Fraud Charges Prove Costly to International Development Agency

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December 8, 2010; Source: Washington Post | The Academy for Educational Development (AED), a Washington, D.C.-based nonprofit that receives federal funds to run programs that support health, education, and social and economic development in some 150 countries, is about to learn a costly lesson for not keeping its financial house in order. Earlier this week, the U.S. Agency for International Development (USAID) said it would stop doing business with AED because of initial findings from an investigation that show “evidence of serious corporate misconduct, mismanagement, and a lack of internal controls.”

The inspector general’s examination also raised “serious concerns of corporate integrity.” The Washington Post reports that AID has contracts from USAID totaling about $640 million. They include $109 million in contracts for work in Afghanistan, where AED oversees USAID’s higher education program.

This week’s suspension restricts AED from bidding on or receiving any more government contracts.

Investigations into the 49-year-old AED have been underway since 2009, focusing on two development and education programs in Afghanistan and Pakistan. A five-year, $150 million AED program to provide disaster relief, infrastructure development, education and agricultural services in Pakistan was recently ended after an inspector general’s investigation found evidence of fraud. Since then, AED has returned $92,000. The agency also says it is “cooperating with the [inspector general’s] investigation and is committed to working with USAID on their overall and specific concerns.”—Bruce Trachtenberg

  • GlennStrachan

    AED has returned $920,000 according to the Inspector General’s report. The Washington Post has quoted an incorrect figure.

  • Bruce Trachtenberg

    Glenn,
    Thanks for your note. The mistake was mine, not the newspaper’s or the Quarterlys. The proper number — as reported by the Washington Post — is $992.000.

  • Lea Sloan

    In addition to the information provided in this article, AED would like to emphasize that we are fully cooperating and are committed to working with USAID on their concerns. We have already taken a number of corrective actions, including asking for the resignation of several corporate officers. We are also undertaking steps to strengthen project-oversight processes and accountability, while we implement a full-scale review of our operations. We are proceeding aggressively to implement organizational oversight and internal controls that will ensure AED is achieving the highest possible levels of compliance and ethical conduct.