11th May, 2003 Volume 9, Issue 43

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  • Highway robbery at Colombo based NGO

Millions of dollars for development projects disappear

By Frederica Jansz

The Norwegian Foreign Ministry has slammed a Colombo based NGO for siphoning off tens of millions of rupees from Norwegian development grants given to the organisation.

The Norwegian government has now withdrawn all funding and is saying there is probably legal basis to demand the NGO repay tens of millions of rupees that have been diverted and remains unaccounted for.

A detailed report by two international audit teams has found that a Norwegian national operating a multi faceted non-governmental organisation, Worldview International Foundation (WIF) in Colombo has rendered the organisation both technically and financially bankrupt. The shocking revelations have brought into question the role of international NGOs in this country and in particular the actions of foreign nationals who have developed close links with political leaders both in Sri Lanka and in Norway.

In this instance the individual concerned is Norwegian born Arne Fjortoft - Secretary General of WIF.

Worldview International Foundation (WIF) came in for severe criticism in a report commissioned by the Norwegian Foreign Ministry. According to the report written by the Norwegian audit firm UniConsult, WIF has spent Norwegian development assistance grants in violation of the agreement it had signed with the Norwegian Agency for Development Cooperation (NORAD).

Norway's Minister for Development Cooperation, Hilde Frafjord Johnson, in a letter dated April 10, 2003 has stated that several breaches of various types of the four year agreement with NORAD (1999-2002), which expired 31.12 2002 have been uncovered. "Also, that based on the breaches in the agreement, a new agreement between NORAD and WIF is not possible."

WIF has denied the accusations, but Chairman Progress Party in Norway, Carl I. Hagen has called for the organisation to be investigated by the National Authority for Investigation and Prosecution of Economic and Environmental crimes.

Powerful patrons

Worldview International Foundation was established in 1979 in Colombo as an international Non Governmental Organisation (NGO). It is registered as an NGO with the  Planning Ministry and as a company with the Registrar of Companies in Sri Lanka. Fjortoft established the company after befriending the late A. C. S. Hameed who was then  foreign minister  of Sri Lanka .   Hameed was the first chairman of Worldview International Foundation and his local political clout and international contacts were used liberally to get funding for Worldview. To this day his son, Amrisha Hameed remains an executive member of the Central Council of WIF, and a number of close relatives of Hameed have been employed by the organisation since its formation.

Fjortoft also has powerful patrons both in Sri Lanka and in Norway. Norway's current Prime Minister Kjell Bondevik was also once chairman of Worldview Rights in Norway, which is an affiliated organisation  of Worldview International Foundation, Colombo. Even Norwegian peace brokers, Eric Solheim and Vidar Helgessen were all part of the organisation at one time - though we learn that both Solheim and Helgessen have since distanced themselves from WIF following the scandalous revelations. In Sri Lanka too, Fjortoft has close connections to powerful politicians and bureaucrats both in the former People's Alliance government and the United National Front government.

The problems at WIF began when reports against Founder and Secretary General Arne Fjortoft were sent to donors. The reports alleged that large amounts of money granted for various aid projects had been misused and diverted instead towards commercial entities in violation of the conditions under which the aid was granted. This triggered NORAD into taking action.

In May 2002, NORAD decided to carry out a technical and financial audit of WIF and entities controlled by WIF. The purpose of the audit was to verify whether funds received from NORAD under the framework agreement had been properly spent and reported in accordance with project proposals and budgets. NORAD concluded its findings in December 2002.

First investigation

Based on these findings, the Norwegian government commissioned another international audit firm, UniConsult to evaluate the management and financial dealings of WIF in Colombo. This is the first time that Norway began an investigation into the financial conduct of an NGO funded by them in Sri Lanka. The second investigation proved to be as damning as the first for Wordlview International Foundation.

