Palestinian Licensed Lawyers' Syndicate – Al-Quds Center 2021–2022

• (Partial shortcomings in compliance, governance, and financial management)
• (Episode No. 15)
• The Palestinian Licensed Lawyers' Syndicate, pursuant to Lawyers Law No. (3) of 1999, is the representative body for lawyers and the supervisor of their professional and social affairs, and it bears responsibility for managing primary funds, which include the pension fund, health insurance, cooperative, and fellowship. The Syndicate Council also has the authority to draft the regulations governing the establishment of these funds and to regulate the profession.
• As for the number of practicing lawyers in Palestine, their number in 2023 amounted to 10,637 practicing lawyers, of whom 7,936 are in the West Bank (5,078 male lawyers and 2,858 female lawyers). The number of practicing lawyers in the Gaza Strip amounted to 2,701 (information derived from the Palestinian Central Bureau of Statistics (PCBS) 2023).
• Although the Syndicate, which was established in 1997, achieved a significant financial surplus in 2022 in the amount of (3,794,321) dinars, reflecting an improvement in the Syndicate's financial solvency, the audit report of the State Audit and Administrative Control Bureau (SAACB) for 2021–2022 revealed material shortcomings in governance, compliance, and financial management, which threaten the sustainability of its funds and undermine the confidence of its members. The Syndicate affirmed, in its response, its full readiness to correct the deviations and address the observations, in accordance with the applicable laws and regulations!

• The most significant material observations from the Bureau's report are listed below:

·         Material observations – financial management

• There are no separate bank accounts and cost centers for each fund, especially the pension fund, which creates the risk of using pension funds to cover losses of other funds!
• The absence of engagement with actuarial experts since the establishment of the pension and health insurance funds, which weakens the Syndicate's ability to face future risks!
• A shortfall in providing the Syndicate Council with periodic reports on the status of the health insurance fund, which weakens corrective decision-making.
• Disbursement of funds from the health insurance fund (116,782 dinars) on an exceptional basis and outside the approval of the insurance company, which threatens the Syndicate's impartiality and members' trust!
• There are disbursements from the cooperative fund that are not classified as humanitarian assistance, with weak supporting justifications!
• The continued benefit of lawyers who are not actually practicing from the privileges of the Syndicate's funds!
• The low volume of investments compared to cash liquidity (only 7% of total available funds, which amounted to 39,192,811 dinars).
• Weak follow-up on fees due from lawyers and company agents, which led to the loss of receivable revenues!
• Accumulated uncollected receivables from previous years (279,380 dinars), and an increase in the allowance for doubtful debts to 98%!
• Reliance on a fixed exchange rate of the shekel against the dinar (5 shekels per dinar), which increased the Syndicate's exposure to exchange rate volatility risks!

·         Compliance violations

• The Bureau's audit report showed the Syndicate's noncompliance with a number of regulations and laws, the most prominent of which are:
• Failure to allocate separate accounts for the pension fund and failure to appoint a separate external auditor for it!
• Illegal distribution of revenues from notarial bonds, as the prescribed percentage was not adhered to (80% for the pension fund!
• Failure to transfer the receivables of minors (heirs of lawyers) to the Institution for Managing Orphans' Funds, contrary to the law!
• Failure to transfer 50% of the surplus of the cooperative fund to the pension fund, as required by the regulations.
• Absence of an administrative committee for the cooperative fund, in addition to violation of the Income Tax Law by failing to withhold tax on employees' additional work.

·         Governance and management issues

• Failure to introduce legislative amendments or issue modern financial regulations that organize cash receipt and disbursement operations!
• The absence of a clear investment policy, which reduced opportunities to strengthen financial solvency.
• Overlap between the duties of the Syndicate Council and the executive management, where some council members assumed executive functions.
• The existence of (1,839) lawyers who are registered as practicing in name only, who did not interact with the courts or purchase Syndicate stamps, yet still benefit from the privileges!
• Absence of a staff affairs regulation to govern relations with employees, and weak asset inventory procedures at the end of the financial period.

• Key recommendations by the Bureau :
• Based on what is stated in the State Audit and Administrative Control Bureau's report, a set of important recommendations was reached to correct the violations and enhance the effectiveness of the Syndicate's management, which can be summarized as follows:

1.     Developing the Syndicate's laws and internal regulations:

-         Carry out comprehensive amendments to the laws and regulations with the aim of improving performance and ensuring their compatibility with legal developments and the financial requirements of the Syndicate's funds.

-         Adopt a unified financial system that serves as a reference for all financial operations and transactions within the Syndicate.

2.     Separating the supervisory and executive authorities:

-         The Syndicate Council is responsible for setting general policies, strategies, and regulating the legal profession.

-         The executive management is responsible for implementing policies and managing the Syndicate's day-to-day affairs.

3.     Managing disbursements from the health insurance fund:

-         Cease all direct and exceptional disbursement operations from the fund.

-         All financial transactions must take place through the competent insurance company, as it is the entity authorized to manage medical services.

4.     Organizing the funds' bank accounts:

-         Allocate a separate bank account for each of the Syndicate's funds.

-         Open two independent bank accounts for both the end-of-service entitlements and the savings fund to ensure transparency and financial control.