Procedure for an Israeli Nonprofit Organization Audit

The nonprofit organization under audit will receive a notice from an accounting firm copied to the government office ordering the audit. This notice will be very clear as to the authority delegated to the accounting firm to conduct the audit, a timeline, conditions for providing all documents requested, and a long list of data, paperwork, explanations, and requests for details of operations and finances.

Each audit request for documents may include, but is not limited to, the following:

• The association (amuta) or public benefit company’s (cheletz) certificate of incorporation
• The organization’s legally registered by-laws and objectives
• The list of members and/or shareholders, i.e., the General Assembly and their details
• The list of members on the Executive Board or the board of directors in a public benefit company
• Certificates of registration with the various tax authorities, including VAT, income tax, and national insurance (bituach leumi)
• Various licenses as relevant to that organization, i.e., medical, customs, and food regulations
• Tax benefit certificates, namely recognition as a public body by income tax, what is known as clause 46a status
• Balance table
• Annual reports, verbal and financial
• A list of the five highest salaries in the organization
• A list of donors whose donations in one tax year accumulate to 20,000 shekels and higher
• A list of donations from foreign states
• General Assembly or shareholder protocols
• Executive Board or board of directors protocols
• Internal Audit Committee or internal auditor protocols
• Record of any and all litigation against or by the organization
• An overview of the organizational structure
• List of all members, employees, regular contractors, voluntary positions, and professional advisors
• An overview of all the assets of the organization
• An overview of all the operations of the organization
• An overview of all the finances and the organization’s budget
• Written and authorized internal regulations (nehalim)
• Protocol authorizing appointment of organizational signatories
• Employee 126 forms submitted to the tax authorities
• Employee contracts
• Receipts for donations
• Receipts for secondary business use with VAT invoice
• General receipts
• Protocols to purchase major assets, such as cars
• Budget proposals and approved budgets of previous years
• Bank statements of finances and terms of the management of the account, namely signatory power and access to information
• Annual summary of bank accounts
• Documents regarding investments and loans
• Documents describing third party holders of interest
• Documents regarding real estate, rental arrangements, and holdings

If you have questions about financial management, an Israeli nonprofit organization audit, or any other matter related to managing an Israeli amuta, please contact us.

Advocate Joshua Pex specializes in Israeli nonprofit law and would be happy to discuss the needs of your nonprofit organization with you.