UPDATE 2-U.N. Palestinian refugee agency replaces boss pending misconduct inquiry

(Adds Israeli and Hamas reaction)

By Rami Ayyub and Nidal al-Mughrabi

JERUSALEM/GAZA, Nov 6 (Reuters) – The head of the U.N. agency that aids Palestinian refugees has stepped aside until the end of an investigation into misconduct allegations, the agency said on Wednesday.

Commissioner General Pierre Krahenbuhl has been replaced until a review of “management-related matters” at the agency is completed, the United Nations Relief and Works Agency for Palestine Refugees (UNRWA) said in a statement.

It gave no details of the substance of the allegations.

UNRWA provides services to more than 5 million registered refugees in the West Bank, Gaza Strip and East Jerusalem, as well as in Jordan, Lebanon and Syria.

The U.N. Secretary General appointed Christian Saunders as Officer-In-Charge for the interim period. Saunders previously served as the agency’s acting deputy commissioner general.

“Over the last few months, UNRWA has initiated an internal review of its governance, management and accountability functions, so as to ensure it practices the highest standards of professionalism, transparency and efficiency,” the UNRWA statement said.

Krahenbuhl was notified in March that an investigation was underway by the U.N. Secretariat in New York “based on allegations received against UNRWA personnel relating to unsatisfactory conduct”, an UNRWA spokeswoman said.

Krahenbuhl, a Swiss national, took over the UNRWA post in 2014, having previously been director of operations at the International Committee of the Red Cross.

UNRWA has faced budgetary difficulties since last year, when the United States, its biggest donor, halted its aid of $360 million per year. The United States and Israel have both accused UNRWA of mismanagement and anti-Israeli incitement.

Switzerland, the Netherlands and Belgium have separately suspended payments to UNRWA over the management issues that are now under investigation. The agency’s spokeswoman says it still needs $89 million to keep operating until the end of this year.

Israel’s foreign ministry said Krahenbuhl’s replacement “is but the first step in a long process that is needed to eliminate corruption, increase transparency, and prevent politicization of the agency.”

The move drew concern from Gaza’s Islamist rulers Hamas, which said it could play into upcoming debates in the U.N. General Assembly over renewing UNRWA’s operational mandate, which is up for vote every three years. UNRWA’s current mandate expires on June 30, 2020.

More than half of the 2 million Palestinians in the Gaza Strip, which is under Israeli blockade, receive food aid from UNRWA.

Hamas official Bassim Naeem said the shake-up increased fears “the agency and its mandate was being targeted under American and Israeli pressure”.

(Reporting by Rami Ayyub in Gaza and Nidal al-Mughrabi in Jerusalem; Editing by Stephen Farrell, Peter Graff and Giles Elgood)

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