WASHINGTON — Palestine Liberation Organization chairman Yasser Arafat could have billions of dollars hidden in foreign banks, but the American public may never know — because a new federal report on PLO assets remains classified.

A former Capitol Hill staffer familiar with the subject accused U.S. government agencies of impeding the General Accounting Office's investigation for political purposes, and of covering up the report's findings.

"There are two reasons it could be classified: first, that it includes confidential sources you don't want to get out, and second, that it's a political embarrassment," said the source, who preferred to remain anonymous.

"I would submit that it's a political embarrassment."

Officials at the State Department and Central Intelligence Agency denied allegations of a cover-up and said the study is classified because it relied on confidential sources.

When Rep. Benjamin Gilman (R-N.Y.) requested the study in June 1994, he asked that it be unclassified. According to the source, Gilman also promised to hold hearings on the contents prior to extending the Middle East Peace Facilitation Act (MEPFA) beyond June 30.

Gilman chairs the House International Relations Committee, and the source called him one of Congress' leading skeptics on the subject of the PLO. He received the GAO report three weeks ago and, so far, no public discussion has taken place.

"The whole strategy on Gilman's part involved getting that report out," the source said.

Gilman aide Jerry Lipson denied that Gilman promised public hearings on the study, but he admitted the contents were intended for public consumption.

"Ben Gilman didn't initiate this process with an eye to having a report that cannot be shared," Lipson said.

Last month, Gilman moved to extend the MEPFA for 90 days; Congress agreed to a 45-day extension. Gilman had expected the GAO report would be available prior to considering the MEPFA so it could be part of the discussions, according to Lipson.

"The GAO comes back and says that the people who have the answers have classified the information. [Gilman is] stuck," Lipson said. "I don't think anyone anticipated over a year ago that, at the end of the process, we'd be sitting with a classified report. If anyone is upset about this, it is certainly Gilman."

The GAO examined the PLO's assets, income and expenses. For years, reports have circulated about hidden or only partially revealed caches of PLO money, much of it ill-gotten, that Arafat is said to have stashed in Swiss bank accounts and/or incorporated into businesses around the world.

There are unanswered questions about PLO accounts, Lipson said last November, and comprehensive answers could "certainly influence the confidence level" of the U.S. regarding the PLO's "ability"to properly use donor funding.

The GAO investigation focused on State Department and CIA material and involved some investigation overseas, including trips to London and the Middle East.

The GAO received assistance from Rachel Ehrenfeld, an expert on money laundering and author of "Evil Money: Encounters Along the Money Trail." When the GAO contacted her in spring 1994, Ehrenfeld provided investigators with tips on where to find resources.

Ehrenfeld is among those who accuse the Clinton administration of impeding the investigation. Asked for evidence of this, she accused the State Department of pressuring Great Britain's National Criminal Intelligence Service (NCIS) not to discuss the findings of its study on PLO assets.

In a 1993 study, the NCIS reported that the PLO and smaller groups under its umbrella have some $7 to $10 billion invested in various businesses, and an annual income of $1.5 to $2 billion. A 1994 report showed similar figures.

Last fall, GAO investigator Michael Ten-Kate visited London to meet with NCIS officials, who agreed to discuss the PLO investigations. But he was told that "there was nothing they could provide" and the meeting fell through, Ten-Kate explained.

"I don't have proof that anybody tried to thwart our investigation," Ten-Kate said, refuting allegations that the State Department contacted the NCIS ahead of time.

A senior State Department official said his agency and the CIA cooperated with the GAO investigation. "For all the people from the GAO that requested information, we spent time with them and shared the information we had," said the official, who requested anonymity.

But Lipson said the CIA ordered the document classified.

"The information we provided involved intelligence sources and methods," said CIA spokesman David Christian. "If a public document were to be derived from this information, it would compromise those sources and methods. That is against the law."

Despite these claims, some insist the report could be summarized without exposing sources.

"We don't need to know the sources. All we need to know is whether [the PLO has] the money or not," Ehrenfeld said.

"Sure, there is a political embarrassment [in this report]. The United States takes the biggest terrorist organization in the world and suddenly makes them wonderful people. I definitely am convinced there is a concerted effort to cover up the GAO findings.

"It's highly unlikely to think that the British government would release a report if there wasn't evidence against the PLO," she added. "Apparently, this doesn't carry weight in Israel and the United States."

The State Department official said there is no hard evidence that the PLO has misused funds. "The general assessment is that if there is money out there, nobody knows where it is," he said. "There are a lot of rumors out there, but the substantiation tends not to be" there too.

If Arafat is misusing funds, the former congressional staffer said, it could damage the credibility of the PLO and the United States, which is supplying American tax dollars to the Palestinians.

The PLO is asking for $9-to-$12 billion in aid from the United States and other industrialized countries over the next five years, for the base economic structures of the Palestinian Authority.

"The PLO has pleaded poverty," the source said. "In fact, we don't know if they are broke. There is a whole atmosphere of secrecy that has surrounded a highly public peace process."

On Tuesday, the Christians' Israel Public Action Campaign (CIPAC) called for immediate release of the GAO report and public hearings on its contents and charged there is a cover-up.