An Investigation into the alleged misuse of the Services Improvement Program Grants in Madang

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    Report on an investigation into the alleged misuse and misapplication of the Services Improvement Program
    grants by the Madang Joint Provincial Planning & Budget Priority Committee to purchase 19 motor vehicles for the 19 Local Level Government presidents in Madang province.

Document content

  • Ombudsman Commission
    Of Papua New Guinea

    AN INVESTIGATION INTO THE ALLEGED MISUSE AND
    MISAPPLICATION OF THE SERVICES IMPROVEMENT PROGRAM
    GRANTS BY MADANG THE JOINT PROVINCIAL PLANNING &
    BUDGET PRIORITY COMMITTEE TO PURCHASE 19 MOTOR
    VEHICLES FOR THE 19 LOCAL LEVEL GOVERNMENT PRESIDENTS
    IN MADANG PROVINCE

    FINAL REPORT
    July 2018

    TABLE OF CONTENTS

    TABLE OF CONTENTS
    i

    ABBREVIATIONS
    iii

    CHRONOLOGY OF EVENTS
    iv

    EXECUTIVE SUMMARY
    vii

    1. JURISDICTION AND PURPOSE OF INVESTIGATION
    1
    [1.1] INTRODUCTION
    1
    [1.2] JURISDICTION OF THE OMBUDSMAN COMMISSION
    1
    [1.3] PURPOSE OF THE INVESTIGATION
    2
    [1.4] METHOD OF INQUIRY
    2
    [1.5] PEOPLE WHO GAVE EVIDENCE BEFORE THE OMBUDSMAN COMMISSION

  • Page 2 of 184

  • 2
    [1.6] OMBUDSMAN COMMISSION NOT CONFINED TO REPORTING ON THE
    LEGALITY OF ADMINISTRATIVE CONDUCT
    3
    [1.7] WHAT IS ―WRONG CONDUCT‖?
    3
    [1.8] THE PROVISIONAL REPORT
    3
    [1.9] RESPONSE FROM HON. JIM KAS, THEN MP, GOVERNOR, MADANG
    PROVINCE 4
    [1.10] RESPONSE FROM MR. GABRIEL SAUL FORMER PROVINCIAL
    TREASURER,
    MADANG PROVINCE
    5
    [1.11] RESPONSE FROM MR. BERNARD LANGE, THEN PROVINCIAL
    ADMINISTRATOR, MADANG PROVINCIAL ADMINISTRAION
    7

    2. FINDINGS OF FACTS
    11
    PART 1: MADANG PROVINCIAL ADMINISTRATION COMMITS TO PURCHASE
    VEHICLES IN 2013
    11
    [2.1] NATIONAL GOVERNMENT GRANTS
    11
    [2.2] FINANCIAL INSTRUCTION No.01/2013
    12
    [2.3] PSIP, DSIP AND LLGSIP ADMINISTRATIVE GUIDELINES
    15
    [2.4] PROVINCIAL ADMINISTRATION FACILITATES GOVERNOR‘S REQUEST
    TO PURCHASE
    VEHICLES
    22
    [2.5] NATIONAL EXECUTIVE COUNCIL DECISION No.414/2013 – SIP
    GUIDELINES 25
    [2.6] APPOINTMENT OF FINANCIAL DELEGATES, AUTHORIZED REQUISITION
    OFFICERS &
    SECTION 24 OFFICERS
    25
    PART 2: PURCHASE OF MOTOR VEHICLES BY THE OFFICE OF THE GOVERNOR,
    MADANG PROVINCE
    34
    [2.7] MADANG PROVINCIAL GOVERNMENT 2014 BUDGET
    34
    [2.8] JOINT PROVINCIAL PLANNING & BUDGET PRIORITY COMMITTEE
    MEETING
    DECISION No. 01/02/2014
    45
    [2.9] PURCHASE OF 19 MOTOR VEHICLES FOR THE 19 LOCAL LEVEL
    GOVERNMENT
    PRESIDENTS
    48
    [2.10] AUTHORITY TO PRE-COMMIT (APC)
    49

  • Page 3 of 184

  • [2.11] PROVINCIAL SUPPLY & TENDERS BOARD DECISION No. 04/05/2014
    50

    Table of Content
    Page i

    3. FINDINGS
    52
    [3.1] FINDING No. 1
    52
    [3.2] FINDING No. 2
    54
    [3.3] FINDING No. 3
    55
    [3.4] FINDING No. 4
    56
    [3.5] FINDING No. 5
    58
    [3.6] FINDING No. 6
    59
    [3.7] FINDING No. 7
    60
    [3.8] FINDING No. 8
    62
    [3.9] FINDING No. 9
    63

    4. RECOMMENDATIONS
    65
    [4.1] CONSTITUTIONAL FRAMEWORK FOR MAKING RECOMMENDATIONS
    65
    [4.2] RECOMMENDATIONS CONCERNING PARTICULAR INDIVIDUALS
    66
    [4.3] RECIPIENTS OF RECOMMENDATIONS
    66
    [4.4] RESPONSIBLE MINISTERS
    66
    [4.5] MINISTERS RESPONSIBLE FOR FOLLOWING UP IMPLEMENTATION OF
    RECOMMENDATIONS
    66
    [4.6] DUTIES OF RECIPIENTS OF RECOMMENDATIONS
    67
    [4.7] RECOMMENDATIONS
    67
    [4.7.1] RECOMMENDATION No. 1
    67
    [4.7.2] RECOMMENDATION No. 2
    68
    [4.7.3] RECOMMENDATION No. 3
    69
    [4.7.4] RECOMMENDATION No. 4
    70

  • Page 4 of 184

  • [4.7.5] RECOMMENDATION No. 5
    71
    [4.7.6] RECOMMENDATION No. 6
    71
    [4.7.7] RECOMMENDATION No. 7
    72
    [4.7.8] RECOMMENDATION No. 8
    73
    [4.7.9] RECOMMENDATION No. 9
    73
    [4.7.10] RECOMMENDATION No. 10
    74
    [4.7.11] RECOMMENDATION No. 11
    75

    5. CONCLUSION
    76

    6. RELEVANT LAWS
    77
    [6.1] CONSTITUTION
    77
    [6.2] ORGANIC LAW ON PROVINCIAL GOVERNMENTS AND LOCAL LEVEL
    GOVERNMENTS
    78
    [6.3] PROVINCIAL GOVERNMENTS ADMINISTRATION ACT 1997
    79
    [6.4] PUBLIC FINANCE (MANAGEMENT) (AMENDMENT) ACT 1995 (No.4 of
    2013) 80
    [6.5] FINANCE MANAGEMENT MANUAL
    84
    [6.6] OFFICIAL PERSONAL STAFF ACT
    107
    [6.7] SALARY REMUNERATION COMMITTEE DETERMINATION
    108

    Table of Content
    Page ii

    ABBREVIATIONS
    APC – Authority to Pre-Commit
    Commission – Ombudsman Commission of Papua New Guinea
    CSTB – Central Supply & Tenders Board
    DSIP – District Services Improvement Program
    GoPNG – Government of Papua New Guinea
    Hon. – Honourable
    ILPOC – Integrated Local Purchase Order & Claim Form
    JPP&BPC – Joint Planning and Budget Priority Committee
    LLG – Local Level Government
    LLGSIP – Local Level Government Services Improvement Program

  • Page 5 of 184

  • MP – Member of Parliament
    MPA – Madang Provincial Administration
    NEC – National Executive Council
    PEC – Provincial Executive Council
    MPG – Madang Provincial Government
    PSIP – Provincial Services Improvement Program
    PSTB – Provincial Supply & Tenders Board
    SIP – Services Improvement Program

    Abbreviations Page iii

    CHRONOLOGY OF EVENTS

    2012

    30 October In its Decision No.102/2012, the National Executive
    Council (NEC)
    directed for the Service Improvement Program (SIP) Funds
    to be expended
    on Key Sectors:-(i) Infrastructure; (ii) Health; (iii)
    Law & Order; (iv)
    Economic & Agriculture; and (v) Administration.

    2013

    01 January Mr. Steven Gibson, then Secretary, Department of Finance,
    approved and
    issued Financial Instruction No.01/2013 for the
    implementation of the PSIP at
    the Provincial level, DSIP at the District level and
    LLGSIP at the LLG level.

    Mr. Bernard Lange, then Provincial Administrator, Madang
    Province, by
    instrument, appointed Mr. Peter Torot as Financial
    Delegate and Section 24
    and Section 32 Officer.

    Mr. Paul Sai‘i, then Secretary, Department of
    Implementation and Rural
    Development also approved and released the Department‘s
    PSIP, DSIP and
    LLGSIP Administrative Guidelines.

    11 February The Madang Provincial Administration made a draft list
    of motor vehicles
    to buy from Ela Motors Ltd.

  • Page 6 of 184

  • 25 February Mr. Raymond Imanaui, Sales Representative, Ela Motors
    Ltd provided a
    quotation No.230562 to Mr. Thomas Naruse within the
    Provincial Finance
    and Treasury Division for the purchase of 20 New Toyota
    Landcruiser 10
    Seater Station Wagon, one New Toyota Landcruiser 5 Door
    Deluxe Wagon,
    one New Toyota Landcruiser 5 Door Wagon and one New
    Toyota Hilux 2.5
    Turbo 4 Wheel Drive Double Cab Ute with the combined
    amount of
    K2,477,899.10.

    Mr. Imanaui sent another quotation No.230578 to Mr. John
    Bivi, within the
    Madang Provincial Mining Office, Madang Provincial
    Administration for
    one New Toyota Landcruiser 10 Seater Station Wagon and
    New Toyota
    Landcruiser Pick-Up 4.2 Wheel drive with a total cost of
    K236,172.53.

    26 February Mr. Lange wrote to the Sales Manager, Ela Motors Ltd and
    enquired
    whether it was possible for the Provincial Administration
    to acquire 10
    motor vehicles on first installment payment and the
    remaining as and when
    the payment is secured.

    12 March Mr. Imanaui sent another quotation No.233649 to Mr. Paul
    Ito Adam,
    within the Madang Provincial Administration for one New
    Toyota
    Landcruiser 5 Door Deluxe Wagon with total costing of
    K144,502.93.

    13 March Mr. Imanaui sent another quotation No.233804 to Mr. Lange
    for one New
    Toyota Landcruiser Prado and New Toyota Landcruiser Pick-
    Up 4.2 Wheel
    Drive with a total cost of K236,172.53.
    Chronology of Events Page iv

    27 March The Office of the Governor for Madang Province raised the
    Requisition and
    General Expenditure Forms which were approved by Mr.
    Lange and
    corresponding Integrated Local Purchase Order & Claim
    (ILPOC) Forms.
    A cheque was raised and payment of K2,834,507.80 was made

  • Page 7 of 184

  • respectively
    to Ela Motors Ltd for the Madang Provincial
    Administration fleet.

    14 April The National Parliament passed the amendments to Sections
    39B and 47B
    of the Public Finance (Management) (Amendment) Act 1995
    (No.4 of 2013) raising
    the financial ceiling for the PSTB from K100,000.00 to
    K300,000 and
    Authority to Pre-Commit (APC) financial delegation to
    K100,000.00 from
    K50,000.00.

    18 November In its Special Meeting No.35/2013, the NEC made several
    decisions one of
    which was Decision No.414/2013. The decision was to
    enhance the SIP
    Guidelines to clarify responsibilities in the Provincial
    Governments and the
    LLGs.

    The Madang Provincial Government passed the Revenue &
    Expenditure
    Estimates for the Year Ending 31 December 2014.

    2014

    16 January The Madang Provincial Government passed its Appropriation
    Act 2014. It was
    certified on the same day by Mr. Lange.

    31 January Mr. Augustine Dunstan, First Secretary to the Governor of
    Madang
    Province, wrote to the Madang Provincial Treasurer and
    forwarded the
    specimen signatures for Mr. Lange, Mr. Peter Pasum,
    Requisition Officer
    and himself to the Senior Examiner.

    17 February Mr. Lange approved the Madang Provincial Administration
    Financial
    Directive No.2/2014: Appointment of Authorized
    Requisition Officers,
    Financial Delegates and Section 24 Officers for funding
    under 783 Series.

    2 March The Madang Joint Provincial Planning and Budget Priority
    Committee
    (JPP&BPC) in Resolution No.01/02/2014, of Meeting No.
    01/2014, held in
    the Governor‘s Office, approved the purchase of 19 motor
    vehicles for the 19
    LLG Presidents.

  • Page 8 of 184

  • 6 March Mr. Lange approved the Madang Provincial Administration
    Financial
    Directive No.1/2014: Appointment of Authorized
    Requisition Officers,
    Financial Delegates and Section 32 officers for funds
    under 283 series.

    13 March Mr. Lange, as Section 32 Officer and Chief Accountable
    Officer, approved
    K1,968,612.61 to be paid to Ela Motors Ltd to purchase 19
    motor vehicles for
    the 19 Local Level Government Presidents.

    26 March Mr. Dunstan wrote to the Madang Provincial Treasurer and
    advised that
    Mr. Peter Pasum, Requisition Officer and himself were
    signatories to 783
    and 283 Series of funded activities.

    3 April Mr. Lange informed the Provincial Supply & Tenders Board
    (PSTB)
    members that their fifth meeting for 2014 was scheduled
    for 1:30pm
    Monday 7 April 2014.
    Chronology of Events Page v

    7 April The PSTB endorsed the JPP&BPC Decision to purchase 19
    motor vehicles
    from Ela Motors Ltd as the only supplier for K2 million.

    15 August The Provincial Treasury informed the Senior Examiner of
    the Authorised
    Requisition Officer‘s specimen signatures, which included
    the Acting
    Provincial Administrator (PSIP), but not including Mr.
    Augustine Dunstan.

    4 February Mr. Lange approved the Madang Provincial Administration
    Financial
    Directive No.2/2014: Appointment of Authorized Requisition
    Officers,
    Financial Delegates and Section 30 Officers for funding
    under 783 Series.

  • Page 9 of 184

  • Chronology of Events Page vi

    EXECUTIVE SUMMARY

    Overview

    This is the Final Report of an Own Initiative investigation
    conducted by the Ombudsman
    Commission into the alleged improper decision by the Joint
    Provincial Planning and Budget
    Priority Committee (JPP&BPC) to divert funds intended for the
    upgrading and
    construction of road within the Province and alleged misapplication
    of K2,834,507.80 to
    purchase 19 motor vehicles for 19 Local Level Government (LLG)
    Presidents.

  • Page 10 of 184

  • The following allegations were investigated:

    1. That Hon. Jim Kas, then MP, Governor, as the Chairman of the
    JPP&BPC
    improperly convened a meeting that resolved to purchase 19 motor
    vehicles for the 19
    LLG Presidents.

    2. That the JPP&BPC‘s decision to approve K2 million to purchase
    motor vehicles and
    then award Ela Motors Ltd the contract for the supply of the 19
    motor vehicles, was
    wrong and improper.

    3. That the Provincial Supply & Tenders Board (PSTB) did not follow
    the proper
    procurement process in awarding the contract to Ela Motors Ltd
    for the supply of 19
    motor vehicles.

    4. That the Office of the Governor and the Provincial Treasury
    failed to comply with
    the Public Finance (Management) (Amendment) Act 1995 (No.4 of
    2013) when they
    processed the payment to Ela Motors Ltd for the supply of the 19
    motor vehicles.

    Principal Findings

    1. In the opinion of the Ombudsman Commission, the Madang Provincial
    Government
    Appropriation Act 2014 was defective as it was developed contrary
    to the intent of the
    Constitution and contradicted the Organic Law on the Provincial
    Governments and Local Level
    Governments and the Public Finance (Management) (Amendment) Act
    1995 (No.4 of 2013).
    2. In the opinion of the Ombudsman Commission, the conduct of then
    Hon. Jim Kas,
    then MP, Governor, was wrong when he informed the JPP&BPC that he
    would fund
    the purchase of the motor vehicles for all LLG Presidents using
    the Governor‘s PSIP
    Grants.
    3. In the opinion of the Ombudsman Commission, there was no proper
    quorum for the
    JPP&BPC to convene as its composition was not in compliance with
    Section 25(2) of
    the Organic Law on the Provincial Governments and Local Level
    Governments.
    4. In the opinion of the Ombudsman Commission, the decision by the
    JPP&BPC to
    award the contract for the supply of the 19 motor vehicles to Ela
    Motors Ltd was

  • Page 11 of 184

  • wrong.

    Executive Summary Page vii

    5. In the opinion of the Ombudsman Commission, the appointment of
    Mr. Augustine
    Dunstan as First Secretary to the Governor and Financial Delegate
    was improper.
    6. In the opinion of the Ombudsman Commission, the conduct of Mr.
    Augustine
    Dunstan, then First Secretary to the Governor, in signing the
    Request for
    Expenditure Forms and General Expenses Forms was wrong because he
    did not have
    the Financial Delegate.
    7. In the opinion of the Ombudsman Commission, the Madang PSTB‘s
    decision to
    award the contract for the supply of 19 motor vehicles to Ela
    Motors Ltd was wrong
    because the payments were done to Ela Motors Ltd prior to the
    PSTB‘s meeting and
    decision.
    8. In the opinion of the Ombudsman Commission, the decision by Mr.
    Bernard Lange,
    then Chairman of the Madang PSTB to award the contract for the
    supply of 19 motor
    vehicles to Ela Motors Ltd was wrong because the payments were
    done to Ela Motors
    Ltd prior to the PSTB‘s meeting and decision.
    9. In the opinion of the Ombudsman Commission the conduct of Mr.
    Bernard Lange,
    then Acting Provincial Administrator was wrong when he failed to
    do due diligent
    checks on the Requisition for Expenditure Forms and General
    Expenses Forms that
    were filled on 13 March 2014 that enabled the processing of
    payment of K2,834,507.80
    made to Ela Motors Ltd for the purchase of 19 motor vehicles.

    Irregularities

    There were irregularities surrounding the expenditure of public
    funds and procurement of
    goods/services and the financial management process which included:

    1. The Madang Provincial Government‘s Appropriation Act 2014 was
    defective.

    2. Abuse of position by Hon. Jim Kas, then MP, Governor for Madang
    to exert political
    pressure and influence on the Provincial Administration and
    Provincial Treasury.

  • Page 12 of 184

  • 3. The failure to comply with Section 25(2) of the Organic Law on
    the Provincial Governments
    and Local Level Governments resulted in a JPP&BPC that lacked
    quorum making the
    decision to divert District SIP and LLG SIP funds from their
    original intentions to
    fund the purchasing of the 19 vehicles for the LLG Presidents.

    4. The Provincial Administration failed to approach and request the
    Department of
    Implementation and Rural Development to conduct the tender and
    procurement
    process on its behalf, when there was no functional PSTB at that
    material time.

    5. The improper appointment of Personal Staff for the Office of the
    Governor.

    6. The improper delegation and abuse of financial powers by
    Officers.

    7. The improper awarding of the contract for the purchase the 19
    vehicles for the 19 LLG
    Presidents to Ela Motors Ltd.

    Executive Summary Page viii

    8. The improper payment for the purchase of 19 vehicles for the 19
    LLG Presidents made
    to Ela Motors Ltd.

    9. Lack of due diligence checks by the Provincial Administrator who
    is the Chief
    Accountable Officer and Section 32 Officer.

    Recommendations

    1. The Ombudsman Commission recommends that the Governor for Madang
    Province
    and the Provincial Administrator ensures that the Madang
    Provincial Government
    complies with the budgetary processes outlined in the
    Constitution, the Organic Law on
    the Provincial Governments and Local Level Governments and the
    Public Finance (Management)
    (Amendment) Act 1995 (No.5 of 2016) when developing the annual
    Appropriation Act for
    the province.

    2. The Ombudsman Commission recommends that the Office of the
    Governor for

  • Page 13 of 184

  • Madang Province must strictly comply with the Appropriation Act
    passed by the
    Provincial Assembly in that respective year and utilize the
    Provincial Service
    Improvement Program grants as outlined in the Appropriation Act.

    3. The Ombudsman Commission recommends that the Provincial
    Government and the
    Provincial Administration must strictly comply with the Public
    Finance (Management)
    (Amendment) Act 1995 (No.5 of 2016), the NEC Decision No.
    102/2012, Financial Instruction
    No.01/2013 and the Department of Implementation and Rural
    Development PSIP,
    DSIP, and LLGSIP Administrative Guidelines, when utilizing the
    Provincial Service
    Improvement Program grants as outlined in each Appropriation Act
    for that particular
    year.

    4. The Ombudsman Commission recommends that all Joint Provincial
    Planning and
    Budget Priority Committee and District Development Authorities
    must strictly
    comply with Section 25(2) of the Organic Law on the Provincial
    Governments and Local Level
    Governments.

    5. The Ombudsman Commission recommends that the Madang Joint
    Provincial
    Planning and Budget Priority Committee must strictly comply with
    Section 25(3) of
    the Organic Law on the Provincial Governments and Local Level
    Governments

    6. The Ombudsman Commission recommends that the Office of the
    Governor for
    Madang Province must strictly comply with the Salary Remuneration
    Committee
    Determination Schedule G007-18 when making appointment of
    Personal Staff.

    7. The Ombudsman Commission recommends that the Office of the
    Governor for
    Madang Province ensures that only Officers with financial
    delegations must endorse
    or approve any Finance Forms.

    8. The Ombudsman Commission recommends that the Provincial
    Administrator ensures
    the Madang Provincial Administration must strictly comply with
    Section 40 of the
    Public Finance (Management) (Amendment) Act 1995 (No.5 of 2016),
    Financial Instructions

  • Page 14 of 184

  • No.01/2013 and the Department of Implementation and Rural
    Development‘s PSIP,
    DSIP and LLGSIP Administrative Guidelines in the event that there
    is a non-
    functional PSTB.

    Executive Summary Page ix

    9. The Ombudsman Commission recommends that the Provincial
    Administrator ensures
    that Madang Provincial Administration must strictly comply with
    Sections 39B and
    40 of the Public Finance (Management) (Amendment) Act 1995 (No.5
    of 2016), Financial
    Instructions No.01/2013 and the Department of Implementation and
    Rural
    Development‘s PSIP, DSIP and LLGSIP Administrative Guidelines when
    deciding to
    award a contract.

    10. The Ombudsman Commission recommends that the Provincial
    Administrator ensures
    that Madang Provincial Administration must strictly comply with
    Section47B of the
    Public Finance (Management) (Amendment) Act 1995 (No.5 of 2016)
    and Financial Instructions
    No.01/2013 when deciding to release funds to fund an activity.

    11. The Ombudsman Commission recommends that the Provincial
    Administrator as the
    Chief Accountable Officer and Section 32 Officer must do due
    diligence checks on all
    Finance Forms prior to approving them.

    Conclusion

    The Ombudsman Commission observed that then JPP&BPC acted wrongly
    when they
    made the decision to award the contract for the purchasing of 19
    vehicles from Ela Motors
    Ltd for the 19 LLG Presidents. Furthermore, then Provincial
    Administration and the
    Provincial Treasury acted wrongly when they improperly facilitated
    the JPP&BPC decision
    to purchase the 19 vehicles.

    The Provincial Administration and the Office of the Governor
    deliberately ignored the
    governing laws and regulations and proceeded with diverting of
    K2,834,507.80 and abusing
    their positions, authority, power and their respective offices to
    enforce the Governor‘s

  • Page 15 of 184

  • policy decision to give 19 vehicles to the 19 LLG Presidents.

    Executive Summary Page x

    1. JURISDICTION AND PURPOSE OF INVESTIGATION

    [1.1] INTRODUCTION

    This is an Own Initiative Investigation by the Ombudsman Commission
    to establish whether
    or not there was any wrong conduct surrounding the alleged improper
    Joint Provincial
    Planning and Budget Priority Committee (JPP&BPC) decision to divert
    funds and misapply
    funds to purchase 19 motor vehicles for 19 Local Level Government
    (LLG) Presidents in
    Madang Province

    The Notice of intention to investigate was issued under Section
    17(1) of the Organic Law on the
    Ombudsman Commission to Mr. Daniel Aloi, then Acting Provincial
    Administrator for Madang on
    7 July 2014 advising him of the Ombudsman Commission‘s intention to
    investigate this matter.

  • Page 16 of 184

  • [1.2] JURISDICTION OF THE OMBUDSMAN COMMISSION

    Sections 218(b) and (c) of the Constitution state that two of the
    purposes for establishing the
    Ombudsman Commission are:

    • to help in the improvement of the work of the governmental bodies
    and the elimination of
    unfairness and discrimination by them; and

    • to help in the elimination of unfair or otherwise defective
    legislation and practices affecting
    or administered by governmental bodies.

    Section 219(1)(a)(ii) of the Constitution empowers the Ombudsman
    Commission to investigate
    on its own initiative or on complaint by a person affected any
    conduct on the part of any
    governmental body or an officer or employee of a governmental body
    in the exercise of a power
    or function vested in it, him or her by law in cases where the
    conduct is or may be wrong,
    taking into account, amongst other things, the National Goals and
    Directive Principles, the
    Basic Rights and the Basic Social Obligations.

    Schedule 1.2(1) defines ―governmental body‖ as:

    (a) the National Government; or

    (b) a provincial government; or

    (c) an arm, department, agency or instrumentality of the
    National
    Government or a provincial government;

    (d) a body set up by statute or administrative act for
    government
    or official purposes.

    The Madang JPP&BPC, the Office of the Governor for Madang Province,
    Madang Provincial
    Administration and Madang PSTB are governmental bodies created by
    statute, namely the
    Organic Law on the Provincial Governments and Local Level
    Governments and the Public Finance
    (Management) (Amendment) Act 1995 (No.4 of 2013).

    Jurisdiction & Purpose of Investigation Page 1

    The Ombudsman Commission therefore has jurisdiction to inquire into
    the question of

  • Page 17 of 184

  • whether the JPP&BPC, the Provincial Administration, the Office of
    the Governor and the PSTB
    made an improper decision to award and make payments to the Supplier
    to supply 19 motor
    vehicles to the 19 LLG Presidents.

    [1.3] PURPOSE OF THE INVESTIGATION

    The purpose of this investigation is to determine whether any of the
    conduct under
    investigation was wrong and to determine whether any laws or
    administrative practices were
    defective in relation to the decision of the Governor for Madang
    Province, the JPP&BPC and
    then Provincial Administration.

    [1.4] METHOD OF INQUIRY

    The Ombudsman Commission issued a notice on 7 July 2014 under
    Section 17(1) of the Organic
    Law on the Ombudsman Commission to the Acting Provincial
    Administrator of Madang Province,
    advising of its intention to investigate the allegation.

    Section 17(1) states:

    Before investigating any matter within its jurisdiction, the
    Commission shall inform the
    responsible person of its intention to make the investigation.

    The Ombudsman Commission obtained documents and other evidence from
    a number of
    sources and used its powers under Section 18 of the Organic Law on
    the Ombudsman Commission to
    require people to produce documents and information.

    Section 18 states:

    (1) Subject to the provisions of this Section and of Section
    19, the Commission may from
    time to time require any person who in its opinion is able
    to give any information
    relating to any matter that is being investigated by the
    Commission to furnish to it that
    information and to produce any documents, papers or things
    that, in the opinion of the
    Commission, relate to any matter being investigated by it
    and that may be in the
    possession or control of that person.

    [1.5] PEOPLE WHO GAVE EVIDENCE BEFORE THE OMBUDSMAN COMMISSION

  • Page 18 of 184

  • The following people were called and gave evidence before the
    Ombudsman Commission:

    No. Name Position Date of
    Response

    Interview
    1 Mr. Daniel Aloi Acting Provincial Administrator 06
    October 2015
    2 Honorable Jim Kas, MP Governor for Madang Province 17
    November 2015
    3 Mr. Simon Simoi Provincial Planner 19
    November 2015
    4 Mr. Paul Amera Provincial Treasurer 18
    November 2015
    5 Mr. Graham Pais Provincial Budget Officer 18
    November 2015
    6 Mr. Peter Sagerom Provincial Commerce Advisor 18
    November 2015
    7 Mr. Augustine Dunstan First Secretary to the Governor 17
    November 2015
    8 Mr. Gabriel Saul Former Provincial Treasurer 16
    March 2017
    9 Mr. Bernard Lange Former Provincial Administrator 16
    March 2017

    Jurisdiction & Purpose of Investigation
    Page 2

    [1.6] OMBUDSMAN COMMISSION NOT CONFINED TO REPORTING ON THE
    LEGALITY OF ADMINISTRATIVE CONDUCT

    When the Ombudsman Commission conducts an investigation of this
    nature, it is not confined
    to reporting on whether breaches of the law have occurred. The
    constitutional mandate is
    much broader than this. The Ombudsman Commission is authorized to
    report on what, in its
    opinion, is wrong conduct, irrespective of whether that conduct was
    in accordance with the law.

    [1.7] WHAT IS ―WRONG CONDUCT‖?

    The Constitution gives some guidance to the Ombudsman Commission,
    when it is deciding
    whether administrative conduct is ―wrong‖.

    Section 219(2) of the Constitution states:

    Subject to Subsections (3), (4) and (5), and without otherwise

  • Page 19 of 184

  • limiting the generality
    of the expression, for the purposes of Subsection (1) (a) conduct
    is wrong if it is –

    (a) contrary to law; or

    (b) unreasonable, unjust, oppressive or improperly
    discriminatory, whether or
    not it is in accordance with law or practice; or

    (c) based wholly or partly on improper motives, irrelevant
    grounds or irrelevant
    considerations; or

    (d) based wholly or partly on a mistake of law or of facts; or

    (e) conduct for which reasons should be given but were not,

    whether or not the act was supposed to be done in the exercise of
    deliberate judgment
    within the meaning of Section 62 (decisions in ―deliberate
    judgment‖).

    The above list is not exhaustive. The phrase ―and without otherwise
    limiting the generality of
    the expression‖ indicates that conduct which does not fit into any
    of the descriptions in
    paragraphs (a) to (e) may still be regarded as wrong. The Ombudsman
    Commission is entitled
    to regard conduct as wrong, even if the conduct does not appear in
    the list of descriptions given
    in Section 219(2) of the Constitution.

    [1.8] THE PROVISIONAL REPORT

    Whenever the Ombudsman Commission prepares a report of this nature,
    it has a duty to
    observe procedural fairness. Section 17(4) (b) of the Organic Law on
    the Ombudsman Commission
    imposes this duty.

    Section 17(4) (b) states:
    Nothing in this Law compels the Commission to hold any hearing and
    no person is
    entitled as of right to be heard by the Commission except that;

    Jurisdiction & Purpose of Investigation Page 3

    (b) the Commission shall not make any comment in its

  • Page 20 of 184

  • report that is adverse to
    or derogatory of any person without –

    (i) providing him with reasonable opportunity to be
    heard; and

    (ii) fairly setting out his defense in its report.

    In order to discharge its duty of procedural fairness, the Ombudsman
    Commission distributed a
    Provisional Report of this investigation into the alleged improper
    purchase of 19 motor vehicles
    for the 19 LLG Presidents by the JPP&BPC in Madang Province.

    Accompanying the Provisional Report was a direction dated 16
    February 2017, pursuant to
    Section 21(1) of the Organic Law on the Ombudsman Commission, which
    all evidence, documents,
    papers and things referred to, including all findings and opinions,
    shall not be published
    without the consent in writing of the Ombudsman Commission. Breach
    of this direction is a
    criminal offence.

    All persons who received the Provisional Report were given the
    opportunity to respond orally,
    and/or in writing, to the Ombudsman Commission‘s preliminary
    findings within 21 days upon
    receipt of the Provisional Report.

    The following people were given copies of the Provisional Report and
    were invited to respond
    to the Ombudsman Commission‘s preliminary findings:

    No Name Position
    Date Responses

    Issued Received
    1. Hon. Governor Jim Kas Governor, Madang Province
    16/2/2017 6/4/2017
    2. Mr. Augustine Dunstan First Secretary to the Former
    Governor16/2/2017 None
    3. Mr. Gabriel Saul Former Provincial Treasurer
    16/2/2017 18/3/2017
    4. Mr. Bernard Lange Former Provincial Administrator
    16/2/2017 3/4/2017

    The Ombudsman Commission has discharged its duty of procedural
    fairness and natural justice
    by giving the above persons the opportunity to respond to the
    Provisional Report within 21
    days from the date of our letter.

  • Page 21 of 184

  • In response to the Provisional Report issued to them, both Mr.
    Gabriel Saul and Mr. Bernard
    Lange responded. Their responses are outlined at paragraph [1.10]
    and [1.11].

    [1.9] RESPONSE FROM HON. JIM KAS, THEN MP, GOVERNOR, MADANG
    PROVINCE

    On 6 April 2017, Hon. Jim Kas, then MP, Governor for Madang Province
    responded and
    requested in seeking for extension of time.

    The Ombudsman Commission granted then Hon. Governor an extension of
    14 days, however he
    did not respond to the Section 17 (4) OLOC Report.

    Therefore, the Ombudsman Commission‘s findings of facts and comments
    regarding then Hon.
    Governor for Madang Province in the Provisional Report have not
    changed.

    Jurisdiction & Purpose of Investigation
    Page 4

    [1.10] RESPONSE FROM MR. GABRIEL SAUL FORMER PROVINCIAL TREASURER,
    MADANG PROVINCE

    On 18 March 2017, Mr. Gabriel Saul, then Provincial Treasurer,
    Madang Province responded to
    the Ombudsman Commission‘s Provisional Report that was issued on 16
    March 2017. Below is
    an extract of his response:

    Dear Sir,

    RE: INVESTIGATION INTO ALLEGED IMPROPER PURCHASE OF 19
    VEHICLES FOR
    19 LLG PRESIDENTS IN MADANG PROVINCE

    Reference is made to your 2014-AC-26760-500 dated 16th February
    2017 which was hand
    delivered to me by Mr. Samuel MOANG and another officer at the
    Madang Provincial
    Administrator‘s Office on today, 16th March 2017.

    Pursuant to Section 17 (4) of the Organic Law on the Ombudsman
    Commission, I hereby provide
    the following to correct certain adverse and derogatory

  • Page 22 of 184

  • comments especially in regards to dates
    in which the alleged breach of laid down rules and regulation
    governing procurement occurred
    pertaining to the subject matter.

    However, allow me to point out that, my engagement as Acting
    Provincial Treasurer for Madang
    Province under General Order 10 was at the whim of Governor Jim
    Kas from 24th March 2014
    until 24th March 2015 when he directed Secretary for Finance to
    terminate my contract because I
    raised questions about his First Assistant Secretary, the
    Project Management Unit (PMU) now
    the Ramu Development Foundation (RDF), Madang Development
    Corporation (MDC) and
    many others including Budgetary allocation for Madang
    Provincial Government‘s Internal
    Revenue (Appropriations under Division 783). (See Appendix ‗A‘)

    However, I was caught up in the 19 vehicles‘ surge when the
    public demanded explanation and
    provided a Press Release for the Governor in June 2014. (See
    Appendix ‗B‘)

    Having said that, my response hereunder would be in direct
    reference to certain comments and
    findings in the Provisional Report relating to me (Gabriel
    Saul) and the Office of the Provincial
    Treasurer commencing from… ―Chronology of Events‖ (pages v to
    vii, ―Executive Summary‖
    (pages 1 to 2 and ―Findings of Facts‖ (pages 7 to 46 of the
    Report).

