Orphan Funds Between Legal Protection and Governance Gaps: A Review of Integrity and Transparency

Orphan funds are considered a public matter, and in this regard, fiduciary responsibility and the test of governance are necessary to understand and review an assessment of the work of the Institution for the Management and Development of Orphan Funds, in terms of integrity, disclosure and accountability, 2025.

In this context, I reviewed a report in English issued by "the Coalition for integrity and accountability (AMAN) 2025, titled: Integrity, Transparency and Accountability in the Work of the Institution for the Management and Development of Orphan Funds. Ramallah – Palestine 2025".

I hereby present a summary of the observations contained in this important report, and of the recommendations it reached to rectify any potential gaps in the governance of the institution’s work; for the primary aim of this report is to assess the reality of integrity, disclosure and accountability in the management and development of orphan funds, and to analyze the legislative and institutional framework regulating the institution’s work, leading to practical recommendations to strengthen governance and protect the funds entrusted to it. The assessment is based on a review of the laws, regulations, and administrative and oversight practices adopted in order to strengthen an environment of integrity, disclosure, and accountability in the management and development of orphan funds, and to protect them from the risks of corruption!

Although these funds are allocated to a specific segment of society, they enjoy the legal protection of public funds, given their multiple sources and the state’s contribution to them. Therefore, the management of these funds must be characterized by efficiency and strict adherence to Sharia standards and investment laws, including protecting the funds, safeguarding them from risks, preventing their misuse or dissipation, and ensuring that the officials adhere to the values of integrity, principles of disclosure and clarity, and systems of oversight, accountability and auditing.

Institution for the Management and Development of Orphan Funds

First: The legal and legislative framework

The Palestinian Orphans Council was established in 2002 by presidential decree, unifying the management of orphan funds in the West Bank and the Gaza Strip, based on the Jordanian law of 1972. In 2005 Law No. (14) was issued, which established the Institution for the Management and Development of Orphan Funds as an independent entity, before the law underwent several amendments, the last of which was Decree-Law No. (10) of 2023, which constitutes the current legal reference.

This framework defines the institution’s objectives in preserving orphan funds, meeting their livelihood, housing, educational and health needs, and managing and developing the funds in accordance with the provisions of Islamic Sharia. It also regulates permitted investment areas, disbursement mechanisms, profit distribution, and the formation of financial reserves, and subjects the financial records to oversight and auditing.

The law stipulates that disbursements shall be made by official vouchers recorded in the institution’s registers, with an allocation of no more than 5% of annual net profits to the reserve account, and distribution of the remaining profits to orphans according to their shares, and covering any potential losses from the reserve. Article (22) of the Decree-Law also affirms the applicability of the rules of public funds to the institution’s funds, subjecting them to the oversight of the State Audit and Administrative Control Bureau (SAACB), prohibiting any personal benefit for board members or employees, and obliging the institution to submit annual reports to the higher authorities, in addition to exempting it from taxes and fees.

Second: The institutional and organizational framework

The institution manages orphan funds using multiple investment instruments compliant with Islamic Sharia, most notably Murabaha financing, investment in shares—especially shares of Islamic banks and insurance companies—in addition to investment in the real estate sector through buying, selling and leasing land and buildings.

The institution is managed by a board of directors that includes a chairman, a vice chairman, and eleven members representing various official entities, alongside four private sector members with expertise, with membership terms defined as four years renewable once. The executive management, headed by a Director General, oversees daily work through several specialized committees, including the Sharia Committee, the Internal Audit Committee, the Finance and Investment Committee, and the Administration Committee. The institution also operates through four geographic branches and has 23 employees.

Third: The reality of integrity and transparency

The report shows that the general legal framework provides an acceptable basis for protecting orphan funds, but the application of institutional values of integrity still suffers from clear gaps. The law does not include explicit and comprehensive provisions regulating conflicts of interest or acceptance of gifts, except for the general prohibition on personal benefit from the fund’s money. Despite internal decisions and practices aimed at reducing conflicts of interest, the conflicts-of-interest and gifts systems issued by the Council of Ministers have not been fully activated, due to the absence of committees specialized in implementing them.

Audit reports also pointed to shortcomings in safeguards that ensure neutrality and independence in some investments, especially in cases where some board members may have a direct or indirect interest in them, which poses a potential risk to the integrity of investment decisions.

Fourth: Transparency and disclosure

In terms of disclosure, the institution prepares audited financial reports and submits them to the competent official authorities, and generally discloses its sources of resources and areas of investment. However, the overall level of transparency remains limited, as the institution does not publish its budgets to the public, does not provide simplified and comprehensible copies for beneficiaries, and does not clearly disclose its investment policies, especially those related to land investment.

Moreover, the institution’s website, despite its technical development, does not include periodic reports, or published financial data, or board of directors’ decisions, which restricts the public’s right to access information and limits societal oversight.

Fifth: Accountability and oversight

The institution is subject to a multi-level oversight system, including internal oversight through audit committees and the internal auditor, external oversight via an independent auditor, Sharia oversight, in addition to the oversight of the State Audit and Administrative Control Bureau (SAACB). Periodic financial and administrative reports are also prepared and presented to the board of directors and submitted to the higher authorities.

However, the effectiveness of the accountability system is affected by the absence of some adopted policies and regulations, such as a personnel affairs system, anti-corruption risk management policies, and the failure to adopt the board’s internal regulations, which weakens clarity of responsibilities and limits the ability to conduct effective and regular accountability.

Report recommendations

The report concludes that, despite the availability of a general legal and regulatory framework for the management and development of orphan funds, they are not insulated by sufficient governance, as there are tangible gaps that remain in the areas of institutional integrity, public disclosure, and activation of accountability tools. It affirms that closing these gaps requires expediting the enactment of internal regulations, activating conflicts-of-interest and gifts systems, expanding the scope of publishing financial and investment information, and strengthening mechanisms for societal accountability, thereby enhancing public trust and ensuring the protection and more efficient and integrity-based management of orphan funds.