George Galloway, the anti-war Respect MP, could face a fresh inquiry into where exactly the funds came from for an appeal that he set up seven years ago to help an Iraqi girl suffering from leukaemia during UN sanctions.

Kenneth Dibble, director of legal services for the Charity Commission, said today that the Commission was in touch with a US Senate sub-committee investigating allegations that Mr Galloway was allocated millions of barrels of cut-price oil by Saddam Hussein’s regime under the UN oil-for-food programme.

Senate investigators have claimed that some of the money was channelled through the Mariam Appeal, which Mr Galloway set up in 1998 to help fund medical treatment for the four-year-old girl and other sick children.

In a bravura appearance yesterday in Washington before the Permanent Sub-committee on Investigations, Mr Galloway fiercely denied all the charges against him. He told the senators that a previous inquiry by the Charity Commission into the Mariam Appeal had recovered "all money in and all money out" and had found no impropriety.

However Mr Dibble said that there had been "limitations" on the inquiry, as some of the records of the appeal had been taken out of the country by its then chairman, the Jordanian businessman Fawaz Zureikat.

"What we did do was to reconstruct the income and expenditure of the appeal by looking at the bank accounts of the appeal fund, which we obtained using our statutory powers," he told the BBC Radio 4 Today programme.

"With the help of the trustees, who we asked various questions in relation to payments, we were able to establish at least that the majority of the monies were applied for purposes that were charitable."

He said that the Commission had now asked the sub-committee for the underlying evidence which supported its report in order to establish whether there was any more it should do.

"When we have that information we will look again at the material which we assessed during the course of the inquiry and consider whether anything further needs to be done," he said.

"We would have to consider whether or not they were aware of any improper nature of funds coming to the charity if indeed we find there is evidence to support that."

In a statement last night after Mr Galloway's fierce testimony on Capitol Hill, the Charity Commission took issue with his statement that its inquiry had examined "all money in and all money out".

It said: "We did not undertake a detailed review of sources of income to the Appeal because the original concern prompting our inquiry was about the use to which funds had been put.

"Our inquiry did not find evidence of donations direct from oil companies but noted that one of the major funders of the Appeal was Fawaz Zureikat, an individual named on 12 May 2005 by the US Senate Sub-Committee as allegedly connected with payments in relation to allocations of oil under the Iraq Oil-for-Food Programme.

"We have no evidence to show that the income received by the Fund from Mr Zuriekat came from an improper source. But had the recent allegations been known to us at the time of our inquiry, we would have made the information available to the appropriate UK authorities for them to decide whether the Mariam Appeal had received funds from an illegal source."

In his testimony before the Senate subcommittee, Mr Galloway again denied having profited personally from any oil allocations or having been involved in any form of oil trading.

Apart from defending his own reputation, he managed to turn the hearing into an indictment of US policy in Iraq and the Iraq war and accused the subcommittee's chairman, Minnesota Republica Norm Coleman, of mounting "the mother of all smokescreens" to divert attention from American plundering of Iraqi assets since the April 2003 invasion.

The performance was widely reported in US newspapers this morning. Under the headline "Brit Fries Senators in Oil", the New York Post said: "Coleman and other senators were caught flat-footed by the ferocity of Galloway's counter-offensive. They cut short the questioning of him and abruptly stopped the hearing."

The New York Times reported: "His aggressive posture and tone seemed to flummox Norm Coleman of Minnesota, the first-term senator who heads the Senate panel.

"But after the hearing, Senator Carl Levin of Michigan, the ranking Democrat on the Senate subcommittee, joined his Republican counterpart in describing Mr. Galloway's dramatic testimony

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