    1. CHRONOLOGY OF EVENTS

    ~ 2014 31 January…I was not engaged as Acting Provincial
    Treasurer. (page vi)

    • 2014 26 March…I had a running battle (paper war) with the
    Governor‘s First Secretary, Mr.
    Augustine Dunstan over his appointment as Financial Delegate
    (F/D) for PSIP and I even
    wrote to the Governor Jim Kas (see Appendix ‗C‘)

    • 2014 15 August…Mr. Dunstan was already removed as Financial
    Delegate for PSIP.

    1. EXECUTIVE SUMMARY. (Principal Findings)

    • Point 6 (page 1)…not sighting as stated in the report, but
    signing of the General Expenses
    Form (FF4) by Mr Dunstan was in breach of Finance Instruction
    01/2013 dated 1/1/2013.

  • Page 23 of 184

  • • Point 9 (page 1)…the amount stated here is K1,968,612.61
    made to Ela Motors for the purchase
    of 19 vehicles. However, according to your Finding of Facts
    under paragraph 5 in page 19 the
    total payment is K2,834,507.80. (I may be wrong?)

    2. FINDINGS OF FACTS

    • PART 1. Paragraph 2.4 (page 19)

    Jurisdiction & Purpose of Investigation
    Page 5

    The findings pertaining to transactions dated 27th March 2013
    pointing out my involvement in
    raising two ILPOCs (FF4A) to draw cheque number 115230 for
    K2,834,507.80 to Ela Motors
    Madang to confirm the dates, especially the year because I was
    not engaged until 24/3/2014.

    • PART 1. Paragraph 2.6 (page 20)

    I was not engaged as Provincial Treasurer until 24th March 2014.

    • PART 1. Paragraph 2.6 (Points 2 & 3 on page 25).

    My explanations…all Service Improvement Program (SIP) funding
    throughout the Country is
    categorized or itemized under PGAS expenditure item 135 only.
    Provincial Treasurers‘ has no
    authority to change the approved Chart of Account (CoA) thus all
    purchases including purchase
    of vehicles, vessels, plant & equipment and other machineries
    are acquired using Item 135.

    Further note that Function (FN) code number 2100 is NOT for the
    Deputy Provincial
    Administrator. Digit 2 indicates that it‘s a Project and figure
    100 indicates that it is located
    within the provincial headquarter.

    • PART 1. Paragraph 2.6 (page 27)

    Third paragraph, the Provincial Administrator (PA) is NOT the
    Chief Accounting Officer he/she
    is the Chief Accountable Officer and Section 32 (1) Officer.
    Provincial Treasurer (PT) is the Chief
    Accounting Officer and Financial Delegate (Section 32 (4)
    Officer) for PSIP.

    PSIP, DSIP & LLGSIP Financial limitations were determined by

  • Page 24 of 184

  • Secretary Finance in Finance
    Instruction number 1/2013.

    Financial Limitations determined by the Provincial Administrator
    are for Recurrent and Project
    Appropriations under Divisions 283 & 783 and for Local Level
    Governments (LLG) under
    Division 711.

    • PART 1. Paragraph 2.6 (2nd paragraph page 28)

    Allow me to clarify that the F/D (Section 32 (4)) certifies in
    the Requisition for Expenditure
    (FF3) that funds are available and if within his/her Limitations
    that claim (General Expenses
    Form FF4) can be processed for a cheque to be drawn without the
    Section 32(1) Officer‘s
    endorsement.

    3. CONCLUDING REMARKS

    With all due respect, I am of the honest opinion that the
    Provisional Report, February 2017 is
    half baked and misleading in some sense because it did not focus
    entirely on the purchase of 19
    vehicles for the LLG Presidents but other purchases as well thus
    a layman digesting the report
    would be totally confused.

    Sir, may I suggest that your Investigators also consult the
    Auditor General‘s Audit Management
    Letters for fiscal years ended 31st December 2013 and 2014 and
    furthermore obtain PSIP
    Acquittals provided to Office of Rural Development (ORD) now
    Department of Implementation
    Rural Development (DIRD) to tidy up your Report to the National
    Parliament.

    I wish I was called upon to give evidence with others by the
    person that would have given
    realistic and documented evidence; Provincial Accountant Mrs
    Regina Rakua was also missed
    out.

    Thank you.

    (signed)
    GABRIEL F SAUL
    Former Madang Provincial Treasurer
    24/3/2014 to 24/3/2015
    Comments

    Jurisdiction & Purpose of Investigation Page 6

  • Page 25 of 184

  • The Commission has noted both Mr. Saul‘s response and appreciates
    the comments made by
    Mr. Saul pertaining to this particular investigation.

    However, the Commission‘s investigations are private and
    confidential and not subjected to
    directions from any person, organization or authority.

    The Commission during its investigation called in responsible
    persons who were occupying
    their respective offices at that material time. Mr. Saul was no
    longer the Provincial Treasurer
    and he was not readily available to answer questions pertaining to
    the matter.

    [1.11] RESPONSE FROM MR. BERNARD LANGE, THEN PROVINCIAL
    ADMINISTRATOR, MADANG PROVINCIAL ADMINISTRAION

    On 03 April 2017, Mr. Bernard Lange, then Provincial Administrator,
    Madang Provincial
    Administration responded to the Ombudsman Commission‘s Provisional
    Report that was
    issued to him on 16 March 2017. Below is an extract of his response:

    SUBJECT: INVESTIGATION INTO THE ALLEGED IMPROPER PURCHASE OF 19
    MOTOR VEHICLE
    FOR THE 19 LOCAL LEVEL GOVERNMENT PRESIDENTS BY THE JOINT
    PROVINCIAL
    PLANNING & BUDGET PRIORITY COMMITTEE IN MADANG PROVINCE

    I acknowledge your letter dated 16th February 2017, referenced:
    2014-AC-26760-500.

    The letter and Provincial Report of Investigation into the above
    mentioned subject matter was hand delivered to
    me by Mr. Samuel Moang at the Madang Star International Hotel on the
    16th March, 2017.

    I am given twenty (20) days, upon receipt of your letter to respond
    to the allegations, starting from the 16/03/17
    and ending on the 07/04/2017.

    I am providing my responses to the nine (9) days, upon receipt of
    your letter to respond to the allegations, starting
    from the 16/03/17 and ending on the 07/04/2017.

    I am providing my responses to the nine (9) findings to the best of
    my ability and knowledge; in order to defend or
    admit the actions and/or decisions made during my term as the
    Provincial Administrator for Madang province.

  • Page 26 of 184

  • My response to the nine (9) Findings:

    3.1 In the opinion of the Ombudsman Commission, it appears that the
    Madang Provincial Government
    Appropriation Act 2014 was defective as it was developed
    contrary to the intention of the
    Constitution and contradicted the Organic Law on Provincial
    Government and Local Level
    Government and the Public Finance (Management) Act 1995.

    My Response: I totally disagree and categorically deny that Madang
    Provincial Government Appropriation Act
    2014 was defective and developed contrary to the intent of the
    Constitution and the Organic Law on Provincial and Local
    Level Government and Public Finance (Management) Act 1995.

    Appropriate Bills are made to guide and manage the passage of the
    budgets throughout the course of the year,
    particularly transfer and revisions of the funding through quarterly
    reviews. It makes the budget flexible to
    unforeseen events.

    Your suggestion that the Appropriation Act is illegal is defamatory
    and malicious. It has been that way and in that
    form for long time without being criticized by either; the Auditor
    General‘s Office, the Provincial and Local
    Government, the National Economic and Fiscal Commission or the
    Department of Treasury.

    3.2 In the opinion of the Ombudsman Commission, it appears that the
    conduct of the Hon. Jim Kas, MP,
    Governor, was wrong when he informed the JPP & BPC that he would
    fund the purchase of the
    motor vehicles for all LLG Presidents using the Governor‘s PSIP
    Grants.

    Jurisdiction & Purpose of Investigation Page 7

    My response: Hon. Jim Kas, MP, Governor‘s conduct was made in the
    context of economy of costs and it was
    sensible and rational decision. Moreover, the Transport cost to
    Madang Provincial Government for the 19
    Presidents to attend Assembly and Provincial Executive Council and
    Committee Meetings would be about K50,
    000 per President per year or K950,000. In 5 years it will cost
    K4,750,000. The Governor‘s decision would save the
    Government approximately K3,000,000.

    Additionally, the Presidents‘ official duties must be perceived as;
    visiting their people in their respective wards,
    the vehicles were in various situations also used as ambulances and/

  • Page 27 of 184

  • or vehicles to assist the sic or assist with
    health issues, assist the Police in law and order problems, and
    assist Public Servants in their various official duties,
    when vehicles of those sectors were not available to provide
    transportation for the public servants to deliver those
    various Government services to the people.

    Furthermore, Transport Infrastructure component of the PSIP was the
    intended cost area against which the
    expenditure, being 20% of the total, K6.0m for the entire province.

    3.3 In the opinion of the Ombudsman Commission, it appears that
    there was no proper quorum for the
    Joint Provincial Planning and Budget Priority Committee to
    convene as its composition was not in
    compliance with Section 25(2) of the Organic Law on the
    Provincial Government and Local Level
    Government.

    My Response: That is very true, however, in my experience as the
    Provincial Administrator and Chief Advisor to
    three different Governors of Madang Province from 2010 – 2014.
    Former Governor Sir Arnold Amet from 2010 –
    2011, former Governor and current Open Member for Raicoast Hon.
    James Gau, MP from 2011 – 2012 and current
    Governor Hon. Jim Kas, MP from 2012 – 2014, it was very difficult to
    have a full quorum (6 x Open Members) of
    the JPP & PBC Members.

    5 x Open Members of Parliament hardly attended Provincial Assembly
    Meetings and JPP & BPC Meetings,
    despite being issued notices. Compliance with the Organic Law in
    that respect can never be satisfied for the entire
    term of Parliament.

    3.4 In the opinion of the Ombudsman Commission, it appears that the
    decision by the JPP & BPC to
    award the contract for the supply of the 19 motor vehicles to
    Ela Motors Ltd was wrong.

    My Response: I believe that decision was not wrong, because the Ela
    Motors Ltd is the only supplier of motor
    vehicles, with a workshop and genuine spare parts sales office in
    Madang Province. The 3 quote procurement
    requirement could not be strictly adhered to, because no other
    vehicle supplier is based in Madang, so going
    outside the province has limitations and costs that unnecessary.

    The Madang Provincial Government and its administrative agencies
    rely on Ela Motors Limited as the sole
    supplier of genuine Toyota Products that are durable, long lasting
    and reliable. This practice is likely to continue
    over the years to come.

  • Page 28 of 184

  • 3.5 In the opinion of the Ombudsman Commission, it appears that the
    appointment of Mr. Augustine
    Dunstan as First Secretary to the Governor and Financial
    Delegate was improper.

    My Response: I am unable to see any rational for officers of the
    Governor not to be appointed as Financial
    Delegates. In my opinion; Financial Delegates are managers of
    Programs and Activities that are budgeted for a
    specific office in a Financial Year, and like other Sector Managers,
    the First Secretary (Mr Augustine Dunstan)
    administers, coordinates and manages the office of the Governor.
    Unless Ombudsman Commission can
    demonstrate the harm that such an appointment can cause to the
    management of finances in the province, I do not
    agree with your view.

    Additionally, Appointing an Officer of the Secretariat as Financial
    Delegate/Fund Manager to Governor‘s Office
    and the JPP & BPC has had limitations, because they are not required
    to be presented in all programs and
    activities of the Governor‘s Office. It has created ―bottle neck‖
    situations and impacted efficiency in the Governor‘s
    Office operations.

    3.6 In the opinion of the Ombudsman Commission, it appears that the
    conduct of Mr. Augustine
    Dunstan, the First Secretary to the Governor, in sighting the
    Request for Expenditure form and
    General Expense Form was wrong because he did not have the
    Financial Delegate.

    My Response: Ombudsman Commission opinion is not supported by
    factual legal provision of the law and
    therefore that opinion cannot be discussed.

    Jurisdiction & Purpose of Investigation Page 8

    Moreover, the First Secretary to the Governor was appointed the
    Financial Delegate of Governor‘s Office
    Operating Funds; under the 783 Series and JPP & BPC Funds und 283
    Series as per Financial Directive No:1/2014
    and 2/2014; issued under my hand as Chief Accountable Officer. My
    power of delegation is vested under Section
    100 of the PFMA.

    3.7 In the opinion of the Ombudsman Commission, it appears that the
    Provincial Supply and Tenders
    Board‘s decision to award the contract for the supply of 19 motor
    vehicles to Ela Motors Ltd was
    wrong because the payments were done to Ela Motors Ltd prior to
    the PSTB‘s meeting and decision.

  • Page 29 of 184

  • My Response: I admit that it was true that payment was done to Ela
    Motors Ltd prior to PSTB‘s meeting and
    decision. The main purpose for the meeting was to formalize the
    purchase done by the Office of the Governor for
    the 19 vehicle.

    Additionally, Government funds were used for the purchase and the
    PSTB meeting was to ensure that the vehicles
    as being State properties; need to be recorded in our Asset Register
    for records purposes.

    3.8 In the opinion of the Ombudsman Commission, it appears that Mr.
    Bernard Lange, the then Chairman
    of the Provincial Supply and Tenders Board‘s decision to award
    the contract for the supply of 19
    motor vehicles to Ela Motors Ltd was wrong because the payments
    were done to Ela Motors Ltd
    prior to the PSTB‘s meeting and decision.

    My Response: My decision as the Chairman of the PSTB was not wrong,
    because my committee‘s (PSTB)
    decision was to formalize the purchase already done by the officers
    of the Office of the Governor. This is also in
    reference to in my above (3.7) Response.

    3.9 In the opinion of the Ombudsman Commission, it appears that the
    conduct of Mr. Bernard Lange, the
    then Acting Provincial Administrator was wrong when he failed to
    do due diligent checks on the
    Requisition for Expenditure forms and General Expenses forms that
    were filled on 13 March 2014
    that enabled the processing of payment of K1, 968,612.61 made to
    Ela Motors Ltd for the purchase of
    19 motor vehicles.

    My Response: I was not acting as the Provincial Administrator; I was
    the then Provincial Administration. Due
    diligent checks were made prior to the Provincial Treasury Office
    processing the payment of K1,968, 612.61 made
    to Ela Motors Ltd for the purchase of 19 motor vehicles. Otherwise
    the payment would not have been processed, if
    diligent checks were not done properly.

    CONCLUSION

    My responses must not be perceived as being defensive against your
    investigation and findings, but as a way
    forward in addressing some of the real life situations occurring in
    most of the Provincial Governments and its
    Administrations today. Let me highlight some of the following points
    to clarify my above responses.

    1) Your opinion that Hon. Jim Kas MP, Governor of Madang and

  • Page 30 of 184

  • Chairman of the JPP&BPC, made the
    decision to purchase 19 LLG vehicles was legally wrong, but I
    believe that decision to use Transport
    Infrastructure Component to purchase vehicle is an accepted
    practice throughout the country. Moreover,
    in 5 years it is expected to save K3.0m in Transport Cost by the
    Madang Provincial Government and the 19
    local Level Governments,

    2) It is my prerogative as the Chief Accountable Officer with powers
    vested in the PFMA, to appoint an officer
    as Financial Delegate/Fund Manager based on his/her position and
    assigned job description,

    3) The Provincial Supply & Tenders Board approved the decision
    (purchasing of 19 motor vehicles for the
    LLG Presidents) in retrospect to the purchase because JPP&BPC is
    an institution of the Organic Law and it
    has equal responsibility to ensure that expenditure decisions are
    not extravagant and uneconomical.
    Moreover, the check and balance mechanism of the procurement
    process had already been passed, when
    the cheque was drawn. This (political) decision and its
    implementation) is clearly a case of the widely
    accepted procurement practice; that PSTB has little to no control
    over decisions made by political
    institutions and,

    4) Ela Motors Limited is the sole supplier of Toyota products and
    residentially located in Madang Town.

    I thank you for reading and accepting my responses.

    Yours sincerely,

    Jurisdiction & Purpose of Investigation Page 9

    (signed)
    Bernard Lange
    Former Provincial Administrator for Madang Province

    Comments

    The Commission noted Mr. Lange‘s response and inserted the
    respective responses with
    comments into the relevant sections in this Report.

  • Page 31 of 184

  • Jurisdiction & Purpose of Investigation Page 10

    2. FINDINGS OF FACTS

  • Page 32 of 184

  • General

    This chapter deals with the events leading up to the PSTB‘s decision
    on 7 April 2014 to
    award the contract for the supply of 19 motor vehicles for the 19
    LLG Presidents in Madang
    Province. There were two separate purchases made by the Office of
    the Hon. Jim Kas, then
    MP, Governor of Madang Province. Therefore, this Chapter is laid out
    into parts: Part One
    will address what transpired and issues encountered in 2013. Part
    Two will address what
    also transpired and issues that arose in 2014.

    PART 1: MADANG PROVINCIAL ADMINISTRATION COMMITS
    TO PURCHASE VEHICLES IN 2013

    [2.1] NATIONAL GOVERNMENT GRANTS

    On 30 October 2012, the National Executive Council (NEC) made a
    Decision No.102/2012.
    The Decision issued directions for Service Improvement Program (SIP)
    and funding to be
    done on Key Sectorial Basis. That is, the SIP and its funds were to
    be based on
    Infrastructure; Health; Education; Law & Order; Economic &
    Agriculture and
    Administration. The Decision further approved the distribution of
    the SIP into percentages
    as follows:

    1. Infrastructure 30%
    2. Health 20%
    3. Education 20%
    4. Law & Justice 10%
    5. Economic & Agriculture10%
    6. Administration 10%

    The Decision further specified the 10% Administration allocation as
    follows:

    1. General Administration 3%
    (Support to JPP&BPC/JDP&BPC and Project Management Team (PMTs)

    2. Electoral (MP) Office Operational Support 3%

    3. Project Mobilization costs 4%

    Comments

    The NEC Decision No.102/2012 was made in order for Government Grants
    to reach the
    people. These Government Grants are the Provincial Service

  • Page 33 of 184

  • Improvement Program (PSIP),
    District Service Improvement Program (DSIP) and Local Level
    Government Service
    Improvement Program (LLGSIP), which are tied down to sectors and all
    project(s) are to be
    funded in compliance with the sector requirements. These measures
    are to allow funds to be
    channeled down to the LLG‘s where the majority of the population is
    located.
    Findings of Fact Page 11

    Hence, the NEC approved for LLGs to be allocated K500,000.00
    annually under the SIP for
    villages and Ward Developments. These development projects must be
    identified and
    categorized into one of the various sectors in order to qualify for
    funding from that
    particular sector.

    Therefore, in this way the funds from the grants are distributed
    fairly and equally to all the
    development partners and the people get the maximum benefit of the
    Government‘s PSIP,
    DSIP and LLGSIP policy at the local level.

    [2.2] FINANCIAL INSTRUCTION No.01/2013

    On 1 January 2013, Mr. Steven Gibson, then Secretary, Department of
    Finance, approved and
    issued Financial Instruction No.01/2013 for the implementation of
    the PSIP, at the Provincial
    level, DSIP at the District level and LLGSIP at the LLG level. The
    relevant section of the
    Financial Instruction is cited below:

    4.0 PROGRAM IMPLEMENTATION PROCESS

    4.1 Project Identification and Selection

    PSIP projects will be identified, selected and approved by the
    JPP&BPC with the
    Governor as Chairman/Chairperson in a manner consistent with
    the respective Five
    Year Rolling Development Plans of the Province and the
    Sectorial Key Priority areas
    identified by the National Government.

    4.2 DSIP projects will similarly be identified, selected and
    approved by the JDP&BPC
    with the open Member of Parliament as Chairman/Chairperson.
    The selection must
    also be consistent with the existing Five Year Rolling

  • Page 34 of 184

  • Development plan for the
    District and the Sectorial Key Priority areas stipulated by
    the National Government.

    4.3 PSIP Projects & Plan

    The selected project must be designed, documented and scoped,
    in consultation with
    Technical Team (DIRD Field Officers, Provincial Works Managers
    and other Sector
    Managers.

    4.4 Information on Projects to DIRD

    Provinces and Districts through the respective Joint Planning
    and Budget Priorities
    Committee (JPP&BPC or JDP&BPC) as is applicable, are to submit
    lists of their
    prioritized Provincial and District projects together with
    duly completed PFDs to the
    DIRD to assist the Department with confirmation of consistency
    with policy,
    planning the provision of oversights and monitoring
    implementation.

    4.5 Project Budgets

    The project budgets shall be derived from the PSI, DSIP and
    LLGSIP (Project Grants)
    as appropriated. Relocation of PSIP and DSIP funds to other
    projects shall not be
    permitted unless authorized by the Department of National
    Planning upon
    recommendation by DIRD upon an application to the effect.

    5.0 PROCUREMENT

    5.1 Existing Procedures to Apply

    The existing procurement procedures and public tendering
    requirements shall apply
    to all PSIP, DSIP and LLGSIP projects after the necessary
    selection by the JPP&BPC
    or JDP&BPC whichever is applicable.

    Findings of Fact Page 12

    5.2 Minor Procurement Arrangements

    Minor procurement, i.e., procurement below K5,000 shall be
    supported by three

  • Page 35 of 184

  • verbal quotations but the particulars must be noted in a
    Register of Quotations to
    ensure that quotations have actually been obtained. The
    Particulars shall include date,
    time, name of suppliers and name of the quote giver and
    receiver.

    Three quotations are required in writing for expenditures or
    purchases from K5,001
    and below K500,000.

    5.3 Major Procurement

    All purchases above K500,000 shall require written quotations
    from suppliers upon an
    invitation to bid under open tenders as per Section 40 of the
    Public Finance
    (Management) Act 1995 either through the Provincial Supply &
    Tenders Board
    (PSTB) or the Central Supply & Tenders Board (CSTB) subject to
    the limit of
    financial authority of the board. For consideration of such
    tenders, submissions will
    need to be supported by duly approved Authority to Pre-Commit
    related (APCs).

    5.4 The Requirement for APC

    Failure to obtain a duly authorized and approved APC where one
    is required will
    negate the evaluation of the tender by the relevant Supply and
    Tenders Board. A
    contract purportedly entered into without the necessary APC
    signed by the
    Provincial Administrator is null and void for the intended
    purpose.

    5.5 Waivers and Certificate of Inexpediencies

    The Minister for Finance may, upon application to the effect,
    waive public tender
    requirement (not procurement procedures) for projects and/or
    contracts not
    exceeding K500,000 under Section 40(3) of the Public Finance
    (Management) Act
    1995. The applicable circumstances must be noted accordingly
    in the application for
    the ministerial waiver, the Register and File.

    A supply and tenders Board may, where it considers it
    inexpedient upon an
    application to the effect, issue a Certificate of
    Inexpediency, thus negating public
    tendering. This provision may however be cautiously applied

  • Page 36 of 184

  • and other only in cases
    of natural calamities, emergency and where an ―only supplier‖
    is concerned.

    6.0 TECHNICAL EVALUATION FOR AWARD OF CONTRACTS

    6.1 Technical Evaluation Committee

    There shall be a Technical Evaluation Committee (TEC) for each
    Province and District
    comprising: A representative from Provincial Works Unit, the
    District Administrator
    and Provincial Planner to evaluate quotations or tender bids
    and recommend as
    follows:

    TEC Recommendations

    (i) All recommendations from the TEC for quotations below
    K500,000 to the Joint
    District Planning and Budget Priorities Committee (JDP&BPC)
    for evaluation,
    selection and award of contract.

    (ii) All recommendations from the TEC for tender bids for
    projects of and over
    K500,000 to the PSTB through the Administrator for
    selection and award of
    contract.

    (iii) The PSTB shall refer all intended contracts beyond its
    financial delegation of
    K5m to the CSTB for award and execution.

    (iv) In any situation of doubt, the Provincial or District
    Treasurer is to advise on the
    requirements of the Public Finance (Management) Act 1995.

    Findings of Fact Page 13

    6.2 Standard Contract

    A standard contract prepared on behalf of the State shall be
    signed between the
    Chairman of the PSTB/CSTB on behalf of Government/State and
    the Contractor as is
    appropriate.

    6.3 Lodgment of Project and Contract Documents with National
    Planning

    A copy of the signed contract (including delivery schedules

  • Page 37 of 184

  • and the billing or claims
    schedule) shall be furnished by the Provincial or District
    Administrator where
    appropriate, to the Department of National Planning and
    Monitoring, within one (1)
    week of the signing of the agreement.

    7.0 RELEASE OF FUNDS

    7.1 Quarterly Warrants

    Total PSIP, DSIP and LLGSIP funding shall be controlled
    centrally through Warrant
    Authorities based on cash-flows and availability of cash-funds
    by Treasury and
    Finance Department.

    Related cash disbursements shall be based on Quarterly
    Warrants and/or in
    accordance with Government directions on the matter.

    7.2 Recording Warrants Received

    Information on released PSIP, DSIP and LLGSIP funds shall be
    kept by the relevant
    Finance Office (Treasury) in the Province or District under
    the different
    components/projects of the program as depicted, reflected or
    displayed by the
    allocations and Chart of Accounts in the PGAS database.

    7.3 CFCs and Delegations

    The Provincial and/or District Administrator are responsible
    for the distribution of
    funds through CFCs, and for the related administration,
    accounting and reporting on
    the funds as distributed to projects under implementation.

    8.0 PROCEDURE FOR CLAIM AND PAYMENT

    8.1 Payments Generally

    All payments out of the accounts holding PSIP, DSIP and LLGSIP
    funds shall comply
    with the issued Guidelines; this Finance Instruction and other
    requirements of the
    Public Finance (Management) Act 1995 where applicable.

    8.2 Acceptance of Claims

    Claims shall be accepted only upon certification by the
    Provincial Works Unit that
    the deliverables in question have been made and received as

  • Page 38 of 184

  • per the terms and
    conditions of contract and schedules of payments/billings as
    provided in the Service
    or Supply Contract. Under no circumstances should forward
    payments be entertained
    or made.

    8.3 Verification and Examination

    All claims by Contractors for amounts between K5,000 and
    K500,000 submitted for
    payment shall be examined, verified and certified by the
    project manager in the
    Province or District and endorsed or approved for payment by
    the responsible
    Provincial or District Administrator using the payment
    schedules.

    8.4 PGAS Processing and Recording

    The Provincial or District Treasurer shall make all authorized
    payments to contractors
    and furnish payment reports to the JPP&BPC or JDP&BPC
    whichever is applicable
    through the Provincial or District Administrator using the
    payment schedules.
    Findings of Fact Page 14

    8.5 Keeping of Accounts

    The District Treasurer is to maintain proper accounts and
    records of financial
    transactions and assets acquired from DSIP, PSIP and LLGSIP
    funds in accordance
    with the Public Finance (Management) Act 1995 and the Organic
    Law on Provincial
    and Local Level Governments using the appropriate PGAS
    system.

    8.6 Bank Reconciliations & Cheque Usage Reports

    Cheque Usage Reports are to be proved regularly to Banks to
    support the cheque
    clearance processes. Provincial and District Treasurers will
    prepare Bank
    Reconciliations monthly and forward certified copies of such
    reconciliations and
    copies of the relevant bank balances to the Department of
    Finance within 14 working
    days each month end.

    No manual cheque books are to be used in the disbursements
    funds and/or payments.

  • Page 39 of 184

  • 8.7 Asset Register

    In addition to keeping records and accounts, the Provincial
    or District Administrators
    shall make sure that the Treasuries or Finance Accounting
    Offices keep up to date
    Asset Registers of fixed assets acquired through PSIP, DSIP
    and LLGSIP development
    funds.

    Comments

    This Financial Instruction No.01/2013 was issued under Section 117
    of the Public Finance
    (Management) (Amendment) Act 1995 (No.4 of 2013) and it superseded
    all existing Financial
    Instructions before it. The financial instruction outlines how the
    PSIP, DSIP and LLGSIP
    are to be used and what processes to follow in order for the grants
    to be accessed and
    payments made to the developer of the project.

    In this case, the Madang Provincial Government, the JPP&BPC and the
    Provincial
    Administration did not comply with the Financial Instruction No.
    01/2013 and the Public Finance
    (Management) (Amendment) Act 1995 (No.4 of 2013).

    The Commission‘s investigation revealed that in 2014 Hon. Jim Kas,
    then MP, Governor
    made a political commitment that was not part of the Five Year
    Development Plan and that
    commitment was not factored in the 2014 Budget. However, since it
    was then Hon.
    Governor‘s commitment, the JPP&BPC and the Provincial Administration
    were made to
    divert and allocate funds to pay for the 19 motor vehicles.

    The Commission noted that there was no evidence that Mr. Bernard
    Lange, then Provincial
    Administrator, Madang Province signed the Authority to Pre-Commit
    (APC) Form and
    authorizing the release of funds to be paid to the supplier Ela
    Motors Ltd.

    [2.3] PSIP, DSIP AND LLGSIP ADMINISTRATIVE GUIDELINES

    On 1 January 2013, Mr. Paul Sai‘i, then Secretary, Department of
    Implementation and Rural
    Development also approved and released the Department‘s PSIP, DSIP
    and LLGSIP
    Administrative Guidelines. The relevant section is cited below:

  • Page 40 of 184

  • Section 2 Purpose of PSIP, DSIP and LLGSIP Administrative
    Guidelines

    2.1 The purpose of this Administrative Guidelines is to assist
    agencies involved in the
    implementation of the Provincial Services Improvement
    Program (PSIP), District
    Services Improvement Program (DSIP) and Local Level
    Government Service
    Improvement Program (LLGSIP) on the requirements they should
    meet in selecting,
    Findings of Fact Page 15

    approving, procuring and implementing projects funded under
    the PSIP, DSIP and
    LLGSIP.
    2.2 The Administrative Guidelines should be read in conjunction
    with the PSIP, DSIP
    and LLGSIP Financial Instructions No.01/2013 of 1 January
    2013 by the Secretary for
    the Department of Finance.
    2.3 All the provisions of the Financial Instructions referenced
    above are applicable in
    the use of these Guidelines.

    Section 3 Objective and Principles
    3.1 Objectives of the PSIP, DSIP and LLGSIP

    The primary objective of the PSIP, DSIP and LLGSIP is to
    provide minimum service
    delivery standards through re-establishment of basic
    infrastructure and facilities,
    including socio-economic activities for essential services
    such as health, education, law
    and justice, quality water and sanitation, transport (air,
    sea and land), communication
    and rural electrification.
    3.2 Principles of the PSIP, DSIP and LLGSIP

    The key principles of the PSIP, DSIP and LLGSIP are: greater
    ownership, affordability,
    value-adding, sustainability, leadership, and optimum
    resource utilization.
    Underpinning the key principles is the Government‘s Policy
    of ―Achieving National
    Equity in Development through the Strengthening of Basic
    Services Infrastructure‖.
    The theme of the policy encapsulates the spirit of the PSIP,
    DSIP and LLGSIP and is
    directly related to the Ten Guiding Principles of the Medium
    Term Development Plan
    (MTDP 2010-2015), DSP (2010-2030) and Vision 2050.

  • Page 41 of 184

  • The key features of PSIP, DSIP and LLGSIP are:

    (a) Sweat Equity: Local communities are important partners of
    the PSIP, DSIP and
    LLGSIP therefore should participate directly in the
    implementation of the projects
    and programs.

    (b) Driven by the Provincial Management Team (PMT) and District
    Management Team
    (DMT). PMT and DMT to manage the PSIP, DSIP and LLGSIP in
    their respective
    Provinces and Districts, ensuring that Provincial and Local
    Level Governments and
    Administrations can sustain and resource any future
    recurrent and development
    financing needs.

    (c) Involvement by Members of Parliament and Presidents of
    Local Level Governments.
    Members of Parliament and Presidents of LLG provide
    Political Leadership and
    facilities initiatives to address funding and other
    (capacity, policy, etc.) gaps and
    constrains.

    (d) Partnership among All Stakeholders. The program components
    will be delivered
    using existing systems and processes of the Government,
    encouraging public-private
    partnerships (PPP), agreements with development partners and
    other forms of
    external support aligned with Government‘s initiatives.

    (e) Value for money. PSIP, DSIP and LLGSIP projects shall
    follow all required
    procurement procedures and ensure they receive good value
    for goods and services.

    (f) Value added and Economies of scale: The focus shall be on
    impact projects,
    encouraging expansions of the value added chain, and on
    economies of scale.

    Section 4 Sectoral Development Funds Allocation and Disbursement

    4.6 Funding to Provinces, Districts and Local Level Governments
    aims to empower
    effective participation to diversify the economy and expand
    productive base,
    thereby improving livelihoods.

  • Page 42 of 184

  • Findings of Fact Page 16

    4.7 NEC Decision NG 102/2012 of 30 October 2012 directed the
    PSIP, DSIP and LLGSIP
    funds be broken down into the following six (6) sectors:

    • 30% Infrastructure Services Support;
    • 20% Health Services Improvement;
    • 20% Education Services Support;
    • 10% Law & Justice Services;
    • 10% Economic Sector Support; and
    • 10% Administration.

    The NEC Decision approved the increase in current Administrative
    Fes from 3.0% up to 10.0%
    of the total Appropriation. This 10% is to be broken down into the
    following categories:

    • 3% General Administration Component for Administration
    Support including
    Joint Provincial/District Planning and Budget Priority
    Committees (JPP&BPCs
    and JDP&BPCs) and Provincial Project Management Team (PPMT),
    District
    Project Management Team (DPMT);

    • 3% Support Fund for travel and project and project
    identification and
    monitoring activities by the Chairperson of JPP&BPC,
    Chairperson of JDP&BPC
    and the LLG Council Chairperson or their delegates; and

    • 4%Project Scoping and Mobilization Costs and related
    activities by PPMT,
    DPMT and PWU as defined in Project Identification Documents
    (PID), Project
    Formulation Documents (PFD) approved by JPP&BPC and JDP&BPC
    for
    scoping and implementation, respectively;

    4.8 Disbursement of Funds is upon availability of Cash Flow
    Statement and funding on
    a quarterly basis.

    4.9 Funds for PSIP, DSIP and LLGSIP may be moved from one
    priority section to
    another except for Administration component, provided that the
    following
    conditions are met:

    • There must be JPP/JDP&BPC/LLG Council approval in line with
    5 Year
    Development Plan;

  • Page 43 of 184

  • • This/these must be justified in a letter to the Minister of
    Planning;

    • Minister of Planning assesses and may/may not approve the
    submission in
    consultation with DIRD and DoF Secretaries.

    Section 5 Project Identification, Selection and Approval at three
    (3) different Levels

    5.3 Provincial Level

    i) The JDP&BPCs in consultation with Provincial Administration
    Sectorial
    Advisers and other interested parties identify projects and
    submit proposals
    through the Chairpersons of JDP&BPCs to JPP&BPC. Legitimate
    associations
    and individuals may also present their proposals directly to
    the PPMT, who
    will register and direct the proposals to the JPP&BPC.

    ii) JPP&BPC selects and prioritizes proposals and submits the
    PIDs of prioritized
    proposals to PPMT or PWU for scoping and technical
    assistance up to the
    formulation of PFDs.

    iii) The JPP&BPC is composed of the PEC member appointed by
    the Governor, as
    the Chairperson, all Chairpersons of the JDP&BPC (or
    nominees),
    Representatives of Church, Women and Youth.