The second investigation of the organisation followed after adverse comments were made by the Norwegian auditing firm Nordic Consulting Group, who in December last year submitted a shocking report on Worldview International Foundation. In their conclusions this auditing firm stated that the entire governing body and management of WIF have not fully realised the seriousness of the challenges faced. They have also stated that, WIF is both technically and financially bankrupt due to a deviation of funds from those allocated by NORAD for project work in Sri Lanka.

 UniConsult, which was the second auditing firm to be commissioned by the Norwegian Foreign Ministry to re-evaluate the shocking findings of WIF in Colombo, concluded that there were indeed significant discrepancies  under local accounting standards and international accounting standards at WIF. Also, that there was a serious lack of specific descriptions  of the quality of the organisation's internal controls and that WIF was lacking in evaluation and confirmation that transactions between the organisation and Worldview Global Media Ltd., and its subsidiaries are based on commercial principles.

Fjortoft has responded through his lawyers Advokatfirmaet Steenstrup Stordrange DA, who state in his defence that the type of formal breaches in the reporting to NORAD that has occurred must be seen in connection with  "WIF's special situation of being an  unique and important development organisation within information, communication and communication knowledge."

"It is therefore important that WIF's work is not damaged due to the formal breaches which have been discovered through this review." the law firm asserts, warning that by stopping "the importance of WIF's work" in Sri Lanka will severely hinder peaceful development projects in the island. (See box for Fjortoft's response)

Considering the April 10 letter from the Norwegian Foreign Ministry it is obvious that Norway has not bought Fjortoft's story. It appears even friends in high places in the Norwegian government could not protect Fjortoft in this instance.

People's Alliance Parliamentarian Dr. Sarath Amunugama is the current Acting President, Central Council,  WIF. Inspite of an impressive 25 member central council of influential individuals from around the globe, Norwegian auditors say, Secretary General Arne Fjortoft "seems to have wide powers and strong influence on all decision making activities."

Also, that "it is difficult to get a clear picture of the overall decision-making process and structure of WIF." Obviously the 25 member Central Council is a mere window dressing to give the impression to funders that Worldview is a respectable organisation.

NORAD entered into a framework agreement with Worldview International Foundation from 1999-2002. The purpose of the agreement was to support a development programme carried out by WIF. Under the agreement, NORAD has granted in total an estimated Rs. 884 million (NOK 68 million) to WIF for different projects in the programme  for the "mobilisation of people's participation in the development process for sustainable development."

Out of this Rs. 884 million it has been estimated by the Nordic Consulting Group that a sum of Rs. 38.4 million meant for NORAD projects have been illegally diverted to other projects.

The main objectives in the agreement between WIF and NORAD were to use communication in support of human development and rights, to facilitate people's participation in communication, to carry out training in communication and to assist in the use of new technologies and skills.

NORAD had in 1999 agreed to contribute, subject to annual appropriations by the Norwegian Parliament, a financial grant to be used exclusively for identified activities. Since 1999, when the agreement was signed, NORAD has contributed yearly over Rs. 260 million (20 million Norwegian Kroner) to WIF.

Overvalued assets

Based on a review of a number of documents produced by WIF and its subsidiaries, the audit team has alleged that WIF and its commercial entities have overvalued assets and inflated profits. It also alleges that the organisation has given false information on the number of viewers of its television programmes, the number of NGOs in the network and staff employed.

The report in fact categorically states that WIF and its commercial companies are in deep organisational and financial crisis and WIF may at the moment be technically bankrupt. The auditing team reiterated that this financial situation at WIF has developed over the years but never  communicated to NORAD.

The Norwegian auditors in fact found that WIF and its related commercial entities are tightly interwoven in a way that obscures the decision-making process and violated the framework agreement between NORAD and WIF.

 The auditors' report say that entities both in the NGO and the commercial wings of WIF are under constant change, which makes it difficult to get a reliable overview of the entities included in the WIF system.

WIF's international office, which serves as its headquarters is located in the new WIF building at Battaramulla. The building also houses Worldview Global Media, Young Asia Television (YATV) and the local media centre, Worldview Sri Lanka.

