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• An Assurance Audit Report of the Auditor General on the Financial Reports
  of the APEC Papua New Guinea 2018 Coordination Authority for the years
  ended 31 December 2015, 31 December 2016,
  31 December 2017, 31 December 2018 and 31 December 2019

• Page 2 of 127

• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: [email protected] Website: www.ago.gov.pg

  OFFICE OF THE AUDITOR-GENERAL

  Date: 07 April, 2021

  The Honourable Job Pomat, MP
  Speaker of the National Parliament
  Parliament House
  WAIGANI
  National Capital District

  Dear Mr Speaker,

  In accordance with the provisions of Section 214 of the Constitution of the Independent State of
  Papua New Guinea, I forward herewith a copy of my report signed on 05th March 2021 upon the
  inspection and audit of the financial reports of the APEC Papua New Guinea 2018 Co-ordination
  Authority for the years ended 31 December 2015, 31 December 2016, 31 December 2017, 31
  December 2018 and 31 December 2019.

  Yours sincerely,

  GORDON KEGA MBA, CPA
  Auditor-General

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

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• AUDITOR-GENERAL’S REPORT ON THE APEC PAPUA NEW
  GUINEA 2018 CO-ORDINATION AUTHORITY

  TABLE OF CONTENTS

  PARA SUBJECT PAGE
  NO. NO.

  1. Executive Summary ……………………………………………………………………………………… 1
  2. Enabling Entity Legislation ……………………………………………………………………………. 3
  3. Policies, Compliance and Budget ……………………………………………………………………. 4
  4. Role and Mandate of the Auditor General ……………………………………………………….. 5
  5. Audit Scope and Nature …………………………………………………………………………………. 5
  6. Result of Audit …………………………………………………………………………………………….. 6
  7. Recommendations……………………………………………………………………………………….. 11
  8. Entity Comments and Responses…………………………………………………………………… 11
  Attachment A –Audit Report Section 8(4) ……………………………………………………… 13
  Attachment B –Audit Report Section 8(2)………………………………………………………. 35
  Attachment C –Audited Financial Statements …………………………………………………. 59
  Attachment D –Other Information……………………………………………………………….. 121

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• 1.0 Executive Summary

  Asia Pacific Economic Cooperation (APEC) 2018 meetings

  APEC meetings are held once every year by the twenty-one (21) APEC Member Economies.
  Papua New Guinea joined APEC in 1993. Each year, one of the member economies plays
  host to APEC meetings and chairs the annual Economic Leaders’ Summit.

  In November 2018, Papua New Guinea played host to the APEC Leaders’ Summit under the
  theme “Harnessing Inclusive Opportunities, Embracing the Digital Future”. Selected
  ministerial meetings, senior officials’ meetings, the APEC Business Advisory Council and
  the APEC Study Centres Consortium meetings were also held during the year leading up to
  the annual Economic Leader’s Summit.

  Figure 1.1 This world map indicates the 21 APEC Member Economies and year they joined APEC

  The APEC Papua New Guinea 2018 Co-ordination Authority (the APEC Authority) came
  into existence as a result of the enactment of the APEC Papua New Guinea 2018 Co-
  ordination Authority Act 2014 (the APEC Act) on 23 December 2014. The Authority was
  responsible for hosting the APEC 2018 meetings in PNG.

  It was estimated that more than K500 million was expended between 2015 to 2019 for the
  preparation and hosting of the event. These expenditures were in the categories of
  infrastructure developments, fixed assets procurements, purchase of goods and services, and
  administrative expenses including the salaries and allowances of the security task forces.
  However, this amount does not capture various contributions and assistance by third parties
  from both within and abroad. The notable omissions included the indirect receipts and
  payments of the APEC Authority that arose from the APEC Haus, Paga Hill Ring Road and
  International Convention Centre. The State currently has 100% claim over these assets.
  Furthermore, the contribution of K100 million for the construction of Hilton Hotel (which
  was built for the event) was not captured in the financial reports of the APEC Authority.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  Since the conclusion of the summit in November 2018, there has been a lot of public interest
  for the APEC Authority to provide a report on the event to account for the funds expended
  to host the event. The APEC Act did not specifically provide for the AGO to conduct the
  audit of the Authority, however given the significant amount of public funds involved, I have
  exercised my constitutional powers provided under Section 214 of the Constitution and
  Section 3 of the Audit Act,1989 (as amended) to conduct the audit of the Authority. I have
  conducted an assurance audit to express an opinion on the truth and fairness of the financial
  reports provided by the Authority. I have disclaimed my opinion on the financial reports
  submitted. My reports under Section 8(4) and Section 8(2) of the Audit Act 1989(as amended)
  which explains the basis of my opinion and the significant issues of concern identified during
  audit are included in Attachments A and B.

  The audit of the APEC Authority was one of the most important audits ever undertaken by
  my office due to the significance of the event itself and amount of public funds expended to
  host this historical event in PNG. I faced significant challenges throughout the course of the
  audit due to unavailability of appropriate supporting documents and records to enable me to
  conclude on my testing procedures. The APEC Authority did not have a centralised
  governance framework to effectively monitor, coordinate and control its activities. There
  was no centralised financial unit within the APEC Authority to process transactions and
  maintain proper records and documents.

  The Authority performed a coordinating function with other agencies for the preparation and
  hosting of the event. The other key agencies where funds were channelled for payments
  included, the Department of Finance, the Department of Prime Minister and NEC
  (PM&NEC) and the Joint Security Task Force (JSTF) which comprises both the Department
  of Defence and the Royal PNG Constabulary. These agencies also did not maintain proper
  and complete record of all transactions for funds expended for APEC related activities which
  resulted in lack of documents and records available for the APEC Authority. Based on our
  analysis of the samples requested for testing, a total of more than 60 % of the samples
  selected for testing were not made available at the time of my audit. Even the documents and
  records of the samples that were provided were incomplete and lacked the key information
  and documents required.

  The funds allocated for the APEC meetings were expended from the preparation stage in
  2015 through to the hosting of the APEC meetings in 2018 and continued on to 2019 where
  contractors and service providers were paid their dues. As at 31December 2019, the total
  creditors yet to be settled by the State was valued at K58.4 million. I did not perform any
  testings to verify the legitimacy, completeness and accuracy of these balances due to lack of
  records and supporting documentation at the time of concluding my audit. An independent
  assessment of these liabilities is necessary to determine their accuracy.

  The audit was conducted by an International Accounting Firm as AGO’s authorised auditor.
  The audit commenced in December, 2019 and has taken over a year to complete due to
  significant challenges in gathering complete and reliable information and evidence required
  to conclude on my audit testings. Due to time constraints, I had to wind up the audit and
  issue my report.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  Nevertheless, despite these challenges I have worked tirelessly with my appointed auditor
  and the respective government agencies to ensure that this report is completed and submitted
  to Parliament

  2.0 Enabling Entity Legislations

  The Act of Parliament

  The APEC Papua New Guinea 2018 Co-ordination Authority (APEC Authority) came into
  existence as a result of the enactment of the APEC Papua New Guinea 2018 Co-ordination
  Authority Act 2014 (the APEC Act) on 23 December 2014. The APEC Act empowers the
  APEC Authority to ensure the efficient and successful running of the APEC 2018 meetings,
  enter into and perform contracts for the construction and rehabilitation of the APEC PNG
  2018 meetings venues and ancillary works and services, and to do all things ancillary to the
  foregoing.

  The APEC Authority was also accountable for ensuring correct protocols were accorded to
  all delegates, all APEC related meetings were held on time, all meeting venues and
  accommodations met world class standards, and all infrastructures associated with the APEC
  meetings were completed on time.

  Functional Structure of the Authority

  The APEC Authority was to report to the National Executive Council (NEC) through the
  Minister responsible for the APEC 2018 meetings as required under Section 15 of the APEC
  Act.

  Section 9 of the APEC Act requires formation of the APEC Operations Task Force to provide
  oversight of the Chief Executive Officer and the Authority to ensure the respective functions
  are properly performed. The APEC Operations Task Force shall comprise the Chief
  Secretary as Chairman and the members shall be the departmental heads responsible for trade
  matters, foreign affairs matter, treasury matters, justice matters, police matters, defence
  matters, works matters and the Director-General of the National Intelligence Organisation.

  The APEC Authority was an independent body corporate established and governed by the
  APEC Act with clearly defined protocols and functions. As such, the APEC Authority was
  responsible to set up all the required committees and management teams to create clear
  channels of command, control, communication and reporting. The complete reporting
  structure of the APEC Authority was not made available, however, based on the APEC Act,
  the structure is depicted below for the purposes of this Report.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  Chart 2.1 Reporting structure of the Authority per APEC Act

  The NEC

  The APEC MINISTER

  The OPERATIONS TASK FORCE The CEO The TENDERS & SUPPLY BOARD

  The Probity Auditor

  Chairman
  Chief Secretary of PNG APEC Authority Officers

  3.0 Policies, Compliances and Budget

  Expansion and Development Policies

  The APEC Authority was a short-lived body corporate with no plans for future expansion or
  development. The APEC Authority was designed to exist for the duration of the preparations
  and hosting of the APEC meetings in 2018. The APEC Authority was limited to operate
  within its mandated functions and execute the Activity Plans or Strategic Plans for the APEC
  2018 meetings to ensure successful preparations and hosting.

  The development and expansion of the APEC Member Economy hosting the APEC meetings
  (in this case Papua New Guinea) are discussed at the APEC Leaders’ Summit. The APEC
  Member Economies provide voluntary contributions to support projects that advance
  APEC’s trade and investment liberalisation, business facilitation and to meet capacity
  building needs especially for developing APEC Member Economies.

  Operational Policies

  Internal control policies and procedures manual are an essential frame-work for safeguarding
  prudent financial management and operation of an organisation for successful achievement
  of desired results. Tailor-made policies and procedures are necessary for every organization.

  The APEC Authority should have a set of policies and procedures manual in place to provide
  clear direction for administration and to avoid loopholes for abuse of public funds through
  fraud and malpractice. Proper controls in the areas of procurements, accounting,
  centralization of records and system integration and record-keeping are vital to eliminate
  possibilities of data manipulation and management override.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  Compliance with Other Applicable Laws and Regulations

  Compliance with all applicable laws was required for efficient and successful conduct of the
  APEC 2018 meetings and for accountability of the public funds the Authority had to manage.
  The APEC Act clearly states the APEC Authority’s mandated functions for compliance
  purposes. Therefore, the APEC Authority was to comply with all provisions under the APEC
  Act and all other enabling laws. Compliance with requirements under the Asia Pacific
  Economic Cooperation (APEC) Safety and Security Act 2017, the Public Finances
  Management Act 1995 (as amended) and the Salaries and Conditions Monitoring Committee
  Act 1988 (the SCMC Act) were no exceptions.

  Budget

  Budget is an important tool that keeps track of all revenue sources and controls expenditures.
  Budget is compulsory for every organization. The main source of revenue for the APEC
  Authority was through the National Budget and its expenditures were to align with the
  Activity Plans for the APEC 2018 meetings.

  The APEC Authority had the responsibility to manage the APEC meetings funds and was
  responsible for adopting appropriate control measures and tools including a budget.

  4.0 Role and Mandate of Auditor-General

  The responsibilities of the Auditor-General are specified under Section 214 of the
  Constitution, Sections 3, 4 and 8 of the Audit Act 1989 (as amended) and Section 63(4) of
  the Public Finances (Management) Act 1995 (as amended). Subject to these laws, the
  Auditor-General has complete discretion in the performance or exercise of its mandated
  functions or powers.

  5.0 Audit Scope and Nature

  Audit Scope

  The audit was conducted in accordance with the International Standards on Auditing and the
  promulgated best business practices with compliance to the Public Finances (Management)
  Act 1995 (as amended), the APEC Papua New Guinea 2018 Co-ordination Authority Act
  2014 and the Asia Pacific Economic Cooperation (APEC) Safety and Security Act 2017.

