Police arrested two senior Education Ministry officials this week on suspicion of taking bribes from an ultra-Orthodox yeshiva in exchange for giving the school more state funding than it deserved.

Police believe the fraud netted the Jerusalem yeshiva, Oz Meir Chabad, tens of thousands of shekels worth of unwarranted funding every month.

The officials, who were arrested two days ago, confessed to the charges and have been released with certain restrictions, police said. They are Dr. Haim Navon, who heads the Jerusalem branch of the ministry's education and welfare services department, and his deputy, Shalom Moha.

The yeshiva's administrative director, Shmuel Weissfish, was remanded for three days on Tuesday by the Jerusalem Magistrate's Court; he has denied the allegations against him. But a teacher from the yeshiva, who was also arrested two days ago, has confessed to the scam and was released with restrictions, police said.

According to police, the scam worked as follows: The yeshiva would submit an affidavit declaring that it had a much larger number of students than it actually did. Navon and Moha would then approve this affidavit, even though they knew it was false. Since the ministry funds yeshivas on a per-student basis, that enabled the yeshiva to obtain much more state funding than it was entitled to get.

In exchange, the two officials received fairly modest financial benefits by the standards of previous such scams. These included a plane ticket overseas, paying for a motel after an operation, a laser printer and a smartphone. Nevertheless, police stressed that this was "corruption of the highest order."

Oz Meir Chabad is located in Jerusalem's Sanhedria neighborhood. It was founded by Rabbi Shimon Elitov, a member of the Chief Rabbinate's governing council, who also serves as its rabbinic leader.

The yeshiva, which falls under the ministry's education and welfare services department because it accepts students who have dropped out of other educational frameworks, has only a few dozen students. But according to the Education Ministry, it has been funded for months as if it had several hundred students.

This is not the first time the ministry's education and welfare services department has been at the center of a scandal. The 2008 State Comptroller's Report, which was published in May 2009, lambasted the department's management, saying, among other things, that it did no follow-up and assessment of some of the programs it runs and failed to maintain continuity of treatment over time. The ministry responded to that report by saying that in order to meet the standards set by the comptroller, the department would have to gobble down a third of the ministry's total budget.

Weissfish's attorney, Avraham Lavie, said he found it puzzling that police have released the two Education Ministry officials while his client is still in jail, given that by law, taking bribes is a more serious offense than giving them. Police responded that this decision stemmed from the needs of the investigation.

The Education Ministry declined to comment on the case, saying it is being handled by the police.