A confidential UN report has concluded that Yemen's Houthi fighters used civilians as shields to avoid attacks and the Arab coalition fighting in Yemen deliberately bombed a civilian house, killing four children.

Yemen descended into chaos after the 2012 removal of longtime president Ali Abdullah Saleh, whose forces are fighting alongside the Houthi fighters.

Security deteriorated further after the Houthis swept into the capital, Sanaa, and pushed south, forcing President Abd-Rabbu Mansour Hadi's government to flee into exile in March last year.

"This was a confidential report that was prepared by experts on Yemen for consideration by the Security Council," said Al Jazeera's Mike Hanna, reporting from the UN headquarters in New York.

"It covers a six-month period and finds that all the parties in the conflict had been guilty of violating international humanitarian law."

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"The panel has documented violations of international humanitarian law and international human rights law committed by the Houthi-Saleh forces, the Saudi Arabia-led coalition and forces affiliated to the legitimate government of Yemen," said the report presented to the Security Council.

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The experts are conducting detailed investigations of four air strikes allegedly carried out by the Arab coalition. Three investigations are still ongoing.

In the fourth case, six people including four children were killed when the coalition bombed a village house in southern Lahij province on May 25 using precision-guided munitions.

"It is almost certain that the civilian house was the deliberate target of the high-explosive aircraft bombs," said the report.

The panel concluded that the coalition failed to take precautions and "thus violated IHL [International Humanitarian Law]."

The Arab coalition, assembled by Saudi Arabia, fighting in Yemen acknowledged on Thursday "shortcomings" in two out of eight cases about air strikes on civilian targets that were condemned by the UN in the report.

A 14-member investigative team - made up of coalition states Bahrain, Kuwait, Qatar, Saudi Arabia and the UAE, as well as Yemen - investigated claims of attacks on a residential area, hospitals, markets, a wedding and World Food Programme aid trucks.

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"We found shortcomings in two cases, while the rest were in line with international humanitarian law," Mansur al-Mansur, the team's Bahraini spokesman, said in Riyadh.

The coalition began the air campaign in March 2015 to push back Houthi fighters after they seized the capital, Sanaa, and many other parts of the country.

The Arab coalition has repeatedly denied that it has deliberately targeted civilians in the war, which has killed more than 6,400 people and displaced 2.8 million.

In civilian areas

In Taiz province, Houthi fighters have concealed their fighters and equipment near or in civilian areas "with the deliberate aim of avoiding attack", said the report.

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"In doing so, the Houthis almost certainly deliberately endanger and expose the civilian population and civilian objects to the perils of conflict."

The report showed a photograph of a tank parked at Taiz University and said it was investigating several reports of civilian sites used as shields.

Meanwhile, Yemen's al-Qaeda franchise, Al-Qaeda in the Arabian Peninsula (AQAP), has upgraded its bomb-making capabilities and could wage a "sustained IED [improvised explosive device] campaign" of attacks, the report said.

The first suicide attack using the refined bomb technique was recorded in Aden on May 1.

AQAP and the local branch of the Islamic State of Iraq and Levant (ISIL) group are competing for recruits in Yemen.

Influx of cash

In March and April, ISIL, also known as ISIS, received a significant influx of cash in Yemen, which it is using to attract recruits, finance operations and purchase equipment, said the report, without providing figures.

"The report says there is a vacuum in governance across Yemen, a vacuum that has been filling by competing groups such as al-Qaeda in the Arabian Peninsula and ISIL," said Al Jazeera's Hanna.

"These groups it says are competing for recruits.

"So very much a bleak picture of what is happening on the ground in Yemen."

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While the war grinds on, Yemen's Central Bank is suffering a major haemorrhage of cash.

About $100m per month is being diverted to support the Houthis, who have gained access to the reserves, said the report.

Yemen's foreign reserves have dwindled from about $4bn in November 2014 to their current critical level of $1.3bn.

Source: Al Jazeera and agencies