  Nature of Audit

  The engagement is an assurance audit in compliance with the Public Finances
  (Management) Act 1995 (as amended), and the Audit Act, 1989 (as amended). The purpose
  is to express an opinion on the truth and fairness of the financial reports provided.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  Period of Reporting

  The Auditor-General’s Report to the Parliament on the accounts of a public body for each
  financial year due on 30 June of the following year. For that purpose, a public body shall
  submit the financial statements of a fiscal year by 30 April of the following year to the
  Auditor-General in line with Section 63(4) of the Public Finances (Management) Act 1995
  (as amended). APEC Authority did not comply with these provisions.

  6.0 Results of Audit

  Audit Opinion

  My Report in accordance with the provisions of the Audit Act 1989 (as amended) and the
  Public Finances (Management) Act 1995 (as amended) on the financial reports of the APEC
  Papua New Guinea 2018 Co-ordination Authority for the financial years ended 31 December
  2015, 31 December 2016, 31 December 2017, 31 December 2018 and 31 December 2019
  were issued on 05 March 2021. All the respective annual reports contained a Disclaimer of
  Opinion. The basis for the Disclaimer of Opinion issued to the Prime Minister of Papua New
  Guinea and the Minister for Finance and Rural Development have been reproduced and form
  part of this Report as Attachment: A.

  Audited Financial Reports

  The Authority’s audited financial reports are attached to this Report as Attachment: C.

  Significant Matters of Concern

  My Report to the Ministers under Section 8(2) of the Audit Act 1989 (as amended) on the
  inspection and audit of the accounts and records of the APEC Papua New Guinea 2018 Co-
  ordination Authority for the fiscal years ended 31 December 2015, 31 December 2016, 31
  December 2017, 31 December 2018 and 31 December 2019 were issued on 05 March 2021.

  The reports contained significant matters which needed careful attention and considerations
  by the Parliament when establishing one-time (short-lived) authorities like the APEC Papua
  New Guinea 2018 Co-ordination Authority in the future. Those significant matters I reported
  to the Prime Minister of Papua New Guinea and the Minister for Finance and Rural
  Development are attached to this Report as Attachment: B.

  Most of the issues reported related to non-compliance with the applicable laws that governed
  the operations of the Authority. The following are brief summaries of the issues reported:

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  x Information and data on National Budget appropriations made for each of the five fiscal
  years were provided. However, full warrant authorities and cash fund certificates were
  not provided to confirm the actual receipts through the National Budget. So I could not
  determine whether the actual receipts were consistent with the budget appropriation.

  x Cash receipts and payments of the Authority appeared to be incomplete. Most of the
  indirect receipts or direct payments by third parties were not appropriately taken up in
  the books or the financial reports. The omissions included the third-party payments for
  the construction of the APEC Haus, the Paga Hill Ring Roads and the International
  Convention Centre. The State currently has 100% claim over these assets, so the funds
  expended on these infrastructures should be disclosed in full.

  x US$30 million (K100 million) was paid by the State through Kumul Petroleum
  Holdings Limited (KPHL) as the State’s contribution for the construction of Hilton
  Hotel but this was not disclosed in the APEC Authority financial reports.

  x Other major infrastructure developments that took place during the APEC meetings
  preparations involving public funds were not included in the financial report of the
  APEC Authority.

  x As at 31 December 2019, the APEC Authority had outstanding creditors valued at
  K58.4 million. I was unable to confirm the legitimacy, completeness and accuracy of
  the creditors balance, since all the relevant documentation were not made available for
  my review.

  x There was no evidence that the APEC Authority had a set of policies and procedures
  manual in place for safe-guarding its daily operations, spending and compliance with
  all relevant Acts;

  x My request for the operational budgets for the five (5) years were not provided. It
  appears that the APEC Authority did not prepare budgets and this may have cost the
  State dearly. Therefore, I was not able to determine whether the expenditures made
  during the period were within and in accordance with the approved operational budget.

  x The APEC Authority did not provide its organizational structure. I was unable to verify
  whether the required reports were prepared and furnished to the responsible authorities
  as required by the respective Acts.

  x My request for copies of minutes of the meeting and resolutions from the APEC
  Operations Taskforce Committee and the Supply and Tenders Board with respect to
  the engagement of a number of service providers were not provided. As a result, I was
  not able to determine and confirm if the engagements were made in compliance with
  the APEC Act and other relevant applicable acts.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  x Section 24 of the APEC Act requires the appointment of a Probity Auditor to access all
  documents of the Authority including all meeting minutes and to advise the Chairman
  of the APEC PNG Supply and Tenders Board, the Chief Secretary of PNG. However,
  the management advised that no Probity Auditor had been appointed as required by the
  Act.

  x Provisions under Section 21 of the APEC Act require all contracts that exceeds
  K500,000 to go for public tender. All documents related to tenders called for, the
  evaluations done, subsequent award of the contract and agreements signed to bind the
  contractors or service providers were not provided. So I was unable to ensure
  legitimacy of the engagement of number of service providers. I was also unable to
  determine whether the APEC Authority complied with the requirements under the
  Sections 20 and 21of the APEC Act.

  x My review revealed that some invoices which would have exceeded K500,000 were
  separated into smaller amounts possibly to slip under the approval limits for the
  purpose of facilitating the approval and payment processes. The Authority departed
  from compliance with Section 21 of the APEC Act which requires the purchase or
  disposal of property or stores or the supply of works and services over K500,000 to be
  advertised on public tender. The practice also circumvented and breached requirements
  under the Public Finances (Management) Act 1995 (as amended).

  x The Asia Pacific Economic Cooperation (APEC) Safety and Security Act 2017 (the
  JSTF Act) does not provide for the Royal PNG Constabulary to enter into any contract
  for purchase of assets or services from suppliers or service providers. However, the
  JSTF had entered into a number of engagements without following proper tender and
  approval procedures as required under Section 21 of the APEC Act.

  x The JSTF (Royal PNG Constabulary and Department of Defence) expended from their
  Trust account K30 million and an additional K19.6 million was incurred and
  transferred to Department of Finance as State liability towards outstanding creditors.

  x The JSTF creditors listing included a hire car company which was owed K11 million,
  however, subsequently the APEC Authority removed the liability from the creditors
  outstanding listing since no underlying documents were available. I have no further
  information on whether the State has settled this liability since all liabilities were
  transferred to the Department of Finance as State liability.

  x The APEC Authority in their response to the management letter, mentioned that on 25,
  26 and 27 December, 2018, the Department of Finance paid K7.6 million for the
  outstanding supplier amounts from IFMS code 13114- 000-200-227. APEC Authority
  review of the IFMS report shows that payments were largely paid to JSTF suppliers
  and JSTF allowances.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  x The payment vouchers for these amounts could not be located but it appears that several
  of these payments were suppliers that were still showing as outstanding on the JSTF
  creditors listing.

  x The APEC Authority is subject to Salaries and Conditions Monitoring Committee Act
  1988 (the SCMC Act). Approved organizational and salary structures of the Authority
  were not made available. As such, there was no evidence for me to confirm that the
  APEC Authority had complied with the requirements of the SCMC Act and the Public
  Service General Orders in remunerating its employees during the period of its
  operations.

  x I noted instances where allowances had been paid at the rate of K500 per day contrary
  to the K200 daily rate required by the Public Services General Orders. I could not
  obtain NEC approval to substantiate the new daily allowance rate used.

  x The Authority opened its first bank account with Bank South Pacific (BSP) on 21
  January 2016. This was one (1) year after the APEC Act came into force on 23
  December 2014.

  x The above account was operated under the trust instrument “Department of Prime
  Minister & NEC APEC OP Plan Trust Account” dated 31 December 2013. Therefore,
  the above Trust account was not operated by the APEC Authority, but the Department
  of Prime Minister & National Executive Council (PM&NEC). The expenditures related
  to APEC meetings preparation were committed by the Department of PM&NEC from
  the trust account and also from PM&NEC operational account;

  x K197,065,555 was expended by the Department of PM&NEC during 2016, 2017 and
  2018 towards APEC meetings. However, K1.8 million (78 payments) was expended
  from the PM&NEC APEC OP Plan Trust Account and the rest of the payments were
  made from PM&NEC operational account under an APEC operational code. I was
  unable to sight any NEC decision or amendment to the Act or other arrangements that
  might have been made to decentralize the ultimate financial powers the APEC
  Authority has under Section 22(2) of the APEC Act to receive and disburse all monies
  through the APEC Authority’s own bank account.

  x From the funds expended by the Department of PM&NEC, the APEC Authority
  excluded about K26.0 million for the financial year 2017, informing me that they were
  not related to APEC meetings.

  x The very purpose of enacting of APEC Papua New Guinea 2018 Co-ordination
  Authority Act 2014 was defeated by the above process, which was one reason for the
  long delay to conduct the audit in time. Also, under Public Finances (Management)
  Act 1995 (as amended) the manner in which the expenses were incurred for the
  meetings was not appropriate.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  x Further, on 28 February 2018 the APEC Authority opened its own Trust account with
  Bank of Papua New Guinea (BPNG) after approval from the Department of Finance to
  operate their own bank account. The account was called “Asia Pacific Economic
  Cooperation (APEC) Trust Account”. The Authority failed to comply with Section 22
  of the APEC Act by not opening the bank accounts once the Act was enacted by
  Parliament. The APEC Authority mentioned in its response to my management letter
  that they requested to open and operate their own Trust account for accountability
  purposes but was denied by the government authorities;

  x As the financial functions of the Authority was decentralised amongst the Department
  of PM&NEC, the Department of Finance (DOF), the Department of Defence, the JSTF
  and the APEC Authority, the purpose of enacting the APEC Act to establish the APEC
  Authority with sole powers to receive and disburse funds budgeted for the APEC
  meetings had been ignored.

  x A central governance committee was necessary where the financial functions of the
  APEC Authority had been seen to decentralize. However, no evidence was available
  to confirm such committee existed to oversee and approve all payments that were
  processed through the four (4) departments and Authority itself (channels).

  x Due to the duplication of the financial functions of the APEC Authority, accounting
  and record-keeping were not organized. Management systems of the four (4)
  departments were not integrated with the APEC Authority, and registers and records
  were in isolation. The transaction listings provided were incomplete and most of the
  underlying payment records were missing. Long delays and difficulties were
  experienced in receiving the requested information for the audit. So the completeness
  and accuracy of the receipts and payments of the Authority could not be confirmed.

  x The APEC Authority had not submitted its financial statements in a timely manner for
  my audit. The financial statements for the years 31 December 2015 to 31 December
  2018 were submitted in December 2019 with the 2019 financial statements submitted
  in April 2020. As such, the Authority failed to comply with the requirements under the
  Public Finances Management Act 1995 (as amended).

  x There was no evidence of progressive financial reporting (semi-annual and annual)
  being prepared by the Authority as required under Section 15 of the APEC Act.

  x Section 29(2)(a) of the APEC Act contravenes the authority of Auditor-General of PNG
  from conducting the audit of the APEC Authority with an independent auditor allowed
  to report on the financial statements of the APEC Authority.

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• APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  x This denies the mandate and powers given to the Auditor-General of PNG under
  Section 214 of the Constitution and other enabling Acts including the Public Finances
  Management Act, 1995 (as amended) and the Audit Act 1989 (as amended) to conduct
  the audit of all public bodies including the statutory authorities. Going forward,
  enactment of any such laws by Parliament must ensure to avoid such oversight that
  causes conflict with the existing laws.

  x Throughout the course of the audit, I faced significant delays and difficulties in
  receiving the requested documentations. At the time of this Report, a number of
  underlying documents and information requested are still outstanding. As such, I was
  unable to determine whether the Authority had the necessary human resource
  capabilities employed to effectively and efficiently run the Authority.

  x As per latest report provided by Department of Finance (DoF) as at 15 February 2021,
  109 of the total 492 vehicles used for APEC 2018 meetings operations were still in the
  hands of individuals. A total of 257 vehicles were distributed to public and statutory
  bodies, provincial and district government arms, NGO’s, hospitals and other charitable
  organisations. However, I was unable to comment on the actions taken by DoF in
  recouping the 109 vehicles from the individuals and whether they have been properly
  disposed of through the public tender process.

