According to an audit performed by the Accountant General, NGOs received billions of shekels illegally in 2006.

The audit revealed that in a large number of elementary schools, nearly all in the ultra-Orthodox school system, students were held back a year - but only on record, which enabled the institutions to obtain extra budgeting.

This practice continued for six years, and resulted in a hefty amount - NIS 50 million of ill-begotten funding. In another instance, the principal of a school was arrested one year ago, following a complaint filed to the police, on the suspicion that he had received more than a million shekels from the Ministry of Education by falsely reporting on students and teachers.

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State funding is allocated for the salaries, purchasing and support of the NGOs along with payment of debts and investment in government companies.

According to Accountant General Yaron Zelekha, the department has improved efficiency in dealing with salaries and ensured that all purchasing matters are handled by way of issuing a tender, according to the law. In both areas the accountant general saved the state hundreds of millions of shekels. The state budgeting of NGOs totals more than NIS 10 billion.

The money saved was not returned to the treasury, but redirected to NGOs eligible for state funding by law.

The accountant general's office also found that the Arab sector suffers discrimination in the distribution of funding as compared to the Jewish sector.

"Aside from the ethical question, the issue has economic repercussions; it is much easier to generate economic prosperity through growth in the weaker economic sectors." The office has invested particular effort in assisting NGOs in the Arab sector and closing long-standing gaps.

Zelekha says that over the past three years, efforts have been made by the Finance Ministry's department of the Accountant General to establish egalitarian criteria and amend operative procedures, resulting in a huge saving of about a billion shekels in budgeting to NGOs. The reform will be completed over the coming year.

"The core of corruption is non-egalitarian behavior," Zelekha says. "A person receives better treatment than another, out of extraneous considerations. This amounts to unequal distribution of state resources, without justification for the division, on the basis of extraneous or dishonest considerations."