Five media centres in Asia and Africa belong directly to WIF, and have their accounts consolidated with that of the international office in Colombo. In addition, Worldview Rights in Stavanger, Norway, is affiliated to WIF, and its accounts have been consolidated in the WIF accounts until 2001. The media centres and partner NGOs work with WIF mainly on two NORAD funded projects.

Worldview Global Media (WGM) was established in 1995 with the aim of launching Young Asia Television and is the holding company for several other commercial companies. Arne Fjortoft is chairman of almost all the companies under the WGM umbrella.

The companies under the WGM umbrella are YATV, MediaSolv, which is a software development company and purely a commercial entity. Another subsidiary - Worldview Institute Ltd., Sri Lanka carries out corporate business training leading up to a Diploma in Business Management. Worldview Global Education, professes to carry out distance education for public servants in Sri Lanka and Worldview Multimedia Education is located in Malaysia and carries out multimedia productions.

According to the Norwegian audit team, only the financial statement of Worldview Multimedia Education in Malaysia had been audited at the end of 2001.

In addition to these companies, WIF is directly engaged in and has shares in three other companies, namely, Paradise Farm, Nature Cure and Nature Cure Health Resort Ltd., and Pan Lanka Networks.

The audit team states that with regard to Pan Lanka Networks, "it has no audit statement or minutes from board meetings for the last three years." When questioned by the auditors Fjortoft is reported to have said the audit will soon be completed.

Pan Lanka Network Ltd., is an internet service provider located in Colombo of which WIF owns 96% of the shares. Pan Lanka has been running at a huge loss and the company has now been put up for sale. Pan Lanka required Rs. 1.4 million (US $ 15,000) a month to survive as well as an injection of a further Rs. 4.8 million (US $ 50,000) immediately for equipment. According to the WIF auditor's report of October 1, 2002, WIF's investment in Pan Lanka is Rs. 13.7 million (US$ 143,652). In the Norwegian audit teams' opinion WIF will have to take losses of up to Rs. 38.6 million (US $ 403,034) where Pan Lanka is concerned.

Luxury guest house

Paradise Farm, billed as an organic farm, is essentially a front for a luxury guest house located at Kitulgala that serves as a holiday home for Fjortoft and his cronies. This luxury guest house is equipped with a private swimming pool, ultra expensive hi-fi systems, and other amenities.  Audited accounts and minutes from board meetings for the last three years for Paradise Farm remain unavailable. The debt to WIF as a result of this project is Rs. 5.7 million (US $ 60,000.). In addition a minimum of Rs. 21.7 million ( US $ 227,000) has been invested directly by WIF as equity in Paradise Farms.

Nature Cure Health Resort Ltd., another project under Fjortoft's guidance and blessings has bought Barbaryn island off Beruwela. Fjortoft has plans to build a hotel and attract "health tourists" for treatment and leisure at this exotic location. According to minutes from board meetings, WIF has several times agreed to carry the operating expenses of Nature Cure Health Resort until its financial situation improves.

Fjortoft was paid an hourly sum of Rs 7,800 (NOK 600) for his time and contribution to this project. In 2001 other foreign investors to this project agreed to convert his time and expenses into shares worth Rs 9.1 million (US $ 95,000.). The audit team asserts that it is not known to what extent the Central Council of WIF has been informed about the main aspects of these investments, especially about the financial issues affecting WIF and Fjortoft's shares which are now return based on time spent in a purely commercial venture. This alone is in serious violation of the statutes on which WIF was founded in 1979.

According to its statutes, the income and property of WIF shall be applied solely for the promotion of its objectives and no part of it "shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever or by way of profit to the members of the Foundation."

The Norwegian auditors meantime also found that the accounting standards, the internal control procedures and the financial management of WIF are extremely weak. "The accounts presented are therefore not in accordance with International Accounting Standards (IAS)," they wrote, which is a requirement of the framework agreement. The financial accounts of WIF also "lack credibility," the auditors stated.