  7.0 Recommendations

  Specific recommendations I proposed to the Authority have been reproduced and form
  part of this report (Refer Attachment: B).

  8.0 Entity Comments and Responses

  Responses from the APEC Authority to the issues that I have raised or the
  recommendations made under Section 8(2) of the Audit Act, 1989 (as amended) form part
  of this report. (Refer Attachment: B).

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• Attachment: A

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• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: [email protected] Website: www.ago.gov.pg

  Our Reference: 30-93-4
  INDEPENDENT AUDIT REPORT
  TO THE PRIME MINISTER ON THE ACCOUNTS OF
  APEC PAPUA NEW GUINEA-2018 CO-ORDINATION AUTHORITY
  FOR THE YEAR ENDED 31 DECEMBER 2019

  DISCLAIMER OF OPINION

  I have audited the accompanying special purpose financial report of APEC Papua New Guinea
  2018 Co-ordination Authority, which comprise the Statement of Cash Receipts and Payments for
  the year ended 31 December 2019 and notes to the special purpose financial report including, a
  summary of significant accounting policies and other explanatory information.

  Because of the significance of the matters referred to in the Basis for Disclaimer of Opinion
  paragraphs below, I was not able to obtain sufficient appropriate audit evidence and accordingly,
  I am unable to and do not express an opinion on the special purpose financial report of the APEC
  Papua New Guinea-2018 Coordination Authority for the year ended 31 December 2019.

  BASIS FOR DISCLAIMER OF OPINION

  Expenditure Lacking Supporting documents

  Cash payments totalling K21,201,364 were stated under the statement of cash receipts and
  payments in the special purpose financial report of the Authority for the year ended 31 December
  2019. Of the total, payments valued at K16,531,930 were selected for my testing, to ensure,
  legitimacy, existence and accuracy of the payments and were appropriately supported with
  documentation and complied with the APEC Papua New Guinea-2018 Coordination Authority
  Act 2014 (the APEC Act) and relevant legislature mentioned therein. My review noted that a
  number of documents were either not provided or partially provided without sufficient and
  appropriate supporting documentation. Accordingly, I was unable to obtain sufficient and
  appropriate audit evidence to express an opinion whether the cash payments made were legitimate
  expenditure of the Authority, made in accordance with the APEC Act or that the expenditures
  were accurately recorded in the special purpose financial report for the year ended 31 December
  2019.

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

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• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2019

  Completeness of receipts from Government-Alesco payroll

  Included in the statement of cash receipts and payments for the year ended 31 December 2019
  were cash receipts from Alesco payroll totalling PGK1,022,401. Funding provided by the
  Department of Finance, as payments for employees’ wages via the Alesco payroll system (Alesco
  payroll), has been a significant source of funding for the Authority. The Authority has determined
  that it is impracticable to establish control over the recording of funding provided by Alesco
  payroll prior to entry into its financial records. As the evidence available to me regarding funding
  from this source was limited, my audit procedures with respect to this funding was restricted to
  the amounts recorded in the financial records. Accordingly, I was unable to obtain sufficient and
  appropriate audit evidence regarding whether this funding recorded was complete.

  Corresponding Amounts

  My audit opinion of the Authority for the year ended 31 December 2018 was disclaimed with
  respect to:

  x expenditure totalling K331,025,203 that lacked sufficient and appropriate supporting
  documents for me to test the existence, accuracy and completeness of the recorded expenditure
  items;
  x completeness of the receipts from the Department of Finance through the Alesco payroll
  totalling K10,038,628; and
  x completeness of the receipts from the Department of PM&NEC totalling K21,094,853.

  These amounts are reflected as comparative amounts in the special purpose financial report.

  EMPHASIS OF MATTERS

  I draw attention to place emphasis on the following significant matters, whilst not qualifying on
  these issues:

  Outstanding Liabilities-Creditors

  Pages 13 to 15 of the financial report includes details of various capital expenditures and liabilities
  incurred during 2015 to 2019 for conduct of the APEC PNG 2018 meetings. These expenditures
  include K58,385,368 disclosed under Note.16(B) as outstanding liabilities of the Authority as at
  31 December 2019. Of the total liability, K38,752,827 was incurred by APEC Authority and
  K19,632,541 was incurred by JSTF respectively. These amounts were subsequently transferred to
  the Department of Finance. I have not audited these liabilities since sufficient and appropriate
  documentation were not made available for my review. Therefore, I was unable to determine their
  existence, accuracy and legitimacy of these liabilities.

  16

• Page 21 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2019

  Capital Expenditures

  Note 16(ii) refers to infrastructure Investment Capital Expenditure. I noted that the value of APEC
  Haus built by Oil Search Limited under tax credit scheme was not appropriately disclosed in the
  financial report. Further, K100million paid by the State as its contribution for the construction of
  Hilton hotel purposely built for the APEC events was not disclosed in the financial report.
  Accordingly, this could materially affect the completeness of the special purpose financial report.

  I conducted my audit in accordance with the Audit Act and International Standards on Auditing.
  My responsibilities under those standards are further described in the Auditor-General’s
  responsibilities for the audit of the financial report section of my report.

  I am independent of the APEC Papua New Guinea-2018 Coordination Authority in accordance
  with the ethical requirements that are relevant to my audit of the financial report in Papua New
  Guinea, and I have fulfilled my other ethical responsibilities in accordance with these
  requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to
  provide a basis for my opinion.

  Responsibilities of the Management for the Special Purpose Financial Report

  The management of the Authority is responsible for the preparation and fair presentation of the
  special purpose financial report in accordance with Finance Instructions1/2016 issued under
  Section 117 of the Public Finances Management Act, 1995(as amended) and International Public
  Sector Accounting Standards-Financial Reporting Under Cash Basis of Accounting and the APEC
  Papua New Guinea-2018 Coordination Authority Act 2014 and other relevant legislature
  mentioned therein or such internal control as the management determines is necessary to enable
  the preparation of the special purpose financial report that gives a true and fair view and is free
  from material misstatement, whether due to fraud or error.

  In preparing the special purpose financial report, the management is responsible for assessing the
  Authority’s ability to continue as a going concern, disclosing, as applicable, matters relating to
  going concern and using the going concern basis of accounting unless the management either
  intend to liquidate the Authority or to cease operations, or have no realistic alternative but to do
  so.

  Auditor-General’s Responsibilities for the Audit of the Special Purpose Financial Report

  My objectives are to obtain reasonable assurance about whether the special purpose financial
  report as a whole are free from material misstatement, whether due to fraud or error, and to issue
  an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance,
  but is not a guarantee that an audit conducted in accordance with International Standards on
  Auditing will always detect a material misstatement when it exists. Misstatements can arise from
  fraud or error and are considered material if, individually or in the aggregate, they could reasonably
  be expected to influence the economic decisions of users taken on the basis of this special purpose
  financial report.

  17

• Page 22 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2019

  As part of an audit is in accordance with International Standards on Auditing, I exercise
  professional judgement and maintain professional scepticism throughout the audit. I also;

  x Identify and assess the risks of material misstatement of the financial report, whether due to
  fraud or error, design and perform audit procedures responsive to those risks, and obtain
  audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk
  of not detecting a material misstatement resulting from fraud is higher than for one resulting
  from error, as fraud may involve collusion, forgery, intentional omissions,
  misrepresentations, or the override of internal control.

  x Obtain an understanding of internal control relevant to the audit in order to design audit
  procedures that are appropriate in the circumstances, but not for the purpose of expressing
  an opinion on the effectiveness of the entity’s internal control.

  x Evaluate the appropriateness of accounting policies used and the reasonableness of
  accounting estimates and related disclosures made by management.

  x Conclude on the appropriateness of the management use of the going concern basis of
  accounting and, based on the audit evidence obtained, whether a material uncertainty exists
  related to events or conditions may cast significant doubt on the Authority’s ability to
  continue as a going concern. If I conclude that a material uncertainty exists, I am required to
  draw attention in my audit report to the related disclosures in the financial report financial
  report or, if such disclosures are inadequate, to modify my opinion. My conclusions are based
  on the audit evidence obtained up to the date of my report. However, future events or
  conditions may cause the Authority to cease to continue as a going concern.

  x Evaluate the overall presentation, structure and content of the financial report, including the
  disclosures, and whether the financial statements represent the underlying transactions and
  events in a manner that achieves fair presentation.

  I communicate with the management regarding, among other matters, the planned scope and
  timing of the audit and significant audit findings, including any significant deficiencies in internal
  control that I identify during my audit.

  GORDON KEGA MBA, CPA
  Acting Auditor-General

  05 March, 2021

  18

• Page 23 of 127

• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: [email protected] Website: www.ago.gov.pg

  Our Reference: 30-93-4
  INDEPENDENT AUDIT REPORT
  TO THE PRIME MINISTER ON THE ACCOUNTS OF
  APEC PAPUA NEW GUINEA-2018 CO-ORDINATION AUTHORITY
  FOR THE YEAR ENDED 31 DECEMBER 2018

  DISCLAIMER OF OPINION

  I have audited the accompanying special purpose financial report of APEC Papua New Guinea
  2018 Co-ordination Authority, which comprise the Statement of Cash Receipts and Payments for
  the year ended 31 December 2018 and notes to the special purpose financial report including, a
  summary of significant accounting policies and other explanatory information.

  Because of the significance of the matters referred to in the Basis for Disclaimer of Opinion
  paragraphs below, I was not able to obtain sufficient appropriate audit evidence and accordingly,
  I am unable to and do not express an opinion on the special purpose financial report of the APEC
  Papua New Guinea-2018 Coordination Authority for the year ended 31 December 2018.

  BASIS FOR DISCLAIMER OF OPINION

  Expenditure Lacking Supporting documents

  Cash payments totalling K331,025,203 were stated under the statement of cash receipts and
  payments in the special purpose financial report of the Authority for the year ended 31 December
  2018. Of the total, payments valued at K208,918,801 were selected for my testing, to ensure,
  legitimacy, existence and accuracy of the payments and were appropriately supported with
  documentation and complied with the APEC Papua New Guinea-2018 Coordination Authority
  Act 2014 (the APEC Act) and relevant legislature mentioned therein. My review noted that a
  number of documents were either not provided or partially provided without sufficient and
  appropriate supporting documentation. Accordingly, I was unable to obtain sufficient and
  appropriate audit evidence to express an opinion whether the cash payments made were legitimate
  expenditure of the Authority, made in accordance with the APEC Act or that the expenditures
  were accurately recorded in the special purpose financial report for the year ended 31 December
  2018.

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

  19

• Page 24 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2018

  Completeness of Receipts from Department of PM&NEC

  Included in the statement of cash receipts and payments for year ended 31 December 2018 were
  cash receipts from PM&NEC totalling K21,094,853. The Authority has determined that it is
  impracticable to establish control over the recording of funding provided by way of payments by
  PM&NEC prior to entry into its financial records. Accordingly, the evidence available to me
  regarding funding from PM&NEC was limited and my audit procedures with respect to this
  funding was restricted to the amounts recorded in the financial records. Accordingly, I was unable
  to obtain sufficient and appropriate audit evidence whether this funding recorded was complete.

  Completeness of receipts from Government-Alesco payroll

  Included in the statement of cash receipts and payments for the year ended 31 December 2018
  were cash receipts from Alesco payroll totalling PGK10,038,628. Funding provided by the
  Department of Finance’s, as payments for employee’s wages via the Alesco payroll system
  (Alesco payroll), is a significant source of funding for the Authority. The Authority has determined
  that it is impracticable to establish control over the recording of funding provided by Alesco
  payroll prior to entry into its financial records. Accordingly, as the evidence available to me
  regarding funding from this source was limited, my audit procedures with respect to this funding
  was restricted to the amounts recorded in the financial records. Accordingly, I was unable to obtain
  sufficient and appropriate audit evidence regarding whether this funding recorded was complete.

