Initial reaction to alleged diversion of World Vision funds

Image courtesy of Adobe Stock.

How can you tell who is really behind the mask, and what is he doing inside your organization? Image courtesy of Adobe Stock.

Last week, the Israeli intelligence service accused a World Vision manager of diverting resources to Hamas. The allegation is he diverted about 60% of the annual funds flowing through the Gaza office, with the amount diverted allegedly around $7M a year.

Some initial reactions are surfacing from donors. Also, some context for magnitude of the alleged amount. Finally, some questions to ponder for leaders of charities and those of us who audit NPOs.

8/4 – World Vision – Statement on World Vision Staff Arrest – Full statement from World Vision. Doesn’t say a lot because they don’t yet know a lot. I’m sure there will be more comments as the situation develops.

8/5 – Reuters at Business Insider – Australia suspends World Vision funding over allegations its Gaza representative funneled millions to Hamas – The Australian government has provided about $4.4 million over the last three years to World Vision for use in helping people living in Gaza and West Bank. The aid has been suspended over the allegations.

Article says Shin Bet says the WV program manager in Gaza confessed to giving about $7.2M a year to Hamas.

As an indicator of additional ripple effects to come, the article says the Israeli government has shared information on the allegations with other countries who provide aid for Gaza.

8/7 – Jerusalem Post – Germany, Australia suspend funding for World Vision – Funding of 3.6M Euros ($3.99M) from the German government

…will no longer be provided until the accusations are clarified.

Article says World Vision has received 1.1M Euros ($1.2M) since 2010 for aid in Gaza. I’m not sure how to reconcile $4M of grants being placed on hold and $1.2M over 6 years, which would only be $0.2M per year on average. Possibly the $4M on hold is for projects all around the Middle East, not just Gaza.

The pushback will get more serious. Article says the Foreign Ministry welcomes the two suspensions, sent a message to all Israeli embassies requesting them to contact officials to seek more oversight, and issued a call for all INGOs to double-check the oversight of funds disbursed in Gaza.

Materiality

Here are a few numbers to put this situation into perspective.

The top-line, consolidated, annual revenue of World Vision for 2015 is $1.03 billion.

As mentioned in the first article linked above, Shin Bet asserts $7.2M per year was diverted to Hamas.

The alleged amount involved is therefore around 0.7% of annual revenue ($7.2M / $1.034B = 0.696%). That would be well under 1% of annual income.

If the allegations are true, and if the alleged amount is around 60% of the expenditures in the Gaza office of World Vision, that suggests the funds going through the Gaza office would be around $12M, which would be about 1.2% of worldwide consolidated revenue ($12M / $1.034B = 1.16%), or just over 1%.

Just as a guess on the obvious, I think we will soon see that 0.7% of worldwide revenue is a material amount for donors around the world.

Two questions:

For leaders and finance staff of charities: What procedures do you have in place to prevent diversion of 1% of annual expenses to terrorists, or one specific illegal activity, or a particular project that will get strong reaction from major donors, or an off-the-books project that will severely offend a government whose tolerance you need to function?

For auditors: Would your audit procedures have a good chance of detecting a similar situation if it were to occur in one of your clients?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: