A BOUT 40 Khmer staff have been laid off by the Vietnam Veterans of America

Foundation (VVAF) at its Kien Khleang facility near Phnom Penh.

"If we do

not reduce the size of our staff immediately, we will run out of operating funds

within a few months," program director Larrie Warren wrote in a letter to sacked

staff last week.

The letter also said that it was "evident for anyone to

see" that Kien Khleang - which produces wheelchairs and artificial limbs for

amputees - had been overstaffed.

The laid off workers have been promised

one month's salary as severance pay, but it is being withheld until the end of

May.

Warren's letter, citing a "tense and angry" atmosphere at Kien

Khleang, said that if "rumored threats toward staff or the facility are carried

out, these severance payments will be held pending

investigation".

"Additionally, if the atmosphere at Kien Khleang becomes

too threatening, the facility will be closed."

Warren told the Post the

layoffs were aimed at cutting unnecessary staff, though saving money was a

"secondary" but "major" factor.

Warren said that since his recent

appointment as program director, he had rapidly concluded that Kien Khleang

could withstand a cut of 40 staff - a quarter of its workforce - without

reducing production.

The cuts had been made across the board, including

artificial limb and wheelchair makers, housekeeping and maintenance staff. The

number of amputees included had been limited to three or four.

Warren

said rumors of trouble at Kien Khleang had to be taken seriously, but the

layoffs had gone a little smoother than feared.

He denied that VVAF's

Cambodian operation, funded by the US government's USAID agency, was in imminent

danger of financial collapse.

But he confirmed that VVAF, whose current

USAID grant is due to expire next June, had sought more money from the agency to

come on line this October.

He said the new application was primarily

aimed at allowing VVAF to start programs such as community outreach.

"I

don't want to give the impression that we're running around looking for money.

We've still got a number of draws left [on USAID money] but it certainly has to

be used properly."

VVAF in Cambodia has a $4.5 million budget for

1992-96, 75 per cent of it from USAID. VVAF has to pay the rest itself, though

it can deduct the value of donations of land and equipment from

that.

"We're certainly kicking in non-US government funds, which we would

have to do whether or not we were running out of government funds," said

Warren.

"I can't answer when we will run out of funds. A lot of that has

to do with what I'm doing right now with cost cutting and reallocation of

resources."

Meanwhile, VVAF is the subject of a US federal audit

following allegations of misuse or theft of funds. Auditors were in Cambodia

recently, visiting Phnom Penh and another VVAF project in Stung Treng, and also

due to go to its Vietnam office.

Senior US-based VVAF officials,

including executive-director Bobby Muller, are also in Cambodia.

Warren

said that if the audit turned out the way VVAF had been "led to unofficially

believe, we're going to be fine".

The audit was examining the use of

USAID money, and not that spent by VVAF from other sources. USAID had the right

to reject items charged to its funds.

Warren confirmed that USAID had

refused to pay for the cost of his travel to Cambodia, after his appointment in

February.

He said USAID, after paying the travel costs of three former

directors since the project began, had "sort of said enough is enough".