  Corresponding Amounts

  My audit opinion of the Authority for the year ended 31 December 2017 was disclaimed with
  respect to the expenditure totalling K128,552,700 that lacked sufficient and appropriate supporting
  documentation for me to verify the existence, accuracy and compliance of the recorded
  expenditure and for completeness of receipts amounting to K128,298,613 from PM&NEC. These
  amounts are reflected as corresponding amounts in the special purpose financial report.

  I conducted my audit in accordance with the Audit Act and International Standards on Auditing.
  My responsibilities under those standards are further described in the Auditor-General’s
  responsibilities for the audit of the special purpose financial statement section of my report.

  I am independent of the APEC Papua New Guinea-2018 Coordination Authority in accordance
  with the ethical requirements that are relevant to my audit of the special purpose financial
  statements in Papua New Guinea, and I have fulfilled my other ethical responsibilities in
  accordance with these requirements. I believe that the audit evidence I have obtained is sufficient
  and appropriate to provide a basis for my opinion.

  20

• Page 25 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2018

  Responsibilities of the Management for the Special Purpose Financial Report

  The management of the Authority is responsible for the preparation and fair presentation of the
  special purpose financial report in accordance with Finance Instructions1/2016 issued under
  Section 117 of the Public Finances Management Act, 1995(as amended) and International Public
  Sector Accounting Standards-Financial Reporting Under Cash Basis of Accounting and the APEC
  Papua New Guinea-2018 Coordination Authority Act 2014 and other relevant legislature
  mentioned therein or such internal control as the management determines is necessary to enable
  the preparation of the financial report that gives a true and fair view and is free from material
  misstatement, whether due to fraud or error.

  In preparing the financial report, the management is responsible for assessing the Authority’s
  ability to continue as a going concern, disclosing, as applicable, matters relating to going concern
  and using the going concern basis of accounting unless the management either intend to liquidate
  the Authority or to cease operations, or have no realistic alternative but to do so.

  Auditor-General’s Responsibilities for the Audit of the Special Purpose Financial Report

  My objectives are to obtain reasonable assurance about whether the special purpose financial
  report as a whole are free from material misstatement, whether due to fraud or error, and to issue
  an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance,
  but is not a guarantee that an audit conducted in accordance with International Standards on
  Auditing will always detect a material misstatement when it exists. Misstatements can arise from
  fraud or error and are considered material if, individually or in the aggregate, they could reasonably
  be expected to influence the economic decisions of users taken on the basis of this special purpose
  financial report.

  As part of an audit in accordance with International Standards on Auditing, I exercise professional
  judgement and maintain professional scepticism throughout the audit. I also;

  x Identify and assess the risks of material misstatement of the financial report, whether due to
  fraud or error, design and perform audit procedures responsive to those risks, and obtain
  audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk
  of not detecting a material misstatement resulting from fraud is higher than for one resulting
  from error, as fraud may involve collusion, forgery, intentional omissions,
  misrepresentations, or the override of internal control.

  x Obtain an understanding of internal control relevant to the audit in order to design audit
  procedures that are appropriate in the circumstances, but not for the purpose of expressing
  an opinion on the effectiveness of the entity’s internal control.

  x Evaluate the appropriateness of accounting policies used and the reasonableness of
  accounting estimates and related disclosures made by management.

  21

• Page 26 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2018

  x Conclude on the appropriateness of the management use of the going concern basis of
  accounting and, based on the audit evidence obtained, whether a material uncertainty exists
  related to events or conditions may cast significant doubt on the Authority’s ability to
  continue as a going concern. If I conclude that a material uncertainty exists, I am required to
  draw attention in my audit report to the related disclosures in the financial report or, if such
  disclosures are inadequate, to modify my opinion. My conclusions are based on the audit
  evidence obtained up to the date of my report. However, future events or conditions may
  cause the Authority to cease to continue as a going concern.

  x Evaluate the overall presentation, structure and content of the financial report, including the
  disclosures, and whether the financial report represent the underlying transactions and events
  in a manner that achieves fair presentation.

  I communicate with the management regarding, among other matters, the planned scope and
  timing of the audit and significant audit findings, including any significant deficiencies in internal
  control that I identify during my audit.

  GORDON KEGA MBA, CPA
  Acting Auditor-General

  05 March, 2021

  22

• Page 27 of 127

• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: [email protected] Website: www.ago.gov.pg

  Our Reference: 30-93-4

  INDEPENDENT AUDIT REPORT
  TO THE PRIME MINISTER ON THE ACCOUNTS OF
  APEC PAPUA NEW GUINEA-2018 CO-ORDINATION AUTHORITY
  FOR THE YEAR ENDED 31 DECEMBER 2017

  DISCLAIMER OF OPINION

  I have audited the accompanying special purpose financial report of APEC Papua New Guinea
  2018 Co-ordination Authority, which comprise the Statement of Cash Receipts and Payments for
  the year ended 31 December 2017 and notes to the special purpose financial report including, a
  summary of significant accounting policies and other explanatory information.

  Because of the significance of the matters referred to in the Basis for Disclaimer of Opinion
  paragraphs below, I was not able to obtain sufficient appropriate audit evidence and accordingly,
  I am unable to and do not express an opinion on the special purpose financial report of the APEC
  Papua New Guinea-2018 Coordination Authority for the year ended 31 December 2017.

  BASIS FOR DISCLAIMER OF OPINION

  Expenditure Lacking Supporting documents

  Cash payments totalling K128,552,700 were stated under the statement of cash receipts and
  payments in the special purpose financial report of the Authority for the year ended 31 December
  2017. Of the total, payments valued at K99,272,414 were selected for my testing, to ensure,
  legitimacy, existence and accuracy of the payments and were appropriately supported with
  documentation and complied with the APEC Papua New Guinea-2018 Coordination Authority
  Act 2014 (the APEC Act) and relevant legislature mentioned therein. My review noted that a
  number of documents were either not provided or partially provided without sufficient and
  appropriate supporting documentation. Accordingly, I was unable to obtain sufficient and
  appropriate audit evidence to express an opinion whether the cash payments made were legitimate
  expenditures of the Authority, made in accordance with the APEC Act or that the expenditures
  were accurately recorded in the special purpose financial report for the year ended 31 December
  2017.

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

  23

• Page 28 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2017

  Completeness of Receipts from Department of PM&NEC

  Included in the statement of cash receipts and payments for year ended 31 December 2017 were
  cash receipts from PM&NEC totalling K128,298,613. The Authority has determined that it is
  impracticable to establish control over the recording of funding provided by way of payments by
  PM&NEC prior to entry into its financial records. Accordingly, the evidence available to me
  regarding funding from PM&NEC was limited and my audit procedures with respect to this
  funding was restricted to the amounts recorded in the financial records. Accordingly, I was unable
  to obtain sufficient and appropriate audit evidence whether this funding recorded was complete.

  Corresponding Amounts

  My audit opinion of the Authority for the year ended 31 December 2016 was disclaimed with
  respect to the expenditure totalling K23,215,895 that lacked sufficient and appropriate supporting
  documentation for me to verify the existence, accuracy and compliance of the recorded
  expenditure and for completeness of receipts amount to K23,470,401 from PM&NEC. These
  amounts are reflected as corresponding amounts in the special purpose financial report.

  I conducted my audit in accordance with the Audit Act and International Standards on Auditing.
  My responsibilities under those standards are further described in the Auditor-General’s
  responsibilities for the audit of the special purpose financial statement section of my report.

  I am independent of the APEC Papua New Guinea-2018 Coordination Authority in accordance
  with the ethical requirements that are relevant to my audit of the special purpose financial
  statements in Papua New Guinea, and I have fulfilled my other ethical responsibilities in
  accordance with these requirements. I believe that the audit evidence I have obtained is sufficient
  and appropriate to provide a basis for my opinion.

  Responsibilities of the Management for the Special Purpose Financial Report

  The management of the Authority is responsible for the preparation and fair presentation of the
  special purpose financial report in accordance with Finance Instructions1/2016 issued under
  Section 117 of the Public Finances Management Act, 1995(as amended) and International Public
  Sector Accounting Standards-Financial Reporting Under Cash Basis of Accounting and the APEC
  Papua New Guinea-2018 Coordination Authority Act 2014 and other relevant legislature
  mentioned therein or such internal control as the management determines is necessary to enable
  the preparation of the special purpose financial report that gives a true and fair view and is free
  from material misstatement, whether due to fraud or error.

  In preparing the special purpose financial report, the management is responsible for assessing the
  Authority’s ability to continue as a going concern, disclosing, as applicable, matters relating to
  going concern and using the going concern basis of accounting unless the management either
  intend to liquidate the Authority or to cease operations, or have no realistic alternative but to do
  so.

  24

• Page 29 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2017

  Auditor-General’s Responsibilities for the Audit of the Special Purpose Financial Report

  My objectives are to obtain reasonable assurance about whether the special purpose financial
  report as a whole are free from material misstatement, whether due to fraud or error, and to issue
  an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance,
  but is not a guarantee that an audit conducted in accordance with International Standards on
  Auditing will always detect a material misstatement when it exists. Misstatements can arise from
  fraud or error and are considered material if, individually or in the aggregate, they could reasonably
  be expected to influence the economic decisions of users taken on the basis of this special purpose
  financial report.

  As part of an audit in accordance with International Standards on Auditing, I exercise professional
  judgement and maintain professional scepticism throughout the audit. I also;

  x Identify and assess the risks of material misstatement of the financial report, whether due to
  fraud or error, design and perform audit procedures responsive to those risks, and obtain
  audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk
  of not detecting a material misstatement resulting from fraud is higher than for one resulting
  from error, as fraud may involve collusion, forgery, intentional omissions,
  misrepresentations, or the override of internal control.

  x Obtain an understanding of internal control relevant to the audit in order to design audit
  procedures that are appropriate in the circumstances, but not for the purpose of expressing
  an opinion on the effectiveness of the entity’s internal control.

  x Evaluate the appropriateness of accounting policies used and the reasonableness of
  accounting estimates and related disclosures made by management.

  x Conclude on the appropriateness of the management use of the going concern basis of
  accounting and, based on the audit evidence obtained, whether a material uncertainty exists
  related to events or conditions may cast significant doubt on the Authority’s ability to
  continue as a going concern. If I conclude that a material uncertainty exists, I am required to
  draw attention in my audit report to the related disclosures in the financial report or, if such
  disclosures are inadequate, to modify my opinion. My conclusions are based on the audit
  evidence obtained up to the date of my report. However, future events or conditions may
  cause the Authority to cease to continue as a going concern.

  x Evaluate the overall presentation, structure and content of the financial report, including the
  disclosures, and whether the financial report represent the underlying transactions and events
  in a manner that achieves fair presentation.

  25

• Page 30 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2017

  I communicate with the management regarding, among other matters, the planned scope and
  timing of the audit and significant audit findings, including any significant deficiencies in internal
  control that I identify during my audit.

  GORDON KEGA MBA, CPA
  Acting Auditor-General

  05 March, 2021

  26

• Page 31 of 127

• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: [email protected] Website: www.ago.gov.pg

  Our Reference: 30-93-4
  INDEPENDENT AUDIT REPORT
  TO THE PRIME MINISTER ON THE ACCOUNTS OF
  APEC PAPUA NEW GUINEA-2018 CO-ORDINATION AUTHORITY
  FOR THE YEAR ENDED 31 DECEMBER 2016

  DISCLAIMER OF OPINION

  I have audited the accompanying special purpose financial report of APEC Papua New Guinea
  2018 Co-ordination Authority, which comprise the Statement of Cash Receipts and Payments for
  the year ended 31 December 2016 and notes to the special purpose financial report including, a
  summary of significant accounting policies and other explanatory information.

  Because of the significance of the matters referred to in the Basis for Disclaimer of Opinion
  paragraphs below, I was not able to obtain sufficient appropriate audit evidence and accordingly,
  I am unable to and do not express an opinion on the special purpose financial report of the APEC
  Papua New Guinea-2018 Coordination Authority for the year ended 31 December 2016.