    Findings of Fact Page 17

    iv) The PPMT or PWU sends completed PFDs to JPP&BPC for
    review,
    endorsement and budget allocation for the approved
    projects.

    v) JPP&BPC sends copy of approved projects and budget to
    Provincial
    Administrator, District Administrators, and DIRD.

    5.4 The role of Provincial Project Management Team (PPMT),
    District Project
    Management Team (DPMT) or Provincial Works Unit (PWU) shall
    be project
    scoping, documentation and appraisal in consultation with
    relevant provincial,

  • Page 44 of 184

  • district and local level government sector advisors and
    national agencies; and
    provide technical advice to JPP/JDP&BPC and LLG Councils.
    Their scoping and
    mobilization expenses should be covered out of the 4%
    Mobilization and Scoping
    component prescribed in paragraph 4.2, for all PSIP, DSIP
    and LLGSIP PIDs they
    process.

    5.5 PPMT shall comprise of the Provincial Administrator as
    Chairperson, Provincial
    Works Manager as Deputy Chairperson, Provincial Planner,
    Provincial Treasurer
    and appropriate sector advisors.

    DPMT shall comprise of the District Administrator as
    Chairperson, District
    Engineer (cases where there is no District Engineer, then
    the Provincial Civil
    Engineer) as Deputy Chairperson, District Planner, District
    Treasurer and
    appropriate sector advisors.

    5.6 In the event Department of Works (DoW) and other sector
    agencies are unable to
    assist in the scoping and documentation for new
    infrastructure, upgrade,
    maintenance and renovation of existing infrastructure, it
    could be outsources in
    consultation with DIRD.

    5.7 The relevant provincial, district and local level
    government sector advisors shall
    provide all technical oversight for the PSIP, DSIP and
    LLGSIP implementation.

    5.8 All copies of Project Documentations and Contract
    Agreements shall be submitted
    by the Provincial and District Administrators to relevant
    national agencies
    consistent with the Financial Instructions for compliance.

    Section 6 Project Documentation Requirements

    6.1 For projects valued up to K5,000 the requirements are the
    following;

    i) Letter of Request from proponents
    ii) Supporting letter from appropriate authorities
    iii) Project Formulation Document
    iv) Three verbal quotes

    6.2 For projects valued above K5,000 and below K5,000,000

  • Page 45 of 184

  • i) Project Formulation Document
    ii) Three written quotes
    iii) Pro-Forma Contract Document
    iv) Other requirements as per relevant sectors

    6.3 For Projects valued at K500,000 and K5,000,000

    i) Project Formulation Document
    ii) Minor/Major Contract Documents
    iii) Authority to Pre-Commit (APC)
    iv) Other requirements as per relevant sectors

    6.4 For Projects valued at K5,000,000 and below K10,000,000.00

    i) Project Formulation Document
    ii) Major Contract Document
    iii) Authority to Pre-Commit (APC)
    iv) NEC Approval
    Findings of Fact Page 18

    v) Other requirements as per relevant sectors

    Section 7 Procurement, Tendering and Selection Process

    7.1 Procurement

    7.1.3 Provincial Level

    i) For procurements valued up to K5,000 three verbal
    quotations to be registered,
    are required for approval by Provincial Administrator.

    ii) For procurements valued over K5,000 and below
    K500,000 three written
    quotation and pro-forma contract are required for
    approval by the Provincial
    Administrator.

    iii) For procurements valued at K500,000 and below
    K5,000,000 an APC and a
    minor/major works contract are required for approval
    by PSTB.

    iv) For procurements valued at K5,000,000 and below
    K10,000,000 an APC and a
    major contract are required for approval by CSTB.

    v) For procurements valued at K10,000,000 and above, an
    APC, scrutiny by CSTB
    and a major contract are required for approval by NEC
    and forwarded to
    Governor General to execute.

  • Page 46 of 184

  • vi) For non-functioning Provincial Supply and Tenders
    Board (PSTB).
    Procurements valued at K500,000 and below K5,000,000,
    all project and tender
    documents shall be referred to DIRD to facilitate, in
    consultation with relevant
    national government agencies and forward to Central
    Supply and Tenders
    Board (CSTB to tender and award).

    7.2 Tendering and Selection

    The Tendering and Selection Process takes place at three (3)
    levels:

    7.2.3 Provincial Administrations

    (i) The PPMT shall comprise of the Provincial
    Administrator as the Chairperson,
    Provincial Civil Engineer as Deputy Chairperson,
    Deputy Provincial
    Administrator–Field Services, Provincial Planner,
    affected District
    Administrators, and Provincial Treasurers or their
    nominees and appropriate
    sector advisors.

    (ii) Districts and other interested parties will be
    supported by the Provincial
    Administrator to prepare PIDs for submission to PPMT
    or PWU.

    (iii) The PPMT or PWU shall receive, register and
    undertake appraisal of submitted
    PIDs, assisting in the formulation of PFDs. PPMT or
    PWU shall access the 4%
    Scoping and Mobilization component of PSIP to carry
    out these duties.

    (iv) The PPMT or PWU through the relevant provincial
    advisors shall prepare
    tender and contract documents, in coordination with
    PSTB and CSTB, where
    appropriate.

    (v) For projects valued below K500,000 PPMT or PWU shall
    call for tender and
    award contracts on behalf of the JPP&BPC.

    (vi) For projects valued at K500,000 and below K5,000,000
    PPMT or PWU shall
    forward the prepared documents to PSTB to tender and
    award contracts and

  • Page 47 of 184

  • the PSTB shall execute the contract on behalf of the
    State.

    (vii) For projects valued at K5,000,000 and below
    K10,000,000 PPMT or PWU shall
    forward the prepared documents to CSTB to tender and
    award contracts.

    (viii) DIRD to facilitate where required.
    Findings of Fact Page
    19

    Note: As a standard practice PPMT (provincial level) and DPMT
    (district and LLG levels)
    shall be engaged in the Tendering and Selection process. In
    cases where PPMT or
    DPMT is non-functional or non-existent, the PWU may be
    utilized.

    7.2.4 Non-Functional PSTB

    Where PSTB is non-functional, project scope and documents
    including JPP&BPC and
    JDP&BPC Budget Resolution, PFDs and related project documents
    from relevant sector
    agencies, shall be submitted by Provincial Administrator and
    District Administrator to DIRD
    for appropriate action.

    (i) The DIRD receives, registers and undertakes appraisal
    of PFDs approved under
    PSIP, DSIP and LLGSIP to ensure that submissions are
    complete and meet all
    compliance requirements.

    (ii) A submission failing the appraised shall be referred
    back to the relevant
    Provincial and District Administrators with appropriate
    recommendations, for
    corrections/and re-submission.

    (iii) Where appropriate, a project submission passing the
    preliminary assessment
    criteria shall be recommended for the CSTB to tender.

    (iv) At the close of the tender period, the DIRD and
    relevant agencies that are part
    of the Tenders Evaluation Committee (TEC), shall
    evaluate all responsive bids,
    and submit recommendations to the CSTB.

    (v) The CSTB shall deliberate on the TEC‘s recommendations
    before awarding the

  • Page 48 of 184

  • contracts.

    (vi) The CSTB shall execute the contract on behalf of the
    State.

    (vii) Terms of Reference and Composition of TEC:

    • TOR

    o Evaluate Bids: compliance to relevant laws (IPA
    Registration
    Documents, COC, and Insurance etc.), financial and
    technical capacity,
    business standing, company profile, bid amount.

    • Composition

    o DIRD (Chair), DNPM, DoW, DoF, Treasury and other
    relevant
    agencies depending on the sectorial nature of the
    project/s.

    Section 8 Payment Process

    8.1 Provincial Administrators, Provincial Treasurers, District
    Administrators and
    District Treasurers and LLG Council Managers shall receive,
    register and evaluate all
    invoices and relevant payment documents and pay the
    Contracts and Service
    Providers progressively.

    8.2 Details of payment should be recorded in DIRD Cheque
    Release Form and approved
    by the JPP&BPC/JDP&BPC Chairman or LLG Council President
    with respective
    Provincial Administrator, District Administrator and LLG
    Council Managers.

    8.3 It is mandatory foe the Provincial and the District
    Administrators as well as
    Provincial and District Treasurers to ensure that all
    projects, including those
    projects procured by PPMT and DPMT, PSTB and CSTB are
    implemented according
    to the conditions of the contract.

    8.4 For every contract, 10% of the total contract value shall
    be retained according to the
    time period specified in the contract. If the Project
    Manager is not satisfied with the
    works done, especially in the case of the defaulting
    contractors, he/she can

  • Page 49 of 184

  • Findings of Fact Page 20

    recommend to the Provincial or District Administrators for
    the amount retained, to
    be forfeited to the State and returned to the Consolidated
    Revenue Fund (CRF).

    Comments

    The Commission‘s investigation revealed that Hon. Jim Kas, then MP,
    Governor, the
    JPP&BPC and the Madang Provincial Administration did not comply with
    the procedures
    outlined above.

    In 2014, then Hon. Governor, made a political commitment to purchase
    motor vehicles for
    all 19 LLG Presidents in the Province. Then Hon. Governor gave
    evidence to the
    Ombudsman Commission under Oath on 17 November 2015 where he stated
    that:

    ―…The LLG Budgets where not yet refunded and considering the
    money that they had and
    vehicles that they were hiring I thought it was the best thing to
    do for them and that was
    to get vehicles for them. So I mean they were elected as mandated
    leaders so I thought it
    was best to get them vehicles and that was the basis on which I
    brought this idea up with
    JPP also I made a commitment whilst there on the LLG‘s during the
    swearing in that as the
    Governor I had to commit about K100,000.00 to each LLG so that
    amounted to about K1.9
    million. Brought that idea to JDP and got JDP to have it resolved
    and thought it was best to
    buy vehicles for LLG Presidents basically to save costs…‖

    Then Hon. Governor made the purchase of the 19 vehicles a priority
    and directed for funds
    to be made available. That is, the actions of the members of the
    JPP&BPC at that time were
    contrary to the set guidelines.

    According to the Guidelines, the process is as follows:

    The Provincial Project Management Team submits a completed PFD to
    the JPP&BPC for its
    endorsement. Once it is endorsed, then the funds are made available
    for implementation. In
    this case, the JPP&BPC awarded the supplies of the 19 vehicles to
    Ela Motors Ltd without

  • Page 50 of 184

  • following the procurement process provided under Section 40(1)(b) of
    the Public Finance
    (Management)(Amendment) Act 1995 (No.4 of 2013), Clause 5.3 of the
    Financial Instruction
    No.01/2013 and Section 7 of the PSIP, DSIP and LLGSIP Administrative
    Guidelines.

    In accordance with Section 7 of the PSIP, DSIP and LLGSIP
    Administrative Guidelines, the
    Madang Provincial Administration should have sent a copy of the
    JPP&BPC Decision to the
    Department of Implementation and Rural Development to facilitate the
    procurement
    process through the appropriate Supply and Tenders Board.

    The Commission‘s investigation revealed that at the time the JPP&BPC
    awarded the
    contract to Ela Motors Ltd there was no functional PSTB to carry out
    the procurement
    process. Hence, in the absence of a PSTB, the JPP&BPC and the Madang
    Provincial
    Administration should have complied with Section 7.1.3(vi) of the
    PSIP, DSIP and LLGSIP
    Administrative Guidelines. That is, this particular project and
    tender documents should
    have been referred to Department of Implementation and Rural
    Development to facilitate, in
    consultation with relevant national government agencies. In the
    absence of a PSTB, the
    CSTB is requested to assist. This did not occur.

    Findings of Fact Page 21

    [2.4] PROVINCIAL ADMINISTRATION FACILITATES GOVERNOR‘S REQUEST
    TO PURCHASE VEHICLES

    On 1 January 2013, Mr. Bernard Lange, then Provincial Administrator,
    delegated his financial
    powers to Mr. Peter Torot, who was Acting Deputy Provincial
    Administrator, Community
    and Government Affairs. Mr. Torot had authority over Accounts 783
    and 283, being LLG
    Accounts, District Treasury Operating Accounts and all other
    Accounts Expenditures in

  • Page 51 of 184

  • accordance with the Cash Funds Certificates (CFC) not exceeding
    K3,000,000.00. The
    appointment as Financial Delegate was for the period 1 January to 31
    December 2014. The
    Instrument of Appointment was accompanied with the specimen
    signatures of both Mr.
    Augustine Dunstan, First Secretary to the Governor and Mr. Thomas
    Warr, then Acting
    Administrative Officer.

    On 11 February 2013, the Provincial Administration prepared a list
    requesting to purchase 28
    motor vehicles to replace its fleet of vehicles. The list is
    outlined below:
    No. Office Type of Vehicle
    Total
    1 Assembly Services Ten Seater 1
    2 Governor‘s Office Ten Seater 2
    3 Provincial Administrator‘s Office 5 Door 1
    4 Information Office 5 Door 1
    5 Provincial Executive Council Ten Seater 9
    6 Finance & Administration Toyota Hilux 1
    7 Finance & Administration Ten Seater 1
    8 Protocol (Madang) Toyota Hilux 1
    9 Deputy Provincial Administrator (CB) Ten Seater 1
    10 Deputy Provincial Administrator (CGA) Ten Seater 1
    11 LLG Support Services Ten Seater 1
    12 Lands Officer Ten Seater 1
    13 Education Office Ten Seater 1
    14 Deputy Governor‘s Office Ten Seater 1
    15 Commerce Office Ten Seater 1
    16 Works Office Ten Seater 2
    17 Mining Ten Seater 1
    18 Mining Ute 1

    On 25 February2013, Mr. Raymond Imanaui, Sales Representative, Ela
    Motors Ltd provided
    a quotation No.230562 to Mr. Thomas Naruse within the Provincial
    Finance and Treasury
    Division to purchase the following motor vehicles:

    1. 20 x New Toyota Landcruiser 10 Seater Station Wagon
    K2,118,000.00
    2. 1 x New Toyota Landcruiser 5 Door Deluxe Wagon K
    136,990.70
    3. 1 x New Toyota Landcruiser 5 Door Wagon and K
    127,921.20
    4. 1 x New Toyota Hilux 2.5 Turbo 4Wheel Drive Double Cab Ute K
    94,987.20
    Total:
    K2,477,899.10.

    On even date, Mr. Imanaui sent another quotation No.230578 to Mr.
    John Bivi within the

  • Page 52 of 184

  • Madang Provincial Mining Office, Madang Provincial Administration
    for the following:

    1. One New Toyota Landcruiser 10 Seater Station Wagon
    K118,487.64
    2. One New Toyota Landcruiser Pick-Up 4.2 Wheel drive
    K117,684.89
    Total:
    K236,172.53.

    Findings of Fact
    Page 22

    On even date, Mr. Imanaui sent another quotation No.228055 to Mr.
    Thomas Naruse for the
    following motor vehicles:

    1. 20 x Toyota Land cruiser 10 Seater Station Wagon
    K2,118,000.00
    2. 1 x Toyota Landcruiser 5 Door Deluxe Wagon K
    136,990.70
    3. 1 x Toyota Landcruiser 5 Door Wagon and K
    127,921.20
    3. 2 x Utility Land cruisers K101,900.00 K
    203,800.00
    4. 1 x Toyota Hilux 4Wheel Drive Double Cab Ute K 94,987.20
    5. 1 x Toyota Hilux 3.0L 4Wheel Drive Double Cab Ute K
    114,900.01
    6. 1 x Toyota Landcruiser 10 Seater Station Wagon K
    118,487.64
    7. 1 x Utility Landcruiser K
    117,684.89
    Total:
    K3,032,771.64

    On 26 February 2013, Mr. Lange wrote to the Sales Manager, Ela
    Motors Ltd and enquired
    whether it was possible for the Provincial Administration to acquire
    10 motor vehicles on
    first installment payment and the remaining as and when the payment
    is secured. Below is
    the payment schedule.

    15th March 15th April 15th May Total
    K1,415,400 K920,000 K697,371.64 K3,032,177.64

    On 12 March 2013, Mr. Imanaui sent another quotation numbered 233649
    to Mr. Paul Ito
    Adam, within the Madang Provincial Administration for one New Toyota

  • Page 53 of 184

  • Landcruiser 5
    Door Deluxe Wagon with total costing of K144,502.93.

    On 13 March 2013, Mr. Imanaui sent another quotation numbered 233804
    to Mr. Lange for
    one New Toyota Landcruiser Prado and New Toyota Landcruiser Pick-Up
    4.2 Wheel drive
    with a total cost of K236,172.53.

    On 27 March 2013, Mr. Peter Pasum, Authorized Requisition Officer,
    raised a Requisition
    for Expenditure Form and the General Expenses Form for the first
    installment payment of
    K1,415,400.00 to Ela Motors Ltd for the 28 motor vehicles. Mr.
    Dunstan confirmed that
    funds were available from the Economic Item 135. Mr. Dunstan was a
    Financial Delegate
    with a limit of K2,000.00 and was also the Commitment Clerk at that
    time. The Requisition
    was approved by Mr. Lange following which Mr. Thomas Warr,
    Commitment Clerk
    committed the funds.

    On even date, Mr. Gabriel Saul, then Provincial Treasurer, Madang
    Province raised two
    ILPOC‘s. The first one numbered 26261 for K1,415,400.00 and the
    second one numbered
    26262 for K1,419,107.80. Attached to these ILPOCs was a Cheque
    numbered 115230 for
    K2,834,507.80 for Ela Motors Ltd.

    The payment was for two sets of fleet of vehicles; the first payment
    of K1,419,107.80 was for a
    fleet of vehicles for the Police. The second payment of
    K1,415,400.00 was for the other fleet
    of vehicles Madang Provincial Government and the Madang Provincial
    Administration.

    On even date, Mr. Graham Pais, the Provincial Budget Officer
    received a Cheque numbered
    115230 worth K2,834,507.80 as payment for the purchase of motor
    vehicles for the Madang
    Provincial Administration fleet.

    Comments

    The Commission‘s investigation revealed that the Madang Provincial

  • Page 54 of 184

  • Administration failed
    to comply with the tender and procurement procedures outlined in
    Section 40(1) and (2) of

    Findings of Fact
    Page 23

    the Public Finance (Management) (Amendment) Act 1995 (No.4 of 2013)
    and Part 13 of the Financial
    Management Manual. That is, they did not conduct an open tender,
    inviting interested Bidders
    to bid for the supply of motor vehicles for the Provincial
    Administration and Provincial
    Government.

    The Commission‘s investigation also revealed that the Madang
    Provincial Administration
    made a list of motor vehicles to purchase and forwarded the list to
    Ela Motors Ltd
    requesting for quotations for the type of motor vehicles that they
    wanted to purchase.

    However, on 25 February 2013, Ela Motors Ltd Sale‘s Representatives
    sent over several
    quotations to and the last quotation numbered 228055 with total
    costing of K3,032,771.64
    was forwarded to the Madang Provincial Administration. Then on the
    15th day of the
    months March, April and May 2013, the Madang Provincial
    Administration made
    installment payments to Ela Motors Ltd.

    On 27 March 2013, the Madang Provincial Administration raised a
    Cheque numbered 115230
    for K2,834,507.80 in favor of Ela Motors Ltd. This payment was in
    two parts; the first part
    was for a fleet of motor vehicles for Police and the second part was
    for the Madang
    Provincial Government and Madang Provincial Administration.

    Therefore, in total, the Madang Provincial Administration spent
    K5,867,279.44 on motor
    vehicles for the Madang Provincial Government, Madang Provincial
    Administration and
    Madang Police without complying with the proper tender and
    procurement procedures
    outlined in the Public Finance (Management) (Amendment) Act 1995
    (No.4 of 2013) and the Finance
    Management Manual.

    [2.4.1] RESPONSE FROM MR. GABRIEL SAUL THEN PROVINCIAL TREASURER,

  • Page 55 of 184

  • MADANG PROVINCE

    On 18 March 2017, Mr. Saul responded to the Ombudsman Commission‘s
    Provisional
    Report that was issued to him on 16 March 2017. Below is an extract
    in regard to Part 1,
    Section 2.4:

    4. FINDINGS OF FACTS

    • PART 1. Paragraph 2.4 (page 19)
    The findings pertaining to transactions dated 27th March 2013
    pointing out my involvement
    in raising two ILPOCs (FF4A) to draw cheque number 115230 for
    K2,834,507.80 to Ela
    Motors Madang to confirm the dates, especially the year because I
    was not engaged until
    24/3/2014.

    Comments

    The Commission noted Mr. Saul‘s response and checked and verified
    with the information
    in its possession and confirmed that during the material time that
    the Madang Provincial
    Administration and the Madang Provincial Treasury were involved in
    the purchase of 19
    vehicles for the 19 LLG Presidents, Mr. Saul was not the Provincial
    Treasurer.

    Even though the statement “…On 27 March 2013, Mr. Gabriel, then
    Provincial Treasurer, Madang
    Province raised two ILPOC’s. The first one No. 26261 for
    K1,415,400.00 and the second one No.26262 for
    K1,419,107.80. Attached to these ILPOCs was a Cheque No. 115230 for
    K2,834,507.80 for Ela Motors Ltd…”
    is not true, in that Mr. Saul was not the Acting Provincial
    Treasurer at that material time.

    Findings of Fact Page 24

    However, the fact remains that the Madang Provincial Treasury did
    raise a Cheque
    numbered 115230 that was paid to Ela Motors Ltd in order for the
    Provincial Administration
    to purchase 19 vehicles for the 19 LLG Presidents.

    [2.5] NATIONAL EXECUTIVE COUNCIL DECISION No.414/2013 – SIP
    GUIDELINES

    On 14 April 2013, the National Parliament passed the amendments to

  • Page 56 of 184

  • Sections 39B and 47B
    of the Public Finance (Management) (Amendment) Act 1995 (No.4 of
    2013). These amendments
    increased the kina threshold amount for major procurement of goods
    and services for PSTBs
    from K3,000,000 to K5,000,000 and the Authority to Pre-Commit (APC)
    expenditure from
    K300,000 to K500,000 at the Provincial level.

    On 18 November 2013, the NEC in its Special Meeting No.35/2013 made
    several decisions.
    Decision No.414/2013 was to enhance the Service Improvement Program
    (SIP) guidelines
    and to clarify responsibilities across levels of government in the
    2014 National Budget.

    Comments

    In 2012, the National Parliament passed a K5.8 billion National 2013
    Budget that was aimed
    at empowering the Provinces, Districts and LLGs to deliver goods and
    services to the bulk
    of the population in the rural and remote parts of the country. The
    Table below indicates
    how much was allocated to the Provinces, Districts and LLGs.

    Components Description Kina Million % of
    DB
    PSIP K5.0 million per district (89) 445.0 12.0
    DSIP K10.0 million per district (89)890.0 23.0
    LLGSIP K0.5 million per LLG (314) 157.0 4.0

    In line with the increase in SIP funds to the Provinces, Districts
    and LLGs, the NEC made
    several decisions that affected and effected the implementation of
    the National
    Government‘s 2013 Budget. These included the amendments to Sections
    39B and 47B of the
    Public Finance (Management) (Amendment) Act 1995 (No.4 of 2013) that
    increased the all PSTBs
    threshold from K3,000,000 to K5,000,000 and the Authority to Pre-
    Commit (APC)
    expenditure threshold from K300,000 to K500,000 at the Provincial
    level.

    [2.6] APPOINTMENT OF FINANCIAL DELEGATES, AUTHORIZED
    REQUISITION OFFICERS & SECTION 24 OFFICERS

    On 27 March 2013, Mr. Saul submitted documents to the Governor‘s
    Office to change
    specimen signatures for the commitment of funds for 2014.

    On 31 January 2014, Mr. Dunstan wrote to Mr. Saul and forwarded the

  • Page 57 of 184

  • specimen signatures
    for Mr. Lange, Mr. Pasum and himself. They were now responsible for
    signing off on the
    Recurrent Budget, the PSIP funds, Non-Discretional and Discretional
    funds.

    On 17 February 2014, Mr. Lange issued a Financial Directive No.
    2/2014 outlining the
    appointment of Authorized Requisitioning Officers, Financial
    Delegates and Section 24
    Officers for funds under the 783 Series for 2014. In that same
    Financial Directive, the
    financial limit for the First Secretary to the Governor was
    K2,000.00 inclusive. The
    Directive is as follows:

    Findings of Fact
    Page 25

    FINANCIAL DIRECTIVE NO: 2/2014
    APPOINTMENT OF AUTHORISED REQUISITIONING OFFICERS FINANCIAL
    DELEGATES AND
    SECTION 24 OFFICERS FOR FUNDING UNDER THE 783 SERIES

    By virtue of the powers conferred upon me under Sections 5, 32 and
    33 and with the power of delegation
    bestowed on me under Section 110 of the Public Finance Management
    (Amendment) Act 1995, I, Bernard
    Lange, Provincial Administrator and Chief Accountable Officer,
    hereby appoint the following
    Designated Officers as Authorized Officers, Financial Delegates and
    Section 24 Officers of the 2014
    Madang Provincial Government Estimates of Revenue & Expenditure
    commencing 01st January 2014 and
    ending on the 31st December 2014.

    SECTION 24 LOCATION VOTE
    FINANCIAL LIMIT
    District Administrator All District and LLGS All projects and
    Recurrent K300,000.00 Inclusive
    Expenditure
    DPA (CGA) All Districts and LLGs All Projects and
    Recurrent K500,000.00 Inclusive
    Expenditure
    DPA (PCI) PHQ All projects and
    Recurrent K500,000.00 Inclusive
    Expenditure
    Provincial All Districts, LLGS and All Votes
    K5,000,000.00
    Administrator PHQ
    Inclusive
    DPA (CGA) All Districts and LLGS Provincial Trust

  • Page 58 of 184

  • Accounts K500,000.00 Inclusive
    DPA (PCI) PHQ Provincial Trust
    Accounts K500,000.00 Inclusive
    Provincial All Districts, LLGS and Provincial Trust
    Accounts K5,000,000.00
    Administrator PHQ
    Inclusive

    FINANCIAL AUTHORIZED LOCATION
    VOTE CODE FINANCIAL
    DELEGATE REQUISITIONING
    LIMIT
    OFFICER
    Deputy District LLG Almami LLG
    783-1011-9701 K2,000.00
    Administrator Executive Officers Iabu LLG
    783-1012-9701 Inclusive
    Bogia Yawar LLG
    783-1013-9701
    Deputy District LLG Ambenob LLG
    783-1021-9701 K2,000.00
    Administrator Executive Officers Transgogol LLG
    783-1022-9701 Inclusive
    Madang Manager MULLG Madang Urban LLG
    783-1023-9701
    Deputy District LLG Arabaka LLG
    783-1031-9701 K2,000.00
    Administrator Executive Officers Josephstaal LLG
    783-1032-9701 Inclusive
    MRD Simabi LLG
    783-1033-9701
    Kovon LLG
    783-1034-9701
    Deputy District LLG Saidor LLG
    783-1041-9701
    Administrator Executive Officers NahoRawa LLG
    783-1042-9701 K2,000.00
    Raicoast Astrolabe Bay LLG
    783-1043-9701 Inclusive
    Nayudo LLG
    783-1044-9701
    Deputy District LLG Karkar LLG
    783-1051-9701 K2,000.00
    Administrator Executive Officers Sumgilbar LLG
    783-1052-9701 Inclusive
    Sumkar
    Deputy District LLG Bundi LLG
    783-1061-9701 K2,000.00
    Administrator Executive Officers Usino LLG
    783-1062-9701 Inclusive
    Usino Bundi Gama LLG
    783-1063-9701
    Clerk of Assembly Admin Officer Assembly Services
    783-1100-9101 K2,000.00

  • Page 59 of 184

  • PHQ
    Inclusive
    Cabinet Secretary Executive Assistant Provincial Executive
    783-1100-9102 K2,000.00
    Council
    Inclusive
    First Secretary to Admin Officer Governor‘s Office –
    783-1100-9104 K2,000.00
    Governor PHQ
    Inclusive
    Clerk of Assembly Project Officer Deputy Governor‘s
    783-1100-9104 K2,000.00
    Office
    Inclusive
    EO Provincial Executive Assistant Provincial
    783-1100-9111 K2,000.00
    Administrator Administrators Office
    Inclusive
    Director HRM Personal Public Service
    783-1100-9121 K2,000.00
    Officer/a/PSDT Support
    Inclusive
    Officer
    Provincial Protocol Executive Assistant Protocol & Events
    783-1100-9125 K2,000.00
    Officer
    Inclusive

    Findings of Fact
    Page 26

    Director Economic Assistant Director Project
    783-1100-9127 K2,000.00
    Services Finance and Administration and
    Inclusive
    Administration Consultancy
    Director Executive Officer Momase Governors‘
    783-1100-9133 K2,000.00
    Secretariat
    Inclusive
    Director Provincial Executive Assistant Search and Rescue
    783-1100-9134 K2,000.00
    Disaster Office Disaster Office
    Inclusive
    Assistant Director Provincial Budget PHQ Consolidated
    783-1100-9154 K2,000.00
    Finance and Admin Officer Operations
    Inclusive
    Provincial Admin Officer Provincial Treasury
    783-1100-9171 K2,000.00
    Treasurer Office
    Inclusive
    DPA (CTS) Assistant Director Administrators

  • Page 60 of 184

  • 783-1100-9901 K2,000.00
    Finance and Admin Advances
    Inclusive
    Assistant Director Provincial Budget Bio Products
    783-2100-9101 K2,000.00
    Finance and Officer
    Inclusive
    Administration
    Assistant Director Coordinator PPII Provincial
    783-2100-9102 K2,000.00
    Finance and Performance
    Inclusive
    Administration Initiative
    Assistant Director Data Manager Information and
    783-2100-9103 K2,000.00
    Policy Planning Communication
    Inclusive
    Technology
    Director Economic Assistant Director Kalibobo Vision 2020
    783-2100-9104 K2,000.00
    Services Finance and
    Inclusive
    Administration
    Deputy District CEO Iabu LLG Manam Affairs Office
    783-2100-9105 K2,000.00
    Administrator
    Inclusive
    DPA (CTS) Assistant Director Transfer of NHC
    783-2100-9106 K2,000.00
    Works Titles
    Inclusive
    Director (PCI) Assistant Director Ward Development
    783-2100-9107 K2,000.00
    Planning Planning
    Inclusive
    Director (PCI) Assistant Director SPSN Counterpart
    783-2100-9108 K2,000.00
    Planning
    Inclusive
    Assistant Director Marine Transport Small Craft Act
    783-2100-9109 K2,000.00
    Works Inspector Establishment
    Inclusive
    Coordination
    Assistant Director Executive Assistant Madang Development
    783-2100-9301 K2,000.00
    Commerce and Cooperation
    Inclusive
    Industry
    Assistant Director Executive Assistant Madang Visitors and
    783-2100-9302 K2,000.00
    Commerce and Cultural Bureau
    Inclusive
    Industry

  • Page 61 of 184

  • Assistant Director Coordination Co-operative Society
    783-2100-9303 K2,000.00
    Commerce and Corporative Society
    Inclusive
    Industry
    Director (PCI) Assistant Director Governors House
    783-2100-9601 K2,000.00
    Works Maintenance
    Inclusive
    Assistant Director Executive Assistant Community
    783-2100-9701 K2,000.00
    Social Services Development Services
    783-2100-9702 Inclusive
    Grants
    783-2100-9703

    783-2100-9704
    Town Manager Deputy Town Beautification
    783-2100-9705 K2,000.00
    Manager Program
    Inclusive
    Assistant Director Kranget Island Water
    783-2100-9706 K2,000.00
    Works Building Inspector Supply
    Inclusive
    Coordination
    Assistant Director Gama LLG Chamber
    783-2100-9707 K2,000.00
    Works Building Inspector
    Inclusive
    Coordination
    Assistant Director Naho Rawa LLG
    783-2100-9708 K2,000.00
    Works Building Inspector Chamber
    Inclusive
    Coordination
    Provincial Assistant Director LLGs, Districts and
    Provincial K2000.00

    Findings of Fact
    Page 27

    Treasurer Finance and PHQ Trust Inclusive
    Administration

    All expenditures must be made against accounting forms Payments
    Voucher (FF4) and Requisition for
    Expenditure (FF3).

    Purchases over K300,000.00 for Goods, Services or Works are subject
    to Government Tender
    Procedures.

  • Page 62 of 184

  • Purchases of K299,000.00 or less –

    a. Where the cost is K2000.00 or less purchase may be made from
    any supplier without three
    quotes.

    b. For cost over K2,000.00 but up to K5,000.00 three verbal
    quotations must be obtained from
    local suppliers and recorded in a quotations register. Where
    three quotations could not be
    obtained, an explanatory note must be made in the register.

    c. For cost over K5,000.00 but up to K299,000.00, three written
    quotations must be obtained.
    Quotations will be entered in a register and filed. Where for
    special reasons there are only one
    or two suppliers, the register and files must be noted
    accordingly.

    d. Where quotations are the same or the lowest quotation is not
    chosen, the purchasing officer
    must explain the reason of his/her choice of supplier on the
    requisition form (FF3), in the
    quotation register and on the file.

    e. In deciding between suppliers quoting the same amount, equal
    consideration of business must
    at all times be exited between the competing suppliers. Care
    must be taken to ensure
    quotations are obtained only from those capable of supplying
    the items or rendering the
    service.

    Any expenditure that exceeds the Financial Delegate limit must
    always bear the endorsement of the
    section 24 officer on the Requisition for Expenditure (FF3).

    (Signed)
    BERNARD LANGE Dated this 17 day of FEBRUARY 2014
    Provincial Administrator

    On even date, Mr. Dunstan forwarded the specimen signatures for Mr.
    Lange, Mr. Galun
    Kassas, then Deputy Provincial Administrator responsible for
    Community and Government
    Affairs, Mr. Thomas Warr, then Acting Administrative Officer to the
    Office of the Provincial
    Treasurer, for commitment of funds for the Office of the Governor
    with their financial
    limits.

    NO NAME DESIGNATION SPECIMEN DELEGATION
    SIGNATURE
    1 Bernard Provincial Administrator Section 32 Officer

  • Page 63 of 184

  • Alvin Lange K50,000.00 –
    K5,000,000.00
    2 Deputy Provincial Section 32 Officer
    Galum KassasAdministrator <K50,000.00
    C&GA
    3 Augustine First Secretary Financial Delegate
    Dunstan
    4 Acting Administrative Authorised
    Requisition
    Thomas Warr Officer Officer (ARO)

    In June 2014, the NEC appointed Mr. Danny Aloi as then Acting
    Provincial Administrator
    replacing Mr. Lange.

    Findings of Fact Page
    28

    On 4 February 2015, Mr. Aloi approved Financial Directive No.2/2015:
    Appointment of
    Authorised Requisition Officers, Financial Delegates and Section 24
    Officers for fund under
    783 Series.

