JERUSALEM, May 27 (JTA) — At first, it was only spoken in whispers. But gradually, as frustrations mounted, increasing numbers of Palestinians voiced it openly, with unconcealed bitterness: The Palestinian Authority, they complained, is plagued by wide-ranging internal corruption that may affect the very future of Yasser Arafat’s regime. Questions of possible financial mismanagement are of keen interest not only to the Palestinians, but also to the foreign donor nations, which have long demanded that the Palestinian Authority maintain transparent accounting techniques to prove that donated funds are not mishandled. As part of that demand, foreign donors called on the Palestinian leadership to establish a supervisory body to ensure that donated funds are channeled properly. But now that very body has confirmed the presence of widespread corruption in the Palestinian Authority. A 600-page report by Jarar Kidwa, head of the authority’s own financial monitoring institution, disclosed last week that the self-rule government had lost $326 million — or 40 percent of this year’s annual budget — to corruption and mismanagement. Although Arafat and his aides have total control over budgetary affairs, Arafat said he was surprised by the findings and has appointed a special committee to look into them. As he confronts accusations of corruption, Arafat faces a difficult dilemma: Let his critics talk freely and thereby endanger the credibility of his government, or suppress freedom of speech and risk being labeled a totalitarian leader. For the most part, Arafat has carefully maneuvered between autocracy and democracy. He sometimes gives free rein to his critics, but when he feels that they go too far, he stops them — if need be, by putting them behind bars. Such was the fate of Daoud Kuttab, a veteran Palestinian journalist who apparently went a step too far in his reports about the Palestinian Authority. Last week, after he attempted to broadcast a session of the 88-member Palestinian legislative council devoted to the corruption issue, Kuttab, who lives in eastern Jerusalem and also holds U.S. citizenship, was placed in a detention cell in the West Bank town of Ramallah. Kuttab later declared a hunger strike when no charges were pressed against him. He was released on Tuesday after American officials worked to secure his freedom. Kuttab was not the first critic of the Palestinian Authority to be arrested. Many others preceded him, among them Bassem Eid, a well-known Palestinian human rights activist who used to direct his wrath at the Israeli authorities, but now is busy criticizing human rights abuses by the Palestinian Authority. On Monday, Eid’s Palestinian Human Rights Monitoring Group issued a report detailing what it said were 42 cases of torture by Palestinian security officials in 1996 and 1997. The report stated that two Palestinians had been tortured to death while in detention this year. The next day, the Palestinian Justice Minister, Freih Abu Medein, acknowledged that too many Palestinians had died while in custody. “This is wrong,” said Medein. “Palestinian security forces must be watched.” Meanwhile, a recent survey by the Jerusalem Media Communication Center found that almost 83 percent of Palestinian respondents in the West Bank and Gaza Strip believe that the Palestinian Authority is plagued with corruption. Critics charge that the Palestinian bureaucracy has grown in total disproportion to the needs of the population it is meant to serve. The Palestinian Health Ministry alone employs 65 directors general, which critics say hardly ensures an efficient administration. Observers say that the bureaucracy’s growth resulted from the need to find employment for those who had served the Palestine Liberation Organization during its years of exile in Tunis. “The PLO, after 30 years abroad, has now brought all these people from abroad,” said Ahmad Abdul Rahman, secretary of the Palestinian Cabinet. “What should we do with them all? Each and every one of them needs a job, to keep a family and feed his children, to run a home. Why, these are human beings, many of them almost 60 years old.” Critics charge that the very existence of the 40-member Palestinian Cabinet is a function of internal corruption. Rafat a-Najar, an independent member of the legislative council, or Palestinian Parliament, charged that some parliamentarians had each been offered $15,000 in exchange for their support of the Cabinet. This explains why parliamentarians who had initially said they would not support the Cabinet last year had changed their minds overnight, he said. Cabinet secretary Rahman said the charge was not even worth a reaction. But there have been other charges. British journalist David Hurst visited Gaza last month and wrote in the Manchester Guardian that Arafat and his supporters from Tunis had turned the “Palestinian homeland” into a corrupt nepotistic regime. An Arabic translation of the article was later distributed unofficially throughout Gaza. It is considered the hottest literature on the Palestinian street. Hurst’s article cited allegations of malfeasance among Palestinian leaders, including: * a $2 million villa built by Mahmoud Abbas, better known as Abu- Mazen, who serves as Arafat’s second-in-command; * four extravagant wedding ceremonies organized for his children by Nabil Sha’ath, planning minister and close Arafat adviser; * large profits made by another minister, Jamil Tarifi, from construction projects; and * the spending habits of Treasury Minister Mohammda Zahdi Nashashibi, whose lavish lifestyle stands in stark contrast to the poor living conditions of the nearby refugee camps. Arafat’s wife, Suha, was described in the article as spending large sums dining at a luxurious restaurant on the Gaza beach. There is no solid proof that any of these allegations are true, but they have certainly kept the Palestinian Parliament busy. Many recent sessions of the legislative council have been devoted to charges of corruption and mismanagement in the Palestinian Authority. “Where are the donations?” asked parliamentarian Hikmat Zeid at one such session. “Can the ministers of finance and supply furnish us with a list of all the donations given to the Authority?” Arafat so far has not taken steps against members of the opposition who have spoken out against his government. But there are allegations that Arafat gave free cars to 63 of the 88 members of the council in an effort to reduce their motivation to criticize the Palestinian Authority. As attempts are made to sort out these various charges, the Palestinian populace, the majority of whom still face difficult living conditions, is finding out the hard way that the road to political and economic independence is not paved with gold.