The British government has suspended its funding of the Commonwealth Secretariat, the body that runs the international organisation from London, the BBC has learned.
UK diplomats have told Lady Scotland, the secretary-general of the Commonwealth, that Britain’s annual £4.7m voluntary contribution will be withheld until her secretariat improves its financial procedures.
The Secretariat insisted it was implementing recommendations made by external auditors.
The UK decision came after Lady Scotland was criticised by auditors for “circumventing” usual competitive tendering rules when she awarded a lucrative consultancy contract to a company run by a friend.
The auditors also discovered that procurement rules had been waived by the secretariat on no fewer than 50 occasions over three years.
Both New Zealand and Australia have also suspended their discretionary funding to the Commonwealth Secretariat until its financial systems are tightened up and tested by external auditors.
The UK decision threatens to plunge the secretariat into a financial crisis and will raise fresh questions about Lady Scotland’s leadership.
Commonwealth heads of government have already rejected calls to give Lady Scotland an automatic second term of office when it comes up for renewal this year.
The funding crisis came to a head last week when Commonwealth high commissioners in London – who together form the organisation’s board of governors – met to discuss the results of the investigation by the external accountancy firm KPMG.