A United States federal audit is being held into the spending of aid money by

the Vietnam Veterans of America Foundation in Cambodia.

The move follows

months of allegations, made to the US Embassy in Phnom Penh, of mismanagement or

misappropriation of money.

The Post has previously reported that some

form of inquiry was expected. A full audit has now been decided on.

US

Embassy spokesman Frank Huffman said the audit was being conducted by the

Inspector-General's Office of the USAID agency, which has granted $4.5 million

to VVAF's Cambodian operations.

He would not comment further, except to

say that the investigation "was still in a Washington phase" and "we have no

idea when it might be brought to some sort of a conclusion."

Sources say

that an initial proposal to contract a private auditing firm to do an audit in

Cambodia was dropped in favor of a federal audit conducted from the

US.

It is understood that bank records are being subpoenaed as the audit

gets underway.

Separate sets of allegations have been made to USAID in

Phnom Penh by former or current VVAF staff over the past year.

Some of

them involve payments which were to former staff's bank accounts by VVAF's head

office in the US.

Former VVAF Cambodian director Tom Leckinger has

confirmed to the Post that he was paid a monthly $5,000 "consultant's fee" for

some months after he resigned, when asked to, last August.

Leckinger said

the fee was to prepare a proposal for further USAID funding, and he was chosen

to do the work because he knew the procedures involved.

Sources maintain

that VVAF Cambodian staff, including Leckinger's replacement, Bill Herod, were

not told of the payments. Concern first arose when similar payments, to other

people, came to light and VVAF denied making them.

Other allegations have

been made about the construction of a new building at VVAF's high-profile Kien

Khleang center - which employs disabled people to manufacture wheelchairs and

artificial limbs - near Phnom Penh.

Estimates of the construction cost

range from $190,000 to $250,000, but some sources maintain that some $100,000

was spent before the building's foundations were completed

properly.

VVAF's Washington-based executive-director, Bobby Muller, and

its financial controller, Dick Howard, visited Cambodia in February to discuss

the allegations with US Embassy officials.

At the time, Muller described

the allegations as unfounded and insane, and welcomed the prospect of any sort

of investigation.

Leckinger has also categorically denied any knowledge

of misappropriation of money, and welcomed an inquiry.

VVAF has been

wracked by sackings and internal disputes for a year. Among those who have been

sacked or asked to resign include its first Cambodian director Ron Podlaski -

who has made wide-ranging allegations to USAID and to the Post - and his

successors, Tom Leckinger and Bill Herod.

Herod was asked to resign in

early February after he refused an order to sack his deputy, Phil Brady. Both

Herod and Brady have declined Post invitations to comment but are understood to

be critical of VVAF management practices.