ZURICH (Reuters) - Austria will release funds to the U.N.'s Palestinian relief organisation UNRWA that were blocked after allegations agency staff were involved in the Oct. 7 attacks on Israel.

Vienna's decision comes after UNRWA set out an action plan to better ensure its impartiality, strengthen internal reviews, and improve how its staff are monitored.

"After a thorough analysis of the action plan, we will release funds to UNRWA again," the Austrian foreign ministry said on Saturday.

Funds totalling 3.4 million euros ($3.70 million) have been budgeted for 2024, with the first payment due to be made in the summer, it added.

Austria was one of the donor states to freeze some $450 million in funds after Israel accused 12 UNRWA staff of participating in the Hamas-led attack that triggered the Gaza war.

Germany said last month it would resume cooperation with UNRWA following a report led by former French foreign minister Catherine Colonna into UNRWA's procedures for ensuring adherence to principles of neutrality.

UNRWA employs 32,000 people in the Palestinian territories and nearby countries, including 13,000 in the Gaza Strip, running schools and social services.

($1 = 0.9200 euros)

(Reporting by John Revill; Editing by Mark Potter)