A Foreign Ministry audit into the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) has found weak internal controls in significant functions, decision-making that is non-compliant with Treasury circulars and an absence of overall supervision by higher level management. Compiled by the Ministry’s Chief Internal Auditor, the system audit of LKI’s finance and [...]

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Audit unveils serious flaws in LKI administration

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A Foreign Ministry audit into the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) has found weak internal controls in significant functions, decision-making that is non-compliant with Treasury circulars and an absence of overall supervision by higher level management.

The Kadirgamar Institute in Colombo. Pic by Nilan Maligaspe

Compiled by the Ministry’s Chief Internal Auditor, the system audit of LKI’s finance and administration functions looked at 18 months of transactions from January last year to June this year. It found that salary scales of officers and staff were not Treasury-approved as required by a 2009 Management Service Circular.

A Deputy Administration/Finance Director has been hired without Treasury sanction. Further, LKI has not yet prepared a formal recruitment procedure which meant that the desired output of officers—particularly those carrying out research—could not be evaluated.

The Chairman of the LKI’s Board of Directors is Foreign Minister Dinesh Gunawardena. It is audited by both the Chief Internal Auditor of the Ministry of Foreign Affairs and the Department of the Auditor General.

The report states that the Institute had calculated the anticipated recurrent expenditure for 2019 as Rs 60mn, of which, just over half—or Rs 32mn—is listed as salaries. This “unrealistic budget preparation” was the result of factoring in salary increases that had not been approved beforehand.

The financial powers of LKI’s Board of Management are not formally delegated to lower levels in terms of authorisation, approval, certification and payment along with respective limits. This has “led to a weak financial control and, thus, it can be considered as the reason behind the poor finance management”.

The audit recommends the appointment of an officer to handle finance and accounting who is conversant with the regulatory framework for public sector finance management.

LKI had, in some instances, failed to deposit revenue collections to the official bank account for 10 to 40 days when it should have been done daily. Separately, more than Rs 20mn was lying “idle” in the cash book from September 2019 till mid-this year.

“If this amount was invested in Fixed Deposits or any other investments at the inception, the institution would have earned a considerable amount of interests [sic] which can be used to uplift the financial position of LKI,” the report says.

The audit unearthed deficiencies in payment vouchers, with all issued during the relevant period containing “different shortcomings, errors and oversights by the auditing perspective”.

The 2018 report of the Auditor General’s Department came to a similar conclusion, stating that payments had been made on uncertified vouchers worth Rs 2,627,566. It also confirmed that approval had not been obtained under the Management Service Circular to pay monthly allowances to the LKI Executive Director and 11 other staff members.

The Foreign Ministry audit warns that, owing to weaknesses in internal controls related to payments at LKI “would lead to create the room [sic] for frauds and critical errors be taken place [sic]…” It urges the management to strengthen payment controls “on an urgent basis”.

The audit saw that at least Rs 6.6mn had been processed without following the certification staged mandated by Financial Regulations. “It is observed that different signatures have been kept on the face of the vouchers by a same certifying officer,” it adds. “This practice would lead to create the room [sic] for emerging frauds and suspicion will be made [sic] with the transparency of the payments.”

The certifying officer was also in the habit of signing the vouchers with the words “for Finance Manager”. Meanwhile, sourcing of goods, services and work has been done without following formal procurement procedures. A Foreign Ministry official appointed to the LKI’s technical evaluation committee had not been invited even once to its meetings.

The Foreign Ministry audit requested evidence of prior approval from the LKI Board, Foreign Ministry Secretary and the Foreign Minister for overseas travel and overseas duty leave of officers. It was not submitted.

While LKI had carried out special projects between 2017 and 2020 and earned foreign income, approval had not been obtained from the Treasury’s External Resources Department for these remittances.

The audit also points to haphazard working habits by the 16 staff members at LKI. At times, officers have signed attendance sheets without arrival and departure times. There are instances where they have not covered mandatory working hours. Names of officers who have not reported for duty are not mentioned in the register on a daily basis while some do not even sign the register every day. There is no supervision of attendance, formal leave applications or records.

Inventory-keeping is also haphazard, as observed by both auditors. Some items in the records could not be physically verified while others are available but not in the inventory.

LKI Executive Director Ganeshan Wignaraja said earlier last week, he was yet to see the system audit which was conducted two months ago. “It seems improper to write about a report that has not been seen and therefore cannot be responded to,” he said in an emailed response to the Sunday Times.

“We understand that there’s no finding of fraud or misuse of funds,” Dr Wignaraja continued. “If there were serious allegations there would have been an immediate board meeting. I am sure that this will be discussed at the next board meeting.”

This week he said he was not a member of the Board and suggested the newspaper to contact the Board for details.

Self-Styled expert calls for probe on report ‘leak’
 

A self-styled International terrorism expert this week called for an inquiry into what he called was the “leak” of the Systems Audit Report on the management of the Lakshman Kadirgamar Institute of International relations and Strategic Studies (LKI), an entity under the Ministry of Foreign Relations.

The Sri Lankan born ‘professor’ has called for “corrective steps” to be taken, but alas, not to rectify the many adverse findings of the internal audit report by the Foreign Ministry, but to find the source of the “leak”.

A one-time reporter turned self-proclaimed academic, who once claimed the JVP had a tie-up with the LTTE, admits that the publication of the findings of the report will be “highly damaging” to the reputation of the LKI management.

He wants all those responsible — for the alleged “leak”, not the mismanagement, sacked. He also offers his unsolicited services to contact the “DG/CID”. The bumbling terrorism “expert” does not even know there’s no position called DG/CID. So much for this expertise.

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