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Hilchos Choshen Mishpat

Volume III : Number 16

Financial Reports For Communal Organizations


Question:

Is there an obligation upon officers of an organization that deals with communal funds to issue regular financial reports providing an accounting for all money used and distributed by the organization?


Answer:

  1. Community officials that are responsible for the fiscal affairs of charity organizations, synagogues, Mikva'os, and any other communal programs, must voluntarily provide a financial report to the public. This is true even if the officers are known to be honest, and have been elected by the community to do their job. The custom is that a report be issued at least once a year. Although they should indicate what their primary income and expenses were, it is not necessary to provide all information down to the last detail.

  2. If a situation arises where a community official is suspected of using communal funds inappropriately, this official must provide a thorough accounting for all funds under his control to a Rabbi or other member of the community appointed to investigate the matter. He may refuse to provide an accounting in front of other members of the community, or to anyone who he feels dislikes him and may have a vendetta against him.

  3. A condominium association that deals with dues of participating homeowners and business partnerships that invest and disburse funds of various partners must provide all homeowners or business partners access to financial records on demand. In the event that various documents provide information different from that which they provide in their report, explanations must be provided. (1)

  4. At least two officials must be appointed to oversee disbursement of charitable communal funds, if decisions must be made that require proper judgment on the part of the administrators, such as what to do with the funds, where to invest them, what to purchase, etc. One person should not be relied upon in this situation, even if he is well known in the community as an honest person.

  5. This is true anytime decisions are being made with communal funds, even if not directly for the purpose of a Mitzvah. If two administrators were appointed, and one of them resigned, left the city or passed away, it is necessary for the community to appoint a second administrator as quickly as possible. (2)


Sources:

(1) These Halachos are stated in the Shulchan Oruch, Yoreh De'ah (257:1-2). See the Rema there, and the Teshuvos Nodeh BiYehuda (Vol. 2 Yoreh De'ah Siman 157).

(2) It is well known that communal organizations and institutions often must deal with various government bodies and agencies, and it is very important that confidentiality be maintained regarding much of the inner workings of these organizations for them to be able to do their job effectively. This is why we can not allow all community members access to the financial records of any organization upon demand. Therefore, the Nodeh BiYehuda states that even if there is cause to suspect wrong doing on the part of administrators of a communal organization and an audit of their income and expenses is in order, only an individual appointed by a Bais Din or community Rabbi should be given access to the communal records, in a manner which all confidentiality can be maintained. Although the institution is serving the entire community, this does not give just anyone in the community the right to access their financial records.

Therefore, in their annual financial report they are only obligated to give a general income and expense accounting.

However, in a business partnership or condominium association, it is rare that there be reason to have sensitive contacts that require confidentiality, and any officers have been appointed to care for the association or the business in a manner beneficial to all who have a financial stake in it. Consequently, all members and partners can demand access at any time to financial records, and request explanations if they see information there that indicates that decisions may have been made by the officers that were inappropriate or not for the benefit of the business.

The basis for the Halacha that there be two officers in charge of the collection and disbursement of funds is from the Taz in Yoreh De'ah 258:5, that states as follows: "We see that the custom of the communities is to appoint two officers for a term, and if one of them should die, to appoint a replacement officer. This is true regarding all appointments, how much more so regarding finances, we must not entrust this to one individual. This is especially true today, since we find that over the years there are fewer honest people, and many orphans have lost their property because of the dealings of guardians who were thought to be honest (at the time of their appointment). We must therefore deal with this wisely, and be careful not to leave such money under the care of one individual."

Even if there is no concern at all that something dishonest will occur, it is still wise and proper to appoint two, since it is common for people to make erroneous judgments, even if unintentional, regarding funds entrusted in their care by others. In the case of the orphans, if the father himself appointed a guardian before his death, his wishes should obviously be respected, even if it is only one person.

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This week's class is based on a column by Rabbi Tzvi Shpitz, who is an Av Bet Din and Rosh Kollel in the Ramot neighborhood of Jerusalem. His column originally appears in Hebrew in Toda'ah, a weekly publication in Jerusalem. It has been translated and reprinted here with his permission and approval. His columns have recently been compiled and published in a three volume work called Mishpetei HaTorah, which should be available from your local Sefarim store.

Feedback is appreciated! It can be sent toatendler@torah.org.


This week's class is based on a column by Rabbi Tzvi Shpitz, who is an Av Bais Din and Rosh Kollel in the Ramot neighborhood of Jerusalem. His Column originally appears in Hebrew in Toda'ah, a weekly publication in Jerusalem. It has been translated and reprinted here with his permission and approval.

We hope you find this class informative and stimulating! If you do not see a subscription form to the left of the screen, access the Advanced Learning Network to subscribe to Business-Halacha.

For information on subscriptions, archives, and other Project Genesis classes, send mail to learn@torah.org for an automated reply. For subscription assistance, send mail to gabbai@torah.org.

Please Note: The purpose of this column is to make people aware of Choshen Mishpat situations that can arise at any time, and the Halachic concepts that may be used to resolve them. Each individual situation must be resolved by an objective, competent Bais Din (or Rabbinic Arbitrator) in the presence of all parties involved!

 
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