The United States on Friday halted its decades of funding to a UN agency that helps Palestinian refugees in a decision further heightening tensions between the Palestinian leadership and the Trump administration. The US supplies nearly 30 percent of the total budget of the UN Relief and Works Agency, or UNRWA, and had been demanding reforms in the way it is run. The department said in a written statement that the United States will no longer commit further funding to the agency. The decision cuts nearly $300 million of planned support. A spokesman for Palestinian President Mahmoud Abbas denounced the decision as “a flagrant assault against the Palestinian people and a defiance of UN resolutions.” State Department spokeswoman Heather Nauert said the business model and fiscal practices of UNRWA were an “irredeemably flawed operation.” “The administration has carefully reviewed the issue and determined that the United States will not make additional contributions to UNRWA,” she said in a statement. Nauert said the agency’s “endlessly and exponentially expanding community of entitled beneficiaries is simply unsustainable and has been in crisis mode for many years.” The latest announcement comes a week after the administration said it would redirect $200 million in Palestinian economic support funds for programs in the West Bank and Gaza. UNRWA released a statement late Friday slamming the decision as disappointing and surprising and rejecting the US assertion that its programs were irredeemably flawed. “We reject in the strongest possible terms the criticism that UNRWA’s schools, health centers, and emergency assistance programs are ‘irredeemably flawed,’” Chris Gunness, a spokesman for the United Nations Relief and Works Agency, said in a series of Twitter posts. The 68-year-old agency says it provides services to about 5 million Palestinian refugees in Jordan, Lebanon, Syria and the West Bank and Gaza. Most are descendants of people who were driven out of their homes or fled the fighting in the 1948 war that led to Israel’s creation. US President Donald Trump and his aides say they want to improve the Palestinians’ plight, as well as start negotiations on an Israeli-Palestinian peace agreement. But under Trump, Washington has taken a number of actions that have alienated the Palestinians. The Palestinian leadership has been openly hostile to any proposal from the administration, citing what it says is a pro-Israel bias, notably after Trump recognized Jerusalem as Israels capital in December and moved the US embassy there from Tel Aviv in May. The Palestinian Authority broke off contact with the US after the Jerusalem announcement. Meanwhile, Trump and his Middle East pointmen, Jared Kushner and Jason Greenblatt, are preparing for the rollout of a much-vaunted but as yet unclear peace plan, and it could intensify Palestinian suspicions that Washington is using the humanitarian funding as leverage. The United States paid out $60 million to UNRWA in January, withholding another $65 million, from a promised $365 million for the year. “Such a punishment will not succeed to change the fact that the United States no longer has a role in the region and that it is not a part of the solution,” Reuters quoted Abbas spokesman Nabil Abu Rdainah as saying. He said “neither the United States nor anybody else will be able to dissolve” UNRWA. In Gaza, "Hamas" group condemned the US move as a “grave escalation against the Palestinian people.” “The American decision aims to wipe out the right of return and is a grave US escalation against the Palestinian people,” said Hamas spokesman Sami Abu Zuhri. He told Reuters the “US leadership has become an enemy of our people and of our nation and we will not surrender before such unjust decisions.” Earlier on Friday, German Foreign Minister Heiko Maas said Germany would increase its contributions to UNRWA because the funding crisis was fueling uncertainty. “The loss of this organization could unleash an uncontrollable chain reaction,” Maas said. UNRWA has faced a cash crisis since the United States, long its biggest donor, slashed funding earlier this year, saying the agency needed to make unspecified reforms and calling on the Palestinians to renew peace talks with Israel. The last Palestinian-Israeli peace talks collapsed in 2014, partly because of Israel’s opposition to an attempted unity pact between the Fatah and Hamas Palestinian factions and to Israeli settlement building on occupied land that Palestinians seek for a state. Nauert said the United States would intensify talks with the United Nations, the region’s governments and international stakeholders that could involve bilateral US assistance for Palestinian children. “We are very mindful of and deeply concerned regarding the impact upon innocent Palestinians, especially school children, of the failure of UNRWA and key members of the regional and international donor community to reform and reset the UNRWA way of doing business,” she said. Earlier this month, Reuters quoted Gunness as saying that UNRWA’s support would be needed as long as the parties failed to reach an agreement to end the crisis. “UNRWA does not perpetuate the conflict, the conflict perpetuates UNRWA,” he said. “It is the failure of the political parties to resolve the refugee situation which perpetuates the continued existence of UNRWA.”