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The U.S. is withdrawing millions of dollars in funding for the Pakistani version of "Sesame Street." Officials say the decision stems from serious allegations of fraud by the local theatre company that produces the program.

NPR's Jackie Northam has the story.

(SOUNDBITE OF A SONG)

UNIDENTIFIED CHILD: (Singing in foreign language)

JACKIE NORTHAM, BYLINE: "Sim Sim Hamara," the Pakistani version of "Sesame Street," is set in a mock-up of a typical Pakistani town. There's a school, the ubiquitous Banyan tree, a restaurant and a colorful cast of characters centered on a 6-year-old girl named Rani, who loves the sport of cricket. Only one of the original "Sesame Street" characters has been transplanted to the Pakistani version, Elmo.

(SOUNDBITE OF "SIM SIM HAMARA")

ELMO: Welcome to Sim Sim Hamara. I'm Elmo.

NORTHAM: The highly produced "Sim Sim Hamara" began airing in Pakistan about six months ago with an aim to educate school-aged children. About one-third of Pakistani children can't or don't attend school in the country. "Sim Sim Hamara" teaches them numbers and letters of the alphabet, and about ideals such as tolerance.

The initial agreement was for the U.S. Agency for International Development, or USAID, to provide $20 million over a four-year period to a Pakistani theater company that was developing the program. State Department spokesman Mark Toner says the funding was withdrawn after the local USAID office received a tip on its anti-fraud hotline.

MARK TONER: We did receive via that hotline what we believe were credible allegations of fraud and abuse by the Rafi Peer Theater Workshop. So we did launch an investigation into the allegations. We've also sent the theater workshop a letter that terminates the project agreement.

NORTHAM: Toner says, to date, just under $7 million was actually sent to the Rafi Peer Theater Workshop. The U.S.-based Sesame Workshop, which was helping the Pakistani group, issued a statement saying it was surprised and dismayed to learn about the allegations and that it hopes the achievements of "Sim Sim Hamara" and the gains made in the lives of Pakistani children will continue.

Alex Thier, a senior official for Afghanistan and Pakistan Affairs at USAID, says it's a tragic turn of events.

ALEX THIER: We had gotten very positive feedback about the quality of the programming and the popularity of the program itself. But at the end of the day, you know, really our goal is to try and reach the Pakistani people with good programs that are going to improve the stability of the country and so we will definitely continue to focus on the ways in which we can do that.

NORTHAM: Thier says it was USAID itself that both established and funded the anti-fraud hotline that forced the withdrawal of U.S. funds for "Sim Sim Hamara." Shamila Chaudhary, a South Asia analyst with the Eurasia Group, says USAID had no choice but to end the program, and quickly, because it could not afford an embarrassment.

She says essentially the children's program was swept up in the larger conflict between the U.S. and Pakistan. The relationship between the two countries has become increasingly contentious over the past year, and now Congress is looking to cut even more funding to Pakistan.

SHAMILA CHAUDHARY: So if you have a program like "Sesame Street," which is accused of corruption, that puts the civilian aid in even more danger.

NORTHAM: Chaudhary says she doubts the State Department wants civilian aid targeted the way security aid has been targeted by Congress. Jackie Northam, NPR News, Washington.

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