  BASIS FOR DISCLAIMER OF OPINION

  Expenditure Lacking Supporting documents

  Cash payments totalling K23,215,895 were stated under the statement of cash receipts and
  payments in the special purpose financial report of the Authority for the year ended 31 December
  2016. Of the total, payments valued at K18,003,116 were selected for my testing, to ensure,
  legitimacy, existence and accuracy of the payments and were appropriately supported with
  documentation and complied with the APEC Papua New Guinea-2018 Coordination Authority
  Act 2014 (the APEC Act) and relevant legislature mentioned therein. My review noted that a
  number of documents were either not provided or partially provided without sufficient and
  appropriate supporting documentation. Accordingly, I was unable to obtain sufficient and
  appropriate audit evidence to express an opinion whether the cash payments made were legitimate
  expenditure of the Authority, made in accordance with the APEC Act or that the expenditures
  were accurately recorded in the special purpose financial report for the year ended 31 December
  2016.

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

  27

• Page 32 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2016

  Completeness of Receipts from Department of PM&NEC

  Included in the statement of cash receipts and payments for year ended 31 December 2016 were
  cash receipts from PM&NEC totalling K23,470,401. The Authority has determined that it is
  impracticable to establish control over the recording of funding provided by way of payments by
  PM&NEC prior to entry into its financial records. Accordingly, the evidence available to me
  regarding funding from PM&NEC was limited and my audit procedures with respect to this
  funding was restricted to the amounts recorded in the financial records. Accordingly, I was unable
  to obtain sufficient and appropriate audit evidence whether this funding recorded was complete.

  Corresponding Amounts

  My audit opinion of the Authority for the year ended 31 December 2015 was disclaimed with
  respect to the expenditure totalling K9,991,308 that lacked sufficient and appropriate supporting
  documentation for me to verify the existence, accuracy and compliance of the recorded
  expenditure and for completeness of receipts from PM&NEC. These amounts are reflected as
  corresponding amounts in the special purpose financial report.

  I conducted my audit in accordance with the Audit Act and International Standards on Auditing.
  My responsibilities under those standards are further described in the Auditor-General’s
  responsibilities for the audit of the special purpose financial statement section of my report.

  I am independent of the APEC Papua New Guinea-2018 Coordination Authority in accordance
  with the ethical requirements that are relevant to my audit of the special purpose financial
  statements in Papua New Guinea, and I have fulfilled my other ethical responsibilities in
  accordance with these requirements. I believe that the audit evidence I have obtained is sufficient
  and appropriate to provide a basis for my opinion.

  Responsibilities of the Management for the Special Purpose Financial Report

  The management of the Authority is responsible for the preparation and fair presentation of the
  special purpose financial report in accordance with Finance Instructions1/2016 issued under
  Section 117 of the Public Finances Management Act, 1995(as amended) and International Public
  Sector Accounting Standards-Financial Reporting Under Cash Basis of Accounting and the APEC
  Papua New Guinea-2018 Coordination Authority Act 2014 and other relevant legislature
  mentioned therein or such internal control as the management determines is necessary to enable
  the preparation of the special purpose financial report that gives a true and fair view and is free
  from material misstatement, whether due to fraud or error.

  In preparing the special purpose financial report, the management is responsible for assessing the
  Authority’s ability to continue as a going concern, disclosing, as applicable, matters relating to
  going concern and using the going concern basis of accounting unless the management either
  intend to liquidate the Authority or to cease operations, or have no realistic alternative but to do
  so.

  28

• Page 33 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2016

  Auditor-General’s Responsibilities for the Audit of the Special Purpose Financial Report

  My objectives are to obtain reasonable assurance about whether the special purpose financial
  report as a whole are free from material misstatement, whether due to fraud or error, and to issue
  an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance,
  but is not a guarantee that an audit conducted in accordance with International Standards on
  Auditing will always detect a material misstatement when it exists. Misstatements can arise from
  fraud or error and are considered material if, individually or in the aggregate, they could reasonably
  be expected to influence the economic decisions of users taken on the basis of this special purpose
  financial report.

  As part of an audit in accordance with International Standards on Auditing, I exercise professional
  judgement and maintain professional scepticism throughout the audit. I also;

  x Identify and assess the risks of material misstatement of the financial report, whether due to
  fraud or error, design and perform audit procedures responsive to those risks, and obtain
  audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk
  of not detecting a material misstatement resulting from fraud is higher than for one resulting
  from error, as fraud may involve collusion, forgery, intentional omissions,
  misrepresentations, or the override of internal control.

  x Obtain an understanding of internal control relevant to the audit in order to design audit
  procedures that are appropriate in the circumstances, but not for the purpose of expressing
  an opinion on the effectiveness of the entity’s internal control.

  x Evaluate the appropriateness of accounting policies used and the reasonableness of
  accounting estimates and related disclosures made by management.

  x Conclude on the appropriateness of the management use of the going concern basis of
  accounting and, based on the audit evidence obtained, whether a material uncertainty exists
  related to events or conditions may cast significant doubt on the Authority’s ability to
  continue as a going concern. If I conclude that a material uncertainty exists, I am required to
  draw attention in my audit report to the related disclosures in the financial report or, if such
  disclosures are inadequate, to modify my opinion. My conclusions are based on the audit
  evidence obtained up to the date of my report. However, future events or conditions may
  cause the Authority to cease to continue as a going concern.

  x Evaluate the overall presentation, structure and content of the financial report, including the
  disclosures, and whether the financial report represent the underlying transactions and events
  in a manner that achieves fair presentation.

  29

• Page 34 of 127

• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2016

  I communicate with the management regarding, among other matters, the planned scope and
  timing of the audit and significant audit findings, including any significant deficiencies in internal
  control that I identify during my audit.

  GORDON KEGA MBA, CPA
  Acting Auditor-General

  05 March, 2021

  30

• Page 35 of 127

• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: [email protected] Website: www.ago.gov.pg

  Our Reference: 30-93-4
  INDEPENDENT AUDIT REPORT
  TO THE PRIME MINISTER ON THE ACCOUNTS OF
  APEC PAPUA NEW GUINEA-2018 CO-ORDINATION AUTHORITY
  FOR THE YEAR ENDED 31 DECEMBER 2015

  DISCLAIMER OF OPINION

  I have audited the accompanying special purpose financial report of APEC Papua New Guinea
  2018 Co-ordination Authority, which comprise the Statement of Cash Receipts and Payments for
  the year ended 31 December 2015 and notes to the special purpose financial report including, a
  summary of significant accounting policies and other explanatory information.

  Because of the significance of the matters referred to in the Basis for Disclaimer of Opinion
  paragraphs below, I was not able to obtain sufficient appropriate audit evidence and accordingly,
  I am unable to and do not express an opinion on the special purpose financial report of the APEC
  Papua New Guinea-2018 Coordination Authority for the year ended 31 December 2015.

  BASIS FOR DISCLAIMER OF OPINION

  Expenditure Lacking Supporting documents

  Cash payments totalling K9,991,308 were stated under the statement of cash receipts and
  payments in the special purpose financial report of the Authority for the year ended 31 December
  2015. Of the total, payments valued at K7,287,001 were selected for my testing, to ensure,
  legitimacy, existence and accuracy of the payments and were appropriately supported with
  documentation and complied with the APEC Papua New Guinea-2018 Coordination Authority
  Act 2014 (the APEC Act) and relevant legislature mentioned therein. My review noted that a
  number of documents were either not provided or partially provided without sufficient and
  appropriate supporting documentation. Accordingly, I was unable to obtain sufficient and
  appropriate audit evidence to express an opinion whether the cash payments made were legitimate
  expenditure of the Authority, made in accordance with the APEC Act or that the expenditures
  were accurately recorded in the special purpose financial report for the year ended 31 December
  2015.

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

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• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the year ended 31 December 2015

  Completeness of Receipts from Department of PM&NEC

  Included in the statement of cash receipts and payments for year ended 31 December 2015 were
  cash receipts from PM&NEC totalling K9,991,308. The Authority has determined that it is
  impracticable to establish control over the recording of funding provided by way of payments by
  PM&NEC prior to entry into its financial records. Accordingly, the evidence available to me
  regarding funding from PM&NEC was limited and my audit procedures with respect to this
  funding was restricted to the amounts recorded in the financial records. Accordingly, I was unable
  to obtain sufficient and appropriate audit evidence whether this funding recorded was complete.

  I conducted my audit in accordance with the Audit Act and International Standards on Auditing.
  My responsibilities under those standards are further described in the Auditor-General’s
  responsibilities for the audit of the special purpose financial statement section of my report.

  I am independent of the APEC Papua New Guinea-2018 Coordination Authority in accordance
  with the ethical requirements that are relevant to my audit of the special purpose financial
  statements in Papua New Guinea, and I have fulfilled my other ethical responsibilities in
  accordance with these requirements. I believe that the audit evidence I have obtained is sufficient
  and appropriate to provide a basis for my opinion.

  Responsibilities of the Management for the Special Purpose Financial Report

  The management of the Authority is responsible for the preparation and fair presentation of the
  special purpose financial report in accordance with Finance Instructions1/2016 issued under
  Section 117 of the Public Finances Management Act, 1995(as amended) and International Public
  Sector Accounting Standards-Financial Reporting Under Cash Basis of Accounting and the APEC
  Papua New Guinea-2018 Coordination Authority Act 2014 and other relevant legislature
  mentioned therein or such internal control as the management determines is necessary to enable
  the preparation of the financial report that gives a true and fair view and is free from material
  misstatement, whether due to fraud or error.

  In preparing the special purpose financial report, the management is responsible for assessing the
  Authority’s ability to continue as a going concern, disclosing, as applicable, matters relating to
  going concern and using the going concern basis of accounting unless the management either
  intend to liquidate the Authority or to cease operations, or have no realistic alternative but to do
  so.

  Auditor-General’s Responsibilities for the Audit of the Special Purpose Financial Report

  My objectives are to obtain reasonable assurance about whether the special purpose financial
  report as a whole are free from material misstatement, whether due to fraud or error, and to issue
  an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance,
  but is not a guarantee that an audit conducted in accordance with International Standards on
  Auditing will always detect a material misstatement when it exists.

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  Misstatements can arise from fraud or error and are considered material if, individually or in the
  aggregate, they could reasonably be expected to influence the economic decisions of users taken
  on the basis of this special purpose financial report.

  As part of an audit in accordance with International Standards on Auditing, I exercise professional
  judgement and maintain professional scepticism throughout the audit. I also;

  x Identify and assess the risks of material misstatement of the financial report, whether due to
  fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
  evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not
  detecting a material misstatement resulting from fraud is higher than for one resulting from
  error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
  the override of internal control.

  x Obtain an understanding of internal control relevant to the audit in order to design audit
  procedures that are appropriate in the circumstances, but not for the purpose of expressing an
  opinion on the effectiveness of the entity’s internal control.

  x Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
  estimates and related disclosures made by management.

  x Conclude on the appropriateness of the management use of the going concern basis of
  accounting and, based on the audit evidence obtained, whether a material uncertainty exists
  related to events or conditions may cast significant doubt on the Authority’s ability to continue
  as a going concern. If I conclude that a material uncertainty exists, I am required to draw
  attention in my audit report to the related disclosures in the financial report or, if such
  disclosures are inadequate, to modify my opinion. My conclusions are based on the audit
  evidence obtained up to the date of my report. However, future events or conditions may cause
  the Authority to cease to continue as a going concern.

  x Evaluate the overall presentation, structure and content of the financial report, including the
  disclosures, and whether the financial report represent the underlying transactions and events
  in a manner that achieves fair presentation.

  I communicate with the management regarding, among other matters, the planned scope and
  timing of the audit and significant audit findings, including any significant deficiencies in internal
  control that I identify during my audit.

