An auditing report has raised serious question marks over EU aid money worth hundreds of millions of euros that has been given to the Palestinian Authority.

According to the report, prepared by the European Court of Auditors and revealed by the Financial Times this week, funds transferred to the PA for Gaza were paid to civilians with ties to Fatah who were no longer working.

The PA leadership has claimed since the Hamas takeover of Gaza in June 2007 that it continues to pay the salaries of tens of thousands of civil servants in the Gaza Strip to ensure basic services for the residents there. It has long been thought, however, that this money was transferred mainly to bolster the Fatah-dominated PA’s standing in Gaza while the services were mainly provided by the Hamas government.

Much of the money for Gaza came from EU funds as part of a €1.4bn programme called Pegase, which was aimed at helping the people of Gaza without the involvement of Hamas, which is considered a terror organisation.

The report confirms that much of the EU money went to finance PA employees who have not been working for years.

The auditors are quoted by the FT saying: “Pegase is intended to support public services for the benefit of the Palestinian population; the payment of non-performing civil servants does not serve this objective.”

The auditors’ report recommends “a major review” of the EU’s funding of the PA and that further payments should be linked to reforms. In the European Commission’s answer to the auditor, the payments are justified by the need to “politically support” the PA and by the fact that it is “very difficult” to verify whether the money’s recipients are indeed working.