The Bush administration has approved $20 million in direct aid to help the Palestinian Authority as it prepares for Jan. 9 presidential elections to replace Yasser Arafat (search).

The U.S. aid, allowed only by waiving existing law, is meant to help the cash-strapped and beleaguered Palestinian Authority (search) pay its utility bills so its power will not be cut off, White House spokesman Scott McClellan said Wednesday.

"They are in a serious financial situation right now," McClellan said of the Palestinians. "This will help them address some of those financial issues as they move forward on holding elections and putting the institutions in place."

Secretary of State Colin Powell (search) recommended that President Bush use his waiver authority to allow direct aid to the Palestinians, which is now on hold because of longstanding U.S. concerns about corruption in the leadership ranks of the Palestinian Authority, and Bush agreed, McClellan said.

Earlier this year, the administration contributed $127 million to Palestinians. Last year, $20 million was given directly to the Authority.

Of the new round of funding, McClellan said the administration has "great confidence in the ability of those funds being directed toward the purpose for which they are designated."

"This contribution of financial assistance hopefully will send a signal to other nations as well that they should help the Palestinian people as they move forward on conducting these elections," he said.

The White House also welcomed an agreement between the Palestinians and Israel on the logistics of the elections.

"That's a positive and constructive step forward," McClellan said.

Arafat died last month.