  GORDON KEGA MBA, CPA
  Acting Auditor-General

  05 March, 2021

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• Attachment: B

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• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: [email protected] Website: www.ago.gov.pg

  Our Reference: 30-93-4
  The Honourable James Marape, MP
  Prime Minister of Papua New Guinea
  The Office of the Prime Minister
  Sir Manasupe Haus – Level 9
  PO Box 693
  WAIGANI, NCD

  AUDIT REPORT ON
  APEC PAPUA NEW GUINEA 2018 CO-ORDINATION AUTHORITY

  In accordance with Section 8(2) of the Audit Act, 1989 (as amended), I have audited the accounts
  and records of financial transactions and records relating to the assets and liabilities and assets in
  the custody of APEC Papua New Guinea 2018 Co-ordination Authority for the years ended 31
  December 2015, 31 December 2016, 31 December 2017, 31 December 2018 and 31 December
  2019.

  My reports in accordance with Section 8(4) of the Audit Act, 1989 (as amended) on the Authority’s
  Special Purpose financial reports for the above financial years were issued to you on even date.
  The report contained a Disclaimer of Opinion.

  OTHER MATTERS

  In accordance with the Audit Act, 1989 (as amended), I have a duty to report on significant matters
  arising out of the financial reports, to which the report relates. Since all issues are of similar in
  nature to each financial year, I decided to issue only one Section 8(2) report containing all these
  issues reported in all these financial years. I draw attention to the following issues:

  Required reports were not prepared or furnished in a timely manner

  I noted that the Authority had failed to prepare and furnish various reports as required under the
  APEC Papua New Guinea 2018 Co-ordination Authority Act 2014 (the APEC Act) on the
  stipulated times. The various reports that were required under the APEC Act are as follows:

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

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• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  ƒ Provisions under Section 6 of the APEC Act required the Authority to provide reports on
  achievement of milestones related to its objectives to the Minister responsible for his review
  to ensure compliance and achievement of the Authority’s objectives. There was no evidence
  available for me to confirm that the required reports had been prepared and submitted to the
  Minister responsible.

  ƒ Provisions under Section 15 of the APEC Act required the Authority to prepare reports in every
  6 month (periodic) or upon request of the Minister responsible or the NEC on the progress and
  performance in relation to its functions. As evidenced, these reports had not been prepared and
  furnished to comply with the requirements.

  ƒ Provisions under Section 19 of the APEC Act required the Authority to comply with Public
  Finances (Management) Act 1995 (as amended), in specific, Part VIII (other than Section
  54,55 and 57), which under Section 63(4) requires the that Authority shall be subject to audit
  for every financial year before 30 of June of the following year. As evidenced, all the financial
  reports of the Authority for the financial years 2015 to 2018 were submitted to AGO in
  December 2019 for conduct of the audits.

  ƒ Provisions under Section 29 of the APEC Act required the Authority to furnish final report on
  the activities and performance of the Authority and on its winding up. The report shall include
  an audit report. However, these reports had been long delayed since the audits of the Authority
  for the Financial years 2015 to 2019 had been delayed.

  Accordingly, the Authority had departed from compliance with the relevant requirements set out
  under the APEC Act and the Public Finances (Management) Act, 1995 (as amended) (PFMA). I
  was unable to determine the causes of not producing the reports or the delays. However, possible
  causes may include lack of human resource capacity or records not maintained in order and were
  intact to facilitate timely reporting.

  As the Authority is not operational at the time of this Report, I recommended that management of
  any organization established as a one-time authority must adopt and implement appropriate control
  measures and processes to ensure the following:

  x Adequate and appropriately skilled and knowledgeable personnel are engaged to carry out day-
  to-day functions including the monitoring and reporting processes;
  x All source documents are filed and maintained intact under retention policies and procedures
  manual, and the records are centralized to enable timely report compilation;
  x All required reports are prepared and furnished on the stipulated times;
  x Financial reports of such short-lived authorities are prepared at least annually;
  x A draft copy of the financial reports for each financial year is forwarded to the Office of the
  Auditor-General before 30 April of the following year to enable the Office conduct audit and
  issue report to the Parliament as requires under the Audit Act, 1989 (as amended) and the
  Public Finances (Management) Act, 1995 (as amended);

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  x Operational plans, budgets and work plans are drafted, approved by the NEC and they exist as
  control tools before the public funds are receipted and disbursed; and
  x All plans and budgets are monitored on a regular and timely basis and variances that arise must
  be factored into variance documents with proper approval given by the NEC.

  The management responded that “Section 29 of the APEC Act states that the Authority shall furnish
  to the Minister for final report on the activities and performance of the Authority and on its
  winding up. The final report shall include an audit report of the Authority’s financial reports
  prepared by a first-tier firm of auditors and accountants with an office in Port Moresby.

  Management do not agree with the comments that the Authority did not meet its reporting
  obligations as the tabling of the final report as noted in Section 29 (including the financial
  statements and audit report) will comply with the requirements under this Section of the Act. The
  Act does not stipulate or require that annual financial reports are to be prepared and audited.
  Therefore, the scope of the audit should be limited to the financial reports that are included in the
  final report that is furnished to the Minister.

  Management note that operational plans and budgets were prepared during the lead up to APEC
  2018. Regular meetings occurred to ensure that all operational issues were addressed to ensure
  the successful hosting of APEC PNG in November 2018.

  Operational plans were prepared and closely monitored to ensure the successful delivery of APEC
  2018. Annual financial reports were not prepared (or audited) as this was not a requirement under
  the APEC Act. Regular meetings occurred individually either relevant stakeholders across
  government, and through the National Organizing Committee, to ensure that all operational issues
  were addressed to ensure the successful hosting of APEC PNG in November 2018.

  Budgets and plans were monitored on a regular and timely basis internally by the Department of
  PM&NEC and Department of Finance for their respective expenditure, and through reporting the
  APEC 2018 National Organising Committee chaired by the Chief Secretary to Government.
  Please refer to each of these respective bodies.

  Management do not agree with the comment that the management and staff were not adequately
  skilled or trained. Much of the day to day functions of the Authority were carried out in a
  competent fashion with proper process taking place with regard to approval of payments for
  suppliers and allowances.

  The APEC Authority was unique in that it was established for the specific purpose of Organising
  a series of events leading to a major global summit. As such the unique circumstances of the APEC
  Authority working across almost all government departments and agencies, as well as numerous
  Provincial Authorities, is unlikely to replicate until the next likely hosting of APEC meeting in
  twenty years, and this must be clearly noted to confuse the role and scope of the APEC Authority
  either other statutory Authorities.”

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• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  The Authority’s Bank Account was opened in 2016 and Trust Account in 2018

  Section 22 of the APEC Act states that the Authority shall open and maintain bank accounts with
  Bank of PNG or commercial banks and at all times maintain one such bank account. However, the
  Authority opened its first bank account with Bank South Pacific (BSP) only in 2016.

  This was one (1) year after the APEC Act came into force on 23 December 2014 and expenditures
  on APEC meetings preparation were already committed by the PM&NEC from 2015. Further,
  receipts and payments by the Authority’s bank accounts from 2016 to 2017 had been minimal until
  the financial year 2018. K176,834,445 was expended by PM&NEC for the financial years 2015,
  2016 and 2017 for the APEC meeting.

  The Asia Pacific Economic Cooperation (APEC) Trust Account was opened on 22 February 2018
  after three (3) years of enactment of the APEC Act. However, the controlling public or statutory
  body of the Trust Account was Department of PM&NEC and not APEC Authority. Also, the
  mandatory signatories to the account were Secretary and Deputy Secretary for operation of the
  Department of Finance and the counter signatories were APEC CEO and Deputy Secretary
  operations – Department of PM&NEC.

  Further, the Asia Pacific Economic Cooperation (APEC) Security Trust Account was opened on
  16 January 2018. However, the controlling public or statutory body of the Trust Account was
  Department of PM&NEC and not the APEC Authority. Also, the mandatory signatories for the
  account were Secretary and Deputy Secretary for operation of Department of Finance and the
  counter signatories are Commissioner for Royal Papua New Guinea Constabulary (Police) and
  Secretary for Defense, Department of Defense.

  As a result, the following issues were noted to arise:

  x Although the APEC Act was in force in 2015, the Authority failed to comply with provisions
  under Section 22 of the APEC Act to open the bank accounts immediately;
  x The Department of the PM&NEC continued to receive and disburse funds for and on behalf
  of the Authority, which was not appropriate. I could not see the NEC decision or documents
  on any other arrangements that might have been made to decentralize the ultimate financial
  powers the Authority has under Section 22, Subsection 2 to receive and disburse all monies
  through the Authority’s own bank accounts; and
  x As the receipts and payments related to APEC meetings were handled by 5 different entities,
  register of transactions and record keeping were not centralized hence, exposed to high risks
  of abuse of funds and manipulation of records and data.

  I recommended that in future the Minister responsible and key stakeholders must ensure that bank
  accounts of such short-lived authorities are opened and utilized in compliance with the enabling
  laws. I advised that using the organization’s own bank account increases level of centralization in
  overall governance, monitoring, accounting and record keeping and timely audit of the authorities
  and to avoid unnecessary delays.

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• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  The management responded that “APEC Authority opened a bank account with BPNG in February
  2018, and APEC CEO approved payments made through this bank account. Payments made for
  the period from FY 2015 to FY 2017 were made from PM&NEC bank accounts and recorded in
  IFMS. There were some additional payments made by PM&NEC in FY 2018. APEC CEO was
  only the Authorised Requisitioning Officer (ARO). Payments made through the other 4 payment
  sources required Section 32 approval by the respective departmental heads.

  As noted in this management letter, payments relating to APEC 2018 were made from 5 different
  sources (APEC Authority, PM&NEC, Joint Security Task Force (JSTF), Department of Finance
  and Department of Defence).

  Further, as financial transaction vetting, compliance, approvals payments and auditing for the
  years 2015 into 2018 were conducted internally by the Department of PM&NEC in which Section
  32 Approval resided under the Chief Secretary, with the APEC Authority not having a stand-alone
  bank account (until February 2018) but rather an item created within the PM&NEC Vote and
  chartered accounts for which the Department of PM&NEC was accountable. Therefore, reporting
  was done through and by the Department of PM&NEC. Similarly, in 2018 this financial delegation
  was also taken up by the Department of Finance assuming Section 32 Authority for financial
  transaction vetting, compliance, approvals, payments and auditing. APEC CEO was designated
  as Authorised Requisitioning Officer and Counter signatory to the APEC Authority Bank Account
  that was opened in February 2018.

  APEC Bank Account-Bank of South Pacific

  On 21 January 2016 the APEC-2018 Trust Account was opened. This account was operated under
  the trust instrument “Department of Prime Minister & NEC APEC OP Plan 2018 Trust Account”
  dated 31 December 2013. This bank account was maintained by staff at PM&NEC. APEC CEO
  was not a signatory to this bank account. From 2016 to 2019 a total of 78 payments were made
  from this bank account with a value of K1.8m (0.3% of total APEC expenditure).

  APEC Bank Account-Bank of PNG

  On 22 February 2018, APEC Authority opened an operating bank account with BPNG. This
  account was operated under the trust instrument: “Asia Pacific Economic Corporation (APEC)
  Trust Account” dated 16 January 2018. Mandatory signatories to the account were Secretary or
  Deputy Secretary (Department of Finance) with countersigning signatories being APEC CEO or
  Deputy Secretary Operations (PM&NEC) Management agree with the comment in this section.

  APEC Authority should have opened a separate bank account in 2015 so that receipts and
  payments and transactions could have been made through this one account, controlled by APEC
  Authority. Having a centralized payment system would have led to more efficient control &
  filing of documentation.

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• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  However, requests to operate such an account were denied by Government authorities.

  In hindsight, while this denial of autonomy did cause delays in payments of suppliers, these
  additional layers of vetting and approval also delivered separation from APEC Authority logistics
  and operations from most financial functions and so removed potential for actual or perceived
  collusion.”

