Under the State Audit and Administrative Control Bureau's Pen in Palestine

Episode No. (27)

·        Financial statements of Tubas Area Electricity Company Public Shareholding Limited for the year 2023

·        I felt a kind of gloom after reading and analyzing some of the observations and violations contained in the annual report of the State Audit and Administrative Control Bureau (SAACB) for 2024 on the operations of Tubas Area Electricity Company for the year ended 31-12-2023, whether it was the absence of a proper organizational structure in the company, or the existence of weak control over operations, overlapping authorities, or weak legal compliance, in addition to the clear shortcomings in governance, institutional oversight, weak transparency, accountability, in addition to the existence of imbalances in the company’s financial management, and violations in the management of travel, missions, expenses, asset management, procurement, and warehouses..!

·        The audit report stated that Tubas Area Electricity Company, which was established on 30-3-2006, faces substantive and structural challenges represented in what was mentioned above. These combined imbalances adversely affect financial sustainability, transparency, and performance efficiency, and necessitate comprehensive institutional reform. The Bureau presented in its report a set of recommendations amounting to approximately 28 recommendations, beginning with strengthening governance and internal control, tightening financial and administrative policies, improving resource and asset management, which the company is required to adopt in order to rectify its situation in a way that achieves its interests and objectives.

·        Below we list some of the most important substantive observations contained in the aforementioned Bureau report:

1-     Weak governance and the role of the Board of Directors

• Failure to comply with the provisions of the internal regulations, especially regarding the remuneration of Board members, where payments were made contrary to Article (29) of the aforementioned internal regulations.
• Failure to form an internal control unit or committee, and failure to require the executive management to submit periodic reports, which reflects a clear negligence by the Board of Directors in performing its supervisory role.
• Decisions to cancel debts and to pay bonuses and advances without sufficient justification, or approved financial and legal studies.

2-     Financial position and planning

• The sharp rise in accounts receivable, which reached (90,464,108) shekels, without effective intervention by the Board of Directors to set effective collection policies.
• Conversely, the increase in accounts payable to (116,632,792) shekels, an increase of (12%) over the previous year, with excessive reliance on the Ministry of Finance (85% of the total).
• Payment of profit advances to shareholders despite the existence of receivables due from them to the company, and payment of profit advances for 2023 before closing the fiscal year, a decision that contradicts the principles of prudence, caution, and financial responsibility.
• Failure to carry out tax reconciliations since 2017, despite the Board’s knowledge of recording annual provisions for income tax.

3-     Human resources and administrative decisions

• Granting exceptional allowances and counting overtime contrary to the salary scale and the Labor Law, based on Board of Directors’ decisions.
• Termination of employees’ services and payment of amounts exceeding their legal entitlement.
• Hiring a female lawyer and legal consultants without contracts or supporting documentation, and by direct decisions from the Board of Directors, without oversight or assessment of the actual need or the feasibility of contracting.
• Conducting appointments and promotions without competition or transparent criteria, and in the absence of clear job titles.

4-     Travel and missions

·         Approving travel participations without clear criteria for the number of participants or the nature of the mission.

·         Paying allowances to Board members for travel missions ($100 per day by Council decision), despite weak supporting documentation and the absence of institutional impact of the missions.

·         Charging the company with travel expenses for missions fully hosted by other parties, and purchasing tickets before obtaining official approvals.

5-     Assets and procurement

·         Weak control over tenders for the purchase, maintenance, and sale of vehicles.

·         Absence of a system for managing vehicle movement, despite the Board of Directors’ responsibility for approving general policies.

·         Discrepancies in warehouses, and failure to use basic control tools such as item cards.