What happened
The IMF's audit, conducted as part of broader donor oversight of PA finances after Arafat's death made a fuller accounting possible, found the diverted funds had been moved into a special commercial investment portfolio effectively under Arafat's personal control rather than the PA's general treasury — including stakes in Palestinian cellular, cement, and other commercial ventures. Some of the money was used to fund the patronage networks and multiple, overlapping security services that underpinned Arafat's political control, paying loyalist officials and security officers outside any transparent civil service structure.
This occurred during the same years the Second Intifada was devastating the Palestinian economy and average incomes were falling sharply — meaning the diversion was not merely an abstract governance failure but happened while ordinary Palestinians faced worsening poverty that international aid was specifically intended to address. Reform-minded PA officials, including Salam Fayyad, who would later become the internationally-respected prime minister credited with real institution-building in the 2000s, cited exactly this kind of unaccountable, Arafat-controlled financial structure as the core problem their post-Arafat reforms needed to fix. That some reform did follow Arafat's death does not erase the underlying finding: hundreds of millions of dollars in public and donor funds were controlled and allocated by one man outside any auditable process, during a period of acute humanitarian and economic crisis for the population those funds were meant to serve.