Thursday, December 9, 2010

USAID Closes Down a Contractor

A little scandal in the development world is always fun – except for the people who are the cause of the scandal.

AED, it was reported in yesterday’s Washington Post, has been suspended from future USAID contracts while the Office of the Inspector General completes an investigation of the non-profit.  The Post reports that according to a statement from USAID, the initial findings by the inspector general's office "reveal evidence of serious corporate misconduct, mismanagement, and a lack of internal controls, and raise serious concerns of corporate integrity.  AED holds 65 contracts with USAID worth over $640 million. The article also points out that USAID said it decided to suspend AED after the inspector general's investigation started in spring 2009 and found "substantiated evidence of misconduct by AED.”  AED had to return money following an investigation into its Pakistan project.  AED also has significant contracts in Afghanistan. 

How much of the misconduct is related to shorting consultants and pocketing the difference?  the article does not say, but if you are in development, you know what I mean.  Example. Hotels can be expensive but if the organization tells the consultant that he or she can only bill for $100 per night and USAID allows up to $250 per night – what happens to the difference if the firm charges USAID the full permitted rate?

Now, this sort of thing has happened before.  I was once brought in to resurrect an organization where one or two staff (out of 15) had colluded with outsiders to fraudulently obtain about $185,000 during the previous two years and the OIG had shut down operations.  In that case, however, my organization had discovered the fraud, reported it to USAID, paid the money back, took responsibility for the sloppy internal financial management but USAID panicked, called in the OIG resulting in a further investigation that held up operations for another 9 months after the situation had been resolved. Nevertheless, this sort of thing happens.

The venerable Harvard University sponsored Russia development program back in the 990s was also involved in some shady practices through some subtle maneuvering by its senior person in the field.  They were found out and black-balled with ramifications all the way to the top at Harvard.

However, my question is, if this investigation started in 2009, why was AED just awarded a USAID contract in Ukraine – the kick-off of which is supposed to be on Monday, 13 December?  How on earth does USAID justify that?  By saying it’s a signed contract?  So what?  On what planet do they live?

Oh. And the CEO of AED reportedly earns close to or over $800 thousand a year. This is rumor, of course, but if true,  nice work in the Not-For-Profit universe for someone who doesn’t have to spend time in the field in the garden spots of Afghanistan and Pakistan.

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