"Washington Watchdogs," a periodic feature of the Post's Investigations blog, looks at the findings of the federal government's official investigators.

A U.S.-sponsored program in Paraguay designed to help the landlocked South American country fight corruption has been sidetracked by allegations of influence peddling and favoritism, a government audit shows.

Paraguayan officials had alleged that U.S. AID's contractor on the project, Alexandria, Va.-based international consulting firm Casals & Associates, had acted with favoritism during the procurement process and that other Paraguayan officials had stolen key documents.

As part of the project, Paraguay would create a new national identification card and passport system, which is expected to cost several million dollars.

Auditors from the U.S. AID's inspector general's office in El Salvador found that one member of the contractor selection committee had shown favoritism during the procurement process and that four Paraguyan officials were somehow involved in the stealing of a copy of a draft of the contract being stolen from the contractor's office.

Each copy of the draft had been labeled with the name of an person working on the proposal and contractors, realizing it was gone, launched an investigation. One of the officials confessed to taking the document, but called it an "unintentional mistake."

"No action was taken against any of the other officials, including the official who allegedly removed the copy from the contractor's office, the official who returned it, and a fourth official who said that he was not involved," the audit states. "Because no one else was present when the terms of reference were taken from the room where the content was being reviewed, it is hard to assign responsibility for the incident to specific individuals. Still, under the circumstances, we do not believe that it would be prudent to place any of these individuals in positions of trust."

Ironically, the program is meant to help Paraguayan officials clamp down on corruption and, in turn, allow for expanded funding from the Millennium Challenge Corp., a Bush initiative created in 2004 to provide foreign aid.

John A. Beed, the mission director for the Paraguayan program for U.S. AID, agreed with the report's findings but noted that "Paraguay is in the midst of a comprehensive political transition, having just completed presidential and national elections" on April 20.

A former Roman Catholic bishop, 56-year-old Fernando Lugo, captured 41 percent of the popular vote, ending the 61-year rule of Paraguay's dominant political party and promising to replace the country's reputation for corruption with one of honesty.