The BBC's Andrew Walker: Reports of corruption may make donors less willing to contribute

The US State Department said the report in the New York Times was misleading and called for a retraction.

The report's central allegation was that up to $1bn of public money and international aid has been stolen by senior Bosnian politicians over the last four years.

The paper says it has agreed to publish three minor corrections, but that it stood by the main allegation.

The newspaper acknowledged it had been contacted by State Department spokesman James Rubin.

The report says massive amounts of reconstruction aid have been syphoned off

A newspaper spokeswoman said a review was under way, but added: "Nothing he [Mr Rubin] has said so far has led us to question the fundamental soundness of the article."

Mr Rubin had said the allegation was misleading and could undermine support inside the US for foreign aid provision.

"It's hard enough to get support in this country for foreign assistance as it is," he said.

"To have a false and unjustified and unsubstantiated perception that $1bn in foreign aid money has been stolen by the Bosnians, when there is no such report proving that ... harms that cause."

He added that if any donor money had been embezzled it was only a tiny proportion of the total aid Bosnia had received.

Bad publicity

The New York Times report, citing anti-fraud officials as well as a 4,000-page report on misused money, said that $1bn had gone missing or been stolen from various coffers in Bosnia.

Sarajevo still bears the scars of the 1992-95 war

The report, compiled by the Office of the High Representative (OHR) in Bosnia, is said to name officials linked to governing parties in Bosnia.

Some have been removed from office, although most remain.

The newspaper's original article said politicians from all three main ethnic communities - Muslims, Serbs and Croats - were involved but embassies and relief agencies were reluctant to publicise the thefts for fear of scaring away potential donors.

'Great damage'

The Muslim member of Bosnia's collective presidency, Alija Izetbegovic, has rejected the allegations as a witch-hunt.

Wolfgang Petritsch: Reputations and Bosnia's future is at stake

In an open letter addressed to High Representative in Bosnia Wolfgang Petritsch and to the Contact Group, Mr Izetbegovic said the article had inflicted "great, if not irreparable, damage" on the country.

And he said it seemed clear that Mr Petritsch had no intention of publishing the report in question, compiled by the latter's own staff.

"The article attests to the fact that your employees have painted a false picture of the situation in the country, blown cases of abuse way out of proportion, relied on rumours instead of objective analysis and labelled honest people as thieves," Bosnian TV quoted the letter as saying.

Correspondents say the report is likely to sour Bosnia's relations with Mr Petritsch, who heads the office responsible for carrying out the civilian aspects of the 1995 Dayton peace agreement.

It could also make aid donors less willing to contribute much needed cash to the region - including Kosovo - if they fear money intended for post-war reconstruction will only end up in the pockets of local officials.