Despite this being the case for several years, WIF's auditor, Amerasekera & Co., chartered accountants has for each year given a 'clean' audit report. In fact, NORAD found to its dismay that the audited project accounts submitted by Herman Amerasekera, do not render a reliable picture.

New figures

When asked to carry out a reconciliation of audited accounts for 1999, 2000 and 2001 in order to verify that the accounts represented actual and relevant expenditures on each project, WIF, courtesy of Herman Amerasekera, presented in late October 2002, new figures for several of the projects. In a few cases these new project accounts deviated  by more than Rs. 13 million (NOK 1 million) from those previously submitted to NORAD as audited project accounts. The new figures also showed that some of the reallocations made by WIF of previous years project expenditures have been in violation of the framework agreement with NORAD.

The Norwegian audit team also discovered that the commercial entities in the WIF system are characterised by "a non-transparent ownership structure, lack of company and share registrations, use of inflated assets as equity not verified by auditors, and missing audited accounts."

Loans written off

WIF has in fact contributed substantial amounts of money to the operations of these ventures as unsecured loans and advances. Most of these loans and advances, the Norwegian audit team asserted, have been lost and will have been written off in accordance with international accounting standards.

The foreign auditors found that WIF has not acted in accordance with the framework agreement by substantially allocating project funds without prior consent from NORAD, of which two such allocations amount to Rs. 19.5 million (NOK 1.5 million.)

Also that WIF has presented YATV programme budgets to NORAD as "cost of production" when in fact they were actually 'prices' with a profit element of up to 50%. Furthermore, that the duration of programmes were shorter than paid for and include a substantial reuse of old material. It is estimated that WIF and YATV have made a net profit of Rs.195 million (NOK 15 million) on programmes produced for NORAD under the framework agreement for the last four years.

Fjortoft draws a monthly salary of Rs. 768,000 (US$ 8000) and his monthly travel perdiem and other costs amount to an average of another Rs. 672,000 (US$ 7000).

On top of that, annual pension premium payments for Fjortoft and Rune Hersvik, Secretary General of Worldview Rights, WIF's sister organisation in Norway, were charged to the NORAD project account under the "implementation of social security." These were for as much as Rs. 4.3 million (NOK 330,000) a year adding up to almost Rs. 13 million (NOK 1 million) in the last three years.

The international audit firm has also found that WIF has charged to the NORAD project accounts for non-project activities, like advances of Rs. 12.4 million (NOK 960,000) for Personal Digital Assistants (PDA) and software from MediaSolv. Records indicate, however, that Worldview has only been invoiced for approximately Rs. 8.6 million (US$ 84,000) for software with no invoices issued or payment made for delivery of PDAs.

False reports

False reports have also been submitted to NORAD that a fully functional international training center was operational, while in fact the grants by NORAD amounting to an estimated Rs. 78 million (NOK 5.6 million) had been used solely for the construction of the new WIF building at Battaramulla.

The Rs. 78 million was released by NORAD to WIF to construct and fully equip an international training center in Colombo and to carry out distance education training for NGO's and the media.

The Norwegian auditors further determined that WIF has charged to the NORAD project accounts  fees for a number of consultants without proper documentation or contracts. Furthermore,  NORAD project account has been charged for fundraising and promotional activities including payments to avoid a court case with a former employee which amounted to approximately Rs. 2.5 million (NOK 195,000.)

The foreign audit team concludes, that WIF "is in deep financial and organisational crisis and maybe technically bankrupt." The implication of this could be that possible repayment to NORAD at the end of the framework agreement period in December last year, is a near impossibility. Also, that WIF is in acute need of funds to settle its debts and carry on its development programmes. In the opinion of the audit team through its findings it states WIF "has lost much of its credibility."