    On 17 November 2015, Hon. Jim Kas, then MP, Governor, stated during
    his interview that:

    ―…The LLG Budgets where not yet refunded and they had the money
    that they had,
    considering the money that they had and vehicles that they were
    hiring I thought it was
    the best thing to do for them and that was to get vehicles for
    them. So I mean they were
    elected as mandated leader so I thought it was best to get them
    vehicles to save money for a
    particular and that was the basis on which I brought this idea up
    with JPP also I made a
    commitment whilst there on the LLG‘s during the swearing inn that
    as the Governor I had
    to commit about K100, 000.00 to each LLG so that amounted to
    about K1.9 million. Brought
    that idea to JDP and got JDP to have it resolved and thought it
    was best buy vehicles for
    LLG Presidents basically to save costs…‖

    Comments

    In 2012, then Hon. Governor made a political commitment to all the
    19 LLG Presidents and

  • Page 64 of 184

  • the Provincial Administration that he would ensure that all the 19
    LLG Presidents and the
    Provincial Administration would be issued with motor vehicles.

    In the following year, the Provincial Administration made a list of
    vehicles to replace its own
    aging fleet. However, the Provincial Administration was not able to
    purchase these vehicles
    all at once. Hence payments by installment arrangements were made
    between the Provincial
    Administration and Ela Motors Ltd.

    The amount involved in purchasing the motor vehicles was
    K1,415,400.00 and it was
    required to go through the proper tender and procurement procedures
    in compliance with
    Sections 5(2), 40 and 110 of the Public Finance (Management)
    (Amendment) Act 1995 (No.4 of
    2013) and Part 11 and Part 13 of the Financial Instructions.

    An analysis of the Financial Directive No.2/2014 with the list of
    Financial Delegates and
    their financial limits revealed that Mr. Dunstan and the
    Administration Officer were
    authorised to approve procurements within the K2,000.00 limits and
    no more. Hence, the
    officer should not have signed on the Requisition for Expenditure
    Form and General
    Expenses Form as K1,415,400.00 was well above his financial
    delegation. This was in direct
    breach of Sections 5(2) and 110 of the Public Finance (Management)
    (Amendment) Act 1995 (No.4
    of 2013) which state:

    5. RESPONSIBILITIES OF HEADS OF DEPARTMENTS.

    (2) The responsibility of a Departmental Head under Subsection (1)
    is not derogated or reduced
    by reason of any delegation of functions by him to another
    person.

    110. DELEGATION

    A Departmental Head may, by instrument, delegate to a person all
    or any of his powers and
    functions under this Act (other than this power of delegation).

    The Commission‘s investigation revealed that those responsible and
    who had signed on the
    Requisition for Expenditure and General Expenses Forms did not have
    the appropriate
    financial delegation to facilitate the procurement process. This is
    further analysed below:

  • Page 65 of 184

  • 1. That the code number 135, written under the ITEM section of the
    code structure, is used
    for Other Operational Expenses, which include printing, committee
    attendance fees,

    Findings of Fact Page 29

    audit expenses, interpreters fees, official entertainment
    expenses, conference and
    workshop expenses.

    It is also used for payment for advertisement of vacancies,
    interview costs, recruitment
    airfares for shortlisted candidates and for successful applicants
    from point of
    recruitment to place of employment and shipment of personnel
    effects in an out, settling
    in and out allowances and repatriation expenses.

    2. However, in this case, the code number 135 from where funds were
    used to purchase
    vehicles was not the correct code number. The correct code number
    that should have
    been used is code number 222 which identifies what the expenditure
    was for, in this
    case, it was the purchase of all types of motor vehicles.

    3. A further analysis of the Finance Forms, in particular, the code
    structure tabled below, it
    was found that:

    DIV FN ACT ITEM AMOUNT
    This Financial Year
    283 2100 8901 135 K1,415,400.00
    Subsequent Financial Years

    DIV is an abbreviation for Division and it identifies the agency.
    In this case, it is the
    Department of Madang with the code number 283.

    FN is an abbreviation for Function and it identifies the strategic
    area. In this case, the
    strategic area code number 2100 was allocated to the Deputy
    Provincial Administrator.
    This means that the Deputy Provincial Administrator had the
    authorization and the
    financial delegate to sign the Requisition for Expenditure and
    General Expenses Forms
    because the amount was within his limit.

    ACT is an abbreviation for Activity and it identifies from what
    particular area funds are

  • Page 66 of 184

  • derived from. In this case, it is the code number 8901 that
    identifies the activity as PSIP
    and DSIP

    When the Provincial Treasurer identified that funds could be moved
    from the PSIP,
    DSIP and LLGSIP, it meant that those activities at the Districts
    and the Province would
    have to be reprioritized in order to fulfill the political
    commitment made by then Hon.
    Governor.

    ITEM is an abbreviation for Item and it identifies expenditure
    activity and in this case
    code number 135 was used to identify Other Operational Expenses
    and not for the
    purchase of vehicles which is code number 222.

    Mr. Torot was the Financial Delegate who had the authority to sign
    the Requisition Forms
    and the General Expenses Forms, however Mr. Dunstan instead signed
    the Forms.

    The Commission‘s investigation also revealed that the position of
    First Secretary to the
    Governor for Madang Province that Mr. Dunstan occupied did not
    exist. This was due to
    the fact that Section 1 of the Official Personal Staff Act states:

    ―1. Persons entitled to official personal staff.

    The following persons are entitled to official staff in accordance
    with the provisions of this
    Act:-

    Findings of Fact Page 30

    (a) the Prime Minister; and

    (b) a Minister; and

    (c) the Leader of the Opposition; and

    (d) the Leader of a minority Party (being a party with at least
    12 members of
    Parliament) recognized as such by the Speaker; and

    (e) the Speaker.

    (f) A Parliament Secretary appointed under the Parliamentary
    Secretaries Act 2004.

  • Page 67 of 184

  • The Salary Remuneration Committee Determination

    SCHEDULE G007-18

    OFFICIAL PERSONAL STAFF

    Recipients A:
    1. Prime Minister
    1. Deputy Prime Minister
    2. Speaker
    3. Deputy Speaker
    4. Leader of the Opposition
    5. Deputy Leader of the Opposition
    6. Ministers
    7. Vice-Ministers
    8. Former Prime Ministers

    Benefits: Such staffing, levels as are approved by the Prime
    Minister from time to
    time in accordance with the Official Staffing Act.

    Recipient B: Provincial Governors

    Benefits: Personal staff allowance of K100,000 per annum‖.

    The Official Personal Staff Act identifies who is entitled to
    official personal staff. In this
    instance, the Hon. Governor is entitled to a personal staff.
    However, the personal staff must
    be appointed by the Prime Minister.

    The Commission‘s investigation revealed that there was no
    documentary evidence
    presented to indicate that Mr. Dunstan was appointed by the Prime
    Minister in accordance
    with Section 4 of the Official Personal Staff Act. Hence, in the
    absence of the Prime Ministerial
    appointment and lack of authority and power, Mr. Dunstan improperly
    exercised his
    position to endorse or approve requisitions and ILPOCs.

    The Commission‘s investigation also revealed that Mr. Lange, as the
    Chief Accountable
    Officer and Section 32 Officer, failed in his duty to properly
    conduct due diligent checks on
    the Requisition for Expenditure Forms and General Expenses Forms.
    That is, he failed to
    ensure that the appropriate authorised Officers signed the Finance
    Forms as required under
    Section 5(a),(b),(c),(d),(e) and (f) of the Public Finance
    (Management) (Amendment) Act 1995
    (No.4 of 2013), which states:

  • Page 68 of 184

  • 5. Responsibilities of Heads of Departments.

    Findings of Fact Page 31

    (1) Each Departmental Head is responsible for ensuring that, in
    relation to the Department of
    which he is Head—

    (a) the provisions of this Act are complied with; and

    (b) all accounts and records relating to the functions and
    operations of the Department
    are properly maintained; and

    (c) all necessary precautions are taken to safeguard the
    collection and custody of public
    moneys; and

    (d) all expenditure is properly authorized and applied to the
    purposes for which it is
    appropriated; and

    (e) there is no over commitment of funds and a review is
    undertaken each month to
    ensure that there is no over-expenditure or over commitment
    and the collection of
    public moneys is according to approved plans and estimates;
    and

    (f) all expenditure is incurred with due regard to economy,
    efficiency and effectiveness
    and the avoidance of waste; and

    In this instance, Mr. Dunstan who had a financial limit of K2,000.00
    as per Financial
    Directive No.2/2014, signed both the Requisition for Expenditure and
    General Expenses
    Forms as Financial Delegate. This was wrong because the amount
    K1,415,400.00 for the
    purchase of motor vehicles was higher than his financial limit.

    An Accountable Officer is, a person authorised by instrument in
    accordance with Section 6
    of the Public Finance (Management) (Amendment) Act 1995 (No.4 of
    2013), which states:

    6. Accountable officers.

    (1) A person who—

    (a) is an officer; or

    (b) authorizes the collection or payment of public moneys or

  • Page 69 of 184

  • accounts for stores, whether
    or not he is an officer,

    is an accountable officer for the purposes of this Act.

    (2) An accountable officer shall comply with the provisions of
    this Act in respect of all matters
    for which he is responsible and for all public moneys and
    stores in his possession or under
    his control, and shall duly account for them.

    Mr. Dunstan was not the Accountable Officer to sign off on the
    Finance Forms and his
    conduct was in direct breach of Section 6(1) and (2) of the Public
    Finance (Management)
    (Amendment) Act 1995 (No.4 of 2013).

    The Commission‘s investigation also revealed that Mr. Saul as the
    Financial Delegate,
    approved the Requisition for Expenditure Form and General Expenses
    Form and proceeded
    to raise the ILPOC Form together with the cheque.

    Then on 27 March 2013, Mr. Graham Paias, the Provincial Budget
    Officer, signed the ILPOC
    Form and received the Cheque No.115230 valued at K2,834,507.80 which
    he delivered to Ela
    Motors Ltd.

    The Commission noted that the certification for payment was wrong
    because the Madang
    Provincial Administration and the Provincial Treasury failed to
    comply with the
    procurement procedures.

    Findings of Fact Page 32

    [2.6.1] RESPONSE FROM MR. GABRIEL SAUL THEN PROVINCIAL TREASURER,
    MADANG PROVINCE

    On 18 March 2017, Mr. Gabriel Saul, then Provincial Treasurer,
    Madang Province responded
    to the Commission‘s Provisional Report that was issued to him on 16
    March 2017. Below is
    an extract in regard to Part 1, Section 2.6:

    • PART 1. Paragraph 2.6 (page 20)

    I was not engaged as Provincial Treasurer until 24th March 2014.

    • PART 1. Paragraph 2.6 (Points 2 & 3 on page 25).

    My explanations…all Service Improvement Program (SIP) funding

  • Page 70 of 184

  • throughout the Country is
    categorized or itemized under PGAS expenditure item 135 only.
    Provincial Treasurers‘ has
    no authority to change the approved Chart of Account (CoA) thus
    all purchases including
    purchase of vehicles, vessels, plant & equipment and other
    machineries are acquired using
    Item 135.

    Further note that Function (FN) code number 2100 is NOT for the
    Deputy Provincial
    Administrator. Digit 2 indicates that it‘s a Project and figure
    100 indicates that it is located
    within the provincial headquarter.

    • PART 1. Paragraph 2.6 (page 27)

    Third paragraph, the Provincial Administrator (PA) is NOT the
    Chief Accounting Officer
    he/she is the Chief Accountable Officer and Section 32 (1)
    Officer. Provincial Treasurer (PT)
    is the Chief Accounting Officer and Financial Delegate (Section
    32 (4) Officer) for PSIP.
    PSIP, DSIP & LLGSIP Financial limitations were determined by
    Secretary Finance in
    Finance Instruction number 1/2013.

    Financial Limitations determined by the Provincial Administrator
    are for Recurrent and
    Project Appropriations under Divisions 283 & 783 and for Local
    Level Governments (LLG)
    under Division 711.

    Comments

    The Commission noted that during the material time, the Madang
    Provincial
    Administration and the Madang Provincial Treasury were involved in
    the purchase of 19
    vehicles for the 19 LLG Presidents, Mr. Saul was not the Provincial
    Treasurer or the Acting
    Provincial Treasurer.

    The Commission also noted Mr. Saul‘s explanation in regard to
    Service Improvement
    Program funding and appreciated his explanation on the Service
    Improvement Program
    funding. The Commission agrees with Mr. Saul‘s explanation in regard
    to the PGAS
    expenditure Item 135 and Item 222 as stated above in the
    Commission‘s original comments
    contained in the Provisional Report. Hence, amendments have been
    made and incorporated
    into this particular section of this Report.

  • Page 71 of 184

  • The Commission appreciates Mr. Saul‘s explanation and clarification
    on the distinction
    between the ―Chief Accounting Officer‖ who is the Provincial
    Treasurer and Section 32(4)
    Officer and the ―Chief Accountable Officer‖ who is the Provincial
    Administrator and Section
    32(1) Officer.

    The Commission also appreciates the explanation that Finance Forms
    No.3 (FF3) can be
    certified by the Section 32(4) Officer, this is in particular regard
    to the approval and release
    of funds under Service Improvement Program.

    Findings of Fact Page 33

    PART 2: PURCHASE OF MOTOR VEHICLES BY THE OFFICE OF THE
    GOVERNOR, MADANG PROVINCE

    [2.7] MADANG PROVINCIAL GOVERNMENT 2014 BUDGET

    On 18 November 2013, the Madang Provincial Government passed the
    Revenue &
    Expenditure Estimates for the Year Ending 31 December 2014.

    The 2014 Madang Provincial Budget is a document that not only shows
    the estimates for the
    year 2014, but it also shows the expenditures and revenues for the
    years 2012 and 2013.

    On 16 January 2014, the Madang Provincial Government passed the
    Appropriation Act 2014.
    Below are extracts of the 2014 Budget.

    MADANG PROVINCIAL GOVERNMENT
    NO. 1 OF 2014
    A Bill for an Act
    Entitled

    APPROPRIATION ACT 2014

    Being an Act under Section 105 (A) of the Organic Law on Provincial
    Governments and Local Level
    Governments:

    1. To permit and control the spending of Finances of the Province
    and

    2. To specify the purposes for which the Finances of the Province
    may be spent and

  • Page 72 of 184

  • 3. To make provisions for excess or unexpected expenditures as and
    when necessary.

    Made by the Madang Provincial Assembly to come into operation on the
    1st day of January in year 2014.

    1. INTERPRETATION:

    (i) The document entitled ―YEAR 2014 PROVINCIAL ESTIMATES OF
    REVENUE AND
    EXPENDITURE‖ presented by the Chairman to the Madang
    Provincial Assembly on the
    occasion of the Year 2014 Expenditure and Revenue shall herein
    after be referred to as ―the
    Estimates‖.

    2. TOTAL APPROPRIATION K239,940,600.00 CONSISTS OF NATIONAL GRANTS
    K211,284,800.00 ROLLOVER FUNDS K13,413,600.00 AND PROVINCIAL
    INTERNAL
    REVENUE K15, 242,200.00

    1) The State shall grant to the Madang Provincial Government
    K211,284,800.00 as per Sections
    92, 93 and 97 of the amended Organic Law on Provincial and
    Local Level Governments
    Intergovernmental Financing Arrangements.

    2) The State shall grant to the nineteen (19) established and
    existing Local Level Governments
    a total sum of K4,298,600.00 as per the provisions under
    Sections 93 and 94 of the Organic
    Law on Provincial and Local Level Governments.

    3) Under Financial Instruction 1B (8) of 2010, the unspent
    grants or rollover funds are
    captured in the 2014 financial year estimates.

    4) The Madang Provincial Government shall raise its internal
    revenue of K15,242,200.00.

    5) The Local Level Governments shall raise their anticipated
    internal revenues.

    Findings of Fact Page 34

    6) The Chairman may authorize the issue and expenditures from
    the finances of the Provincial
    and Local Level Government for goods and services for the
    fiscal year commencing January
    of 2014 the sum of K239,940,600.00 as contained in Section
    2(3)(4) and (5).

  • Page 73 of 184

  • 3. APPROPRIATION:

    The sum estimated under Section 2 sub-section (1) to (5) is
    appropriated for the purpose of
    goods and services specified in relation to the fiscal year
    starting 1st January 2014.
    4. EXPENDITURE IN EXCESS OF APPROPRIATION:

    (1) Where and when insufficient appropriation exists in the
    estimate to meet expenditure
    under an item, the Chairman, upon the recommendation from the
    Chief Accountable
    Officer may direct that the expenditure shall be met by
    transferring appropriation from
    another item within the same activity.

    (2) Where insufficient appropriation exists in an estimate to
    meet an expenditure under an
    activity, the Chairman, upon recommendation from the Chief
    Accountable Officer, may
    direct that the expenditure shall;

    (a) Be met by transferring an appropriation from another
    activity within the same head
    of programme or

    (b) Be charged against the same activity by transferring
    from the activity entitled
    ―Administrator‘s Advance‖ (unforeseen expenditure) for
    appropriations under
    Section 2(3) and (4) and changed, partially in accordance
    with Section 5(2).

    (3) Where insufficient appropriation exists in the estimate to
    meet expenditure under a main
    programme, the Chairman, may authorize the transfer of money
    from one main programme
    to another of in his opinion it is expenditure to do so,
    subject to Section 5(1) and (2) of this
    Act, for appreciation under Section 2(3) and (4).

    5. EXPENDITURE NOT PROVIDED FOR:

    (1) Where no appropriation exists in the estimate to meet
    expenditure, the expenditure shall
    be charged against the activity entitled ―Administrator‘s
    Advance‖ upon approval by the
    Chairman of Finance.

    (2) Where no appropriation exists in the estimate to meet
    expenditure under a main
    programme, the Chairman may authorize transfer of money from
    one main programme to

  • Page 74 of 184

  • another programme if in his opinion, it is expedient to do so,
    subject to Section 5(1) of this
    Act.

    (3) Where a ―Change of Scope‖ is requested in the estimate the
    Chairman may authorize the
    expenditure upon endorsement by the Provincial Assembly after
    recommendations from
    the Provincial Executive Council.

    6. BUDGET REVIEW COMMITTEE:

    (1) There shall be a Budget Review Committee appointed by the
    Provincial Executive Council.

    (2) The Committee shall consist of the following persons:

    (a) the Provincial Administrator as the Chairman
    (b) the Deputy Administrator – Corporate and Technical
    Services
    (c) the Deputy Administrator – Community and Government
    Services
    (d) Director – Policy Coordination & Implementation
    (e) Principal Legal Officer
    (f) Director – HRM
    (g) Provincial Treasurer
    (h) The Chief Internal Auditor
    Findings of Fact Page 35

    (i) The Assistant Director Finance & Administration

    All members must be present to make the quorum.

    (3) The Committee shall report to the Finance & Planning
    Committee of the Provincial
    Executive Council.

    (4) All Quarterly or Special Reviews carried out by the
    Budget Review Committee shall be
    presented to the Finance and Planning Committee of the
    Provincial Executive Council for
    its vetting and/or approval before Warrants and Cash Fund
    Certificates are issued or
    transferred, disbursed, remitted or paid.

    (5) The Provincial Budget Officer is the Executive Officer to
    the Budget Review Committee.

    (6) Records of all meetings and decisions of the Budget
    Review Committee shall be kept by the
    Provincial Budget Officer and be made available upon
    request.

  • Page 75 of 184

  • 7. NOTICE TO PROVINCIAL CHIEF INTERNAL AUDITOR:

    The Chairman shall give notice to directions given by him
    under Section 4 and 5 to the
    Provincial Chief Internal Auditor within 30 days of giving
    such direction.

    Revenue Estimates for 2014
    Appropriation Bill (in thousands of Kina
    Code Description Actual
    Appropriation
    2012
    2013 2014
    National Government Grants 105,470.9
    209,385.9 211,284.8
    Recurrent Unconditional Grants to Provinces & 3,026.0
    4,961.8 6,828.9
    LLGs
    111/1 Administration Grant 811.1
    892.2 3,129.3
    111/9 Other Service Delivery Function Grant 2,214.9
    4,069.6 3,699.6
    Recurrent Conditional Grants to Provinces & LLGs95,131.0
    88,052.7 97,657.3
    116/3 Primary Production Function Grant 1,508.0
    2,497.8 3,174.6
    112/1 Staffing Grant 21,061.8
    20,675.5 20,675.5
    112/4 Teachers‘ Salaries (TSC) 52,283.0
    41,935.5 41,935.5
    111/2 Public Servants Leave Fares 1,225.4
    955.4 955.4
    111/4 Teachers Leave Fares 931.5
    1,711.5 1,711.5
    112/5 Village Courts Allowance 321.0
    453.2 453.2
    113/2 Health Function Grant 5,515.0
    5,954.8 8,497.6
    113/4 Education Function Grant 4,369.8
    5,161.7 8,148.0
    113/6 Transport/Infrastructure Maintenance Grant 7,571.6
    8,363.4 11,600.8
    113/5 Village Courts Function Grant 343.9
    343.9 505.2
    (Public Investment Programme) 1,750.0
    90,000.0 90,000.0
    Madang Provincial Government MNDG 1,750.0
    0.0 0.0
    118/2 District Support Improvement Program-Madang 0.0
    60,000.0 60,000.0
    117/1 Provincial Support Improvement Program-Madang 0.0
    30,000.0 30,000.0
    Infrastructure Development 0.0
    13,000.0 3,000.0

  • Page 76 of 184

  • 118/4 Manam Islanders Resettlement Project 0.0
    3,000.0 3,000.0
    Madang Town Road
    10,000.0 0.0
    District Services 2,000.0
    0.0 0.0
    District Dispensary Upgrade Program 200.0
    0.0 0.0
    District Dispensary Upgrade Program 600.0
    0.0 0.0
    District Dispensary Upgrade Program 1200.0
    0.0 0.0
    LLG Grants 3,563.9
    13,371.4 13,798.6
    114/7 LLG Grants 3,563.9
    3,871.4 4,298.6
    118/5 LLG Service Improvement Program 0.0
    9,500.0 9,500.0
    SUB TOTAL 105,470.9
    209,385.9 211,284.8
    2013 Roll Over Grants 5,517.5
    6,549.6 13,413.6
    120/1 Administration 319.3
    356.0 1,211.3
    120/2 Health Function 238.4
    435.6 0.0
    120/3 Education 280.8
    441.6 559.4
    120/4 Transport Infrastructure 1,581.1
    1,312.5 1,731.7

    Findings of Fact
    Page 36

    120/7 NADP 3,054.6 0.0 0.0
    120/8 Village Court Function 6.6 173.4
    36.0
    120/9 Primary Production 36.7 30.8
    266.4
    120/10 Teachers Leave Fares 0.0 116.6
    116.6
    120/12 LLG Grant 0.0 558.0
    890.2
    120/13 Public Service Support 0.0 153.4
    230.2
    120/14 LLG SIP 0.0 0.0
    100.0
    120/15 Manam Resettlement 0.0 0.0
    1,438.9
    120/16 Madang Town Road 0.0 0.0
    6,321.8
    120/17 Free Health Care 2013 0.0 0.0
    511.1

  • Page 77 of 184

  • INTERNAL REVENUE 8,219.8 20,739.0
    15,242.2
    601100/ Taxes 4,351.0 11,000.0
    10,954.2
    1 Goods and Services Tax 4,351.0 5,000.0
    9,795.3
    2 Bookmakers Tax 0.0 6,000.0
    1,158.9
    3 Gambling Tax 0.0 0.0 0.0
    602100/ Fees and Fines 2,334.0
    3,603.0
    1 Abattoirs Slaughter Fees 0.7 10.0 0.0
    2 Stale/Cancelled Cheque Fees 5.0 10.0 0.0
    3 Business Development Centre Fees 1.3 5.0 0.0
    4 Education Resource Centre Fees 0.0 4.0 0.0
    5 Driving License Fees 176.1 300.0
    300.0
    6 Heavy Motor Vehicle Registration Fees 54.1 200.0
    200.0
    7 Motor Vehicle Registration Fees 966.3 1,320.0
    2,350.0
    8 PMV License Fees 56.4 120
    120.0
    9 MVIL Commission Fees 24.3 0.0
    48.0
    10 Land Transport Board Control Fees 92.0 90.0
    300.0
    11 Liquor Licensing Fees 137.7 250.0
    250.0
    12 MPG Driving Permit and ID Fees 1.5 5.0 5.0
    15 Tender Board Fees 14.7 15.0
    15.0
    16 Pre-qualification and Arch-Design Fees1.1 5.0
    15.0
    603100/ Business Receipts 46.6 7,075.0
    355.0
    1 Cash Crop Sales 0.0 400.0 0.0
    2 Disposals of Assets 19.3 30.0
    30.0
    3 Export Log Levy 10.0 70.0
    300.0
    4 Fish Landing Fees 0.0 1,500.0 0.0
    5 MPG Operating Account Interest 0.0 50.0 0.0
    6 Minor Power House 1.8 2.0 2.0
    7 Information Printing Charges 0.0 3.0 3.0
    8 MPG Housing Rentals 20.0 20.0
    20.0
    9 MCC Grant 0.0 5,000.0 0.0
    604100/ Miscellaneous 2,072.5 330.0
    330.0
    1 Former Years Appropriation 58.7 300.0
    300.0
    3 2011 PDIP Rollover 2,000.9 0.0 0.0

  • Page 78 of 184

  • 4 Sundry Revenue 12.9 30.0
    30.0
    TOTAL REVENUE
    119,208.2236,674.5239,940.6

    In the 2014 Provincial Budget, it was revealed that K60 million was
    allocated to the six
    Districts, with each District allocated K10 million each. While
    K500,000 was allocated to
    the 19 LLGs totaling K9.5 million. Below are tables for each
    District and LLG outlining
    allocations for the years 2012, 2013 and 2014.

    1. Bogia District
    Activity: DSIP – Bogia Function: Other Services
    Activity Type: Project Program: District Support
    Description Item 2012 2013
    2014
    283-2010-8901 District Support Grants (SSG) and Rural
    Action Program [DSIP]
    Other Operational Expenses135
    10,000.0

    10,000.0
    Grand Total 0.0 0.0
    10,000.0

    Findings of Fact
    Page 37

    Activity: LLGSIP – Almami Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2011-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grant]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Iabu Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2012-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grant]

  • Page 79 of 184

  • Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Yawar Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2013-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grant]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    2. Madang District

    Activity: DSIP – Madang Urban Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2020-8901 District Support Grants (SSG) and
    Rural Action Program [DSIP]
    Other Operational Expenses 135
    10,000.0

    10,000.0
    Grand Total 0.0 0.0
    10,000.0

    Activity: LLGSIP – Ambenob Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2021-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

  • Page 80 of 184

  • Activity: LLGSIP –Transgogol Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2022-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP –Madang Urban Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2023-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Findings of Fact
    Page 38

    3. Middle Ramu District

    Activity: DSIP – Middle Ramu Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2030-8901 District Support Grants (SSG) and
    Rural Action Program [DSIP]
    Other Operational Expenses 135
    10,000.0

    10,000.0
    Grand Total 0.0 0.0

  • Page 81 of 184

  • 10,000.0

    Activity: LLGSIP – Arabaka Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2031-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Josephstaal Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2032-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Simbai Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2033-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Kovon Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2034-8901 District Support Grants (SSG) and Rural

  • Page 82 of 184

  • Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    4. Rai Coast District

    Activity: DSIP – Raikos Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2040-8901 District Support Grants (SSG) and
    Rural Action Program [DSIP]
    Other Operational Expenses 135
    10,000.0

    10,000.0
    Grand Total 0.0 0.0
    10,000.0

    Activity: LLGSIP – Saidor Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2041-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Findings of Fact
    Page 39

    Activity: LLGSIP – Naho Rawa Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2042-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]

  • Page 83 of 184

  • Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Astrolabe Bay Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2043-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Nayudo Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2044-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    5. Sumkar District

    Activity: DSIP – Sumkar Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2050-8901 District Support Grants (SSG) and
    Rural Action Program [DSIP]
    Other Operational Expenses 135
    10,000.0

    10,000.0
    Grand Total 0.0 0.0
    10,000.0

  • Page 84 of 184

  • Activity: LLGSIP – Karkar Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2051-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: Karkar LLGSIP (2013 Rollover) Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2051-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants
    (Rollover 2013)]
    Other Operational Expenses135
    100.0

    100.0
    Grand Total 0.0 0.0
    100.0

    Activity: LLGSIP – Sumgilbar Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2052-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Findings of Fact
    Page 40

  • Page 85 of 184

  • 6. Usino – Bundi District

    Activity: DSIP – Usino-Bundi Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2060-8901 District Support Grants (SSG) and
    Rural Action Program [DSIP]
    Other Operational Expenses 135
    10,000.0

    10,000.0
    Grand Total 0.0 0.0
    10,000.0

    Activity: LLGSIP – Bundi Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2061-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Usino Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2062-8901 District Support Grants (SSG) and Rural
    Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Activity: LLGSIP – Gama Function: Other
    Services
    Activity Type: Project Program: District
    Support
    Description Item 2012
    2013 2014
    283-2063-8901 District Support Grants (SSG) and Rural

  • Page 86 of 184

  • Action Program [LLGSIP Grants]
    Other Operational Expenses135
    500.0

    500.0
    Grand Total 0.0 0.0
    500.0

    Comments

    The Commission‘s investigation it was revealed that the Madang
    Provincial Assembly and
    the Provincial Government passed the Appropriation Act 2014 that did
    not capture the
    intention of Section 187C(1) and (4) of the Constitution, which
    state:

    187C. Constitution, functions, etc., of Provincial Governments
    and Local-level Governments.

    (1) Subject to this Part, an Organic Law shall make
    provision in respect of the constitution,
    powers and functions of a Provincial Government or a
    Local-level Government.

    (4) An Organic Law shall make provision for and in respect
    of—

    (a) grants by the National Government to Provincial
    Governments and Local-level
    Governments; and

    (b) subject to Subsection (4A), the imposition,
    collection and distribution of
    taxation by Provincial Governments and Local-
    level Governments,

    and may make other financial provisions for Provincial
    Governments and Local-level
    Governments, to an extent reasonably adequate for the
    performance of their functions.

    The Commission‘s investigation revealed that all the six Districts
    and 19 LLGs in Madang
    Province forwarded their plans to the Provincial Planner to include
    as part of the Provincial
    Budget. After the Provincial Planner has incorporated all the
    Districts and LLG‘s plans into
    one Provincial Plan, it is then submitted to the Provincial Treasury
    who is required to

    Findings of Fact
    Page 41

  • Page 87 of 184

  • finalize and endorse the plan. This would be in line with Section
    106 of the Organic Law on
    Provincial Governments and Local Level Governments which state:

    106. Provincial Planning and Data System.

    (1) There shall be established in each province an extended
    service of the
    Department responsible for planning matters and of the
    National Statistical
    Office.

    (2) The functions of these services are to establish and
    maintain an effective and
    efficient provincial and local-level planning and data
    system.

    This aspect of the budgetary process is important as it ties down
    the activities to estimates
    that are reflected in the annual Provincial Budget. The Provincial
    Treasurer incorporates
    estimated costing to all the activity items tying down the
    Provincial Plan to the Budget.

    It is common practice for the Provincial Treasury to include in the
    current budget, snap
    shots of the previous year‘s budget in order to get an accurate
    estimate of what was spent
    and what was unspent.

    However, during his interview Mr. Simon Simoi, Director, Planning &
    Co-ordination
    Division, revealed that since 2012, the Madang Provincial Government
    did not have a
    Provincial Plan on which to base their expenditure on.

    Mr. Simoi stated that since there was no Provincial Plan, funds were
    not tied down to any
    plan or activity at the Provincial level. Hence, the Provincial
    Government and the Provincial
    Administration on many occasions overspent on unbudgeted activities.
    Sections 105 and
    105A of the Organic Law on Provincial Governments and Local Level
    Governments state:

    105 Financial Responsibility

    (1) Subject to this Organic Law and other Constitutional Laws,
    a province shall exercise
    full autonomy within the powers and functions as provided for
    in this Organic Law
    including financial responsibility.

  • Page 88 of 184

  • (2) An Act of the Parliament shall make provision for the
    details of financial autonomy of
    a Provincial Government and a Local-level Government.

    105A Financial Responsibility

    (1) For each fiscal year there shall be a Provincial Government
    and a Local-level
    Government Budget comprising—

    (a) estimates of—

    (i) finances proposed to be raised; and
    (ii) expenditure proposed for the provincial and district
    administration; and
    (iii) expenditure proposed for the rural services; and
    (iv) expenditure proposed for the urban services; and

    (b) appropriation for the services of that year in respect
    of Subsection (1); and

    (c) such other supplementary Budgets and Appropriations as
    are necessary.

    (4) If, at the beginning of a fiscal year, the Provincial
    Government and Local-level
    Government have not made provision for public expenditure for
    their respective
    services for that year, the Provincial Executive Council and
    Local-level Government,
    as the case may be, may, without authorization other than
    this Section but in

    Findings of Fact Page 42

    accordance with an Act of the Parliament, expend amounts
    appropriated out of the
    General Revenue Fund for the purpose not exceeding in total
    one-third of its
    respective budgeted expenditure during the immediately
    preceding fiscal year.

    The Commission noted that the Madang Provincial Government
    Appropriation Act 2014
    passed by the Provincial Assembly in 2014 contradicted the Organic
    Law on Provincial
    Governments and Local Level Governments and the Public Finance
    (Management) (Amendment) Act 1995
    (No.4 of 2013). In particular Sections 4 and 5 of the Appropriation
    Act 2014 state:

    4. EXPENDITURE IN EXCESS OF APPROPRIATION:

  • Page 89 of 184

  • (1) Where and when insufficient appropriation exists in the
    estimate to meet expenditure
    under an item, the Chairman, upon the recommendation from the
    Chief Accountable
    Officer may direct that the expenditure shall be met by
    transferring appropriation from
    another item within the same activity.

    (2) Where insufficient appropriation exists in an estimate to
    meet an expenditure under an
    activity, the Chairman, upon recommendation from the Chief
    Accountable Officer, may
    direct that the expenditure shall;

    (a) Be met by transferring an appropriation from another
    activity within the same head
    of programme or

    (b) Be charged against the same activity by transferring from
    the activity entitled
    ―Administrator‘s Advance‖ (unforeseen expenditure) for
    appropriations under
    Section 2(3) and (4) and changed, partially in accordance
    with Section 5(2).

    (c) Where insufficient appropriation exists in the estimate
    to meet expenditure under
    a main programme, the Chairman, may authorize the transfer
    of money from one
    main programme to another of in his opinion it is
    expenditure to do so, subject to
    Section 5(1) and (2) of this Act, for appreciation under
    Section 2(3) and (4).

    5. EXPENDITURE NOT PROVIDED FOR:

    (1) Where no appropriation exists in the estimate to meet
    expenditure, the expenditure shall
    be charged against the activity entitled ―Administrator‘s
    Advance‖ upon approval by the
    Chairman of Finance.

    (2) Where no appropriation exists in the estimate to meet
    expenditure under a main
    programme, the Chairman may authorize transfer of money from
    one main programme to
    another programme if in his opinion, it is expedient to do so,
    subject to Section 5(1) of
    this Act.

    (3) Where a ―Change of Scope‖ is requested in the estimate the
    Chairman may authorize the
    expenditure upon endorsement by the Provincial Assembly after
    recommendations from

  • Page 90 of 184

  • the Provincial Executive Council.

    Sections 4 and 5 of the Appropriation Act 2014 are inconsistent with
    Section 105A (4) of the
    Organic Law on Provincial Governments and Local Level Governments
    which states:

    105A. Financial responsibility.

