The US Wednesday took the unusual step of banning an American firm from being awarded new federal contracts due to evidence of serious corporate misconduct uncovered in an investigation of the companys work on aid programmes in Pakistan and Afghanistan, the Los Angeles Times reported on Thursday. The move by the USAID to suspend the Academy for Educational Development (AED), a Washington-based nonprofit corporation that does extensive federal contracting, highlights longstanding concerns about the way the US delivers foreign aid through a network of American contractors that some critics deride as Beltway Bandits. AED has 65 contracts and grant agreements with USAID worth $640 million, according to agency spokesman Lars Anderson. The suspension prevents AED from winning new contracts with any federal agency, Anderson said. USAID is now examining whether to seek debarment of the company, a step which would mean the loss of all its federal contracts. USAIDs inspector-general declined to release details of the alleged wrongdoing by AED, citing an ongoing investigation. But in a recently published report to Congress, the office noted that USAID terminated a 5-year, $150m cooperative agreement after [investigators] found evidence of fraud relating to the purchase of household kits obtained by AED in Pakistans tribal areas. The investigation revealed evidence of collusion between vendors and AED, resulting in overpayment for certain goods, the report said. The investigation also discovered that AED had inappropriately hired relatives of a person hired by USAID to oversee the programme. AEDs interim CEO George Ingram, who also served as deputy assistant administrator of USAID, confirmed in a statement an active, ongoing investigation of the firm related to programmes in Pakistan and Afghanistan. The firm has made significant steps towards strengthening its project-oversight processes - and is undertaking a full scale structural and procedural review to institute further organisational oversight and internal controls, the statement said. USAID once sent thousands of government employees abroad but now distributes aid mainly through American companies. Following two decades of staff cuts, it has become a check writing agency, in the words of Sen Patrick J Leahy (D-Vt), who chairs a committee that oversees its work. In Afghanistan and Pakistan, where aid is considered an important factor in battling the Taliban insurgencies, the Obama Administration has been pushing to distribute funds directly through the governments and local organisations. Contractors and their political allies in Washington have opposed that approach, warning, among other things, that money would be lost to corruption. The money at stake is significant: The US has pledged $7.5b in civilian aid to Pakistan, while the US awarded $17.7b in contracts for Afghanistan reconstruction from 2007 to 2009, a recent audit found. AED is among a group of large USAID contractors that are organised as tax-exempt public charities. A 2007 report, by a commission appointed by the president and Congress to examine foreign aid, concluded that some nonprofit USAID grant recipients are so dependent on the agency that their private character is in doubt.