(Adds figure to be cut, details on what will be affected)

By Sue Pleming

WASHINGTON, March 21 (Reuters) - The United States plans to slash by more than a third an $86 million budget request to bolster Palestinian President Mahmoud Abbas' security forces due to concerns over how funds would be spent, said U.S. officials on Wednesday.

U.S. Secretary of State Condoleezza Rice told a congressional committee she would submit a new plan soon, cutting out funds she feared could have reached the "wrong hands."

A State Department official said later she would request about $50 million, trimming some $36 million. Most of the cuts would affect the training and equipping of Abbas's security forces, he said.

"It (the revised plan) will request less money, precisely because some of the money that I would have requested I did not think I could fully account for," Rice told a House of Representatives Appropriations subcommittee.

Congress has held up since last month the $86 million request for Abbas' forces after agreement was reached over a new Palestinian government, which includes Islamist Hamas as well as Abbas's more moderate Fatah faction.

Several congressional members feared some money could reach Hamas, which the United States considers a terrorist group. Under U.S. law, taxpayer funds cannot go to such a group.

Rice sought to ease lawmakers fears over the funding, which is part of the Bush administration's overall strategy to boost Abbas and counter Hamas.

"I hope that is a sign for you that we take very seriously our responsibilities," Rice said of the new plan. "I have no interest in having to come here one day and say, 'you know this funding did not end up in the right place.' I will do my very best."

WANTS ASSURANCES

But Rep. Steve Israel, a New York Democrat, said he was not sure the Bush administration could provide solid assurances the money would not reach Hamas.

"I still don't know how you can make that assurance," Israel told Rice.

The revised spending plan would likely focus U.S. aid on Abbas' presidential guard and security improvements at Gaza's main commercial crossing with Israel, said sources familiar with the Bush administration's deliberations.

Originally the money would also have helped train Abbas' National Security Forces, the closest thing the Palestinians have to an army. There are an estimated 40,000 members, according to Palestinian estimates, although Western diplomats say the number of active forces is about half that.

"The redactions mostly center around funds targeted for the training and equipping of the national security forces," said a State Department official, who spoke on condition of anonymity.

Rice is set to leave for the Middle East on Friday and will see both Israeli Prime Minister Ehud Olmert as well as Abbas to try and get both sides to move closer to reviving stagnant peace initiatives.

She conceded the new Palestinian unity government, which was sworn in last weekend, "has provided something of a challenge." But Rice said it was important for the United States to be stay engaged.

She reiterated a new U.S. policy that the administration would have contacts with members of the new government committed to recognizing Israel, agreeing to past Israeli-Palestinian accords and who renounced violence.

The United Nations, European Union, United States and Russia have kept up an international embargo on the Palestinian authority until it agrees to meet those conditions.

"We will of course continue to work with Abu Mazen," Rice said, referring to Abbas' nickname.

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