Hamas has said that Fatah is acting as Washington's stooge in the region.

The US state department put the $42 million fund aside after Hamas won Palestinian elections in January, claiming that the money is meant to "protect and promote moderation and democratic alternatives to Hamas".

The US, along with other Western donor nations, cut off funds to the Hamas-led government after it took power in March, listing Hamas as a terrorist organisation.

Meddling

Although US officials say none of the $42 million has been spent yet, Hamas officials accused Washington of meddling in Palestinian affairs.

Salah Bardawil, a Hamas spokesman, said the "American financing" is clearly meant to return Fatah, which dominated Palestinian politics for four decades, to power.

He said: "America is trying to consolidate its idea of a crusade launched by Bush [the US president], and they want tools for this war."

Micaela Schweitzer-Bluhm, a spokeswoman for the US consulate in Jerusalem, said that the US doesn't send any money directly to Palestinian political parties.

Instead, it provides funding and expertise to nonprofit groups, including those with ties to political parties not branded as terrorist groups.

She said: "We build their capacity to make them more capable of participating in elections."

She said it was a "misconstruction" to say that the US is trying to topple Hamas.

Fatah officials have sought to distance their party from the US.

Mohammed Hourani, a Fatah spokesman, said the party does not accept American money.

He said: "It [Fatah] refuses any aid from the US, whom we consider an unfair mediator."