Smoke and mirrors: PA hoodwinks World Bank

By Baruch Yedid

International aid transferred to the Palestinian Authority (PA) through the World Bank’s Palestinian Recovery and Development Program (PRDP) Trust Fund is used to pay the salaries of Palestinian terrorists, an in-depth investigation by TPS has exposed.

A joint inquiry by TPS and the Palestinian Media Watch has uncovered that PRDP, in its signed agreements with the PLO, does not prohibit the use of international funding transferred through it to pay the salaries of Palestinian terrorists killed or imprisoned by Israel or to their families.

The expose further showed that the World Bank is aware of the issue but has taken no action to prevent it. The PRDP does not directly pay the salaries of the Palestinian terrorists, but a lack of proper legal procedures and oversight enables the PA to use the funding to pay terrorist stipends, which Israel has argued serves as an incentive for terrorism.

The PRDP was established in 2008 to help donor countries support the PA’s policy agenda. Donor funds are relayed to the PA’s Ministry of Finance. The PA has so far received a total of $1.6 billion from the PRDP.

The Finance Ministry is currently headed by Shukri Bishara.

An examination of the agreements between the PRDP and the PA shows that the former did not act to ensure that the aid transferred through it was not used to incentivize terrorism.

Similarly, donor countries, including the United Kingdom’s Foreign Ministry, have for years neglected to keep track of the funds they transferred to the PRDP.

The group UK Lawyers for Israel has petitioned the Foreign Ministry for reports on the subject and was told that documents show that the funds transferred to the PRDP have not been misused.

The UK over the past seven years has transferred £430 million ($553 million) through the PRDP to the PA. While the Foreign Ministry claims it has kept track of its donations to the PA, officials at the World Bank have admitted in a conversation with TPS that no such control of the funds is possible, and that the funds continued to stream through the World Bank as long as it was pleased with reforms the PA was conducting.

The World Bank could have ensured that the funds passing through it to the PA were not used for terrorism-related issues when it formulated the agreements on the aid with the PA, but did not do so and established only an overall mechanism to ensure that the funds were used for development projects and for the benefit of the residents of the PA.

While the agreement prohibits the use of the funds for the purchase of tobacco, alcohol, jewelry, weaponry, and other commodities, and may not be used to pay bills and taxes, it does not ban the use of the funds to pay the stipends of terrorists.

The agreements are signed with the PLO, which is tasked with ensuring that the PA follow the guidelines. Palestinian sources told TPS that in 2008, after Hamas gained control of the Gaza Strip in 2007 and there was no unified stable government, it was feared that the PRDP funds would reach Hamas hands, and therefore it was decided to transfer the funds through the PLO and not directly to the PA.

In 2007, the World Bank criticized the PA for the support it provided to families of terrorists, but it did not ensure that funds transferred through it would not be used for the same purpose.

PRDP funds abused

The investigation further revealed that the World Bank did not designate the funds for any specific project, and there is no evidence that PRDP required that the funds be used specifically for schools, hospitals or similar projects as a prerequisite to receiving them.

The funds were also not used to finance the reforms the PA is supposedly undergoing, and as long as the PA claimed it was going through with the reforms the funds continued to flow.

Special grants were transferred directly to the PA’s Finance Ministry to help support the PA’s budget, but the PRDP did not work to ensure that the funds were used for necessary civilian infrastructure.

The PRDP’s founding agreement states that the PA will open a designated bank account into which the aid will be deposited. The PA is the sole signatory for the account, and PRDP did not reserve the right to act as a co-signer to the account, which would have provided it with oversight, and the funds were treated as an “all use grant.”

The PRDP knows that the moment the funds are deposited in the designated account it has no way of knowing how they were spent, World Bank officials told TPS.

Based on official PA reports, the PA has drawn some of the funds from the account and has relayed them back to the PLO, which has used them to fund projects which are not defined as civilian development projects.

The PLO has utilized the funds to finance its foreign service, which is separate from that of the PA. The PLO also utilized the funds to finance its institutions, which include several anti-Israel organizations and BDS groups, and to finance Fatah, its political party, as well.

A senior PA official, who spoke on condition of anonymity, told TPS that the PA’s embassies around the world are officially funded by the PLO, and not the PA. However, the PA reimburses the PLO for these expenses, and in effect, the donor countries are funding these activities, and their aid is not routed toward civilian projects.

The funding is split in such a way because the PA is banned by the 1994 Oslo Accords from officially having a foreign service.