  Lack of centralized governance body and integration of management systems

  Receipts and payments of the APEC 2018 meetings funds were handled by 5 different entities
  namely; the PM&NEC, the Department of Finance, the JSTF, the Department of Defence and the
  APEC Authority itself. Accordingly, establishment of a central governance body was necessary to
  oversee and approve all payments processed through the 5 different channels, and to ensure control
  over the entire operations of the Authority. Section 9 of the APEC Act requires the establishment
  of the APEC Operations Task Force to provide oversight of the Authority. However, no meeting
  minutes of such central governance body were available for my confirmation of their existence.

  Further, the 5 entities operated in isolation using their respective standalone systems to capture
  their share of APEC meetings related transactions. Hence, there was no system integration to
  collate, compile and centralize the transaction data from the 5 payment channels. As a result,
  transaction listings and payments records provided may be incomplete. I also experienced long
  delays and difficulties in receiving the requested information for conducting and finalizing the
  audits of the Authority for the years ended 31 December 2015, 2016, 2017, 2018 and 2019. There
  was no clear audit trail to ensure completeness and accuracy of the final financial data presented
  in the financial reports.

  I emphasized that where financial functions of an organization are decentralized, it is more
  appropriate and prudent to establish a central governance body. I recommended that in future the
  management together with the Minister responsible and relevant key stakeholders must ensure that
  such organizations:

  x establish a central governance body to oversee and approve all payments processed over
  decentralized financial functions as seen in this case of the APEC Authority; and
  x maintain proper accounting records and source documents in line with approved filing and
  retention policy and procedures manual by the organisation itself and not at every
  decentralized organisations.

  The management responded that “Management agree with the comments noted in this section. A
  centralized payments system would have allowed a governance committee to overview and
  monitor all payment process and procedures for all operational expenses relating to APEC 2018.

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  In theory a centralized payment committee system would have been ideal, however the
  practicalities of interagency co-ordination on such a massive scale with a full whole of
  Government consultation, planning and delivery of the 250 meetings was not dissimilar to the
  experience of previous hosts where inefficiencies and cost blowouts occurred due to the
  bureaucratic internal requirements and the number of agencies involved.

  The systems and structures that exist in developed countries such as Australia and the United
  Kingdom that enable WOG processes are still evolving in our departments, but are being managed
  by personnel with ever increasing experience and expertise.”

  Missing transaction listings and source documents

  My audit procedures to verify appropriateness, completeness and accuracy of the payment figures
  reported in the financial reports for the years ended 31 December 2015 to 2019 had been limited
  since a significant number of the documents requested were not received by me at the time of this
  report. The transaction listings provided may be incomplete and about 78% of the payment
  samples selected for testing could not be provided with all relevant source documents. I noted that
  proper filing and archiving systems and processes did not appeared to be designed and
  implemented to ensure proper maintenance of all the payments and transactions records pertained
  to the APEC events.

  As the transactions listings provided may not be complete, I could not select samples or perform
  other substantive procedures over a significant sub-population (number) of the payments. Based
  on the transaction listings made available, I have requested 1,403 payment samples for testing as
  presented in column 4 of Table 1.1 below. Out of the total samples requested only 305 were
  provided as indicated in column 6 of the table. This means 1098 or 78% of the payment samples
  requested could not be provided as shown in columns 5 and 7 of the table. Even though the
  management claimed that they have provided 60.4% of the payment documents, most of the
  payment vouchers were incomplete without underlying documents, including quotes, tender
  documents, evaluation report, tender board resolution, engagement contracts signed by the
  relevant authorities, etc.

  Table 1.1 Summary of substantive samples by payment channel

  Payment Total Value of samples Number of Outstanding Partially Outstanding
  Channels Payments requested samples samples received samples in
  (entities) (Kina) (Kina) requested samples (%)
  PM & NEC 209,660,951 161,074,797 664 394 270 59%
  APEC 288,325,818 175,694,272 168 148 20 88%
  JSTF 29,476,439 10,612,681 293 278 15 95%
  DoF – Alesco 11,061,028 2,631,561 278 278 0 100%
  Total 538,524,235 350,013,311 1403 1098 305 78%

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  I have reported in my other findings that a central governance body did not appear to exist to
  oversee all payments processed through the 5 payment channels. Also, the systems they used were
  not integrated to centralize the financial data and records. As a result, transaction listings provided
  were incomplete and payment samples requested could not be provided in entirety.

  Accordingly, I was unable to conclude my audit procedures satisfactorily by alternative means to
  ensure appropriateness, completeness and accuracy of the financial information reported in the
  financial reports. I could not confirm whether the payments made have been appropriately
  approved and paid to genuine service providers that were contracted through proper tendering
  processes.

  I recommended that the management together with the relevant stakeholders to ensure such short-
  lived authorities that arise in future:

  x Design and implement proper filling and archiving systems, processes and controls to ensure
  that documents pertaining to operational activities are appropriately filed and safely
  maintained for easiness and fast retrieval whenever needed; and
  x A policy and procedures manual are drafted, reviewed, approved, implemented and closely
  monitored to ensure effective control is attained in respect of the above.

  I brought this to management and responded that “Management agree with the comment made in
  this section. The fact that payments were made from 5 different sources and government
  departments has meant that there was no centralized location to allow proper filing and archiving
  of all documents and records that related to APEC 2018.

  When APEC Authority opened its own bank account with BPNG in February 2018, approval
  procedures and processes were put in place to ensure payments were properly procured and
  approved for payment.

  An approved finance policy and procedures manual under the responsibility of a Chief Financial
  Officer at the commencement of the preparations of APEC in 2015 would have allowed the
  implementation of procedures and processes or ensure appropriate filing, archiving and retention
  of all accounting records.

  Payments were made from commercial operational Accounts, Department of Finance, Department
  of PM&NEC and Department of Defence, however it has to be clear that funding and payments
  were endorsed and approved from Finance Department, PM&NEC and Department of Defence
  from funds disbursed from Department of Finance as the funding agency responsible.”

  Establishment of Supply and Tenders Board

  My requests to the Authority to provide listing of the APEC Papua New Guinea Supply and
  Tenders Board members, tender register, contract register, approved suppliers and service
  organization listings, procurement plan, and policies and procedures manual for the five (5) years
  (2015-2019) could not be provided at this time of reporting.

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  In addition, minutes of the APEC Papua New Guinea Supply and Tenders Board deliberations and
  contract agreements duly signed by the Supply and Tenders Board and the NEC according to their
  financial authority limit to engage contractors were not provided for my review.

  Per Table 1.1 above payment samples totaled 1,403 at a value of K350,013,311 were selected
  throughout the 5 years. No complete documentation was provided for 78% of the of the samples
  which included on the tendering and contract awarding processes, and contracts agreements signed
  with the Chairman of the APEC Papua New Guinea Supply and Tenders Board and Head of State
  as required under Section 21(3)(b), 21(4) and Section 21(5) of the APEC Act respectively. The
  Authority was required by provisions under Section 20 of the APEC Act to establish a Supply and
  Tenders Board (the S&T Board). The provisions under Section 21 of the APEC Act stipulates the
  functions of the S&T Board. The Chief Secretary shall be the Chairman of the S&T Board.

  Due to the lack of supporting documentations including the listing of the Supply and Tenders
  Board members and their meeting minutes, I was unable to confirm the establishment and
  existence of the S&T Board. Also, I was unable to ensure legitimacy of all contractors engaged
  and validity of the payments made to the contractors and goods and service providers.

  At the time of this Report, the Authority is extinct. Therefore, I recommended the management
  must ensure the following in future:

  x Establish, implement or enforce all functions or requirements including set up of the Supply
  and Tenders Board as requires under the relevant legislation;
  x All appropriate processes and controls are adhered to in line with all applicable laws and be
  held accountable in instances of non-compliance;
  x Implement a suitable policy with regard to record keeping so that filing and storage of all
  relevant source documents are well maintained for future review and audit; and
  x Maintain a centralized governance committee to enforce proper control and monitoring over
  maintenance of the accounts and source documents to enable conduct of audit within a set time
  frame.

  I brought this to management and they responded that “Management note the comments made in
  this section.

  On 16 March 2016, the then Finance Minister approved the establishment of the APEC PNG 2018
  Co-ordination Authority Specialized Supply & Tenders Board allowing the Board to approve
  contracts not exceeding K1.0 million.

  However, on the occasions that the Board convened there was never a quorum to approve
  contracts. As a result, relevant contracts were submitted to Central Supply’s & Tender Board for
  approval. Authorities to Pre-Commit were also sought from respective Government Bodies and
  contracts were also submitted to Office of the State Solicitor for approval. Where necessary, major
  contracts were submitted to National Executive Council for approval.

  These procurement procedures were put in place for contracts entered into by APEC Authority.

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  Procurement process for the other payment’s sources were not controlled by APEC Authority.”

  No SCMC/NEC approval sighted on the salaries and conditions of the employees

  I noted that payments of salaries and allowances of the employees of the Authority were made
  from all the five (5) payment channels.

  My audit procedures identified issues or difficulties as detailed below:

  ƒ Section 11, Sub-sections 6 and 7 of the APEC Act states that terms and conditions of
  employment of the Chief Executive Officer (CEO) of the Authority shall be determined by the
  National Executive Council (NEC) and the salaries, allowances and benefits of the CEO shall
  be determined by the Salaries and Conditions Monitoring Committee (SCMC).

  ƒ Section 9(2) of the Salaries and Conditions Monitoring Committee Act 1988 (the SCMC Act)
  states that the CEO of the Authority shall be responsible for ensuring that the employees of the
  Authority are remunerated in accordance with the salaries and conditions approved by the
  SCMC.

  My request for listings of the employees on the Authority’s organizational structure, their
  contracts of employment and the salary structure approved by the SCMC were not provided
  for my review to ensure the salaries and allowances were paid in accordance with the NEC
  determined and the SCMC approved conditions.

  ƒ Section 10(1) of the SCMC Act states that a public body (the Authority) cannot determine or
  vary the salaries and conditions of employment of any employee on its own accord as such
  will be void and unenforceable with payment made under such arrangement recoverable by
  the State.

  My request for the listings of all the employees on the Authority’s organizational structure and
  details of performance measures and incentive compensation taken were not provided for my
  review. Should there be any variations made to the salaries and conditions of the employees, I
  was unable to determine whether proper approval was sought in accordance with Section 11(1)
  of the SCMC Act and granted by the SCMC.

  ƒ I noted instance where allowances were paid at the rate of K500 per day opposing to K200 per
  day as required under the Public Services General Orders. No NEC approval was provided to
  substantiate the new daily allowance rate used or the excess allowance paid. The
  documentations on a significant number of allowances paid under the Joint Security Task
  Force (JSTF) payments were not provided for my review.

  ƒ I have selected samples of payroll and allowance payments for staff including that of the CEO
  and requested supporting documentations including pay slips, hours worked and rate per hour,
  proof of identification and signed and dated employment contracts to determine whether the

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  salaries and allowances paid were properly approved and complied with the SCMC Act, and
  that the payees were not fictious or fraudulent.

  However, none of the documentations requested was made available for my review to ensure
  validity and legitimacy of the salaries and allowances paid through the various payment channels.
  Unbelievably, no information was provided for samples selected for my test on payments
  channelled through the Alesco payroll system.

  As a result, I could not ascertain whether the remunerations paid to the Authority’s employees and
  the allowances paid to the security personnel complied with the APEC Act, the SCMC Act, the
  PFMA and the other regulatory frameworks including the Public Services General Orders.

  At the time of this Report, the Authority is extinct. Therefore, I recommended that management
  of such organization established in future should ensure the following:

  x All appropriate processes and controls are implemented, enforced and adhered to in
  accordance with all the relevant laws that are applicable and be held accountable in instances
  of non-compliance;
  x Implement suitable policies with regard to recordkeeping so that filing and storage of all
  relevant source documents are well maintained for future review and for the purpose of audit
  use; and
  x Maintain a centralized governance committee to enforce proper control over the overall
  operations including close monitoring over maintenance of the accounts and source documents
  to enable conduct of audit within a set time frame.

