Elmo, Pakistani Sesame Street

REUTERS/Mohsin Raza

Elmo ain't tickled about this.

U.S. officials in Islamabad, Pakistan, have announced that $20 million in funding for a Pakistani version of Sesame Street has been suspended after a local newspaper lodged corruption allegations against the local puppet theater coproducing the show.

It's a not-so-sunny day for the gang at the Sesame Workshop.

A spokesman for the United States Agency for International Development (USAID) tells E! News that it has withdrawn the remainder of the cash dedicated to educational programming on the Sesame-type series starring Elmo and Pakistani puppet friends after learning that the Rafi Peer Theater Workshop may have misappropriated the funds.

"We have an anti-fraud hotline that's set up in Pakistan and we take all allegations of waste, fraud and abuse of U.S. funding very seriously and will take action to halt or suspend a program and investigate any call that comes in," said the spokesman. "So we got one in response to this program…and our office launched an investigation which identified irregularities. So we have taken action by terminating the funding for the project."

So far, USAID had given over $6.7 million, but sources told Pakistan Today newspaper that the Lahore-based group was found to have used the aid money to pay down various personal and business debts and give relatives of theater operators lucrative contracts.

Though USAID could not say if it would revisit the project in the future due to its ongoing investigation, the spokesman added that it's still definitely behind the goals of the show.

However, the agency did not know if the first season, made up of 26 episodes, will air.

Rafi Peer rep Faizaan Peerzada denied the charges, telling the paper that "the information regarding suspension of aid is nothing more than a rumor."

U.S.-based Sesame Street Workshop, which was awarded funds independently by USAID, expressed "surprise and dismay" regarding the accusations made against Rafi Peer.

"We are grateful for USAID's initial investment which has allowed Sesame Workshop to provide its expertise in children's media to help Rafi Peer reach three million children, many of whom otherwise would not have access to any early childhood education," said a Sesame representative. "It is our hope that the…gains we have made in the lives of children in Pakistan, will carry on."

—Additional reporting by Sharareh Drury

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