updated 2/22/2008 12:52:13 PM ET 2008-02-22T17:52:13

The German branch of UNICEF said earlier this week it lost a coveted endorsement from the country's leading watchdog for charities, a move that may further tarnish its reputation in the midst of a financial scandal plaguing the group.

The German Institute for Social Questions, or DZI, said it revoked its seal of approval for UNICEF Germany after investigating accusations of financial irregularities and substantiating allegations that UNICEF had paid inordinately high commissions to fundraisers.

"According to the estimate of the DZI, the management and oversight of UNICEF Germany needs to be substantially improved so that previous errors are not repeated," the organization said in a statement.

DZI described UNICEF's payments to fundraisers as violations of the standards on "economy and thriftiness."

The group's seal of approval is meant "to advance trust and achieve greater cooperativeness" toward charitable organizations. It is currently carried by 230 charities in Germany, which receive a total of $2.06 billion in annual donations from residents.

UNICEF Germany has already lost 20,000 of its 200,000 members since allegations emerged last year that it had misappropriated donor funds.

However, losing the endorsement of DZI does not mean that UNICEF Germany will have to shut down its operations.

"We can still collect donations and help out, as we had until now," said spokeswoman Helga Kuhn, though the seal of approval would have to be removed from letter head and brochures. According to DZI, the earliest that UNICEF Germany could carry the endorsement again would be in 2010.

"It's too early to say what the impact will be," said Michael Klaus, a spokesman at UNICEF's office in Geneva, Switzerland.

Klaus said UNICEF Germany had already made efforts to atone for the scandals that have wracked the organization, citing last week's resignation of its chief executive, Dieter Garlich, and the chairman of its board, Heide Simonis.

Also last week, UNICEF headquarters in New York sent Philip O'Brien, who is responsible for the agency's private fundraising and partnerships, to Germany in order to restore a sense of confidence in the agency.

Reinhard Schlagintweit, interim chairman of UNICEF Germany, said that the organization was already learning from its past mistakes.

"We are doing everything to ensure that the problems don't occur again," he said.

UNICEF Germany is one of 36 different national committees associated with UNICEF. The national committees are independent NGOs that carry out fundraising and advocacy for child rights under a cooperation agreement with the U.N. Children's Fund.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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