SriLankan's 'half baked' Rs 201m Mattala flight kitchen sans audit report, review

No audit report nor a review was carried out into the dubious manner in which SriLankan Airlines ( SriLankan) built a flight kitchen at the Mattala Rajapaksa International Airport in 2012, for Sri Lanka Catering (SL Catering), it was revealed by multiple witnesses appearing before the Commission of Inquiry (CoI) probing allegations of large-scale fraud and malpractices at SriLankan, SL Catering Ltd and Mihin Lanka (Pvt) Ltd (Mihin), this week.

The project, estimated at Rs 201 million, began without the essential project contract, had a breach of procedure in the selection of its constructor and architect, and finally pressed a cost burden on the Bank of Ceylon (BoC), when the advance payment and security deposits had to be recovered, following the scrapping of the plan. Today, there stands only a crooked foundation, unaligned and cracked walls, with no roof.

Group Assurance & Advisory Services Senior Manager Mahesh Nanayakkara, who is responsible for conducting internal audits into the financial accounts and processes of SriLankan, stated that, although he hadn’t done an audit on this matter, his section had engaged in a ‘continuous monitoring process.’

A technical committee was appointed to evaluate the project and choose a construction company whose profile would then be sent to the Board of Directors for approval. This had been done in accordance with the procurement manual, but former SriLankan Chair man Nishantha Wickramasinghe then barged in and selected a different construction firm, disregarding the manual and all due process.

His choice, Gunathilaka Construction (Pvt) Ltd. entered into an agreement with SL Catering for a total project cost of Rs. 201 million, but the parties didn’t draw up a contract document. Construction began as per the 'Letter of Award' and an Institute of Construction Training & Development (ICTAD) document.

These documents are sufficient to begin construction, but their validity period is limited, and a contract has to be drafted soon, said Senior State Counsel (SSC) Fazly Razik who led the evidence.

SL Catering had paid Gunathilaka Constructions a total of Rs 71 million, which included a Rs. 51 million advance payment using bank guarantees from the BoC. SL Catering had this amount reimbursed, but SSC Razik said there was no evidence that BoC had recovered the money.

Finance Manager Nalaka Sanjeewa, tes- tifying before the CoI on Thursday, revealed that the architect chosen for the project, Nishantha Munasinghe, too, was selected without a tender process, by the Ex- CEO of SL Catering, Sarath Fernando. The architect was paid Rs. 7,034,503 for his services. Mr. Munasinghe had instructed SL Catering to procure the kitchen equipment, which had to be installed simultaneously, with the construction of the floor and walls. A company called Eurokitchens Ltd was picked as the contractor who procured equipment worth Rs. 56 million from various manufacturers, and SL Catering paid these manufacturers separately, on the instructions of the contractor.

However, with the halting of construction and the subsequent decision to scrap the plan altogether in late 2013, half the equipment was sent for use in the company’s kitchen at Katunayake, while the other half lies in the company's warehouses in Awariwaththa. Now there are plans to sell the unused half, the witness said.

SL Catering Maintenance Manager Suneth Gunathilake, testifying before the CoI on Thursday, said he had discovered the construction of the kitchen to consist of just a few walls built on a crooked foundation with no roof. The walls were not aligned and had cracks running along them.

Except in the last report, Architect Munasinghe had not identified the defects in all his other reports, and he, too, had failed to mention that the construction had deviated from the original plan. “We also found that normal labourers had worked as masons,” Mr. Gunathilake said.

Commissioner, Retired Deputy Auditor General Don Anthony Harold said the manner in which the company had gone about the construction, satisfied all conditions for a comprehensive audit report to be made. He inquired from Mr. Nanayakkara why he had failed to do so.

Witness accepted there was no bar in the manuals preventing him from doing so, but added that the main thing was the recovery of the funds, which they had done.

“That may be so, but the process was out of place,” CoI Chairman, retired Supreme Court Justice Anil Gooneratne pointed out. “This cannot be allowed to happen in a company like SriLankan.”

In a separate incident, it was revealed that former Civil Aviation Minister Priyankara Jayaratne had made orders from SL Catering for his private functions and hadn’t paid for any of them. On one occasion, the Government had settled a bill of Rs. 600,000 on his behalf. Mr. Jayaratne owes SL Catering Rs 292,900. His functions included a lunch at a bungalow in Madampe, for which he ordered food worth Rs 116,000, and two meals at the residence of the Assistant Government Agent of Madampe worth Rs. 118,800. He had also ordered rich cake for Rs 58,100 on another occasion.

These orders were given to the Executive Chef directly by the former CEO Mr. Fernando, who had instructed that they not be invoiced.

The CoI was also told this week that controversial former Head of Human Resources ( HR) at SriLankan, Pradeepa Kekulawala recruited several ineligible candidates as flight stewards.

SriLankan Cabin Manager and Flight Attendants' Union member, Mohamed Irshad told the CoI that these included the recruitment of an underage steward in 2014.

When the candidate, who was underage by a week, walked in for the interview, an HR Department staffer was present with Mr. Irshad at the interview. The Commission was told that this staffer instructed the latter to ‘stop complicating the process by asking the candidate questions and to recruit them directly’, as they had received instructions to do so from Mr. Kekulawala. It was revealed that the candidate was a close relative of the then VicePresident of the Flight Attendants' Union.

The HR division had also appointed a former Flight Attendant with no prior salon or styling experience as the beautician for the cabin crew. This post was previously held by well known professionals such as Ramani Fernando and Ramzi Rahaman.

Two years ago, the HR Division had introduced mandatory training for the cabin crew recruits at the Aviation Academy, which, due to the high fees charged, made it tough for candidates from rural areas to attend.

Mr. Irshad said that, during his years of training young cabin recruits, he had found, on many occasions, people from rural areas to be naturally accustomed to hospitality, compared with those from the cities. “All we had to do was brush up their linguistic abilities,” he said.

Deputy Governor of the Central Bank, S.R. Attygalle also appeared before the CoI on Wednesday, over the Treasury Bond issuance to SriLankan. He was directed to bring more supporting documents and return on February 7.

The CoI comprises retired Supreme Court Judge Anil Gooneratne (Chairman), Supreme Court Judge Gamini Rohan Amarasekara, retired High Court Judge Piyasena Ranasinghe, retired Deputy Auditor General Don Anthony Harold and Sri Lanka Accounting & Auditing Standards Monitoring Board Director General Wasantha Jayaseeli Kapugama.

The sittings will continue on Tuesday (5).