The UK's funding was subject to "a thorough vetting process" and was based on the PA's commitment to non-violence and a negotiated solution to the conflict, he added.
Mr Cameron wrote to Ms Ryan that DfID was already undertaking a review of its funding "to consider how it can best support progress towards a negotiated two-state solution".
He said: "We are also open to considering your suggestion of increasing support… for strong co-existence projects."
The Prime Minister told Ms Ryan that more initiatives to bring Israelis and Palestinians together could be developed if they were likely to have a positive impact and represent value for money.
A Mail on Sunday investigation last month revealed that the PA was passing on millions of pounds to the Palestine Liberation Organisation (PLO) which was in turn giving it to convicted terrorists and their families.
Writing in the JC today, Ms Ryan said her own assessment of the money provided by Britain had shown a "pitiable" approach to supporting co-existence efforts.
Ms Ryan said she had calculated that less than 13 per cent of the £1.14m from the government's Conflict, Stability and Security Fund spent in Israel and the Palestinian territories was going towards "projects which bring the two peoples together".