    (4) If, at the beginning of a fiscal year, the Provincial
    Government and Local-level
    Government have not made provision for public expenditure for
    their respective services
    for that year, the Provincial Executive Council and Local-
    level Government, as the case
    may be, may, without authorization other than this Section but
    in accordance with an
    Act of the Parliament, expend amounts appropriated out of the
    General Revenue Fund
    for the purpose not exceeding in total one-third of its
    respective budgeted expenditure
    during the immediately preceding fiscal year.

    Findings of Fact Page 43

    The Provincial Executive Council (PEC) was not involved in approving
    the transfer of
    appropriation from one item to another. The Chairman of the
    Provincial Finance and
    Planning, who in this case is the Hon. Jim Kas, then MP, Governor,
    was mandated to
    approve all the movement of funds from one item to another or in
    some cases movement of
    funds to fund unbudgeted activities. One such unbudgeted activity
    was the purchase of the
    19 motor vehicles.

    An analysis of the budget indicated that there was a rollover of
    K100,000 as unspent
    LLGSIP funds from 2013 to 2014 in accordance with the Appropriation
    Act 2014 and Financial
    Instruction 1B(8) of 2010. The rollover funds were in addition to
    the LLGSIP of K9.5 million
    as outlined below:

    Code Description Actual
    Appropriation
    2012
    2013 2014
    (Public Investment Programme) 1,750.0
    90,000.0 90,000.0
    Madang Provincial Government MNDG 1,750.0 0.0

  • Page 91 of 184

  • 0.0
    113/6 Transport/Infrastructure Maintenance Grant 7,571.6
    8,363.4 11,600.8
    118/2 District Support Improvement Program-Madang 0.0
    60,000.0 60,000.0
    117/1 Provincial Support Improvement Program-Madang0.0
    30,000.0 30,000.0

    LLG Grants 3,563.9
    13,371.4 13,798.6
    114/7 LLG Grants 3,563.9
    3,871.4 4,298.6
    118/5 LLG Service Improvement Program 0.0
    9,500.0 9,500.0
    2013 Roll Over Grants 2012
    2013 2014
    120/4 Transport Infrastructure 1,581.1
    1,312.5 1,731.7
    120/12 LLG Grant 0.0
    558.0 890.2
    120/14 LLG SIP 0.0 0.0
    100.0

    An analysis of the Madang Provincial Government’s Appropriation Act
    2014 revealed that there
    were no specifically allocated funds for the refurbishment of the
    Provincial Government
    vehicle fleets.

    The Commission‘s investigation revealed that the Provincial
    Government Budget for the
    years 2012 and 2013 did not contain any estimates to indicate
    whether or not there was any
    funding allocated for this activity. Then in 2014, the Provincial
    Government allocated funds
    under the DSIP and LLGSIP as indicated in the above tables.

    The Commission investigation also revealed that the Provincial
    Government, together with
    the Provincial Administration and Provincial Treasury had applied
    the wrong and outdated
    Financial Instruction. That is, under Section 117 of the Public
    Finance (Management)
    (Amendment) Act 1995 (No.4 of 2013), the Department of Finance
    issues Financial
    Instructions under the hand of the Secretary for the Department of
    Finance to enable the
    facilitation of funds to rollover to the next fiscal year in order
    to complete outstanding
    projects.

    Then Hon. Governor stated under Oath during his interview that he
    told all the 19
    Presidents who were present during the JPP&BPC that he would

  • Page 92 of 184

  • purchase vehicles for all
    the 19 Presidents. The Hon. Governor further stated that the funding
    would come from his
    PSIP funds. He further stated that the source of funding for the
    purchase of the vehicles
    would be from his PSIP funds. However, analysis of the JPP&BPC
    Decision No.01/02/2014,
    made in Meeting No.01/2014 revealed that the JPP&BPC approved for
    K100,000.00 to be
    taken out from the LLG funds to go toward the purchasing of the
    vehicles.

    Findings of Fact
    Page 44

    However, the Commission‘s investigation revealed that the funds that
    were used to
    purchase the 19 vehicles were not from the Governor‘s component of
    the PSIP funds, but
    from the DSIP and LLGSIP. This was also confirmed when he stated
    during the JPP&BPC
    Meeting No.01/2014, each of the Presidents contributed K100,000.00
    to purchase the other
    vehicles.

    The Commission‘s investigation also revealed that then Hon.
    Governor, misled the Members
    of the JPP&BPC by stating that the 19 motor vehicles would be
    purchased from his
    component of the PSIP funds. The decision to purchase the motor
    vehicles was made
    outside of the Madang Provincial Government’s Appropriation Act
    2014. Hence, this was an
    unbudgeted activity.

    The Commission‘s investigation also revealed that the Madang
    Provincial Government
    passed an Appropriation Act that was contradictory to the intentions
    of Section 187C(4) of
    the Constitution, Sections 105 and 105A of the Organic Law on
    Provincial Governments and Local
    Level Governments, the Public Finance (Management) (Amendment) Act
    1995 (No.4 of 2013) and the
    Financial Instruction No.01/2013.

    The Commission‘s investigation further revealed that the Code
    283-2063-8901-135 that was
    used by the Provincial Administration indicated the following:

    • 283 mean that the funds were from the Madang Provincial
    Government.

  • Page 93 of 184

  • • 8901 means that the funding is derived from the DSIP.

    • 135 means that all SIP funds are categorized and itemized under
    the PGAS
    expenditure.

    Therefore, this further confirmed that the funding of the purchase
    of the 19 motor vehicles
    was not from the Hon. Governor‘s PSIP funds but from the DSIP and
    LLGSIP funds.

    [2.8] JOINT PROVINCIAL PLANNING & BUDGET PRIORITY COMMITTEE
    MEETING DECISION No. 01/02/2014

    On 1 January 2013, Mr. Paul Sai‘i, then Secretary, Department of
    Implementation and Rural
    Development approved and released the Department‘s PSIP, DSIP and
    LLGSIP
    Administrative Guidelines. Below is an extract of the Guidelines:

    Section 4 Sectorial Development Funds Allocation and Disbursement
    4.10 Funding to Provinces, Districts and Local Level
    Governments aims to empower
    effective participation to diversify the economy and expand
    productive base,
    thereby improving livelihoods.

    4.11 NEC Decision NG 102/2012 of 30 October 2012 directed the
    PSIP, DSIP and LLGSIP
    funds be broken down into the following six (6) sectors:

    • 30% Infrastructure Services Support;
    • 20% Health Services Improvement;
    • 20% Education Services Support;
    • 10% Law & Justice Services;
    • 10% Economic Sector Support; and

    Findings of Fact Page 45

    • 10% Administration.
    The NEC Decision approved the increase in current
    Administrative Fees from 3.0% up to 10.0%
    of the total Appropriation. This 10% is to be broken down into
    the following categories:

    • 3% General Administration Component for
    Administration Support including
    Joint Provincial/District Planning and Budget
    Priority Committees (JPP&BPCs
    and JDP&BPCs) and Provincial Project Management
    Team (PPMT), District

  • Page 94 of 184

  • Project Management Team (DPMT);

    • 3% Support Fund for travel and project and
    project identification and
    monitoring activities by the Chairperson of
    JPP&BPC, Chairperson of JDP&BPC
    and the LLG Council Chairperson or their
    delegates; and

    • 4%Project Scoping and Mobilization Costs and
    related activities by PPMT,
    DPMT and PWU as defined in Project Identification
    Documents (PID), Project
    Formulation Documents (PFD) approved by JPP&BPC
    and JDP&BPC for
    scoping and implementation, respectively;

    4.12 Disbursement of Funds is upon availability of Cash
    Flow Statement and funding on
    a quarterly basis.

    4.13 Funds for PSIP, DSIP and LLGSIP may be moved from
    one priority section to
    another except for Administration component,
    provided that the following
    conditions are met:

    • There must be JPP/JDP&BPC/LLG Council approval in
    line with 5 Year
    Development Plan;

    • This/these must be justified in a letter to the
    Minister of Planning;

    • Minister of Planning assesses and may/may not
    approve the submission in
    consultation with DIRD and DoF Secretaries.

    On 2 March 2014, the Madang JPP&BPC held its Meeting No.01/2014 held
    in the Hon. Jim
    Kas, then MP, Governor‘s Office. In its Resolution No.01/02/2014, it
    resolved for K2 million
    to be approved to purchase motor vehicles for the 19 LLGs. The motor
    vehicles were to be
    registered under Madang Provincial Government and the vehicles were
    to be coordinated by
    Madang Provincial Administration.

    Comments

    The Commission‘s investigation revealed that there was a JPP&BPC
    meeting held in the
    Hon. Governor‘s office in Madang Province on Sunday 2 March 2014 at
    3:55pm. The

  • Page 95 of 184

  • Meeting was attended by all the LLG Presidents, an Appointed
    Representative and Mr.
    Lange, who represented the Provincial Administration as the Chief
    Executive Officer of the
    Committee. Those present at the Meeting No. 01/2014 were:

    2.0 MEMBERS PRESENT

    (i) Hon. Jim Kas, MP – Governor Madang
    Province & Chairman
    (ii) Hon. Anton Yagama, MP – Member for Usino/
    Bundi & Deputy Chairman
    (iii) Hon. Joe Maira, MPA – President –
    Arabaka LLG
    (iv) Hon. Peter Bariau, MPA – President – Yawar
    LLG
    (v) Hon. Joe Y. Yama, MPA – Mayor – MULLG
    (vi) Hon. Samuel Nessau, MPA – President Naho-
    Rawa LLG
    (vii) Hon. Elijah Kas, MPA – President – Gama
    LLG
    (viii) Hon. Andrew Mapio, MPA – Appointed
    Representative – CSO

    Mr. Bernard Lange – Provincial
    Administrator, Chief Advisor (CEO)

    Findings of Fact
    Page 46

    OBSERVERS

    (ix) Hon. Rama Marisan, MPA – Deputy Governor–
    President– Sumgilbar LLG
    (x) Hon. Amili Deide, MPA – President –
    Astrolabe Bay LLG
    (xi) Hon. Erick Pekah, MPA – President –
    Almami LLG
    (xii) Hon. Martin Ururu, MPA – President – Iabu
    LLG
    (xiii) Hon. Nasare Lato, MPA – President –
    Ambenob LLG
    (xiv) Hon. Bernard O. Koita, MPA – President –
    Transgogol LLG
    (xv) Hon. Anton Karukai, MPA – President –
    Josephtaal LLG
    (xvi) Hon. Joseph Guasilu, MPA – President – Usino
    LLG
    (xvii) Hon. Joseph Dimiang, MPA – President – Kovon
    LLG
    (xviii) Hon. Nathan Kolai, MPA – President –
    Simbai LLG

  • Page 96 of 184

  • (xix) Hon. Baza Yowa, MPA – President –
    Nayudo LLG
    (xx) Hon. Roy Anir, MPA – President –
    Raicoast LLG
    (xxi) Hon. Ben B. Naing, MPA – President –
    Karkar LLG
    (xxii) Hon. Victor M. Kavare, MPA – President – Bundi
    LLG

    The composition of the JPP&BPC was contrary to Section 25(2) of the
    Organic Law on the
    Provincial Governments and Local Level Governments which states
    that:

    25. Provincial Executive Council Committees.

    (2) The Joint Provincial Planning and Budget Priorities
    Committee shall consist of –

    (a) a member of the Provincial Executive Council
    appointed by the Governor, who
    shall be the Chairman; and

    (b) the Chairman (or his nominee) of each
    District Development Authority; and

    (c) any other members not exceeding three in
    number appointed, on an ad hoc
    basis, the Provincial Executive Council.

    The Commission‘s investigation also revealed that the JPP&BPC
    composition was made up
    of politicians and one public servant. There was no Chairman from
    the other five JDP&BPC
    present in the meeting, therefore there was no quorum

    The Commission‘s investigation also revealed that then Hon. Governor
    told the members of
    the JPP&BPC that he had allocated the PSIP funds into the following
    sectors:

    3.1.1 Governor‘s Decision for the PSIP as follows:

    Infrastructure – 62%
    Education – 18%
    Health – 4%
    Agriculture – 3%
    Law & Justice – 3%
    Administration – 3%
    General Administration – 3%
    Electoral – 3%

    The decision by then Hon. Governor, to allocate the PSIP funds as
    indicated above was

  • Page 97 of 184

  • contrary to the NEC Decision No. 102/2012 of 30th October 2012. That
    is, the PSIP, DSIP
    and LLGSIP funds to be allocated in the following six (6) sectors:

    • 30% Infrastructure Services Support;
    • 20% Health Services Improvement;

    Findings of Fact
    Page 47

    • 20% Education Services Support;
    • 10% Law & Justice Services;
    • 10% Economic Sector Support; and
    • 10% Administration.

    The Commission‘s investigation further revealed that the JPP&BPC
    decision to purchase
    the vehicles was made after then Hon. Governor, informed those who
    were present in the
    meeting that:

    4.0 LLG PRESIDENTS VEHICLES – K2.0 MILLION
    The Chairman informed the Members that the Provincial
    Government, through the Governor‘s
    PSIP will purchase official vehicles for all the Presidents
    that is K100,000.00 per president‖.

    He also mentioned that this is a package and it is up to
    individual presidents to use their own
    funds to purchase other vehicles‖.

    Then Hon. Governor, directly informed those present in the meeting
    that all 19 LLG
    Presidents would each receive their motor vehicles and this would be
    deducted from the
    Governor‘s PSIP Grants.

    In order to honour this commitment, the Madang Provincial
    Administration also diverted
    funds from the DSIP Grants apart from the LLGSIP Grants.

    [2.9] PURCHASE OF 19 MOTOR VEHICLES FOR THE 19 LOCAL LEVEL
    GOVERNMENT PRESIDENTS

    On 6 March 2014, Mr. Lange, approved Financial Directive No.1/2014:
    Appointment of
    Authorized Requisition Officers, Financial Delegates and Section 32
    Officers under 283
    series.

    On 13 March 2014, Mr. Thomas Warr, the Authorised Requisition
    Officer raised a

  • Page 98 of 184

  • Requisition for Expenditure Form requesting for K1,968,612.61 to be
    released to pay for 19
    motor vehicles for the 19 LLG Presidents. Mr. Lange, then Provincial
    Administrator and
    Section 32 Officer approved it while Mr. Dunstan as the Financial
    Delegate, approved the
    General Expenses Form and committed the funds.

    On 26 March 2014, Mr. Dunstan wrote to Mr. Saul and advised that
    both Mr. Pasum, as the
    Authorized Requisition Officer, Office of the Governor, Madang
    Province and himself were
    signatories to 783 and 283 series of funds activities.

    Comments

    Mr. Dunstan signed documents as the Financial Delegate, however he
    did not write down
    his Cash Fund Certificate number as Financial Delegate. This Cash
    Fund Certificate
    number would have identified his financial delegation authority.
    This means that he did not
    have the financial delegation to sign off on the requisition forms
    and the general expenses
    forms because his limit for financial delegation was only K2,000.00
    as per the Financial
    Directive No.2/2013.

    Findings of Fact Page 48

    [2.10] AUTHORITY TO PRE-COMMIT (APC)

    On 14 April 2013, the National Parliament passed the amendments to
    Section 47B of the
    Public Finance (Management) (Amendment) Act 1995 (No.4 of 2013).
    These amendments increased
    the kina threshold amount for the Authority to Pre-Commit (APC)
    expenditure from
    K300,000 to K500,000 at the Provincial level.

    Comments

    The Financial Instructions states that the purpose of an APC is to
    ensure proper
    accounting, management and reporting is maintained on the Pre-
    Commitment of
    Expenditure at all levels of the National, Provincial and Local-
    Level Governments.

    The Commission‘s investigation revealed that there was no APC issued

  • Page 99 of 184

  • by the Provincial
    APC Committee to commit the funds needed to fund the activity as
    required under Section
    47B of the Public Finance (Management)(Amendment) Act 1995 (No.4 of
    2013).

    47B. Authority to Pre-commit Expenditure.

    (1) The Departmental Head of the Department responsible for
    financial management may issue
    to a Departmental Head an Authority to Pre-commit Expenditure
    in relation to the purchase
    of property or stores or to the supply of goods or services
    where the Departmental Head of
    the Department responsible for financial management is
    satisfied that—

    (a) in the case of proposed expenditure exceeding K100,000.00—

    (i) the provisions of this Part have been complied with in
    relation to the purchase or
    supply; and
    (ii) funds will be available to meet the proposed schedule
    of payments for the
    purchase or supply; and

    (b) in the case of proposed expenditure not exceeding
    K500,000.00, the circumstances of
    the proposed expenditure are such that it is appropriate to
    authorize the Department,
    to the Departmental Head of which the Authority to Pre-
    commit Expenditure was
    granted, to enter into a contract for the purchase of
    property or stores or for the
    supply of goods or services notwithstanding that the full
    amount of funds to meet the
    payment required under the contract is not immediately
    available but it is within the
    appropriation for the year to which the Authority to Pre-
    commit Expenditure relates
    for the item to which it relates.

    (2) An Authority to Pre-commit Expenditure under Subsection (1)
    shall specify—

    (a) the purchase of property or stores or the supply of goods
    or services to which it
    relates; and
    (b) the maximum amount to which the Authority extends.

    (3) Subject to Subsection (4), an Authority to Pre-commit
    expenditure under Subsection (1)
    authorizes the execution, in accordance with and subject to
    compliance with the procedures

  • Page 100 of 184

  • specified in this Part, of a contract for the purchase of
    property or stores or for the supply of
    goods and services specified in the Authority to the extent of
    an amount not exceeding the
    maximum amount specified in the Authority.

    (4) A contract under Section 47 shall not be entered into unless—

    (a) an Authority to Pre-commit Expenditure under Subsection
    (1) relating to the contract
    has been issued; and
    (b) all other requirements of this Part relating to the
    contract have been complied with.

    The Commission‘s investigation also revealed that Mr. Lange did not
    conduct due diligent
    checks to ensure that all appropriate and authorised persons had
    signed on the documents

    Findings of Fact Page 49

    as outlined in Section 5(a),(b),(c),(d),(e) and (f) of the Public
    Finance (Management)
    (Amendment) Act 1995 (No.4 of 2013) below:

    5. Responsibilities of Heads of Departments.

    (1) Each Departmental Head is responsible for ensuring that, in
    relation to the Department of
    which he is Head—

    (a) the provisions of this Act are complied with; and
    (b) all accounts and records relating to the functions and
    operations of the Department
    are properly maintained; and
    (c) all necessary precautions are taken to safeguard the
    collection and custody of public
    moneys; and
    (d) all expenditure is properly authorized and applied to the
    purposes for which it is
    appropriated; and
    (e) there is no over commitment of funds and a review is
    undertaken each month to
    ensure that there is no over-expenditure or over commitment
    and the collection of
    public moneys is according to approved plans and estimates;
    and
    (f) all expenditure is incurred with due regard to economy,
    efficiency and effectiveness
    and the avoidance of waste; and

    [2.11] PROVINCIAL SUPPLY & TENDERS BOARD DECISION No. 04/05/2014

  • Page 101 of 184

  • On 3 April 2014, Mr. Lange wrote to the Provincial Supply & Tenders
    Board (PSTB)
    members and advised them of their fifth meeting of 2014 that was
    scheduled for 1:30pm on
    Monday 7 April 2014.

    On 7 April 2014, Mr. Lange, as then Chairman for the Madang PSTB
    certified the PSTB
    Special Meeting No.05/2014 and Decision No.04/05/2014, where it
    endorsed the JPP&BPC
    Resolution No.01/02/2014 to purchase 19 motor vehicles from Ela
    Motors Ltd as the only
    supplier for K2 million.

    Comments

    Then Hon. Governor stated during his interview that the source of
    funding for the purchase
    of the vehicles was from the PSIP. In order to fulfill this
    political commitment, several
    activities should have taken place in order to facilitate this
    commitment as outlined below.

    1. The JPP&BPC to meet in order to formalize this political
    commitment. The
    JPP&BPC decision should specify how much will be allocated in
    order to purchase
    vehicles and from where these funds will be derived.

    2. A Technical Evaluation Committee (TEC) should have assessed all
    bids and
    quotations and provide technical advice to the PSTB through a
    report for the Top
    Management Team to consider.

    3. The Top Management Team to approve a draft list of vehicles
    made on 11 February
    2013 for the Provincial Administration to purchase 28 motor
    vehicles. This report
    becomes part of the TEC report will be submitted to the PSTB.

    4. Since the amount is above the K5,000.00 an APC form is filled
    by the originating
    office and submitted to the Provincial APC Committee. It is the
    role of the Provincial
    APC Committee to identify monies to fund the project.

    Findings of Fact Page 50

  • Page 102 of 184

  • 5. The APC form is returned to the Office of the Governor and the
    Finance Forms are
    attached and submitted to the Office of the Provincial Treasurer
    to process the
    payment.

    6. Upon establishing the funding of the project, the PSTB meets
    and calls for an open
    tender on the contract. Inviting Bidders to bid for the
    contract. The bids are
    collected by the TEC and evaluated.

    7. The TEC produces a report with recommendations and submits it
    to the PSTB to
    deliberate on.

    8. The PSTB then deliberates on the TEC report and makes a
    decision to award the
    contract on the project to the successful Bidder.

    9. Upon receipt of the PSTB decision, the Provincial
    Administration and the Office of
    the Governor for Madang Province then raises the Requisition for
    Expenditure Form
    and the General Expenses Form. These Finance Forms must have the
    authorized
    financial delegate signatures on them to validate them.

    10. The Provincial Administrator upon assessment of the Finance
    Forms and satisfied
    that the process had been complied with in accordance with the
    Public Finance
    (Management) (Amendment) Act 1995 (No.4 of 2013) approves the
    payment as the
    Section 32 Officer.

    The process described above was not followed because the Provincial
    Administration made
    a list of motor vehicles to be purchased and that list was forwarded
    to the Office of the
    Governor to be formalized and processed.

    The Commission‘s investigation revealed that the manner in which the
    payment voucher for
    the purchase of the vehicles was made was highly irregular. That is,
    Mr. Dunstan, whose
    Financial Delegation was K2,000 endorsed and approved the
    Requisition for Expenditure
    Form and the General Expenses Form.

    The Commission noted that the PSTB‘s decision to endorse and
    facilitate the JPP&BPC‘s
    Resolution No.01/02/2014 was highly irregular as the payment and
    purchase of the 19 motor

  • Page 103 of 184

  • vehicles had already taken place.

    The Commission‘s investigation also revealed that there was no TEC
    report that the PSTB
    could consult in order to make a decision. In this case, the
    Provincial Government and the
    Administration purchased the vehicles before going back to comply
    with the procurement
    process. Section 40(1)(b) of the Public Finance (Management)
    (Amendment) Act 1995 (No.4 of 2013)
    which states:

    40. Tenders for property, stores, works and services.

    (1) Subject to—
    (a) this section; and
    (b) Section 41,

    Tenders shall be publicly invited and contracts let for the purchase
    or disposal of property or stores or
    the supply of works and services the estimated cost of which exceeds
    the prescribed amount.

    (2) In relation to the purchase or disposal of property and
    stores and the supply of works and
    services the estimated cost of which does not exceed the
    prescribed amount, the provisions of
    the Financial Instructions shall apply.

    Findings of Fact Page 51

    3. FINDINGS

    [3.1] FINDING No. 1

    In the opinion of the Ombudsman Commission the Madang Provincial
    Government
    Appropriation Act 2014 was defective as it was developed contrary to
    the intent of the
    Constitution and contradicted the Organic Law on the Provincial
    Governments and
    Local Level Governments and the Public Finance (Management)
    (Amendment) Act
    1995 (No.4 of 2013).

    Reasons

  • Page 104 of 184

  • 1. On 16 January 2014, the Madang Provincial Government passed the
    Appropriation Act
    2014 outlining the Provincial Government‘s estimates for the
    year 2014. However,
    evidence shows that the process that should have been followed
    leading up to the
    compilation of the Provincial Budget was not complied with.

    Section 187C (4) of the Constitution and Section 106 of the
    Organic Law on Provincial
    Governments and Local Level Governments states:

    187C. Constitution, functions, etc., of Provincial Governments
    and Local-level Governments.

    (1) Subject to this Part, an Organic Law shall make provision
    in respect of the constitution,
    powers and functions of a Provincial Government or a Local-
    level Government.

    (4) An Organic Law shall make provision for and in respect of—

    (a) grants by the National Government to Provincial
    Governments and Local-level
    Governments; and

    (b) subject to Subsection (4A), the imposition, collection
    and distribution of
    taxation by Provincial Governments and Local-level
    Governments,

    and may make other financial provisions for Provincial
    Governments and Local-level
    Governments, to an extent reasonably adequate for the
    performance of their functions.

    Section 106 of the Organic Law on Provincial Governments and
    Local Level Governments which
    state:

    106. Provincial Planning and Data System.

    (1) There shall be established in each province an
    extended service of the
    Department responsible for planning matters and of the
    National Statistical
    Office.

    (2) The functions of these services are to establish and
    maintain an effective and
    efficient provincial and local-level planning and data
    system.

  • Page 105 of 184

  • Findings Page 52

    Hence, the Appropriation Act 2014 and the Provincial Budget were
    done outside of the
    normal budgetary process which included the formulation and
    compilation of plans to
    tie the budget down.

    2. Sections 4 and 5 of the Appropriation Act 2014 contradicted
    Section 105A (4) of the
    Organic Law on Provincial Governments and Local Level Governments
    when it empowered and
    authorized the Chairman of the Provincial Assembly and the PEC to
    transfer funds
    from one appropriation to another, instead of the PEC having that
    authority.

    3. There was no evidence to state that the Madang Provincial
    Government and the
    Provincial Administration had complied with Financial Instruction
    No.01/2013.
    However, the Appropriation Act 2014 did state that it had
    complied with Financial
    Instruction 1B(8) of 2010, which was superseded by Financial
    Instruction No.01/2013.

    4. The Chairman of the Provincial Assembly and the PEC does not have
    the authority to
    transfer funds from one item to another. This responsibility of
    appropriation lies with
    the PEC, Secretary for Department of National Planning and
    Monitoring, Department
    of Treasury and Department of Implementation and Rural
    Development.

    Reference

    The facts relevant to this finding are on Pages 7 – 10, 12 – 21 and
    34 – 35 of Chapter 2.

    RESPONSE FROM MR. BERNARD LANGE

    On 03 April 2017, Mr. Lange responded to the Commission‘s
    Provisional Report issued to
    him on 16 March 2017. Below is an extract of his response in regard
    to Finding No. 1:

    My Response: I totally disagree and categorically deny that
    Madang Provincial

  • Page 106 of 184

  • Government Appropriation Act 2014 was defective and developed
    contrary to the intent of
    the Constitution and the Organic Law on Provincial and Local
    Level Government Act and
    Public Finance (Management) Act 1995. Appropriate Bills are made
    to guide and manage the
    passage of the budgets throughout the course of the year,
    particularly transfer and revisions
    of the funding through quarterly reviews. It makes the budget
    flexible to unforeseen events.
    Your suggestion that the Appropriation Act is illegal is
    defamatory and malicious. It has been
    that way and in that form for long time without being criticized
    by either; the Auditor
    General‘s Office, the Provincial and Local Government, the
    National Economic and Fiscal
    Commission nor the Department of Treasury.

    Comments

    The Commission noted Mr. Lange‘s response to Finding No.1.

    However, the Commission‘s original comments on Finding No.1
    contained in its Provisional
    Report remain unchanged.

    Findings Page 53

    [3.2] FINDING No. 2

    In the opinion of the Ombudsman Commission the conduct of the Hon.
    Jim Kas, then
    MP, Governor, was wrong when he informed the Joint Provincial
    Planning and Budget
    Priority Committee that he would fund the purchase of the motor
    vehicles for all LLG
    Presidents using the Governor‘s PSIP Grants.

    Reasons

    1. During the JPP&BPC Meeting No.01/2014 which was attended by all

  • Page 107 of 184

  • elected and
    appointed members of the Provincial Assembly, then Hon. Governor
    made a political
    commitment. It was also in this meeting that he stated that
    K100,000.00 would be
    taken out from each of the DSIP funds and the PSIP funds to fund
    the purchase of the
    19 motor vehicles.

    2. This was improper as then Hon. Governor did not have the power or
    authority to
    divert or transfer funds from one appropriation to another. This
    power and authority
    lies with the Provincial Government.

    3. In 2013 and 2014, the Provincial Government did not allocate any
    miscellaneous funds
    in its respective budgets to cater for any political commitments
    by then Hon.
    Governor made. However, due to this policy decision, the
    Provincial Administration
    was pressured to divert funds to cater for then Hon. Governor‘s
    political commitment.

    4. The action of the Provincial Administration was in line with the
    Madang JPP&BPC
    Resolution No.01/02/2014, made in Meeting No.01/2014 in the
    Office of the Governor
    for Madang Province. In this case, funding for this unbudgeted
    activity came from the
    DSIP funds and the LLG SIP funds contrary to the original
    intention of the funds.

    5. In addition to this, then Hon. Governor misled the Presidents of
    the 19 LLGs that
    funding for the purchase of the vehicles would come from his
    component of the PSIP
    funds, when in actual fact the funding came from the DSIP funds
    and the LLGSIP
    funds.

    Reference

    The facts relevant to this finding are on Pages 7 – 10, 11 – 21 and
    34 – 45 of Chapter 2.

    RESPONSE FROM MR. BERNARD LANGE

    On 03 April 2017, Mr. Lange responded to the Commission‘s
    Provisional Report issued to
    him on 16 March 2017. Below is an extract of his response in regard
    to Finding No. 2:

  • Page 108 of 184

  • My response: Hon. Jim Kas, MP, Governor‘s conduct was made in the
    context of
    economy of costs and it was sensible and rational decision.
    Moreover, the Transport cost to
    Madang Provincial Government for the 19 Presidents to attend
    Assembly and Provincial
    Executive Council and Committee Meetings would be about K50, 000
    per President per year
    or K950, 000. In 5 years it will cost K4, 750,000. The Governor‘s
    decision would save the
    Government approximately K3,000,000.

    Findings Page 54

    Additionally, the Presidents‘ official duties must be perceived
    as; visiting their people in
    their respective wards, the vehicles were in various situations
    also used as ambulances
    and/or vehicles to assist the sic or assist with health issues,
    assist the Police in law and order
    problems, and assist Public Servants in their various official
    duties, when vehicles of those
    sectors were not available to provide transportation for the
    public servants to deliver those
    various Government services to the people.

    Furthermore, Transport Infrastructure component of the PSIP was
    the intended cost area
    against which the expenditure, being 20% of the total, K6.0m for
    the entire province.

    Comments

    The Commission noted Mr. Lange‘s response to Finding No.2.

    However, the Commission‘s original comments on Finding No.2
    contained in its Provisional
    Report remain unchanged.

    [3.3] FINDING No. 3

    In the opinion of the Ombudsman Commission there was no proper
    quorum for the
    Madang Joint Provincial Planning and Budget Priority Committee to
    convene as its
    composition was not in compliance with Section 25(2) of the Organic
    Law on the

  • Page 109 of 184

  • Provincial Governments and Local Level Governments.

    Reasons

    1. On 2 March 2014, the Madang JPP&BPC in its Meeting No.01/2014,
    then Hon.
    Governor informed those present in that meeting that all 19 LLG
    Presidents would be
    given vehicles.

    2. The JPP&BPC meeting was attended by the LLG Presidents, two Open
    Members of
    Parliament and then Provincial Administrator.

    3. The Chairmen for each of the District Development Authority, or
    their nominees were
    not present in the meeting as is required in Section 25(2) of the
    Organic Law on the
    Provincial Governments and Local Level Governments.

    ―25. Provincial Executive Council Committees.

    (2) The Joint Provincial Planning and Budget Priorities
    Committee shall consist of –

    (a) a member of the Provincial Executive Council appointed
    by the Governor, who
    shall be the Chairman; and

    (b) the Chairman (or his nominee) of each District
    Development Authority; and

    (c) any other members not exceeding three in number
    appointed, on an ad hoc basis,
    the Provincial Executive Council‖.

    Reference

    Findings Page 55

    The facts relevant to this finding are on pages 7 – 10, 15 – 21 and
    45 – 48 of Chapter 2.

    RESPONSE FROM MR. BERNARD LANGE

    On 03 April 2017, Mr. Lange responded to the Commission‘s
    Provisional Report issued to
    him on 16 March 2017. Below is an extract of his response in regard
    to Finding No. 3:

  • Page 110 of 184

  • My Response: That is very true, however, in my experience as the
    Provincial
    Administrator and Chief Advisor to three different Governors of
    Madang Province from
    2010 – 2014. Former Governor Sir Arnold Amet from 2010 – 2011,
    former Governor and
    current Open Member for Raicoast Hon. James Gau, MP from 2011 –
    2012 and current
    Governor Hon. Jim Kas, MP from 2012 – 2014, it was very difficult
    to have a full quorum (6 x
    Open Members) of the JPP & PBC Members.

    5 x Open Members of Parliament hardly attended Provincial
    Assembly Meetings and JPP &
    BPC Meetings, despite being issued notices. Compliance with the
    Organic Law in that
    respect can never be satisfied for the entire term of Parliament.

    Comments

    The Commission noted Mr. Lange‘s response to Finding No.3. However,
    the Commission‘s
    original comments on Finding No.3 contained in its Provisional
    Report remain unchanged.

    [3.4] FINDING No. 4

    In the opinion of the Ombudsman Commission the decision by the Joint
    Provincial
    Planning and Budget Priority Committee to award the contract for the
    supply of the
    19 motor vehicles to Ela Motors Ltd was wrong.

    Reasons

    1. The Organic Law on the Provincial Governments and Local Level
    Governments clearly states the
    functions of the Joint Provincial Planning and Budget Priority
    Committee under
    Section 25(3) that:

    The Joint Provincial Planning and Budget Priorities Committee
    shall have the
    following functions: –

    (a) To oversee, co-ordinate and make recommendations as to
    the overall planning in

  • Page 111 of 184

  • the province, including budget priorities, for
    consideration by the National
    Government; and

    (b) To determine and control budget allocation priorities for
    the Province; and

    (c) To approve Provincial Government Budgets for presentation
    to the Provincial
    Assembly; and

    (d) To draw up a rolling five-year development plan and
    annual estimates for the
    Province; and

    Findings Page 56

    (e) To conduct annual reviews of the rolling five-year
    development plan.
    2. The JPP&BPC‘s functions were not adhered to in this instance when
    those present
    unanimously accepted then Hon. Governor‘s statement that all 19
    LLG Presidents
    were going to receive their motor vehicles.

    3. The JPP&BPC‘s function does not include performing the functions
    of the Provincial
    Supply & Tenders Board. In this case the members of the JPP&BPC
    resolved and
    awarded the contract to Ela Motors Ltd because it was the only
    supplier in Madang
    of the types of motor vehicles they wanted.

    4. Due to the political commitment made by then Hon. Governor, to
    purchase the motor
    vehicles he had to source the funds from the Provincial Services
    Improvement
    Program.

    Reference

    The facts relevant to this finding are on pages 7 – 10 and 45 – 48
    of Chapter 2.

    RESPONSE FROM MR. BERNARD LANGE

    On 03 April 2017, Mr. Lange responded to the Commission‘s
    Provisional Report that was
    issued to him on 16 March 2017. Below is an extract of his response
    in regard to Finding

  • Page 112 of 184

  • No.4:

    My Response: I believe that decision was not wrong, because the
    Ela Motors Ltd is the only
    supplier of motor vehicles, with a workshop and genuine spare
    parts sales office in Madang
    Province. The 3 quote procurement requirement could not be
    strictly adhered to, because no
    other vehicle supplier is based in Madang, so going outside the
    province has limitations and
    costs that unnecessary.

