Gao Report: Arafat Tried to Dodge Donor Restrictions

Palestine Liberation Organization Chairman Yasser Arafat has tired unsuccessfully to circumvent international restrictions on funds donated to the Palestinian Authority, according to a newly declassified report.

Arafat has “launched several attempts to frustrate” donor controls over money flowing to the Palestine Authority, according to a report by the U.S. General Accounting Office.

The congressional watchdog agency’s report, “Foreign Assistance: PLO’s Ability to Help Support Palestinian Authority Is Not Clear,” was intended to address three central issues surrounding the financial situation of the Palestinian Authority, which is headed by Arafat and governors the Gaza Strip and parts of the West Bank.

The review, which was conducted from July 1994 to April 1995, set out to: * determine the PLO’s financial ability to help finance the Palestinian Authority’s operations; * review whether the international donors have effectively analyzed the authority’s needs; and * assess whether there is an adequate Palestinian accounting system in place.

Although the second two questions were addressed by the much-awaited GAO report, it was unable to answer the central query posed by Rep. Benjamin Gilman (R-N.Y.), the chairman of the House International Relations Committee who had requested the study; Does the PLO have billions of dollars squirreled away in worldwide investments?

The “PLO was unwilling to provide us with requested accounting records and supporting documentation,” the GAO said in the 14-page version of its declassified report.

The GAO was “unable to reach a definitive conclusion on PLO’s ability to assist the Palestinian Authority with its operation expenses.”

GAO investigators “could not verify the accuracy” of a British National Criminal Intelligence Service briefing document that stated that the PLO “constitutes the richest of all terrorist groups.”

“Despite denials to the contrary, it is estimated that they have worldwide assets approaching $8-10 billion.”

The GAO presented a classified version of the report to Congress in April.

The declassified versions – released Wednesday – deletes all information provided by the Central Intelligence Agency.

The GAO based the declassified version on information gleaned from the State Department and GAO researchers.

The GAO report accused Arafat of trying to have himself appointed the head of the U.N. agency responsible for disbursing funds to the Palestinians.

It also noted what when Palestinian Authority spent $2 million of donor funds to pay relatives of “martyrs,” the World Bank disallowed the expense.

The World Bank, which is managing the funds from international donors, also denied a request to fund the PLO’s Rome and Washington offices.

In spite of these attempts, the GAO believes that the oversight mechanism to determine the spending for the hundreds of millions of dollars in donor funds is effective.

In 1994, donor countries contributed $120 million to the Palestinian Authority, representing 68 percent of its budget.

1995, the donor contributions rose to $200 million, or 45 percent of the PLO’s budget.

The Untied States gives the PLO about $75 million in cash assistance each year. Another $25 million flows to Palestinian-controlled areas through specific development projects.

Addressing concerns about the use of U.S. funds, the report states that “U.S. funds have not been used to pay PLO administrative expenses, armed militia salaries or martyr payments,” referring to Palestinians killed during conflicts with Israelis.

Instead American tax dollars go to pay for expenses incurred by the Palestinian Authority.

The report was critical of the donor countries, including the United States, for agreeing “to pay for certain costs, most notably civil servant and police salaries, without an adequate analysis of the support for such costs.”

The report cited as an example the 9,000 Palestinian Authority personnel hired to replace 1,600 Israeli civil service employees.

“Nor is it clear why the Palestinian police force has grown to an 18,000-member force when the Gaza-Jericho Agreement between the PLO and Israel stipulates a 9,000-member force,” the report says.

Although the donor community pays only the salaries for 9,000 police officers, the Palestinian Authority spends other money on police that “can be devoted to the expenses the donor community is willing to underwrite,” the report states.

In assessing the finances of the PLO, the report sought to determine whether the PLO was capable of financing the Palestinian Authority.

According to a State Department cable cited in the report, the United States had originally hoped that the PLO could operate without external assistance.

The report found that the PLO’s principal income historically came from official contributions from Arab states, the Palestinian Liberation Tax Fund – a 3.5 percent to 7 percent tax on Palestinian workers in Arab states, income from investments, and donations from wealthy Palestinians and philanthropic organizations.

After the Gulf War, in which the PLO backed Iraq, many Arab states withdrew their financial support and withheld the tax paid by Palestinians.

Investigators were unable to confirm allegations that the PLO owns several national airlines.

But they did find that the PLO operated agricultural cooperatives, a film studio and a children’s clothing factory. And according to the State Department, the PLO operated a duty-free shop in Tanzania. The report did not site where the operations existed.

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