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Last December, USAID suspended AED from any new contracts, and by this March the gig was up - AED went up for sale, and now we have FHI360. All along, I wondered why USAID would invoke the nuclear option on AED.

There were many rumors and much innuendo, but now thanks to AED Watch we can read the full Justice Department settlement to learn the official reason. I'll spare you the legalese and just give the highlights.

The Justice Department claims that under the Federally Administered Tribal Area Livelihood Development Program (FATA-LDP) in Pakistan, and the Higher Education Project (HEP) in Afghanistan, during the period from 2008 through 2010:

1. AED failed to consistently maintain appropriate systems of internal controls, which lead to fraud and kickbacks in procurements
2. When it found problems, AED failed to fully disclose the issues to it's own auditors and USAID

The second allegation of a cover up are pretty amazing (full details) but bear in mind that AED doesn't admit to any wrongdoing in the settlement. Still, AED agreed to:

1. Pay the United States $5,294,000 when the settlement was signed
2. Pay the United States $341,000 on August 1, 2011
3. Pay to the United States ninety percent (90%) of the gross insurance benefits paid to AED from it's FATA-LDP and HEP insurance claims
4. Pay the United States all of AED's excess funds on December 31, 2012 and 2013, and all cash on hand on AED’s final cessation of corporate existence

From what I can tell (and I'm no lawyer) this settlement ends the Justice Department action and will not effect FHI360 - the new combined AED-FHI firm.

My only lasting question: what should the international development community learn from this episode?

Back in December, USAID suspended the Academy for Educational Development from new government funding. This has kept AED from bidding on any new contracts and to an extent, even receiving funding for current projects.

Since then, I did a back-of-the-napkin calculation based on AED's size and assumed proposal win rate, and figured they were unable to bid on $80 million a month in new programming, which would reduce their future size by $30 million for each month they were suspended.

I was concerned that if they were suspended too long - for more than 6 months - AED would be permanently reduced in size and scope. It seems my calculations may have been too optimistic.

Today, after just 4 months of suspension, AED Chairman of the Board, Edward W. 'Peter' Russell announced that AED is selling or transferring all of its important assets:

AED will pursue a process to sell itself of all of its highly valued programs and assets. We believe that this acquision of our assets is the only way to ensure the continuity of our programs and projects and to provide a new home and safe harbor for our talented staff within another appropriate for-profit or non-profit organization.

While this is a profoundly sad announcement, it is the right choice. First, and foremost, it allows us to focus on sustainability: most of AED’s programs will continue uninterrupted and most staff will continue to implement activities grounded in our mission of implementing solutions to critical social problems in the U.S. and around the world.

The Board’s decision was a difficult one to make and is premised on AED’s current and projected financial condition. We have concluded that the conditions under which we are operating – the significantly negative impact AED’s financial reserves have absorbed during the last few months coupled with an increasingly restricted revenue stream – will not be sustainable. While we have the ability to remain solvent in the near future, AED is choosing the prudent course of divesting itself of its projects and assets so that the important objectives of our programs can continue under the banner of another organization.

Now from what I can tell, that's a going out of business sale. AED will be transferring its programs that are USAID or US government funded to other organizations (I don't think they can be "sold"). AED may be able to sell other programs that it's developed or acquired that have independent funding sources.

Regardless, its gong to be traumatic for all AED staff and programs. My heart goes out to all the hardworking and talented professionals who were focused on doing the right thing, and are now feeling a gut-punch. Even though funded programs will continue elsewhere, this change is going to be a wrenching emotional experience.

And don't think this event will only effect AED. Every single USAID implementing partner is now put on notice - USAID can and will exercise the nuclear option.

WOW!!! USAID just pulled out its nuclear option on the Academy for Educational Development - suspending them from new awards. The press release from USAID is below along with news articles about it.

AED is a large implementer of ICT projects around the world so this will be a major disruption in the ICT4D community. I can't even begin to think of the full fallout. What do you think will happen? To AED, to ICT4D, even to USAID with this?

Post updated to remove incorrect date

USAID Suspends Academy for Educational Development from Receiving New U.S. Government Awards

FOR IMMEDIATE RELEASE
December 08, 2010
Press Office: 202-712-4320
Public Information: 202-712-4810

WASHINGTON, DC - Today, the United States Agency for International Development (USAID) suspended the Academy for Educational Development (AED) from receiving new U.S. Government awards pending an ongoing investigation by the USAID Office of Inspector General (OIG). Initial findings by USAID's OIG reveal evidence of serious corporate misconduct, mismanagement, and a lack of internal controls, and raise serious concerns of corporate integrity.

The investigation was initiated in the spring of 2009 and OIG informed USAID of its findings this summer.

USAID took this suspension action in response to substantiated evidence of misconduct by AED. The Agency takes seriously any allegations involving the mismanagement of U.S. Government funds. USAID is conducting a review of every program associated with AED. The review will determine the best steps forward for ensuring the protection of U.S. taxpayer funds and the continuity of the United States' development goals. USAID will continue to work closely with OIG during its investigation.

AED has published a short paper on some of the new technologies available for International Development. Its geared towards those that are not familiar with technology and gives a good overview of selected devices and solutions.

Their "Small Technology - Big Impact" report covers:
- PDA's
- Flash drives
- Cell phones
- Wireless Internet
- VoIP
- Radio
- VSAT
- Netbooks
- GPS
- Wikis
- Solar Power

Read More Small Technology - Big Impact (PDF)
.