sample included 100 associations from all local and foreign associations that underwent merger or dissolution and liquidation operations since 2000 through 2021. The number of registered associations in Palestine amounted to 3,272 associations, while the associations that were dissolved amounted to 1,413 associations, i.e. 43% of the total registered associations.

●      Reference laws in the report:

●      Palestinian Associations Law No. 1 of 2000

●      Article No. 37 of the Palestinian Associations Law No. 1 of 2000 (Dissolution of associations)

●      Article 39: Decree-Law No. 6 of 2011 amending the Charitable Associations and Civil Society Organizations Law No. 1 of 2000

●      Council of Ministers Decision No. 9 of 2003 regarding the Executive Regulations of the Charitable Associations and Civil Society Organizations Law No. 1 of 2000

●      Procedures Manual – Ministry of Interior:

●      Instructions manual for liquidation operations of associations which explains the mechanism for dealing with the movable and immovable assets and properties of the association after liquidation has been carried out

●      Liquidation of associations (according to the report)

●      Liquidation of associations is a subsequent procedure to dissolution of associations.. however, only 7 associations were liquidated out of a total of 1,413 associations during the years 2000 through 2021!

●      It was found that 394 associations were dissolved long ago, more than 10 years ago, and had not been liquidated by the end of 2021!

●      Geographic distribution of associations that were dissolved from 2000 through 2021

-        Ramallah and Al-Bireh: 324 associations, at 24.66%; Bethlehem: 219 associations, at 16.67%; Nablus: 206 associations, at 15.68%, Hebron: 150 associations, at 11.42%; Jenin: 137 associations, at 10.43%; Tulkarm: 109 associations, at 8.3%!

●      Liquidation procedures: (according to the report)

●      The Bureau did not find that the Ministry of Interior conducted requests for proposals to appoint liquidators for the associations that were liquidated (except for Farh Association for Telephilately), contrary to the rules!

●      There are reservations about some liquidation reports for associations: (Al-Ri'aya Medical, Al-Farh Charity Social), regarding the accuracy and adequacy of about the properties of those associations, revaluation of lands and real estate and others!

●      There is insufficient confirmation of the soundness and validity of the transfer of ownership of some lands and real estate for both Al-Ri'aya Medical Association and Al-Farh Charity Association, due to the Land Authority not providing the State Audit and Administrative Control Bureau (SAACB) with details that include some plots of land and properties belonging to the two associations!

●      Liquidation of associations: the Ministry carried out the liquidation of only 7 associations, one of which is a foreign association, out of 1,314 associations that were dissolved..!

1-    Al-Ri'aya Medical Association: liquidation date 13-9-2017, dissolution date: 3-12-2015

2-    Al-Farh Charity Social Association: liquidation 25-7-2010, dissolution 5-10-2008

●      Through auditing the liquidation operations carried out by the Ministry of Interior, the following observations were recorded:

1-    Selecting certain associations and liquidating them after their dissolution to the exclusion of other dissolved associations

2-    From reviewing the files of some associations that were dissolved, and examining the dissolution decisions and the violations committed by the associations which led to their dissolution (in the case of compulsory dissolution), one finds these are general and recurring violations in the majority of associations that were liquidated by decision of the General Administration of Non-Governmental Organizations, Ministry of Interior. It appears that the common characteristic of the associations that were liquidated is ownership of movable and immovable assets (lands, real estate, bank balances)

3-    Al-Ri'aya Medical Association, for example, had a liquidation date of 13-9-2017 and the value of lands it owned was 59,155,963 sheqel (fifty-nine million, one hundred fifty-five thousand, nine hundred sixty-three sheqels) – according to the Bureau's report–

4-    Al-Farh Charity Social Association: liquidation date 25-7-2010, and it owned lands valued at 2,550,000 sheqel (two million five hundred fifty thousand sheqels) – according to the Bureau's report–

●      Key observations concluded by the State Audit and Administrative Control Bureau (SAACB) report

●      Merger procedures:

●      There are no procedures related to verifying the correctness of the unification of financial data (in merger operations between associations), which results in risks related to exploiting the assets of those associations (lands—vehicles—investments) outside the framework of the objectives of the associations resulting from the merger.

●      Dissolution procedures:

●      There are more than 1,306 charitable associations that were dissolved during the years 2000–2021 and had not been liquidated at the time this report was prepared; therefore, the movable and immovable funds of those associations remained idle, and have not been utilized until now, which led to a large portion of those funds being lost due to deterioration of tangible assets and changes in the time value of money over the years.

●      There are high risks represented by the use of the assets and funds of the association (dissolved and not liquidated), and the possibility of carrying out certain activities (collecting donations and others), and thus exploiting those funds to achieve personal interests outside the framework set by the law.!

●      There are associations previously warned (some of them their warning period exceeded ten years), due to legal, financial or administrative violations, some of which have not operated since their establishment, and did not comply with correcting their status within the legally specified deadlines, and the Ministry of Interior did not issue dissolution decisions for them to date.

