The Israeli Nonprofit Organization and the Audit Committee
All Israeli nonprofit organizations (amutot) are required to have three institutions to aid in the management of the organization, and this article addresses the role and authority of the Audit Committee.
This Series of Posts
Our law firm has experience in a variety of fields, including Israeli nonprofit organizations. This article discusses the essential role of the Audit Committee, while other articles in this series address various essential topics to assist you in nonprofit management.
For more information on the Israeli Corporations Authority which oversees Israeli nonprofit organizations, see the government website. For more articles from an Israeli lawyer and legal advice for Israeli nonprofit organizations related to the topic of this article, see our articles about the three mandatory institutions of an amutah, the General Assembly and the Executive Board.
Background Information on Israeli Nonprofit Organizations
An amutah may have multiple institutions, but all Israeli nonprofit organizations or amutot (the plural of amutah, i.e., a nonprofit organization or NGO in Israel) must include three institutions: a General Assembly, an Executive Board and an Audit Committee. In order to add more institutions, the amutah must discuss this in its by-laws and have it approved by the Registrar of Amutot. This article will discuss the third institution as well as its roles and responsibilities.
The Audit Committee (sometimes referred to as the Audit Body) is comprised of a minimum of two members who are elected by the General Assembly to help ensure proper financial management of the nonprofit organization (amutah). Audit Committee members should be, among other things, members of the amutah, over the age of 17, and must not have been convicted of crimes involving moral turpitude. Every amutah is legally required to have an Audit Committee regardless of whether the amutah is engaged in financial activities. In the event that an amutah uses an internal auditor, which is required when the annual return is over ten million shekels, the internal auditor is not a substitute for the Audit Committee.
Issues Regarding Payment
Individuals who provide various services to the amutah for payment may not be members of the Audit Committee. Essentially, this means that the members of the Audit Committee may not be employees of the amutah or have any other sort of contractual relationship with the amutah. However, members of the committee can be reimbursed for their attendance in meetings and expenses as members of the Audit Committee. Israeli law has detailed rules regarding legitimate expenses and reimbursements.
The Authority of the Audit Committee
The committee has the authority to, among other things, examine the financial affairs of the amutah, assess how the amutah is fulfilling its established goals, examine economic effectiveness and management within the amutah, suggest ways to address problems in the amutah’s management, and to review the amutah’s financial affairs. It is required to conduct a yearly examination for the previously mentioned issues and must give any recommendations to the Executive Board and General Assembly, which must also be given to the Registrar of Amutot. Additionally, the Audit Committee must prepare an audit report at least once a year and give it to the Executive Board and General Assembly. The Audit Committee has wide-reaching access to the financial documents of the amutah and any other documents necessary to help them perform their functions.
If you are interested in Israeli nonprofit organizations (whether an amutah or cheletz) or have questions, please contact us.
Advocate Joshua Pex works in nonprofit law in Israel and would be happy to discuss the needs of your Israeli nonprofit organization with you.