"Arne is a man of great integrity..." - Amunugama

People's Alliance Parliamentarian and Acting President, Central Council at WIF, Dr. Sarath Amunugama strongly defended Arne Fjortoft. "I know personally that Arne is a man of great integrity and he has sacrificed a lot. I don't think anybody in Sri Lanka who knows Arne Fjortoft will doubt his integrity and commitment." Amunugama said.

Admitting that he knew "little about the nuts and bolts of the operation at WIF," Amunugama however reiterated that he is certain Fjortoft is not using him or other political personalities to whitewash serious financial discrepancies at WIF.

According to Amunugama "There are two factions within WIF - the dissenting faction is led by Gowrie Ponniah who is trying to oust Fjortoft who founded WIF and remains its Secretary General."

He alluded that the two audit reports by Norwegian audit teams "are not yet conclusive and we are awaiting a final decision on this issue to be communicated to us by the Norwegian Foreign Ministry."

Amunugama claimed that the new Rs. 78 million WIF building at Battaramulla "is a training centre for media personnel." He maintained that many young people are trained here at the offices of YATV which are housed in the same building.

When quizzed on the findings of the audit team alleging that YATV has  projected false production costs and siphoned elsewhere Rs.38 million. Amunugama responded, "these things happen with big companies - I really do not know about that."

Amunugama insisted that he took over as Acting President of the Central Council at WIF only a few months back when the organisation was facing deep crisis and they needed someone to stabilise the situation. " I figured I owed it to the media outfit, given my previous experiences at UNESCO in the media field," he said.

Amunugama asserted the crunch decision could now be one of three for WIF. Either, he said, NORAD will continue to fund WIF in full under a new agreement, or they will have an agreement with a lowered contribution or, finally may completely break off relations as a funding agency.

"We are awaiting the decision of the Norwegian Foreign Ministry on this," Amunugama said, adding "NORAD is not our sole funders - we have others too."

Asked if he is willing to take responsibility in the event the decision of the Norwegian Foreign Ministry is detrimental, Amunugama replied evasively, "I only took over when this whole mess had erupted and I did it in good faith."

When told the Norwegian Foreign Ministry has in fact taken a decision with regard to funding by withdrawing all future funding via the Norwegian government for WIF, Amunugama was taken by surprise. "I did not know about this," he said, adding however "Fjortoft is bound to appeal."

 Amunugama continued to defend Fjortoft asserting that "it has been a well known fact within the organisation that Fjortoft held shares in his name in subsidiary companies of WIF." Amunugama claimed he is not familiar with the organisation's articles of association to know if Fjortoft has indeed violated the very principles on which WIF has been founded.

Amunugama strongly denied that he is serving as Acting President  of  the Central Council at WIF for personal gain. "I have not gone on a single free trip since I took office at WIF - I have not even travelled to Norway for the last  five or  six  years," he said. The former minister added that he has also not been compensated a single cent for his time and energy devoted to handling the crisis at WIF over these last few months.

"No breach of framework agreement"
- Fjortoft's lawyers

Lawyers, Advokatfirmaet Steenstrup Stordrange DA appearing on behalf of Arne Fjortoft state in his defence that WIF has not deliberately attempted to overlook any problems in the foundation. "On the contrary, WIF has shown its ability to take action as soon as possible when any problems have arisen. WIF's management has clearly shown their responsibility by rectifying problems immediately when they were discovered."

Conceding that there have indeed been financial irregularities committed, the lawyers have responded asserting, " The foundation's finance department today has a new management and new routines with stricter internal control procedures, in addition to taking into use a new accounting system which has been especially developed for them."

The lawyers add, "it is difficult to see that WIF could have done more than they already have done, and this even before the NCG report was completed. Because WIF acted as quickly as possible when problems arose and implemented measures to rectify the problems, it must be concluded that there is no breach of the framework agreement in this respect." 

