Report on the Investments of the Palestinian Fund for Compensating Road Accident Victims

●      (The fifth instalment) - from the State Audit and Administrative Control Bureau (SAACB) annual report for 2023

●      The Palestinian Fund for Compensating Road Accident Victims is a fund established by Decision No. 95 for 1995, whereby the fund compensates the injured person who is entitled to compensation under conditions and orders, and who is unable to claim compensation from the insured for several reasons. The fund is managed by a Board of Directors consisting of seven members with experience in the field of insurance, appointed by a decision of the President of the Palestinian National Authority, upon the proposal of the Ministry of Finance, for a period of 3 years, renewable (Article No. 2). The Board of Directors appoints a General Manager who is responsible for the fund’s operations and for implementing the Board’s decisions. The Board also appoints a Risk Management Officer and an Internal Auditor.

●      The fund’s resources (Article No. 10) consist of the following items: a percentage of insurance fees, determined by decision of the Ministry of Finance, which insurance companies transfer to the fund at the specified dates; in addition to amounts collected from contributions by exempted bodies and institutions from the duty of insurance; and finally from the amounts that the current fund pays from the premiums that it obtains from insured owners of their vehicles registered in the West Bank.

●      The Palestine Capital Market Authority assumes supervision and oversight of the fund’s activities; the fund is obliged to provide the Authority with annual and semiannual financial statements audited by an external auditor, in addition to quarterly interim statements (Instruction No. (1), 2020, on the supervision and oversight of the Palestinian Fund for Compensating Road Accident Victims’ activities).

●      The State Audit and Administrative Control Bureau (SAACB), in its annual report for 2023, revealed violations and observations on the performance of the Palestinian Fund for Compensating Road Accident Victims, its investments... Among these observations and violations are the following:

●      Concentration of investments: The investments of the Palestinian Fund for Compensating Road Accident Victims are concentrated in bank deposits and bonds, where bank deposits amounted to 58% of total investments, in addition to the loan granted to the Ministry of Finance in the amount of 150 million shekels—about 42 million dollars—which is in favor of the General Petroleum Corporation—whose share of total investments amounted to 39%—noting that the General Petroleum Corporation is indebted with large amounts, valued at 1,288 million shekels to banks, in addition to 206 million shekels from funds such as the Fund of the Orphans’ Funds Management and Development Corporation, and the Palestinian Fund for Compensating Road Accident Victims—as noted above (according to the Ministry of Finance and Planning’s monthly public debt data for 2024, from January through May 2024—Table No. 7 Public Debt)..!

●      Operational procedures manuals: The Palestinian Fund for Compensating Road Accident Victims does not have operational procedures manuals to implement the approved investment policy, which may affect achieving the fund’s objectives from investing its money.

●      Investment policy: The investment policy of the Palestinian Fund for Compensating Road Accident Victims lacks key provisions to regulate the investment process, including defining the nature and types of risks, the channels of investment operations such as foreign and domestic investments, the possibility of speculating in equities, an Investment Committee, and in the investment policy the terms and duties of the Investment Manager, the terms and duties of the custodian required to be appointed, criteria for investments in new companies or a criterion that allows or prevents entering as a shareholder or founder in new companies or investment sectors. This weakens the quality of investment decisions and the lack of clarity of obligations to exercise sufficient professional care when making investment decisions.

●      Performance measurement criteria for investments: The fund’s investment policy lacks criteria for measuring the investment performance of investments, and the investment policy lacks provisions for reviewing and following up the fund’s investments, such as issuing periodic reports about its investments by the competent authority for interested parties.!

●      And in my opinion.........the concentration of investments, as I noted above, in bank deposits, bonds, and loans to government bodies, is an observation that weakens the fund’s ability to grow its assets and investments with due care and professionally... and is far from the clear risks in concentrating these investments in areas with investment risk..!

●      As for the absence of operational procedures manuals... this contravenes the objectives of establishing the fund and its management. Why are no operational procedures manuals drawn up to implement the investment policy in a professionally correct manner.... These are funds that must be invested by specialists and monitored by the Board of Directors and the Palestine Capital Market Authority management, according to operational procedures manuals. The absence of operational procedures manuals in investment is surprising in the world of asset investment, and hardly helps the fund to implement the investment policy optimally..!

●      In addition, the absence in the investment policy of the Palestinian Fund for Compensating Road Accident Victims of the key investment process provisions cited in the SAACB report above weakens the quality of investment decisions and the lack of clarity of obligations to exercise sufficient professional care when making investment decisions..!

●      As for the absence in the fund’s investment policy of provisions to review and follow up the fund’s investments, such as issuing periodic reports about its investments by the competent authority for interested parties, this is a matter that raises concern.

●      Investment is a professional process that requires operational procedures manuals, policies, performance measurement standards, and other essential tools to organize the fund’s investment process and to exercise sufficient professional care.. This does not appear to be adequately present in the performance of the Palestinian Fund for Compensating Road Accident Victims (according to the SAACB report cited above). Therefore, the State Audit and Administrative Control Bureau (SAACB) should follow up on such violations and write recommendations on the necessity of the fund management’s compliance with the SAACB’s observations. There should also be follow-up with the fund’s supervisory bodies to correct the course of the fund’s investment policy. Because without sufficiently professional risk avoidance in the investment policy, the fund’s finances will be in jeopardy, given the existence of large financial obligations to compensate victims—injured people in road accidents..!