    The Madang Provincial Government and its administrative agencies
    rely on Ela Motors
    Limited as the sole supplier of genuine Toyota Products that are
    durable, long lasting and
    reliable. This practice is likely to continue over the years to
    come.

    Comments

    The Commission noted Mr. Lange‘s response to Finding No.4.

    However, the Commission‘s original comments on Finding No.4
    contained in its Provisional
    Report remain unchanged.

    Findings Page 57

    [3.5] FINDING No. 5

    In the opinion of the Ombudsman Commission the appointment of Mr.
    Augustine
    Dunstan as First Secretary to the Governor and Financial Delegate
    was improper.

  • Page 113 of 184

  • Reasons

    1. There was no documentation indicating that the Prime Ministerial
    appointed Mr.
    Dunstan as First Secretary to the Governor.

    2. In fact the Official Personal Staff Act does not state that
    Provincial Governors are
    entitled to personal staff. However, the Salary Remuneration
    Committee
    Determination Schedule G007-18 did state that Provincial
    Governors are entitled to
    one personal staff.

    3. During his interview Mr. Dunstan stated that he was recruited by
    then Hon.
    Governor as First Secretary. Hence, it was then Hon. Governor and
    not the Prime
    Minister who appointed Mr. Dunstan.

    4. Therefore, it was improper for Mr. Dunstan to have endorsed or
    approved any
    requisition or Cheque for any payment on behalf of the Office of
    the Governor or for
    the Provincial Administration.

    Reference

    The facts relevant to this finding are on pages 7 – 10 and 25 – 33
    of Chapter 2.

    RESPONSE FROM MR. BERNARD LANGE

    On 03 April 2017, Mr. Lange responded to the Commission‘s
    Provisional Report issued to
    him on 16 March 2017. Below is an extract of his response in regard
    to Finding No.5:

    My Response: I am unable to see any rational for officers of the
    Governor not to be appointed
    as Financial Delegates. In my opinion; Financial Delegates are
    managers of Programs and
    Activities that are budgeted for a specific office in a Financial
    Year, and like other Sector
    Managers, the First Secretary (Mr Augustine Dunstan) administers,
    coordinates and
    manages the office of the Governor.

    Unless Ombudsman Commission can demonstrate the harm that such an
    appointment can
    cause to the management of finances in the province, I do not

  • Page 114 of 184

  • agree with your view.

    Additionally, Appointing an Officer of the Secretariat as
    Financial Delegate/Fund Manager
    to Governor‘s Office and the JPP & BPC has had limitations,
    because they are not required to
    be presented in all programs and activities of the Governor‘s
    Office. It has created ―bottle
    neck‖ situations and impacted efficiency in the Governor‘s Office
    operations.

    Comments

    Findings Page 58

    The Commission noted Mr. Lange‘s response to Finding No.5. However,
    the Commission‘s
    original comments on Finding No.5 contained in its Provisional
    Report remain unchanged.

    [3.6] FINDING No. 6

    In the opinion of the Ombudsman Commission the conduct of Mr.
    Augustine Dunstan,
    the First Secretary to the Governor, in signing the Request for
    Expenditure Form and
    General Expenses Form was wrong because he did not have the
    Financial Delegate.

    Reasons

    1. On 17 February 2014, the Provincial Administration issued a
    Financial Directive
    No.2/2014 that outlined all Authorised Requisition Officers,
    Financial Delegates and
    Section 24 Officers with their financial limits.

    2. Mr. Dunstan‘s financial delegation was K2,000.00 and no more. In
    this case, he was
    authorised to sign off on all Requisition for Expenditure Form or
    General
    Expenditure Form within his financial limit.

    3. However, Mr. Dunstan signed off on two sets of Requisition for
    Expenditure Forms
    and General Expenses Forms, that is, one set was raised on 27
    March 2013 for

  • Page 115 of 184

  • K1,415,400.00 and the other set was raised on 13 March 2014 for
    K1,968,612.61.

    4. In both cases the amounts were above his financial delegation

    5. On Tuesday, 17 November 2015, during his interview with the
    Officers of the
    Commission, Mr. Dunstan, stated that he was well aware of his
    financial limits and
    yet he ignored this fact and went ahead with signing off on the
    Requisition for
    Expenditure Forms and General Expenditure Forms.

    6. Mr. Dunstan understood that what he did was not in compliance
    with the Public
    Finance (Management) (Amendment) Act 1995 (No.4 of 2013), but
    because it was a
    commitment that then Hon. Governor had made and then Hon.
    Governor was
    determined to have the motor vehicles purchased for the 19 LLG
    Presidents.

    Reference

    The facts relevant to this finding are on page 5 – 6, 7 – 10, 26 –
    33 and 48 – 49 of Chapter 2.

    1. RESPONSE FROM MR. BERNARD LANGE

    On 03 April 2017, Mr. Lange responded to the Commission‘s
    Provisional Report that
    was issued to him on 16 March 2017. Below is an extract of his
    response in regard to
    Finding No.6:

    My Response: Ombudsman Commission opinion is not supported by
    factual legal
    provision of the law and therefore that opinion cannot be
    discussed.

    Findings Page 59

    Moreover, the First Secretary to the Governor was appointed the
    Financial Delegate of
    Governor‘s Office Operating Funds; under the 783 Series and JPP &
    BPC Funds und 283
    Series as per Financial Directive No: 1/2014 and 2/2014; issued
    under my hand as Chief
    Accountable Officer. My power of delegation is vested under
    Section 100 of the PFMA.

  • Page 116 of 184

  • 2. RESPONSE FROM MR. GABRIEL SAUL

    On 18 March 2017, Mr. Saul responded to the Commission‘s Provisional
    Report that was
    issued on 16 March 2017. Below is an extract of the letter in regard
    to the Executive
    Summary:

    • Point 6 (page 1)…not sighting as stated in the report, but
    signing of the General Expenses
    Form (FF4) by Mr Dunstan was in breach of Finance Instruction
    01/2013 dated 1/1/2013.

    Comments

    In regard to Mr. Lange‘s response to Finding No.6, the Commission
    has noted Mr. Lange‘s
    comments. However, the Commission‘s original comments on this
    particular Finding No. 6
    as contained in its Provisional Report remains and it has not
    changed.

    In regard to Mr. Saul‘s comments on Finding No.6 in the Provisional
    Report, the
    Commission has noted and taken on board Mr. Saul‘s correction of the
    word ―sighting‖ as
    written in Principal Finding No.6 and also in the Executive Summary
    of the Provisional
    Report. Therefore, the word ―sighting‖ has now been replaced with
    the word ―signing‖. This
    change has been incorporated into Finding No.6 and the Executive
    Summary of this Final
    Report.

    [3.7] FINDING No. 7

    In the opinion of the Ombudsman Commission the Provincial Supply and
    Tenders
    Board‘s decision to award the contract for the supply of 19 motor
    vehicles to Ela
    Motors Ltd was wrong because the payments were done to Ela Motors
    Ltd prior to
    the PSTB‘s meeting and decision.

    Reasons

    1. Section 40(1)(b) of the Public Finance (Management) (Amendment)

  • Page 117 of 184

  • Act 1995 (No.4 of 2013)
    which states:

    40. Tenders for property, stores, works and services.

    (1) Subject to—

    (a) this section; and

    (b) Section 41,

    tenders shall be publicly invited and contracts let for the
    purchase or disposal of property or
    stores or the supply of works and services the estimated cost of
    which exceeds the prescribed
    amount.

    Findings Page 60

    (2) In relation to the purchase or disposal of property and
    stores and the supply of works
    and services the estimated cost of which does not exceed the
    prescribed amount, the
    provisions of the Financial Instructions shall apply.

    2. It was noted that at the time the contract for the supply of
    motor vehicles was awarded
    to Ela Motors Ltd, there did not exist a functional PSTB.

    3. What should have happened then was for the Provincial
    Administration to conduct an
    open invitation to all interested suppliers to submit their bids.

    4. The Technical Evaluation Committee would have collected and
    assessed all the Bidders
    and provided advice to the PSTB as to which supplier was the best
    with the lowest
    possible costing.

    5. Due to the fact that this was public funds, the Provincial
    Authority to Pre-Commit
    Committee should have met and approved for K3 million to be
    released to fund the
    activity.

    6. However, this was not the case as it was the Hon. Jim Kas, then
    MP, Governor‘s
    political commitment and there were no funds readily available at
    that time to
    implement the policy decision.

    7. In fact, the Provincial Administration went ahead with the

  • Page 118 of 184

  • raising of the payment
    vouchers and made payments to Ela Motors Ltd without complying
    with the tender and
    procurement procedures outlined in the Public Finance
    (Management) (Amendment) Act 1995
    (No.4 of 2013) and the Finance Management Manual.

    Reference

    The facts relevant to this finding are on Pages 7 – 10, 45 – 46 and
    50 – 52 of Chapter 2.

    RESPONSE FROM MR. BERNARD LANGE

    On 03 April 2017, Mr. Lange responded to the Ombudsman Commission‘s
    Provisional
    Report that was issued to him on 16 March 2017. Below is an extract
    of his response in
    regard to Finding No.7:

    My Response: I admit that it was true that payment was done to
    Ela Motors Ltd prior
    to PSTB‘s meeting and decision. The main purpose for the meeting
    was to formalize the
    purchase done by the Office of the Governor for the 19 vehicle.

    Additionally, Government funds were used for the purchase and the
    PSTB meeting was to
    ensure that the vehicles as being State properties; need to be
    recorded in our Asset Register
    for records purposes.

    Comments

    The Commission noted Mr. Lange‘s response to Finding No.7.

    However, the Commission‘s original comments on Finding No.7
    contained in its Provisional
    Report remain unchanged.

    Findings Page 61

    [3.8] FINDING No. 8

    In the opinion of the Ombudsman Commission Mr. Bernard Lange, then
    Chairman of
    the Provincial Supply & Tenders Board‘s decision to award the
    contract for the supply

  • Page 119 of 184

  • of 19 motor vehicles to Ela Motors Ltd was wrong because the
    payments were done to
    Ela Motors Ltd prior to the PSTB‘s meeting and decision.

    Reasons

    1. On 2 March 2014, the JPP&BPC made a decision for the Provincial
    Government to
    purchase motor vehicles only from Ela Motors Ltd. This decision
    was not proper as it
    did not allow for the normal and best practices in acquiring
    works, services or goods
    to take place.

    2. Section 40 of the Public Finance (Management) (Amendment) Act
    1995(No.4 of 2013) states
    that goods, works and services with a value greater than
    K300,000.00 are to be
    purchased through a public tender process. The public tender
    process provides the
    government with the best chance of obtaining value for money,
    transparency,
    effective competition, fair and ethical dealing and efficiency
    and effective outcome.

    3. Public tenders involve the widespread advertising of
    opportunities to supply the
    government with the goods or services required. They promote
    competition. This
    differentiates them from selective tenders, expressions of
    interest and other
    procurement mechanisms.

    In this case the amount for the project was over K300,000.00 and
    should have been
    advertised in at least two national newspapers and the relevant
    international media
    to attract the best bidders.

    4. The Public Finance (Management) (Amendment) Act 1995 (No.4 of
    2013) does not encourage
    selective tenders as they restrict the level of competition and
    it also makes the tender
    process not transparent and there is lack of accountability.

    Reference

    The facts relevant to this finding are on pages 7 – 10 and 48 – 51
    of Chapter 2.

    MR. BERNARD LANGE‘S RESPONSE

  • Page 120 of 184

  • On 03 April 2017, Mr. Lange responded to the Ombudsman Commission‘s
    Provisional
    Report that was issued to him on 16 March 2017. Below is an extract
    of his response in
    regard to Finding No. 8:

    My Response: My decision as the Chairman of the PSTB was not
    wrong, because my
    committee‘s (PSTB) decision was to formalize the purchase already
    done by the officers of
    the Office of the Governor. This is also in reference to in my
    above (3.7) Response.

    Findings Page 62

    Comments

    The Commission noted Mr. Lange‘s response to Finding No.8.

    However, the Commission‘s original comments on Finding No.8
    contained in its Provisional
    Report remain unchanged.

    [3.9] FINDING No. 9

    In the opinion of the Ombudsman Commission the conduct of Mr.
    Bernard Lange,
    then Acting Provincial Administrator was wrong when he failed to do
    due diligent
    checks on the Requisition for Expenditure Forms and General Expenses
    Forms that
    were filled on 13 March 2014 that enabled the processing of payment
    of K2,834,507.80
    made to Ela Motors Ltd for the purchase of 19 motor vehicles.

    Reasons

    1. Mr. Lange failed to properly cross check the Financial Directive
    No.2/2014 that he issued
    on 17 February 2014, the Public Finance (Management) (Amendment)
    Act 1995 (No.4 of 2013)
    and Financial Instructions to ensure whether or not Mr. Dunstan
    or other officers had
    the proper authority to approve and sign off on the Requisition
    for Expenditure

  • Page 121 of 184

  • Forms.

    2. The field that requires for a Cash Fund Certificate number of the
    Financial Delegate to
    be written down was left blank. There was no Cash Fund
    Certificate issued with the
    Requisition for Expenditure Forms and General Expenses Forms.

    3. The Cash Fund Certificate number is issued by the Provincial
    Treasurer after he has
    assessed the information on the Requisition for Expenditure Forms
    and General
    Expenses Forms.

    4. Mr. Lange failed to sign the General Expenses Form dated 13 March
    2014 as the
    Financial Delegate and Section 32 Officer.

    5. The Financial Delegate who signed on the General Expenses Form
    dated 13 March
    2014 was Mr. Dunstan who was not the appropriate officer.

    6. Mr. Dunstan‘s actions went beyond his authority and limit when he
    signed off on the
    General Expenses Forms for the purchase of motor vehicles.

    Reference

    The facts relevant to this finding are on pages 5 – 6, 7 – 10 and 50
    – 51 of Chapter 2.

    1. MR. BERNARD LANGE‘S RESPONSE

    On 03 April 2017, Mr. Lange responded to the Commission‘s
    Provisional Report that
    was issued to him on 16 March 2017. Below is an extract of his
    response in regard to
    Finding No.9:
    Findings Page 63

    My Response: I was not acting as the Provincial Administrator; I
    was the then Provincial
    Administration. Due diligent checks were made prior to the
    Provincial Treasury Office
    processing the payment of K1, 968, 612.61 made to Ela Motors Ltd
    for the purchase of 19
    motor vehicles. Otherwise the payment would not have been
    processed, if diligent checks
    were not done properly.

    2. MR. GABRIEL SAUL‘S RESPONSE

  • Page 122 of 184

  • On 18 March 2017, Mr. Saul responded to the Commission‘s Provisional
    Report that was
    issued on 16 March 2017. Below is an extract of the letter in regard
    to Finding No.9:

    • Point 9 (page 1)…the amount stated here is K1,968,612.61 made
    to Ela Motors for the
    purchase of 19 vehicles. However, according to your Finding of
    Facts under paragraph 5
    in page 19 the total payment is K2,834,507.80. (I may be wrong?)

    Comments

    The Commission noted Mr. Lange‘s response to Finding No.9. However,
    the Commission‘s
    original comments on Finding No. 9 contained in its Provisional
    Report remain unchanged.

    In regard to Mr. Saul‘s response, the Commission has noted and
    accepted his response to
    Finding No.9 of the Provisional Report. However, the Commission
    maintains that the
    amount K2,834,507.80 was the same amount contained in Cheque No.
    115230 that was paid
    to Ela Motors to purchase 19 vehicles for the 19 LLG Presidents as
    highlighted in the
    Commission‘s Finding No.9 in the Provisional Report.

  • Page 123 of 184

  • Findings Page 64

    4. RECOMMENDATIONS

    [4.1] CONSTITUTIONAL FRAMEWORK FOR MAKING RECOMMENDATIONS

    As indicated in Chapter 1, the general purpose of this investigation
    is to determine whether
    any of the conduct under investigation was wrong, or whether any
    laws or administrative
    practices were defective.

    The Commission is expressly authorized to form such opinions by
    Section 22(2) of the
    Organic Law on the Ombudsman Commission.

    If, after making its investigation, the Commission comes to the
    conclusion that some of the
    conduct was wrong or that any law or administrative practice was
    defective, it is authorized
    to make recommendations. Such recommendations are made under Section
    22(2) of the
    Organic Law on the Ombudsman Commission.

    Section 22 (2) OLOC states:

    If in any case to which this section applies the Commission is of
    the opinion that any service,
    body, person or other appropriate authority should –

    (a) consider the matter further; or
    (b) take certain specific action; or
    (c) modify or cancel any administrative act; or
    (d) alter any regulation or ruling; or
    (e) explain more fully any administrative act; or
    (f) do any other thing,

    the Commission shall report its opinion and the reasons for its

  • Page 124 of 184

  • opinion, to the Minister
    responsible for the relevant service, body or person and to the
    Permanent Head or statutory
    head responsible for the service, body or person, and may refer
    the matter to the Public
    Prosecutor if action by him is warranted and may make such
    recommendations as it thinks
    fit.

    In this chapter, recommendations are made based on the findings of
    wrong conduct and
    defective administration referred to earlier in the report.

    Each recommendation is set out as follows:

    o The recipients (i.e. the persons to whom the recommendations are
    directed) are
    identified.

    o The main reason for making the recommendation, are stated.

    Recommendations Page 65

    [4.2] RECOMMENDATIONS CONCERNING PARTICULAR INDIVIDUALS

    We recommend that some individuals have their continuing public
    employment carefully
    reviewed. The Commission is of the opinion that holders of public
    offices must continue at
    all times to be accountable for their actions, even if they have
    left the position in which they
    were found to have committed the wrong conduct and are occupying new
    positions.

    [4.3] RECIPIENTS OF RECOMMENDATIONS

    When we make recommendations we are obliged by Section 22(2) of the
    Organic Law on the
    Ombudsman Commission to identify the service, body, person or other
    appropriate authority
    who has to carry them out.

    We are also obliged by Section 22(2) of the Organic Law on the
    Ombudsman Commission to report
    our recommendations to both the Minister and, if appropriate, the
    permanent or statutory

  • Page 125 of 184

  • head responsible for the service, body or person who has to carry
    out the recommendations.

    In relation to each recommendation made in this Chapter, recipients
    of the recommendations
    are listed as follows:

    • first, the service, body or person we are asking to do things
    is identified;

    • secondly, the Minister responsible for that service, body or
    person is identified;

    • thirdly, if appropriate, the permanent or statutory head
    responsible for that service,
    body or person is identified.

    [4.4] RESPONSIBLE MINISTERS

    Section 148 of the Constitution provides that each department,
    section, branch or function of
    government must be the political responsibility of a Minister. The
    Prime Minister has the
    power to determine the titles, portfolios and responsibilities of
    the Ministers.

    At the time of the preparation of this report, the service, body or
    persons to whom specific
    recommendations are being directed were the responsibility of the
    Ministers set out in the
    table below.

    [4.5] MINISTERS RESPONSIBLE FOR FOLLOWING UP IMPLEMENTATION OF
    RECOMMENDATIONS

    • Minister for Finance and Treasury
    • Minister for Provincial Affairs & Inter-Governmental Relations

    In the event of the title or responsibilities of the Minister
    changes after the date of this
    report, the responsibility for notifying the Commission of the steps
    being taken to give effect
    to its recommendations will pass to the Minister who, from time to
    time, has political
    responsibility for the services, bodies or persons who received our
    recommendations.

    Recommendations Page 66

    [4.6] DUTIES OF RECIPIENTS OF RECOMMENDATIONS

  • Page 126 of 184

  • The fact that our opinions on things to be done are expressed in the
    form of
    ―recommendations‖ does not mean that recipients are entitled to
    ignore them.

    Each recipient is required under Section 22(3) of the Organic Law on
    the Ombudsman Commission
    to notify the Ombudsman Commission in writing within 30 days after
    the day of the service
    of the report, of the steps proposed to be taken to give effect to
    our recommendations.

    Section 22(3) states:

    If the Commission so requests, the responsible Minister,
    Permanent Head or statutory head
    as the case may be, shall, within such period as is specified by
    the Commission, notify the
    Commission as to the steps (if any) that he proposes to take to
    give effect to its
    recommendations.

    Accordingly, there is a duty placed on each recipient of a
    recommendation to notify the
    Commission; and if it is proposed not to implement any
    recommendation, there is a further
    duty to give cogent and convincing reasons why the recommendations
    cannot or should not
    be implemented. These duties arise due to the combined effect of the
    Constitution and the
    Organic Law on the Ombudsman Commission.

    A failure to comply with these duties may result in the Ombudsman
    Commission
    commencing enforcement proceedings in the National Court pursuant to
    Section 23 of the
    Constitution.

    [4.7] RECOMMENDATIONS

    The Ombudsman Commission has upon receipt of responses from those
    recipients who were
    issued their copies of the Provisional Report in accordance with
    Section 17(4)(b) of the
    Organic Law on the Ombudsman Commission, developed 11)
    recommendations. These eleven (11)
    recommendations are hereby outlined in the following pages.

    [4.7.1] RECOMMENDATION No. 1

    The Ombudsman Commission recommends that the Governor for Madang

  • Page 127 of 184

  • Province and
    the Provincial Administrator ensures that the Madang Provincial
    Government complies
    with the budgetary processes outlined in the Constitution, the
    Organic Law on the
    Provincial Governments and Local Level Governments and the Public
    Finance
    (Management) (Amendment) Act 1995 (No.4 of 2013) when developing the
    annual
    Appropriation Act for the province.

    Recipients

    • Minister for Inter – Government Relations
    • Minister for Finance
    • Minister for National Planning
    • Governor, Madang Province
    • Secretary, Department of Provincial & Local Level Government
    Affairs

    Recommendations Page 67

    • Secretary, Department of Implementation and Rural Development
    • Clerk of the Madang Provincial Assembly
    • Provincial Administrator, Madang

    Reasons

    1. It was found that the process that should have been followed
    leading up to the
    compilation of the Provincial Budget was not complied with
    pursuant to Section 187C
    (4) of the Constitution and Section 106 of the Organic Law on
    Provincial Governments and
    Local Level Governments states: Hence, the Appropriation Act 2014
    and the Provincial Budget
    were done outside of the normal budgetary process which included
    the formulation
    and compilation of plans to tie the budget down.

    2. It was found that the Madang Provincial Government and the
    Provincial
    Administration failed to comply with Financial Instruction No.
    01/2013 when they passed
    the Appropriation Act 2014.

    3. The Chairman of the Provincial Assembly and the PEC does not have
    the authority to
    transfer funds from one item to another. This responsibility of
    appropriation lies with
    the PEC, Secretary for Department of National Planning and
    Monitoring, Department

  • Page 128 of 184

  • of Treasury and Department of Implementation and Rural
    Development.

    [4.7.2] RECOMMENDATION No. 2

    The Ombudsman Commission recommends that the Office of the Governor
    for Madang
    Province must strictly comply with the Appropriation Act passed by
    the Provincial
    Assembly in that respective year and utilize the Provincial Service
    Improvement
    Program grants as outlined in the Appropriation Act.

    Recipients

    • Minister for National Planning
    • Minister for Inter-Government Relations
    • Governor, Madang Province
    • Secretary, Department of Provincial & Local Level Government
    Affairs
    • Clerk of the Madang Provincial Assembly
    • Provincial Administrator, Madang
    • Provincial Treasurer, Madang

    Reasons

    1. During the JPP&BPC Meeting No.01/2014 which was attended by all
    elected and
    appointed members of the Provincial Assembly, Hon. Jim Kas, then
    MP, Governor,
    made a political commitment. It was also in this meeting that he
    stated that
    K100,000.00 would be taken out from each of the DSIP funds and
    the PSIP funds to
    fund the purchase of the 19 motor vehicles.

    Recommendations Page 68

    2. It was found that this was improper as Hon. Jim Kas, then MP,
    Governor did not
    have the power or authority to divert or transfer funds from one
    appropriation to
    another. This power and authority lies with the Provincial
    Government.

    3. It was also found that in 2013 and 2014, the Provincial
    Government did not allocate
    any miscellaneous funds in its respective budgets to cater for

  • Page 129 of 184

  • any political
    commitments by Hon. Jim Kas, then MP, Governor made. However, due
    to this policy
    decision, the Provincial Administration was pressured to divert
    funds to cater for the
    Hon. Jim Kas, Governor‘s political commitment.

    4. The action of the Provincial Administration was in line with the
    Madang JPP&BPC
    Resolution No.01/02/2014, made in Meeting No.01/2014 in the
    Office of the Governor
    for Madang Province. In this case, funding for this unbudgeted
    activity came from the
    DSIP funds and the LLG SIP funds contrary to the original
    intention of the funds.

    5. In addition to this, Hon. Jim Kas, then MP, Governor, misled the
    Presidents of the 19
    LLGs that funding for the purchase of the vehicles would come
    from his component
    of the PSIP funds, when in actual fact the funding came from the
    DSIP funds and the
    LLGSIP funds.

    [4.7.3] RECOMMENDATION No. 3

    The Ombudsman Commission recommends that the Provincial Government
    and the
    Provincial Administration must strictly comply with the Public
    Finance (Management)
    (Amendment) Act 1995 (No.5 of 2016), the National Executive Council
    Decision
    No.102/2012, Financial Instruction No.01/2013 and the Department of
    Implementation
    and Rural Development PSIP, DSIP, and LLGSIP Administrative
    Guidelines, when
    utilizing the Provincial Service Improvement Program grants as
    outlined in each
    Appropriation Act for that particular year.

    Recipients

    • Minister for Finance
    • Governor, Madang Province
    • Secretary, Department of Finance
    • Secretary, Department of Implementation and Rural Development
    • Clerk of the Madang Provincial Assembly
    • Provincial Administrator, Madang
    • Provincial Treasurer, Madang

    Reasons

  • Page 130 of 184

  • 1. On 30 October 2012, the NEC made a Decision No.102/2012 that
    issued directions for
    Service Improvement Program (SIP) and funding to be done on Key
    Sectorial Basis.
    That is, the SIP and its funds were to be based on
    Infrastructure; Health; Education;
    Law & Order; Economic & Agriculture and Administration

    2. On 1 January 2013, Mr. Steven Gibson, then Secretary, Department
    of Finance,
    approved and issued Financial Instruction No.01/2013 for the
    implementation of the PSIP,
    at the Provincial level, DSIP at the District level and LLGSIP at
    the LLG level
    Recommendations Page 69

    3. During the JPP&BPC Meeting No. 01/2014 which was attended by all
    elected and
    appointed members of the Provincial Assembly, Hon. Jim Kas, then
    MP, Governor,
    made a political commitment. It was also in this meeting that he
    stated that
    K100,000.00 would be taken out from each of the District Services
    Improvement
    Program funds and the Provincial Services Improvement Program
    funds to fund the
    purchase of the 19 motor vehicles.

    4. It was found that this was improper as Hon. Jim Kas, then MP,
    Governor did not have
    the power or authority to divert or transfer funds from one
    appropriation to another.
    This power and authority lies with the Provincial Government.

    5. It was also found that in 2013 and 2014, the Provincial
    Government did not allocate any
    miscellaneous funds in its respective budgets to cater for any
    political commitments by
    Hon. Jim Kas, then MP, Governor made. However, due to this policy
    decision, the
    Provincial Administration was pressured to divert funds to cater
    for the Hon. Jim Kas,
    then MP, Governor‘s political commitment.

    6. The action of the Provincial Administration was in line with the
    Madang JPP&BPC
    Resolution No.01/02/2014, made in Meeting No.01/2014 in the
    Office of the Governor
    for Madang Province. In this case, funding for this unbudgeted
    activity came from the
    DSIP funds and the LLGSIP funds contrary to the original
    intention of the funds.

  • Page 131 of 184

  • 7. In addition to this, Hon. Jim Kas, then MP, Governor, misled the
    Presidents of the 19
    LLG that funding for the purchase of the vehicles would come from
    his component of
    the PSIP funds, when in actual fact the funding came from the
    DSIP funds and the
    LLGSIP funds.

    [4.7.4] RECOMMENDATION No. 4

    The Ombudsman Commission recommends that all Joint Provincial
    Planning and
    Budget Priority Committee and District Development Authorities must
    strictly comply
    with Section 25(2) of the Organic Law on the Provincial Government
    and Local Level
    Government.

    Recipients

    • Minister for Inter – Government Relations
    • Minister for National Planning
    • Governor, Madang Province and Chairman of the Madang JPP&BPC
    • Secretary, Department of Provincial & Local Level Government
    Affairs
    • Provincial Administrator, Madang

    Reasons

    1. On 2 March 2014, the Madang JPP&BPC in its Meeting No.01/2014,
    Hon. Jim Kas, then
    MP, Governor, informed those present in that meeting that all 19
    LLG Presidents
    would be given vehicles.

    2. The JPP&BPC meeting was attended by the LLG Presidents, two Open
    Members of
    Parliament and then Provincial Administrator.

    Recommendations Page 70

    3. The Chairmen for each of the District Development Authority, or
    their nominees were
    not present in the meeting as is required in Section 25(2) of the
    Organic Law on the
    Provincial Government and Local Level Government.

    [4.7.5] RECOMMENDATION No. 5

  • Page 132 of 184

  • The Ombudsman Commission recommends that the Madang Joint Provincial
    Planning
    and Budget Priority Committee must strictly comply with Section
    25(3) of the Organic
    Law on the Provincial Governments and Local Level Governments

    Recipients

    • Minister for Inter – Government Relations
    • Minister for National Planning
    • Governor, Madang Province and Chairman of the Madang JPP&BPC
    • Secretary, Department of Provincial & Local Level Government
    Affairs
    • Provincial Administrator, Madang

    Reasons

    1. The Madang JPP&BPC does not have the powers or the authority to
    perform the
    functions and roles of the Provincial Supply and Tenders Board.
    5. The Madang JPP&BPC‘s functions were not adhered to in this
    instance when those
    present unanimously accepted the Hon. Jim Kas, then MP,
    Governor‘s statement that
    all 19 LLG Presidents were going to receive their motor vehicles.

    6. Due to the political commitment made by the Hon. Jim Kas, then
    MP, Governor, to
    purchase the motor vehicles he had to source the funds from the
    Provincial Services
    Improvement Program.

    [4.7.6] RECOMMENDATION No. 6

    The Ombudsman Commission recommends that the Office of the Governor
    for Madang
    Province must strictly comply with the Salary Remuneration Committee
    Determination
    Schedule G007-18 when making appointment of Personal Staff.

    Recipients

    • Minister for Inter-Government Relations
    • Secretary, Department of Provincial & Local Level Government
    Affairs
    • Minister for Finance
    • Governor, Madang Province
    • Secretary, Department of Finance

  • Page 133 of 184

  • • Provincial Administrator, Madang
    Recommendations Page 71

    Reasons

    1. The Office of the Prime Minister determines the appointments of
    Ministerial Staff.
    However, it was found that the Official Personal Staff Act is
    silent on the appointment of
    the Offices of the Provincial Governors.

    2. This the silence in the Official Personal Staff Act was
    compensated by the Salary
    Remuneration Committee Determination Schedule G007-18, which
    stated that the Provincial
    Governors are entitled to one personal staff.

    3. Therefore, the appointment of the First Secretary or any one
    personal staff for the
    Office of the Provincial Governor must comply with the procedures
    outlined in the
    Official Personal Staff Act and the Salary Remuneration Committee
    Determination Schedule
    G007-18.

    [4.7.7] RECOMMENDATION No. 7

    The Ombudsman Commission recommends that the Office of the Governor
    for Madang
    Province ensures that only Officers with financial delegations must
    endorse or approve
    any Finance Forms.

    Recipients

    • Governor, Madang Province
    • Provincial Administrator, Madang
    • Provincial Treasurer, Madang

    Reasons

    1. It was found that Mr. Augustine Dunstan, First Secretary to the
    Governor, endorsed or
    approved requisitions and/or cheque for payments on behalf of the
    Office of the
    Governor or for the Provincial Administration.

    2. Mr. Lange, when delegating his financial powers to Financial
    Delegates and Section 24
    Officers indicated that the financial delegate for Mr. Augustine

  • Page 134 of 184

  • Dunstan was K2,000
    and below.

    3. Mr. Dunstan had no authority to endorse and/or approve any
    Finance Forms with
    amounts above K2,000.

    Recommendations Page 72

    [4.7.8] RECOMMENDATION No. 8

    The Ombudsman Commission recommends that the Provincial
    Administrator ensures
    the Madang Provincial Administration must strictly comply with
    Section 40 of the
    Public Finance (Management) (Amendment) Act 1995 (No.5 of 2016),
    Financial
    Instructions No.01/2013 and the Department of Implementation and
    Rural
    Development‘s PSIP, DSIP and LLGSIP Administrative Guidelines in the
    event that
    there is a non-functional Provincial Supply & Tenders Board.

    Recipients

    • Minister for Finance
    • Minister for National Planning & Monitoring
    • Governor, Madang Province and Chairman, Provincial Supply &
    Tenders Board
    • Secretary, Department of Finance
    • Secretary, Department of Implementation and Rural Development
    • Provincial Administrator, Madang
    • Provincial Treasurer, Madang

    Reasons

    1 It was found that at that material time when the Provincial
    Administration made the
    Cheque payment to Ela Motors Ltd, Madang Province did not have a
    functional
    Provincial Supply & Tenders Board.

  • Page 135 of 184

  • 4. The Madang Provincial Administration failed to consult and submit
    all relevant
    documents to the Department of Implementation and Rural
    Development for the
    Provincial Administration to purchase 19 vehicles for the 19 LLG
    Presidents.

    5. In spite of the non-existence of a Provincial Supply & Tenders
    Board, Mr. Lange
    approved and signed the Cheque for the purchase of 19 vehicles
    for the 19 LLG
    Presidents and paid it to Ela Motors Ltd.

    [4.7.9] RECOMMENDATION No. 9

    The Ombudsman Commission recommends that the Provincial
    Administrator ensures
    that Madang Provincial Administration must strictly comply with
    Sections 39B and 40
    of the Public Finance (Management) (Amendment) Act 1995 (No.5 of
    2016), Financial
    Instructions No.01/2013 and the Department of Implementation and
    Rural
    Development‘s PSIP, DSIP and LLGSIP Administrative Guidelines when
    deciding to
    award a contract.

    Recipients

    • Minister for Finance
    • Minister for National Planning
    • Governor, Madang Province and Chairman, Provincial Supply &
    Tenders Board
    Recommendations Page 73

    • Secretary, Department of Implementation and Rural Development
    • Secretary, Department of Finance
    • Provincial Administrator, Madang
    • Provincial Treasurer, Madang

    Reasons

    1. The contract for the purchase of 19 vehicles for the 19 LLG
    Presidents was not a
    budgeted item.

    2. It was found that the Madang Province did not have a functional
    Provincial Supply &
    Tenders Board.

  • Page 136 of 184

  • 3. Regardless of this and with the knowledge of the existence of
    Financial Instructions
    No.01/2013 and the Department of Implementation and Rural
    Development‘s PSIP,
    DSIP and LLGSIP Administrative Guidelines, the Provincial
    Administration at that
    material time did not perused the fact that in the event that
    there is a non-functional
    Provincial Supply & Tenders Board, it should have consulted the
    Department of
    Implementation and Rural Development and forwarded the contracts
    to the
    Department of Implementation and Rural Development and requested
    them to
    conduct the tendering and procurement of the contracts.