Fjortoft denies allegations

Despite claims concerning Arne Fjortoft that "Arne is a man of great integrity and he has sacrificed a lot. I don't think anybody in Sri Lanka who knows Arne Fjortoft will doubt his integrity and commitment." the audit report and answers filed by lawyers with a different version show that Fjortoft appears to have indulged in unethical practices by owning shares in companies where WGM and WIF had invested money. It is not clear on what basis these shares were allocated to Fjortoft. We  list below some of the points raised by the audit firm.

UniConsult, the entity hired by the Norwegian Ministry of Foreign Affairs alleges that Fjortoft's pension payments totaling millions of rupees were illegally charged to the NORAD capacity building project. An allegation denied by Fjortoft in his response to the Norwegian Foreign Ministry.

Another allegation against Fjortoft is that he personally benefited when one of the companies under Worldview Global Media granted him 5% of the shares based on a request made by him to the board in 1999. Once this was discovered by the auditors, Fjortoft claimed that he had returned the shares claiming he was not aware that he personally owned shares. The fact is up to date he still owns these shares.

Another WIF company - Nature Cures Health Resort Ltd., owns an island off Beruwela. In an attempt to hide his interest in this company Fjortoft claims that he had given a personal loan. However, board minutes of January 19, 2002 of the company states that he had been allocated shares. Fjortoft in his response to the Norwegians claims that the board minutes are inaccurate.

Fjortoft was paid an hourly rate of Rs 7,800 (NOK 600) for his time and contribution to this project. In 2001 other foreign investors to this project agreed to convert his time and expenses into shares worth Rs 9.1 million (US $ 95,000.). The audit team asserts that it is not known to what extent the Central Council of WIF has been informed about the main aspects of these investments, especially about the financial issues affecting WIF and Fjortoft's shares which are now return based on time spent in a purely commercial venture.

All this while he was also pocketing a princely sum of over Rs. 1 million every month as salary and expenses. 

Disgraceful act by Minister

In every cabinet, there is at least one minister who makes a habit of putting his foot in his mouth. The Mass Communication Minister, Imtiaz Bakeer Markar appears to have taken that role in Prime Minister  Ranil Wickremesinghe's cabinet.

Despite the ongoing investigations by Norway, the Minister in November last year wrote a confidential letter to Minster of Development Cooperation, Ministry of Foreign Affairs in Norway, Hilde Frafjord Johnsen.

In the letter he expresses concern that funding from Norway to Worldview International Foundation "has been reduced for 2002 and that only a portion of the amount pledged for this year has been disbursed due to a technical and financial audit which is still going on."

Bakeer Markar shamelessly and with no sense of responsibility wrote that as a result of this audit he understands WIF is now coming to a critical point with its future at stake. He arrogantly asserted that "it with this in mind I regard it my duty to keep you informed. I am in particular concerned of the negative influence it might have for media development in Sri Lanka if Worldview has to cease its activities."

The Sri Lankan Minister went one disgraceful step further, stating, "My concerns are also related to the ongoing peace process, which urgently need more support from media in general, and from Worldview and Young Asia Television in particular, as there is no other institution to take their place."

Needless to say, both the peace process and the development of the media are in bigger danger from ill-informed ministers who write pompous letters backing NGOs with questionable reputations, than from WIF ceasing its activities.

Grants received from donor agencies
by Worldview International Foundation for the
year ending December 2001

Grants and project funds            US Dollars

Norwegian Agency for International

Development (NORAD)            2, 244, 657

Ministry of Foreign Affairs - Norway 209,904

Letten Saugstad Foundation            153,846

International Family Health            175,577

Economic and Social Commission for Asia and Pacific            56,994

Swedish International Development Agency 171,316

International Fund for Agricultural Development            49,994

Fredskorpset            9,304

Family Planning Association of Sri Lanka            11,192

KELLOG Foundation            114,903

U. S. Embassy - BOTSWANA            9,496

Canada Fund            5,235

Norwegian Church Aid            19,322

Redd Barna - Sri Lanka   5,170

United Nations Development Fund for Women            27,224

United Nations Fund for Population Activities            902

Food and Agriculture Organisation            1,750

Young Asia Television            70,983


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