With Guy Leshem
They are not detectives. This is unarguably true. And that's the defense offered by the accounting firm for failing to notice that enormous proportions of money were being pumped out of NILI, a nonprofit organization subject to the National Workers Organization, during the stint of Avraham Hirchson as its chairman.
"It is disappointing that the embezzlement at NILI happened right under our noses, but accountants aren't detectives," argues Aharon Zohar, the senior partner of accounting firm Zohar & Zohar. "At the time, I know we asked questions, and we received answers. That's all we could do. Note that the police came, heard our explanations and left," said Zohar.
Finance Minister Abraham Hirchson is suspected of being at the center of the theft of millions of shekels from NILI.
Zohar & Zohar had handled the books for NILI, which operated under the auspices of the National Workers Organization (NWO). The police are also investigating NILI chairman Ovadia Cohen for alleged fraud and embezzlement.
According to reports, the amounts involved reached NIS 6 million. However, the organization had annual turnover of just NIS 11.7 million in 2003 the year the fraud came to light. Therefore, the fraud should have screamed out of the books - yet there is no mention whatsoever of the matter in the organization's books or reports prepared by Zohar, Zohar.
Non-profit organizations are required by law to submit annual reports to the Registrar of Non-Profit Societies.
The accountants knew nothing of the fraud, according to Aharon Zohar, and the heads of the NWO happened not to mention them either.
"The theft, as far as we know today, was not done within NILI. NILI only served as a conduit to transfer the monies. The National Workers Organization was involved in a number of cases where funds earmarked for one non-profit were transferred to it via another non-profit. So it seems happened here, the monies were only transferred via NILI," said Zohar.
"But the money was not meant for use by NILI and therefore, there was no effect on the accounts," he continued. "When the investigation was announced I was also surprised how it could be that the books, which we supervised, had activities of cashing checks.
"Therefore, I checked and was told that the cash actions did not take place within NILI, but in other non-profit organizations which received the money via NILI," added Zohar.
The only thing related to the affair in NILI's books was a loan granted by NWO to NILI, which appeared in the 2004 report. The NIS 1.2 million loan was given without a repayment date and with no interest or linkage. However, there was no mention of the loan in the 2003 report, despite the board of director's statement that the loan was granted in 2003 and was for NIS 2.5 million.
Zohar explained that except for the NIS 2.5 million loan, they did not detect any exceptional activities at NILI. He said they asked questions and received answers. The fact that NILI needed an emergency loan did not set off a red light for the accountants. "NILI always received allotments from the NWO over the years, and we did not see any difference between the no-interest loan and the allotments, even though the loan was a one-time matter," said Zohar.
Zohar also revealed that the accountants were questioned as part of the police investigations.
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