Special representative Richard Holbrooke's bid to rapidly shift U.S. aid from American contractors to local Pakistani organizations will "seriously compromise" the effort to stabilize Pakistan, a U.S. diplomat says in a "dissent channel" message to senior State Department officials. The memo, obtained by USA TODAY, comes as President Obama is poised to sign legislation that would triple non-military aid to Pakistan in an effort to battle its growing Islamic fundamentalist insurgency and economic crisis. Underscoring sensitivities about the U.S. role there, the $7.5 billion aid package has drawn fierce criticism in Pakistan because of the accountability provisions Congress attached to the money, such as requiring Pakistan to show a commitment to fighting terrorism. Pakistan's government also has complained about the use of U.S. companies to run aid programs, and USA TODAY reported Oct. 2 that Holbrooke has been moving to overhaul the aid regime so that more of the money goes to the Pakistani government and local organizations. The problem according to the memo by C. Stuart Callison, an economist with the U.S. Agency for International Development is that Holbrooke is canceling successful programs run by U.S. contractors and preparing to bypass them by giving large sums to local organizations with shaky financial track records. Holbrooke, the top civilian overseeing Obama administration policy on Afghanistan and Pakistan, has asked to personally approve every project funding renewal involving U.S. contractors, Callison wrote and "the disapprovals already received are shockingly counterproductive." In an interview, Deputy Secretary of State Jack Lew said he did not want to comment directly on Callison's confidential memo. He said the administration makes no apologies for wanting to shift aid money away from U.S. contractors in Pakistan, but "we're not going to do it so quickly that it causes disruption." Callison sent the Oct. 2 cable through a process designed to give the secretary of State access to opposing views. He confirmed the authenticity of the memo but declined to comment. It was addressed to Anne Marie Slaughter, an appointee of Secretary Hillary Rodham Clinton who is director of policy and planning. The memo reflects larger frustrations within USAID, which has gone leaderless for eight months as it waits for Obama to appoint an administrator, said Carol Lancaster, interim dean of the Walsh School of Foreign Service at Georgetown University, who served as deputy administrator of the agency under President Bill Clinton. The agency "is hugely frustrated and pretty demoralized," she said. USAID has long relied mainly on large U.S. firms to deliver aid. Secretary Clinton and Holbrooke have said they want to reduce the reliance on those American firms because, in their view, too much of the money spent that way is lost to overhead, security and expatriate salaries. A report in March by the aid group Oxfam said the multibillion U.S. aid effort in Afghanistan had been ineffective in part because of an overreliance on contractors. In a series of audits, USAID's inspector general found that many contractor-run aid programs in the region have not been working as intended. Callison did not argue to preserve the status quo, but rather that the disruption caused by an instantaneous change would outweigh any savings on overhead. The change should happen more gradually, he wrote. Shifting money from U.S. contractors already on the ground to local groups "without an appropriate transition period," Callison wrote, "will seriously compromise the more important requirements for quick counterinsurgency and economic impacts." "Changing course instantly," he added, means that the impacts of American aid "will be suspended for many months or a year." Pakistan's government has been pressing the U.S. to reduce the role of American contractors, Lew said. Finance Minister Shaukat Tarin has complained that U.S. contractors have absorbed as much as 45% of the aid to his country in recent years. Yet very few Pakistani firms or charities can comply with U.S. accounting and anti-corruption rules, Callison wrote. For example, he said, Pakistan's biggest agency for making small anti poverty loans recently had to give back half its $5 million U.S. grant after a subcontractor misspent funds. Yet now the U.S. is considering giving that agency a $50 million grant, Callison wrote. Lew said the administration would insure that aid money was "audited in real time." In a July report for Harvard University's John F. Kennedy School of Government entitled "U.S. Aid to Pakistan U.S. Taxpayers Have Funded Pakistani Corruption" Azeem Ibrahim documented that U.S. officials have not been able to monitor aid to the tribal areas because of the danger in traveling there. Transparency International, which monitors a non-profit group monitoring global corruption, calls Pakistan one of the world's most corrupt countries. In its most recent survey, 60%. of the Pakistani businesspersons who were questioned said they had been solicited for bribes by government officials. Shifting aid from U.S. to local entities is a good thing, "but it has to be done at in the right sequence," said Paul O'Brien, Oxfam's director of aid effectiveness. If we see whole development programs come to an immediate halt, and people not going to school or the health clinic, that's a huge cost right now." Pakistan's military and some government officials have complained about provisions in the Pakistan aid legislation placing conditions on the money. During the Bush administration, U.S. aid came with no strings attached, and later government reports were unable to account for how it was spent. Among other strings, the bill conditions U.S. aid on whether Pakistan government maintains effective control over the military, including its budgets, the chain of command and top promotions. Last week, Pakistan's military issued a brief written statement that said senior commanders, including the army chief, "expressed serious concern regarding clauses impacting on national security."