    [4.7.10] RECOMMENDATION No. 10

    The Ombudsman Commission recommends that the Provincial
    Administrator ensures
    that Madang Provincial Administration must strictly comply with
    Section47B of the
    Public Finance (Management) (Amendment) Act 1995 (No.5 of 2016) and
    Financial
    Instructions No.01/2013 when deciding to release funds to fund an
    activity.

    Recipients

    • Minister for National Planning
    • Minister for Finance
    • Governor, Madang Province and Chairman, Provincial Supply &
    Tenders Board
    • Secretary, Department of Implementation and Rural Development
    • Secretary, Department of Finance
    • Provincial Administrator, Madang
    • Provincial Treasurer, Madang

    Reasons

    1. There was no Provincial Authority to Pre-Commit Committee meeting
    or decision at
    that material approving forK3 million to be released to fund the
    activity.

    2. However, Hon. Jim Kas, then MP, Governor, Madang Province made
    the decision to
    divert funds from the 19 Districts SIP to fund the purchase of
    the 19 vehicles for the 19
    LLG Presidents.

  • Page 137 of 184

  • Recommendations Page 74

    3. The total amount of K2,834,507.80 that was raised in the Cheque
    numbered 115230 for
    Ela Motors Ltd by the Provincial Administration and Provincial
    Treasury required the
    Provincial Authority to Pre-Commit Committee approval.

    [4.7.11] RECOMMENDATION No. 11

    The Ombudsman Commission recommends that the Provincial
    Administrator as the
    Chief Accountable Officer and Section 32 Officer must do due
    diligence checks on all
    Finance Forms prior to approving them.

    Recipients

    • Minister for Finance
    • Governor, Madang Province
    • Provincial Administrator, Madang
    • Provincial Treasurer, Madang
    • Secretary, Department of Finance

    Reasons

    1. Mr. Lange failed to properly cross check the Financial Directive
    No. 2/2014 that he
    issued on 17 February 2014, together with the Public Finance
    (Management) (Amendment)
    Act 1995 (No.4 of 2013) and Financial Instructions No.01/2013 to
    ensure whether or not
    Mr. Augustine Dunstan or other Officers had the proper authority
    to approve and sign
    off on the Requisition for Expenditure Forms.

    2. Mr. Lange failed to sign the General Expenses Form dated 13 March
    2014 as the
    Financial Delegate and Section 32 Officer.

    3. The Financial Delegate who signed on the General Expenses Form
    dated 13 March 2014
    was Mr. Augustine Dunstan, the First Secretary to the Governor
    who was not the
    appropriate officer.

    4. Mr. Dunstan‘s actions went beyond his authority and limit when he
    signed off on the
    General Expenses Forms for the purchase of motor vehicles.

  • Page 138 of 184

  • Recommendations Page 75

    5. CONCLUSION

    Good and desirable governance of the public institutions as well as
    the nation is dependent
    upon good and sound management and decisions being made by those
    placed in responsible
    positions. Good public officials and managers understand their roles
    and responsibilities
    and perform their duties within the ambit of the laws that governs
    their conduct. Public
    officials who are empowered by law make decisions that will affect
    the lives of individuals
    must ensure that they carry out their duties in good faith and in
    compliance with the laws.

    Public officials must exercise due diligence, honesty and dedication
    in the work they are
    entrusted with. Inconsistency in decision making or non-compliance
    with relevant laws
    creates doubt in the minds of the public that the decision maker has
    been influenced by
    outside sources and forces not conducive to good governance and
    accountability.
    Professional negligence must be dealt with seriously.

    Some characteristics of good governance necessary to eliminate bad
    administrative practices
    include honesty, diligence, consistency, competency, compliance with
    established laws and
    procedures, and standing up to political interference.

    This Report highlighted irregularities committed by then Provincial
    Government and then
    Provincial Administration when they decided to purchase 19 vehicles

  • Page 139 of 184

  • from Ela Motors Ltd
    for the 19 LLG Presidents. It further highlights the non-compliance
    by then JPP&BPC in
    holding its meetings in accordance with Section 25(2) of the Organic
    Law on the Provincial
    Governments and Local Level Governments. It further highlighted the
    political influence that was
    exerted by the politicians on the Provincial Administration. It
    further highlighted that the
    Provincial Administration and the Provincial Treasury failed to
    comply with the tender and
    procurement procedures as outlined in the Public Finance
    (Management) (Amendment) Act 1995
    (No.4 of 2013) and Financial Instruction No:01/2013.

    Then Provincial Government, the Office of the Governor, the
    Provincial Administration and
    Provincial Treasury failed to live up to the expectation of the
    people and State in complying
    with the administrative processes and procedures and the Acts
    governing the operation of
    the Provincial Administration and Provincial Treasury.

    The officers of the Provincial Administration and the Provincial
    Treasury are to take note of
    the findings and recommendations made in this Report and make
    special effort to correct
    the irregularities for the good of the Province and the people of
    Papua New Guinea.

    The leaders to whom the Ombudsman Commission directs its
    recommendation are asked to
    carefully consider the recommendations and implement them.

    MICHAEL DICK RICHARD PAGEN
    CHIEF OMBUDSMAN OMBUDSMAN

    PORT MORESBY
    May 2018

    Conclusion Page 76

    6. RELEVANT LAWS

    [6.1] CONSTITUTION

    Section 219 of the Constitution lists the functions of the Ombudsman
    Commission. The first

  • Page 140 of 184

  • of these functions is:

    (d) to investigate, on its own initiative or on complaint made by a
    person affected, any
    conduct on the part of-

    … (any governmental body or an officer or employee of any
    such body)

    specified by or under an Organic Law in the exercise of a
    power or function
    vested in it or him by law in cases when the conduct is or may
    be wrong,
    taking into account amongst other things, the National Goals
    and Directive
    Principles…

    Section 148 of the Constitution is concerned with the functions and
    responsibilities of
    Ministers.

    (1) Ministers (including the Prime Minister) have such titles,
    portfolios and
    responsibilities as are determined from time to time by the
    Prime Minister.

    (2) Except as provided by a Constitutional Law or an Act of the
    Parliament, all
    departments, sections, branches and functions of the Prime
    Minister is politically
    responsible for any of them that are not specifically allocated
    under this section.

    (3) Subsection (2) does not confer on a Minister any power of
    direction or control.

    Section 187C (1) and (4) of the Constitution is concerned with the
    Constitution, functions of
    the Provincial Governments and Local Level Governments.

    (1) Subject to this Part, an Organic Law shall make provision in
    respect of the
    constitution, powers and functions of a Provincial Government or
    a Local-level
    Government.

    (4) An Organic Law shall make provision for and in respect of—

    (a) grants by the National Government to Provincial
    Governments and
    Local-level Governments; and

    (b) subject to Subsection (4A), the imposition, collection
    and distribution

  • Page 141 of 184

  • of taxation by Provincial Governments and Local-level
    Governments,

    and may make other financial provisions for Provincial Governments
    and Local-level
    Governments, to an extent reasonably adequate for the performance
    of their functions.

    Relevant Laws Page 77

    Section 106 of the Organic Law on Provincial Governments
    and Local Level Governments which state:
    which state:

    [6.2] ORGANIC LAW ON PROVINCIAL GOVERNMENTS AND LOCAL LEVEL
    GOVERNMENTS

    Section 25 is concerned with the roles and functions of the
    Provincial Executive Council Committees.
    Committees.

    (1) A Provincial Executive Council shall, in accordance with
    an Act of the
    Parliament—

    (a) establish a Joint Provincial Planning and Budget
    Priorities Committee; and

    (b) establish such number of committees (including
    permanent committees) as
    it considers necessary to carry out its functions; and

    (c) determine all matters relating to such committees.

    (2) The Joint Provincial Planning and Budget Priorities
    Committee shall consist of—

    (a) a member of the Provincial Executive Council
    appointed by the Governor,
    who shall be the Chairman; and

    (b) the Chairman (or his nominee) of each District
    Development Authority; and

    (c) any other members not exceeding three in number
    appointed, on an ad hoc
    basis, by the Provincial Executive Council.

    (3) The Joint Provincial Planning and Budget Priorities
    Committee shall have the
    following functions:—

  • Page 142 of 184

  • (a) to oversee, co-ordinate and make recommendations as
    to the overall
    planning in the province, including budget priorities,
    for consideration by
    the National Government; and

    (b) to determine and control budget allocation priorities
    for the Province; and

    (c) to approve Provincial Government Budgets for
    presentation to the
    Provincial Assembly; and

    (d) to draw up a rolling five-year development plan and
    annual estimates for the
    province; and

    (e) to conduct annual reviews of the rolling five-year
    development plan.

    (4) The Provincial Administrator shall be the Chief
    Executive Officer of the Committee.
    .
    (5) A Member of the Parliament who occupies an office
    referred to in Section 19(1)(b) is not eligible to be a
    member of a Committee under this section.
    is not eligible to be a member of a Committee under this
    section.

    Relevant Laws Page 78

    (6) The Governor shall appoint a Chairman for each Committee
    under this section, but
    such appointments shall be made so as to ensure fair
    representation of the various
    electorates and districts within the province.

    (7) An Act of the Parliament shall make provision for other
    functions and powers of,
    and administrative arrangements for, the Committee.

    Section 106 of the Organic Law on the Provincial Governments and
    Local Level
    Governments is concerned with Provincial Planning and Data System.

    (1) There shall be established in each province an extended
    service of the Department
    responsible for planning matters and of the National
    Statistical Office.

  • Page 143 of 184

  • (2) The functions of these services are to establish and maintain
    an effective and
    efficient provincial and local-level planning and data system.

    [6.3] PROVINCIAL GOVERNMENTS ADMINISTRATION ACT 1997

    Section 17 deals with Powers and functions delegated to the
    Provincial Governments.

    Section 17 Powers and functions delegated.

    Any legislative power or function of the National Government or
    power or function of the
    National Government under an Act of the Parliament delegated to a
    Provincial Government
    under Section 50 of the Organic Law shall be exercised and performed
    as prescribed.

    Section 18 empowers the Provincial Governments to make laws and
    regulations in
    accordance with the Organic Law on Provincial Governments and Local
    Level Governments.

    18. Making of provincial laws.

    (1) An Act of a Provincial Assembly is effective where—

    (a) it has been made by the Assembly; and

    (b) it has been certified

    (i) by the Clerk to the effect that it is a true copy of
    the Act made by the
    Assembly; and

    (ii) by the Chairman that it was made by the Assembly;
    and

    (c) it has been sealed with the Seal of the Assembly in
    accordance with the
    Standing Orders of the Assembly; and

    (d) it has been brought into operation in accordance with its
    commencement
    clause.

    (2) An Act of a Provincial Assembly may have retrospective or
    retroactive effect.

    Relevant Laws Page
    79

  • Page 144 of 184

  • [6.4] PUBLIC FINANCE (MANAGEMENT) (AMENDMENT) ACT 1995 (No.4 of
    2013)

    5. Responsibilities of Heads of Departments.

    (1) Each Departmental Head is responsible for ensuring that, in
    relation to the
    Department of which he is Head—

    (a) the provisions of this Act are complied with; and

    (b) all accounts and records relating to the functions and
    operations of the
    Department are properly maintained; and

    (c) all necessary precautions are taken to safeguard the
    collection and custody
    of public moneys; and

    (d) all expenditure is properly authorized and applied to
    the purposes for
    which it is appropriated; and

    (e) there is no over-commitment of funds and a review is
    undertaken each
    month to ensure that there is no over-expenditure or
    over-commitment
    and the collection of public moneys is according to
    approved plans and
    estimates; and

    (f) all expenditure is incurred with due regard to economy,
    efficiency and
    effectiveness and the avoidance of waste; and

    (g) all necessary precautions are taken to safeguard stores
    and other property
    of the State; and

    (h) any fee, charge or tax imposed by legislation for which
    the Department is
    responsible is collected promptly and to the fullest
    extent; and

    (i) any fee, charge or tax imposed by legislation for which
    the Department is
    responsible is reviewed at least once in each year in
    order to establish—

    (i) whether the level of such fee, charge or tax is
    adequate; and

  • Page 145 of 184

  • (ii) whether such fee, charge or tax should be
    increased and, if so,
    by what amount,

    and that financial reports on reviews and other such
    matters are submitted
    to the Departmental Head of the Department responsible
    for financial
    management in the format specified in the Financial
    Instructions; and

    (j) information required by the Public Accounts Committee is
    submitted to
    that Committee accurately and promptly; and

    (k) advice on financial management is given to the Minister
    politically
    responsible for the Department; and

    (l) proper estimates in respect of collection and
    expenditure of public moneys
    are prepared in a form specified in the Financial
    Instructions; and

    Relevant Laws Page 80

    (m) as soon as practicable after the end of each quarter of
    each fiscal year he
    submits to the Departmental Head of the Department
    responsible for
    financial management a report on financial management in a
    form specified
    in the Financial Instructions.

    (2) The responsibility of a Departmental Head under Subsection (1)
    is not derogated or
    reduced by reason of any delegation of functions by him to
    another person.

    (3) A Departmental Head is liable to imposition of surcharge under
    Section 102 and
    levy of penalty for an offence under Section 112 in addition to
    disciplinary action
    under the Public Service General Orders for improper discharge
    of responsibility
    under Subsection (1).

    Section 6 deals with the Accountable officers and financial
    delegates.

    6. Accountable officers.

    (1) A person who—

  • Page 146 of 184

  • (a) is an officer; or

    (b) authorizes the collection or payment of public moneys or
    accounts for
    stores, whether or not he is an officer,

    is an accountable officer for the purposes of this Act.

    (2) An accountable officer shall comply with the provisions of
    this Act in respect of
    all matters for which he is responsible and for all public
    moneys and stores in his
    possession or under his control, and shall duly account for
    them.

    Section 40 deals with the tender and procurement procedures for
    property, stores, works
    and services.

    (1) Subject to—

    (a) this section; and

    (b) Section 41,

    tenders shall be publicly invited and contracts let for the
    purchase or disposal of
    property or stores or the supply of works and services the
    estimated cost of which
    exceeds the prescribed amount.

    (2) In relation to the purchase or disposal of property and stores
    and the supply of
    works and services the estimated cost of which does not exceed
    the prescribed
    amount, the provisions of the Financial Instructions shall
    apply.

    (3) The preceding provisions of this section do not apply to the
    purchase or disposal of
    property or stores or the supply of works and services—

    (a) that are to be purchased from, disposed of to, or executed
    or performed by—

    Relevant Laws Page 81

    (i) a public body or an authority or instrumentality of the
    State
    approved for the purpose by the Minister; or

  • Page 147 of 184

  • (ii) a Provincial Government; or

    (iii) a Local-level Government; or

    (iv) an approved overseas agency; or

    (b) in respect of which a Board certifies that the inviting of
    tenders is
    impracticable or inexpedient; or

    (c) where, in individual transactions involving amounts not
    exceeding
    K500,000.00, the Minister in his discretion considers that
    there is a natural
    disaster or it is not expedient or proper to call public
    tenders and, prior to
    the goods or services being provided, by certificate in
    writing narrates these
    circumstances and waives the provisions of this section;

    (d) where the terms of an agreement concluded, or proposed to
    be concluded,
    with any international organization under which the State is
    to receive
    moneys, make specific provision for the manner in which
    tenders will be
    invited for contracts to be performed in relation to the
    agreement.

    (4) In Subsection (3)(a)(iv), “approved overseas agency” means
    the government, a
    government department, a government instrumentality or a
    statutory corporation
    of a country other than Papua New Guinea approved by the
    Minister by notice in
    the National Gazette.

    (5) In relation to contracts for the supply of works and
    services, the provisions of this
    section and of Section 41 shall apply to—

    (a) turnkey contracts; and

    (b) build-operate transfer contracts; and

    (c) contracts which in substance are similar to turnkey
    contracts or build-
    operate transfer contracts; and

    (d) contracts involving the expenditure of public moneys.

    Section 47B of the Public Finance (Management)(Amendment) Act 1995
    (No.4 of 2013) deals with
    the approval of funds for projects

  • Page 148 of 184

  • 47B. Authority to Pre-commit Expenditure.

    (1) The Departmental Head of the Department responsible for
    financial management
    may issue to a Departmental Head an Authority to Pre-commit
    Expenditure in
    relation to the purchase of property or stores or to the supply
    of goods or services
    where the Departmental Head of the Department responsible for
    financial
    management is satisfied that—

    (a) in the case of proposed expenditure exceeding K100,000.00—

    Relevant Laws Page 82

    (i) the provisions of this Part have been complied with in
    relation to the
    purchase or supply; and

    (ii) funds will be available to meet the proposed schedule of
    payments for
    the purchase or supply; and

    (b) in the case of proposed expenditure not exceeding
    K500,000.00, the
    circumstances of the proposed expenditure are such that it is
    appropriate to
    authorize the Department, to the Departmental Head of which
    the
    Authority to Pre-commit Expenditure was granted, to enter
    into a contract
    for the purchase of property or stores or for the supply of
    goods or services
    notwithstanding that the full amount of funds to meet the
    payment
    required under the contract is not immediately available but
    it is within the
    appropriation for the year to which the Authority to Pre-
    commit
    Expenditure relates for the item to which it relates.

    (2) An Authority to Pre-commit Expenditure under Subsection (1)
    shall specify—

    (a) the purchase of property or stores or the supply of goods or
    services to
    which it relates; and

    (b) the maximum amount to which the Authority extends.

  • Page 149 of 184

  • (3) Subject to Subsection (4), an Authority to Pre-commit
    expenditure under
    Subsection (1) authorizes the execution, in accordance with and
    subject to
    compliance with the procedures specified in this Part, of a
    contract for the
    purchase of property or stores or for the supply of goods and
    services specified in
    the Authority to the extent of an amount not exceeding the
    maximum amount
    specified in the Authority.

    (4) A contract under Section 47 shall not be entered into unless—

    (a) an Authority to Pre-commit Expenditure under Subsection (1)
    relating to
    the contract has been issued; and

    (b) all other requirements of this Part relating to the contract
    have been
    complied with.

    Section 110 of the Public Finance (Management) (Amendment) Act 1995
    (No.4 of 2013) is
    concerned with the delegation of the powers and function of the Head
    of Department.

    Section 110 of the Public Finance (Management) (Amendment) Act 1995
    (No.4 of 2013) deals with
    delegation

    A Departmental Head may, by instrument, delegate to a person all or
    any of his powers and
    functions under this Act (other than this power of delegation).

    Relevant Laws Page 83

    [6.5] FINANCE MANAGEMENT MANUAL

    PART 11 – PROCUREMENT – FRAMEWORK AND PRINCIPLES

    DIVISION 1 – FUNDAMENTAL PRINCIPLES

    1. The five fundamental principles in the GoPNG procurement system
    are:
    a. ―Value for money‖,

  • Page 150 of 184

  • b. Transparency,
    c. Effective competition,
    d. Fair and ethical dealing, and
    e. Efficiency and Effectiveness.

    These principles are explained below.

    2. ―Value for Money‖
    ―Value for money‖ involves obtaining goods and services that best
    meet the
    government‘s need at the lowest total cost.
    The main objective of GoPNG procurement is to obtain ―value for
    money‖ in the
    acquisition of goods and services using ethical, transparent
    processes whilst promoting
    open and effective competition.
    All decision makers in the procurement process must satisfy
    themselves that a proposed
    contract will make effective use of taxpayers or donor agency
    funds.
    3. Transparency:
    Transparency involves the clear and public documentation of
    procurement processes
    and decisions. All processes used and decisions made should be
    able to withstand
    independent review and scrutiny.
    It is the responsibility of all GoPNG staff involved in
    procurements to act in a
    transparent manner.
    4. Effective Competition:
    Effective competition is a key operating principle that must be
    applied if ―value for
    money‖ is to be achieved.
    Competition that is effective will see a number of independent
    companies bidding to
    provide goods and services to the GoPNG, through the procurement
    process. Creating
    effective competition involves publicly requesting tenders and
    quotes from suppliers,
    providing timely and adequate information to suppliers, and
    ensuring that new entrants
    and small suppliers are able to participate.

    5. Fair and Ethical Dealing:
    The GoPNG in spending taxpayers and donor agency money has a
    special responsibility
    Relevant Laws Page 84

    to avoid waste, act honestly and impartially, and be accountable
    for procurement
    actions.
    The central principles underpinning fair and ethical dealing
    include:

  • Page 151 of 184

  • a. Treating potential and existing suppliers with equality and
    fairness
    b. Not seeking personal or family gain
    c. Treating suppliers and potential suppliers information with
    respect and
    confidentiality;

    d. Where conflict of interest occurs, it must be declared
    It is important not only that all staff involved in major
    procurements follow these
    principles; but also that they be seen at all times to follow
    these principles. Failure to do
    so undermines the credibility of the whole GoPNG procurement
    process.
    6. Efficient and Effective Operation:
    The principle of efficient and effective procurement requires
    procurement staff to use
    procurement processes that are commensurate with the amount of
    monies being spent.
    For example, it would not be efficient or effective to run a
    public tender for expenditure
    of K5,000. The overhead cost of running a public tender is
    substantial, and such a small
    purchase would not be able to justify the expense of the
    procurement process.
    Appropriate processes for different levels of expenditure are laid
    down in Part 11,
    Division 2 of these instructions.

    DIVISION 2 – PROCUREMENT DEFINITION and PROCESSES
    7. Procurement is defined as a process undertaken by the Government
    in order to obtain
    goods, works or services. As such, procurement includes all
    minor purchases, major
    purchases, hire purchases, rentals and leases.
    8. The procurement processes to be used are determined by the value
    (in kina), of the
    procurement. The categories of expenditure by value are:
    a. Minor Procurements – less than K100,000, and
    b. Major Procurements – greater than or equal to K100,000. This
    is summarised in
    the table below.

    Procurement ClassificationProcess Detailed
    Value Reference

    < K100,000 Minor Quotes Part 12 >= K100,000 Major Public Part 13
    Tender

    9. When considering whether a procurement is ―major‖ or ―minor‖,
    the total amount of
    monies to be paid to a supplier over the life of the contract

  • Page 152 of 184

  • must be established.
    10. Major procurements generally occur through a public tender
    process – Part 13
    Relevant Laws Page 85

    provides specific details of processes available for major
    procurements.

    11. Minor procurements occur by obtaining quotes – Part 12 provides
    specific detail of
    these procurement processes.

    12. The fundamental principles of procurement are to be adhered to,
    irrespective of
    whether the procurement is major or minor.
    13. Procurement processes result in the formation of a contract
    between the GoPNG and
    a Contractor. A contract is an exchange of a conditional agreement
    between GoPNG
    and a Contractor, which once executed is a legally enforceable
    agreement in law.

    14. For clarity, contractors, suppliers and consultants are simply
    referred to in Parts 11,
    12, 13, 14, 15 as ‗Contractors‘.

    15. No express or implied contract can be entered into or purchase
    order raised without
    following the prescribed financial procedures for purchase of
    goods and services, or
    capital works or for disposal of Government assets; as outlined in
    Parts 11, 12, 13, 14 and
    15 of this Manual.
    16. For the following expenditures, the additional special
    procedures (Part 13 of this
    Manual) will apply:

    a. Official overseas travel

    b. Air Charters (including helicopter charters)
    c. Engaging of consultants

    d. Official Entertainment Expenses

    Approval by a special committee does not dispense with the need to
    use the appropriate
    procurement (major or minor) process, based upon the amount of the
    expenditure.
    DIVISION 3 – LINKAGE BETWEEN FINANCIAL MANAGEMENT PROCESSES AND
    PROCUREMENT PROCESSES

    17. Procurement activities are governed by the Public Finance
    (Management) Act 1995,

  • Page 153 of 184

  • Regulations, and Financial Instructions. Procurement processes
    necessarily interlace
    with financial management processes such as budgeting, commitment
    of funds, and
    management of expenditure.

    18. The specific linkages between the Financial Management System,
    and Procurement
    processes are detailed for Major Procurements in Part 13, and for
    Minor Procurements
    in Part 12.
    DIVISION 4 – OTHER REQUIREMENTS

    19. Splitting Contracts: No attempt must be made to circumvent or
    by-pass the limits on
    the powers given under the Public Finance (Management) Act 1995 or
    other limits laid
    down in this Manual by splitting contracts, requisitions or
    purchase orders.

    20. Existing Contracts: Responsible Officers must satisfy themselves
    before purchasing,
    that no current contract exists for the particular item they
    require.

    Relevant Laws Page 86

    21. Forward Planning:

    Purchases of goods and services (including Works) must be planned
    well in advance
    especially where purchases require a long lead-time. Since
    Parliamentary appropriations are
    annual, contracts should be planned in a timely manner, and orders
    for purchases raised in
    time so that payments are made as far as possible before the close
    of the year.

    22. Contracts Spanning Fiscal Years:

    Departments must ensure that, where contracts span more than 1
    fiscal year, appropriations
    are made for each fiscal year. This requirement is fully outlined in
    Part 13, Attachment 1.

    23. Mandated Government Suppliers:

    For printing or mapping needs, the appropriate specialist Government
    agency such as
    Government Printing Office, or National Mapping Bureau must be used.

    24. Purchase from other Government Agencies:

  • Page 154 of 184

  • All purchases where the goods, services or works are to be provided
    by one government
    agency to another, are exempt from tender procedures under Section
    40 (3) and (4) of the
    Act.
    25. Commitment Control:

    a. The procedure for obtaining the Section 32 officer’s approval
    and maintaining control
    over funds allocated through Cash Fund Certificates is outlined
    in Part 7 of this
    Manual.

    b. All purchase orders must be pre-committed using the appropriate
    accounting system
    (PGAS) and raised under the authorised Financial Delegate’s
    signature. The
    Departmental Head who appoints the Financial Delegate can sign
    the purchase
    orders or other Finance Forms in the place of Financial Delegates
    notwithstanding
    the issue of Cash Fund Certificates, after following the
    prescribed commitment
    procedure.
    c. All major procurements must be pre-committed using the process
    outlined in Part 13,
    Attachment 1.

    PART 13 – MAJOR PROCUREMENTS – (COSTING K100,000 AND ABOVE)
    DIVISION 1 – PROCUREMENT THROUGH SUPPLY AND TENDERS BOARDS

    1. All procurements of K100,000 or more are to be conducted through
    the relevant Supply
    and Tenders Board. A list of these Boards, their purpose,
    membership, and powers is
    provided in Part 14.

    DIVISION 2 – AVAILABLE PROCUREMENT PROCESSES
    2. Public Tenders to be Used:

    Section 40 of the Public Finance (Management) Act 1995 prescribes
    that goods, works and
    services with a value greater than K100,000 are to be purchased
    through a public tender
    process as the public tender process provides government with the
    best chance of
    Relevant Laws Page 87

    obtaining a ―value for money‖ outcome.
    3. Public tenders involve the widespread advertising of
    opportunities to supply the
    government with the goods or services required. They promote

  • Page 155 of 184

  • competition. This
    differentiates them from selective tenders, expressions of interest
    and other
    procurement mechanisms.
    4. Selective tenders are NOT allowed as they restrict the level of
    competition.
    a. Expressions of Interest (EoI‘s) may be used to provide market
    research, but are not an
    acceptable procurement process in themselves, and must be followed
    up with one of
    the available procurement processes (eg, public tender).
    Contractors cannot be short
    listed through the use of EoI‘s.
    5. The processes available for procurement must also be used for the
    disposal of items no
    longer required by government.
    6. In circumstances where a Supply and Tenders Board issues a
    ―Certificate of
    Inexpediency‖, the public tendering process will not apply. A
    ―Certificate of
    Inexpediency‖ may only be issued in exceptional circumstances as
    outlined in Division 4
    of Part 13.
    7. International Financing Arrangements:
    In circumstances where the terms of an agreement with an
    international organisation
    under which the Government of PNG is to receive monies, make
    specific provision for
    the manner in which tenders will be invited for contracts performed
    as a result of the
    agreement, other procurement processes may be used. However, in
    order to maximise
    the extent to which ―value for money‖ is obtained, all efforts
    should be made to ensure
    that the public tendering process is specified as the appropriate
    procurement process
    when drafting such international agreements.

  • Page 156 of 184

  • Relevant Laws Page 88

    Department of Finance Financial Management Manual

    DIVISION 3 – PUBLIC TENDERING PROCESS

    8. The key responsibilities in the public tendering process are
    outlined in the diagram below:

    Key Responsibilities in the Public Tendering Process

    Establish the Need for
    Goods, Works or Services

    Develop Specification and
    Bid Documents and costs
    estimates

    Obtain an Authority to

  • Page 157 of 184

  • Pre-Commit

    Issue Bid Documents to
    prospective Suppliers

    Write Report Consider
    Recommending a Recommendation Report
    Supplier(s)
    The Board may require
    clarification of issues in
    relation to the tender.
    Implement and Execute Contract
    Administer Contract to (if within the Boards
    Completion delegated limit,

    Relevant Laws Page 89

    The diagram above has been provided to assist Supply and Tenders
    Boards, and purchasing
    Departments and agencies to:

    • Understand the tender process used for major procurements, and

    • Separate the responsibilities and accountabilities within the
    procurement
    process in accordance with the Public Finance (Management) Act
    1995 and good
    procurement practice.
    9. These key steps should be followed by all agencies and Supply and
    Tenders Boards
    involved in a public tender. Each step is briefly outlined below:
    a. Establish the Need for Goods, Works and Services.
    Departments / agencies should consider carefully why they require
    the goods, works
    or services that are proposed to be purchased. The purchase
    should be prioritised (in
    importance) in accordance with approved plans. An estimated cost
    must also be

  • Page 158 of 184

  • established and approved in the annual budget.

    b. Develop a Specification and Bid Documents
    The bid documents should consist of:

    1) Conditions of tendering – the rules of tendering

    2) Specification – a clear description of the goods or services
    that the Department
    wishes to buy

    3) Draft Conditions of Contract – a draft contract that will form
    the basis of the
    final contract agreed between the Government of PNG and the
    successful
    supplier

    4) Standard Tenderer Response Sheets – standard forms that will
    enable the
    Tenderer to clearly define their offer, and the Department to
    easily evaluate and
    compare each tenderer‘s offer

    5) Selection criteria – publication of Selection criteria is
    required, to assist in
    establishing a transparent tendering process.

    6) Pre-tender cost estimates

    Wherever possible, standard template bid documents (issued by the
    Central Supply
    and Tenders Board) are to be used. It is however, the
    responsibility of the
    Department or agency to produce high quality bid documents. The
    Department
    should generally use the people it wishes to have evaluate the
    tender, to also develop
    the bid documents; including the selection criteria.
    c. Obtain an ―Authority to Pre-commit‖ (APC) Expenditure and other
    requirements.
    The process for obtaining an Authority to Pre-Commit Expenditure
    (APC) is clearly
    documented in Attachment 1 to Part 13 of this manual. An APC
    confirms that funds
    will be made available to the supplier once a contract has been
    executed and
    fulfilled. A Supply and Tenders Board must not invite a tender
    without an APC
    Relevant Laws Page 90

    having been issued.

    d. Advertising the Tender.

  • Page 159 of 184

  • Tender advertisement is designed to inform suppliers of
    opportunities, promote
    transparency and equal opportunity, and create a competitive
    environment.
    For goods and services; where the tender is valued at:
    • Greater than K100,000 and less than K10.0m it must be advertised
    in a national
    newspaper with large circulation (eg ―The National‖ or the
    ―Post-Courier‖)

    • Greater than K10.0m it must be advertised in at least two
    national newspapers and
    relevant international media.
    For capital works and construction; where the tender is valued at:

    • Greater than K100,000 and less than K10.0m it must be advertised
    in a national
    newspaper with large circulation (eg ―The National‖ or the
    ―Post-Courier‖)
    • Greater than K10.0m it must be advertised in at least two
    national newspapers and
    relevant international media.
    e. Issue Bid Documents.
    Bid documents must be issued to all prospective tenderers that
    have paid the required
    fee. The fee is to recover the cost of reproduction of the bid
    documents. Documents are
    issued by the Supply and Tenders Board, which must also retain a
    list of all individuals
    and companies receiving the bid documents along with their contact
    details.
    f. Receiving and Opening Tenders.
    The Supply and Tenders Board will arrange for tenders to be opened
    on the day that the
    tender closes. All tenders will be opened ―publicly‖.
    Departmental/ agency
    representatives should be encouraged to attend the public opening,
    along with
    representatives of the companies that have submitted bids.
    The Supply and Tenders Board representative at the opening will
    read out the
    following information in relation to each bid:

    • Company Name, and
    • Price
    • Submitted Bid Securities (if applicable)

    Where more than one bid is received from a company, the detail of
    each offer submitted
    must be read out. The Supply and Tenders Board representative then
    formally registers
    all copies of offers. The Supply and Tenders Board will hold one
    copy of each tender,
    whilst all subsequent copies will be given to the Department for

  • Page 160 of 184

  • evaluation.
    The only exception to this will be when the Conditions of
    Tendering require a ―two
    envelope‖ offer, where companies are required to submit details of
    their price in a
    separate envelope to qualitative aspects of their offer.
    In this case initially only the Company Name will be read out
    publicly. Once the
    Department has completed its qualitative (non-financial) analysis,
    a second public

    Relevant Laws Page 91

    opening will be held where prices will be read out.
    g. Analysing Tenders.
    Upon advice from the Supply and Tenders Board, Departments are to
    nominate
    suitably qualified staff or consultants to undertake the tender
    evaluation. These staff
    will be known as the ―Technical Evaluation Committee‖ (TEC). The
    Supply and
    Tenders Board may reject one or more of the nominations, in which
    case the
    Department is to offer a substitute.

    The TEC is a small team of specialists from the Department(s),
    which under the
    direction of the Supply and Tenders Board, evaluate the tenders.
    The role of the TEC is
    to carry out the tender evaluation in accordance with the Public
    Finance (Management) Act
    1995, Regulations and Financial Instructions, using the processes
    outlined in the
    ―Good Procurement Manual‖. In a practical sense this requires the
    TEC to evaluate
    tenders according to the requirements of the bid documents, and
    previously defined
    selection criteria.
    The TEC must follow the steps outlined below when analysing
    tenders:

    STEP 1. Read ALL of the Offers

    STEP 2. Clarify – Write to any tenderer to clarify aspects of
    their tender that
    are unclear. Be sure that you do not create a ―counter-
    offer‖ in doing
    this – consult people with a good understanding of
    contract law if in
    any doubt. The Central Supply and Tenders Board
    Secretariat can also
    advise you in relation to such matters.
    STEP 3. Rate the Qualitative (Non-Cost) aspects (Technical,

  • Page 161 of 184

  • Capacity,
    Experience, Past Performance, Integrity, Financial status,
    Contractual,
    Financial, Other) of each tenderers offer against the
    selection criteria
    previously established.

