Correction to This Article
Earlier versions of this article, including in the print edition of The Washington Post, understated the amount that the Academy for Educational Development returned to the government when its contract was terminated. The article, because of a typographical error in the report, put the amount at more than $92,000; the actual amount returned was more than $992,000. This version has been corrected.

USAID suspends District-based nonprofit AED from contracts amid investigation

By Dana Hedgpeth and Josh Boak
Washington Post Staff Writers
Wednesday, December 8, 2010; 10:18 PM

The U.S. Agency for International Development said Wednesday that it suspended a nonprofit organization from receiving new government contracts because of an ongoing investigation regarding questionable practices.

USAID's Office of Inspector General is investigating the Academy for Educational Development (AED), which is based in the District. The 49-year-old nonprofit group contracts with U.S. government agencies and others to run health, education, social and economic development programs in about 150 countries.

AED is also one of USAID's key contractors in Afghanistan, overseeing the government agency's higher-education program in the war-torn country. In the past three years, it has received $109 million in contracts from USAID for work in Afghanistan.

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," according to a statement from USAID.

AED has 65 contract awards from USAID worth roughly $640 million, according to a USAID official.

The agency said it plans to conduct "an immediate internal review" of "every program associated with AED."

Lars Anderson, a spokesman for USAID, said AED's suspension "prevents it from bidding on or receiving any further awards from the U.S. government until the suspension is lifted or legal proceedings are instituted against the organization."

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."

The inspector general's investigation involved AED's work in two development and education programs in Afghanistan and Pakistan, according to a statement the company released Wednesday.

"AED is cooperating with the [inspector general's] investigation and is committed to working with USAID on their overall and specific concerns," AED's statement said.

The organization said it has made "significant steps toward strengthening its project-oversight process, personnel and resources."

USAID recently ended a five-year, $150 million cooperative agreement with AED after its inspector general found evidence of fraud related to a program in Pakistan that was designed to provide disaster relief, infrastructure development, education and agricultural services, according to a recent report to Congress that did not identify the company by name. A source close to the investigation confirmed that the company in the report was AED.

In that Pakistan program, the inspector general's investigation found "evidence of collusion between vendors and staff . . . resulting in overpayment for certain goods," according to the agency's report.

USAID ended its work with AED on the program, and the group returned more than $992,000.

AED has recently lost some of its top management. Robert S. Murphy replaced Deanna Trotter, who is retiring after 22 years with the group, as chief financial officer. And last month, Stephen F. Moseley, who had served as AED's president and chief executive for 23 years and is well known in the nonprofit world, said he would retire next year.

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