Officials said the Bush administration was being pressed by Congress to wait until PA Chairman Mahmoud Abbas institutes controls that would ensure that U.S. aid does not support Palestinian insurgents. They said Congress has also demanded benchmarks to measure PA pledges for reform.

"We're still looking at the full amount, how we might restructure it," State Department spokesman Sean McCormack said on July 2. "Our guys are looking at how they might do that internally. At some point, we're going to go to the Hill [Congress] and talk to them, because they have a say in this, about reprogramming money."

Over the last week, the PA has announced efforts to collect unlicensed weapons and ban political activities at mosques in the West Bank. But officials said Congress wants to see results before approving the transfer of at least $86 million to Abbas's regime. Abbas also heads the Fatah movement, whose military wing was deemed a terrorist organization by the State Department.

In the first stage, officials said, the Bush administration plans to revise assistance programs to the PA, particularly in the security sector. They said the State Department would seek to ban Fatah insurgents from receiving U.S.-financed training or equipment.

At the same time, Washington would convene a ministerial-level meeting of the Quartet [The United States, Russia, European Union and the United Nations] to determine priorities for aid to the PA. Such a meeting was envisioned by August.

"I don't think that we have finally nailed down a date for that Quartet meeting, but it should be in the next several weeks," McCormack said.

McCormack said the administration would discuss with Congress the allocation of $27 million in reserve for the PA from fiscal 2006. He said this would augment another $59 million to PA security forces approved by Congress in the spring of 2007.

"We're still looking at how we might rearrange that money, redistribute it and make sure that it's spent effectively to help build up Palestinian institutions, help build up a more professional Palestinian security force, take a look at what projects we might either resume or implement that would benefit the Palestinian people," McCormack said.

Officials said the projects approved in 2006 included water and sewage development. They said the projects had been delayed in wake of the Hamas victory in Palestinian Legislative Council elections in January 2006.