    STEP 4. Identify the Price of each Tenderer and adjust it for all
    or any of the
    following:

    a) Arithmetic mistakes made by the Tenderer
    b) Significant ―whole of life‖ costs that vary across the
    different
    offers
    c) Any price variation or foreign exchange exposures borne
    by the
    GoPNG

    The adjusted price can now be used to rank tenderers in
    relation to
    Cost.
    STEP 5. Make a transparent and supportable judgment, based upon
    the
    Qualitative ranking of each tenderer and Adjusted Price,
    as to which
    offer represents best ―value for money‖ for the GoPNG.
    Where doubts exist within the TEC as to how an evaluation should
    be conducted the
    TEC may seek guidance from the Supply and Tenders Board to which
    it reports.

    Relevant Laws Page 92

    h. Write the Recommendation Report.
    The TEC must ensure that the evaluation and Recommendation Report
    is undertaken
    promptly, and within the validity period specified in the
    Conditions of Tender.

    The TEC must write a recommendation report designed to:
    1 Describe the procurement process used to arrive at the
    recommended tenderer, so
    that the Supply and Tenders Board is able to certify that the
    procurement has taken
    place in accordance with the Public Finance (Management) Act
    1995, and

    2 Outline why the recommended tenderer represents ―value for
    money‖. A valid,
    approved APC must be included with the Recommendation Report.

  • Page 162 of 184

  • 3 All bidders ranked must be included in the recommendation to the
    Board.
    The ―Recommendation Report‖ MUST be signed by each of the people
    in the TEC, as
    well as the Departmental / Agency Head.

    i. Consideration of the Recommendation Report. Supply and Tenders
    Boards MUST
    satisfy themselves that:

    1) The tender has been conducted in accordance with the Public
    Finance (Management
    Act) 1995, Regulations and Financial Instructions, and
    2) The recommended offer represents ―value for money‖.

    In carrying out this role, Supply and Tenders Boards should ask
    inquiring questions of
    purchasing Departments and agencies where information presented is
    deficient.
    Recommendations must not be approved until the Board is confident
    that the
    abovementioned conditions have been met.
    The Supply and Tenders Board is not obliged to accept the
    recommendation of the
    TEC. However, when the Board disagrees with the TEC’s
    recommendation, in the first
    instance the Board is to discuss the matter with the TEC. If
    required, the TEC is then
    required to consider additional information provided by the Board.
    If deemed
    appropriate the TEC is to prepare a revised evaluation report.
    In the event that the Board disagrees with the initial and
    subsequent evaluations, the
    Board may disregard the TEC’s recommendation and award the
    contract, based on the
    Board’s sole recommendation. In this event the Board must prepare
    its own evaluation
    report with clear and comprehensive justifications in accordance
    with the law, for the
    recommended award. The Board must also attach to their evaluation
    report the TEC’s
    evaluation report(s) and all relevant correspondence in regards to
    the disagreement of
    the recommendation.
    Where an organization disagrees with a Boards decision, a formal
    complaint may be
    pursued under Division 6 of Part 14.

    j. Contract Execution.
    The Supply and Tenders Board Chairman may execute a contract
    within the Boards
    delegated authority, once the Supply and Tenders Board has
    approved the

  • Page 163 of 184

  • recommended tenderer.

    Relevant Laws Page 93

    Where the contract consideration exceeds the Boards delegated
    limit, the Chairman of
    the Board will refer the Board’s recommendation with supporting
    documents to the
    National Executive Council through the Minister responsible for
    the Department.

    Contracts should be executed by the signing of a single contract
    agreement by all of the
    parties to the agreement. Letters of Acceptance must not be used
    for contract execution.

    The State Solicitor must sight all contracts before they are
    executed, unless a template
    contract that has previously been given blanket approval by the
    State Solicitor is used.
    In this circumstance, a copy of the signed contract must be lodged
    with the State
    Solicitor for information.
    The Supply and Tenders Board is also responsible for completing
    the relevant section
    of the APC Form (FF5A), by inserting details of the successful
    supplier, its file number,
    and stamping the form. The ―Blue‖ copy of the APC is to be sent to
    the Department of
    Finance, whilst the original and ―Green‖ copies are to be sent to
    the contract officer
    nominated by the Department on the APC.
    The Supply and Tenders Board must retain a photocopy of the
    approved APC on their
    file. The APC process is fully detailed in Part 10, Attachment 1.

    Section 47 (3) of the Public Finance (Management Act) 1995
    requires every Minister whose
    portfolio establishes a contract greater than K5.0m to provide a
    copy of that contract
    to Parliament at the first sitting of Parliament after the
    execution of the contract.

    k. Implement Contract and Administer to Completion.
    Once a contract is executed, the purchasing Department / agency is
    responsible for the
    effective administration of the contract in accordance with the
    Public Finance
    Management Act, Financial Instructions and good accounting
    practice.
    For assistance in relation to contract implementation, refer to
    Division 7 – ―Contract
    Implementation‖ in this part.

  • Page 164 of 184

  • DIVISION 5 – CONFIDENTIALITY
    17. Section 46 of the Public Finance (Management) Act 1995 requires
    members of Supply and
    Tenders Boards, Secretariat staff, technical evaluation staff and
    other public servants
    NOT to discuss (or communicate with by non-verbal means) the
    contents of a tender
    except when:

    a. Recording details of the tender in the Tender Register
    b. Preparing a notice of acceptance of late tender
    c. Giving advice to the Board on the tender
    d. Considering the tender at a Board meeting
    e. Making a recommendation that involves reference to the tender
    f. Causing notice of the tender to be sent to other tenderers

    18. Under no circumstances are Supply and Tenders Board members,
    Secretariat staff,
    technical evaluation staff or other public servants to
    communicate the details of a

    Relevant Laws Page 94

    tenderers offer to another tenderer or potential tenderer, or
    their agent or affiliate
    except where details of successful tenderers are published in the
    Boards Annual
    Report, or other general publicly available reports.

    DIVISION 6 – CONFLICT OF INTEREST
    19. Avoidance of Conflict of Interest‖
    The private interest of a GoPNG employee, Supply and Tenders Board
    member, appointee or
    representative, must under no circumstances be allowed to conflict
    with the duties of the
    person as a member of a Supply and Tenders Board, Secretariat staff
    to a Supply and
    Tenders Board, evaluation committee / team, or as a Head of
    Department, or other relevant
    position, whilst involved in a major procurement.
    A conflict of interest situation may arise from the following:

    • A conflict exists, or

    • A conflict might reasonably be thought to exist, or
    • There is the potential of a conflict.
    20. Action When a Conflict of Interest Situation Arises:
    A GoPNG employee, Supply and Tenders Board member, appointee or
    representative in a ―Conflict of Interest‖ situation in relation to
    a:

  • Page 165 of 184

  • • Major Contract, or
    • Proposed Major Contract

    MUST disclose the nature of their interest to the Board, and
    MUST NOT take part in any evaluation or deliberations with respect
    to the contract,
    and
    MUST NOT take part in any recommendation with respect to the
    contract, and MUST

    NOT be involved in the Administration with respect to the contract,
    and MUST NOT

    attempt to influence others involved in such tasks.

    The Secretary to the Supply and Tenders Board must record the
    disclosure of conflict of
    interest situations in the Board minutes, and related contract
    files.

    DIVISION 7 – CONTRACT IMPLEMENTATION
    21. This division explains the relationship between key contract
    participants including
    their usual roles and obligations. Important contract
    administration issues are outlined
    in order to assist Contract Managers to fulfill their role.

    22. Contract Parties and Relationships:

    Relevant Laws Page 95

    There are two principal parties to a contract; the GoPNG and the
    Contractor. The contract
    is established on behalf of the GoPNG by an Executing Authority
    (either Chairman of the
    Supply and Tenders Board or the Governor General).
    23. Contract Manager:
    The Contract Manager manages the implementation of the contract on
    behalf of the
    GoPNG. This person may be either a Public Servant or a Consultant
    appointed for the
    purpose (if the contract is either large or complex). All GoPNG
    contracts must have a
    nominated Contract Manager (sometimes referred to as; Project
    Manager, or
    Superintendent, or Engineer) and contact details of this person
    provided to the Contractor.
    24. Principles of Delivery and Performance:
    A number of key principles are embodied in good contract
    implementation. These are
    detailed below:
    a. Accountability and Responsibility

  • Page 166 of 184

  • Once the contract is agreed and signed (in accordance with the
    law), both parties are
    legally accountable and responsible to carry out their respective
    responsibilities
    under the contract. The Contractor is responsible to carry out
    the
    works/goods/services as stated in the contract. GoPNG and its
    Contract Manager are
    responsible for duties including; providing access to sites and
    information,
    responding to requests and timely payments.
    b. Timeliness
    Both parties are required to undertake duties in a timely manner.
    The contract will
    normally state the time within which these responsibilities are
    to be carried out.
    However regardless of whether stated in the contract or not,
    respective
    responsibilities must be actioned in a reasonable timeframe.
    c. Knowledge of Contract Administration and Contract Documents
    The Contract Manager must have a good working knowledge of
    contract
    administration within the relevant specialist field. The Contract
    Manager must have
    a comprehensive knowledge of the contract documents. Contractors
    will take
    advantage of Contract Managers who either have inadequate skills
    or do not
    understand the contract documents. Both the Contract Manager and
    Contractor
    must have a properly executed copy of the agreement.

    d. Good Documentation
    The Contract Manager administering the contract must maintain
    documentation to
    ensure the Contractor delivers the works/goods/services as stated
    in the contract and
    that accounting and payment details are clearly documented.
    During a contract
    disagreement or dispute, good documentation will assist with
    achieving a quick and
    fair solution.
    25. Contractual Obligations:
    The following obligations are usually common to all contracts
    regardless of their scale and
    nature:
    a. Government of Papua New Guinea
    ~ Appoint a Contract Manager and allow this person to administer
    the contract
    Relevant Laws Page 96

    impartially, without influence and in accordance with the
    law.

  • Page 167 of 184

  • • Provide unhindered access for the Contractor to implement
    the contract.

    • Make timely payment for completed portion(s) in accordance
    with the contract
    agreement.

    • Allow the Contractor to complete the whole contract, unless
    there has been
    mutual consent to change the scope of the contract or the
    Contractor is in
    breach of the contract.
    • Provide information and directions in a timely manner.

    • If provided for under the contract, provide work, equipment,
    materials and
    services in a timely manner.
    b. Contractor
    • Carry out and complete the works/goods/services under the
    contract
    • Complete the works/goods/services to the required standard
    under the contract
    in a professional manner and with due care.

    • To provide early notice of expected variations to the
    contract.
    • To proceed at an appropriate rate and complete the contract
    either as specified
    under the contract or within a reasonable time, where
    detailed timings are not
    specified in the contract.
    c. Contract Manager
    • To act as the Government‘s agent to administer the contract
    to ensure timely and
    satisfactory completion of the contract.

    ~ To implement the contract in accordance with its terms and
    conditions.

    • To act impartially to make determinations that affects both
    parties, such as
    variations, latent conditions and liquidated damages.

    • To supervise, make determinations, give instructions,
    exercise discretion and
    certify completed portions of the contract.
    • To certify payment(s) for completed portion(s) of the
    contract.

    • The Contract Manager must endeavour to promptly settle
    disagreements with the
    Contractor and the Government of Papua New Guinea in a
    professional,
    impartial manner. The Contract Manager must maintain

  • Page 168 of 184

  • accurate records of the
    disputed issue, as these records will be critical to any
    possible legal
    determination.

    26. Contract Administration:
    The Contract Manager administers the contract on behalf of the
    Government of Papua New
    Relevant Laws Page 97

    Guinea. Specific contract administration issues that must be
    considered by the Contract
    Manager are:
    a. Documentation
    Maintain an updated copy of the contract agreement. Maintain
    appropriately filed
    and documented records of; meetings and decisions, Trading
    Documents (bills of
    lading and invoices), insurance details, design information,
    quality control records,
    measurement and payment records and conditions and events
    affecting the contract:
    so to allow independent scrutiny or audit.
    b. Variations
    Variations where necessary, are to be implemented in accordance
    with Division 8 of
    Part 13 of this Manual.
    c. Quality Control
    Maintain records of the quality of the works/goods/services
    provided and note either
    acceptance, rejection or rectification measures taken.
    d. Measurement and Payment
    To use means of measurement which is acceptable to the Contractor
    and GoPNG, as
    stated in the contract. All payments made must comply with the
    relevant sections of
    the Public Finance (Management) Act 1995, Regulations and
    Financial Instructions.
    e. Financial Control
    Maintain adequate financial records of payments including
    variations. Notify the
    relevant Executing Authority if contract value is to exceed the
    delegate authority for
    the Department to approve variations, in accordance with Division
    8 of Part 13 of
    this Manual.
    f. Project Completion
    Upon physical and financial completion of the contract, advise
    the relevant Supply
    and Tenders Board that the contract is successfully completed,
    and the total amount

  • Page 169 of 184

  • of monies spent on the contract.
    27. Suspension of Contract:
    If allowed for in the Contract Agreement, the Contract Manager can
    suspend the contract if
    either the Contractor or the Government of Papua New Guinea
    substantially fails to
    perform their obligations. Refer to the Contract Administration
    Manual for detailed
    information on the process of contract suspension.
    28. Termination of Contract:
    Contract termination processes should only begin after all
    reasonable actions to end a dispute
    have been explored, and formal legal and other advice has been
    sought. Only the Chairman
    of a Supply and Tenders Board, or Head of State can terminate a
    contract in accordance
    with their powers to execute contracts.

    Relevant Laws Page 98

    DIVISION 9 – PROCUREMENT PROCESS AND THE FINANCIAL
    MANAGEMENT PROCESS

    32. The major procurement process parallels the financial management
    process. This
    interaction is outlined in the diagram below.

    Establish the Need for Establish Annual Budget
    Goods, Works or Services and Work plan

  • Page 170 of 184

  • Develop Specification Obtain an APC, based
    and Bid Documents upon clear estimates
    Ref: FI, Part 10, Attachment 1

    Contractor Signs APC form given to Contractor
    Contract (Original Copy)
    Ref: FI, Part 10,
    Attachment 1

    Contractor Completes
    Requirement In large contracts the process
    of
    requesting work, doing work,
    and
    invoicing can occur many
    times.

    Supplier Prepare General Expenses Form
    Contract Manager Invoice (FF4) and attach supporting
    Receives Invoice and documentation
    Confirms completion

    Claims Examination and
    Payment Authorisation Process
    Confirm that the Contractor Paid

  • Page 171 of 184

  • Contractor has
    received full payment

    Relevant Laws Page 99

    DIVISION 10 – AUTHORITY TO PRE-COMMIT PROCESS

    33. Introduction:

    The Authority to Pre-Commit (APC) process has been introduced to
    bring under
    control the problem of ‘arrears.’ The legislation within the PFMA
    relating to the APC
    process is contained within Sections 47B, 47C, and 47D. The
    amendments aim to
    achieve this by limiting the validity of contracts with the
    government to:
    34. Those that are authorised by a PGAS generated Integrated Local
    Purchase Order Claim
    (ILPOC) (Form 4A) [The national Department of Works shall
    continue using its
    ORACLE based computer generated ILPOC], i.e. where funds are
    available in the
    current year, or,

    35. Where there is a need to commit expenditure in advance of funds
    becoming available,
    those that are authorised by the Secretary for Finance as
    evidenced by his signature on
    an Authority to Pre Commit (Finance Form 5A).

    The amendments provided that unless contracts with government are
    supported by
    one of these two forms of authority, those contracts will be null
    and void and will not
    be enforceable against the Government.
    36. Purpose:
    The purpose of the APC process is to ensure proper accounting,
    management and
    reporting on the Pre-Commitment of Expenditure is maintained in
    all levels of the
    National, Provincial and Local-Level Governments.

  • Page 172 of 184

  • 37. Application:
    37.1 Those agencies and Commercial Statutory Authorities that are
    classed as trading
    enterprises are exempted from these amendments and this
    Financial Instruction
    (unless their Act specifically binds them to the PFMA). Though
    any agency that
    requires Section 61 approval under the PFMA will need to comply
    with the
    amendments and first obtain an APC. Should this say ―binds‖ or
    ―exempts‖?

    37.2 This APC process is effective from 1st March 2003, the same
    date that the
    amendments to the PFMA and Claims By and Against the State Act
    became effective.

    38. Relationship between the APC process and other Financial
    instructions dealing
    with procurement:
    38.1 The APC process is additional to other procurement
    requirements, and Supply and
    Tender Board requirements contained within the Financial
    Management Manual.

    38.2 Departments, Provincial and Local Level Governments are
    reminded that the use of
    manual ILPOCs is illegal i.e. not allowed. Any Department or
    level of Government
    without a computer capable of producing PGAS generated ILPOCs
    will need to
    proceed to their nearest PGAS site to do this.
    38.3 In situations where National Departments in the provinces do
    not have access
    through the PGAS system, they should contact their Departmental
    Heads to send
    their CFCs (ex-warrant) to the nearest Provincial Treasury
    Office to be down loaded
    into the PGAS system in order that PGAS generated ILPOCs and
    Cheques can be

    Relevant Laws Page 100

    raised.

    39. Arrears:
    In recent years some Departments and provinces have increasingly
    turned to the
    Finance and Treasury Departments to pay claims or invoices from
    suppliers because
    those Departments do not have sufficient funds to meet these
    claims.

  • Page 173 of 184

  • 40. These new provisions in the PFMA will make it clear that
    suppliers who provide
    goods or services without proper authority from the Government,
    i.e. without a
    purchase order (ILPOC) or contract (backed by an APC), will have
    no valid contract
    or claim against the Government.

    41. Responsibility of Departmental Heads:
    Departmental Heads are responsible for ensuring compliance with
    the new changes to
    the PFMA and these Financial Instructions. Failure to comply
    with these amendments
    could result in penalties and charges being imposed on
    Departmental Heads.

    42 The Head of each spending Department or province must ensure that
    all pre
    commitments made by their own Department or province are
    included in the annual
    bids or estimates in the following year (and any subsequent
    years).

    43 Purchases, claims and contracts under K100,000:
    43.1 The Secretary for Finance will not approve an APC for amounts
    less than K100,000
    (even though the amendments to the PFMA does make allowance for
    this). If there are
    insufficient funds available in a vote to make the purchase
    using an ILPOC in the
    current year, the relevant Department should make use of
    available capacity, or seek
    to have the purchase funded through Estimates for the following
    year. The relevant
    Department or province should not enter into a contract with a
    supplier if there are
    insufficient funds available. The relevant Department cannot
    anticipate that funds
    will be available in the following year (without an APC).

    43.2 These are the cases that sections 47B, 47C and 47D are intended
    to eliminate, i.e.
    unauthorised officers ordering goods or services without an
    ILPOC when there are no
    funds or insufficient funds available. An ILPOC (Form 4A) is the
    only legitimate
    evidence that funds are immediately available in the current
    year. An APC (for
    amounts over K100,000) is the only legitimate evidence that
    funds will be made
    available later in the current year or in a following year.
    Officers who deal with
    suppliers and contractors without an ILPOC (Form 4A) or an APC
    are not acting on

  • Page 174 of 184

  • behalf of their Department or the Government. Suppliers and
    contractors cannot seek
    to be paid for any goods or services they have provided, where
    they did not first obtain
    an ILPOC (Form 4A) or an APC.
    43.3 Departments are reminded that normal procurement procedures
    apply for amounts
    under K100,000. This includes obtaining three written quotes and
    the issuance of
    ILPOCs.

    43.4 The only exemption to the above will be the use of an FF4 for
    purchases in genuine
    emergency situations up to a maximum amount of K300. Examples
    could include
    purchase of food for a large and unexpected police cell intake
    in a remote area. Fixing
    a dripping tap, purchase of stationery and other such examples
    cannot and do not
    constitute an emergency. This provision may not be used to
    substitute for poor
    planning and preparation by a Department.
    Relevant Laws Page 101

    42. APCs for contracts K100,000 and above:
    Where a Department wishes to enter into contracts for amounts of
    K100,000 or above,
    and there will be funds available to meet the schedule of
    payments under the contract
    (either in the current or subsequent financial years), that
    Department will be able to
    apply to the Secretary for Finance for an APC. It will be the
    Head of that Department’s
    responsibility to ensure that funds are secured in subsequent
    years’ estimates and
    appropriations through their budget negotiations with the
    Department of National
    Planning and Monitoring and with the Department of Treasury.
    43. An application for an APC (see application form attached) should
    be completed by
    officials of the relevant Department, and signed by the Head of
    that Department. All
    relevant parts of the application form should be completed.
    44. The APC must be applied for and obtained by the relevant
    spending Departments
    prior to inviting any tender including applying for any
    Certificate of Inexpediency
    (CoI). All other requirements of any relevant Supply and Tenders
    Board must be
    complied with after an APC has been obtained An APC is not
    required for utility
    payments.

  • Page 175 of 184

  • 45. The application should be delivered to the First Assistant
    Secretary, Expenditure and
    Cash Management Division of Finance Department (marked for the
    attention of the
    Assistant Secretary, Expenditure), where it will be registered.
    If the application form
    is not complete, the application will not be registered or
    accepted and will be
    returned to the relevant Department if such omissions are
    subsequently discovered.
    46. The First Assistant Secretary, Expenditure and Cash Management
    Division will
    evaluate the application according to the criteria set out
    below. The results of this
    evaluation will then be considered at the weekly APC Committee
    meeting (chairman
    of which will be the First Assistant Secretary, Public
    Accounts). The committee will
    include heads of the relevant divisions of the Treasury
    Department and the
    Department of National Planning and Monitoring in order to
    jointly ascertain the
    merits of the APC request and the likelihood of funds becoming
    available to fund
    payments under the contract.
    47. The First Assistant Secretary Expenditure and Cash Management
    Division (in his
    capacity as Chairman of the APC Committee) will then make
    recommendation to the
    Secretary for Finance as to whether an APC should be approved,
    together with a
    recommended maximum amount of pre commitment.
    48. If approved by the Secretary, the First Assistant Secretary
    Expenditure and Cash
    Management Division will allocate an APC number, and the APC
    details will be
    entered into the register accordingly (see below). The APC will
    be in triplicate –
    white (original for the supplier / contractor); blue –
    Department of Finance copy and
    green – implementing department’s copy.
    49. For all APCs the Department of Finance will make and retain a
    photocopy of the APC
    form (the supplier / contractor has not been filled in at this
    stage). The entire APC
    form is then passed on to the nominated contact officer of the
    implementing
    Department. This officer will then make a photocopy of the form
    and forward the
    entire APC form, together with any requisition (FF3), to the
    relevant Supply and
    Tenders Board. The relevant Supply and Tenders Board will not
    proceed to tender or
    grant a COI unless an APC has first been obtained from and

  • Page 176 of 184

  • approved by the
    Secretary for Finance.

    Relevant Laws Page 102

    50. The relevant Supply and Tenders Board will write their file
    number on the original of
    the APC, and place their stamp and date over the top of that
    file number.
    51. When a Notice of Successful Tender or COI has been issued by a
    Supply and Tenders
    Board, the relevant Supply and Tenders Board will fill in the
    contractor / supplier to
    whom the contract has been awarded. The relevant Supply and
    Tenders board will
    make and retain a photocopy of the APC and return the blue copy
    to the Department
    of Finance, and the original (white) and implementing Department
    copy (green) to
    the nominated contact officer on the APC. The nominated contact
    officer will then
    forward the original APC to the selected supplier or contractor.
    52. Any remaining contractual documentation may then be finalised
    with the supplier or
    contractor. It is the supplier’s or contractor’s responsibility
    to retain the original of
    the APC. Without the original, the supplier or contractor will
    not be able to
    demonstrate that they have a valid enforceable contract with
    GoPNG should any
    disputes subsequently arise.
    53. Neither the First Assistant Secretary (PAD) nor his officers
    will discuss any aspect of
    applications or approvals or progress with suppliers or
    contractors. Only the relevant
    Head of Department or the contact officer nominated on the
    application may contact
    the First Assistant Secretary to discuss the progress of
    applications.
    54. For all proposed contracts requiring an APC, the APC is not
    valid unless it has an
    APC Number that matches the APC number entered in the Register
    held by the
    Department of Finance. The APC is also not valid unless it has a
    relevant Supply and
    Tenders Board file number, stamped by the relevant Supply and
    Tenders Board, and
    matching the file number for that contract held by that Supply
    and Tenders Board.
    55. An APC does not need to be obtained in respect of expenditure or
    contracts that are
    100% donor funded. An APC will however be required for any
    contract that will

  • Page 177 of 184

  • involve Government counterpart contributions and that would
    normally require
    tender procedures to be undertaken. The APC would be issued for
    the full amount but
    the separation between Government contribution (cash) and donor
    funds (non-cash)
    will need to be made clear on the new revised APC form (copy
    attached).

    56. An APC is not required for cash transfers from one level of
    Government to another e.g.
    Grant transfers to Provincial Governments, Department of
    Education school subsidies,
    Department of Health transfers to NGOs and so forth. An APC is
    also not required for
    principal and interest payments for debt.

    57. Criteria used by Secretary in approving APCs:
    59.1 In order to authorise a pre commitment the Secretary for
    Finance needs to be satisfied
    that the provisions of the PFMA have been complied with, and
    that funds will become
    available at a later time. The criteria used by the Secretary
    for Finance (and the APC
    Committee) in deciding whether to approve (endorse) an
    application for an APC will
    include:

    59.2 The likelihood of the contract being funded from warrants
    issued later in the current
    year or in a subsequent year’s estimates and appropriations. In
    this respect, the
    Secretary will consult with Treasury Department, Department of
    National Planning
    and Monitoring and may consult any other agency.
    59.3 Whether all provisions of Part VII of the PFMA have been
    complied with in respect of
    the proposed contract.

    Relevant Laws Page 103

    59.4 Whether the application for the APC has been completed fully
    and correctly, and
    whether any required attachments are attached (this includes the
    covering letter from
    the Head of Department and the PGAS printout showing the current
    appropriation,
    warrants, commitments and expenditure).
    59.5 Whether the Secretary believes that the Head of the Department
    or province applying
    for the APC is fully aware of the nature of the purchase or
    contract, and of the
    amounts that the Departmental Head is committing their Department

  • Page 178 of 184

  • or province and
    the Government to in future years.
    59.6 Whether the Department / Division has commitments already in
    place that are not
    fully funded in the Department’s / Division’s Budget for the
    year, the APC request can
    be rejected and the relevant agency told to transfer funds to the
    underfunded vote e.g.
    a Department has an appropriation of K0.5 million for the
    purchase of cars and
    submits an APC request for their purchase. The Department however
    also has an
    ongoing road project that requires K0.8 million in this year but
    it has only K0.6
    million in the Budget for the road project.
    59.7 This request for an APC for the cars and any further APC
    requests would be rejected
    and the Department concerned told to shift K0.2 million to the
    road project
    appropriation. It may transfer the appropriation from the cars
    appropriation or from
    elsewhere in its Budget. Only once this has been done will the
    Department be allowed
    to resubmit its request for an APC for the vehicles and for other
    purposes. In
    summary: no new commitments will be allowed unless existing
    commitments are
    fully funded.

    58. Period contracts and standing contracts: 60.1 New period
    contracts and standing
    contracts

    60.1.1 From 1 March 2003, as various Departments seek to enter into
    new period contracts
    or standing contracts, e.g. for mess supplies, rations,
    pharmaceuticals, security
    services, property leases etc, the new provisions, in section
    47B, 47C and 47D will
    need to be complied with, and the procedures set out above will
    need to be followed.
    60.2 Validating existing period or supply contracts
    60.2.1 Section 47B is effective for contracts entered into or
    purported to have been entered
    into by or on behalf of the State on or after 1 March 2003. At
    that time there will be
    numerous existing period or supply contracts entered into on
    earlier dates that will
    require ongoing payment as services are supplied or goods are
    delivered. These
    include:

    • Rental contracts or property leases
    • Electricity supply contracts

  • Page 179 of 184

  • • Telephone service contracts
    • Water supply contracts
    • Pharmaceutical supply contracts
    • Mess supplies, rations etc.

    60.3 For ease of administration and consistent application of the
    new sections 47B, 47C
    and 47D to claims for payments from suppliers after 1 March 2003,
    the Secretary for
    Relevant Laws Page 104

    Finance may issue APCs for contracts entered into prior to 1
    March 2003. This will
    allow claims under valid pre commitment from 1 March 2003
    contracts to be
    distinguished from other claims lodged by suppliers whose
    contracts were entered
    into after 1 March 2003, but who have no ILPOC and no APC. These
    latter claims will
    be rejected by government (see below).

    60.4 Departments are required to provide a list of ongoing (i.e.
    that commenced prior to 1
    March 2003) contractual commitments that exceed K100,000 to the
    Department of
    Finance / Provincial Treasury by 30 May 2003.

    59. Register of APCs:
    61.1 The First Assistant Secretary, Expenditure and Cash Management
    Division of the
    Department of Finance and the Provincial Treasurer will maintain
    a register of
    applications for and approvals of APCs. The First Assistant
    Secretary will arrange for
    relevant parts of that register to be available in hard copy or
    electronic format to
    relevant line agencies and other central agencies. This will
    facilitate preparation of
    budget estimates by spending agencies and by central planning and
    budgeting
    agencies.

    61.2 All Departments that are in receipt of APCs will be required to
    keep a register of the
    APCs applied for, awarded and expenditures made against these
    APCs.
    61.3 In the event that the project or contract is to be completed in
    a short period and
    within the same year, all expenditures must be committed within
    the appropriation
    for that same financial year.
    61.4 If the project or contract is ongoing, the relevant
    Departmental Head or Provincial

  • Page 180 of 184

  • Administrator must ensure that the contract must have its
    limitation and if it
    continues to the next financial year, the estimates for the
    project or contract must be
    appropriated for in the next financial year’s budget.

    61.5 The register will also enable Departments and provinces to
    check on the validity and
    authenticity of APCs attached to claims or invoices, prior to
    processing those claims
    or invoices.

    61.6 Manual Registers will be maintained parallel to the spread
    sheets both in the Finance
    Department and Provincial Treasuries.

    60. Provincial Government and LLG purchases and contracts:
    62.1 The Secretary for Finance will delegate the authority to
    approve APCs to Provincial
    Administrators. The Provincial Treasurer will perform the role of
    the Chairman of the
    APC Committee. Provincial Administrators will apply the same
    criteria as the
    Secretary for Finance in deciding whether to approve applications
    for APCs.

    62.2 The Provincial Authority to Pre Commit Committee (PAPCC) that
    meets weekly (or
    when APCs are lodged) will consider APC requests that have been
    evaluated and
    endorsed by the Expenditure Accountant (who would have checked on
    funds
    availability and that the requested pre-commitment is, in the
    Budget for the
    Province). If the APC Committee approves, it will then make
    recommendations to the
    Administrator for his final approval and signature.

    62.3 The Provincial Authority to Pre Commit Committee (PAPCC) will
    comprise of the
    following:-
    Relevant Laws Page 105

    • Provincial Treasurer – Chairman

    • D/Administrator Economics- D/Chairman
    • Provincial Legal Officer –
    • Provincial Budget Officer –
    • Provincial Planner –
    62.4 If an APC request comes through that is not in the Budget for
    the current year it will
    need the support of the Joint District Planning and
    Budgetary Committee (JDPBC).

  • Page 181 of 184

  • Appropriation will also have to be transferred to the new
    vote prior to endorsement
    from the Provincial Treasurer.
    62.5 Provincial Governments will be limited to issuing APC
    commitments for future years
    up to a maximum level of 10 per cent of their current non-
    salaries and wages Budget
    (this includes National Government grants, internally
    generated revenue and VAT
    flows to the provinces). E.g. Current total Budget for the
    Province (excluding salaries
    and wages) is K20.0 million. In this example, APC
    commitments running into the
    following year can only be issued up to a maximum level of
    K2.0 million. Any levels
    above this limit will need to be endorsed by the national
    APC Committee and
    approved by the Secretary for Finance.

    62.6 In addition to the above, the limit for endorsement at the
    Provincial level for APCs is
    K3.0 million – the same as that currently set for tenders.
    Any single APC request that
    exceeds K3.0 million will need to be submitted to the
    National Department of Finance
    for its consideration.
    62.7 Where there are National and Provincial contributions to a
    project, these will need to
    be separated out clearly on the revised APC form. Any
    project that has both Provincial
    and National funding contributions will need to be submitted
    to the National
    Department of Finance for approval (and not the Provincial
    Government).
    62.8 The amendments to the law and these Financial Instructions
    cover all expenditures
    and commitments of the Provincial Government and LLG –
    whether the funds used are
    sourced in the Province, LLG or from grants from the
    National Government.
    62.9 Provincial Treasurers will maintain a similar register to that
    maintained by the First
    Assistant Secretary (PAD) for national departmental
    contracts, and will use the same
    APC form.
    61. Reporting
    63.1 All Departments / Divisions that have been granted APCs must
    provide quarterly
    reports to the Department of Finance (FAS Public Accounts) /
    Provincial Treasury by
    the 11th of the month following the end of each quarter.
    63.2 Failure to produce these reports will result in a cessation of
    approvals for APCs in the
    future (until any outstanding reports have been submitted).

  • Page 182 of 184

  • 63.3 The Provincial Treasurers must furnish their reports to
    Expenditure and Cash
    Management Division on Provincial APCs by the 22nd of the
    month following the end
    of every quarter.

    Relevant Laws
    Page 106

    63.4 The format for reporting is attached to this Financial
    Instruction.
    62. Forms

    64.1 Departments or provinces seeking an APC on behalf of suppliers
    and contractors are
    required to complete the application form supplied by the
    Department of Finance.
    This is an approved Finance Form 5A that is required for all
    contracts and purchases
    over K100,000. Amongst other details this application form will
    require:

    . Name of Department
    . Name of contact officer and contact details

    • Name of the supplier or contractor, and the business address
    of the supplier or
    contractor (entered by the relevant Supply and Tenders Board
    after the tender
    has been awarded)

    • Total value of contract, amount funded in current year, and
    amount to be pre
    committed against the following year(s) appropriation

    • An accurate description of the goods or services to be
    supplied under the
    contract
    • The vote number against which the department anticipates that
    funds will be
    made available at some future time

    • Signature of Head of Department (or Acting Head of Department)
    and the date
    signed.

    [6.6] OFFICIAL PERSONAL STAFF ACT

    9. Persons entitled to official personal staff.
    The following persons are entitled to official staff in
    accordance with the provisions of

  • Page 183 of 184

  • this Act:-
    (g) the Prime Minister; and
    (h) a Minister; and
    (i) the Leader of the Opposition; and
    (j) the Leader of a minority Party (being a party with at least
    12 members of
    Parliament) recognized as such by the Speaker; and
    (k) the Speaker.

    (l) A Parliament Secretary appointed under the Parliamentary
    Secretaries Act 2004.

    Relevant Laws Page 107

    [6.7] SALARY REMUNERATION COMMITTEE DETERMINATION

    SCHEDULE G007-18

    OFFICIAL PERSONAL STAFF

    Recipients A
    1. Prime Minister
    10. Deputy Prime Minister
    11. Speaker
    12. Deputy Speaker
    13. Leader of the Opposition
    14. Deputy Leader of the Opposition
    15. Ministers
    16. Vice-Ministers
    17. Former Prime Ministers

    Benefits
    Such staffing, levels as are approved by the Prime
    Minister from time to
    time in accordance with the Official Staffing Act.

    Recipient B: Provincial Governors

    Benefits: Personal staff allowance of K100,000 per annum

  • Page 184 of 184

  • Relevant Laws Page 108