●      There are associations (that were dissolved after a long period elapsed from their warning) that operated for many years without financial records to control their operations and activities, and therefore there are high risks of exploiting the funds of those associations resulting from grants, donations, and other revenues, outside their objectives, and achieving personal interests of their members, in the absence of monitoring or follow-up mechanisms by the competent authorities to prevent disposal or exploitation of those funds after a dissolution decision is issued

●      The Ministry did not inventory the fixed assets of the associations (furniture, devices, equipment) within official inventory minutes to prevent their use or sale or rental after a dissolution decision.. and in the absence of field follow-up of those associations by the directorate teams in the Ministry

●      The Ministry did not require the associations that were dissolved to hand over all legal annexes and documents that enable them to manage their affairs, and this matter involves many risks, including (collecting donations illegally, issuing checks in the name of the association to cover personal expenses of former association officials after the date of dissolution.. exploiting the association’s seals and registration certificate by signing agreements with local donors to implement fictitious projects that benefit persons related to the dissolved association), and part of these risks indeed materialized as violations observed from the selected samples and from the audit procedures..!

●      There are legal cases filed after the date of dissolution against 35 associations that were dissolved by decisions issued by the Ministry of Interior, which indicates the possibility that these associations and others that were dissolved operate unlawfully and carry out operational and investment activities after the dissolution procedure..!

●      Liquidation procedures:

●      From reviewing the liquidation files at the Ministry of Interior, it was not evident that the Ministry conducted requests for proposals to appoint liquidators for the associations that were liquidated (except for the Farh Association for Telephilately), therefore noncompliance with public procurement policies in the selection process of the liquidator constitutes a violation of the instructions manual prepared by the Ministry relating to the liquidation process, limits the principle of equal opportunity, and may lead to contracting with liquidators who have common interests with decision-makers in the Ministry which leads to a conflict of interest in the liquidation process!

●      Observations of the State Audit and Administrative Control Bureau (SAACB) on the liquidation reports

●      Through a review of the liquidation reports for some associations that were liquidated, the following observations were found:

1-  Liquidation report of the Medical Care Association: The total area of the lands owned by the association was not disclosed, nor was the area of each parcel disclosed separately; only the parcel numbers were presented. In addition, the report included details about a residential apartment belonging to the association - Al-Bireh, while it did not include details regarding parcel number 139 of basin number 5, which was mentioned in the approvals of both the Lands Department and the Land Authority.

2-    There are insufficient assurances regarding the validity and correctness of the transfer of ownership of some lands and real estate for both the Medical Care Association and the Al-Farah Charity Association, due to the Land Authority’s failure to provide the State Audit and Administrative Control Bureau (SAACB) with details that include some land parcels and properties belonging to the two associations...!

3-    The association was liquidated on 25-7-2010, while the Ministry of Interior corresponded with the Palestine Monetary Authority and the Land Authority to transfer the association’s funds to the State Treasury on 25-9-2018 (after 8 years from the liquidation), and therefore part of the cash funds in the association’s bank accounts was lost, commissions before being transferred on 23-10-2018 to the unified treasury account!

●      Response of the competent authority to the Bureau’s observations: We hope the Bureau follows up some of the observations with the competent authorities because we cannot confirm or deny what was reported...!

●      Recommendations of the State Audit and Administrative Control Bureau (SAACB)

●      The competent bodies in the Ministry of Interior must require charitable associations wishing to merge to submit audited financial statements dated at the time of the merger request, and financial statements for the new association dated at the time of the merger, to verify the correctness of the transfer of opening balances in full.

●      It is necessary to resolve legal issues concerning dissolution and liquidation processes, and to issue binding instructions from the competent authorities that lead to the implementation of liquidation procedures properly, smoothly, and as quickly as possible.

●      Regarding the associations that have been dissolved but not yet liquidated, numbering (1,306) associations, it is necessary to coordinate between the Ministry of Interior and the Council of Ministers to form a governmental committee of specialists with legal and auditing expertise to liquidate all files of those associations.

●      It is necessary to coordinate between the Ministry of Interior and the security institution concerning associations that are dissolved and to issue procedural instructions to limit the risks related to the exploitation of associations’ movable and immovable funds, including the following:

●      Seizure of all evidence and legal belongings that enabled the association to conduct its affairs prior to the dissolution decision.

●      Inventory of fixed assets and cash in the fund and recording of personal custodianships.

●      Sealing the association’s headquarters.

●      Conduct unannounced field visits by directorate teams to verify the soundness of procedures.

-        It is necessary to comply with the provisions of the law regarding associations that have been warned and have not regularized their status, and the dissolution procedure must be taken for those associations by the Ministry of Interior in compliance with Article No. 37 of the Palestinian Associations Law No. 1 of 2000.

●      The competent bodies in the Ministry of Interior must adhere to public procurement policy in the process of selecting the liquidator, in compliance with the Comprehensive Liquidation Guide prepared by the ministry regarding the liquidation process, and to reinforce the principle of equal opportunity and ensure the quality, integrity, and transparency of the liquidation process.

●      It is necessary to issue new instructions in the Comprehensive Liquidation Guide regarding the contents and format of the liquidator’s report and the mechanism for presentation and disclosure related to the assets and properties of the liquidated association.

●      Response of the competent authority to the executive summary

●      The observations regarding merger procedures will be taken into account and will be incorporated into the Merger Procedures Guide.

●      We agree with the observations made in the report on dissolution procedures, except for point five; the primary role in field follow-up lies with the ministry concerned, nevertheless the ministry does follow up.

●      As for coordination with the security institution regarding the associations that are dissolved, there are no legal texts that indicate a role for the security institution with respect to dissolution; this is the role of the ministry and the competent ministry.!

●      No responses were noted regarding liquidation procedures except with respect to appointing the liquidator, on which the State Audit and Administrative Control Bureau (SAACB) did not comment...