WASHINGTON — The Bush administration told Congress last year of a secret plan to dramatically expand covert operations inside Iran as part of a long-running effort to destabilize the country's ruling regime, according to a report published Sunday.

The plan allowed up to $400 million in covert spending for activities ranging from spying on Iran's nuclear program to supporting rebel groups opposed to the country's ruling clerics, veteran investigative journalist Seymour Hersh reported in the New Yorker magazine.

While the administration has been waging a low-grade covert campaign against Iran for at least three years — consisting mainly of cross-border raids targeting groups tied to attacks against U.S. forces in Iraq — the
new policy represents a significant expansion, the report contends. The prospect of a broader covert presence inside Iran also has raised concerns among some congressional and military officials about a possible escalation leading to a broader military conflict, it states.

The article drew a sharp reaction from administration officials who denied U.S. forces were engaged in operations inside Iran.

"I can tell you flatly that U.S. forces are not operating across the Iraqi border into Iran, in the south or anywhere else," U.S. Ambassador to Iraq Ryan C. Crocker said Sunday during an interview on CNN's Late Edition.

Hersh reported the approval for expanded covert authority was contained in a "Presidential Finding," a highly classified document that lays the legal groundwork for all covert activities by U.S. intelligence officials. The Iranian finding was presented late last year to a group of eight congressional leaders — the top Democrat and Republican in the Senate, House and intelligence committees of both chambers — in keeping with a requirement for congressional notification. In theory, Congress can challenge a proposed covert action by denying funding.

Spokesmen for the intelligence committees declined to comment, citing the strict rules of secrecy governing such documents. The CIA also declined to comment. "The CIA does not, as a rule, comment on allegations regarding covert operations," agency spokesman George Little said.

The article, quoting unidentified administration officials, said the primary objectives of the covert activity included gathering intelligence on Iran's nuclear program as well as assisting Iranian opposition groups in their bid to undermine the current regime. Among the opposition groups allegedly receiving cash and other assistance are ethnic Balochi dissidents in southern Iraq as well as established resistance groups such the Mujaheddin-e Khalq.