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• 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