The PA further pays out mass sums to families of terrorists who were injured while carrying out attacks. The bureau for the deceased and wounded spent 687 million shekels ($194 million) in stipends to some 22,000 families of deceased and wounded terrorists in 2018.

Among those receiving such stipends are some 13,500 Palestinians who are not residents of the PA, including victims of the 1970 Black September purges in Jordan.

PA officials admit: Funds are relayed to Fatah in corrupt fashion

Z.T., another senior PA official ,told TPS that “the moment the money reaches the Palestinian treasury fund, it can also be used by the Fatah organization in a roundabout way. He said that several years ago, the PLO’s National Fund was transferred $55 million to Fatah’s coffers, carried out by Muhamad Shtayeh, currently the head of the Palestinian government who previously served as Fatah treasurer.

It is alleged that this move left the Palestinian National Fund almost empty, but the PA is funding a large portion of its expenses. Senior officials of the PA are Fatah members, and so they are able to provide financial assistance to the organization from the PA, which, as mentioned, is also financed by donor countries.

Evidence from several PA officials suggests another indirect method of transferring money from the PA to Fatah: Most of the tenders of Palestinian government ministries are fixed in advance and prioritize Fatah elements and companies in which Fatah invests money. For example, an electric equipment company, in which the Fatah organization invests funds, according to testimony from officials, won a tender for the installation of equipment in all Palestinian government offices.

This company, which is also owned by senior executives in the PA and Fatah, won the tender, and the payments transferred to it were far higher than the true value of the equipment and work, leaving the company, Fatah and the seniors’ pockets with a big profit.

A similar method is also used in connection with agricultural companies established by Fatah in the area.

Funds flowed to the PA unchecked, used in violation of agreements

The accounting firm PWC was hired by the World Bank to carry out the audit of the fund’s finances, but all documents in TPS’ possession show that the area of responsibility entrusted to the company was extremely limited and it was only required to check the money flow path from the World Bank to the Palestinian Ministry of Finance, but not the actual use of funds by the PA. There is no evidence that the control reports even referred to the prohibitions imposed by the World Bank regarding the use of money.

The PLO has also pledged that the PA will submit quarterly reports to the World Bank on condition of which the money will continue to flow to its funds. But the accounting professionals who reviewed these PWC audit reports for TPS noted that PWC auditors did not refer to the obligations assumed by the Palestinian Authority to the World Bank.

For instance, the PA pledged to cut its wage share in the budget from a total of 27% of GDP in 2007 to at least 22% in 2010. The PA did not meet this target and a World Bank official acknowledges this but notes that progress was made only in 2018. The audits do not address this.

Sources in the PA say that the PA’s share of wages is on the rise and that the data presented by the PA does not include all of the wage earners in the Gaza Strip, under Hamas rule. The audits also do not refer to this.

The World Bank also determined that the PA should reduce its total loans from $535 million in 2007 to $250 million by 2010 and $224 million in 2012. That was likewise not implemented. As mentioned, the control reports are lenient with the PA and do not address this issue.

The PA has also committed to strengthening the public financial management system by improving the standard accounting system used by all offices, instituting budget transparency and publishing it, subject to external scrutiny. The PA’s reports are not fully transparent. The PA has also pledged to reduce its total number of employees from 170,000 to 150,000, which it has not done.

The PA was also supposed to install 4,000 advanced meters for calculating water and electricity consumption, which it also has not done.

Several control reports, which TPS has seen, state that PWC did not conduct checks in the PLO’s bank accounts, even though the PA transfers huge sums to various PLO needs. Similarly, the audit reports do not relate in any way to restrictions on the use of the funds that have already been imposed in the “founding agreement.”

The low quality of the account control becomes clear in light of the following facts: A look at the PA budget shows that for several years there have been gaps and discrepancies in large sums between the amount transferred from the World Bank and the amount reported by the Palestinian Ministry of Finance.

For instance, in 2011, the World Bank transferred a sum of $223.1 million, at a value of 750-850 million shekels, fluctuating in tandem with the exchange rate. However, the authority reported only receiving 600 million shekels, and there is no satisfactory explanation for the balance of donations of NIS 150—250 million shekels.

Two years earlier, in 2009, the gap was $23 million.

In 2012, the World Bank transferred a sum of $161.9 million, while the PA reported receiving a total of 458.8 million shekels, a gap of 160-200 million shekels.

All data is calculated at the official exchange rates for that year.