Vehicle Customs Revenues at the Ministry of Finance (1-1-2020 to 25-4-2022)

●      Episode No. (4)

-        Embezzlement of 14,349,771 shekels:

-        The fraud case that occurred in Vehicle Customs at the Ministry of Finance in 2022, and was discovered by it, was audited by the State Audit and Administrative Control Bureau (SAACB), which recorded the following observations in its 2022 annual report:

-        Responsibility to prevent and detect fraud: The responsibility to prevent and detect fraud rests with the Ministry of Finance, by designing and implementing an effective internal control system capable of detecting errors when they occur and reducing fraud risks. Although the Ministry of Finance developed its internal control system after a previous fraud case in Vehicle Customs, the SAACB points out that one of its qualifications on the final accounts arose from the failure of the revenue-generating centers that collect on behalf of the Treasury, including the Ministry of Finance (the revenue departments), to prepare the necessary bank reconciliations (amounts due versus amounts actually paid). This requires activating oversight procedures over collection operations and recording revenues as stipulated in the provisions of the Palestinian Financial System and the related Cabinet decisions, particularly the instructions issued by the Council of Ministers in session 60/18 held on 8-6-2020 regarding matching revenue receipts related to services provided to the public with the amounts deposited in banks.

●      The Ministry of Finance adopted this recommendation and allocated staff for the bank reconciliations related to the Customs accounts... This appears in the SAACB follow-up report on the Bureau’s recommendations issued in 2022, noting that the follow-up report was issued on 21-8-2023....!

-        Direct responsibility for detecting the fraud in Vehicle Customs

-        The direct responsibility for detecting the fraud in Vehicle Customs lies with the Vehicle Customs Department, since it failed to verify the amounts deposited in the bank and compare them with the amounts due, recorded in the customs program (ESCODA), despite having a user screen to view the customs’ bank accounts. Also, the necessary reconciliations for the customs’ bank accounts were not prepared and were not reconciled with the reports of the (ESCODA) program.

-        The financial controller and internal audit did not carry out their responsibilities in overseeing revenues, which prevented the detection of the fraud that occurred in Vehicle Customs.

-        Embezzlement of 14,349,771 shekels:

-        Manipulation of the monetary values of 248 payment receipts related to Vehicle Customs, where the value of these receipts according to the customs system was 15,843,664 shekels, whereas the deposits in the bank accounts for the same receipts amounted to 1,493,893 shekels. The bank deposit slips were manipulated to make them match the payment receipts issued by the system, and when checking the bank account it was found that these slips were forged as a result of tampering with their amounts, which confirms the embezzlement of 14,349,771 shekels.

●      The Ministry of Finance implemented one of the three SAACB recommendations regarding Vehicle Customs, namely the requirement that the Ministry of Finance complete the procedures to collect the embezzled amounts from the relevant parties..! An amount of 10,927,280 shekels was recovered as of 18-12-2022, and the remaining amounts are being followed up with the Public Prosecution by the Ministry of Finance..

-        Main causes of the fraud

-        One of the main causes of the fraud that occurred in Vehicle Customs revenues at the Ministry of Finance is weak internal control procedures in revenue collection, where the necessary matching and bank reconciliations are not prepared, and oversight over revenue collection was not activated.

-        Deposits placed in a bank account other than the one designated for them..

-        There were bank deposits in 2021, some matching and some not matching in value, related to Vehicle Customs, deposited in an account other than the bank account designated for them, which increased the risk of such cases recurring in previous and subsequent years..! This requires the Ministry of Finance to establish more effective control procedures and prepare the necessary bank reconciliations to identify such cases and ensure detection of any fraud or unintentional errors.

●      Government policy on dealing with imported vehicles:

-        The SAACB did not review the government’s policy on dealing with imported vehicles from abroad in terms of prices and the production year of vehicles permitted for import. Since the Ministry of Finance alone determines the monetary values of all vehicles according to their production year and model and allows the import of new vehicles and vehicles whose production age does not exceed 3 years, without involving the competent government authorities! This may affect optimal implementation of government policy. Accordingly, the SAACB recommends forming a government committee of competent authorities (the Ministry of Finance, the Ministry of Transport and Communications, the Ministry of National Economy) and any other relevant entity to implement government policy on dealing with imported vehicles in the best possible way.

●      The report was responded to by the Ministry of Finance, which adopted most of the SAACB recommendations, and the report was referred to the Anti-Corruption Commission.

-        In my opinion, it is necessary to intensify internal control and oversight at the centers of responsibility (the revenue departments) and the central follow-up departments, because we noticed that even the simplest rules of accounting control and basic governance practices require preparing bank reconciliations for these departments’ accounts at banks and performing monthly, if not weekly, matching of collection operations and reconciling the departments’ bank accounts...

-        It is also necessary to punish all administrative levels connected to this embezzlement, including employees and officials, because leniency in addressing such issues in public service and in collecting and disbursing public funds will lead to similar events.. God forbid.

-        It is necessary to conduct periodic testing and examination of the readiness of internal controls at the centers of responsibility...because the bleeding of public funds will continue at various levels if decisions are not finalized and internal control over financial operations is not tightened, first and foremost....!

●      As for the recommendation on which the concerned entity (the Ministry of Finance) took no action, it concerns the item of unlawful discounts, where the recommendation from the SAACB in 2022 was that the amounts deducted from Vehicle Customs were granted without legal basis, and that they are public funds that do not lapse by prescription. The SAACB recommended that the Ministry of Finance take the necessary measures to collect the rights of the public treasury from all companies that received discounts without justification ......(however the Ministry of Finance did not implement this recommendation, according to the 2022 recommendations follow-up report issued on 21-8-2023)..!