The US State Department is considering providing $500 million to the Gaza Humanitarian Foundation (GHF), the US-"Israel"-backed entity mired in controversy tasked with distributing aid in Gaza, according to Reuters on Saturday, citing sources. 

The funding would be channeled through the US Agency for International Development (USAID), which is in the process of being folded into the State Department, according to two knowledgeable sources and two former US officials. 

According to the report, the proposal, which has not been finalized, would deepen US involvement in a contentious humanitarian operation that has drawn criticism for mismanagement and massacres of Palestinians at aid distribution sites.

The GHF, which began distributing aid last week, has faced strong criticism from humanitarian organizations, including the United Nations, for lacking neutrality. The foundation launched operations shortly after "Israel" lifted an 11-week blockade on May 19 that had left Gaza’s 2.3 million people at severe risk of famine.

Since launching, GHF has faced internal instability, including senior resignations and repeated pauses in aid handouts due to overwhelming crowds at distribution hubs, according to Reuters. Of its three operational hubs, only two were functioning over the past two days.

The State Department and the GHF have not responded to media inquiries about the foundation’s funding or oversight mechanisms.

Fatal violence near aid hubs raises alarm

The aid effort has been marred by deadly violence. Gaza hospital officials report that more than 80 Palestinians were killed and hundreds wounded by Israeli forces near GHF distribution points between June 1 and 3. Witnesses accused Israeli soldiers of opening fire on civilians attempting to access aid.

On Thursday, Reuters reported that McNally Capital, a Chicago-based private equity firm, holds an “economic interest” in the for-profit contractor overseeing the operation in Gaza.

Despite being positioned as a humanitarian initiative, the financial and structural links to private American firms have added to concerns over transparency and accountability.

Sources indicate that "Israel" requested the $500 million in US funds to underwrite GHF operations for 180 days. Although the Israeli government did not respond to requests for comment by Reuters, sources say it is opposed to involving well-established international NGOs with a proven track record in Gaza.

While both the Trump administration and "Israel" deny direct financing of the GHF, they have pressed the UN and other international bodies to collaborate with the foundation. The US and "Israel" allege that previous aid routed through the UN system was diverted to Hamas, a claim Hamas denies.

The possible funding shift to GHF comes as USAID undergoes sweeping changes under President Donald Trump’s "America First" foreign policy doctrine. The agency has seen 80% of its programs canceled, and many of its staff face termination.

According to sources familiar with the matter, acting deputy USAID Administrator Ken Jackson, who is overseeing the dismantling of USAID, is championing the GHF proposal, reported Reuters. 

Dozens of Palestinians deliberately killed

On Friday, the Gaza Humanitarian Foundation suspended operations at its aid distribution centers after 110 Palestinians were killed in incidents that the Gaza government has denounced as American- and Israeli-backed "death traps".

GHF announced the closure of all its aid distribution sites until further notice.

Just three days earlier, the foundation had temporarily suspended distribution operations, citing the need to discuss security measures with the Israeli military.