  The management responded that “APEC Authority did not have direct access to Alesco payroll
  system nor did the Authority have access to reprint pay slips from Alesco payroll.

  Payroll files were maintained for all staff employed directly by APEC Authority and are located
  at International Convention Centre. However, without the Alesco payroll pay slips the audit
  testing could not be completed.

  In addition, the actual supporting documents needed to verify the appropriateness of the payroll
  expenses could not be located.

  APEC Authority had no direct control over allowances paid by JSTF. Supporting documentation
  for JSTF supplier payments and allowances were only partially provided after numerous requests
  in September 2020.”

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  In-complete Financial Reports

  I was provided with the draft Financial Reports for the financial years ended 31 December 2015,
  2016, 2017, 2018, and 2019 backed with majority of the transaction listings. Though, my audit
  procedures had been designed to reasonably verify the existence, completeness, accuracy and
  compliance aspects of the sampled transactions presented in these Reports, the matter of
  completeness of the data presented in these Reports could not be reasonably verified given the
  following findings:

  ƒ The Department of PM&NEC had not maintained separate bank accounts for transacting the
  APEC meetings related receipts and payments. During the APEC meeting period between
  2015 to 2018, K205.6 million was expended from the Department of PM&NEC, however they
  drew the funds from their main operational bank accounts and merely registered the payments
  under APEC meetings payments listings/ledgers. These payments registers/ledgers were then
  extracted and supplied for drafting the Financial Reports. It has not been possible for me to
  trace and agree the APEC meetings related transactions listings amounts with the bank
  statements amounts; and

  ƒ While thousands of operational transactions were made from its respective operational bank
  accounts in a year, the APEC meetings payments were also channeled from the same
  operational bank accounts posing high risks for posting errors and fraudulent activities to go
  undetected. There was a possibility that payments drawn for APEC meetings related expenses
  may not be registered under the APEC payments register or fictitious payments could be
  registered under the APEC meetings expenditures.

  Due to the fact that the Department of the PM&NEC had not maintained separate bank accounts
  for transacting the APEC meeting related expenses, I was unable to complete my audit procedures
  to verify the completeness of the payments made from the channel. Additionally, system generated
  trial balances which should summarize the capture of all transactions from the four (4) payment
  channels, and as a basic requirement for maintaining set of accounts was not provided for my
  review.

  I recommended that going forward centralized accounting systems are maintained to facilitate
  proper record keeping and timely report productions.

  The management responded that “Management do not agree with conclusion made in this section.
  The completeness of the financial information being the payments relating to the hosting of APEC
  2018 are sourced from:

  x IFMS reports generated by Department of Finance, PM&NEC and Department of Defence
  and supported by reports detailing the payee, amount and nature of the expense;
  x Receipts (From government) and payments made from APEC Authority BSP bank account and
  JSTF bank accounts (BPNG &BSP) reconciled to bank statements; and

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  x Alesco payroll Reports for APEC Authority and PM&NEC for staff employed. Management
  are of the opinion that the financial statements are complete even though not all of the
  supporting documentation could be located for audit.

  Accuracy of Financial Statements

  In preparing the financial statements for APEC Authority from 2015 to 2019, the following
  information was identified to be included in the financial statements:

  – Payments directly made from APEC bank accounts where receipts and payments were able to
  be reconciled to bank statements for completeness and the nature of the expense confirmed as
  relating to APEC activities;

  – Payments made by other government departments on behalf of APEC Authority including from
  departments: PM&NEC; Department of Defence; Department of Finance; Alesco payroll;

  – Payments by other government departments have been recorded in IFMS. Department of
  Finance provided detailed IFMS reports from 2015 to 2018 by approved APEC vote codes.
  APEC expensed included payments to suppliers for goods and services. IFMS reports provided
  also detailed payments made for payroll costs through Alesco payroll;

  – APEC Authority were able to review and reconcile the funds draw down from the IFMS
  reports, and include this information in the financial statements. The IFMS reports also
  detailed the APEC Budget of K584 million. Where the nature of the payment could be
  accurately determined, there were payments that had been allocated to “APEC” IFMS codes
  that were not APEC related. These payments have been excluded from the financial
  statements; and
  – Given the process detailed above in the preparation of the financial statements, management
  are satisfied that the receipts and payments disclosed in the financial statements are accurate
  and fairly represented.

  Location of Accounting Records/Payments Vouchers:

  APEC Authority Payments

  There was no centralized accounting system or process whereby financial records were gathered
  and filed. Cash books for all APEC bank accounts have been prepared and reconciled to bank
  statements. Due to the separate locations of the APEC head office at ICC and the final approval
  process at Department of Finance meant that not all paid vouchers were returned and filed in the
  one location.

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  Other government agency payments:

  APEC Authority did not gather financial information from other government departments on a
  timely basis. It should be noted that the other government departments have been subject to
  separate audit by Auditor General’s Office. As mention in the management responses in this
  report regarding the financial records of the Joint Security Task Force. Financial information
  relating to JSTF transactions was only partially provided in the last part of the audit.

  The Auditors selected a sample of payment vouchers from both APEC Authority and other
  Government Agencies, circumstances have arisen where supporting payment vouchers could not
  be located for the samples selected, which has impacted on the verification process of the audit.”

  Audit requirements

  Section 24 of the APEC Act, states that the Authority shall appoint an independent Probity Auditor,
  who shall advise the Authority and Chairman of the APEC 2018 Supply and Tenders (S&T) Board
  on matters of transparency and probity. I was unable to confirm whether a probity auditor had
  been engaged progressively throughout the years as no service agreements nor their audit reports
  were furnished to me.

  In addition, I noted as per Section 29 of the APEC Act that the Authority was to furnish to the
  Minister a final report on the activities and performance of the Authority and on its winding up.
  The report was to include an audit report “prepared by a first-tier firm of auditor and accountants
  with an office in Port Moresby” and be tabled in Parliament by the Minister during the first siting
  of Parliament after receipt of the report by the Minister.

  As detailed in my observation number one (1) of this report, the audit and report on each of the
  five (5) financial years had been long delayed with high considerations given to the specified time
  of reporting under applicable legislations.

  Furthermore, I noted that Section 29(2)(a) of the APEC Act is silent on the Auditor-General of
  Papua New Guinea conducting the audit of the Authority by stating that a “first-tier firm of
  auditors and accountants with an office in Port Moresby” will report on the financial statements
  of the Authority. Hence, this provision conflicts with the mandate and powers given to the Auditor-
  General of Papua New Guinea under Section 214 of the Constitution and other enabling Act of
  Parliament including Part II of the Audit Act 1989 (as amended) and Section 63 of the Public
  Finances (Management) Act, 1995 (as amended) to conduct the audit of all public bodies including
  the statutory authorities and State-owned companies funded by the State.

  I recommended that all public bodies and authorities that are established by an Act of Parliament
  using public funds are subject to audit by the Auditor-General of Papua New Guinea under the
  requirements of the Constitution, the Public Finances (Management) Act, 1995 (as amended) and
  the Audit Act 1989 (as amended).

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  I also emphasized that probity auditors should be engaged as required by the respective enabling
  Act. Service agreements and final audit reports of the probity auditors should be filed
  appropriately for easy reference when needed.

  I further highlighted that going forward, enactment of any such laws by Parliament must ensure to
  avoid such oversight that causes conflict with the existing laws in particular of my constitutional
  responsibility as the State auditor.

  The management responded that “Management do not agree with the comment made in this
  section.

  Probity prior to 2018 are the responsibility of the agencies or departments that vet, approve and
  expend finances under section 32 Authority delegation.

  Procedures and controls of the departments making the payments were relied (Department of
  Finance, PM&NEC, Department of Defence, Royal Papua New Guinea Constabulary
  (police/JSTF) and Alesco payroll).

  An external probity auditor was not appointed for 2018 as this would have amounted to
  duplication with the independent auditor due to be appointed in early 2018.

  Independent Auditor engagement was required to prepare audit report on the financial statements
  that were part of the Final Report to be furnished to the APEC Minister, the Final Report to be
  tabled in Parliament.

  Financial procedures and controls primarily came into effect when the APEC Authority’s BPNG
  bank account was opened in 2018. Prior to that date, procedures and controls of the departments
  making the payments were relied upon (Department of Finance, PM&NEC, Department of
  Defence, Royal Papua New Guinea Constabulary (Police/JSTF) and Alesco payroll).

  With the benefit of hindsight, APEC Authority should have prepared annual financial statements
  from 2015 onwards on a timelier basis and gathered the source documents in one central location
  at the time the financial statements were prepared.

  APEC Authority would then have had the opportunity to gather all of the relevant
  documentation from the government departments at the time rather than after the event.”

  Human Resources Capabilities

  Section 9 of the APEC Act, states that the APEC Operations taskforce is responsible for providing
  oversight of the APEC CEO to ensure his functions and that of the Authority are performed
  properly.

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  Section 12 further states that the functions of the APEC CEO are to carry out the day-to-day
  business of the Authority, implement the decision of the Operations Taskforce and administer the
  staff of the Authority in an efficient and effective manner and in accordance with the Operations
  Plan 2018. The APEC CEO is also responsible and accountable to the Government in relation to
  these functions.

  Throughout the course of the audit, I faced significant delays and difficulties in receiving the
  requested documentation as detailed in my observation number three (3) of this report. As part of
  the risk assessment procedures for APEC audit, I had requested for the meeting minutes of the
  Authority, fraud registers, budgets and other monitoring tools maintained in relation to the APEC
  2018 PNG meetings. However, these documents could not be provided to me at the date of this
  report. I also could not obtain few of the transactions listings which had been outstanding and
  supporting source documents for some sampled transactions.

  As such, I could not comment on whether the Authority had the necessary human resource
  capabilities employed to effectively and efficiently run the Authority not only in accordance with
  the relevant legislature but even in line with standard best practice.

  I recommended that going forward a proper filing and retention policies and procedures are
  designed and implemented by such public authorities. Maintenance of accounts and other
  reporting documents should also be centralized.

  Moreover, the Minister and operations taskforce of such public authorities must ensure that
  management of the authorities are performing their functions as required and are held accountable
  on a progressive basis. The CEOs of such authorities should also ensure that they have a strong
  team of staff that have the necessary skills, knowledge and accountability to perform their duties
  efficiently and effectively.

  The management responded that “The Asia Pacific Economic Cooperation (APEC) safety and
  Security Act 2017 was certified on 13/4/2017. The Act created the Joint Security Task Force
  (JSTF) and largely dealt with operational & security issues There were no administrative or
  financial clauses.

  On 18 January 2018 the Asia Pacific Economic Cooperation Security Trust Account was created
  under a Trust Instrument. Signatories to this trust were representatives from Department of
  Finance, Commissioner of Police or Secretary for Defence. APEC Authority CEO had no approval
  or signing powers over payments made from this JSTF trust account.

  While there were regular communications between APEC Authority and JSTF on operational
  issues. During FY 2018, approximately K51.8 million was paid out from two JSTF on operational
  issues, there was no financial reporting prepared by JSTF and provided to APEC Authority during
  2018.

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  No financial information was received from JSTF until July 2019, when APEC Authority received
  copies of bank statements for the BSP & BPNG bank accounts maintained by JSTF and reconciled
  cash books maintained on excel spreadsheets. There were no supporting vouchers or documents
  provided by JSTF despite numerous requests. In mid-September 2020, a number of arch lever files
  were located with vouchers relating to JSTF payments and subsequently an additional file was
  located in late September 2020 with details of JSTF allowances.

  Auditors were able to vouch a sample of the payment vouchers (52 vouchers of the sample of 65
  were provided). However, the JSTF allowances information was located in the week after audit
  testing cut off-date and were not able to be tested.

  Management agree with the recommendation that there be one centralized system of approval and
  payment of APEC related expenses to ensure proper authorisation, filing and retention of
  documents.

  It should be noted that a significant portion of APEC expenses (approx..46%) included in the
  financial statements were not finally approved for payment by the APEC Authority CEO.

  Management are of the view that that APEC Authority had a strong team of staff with the necessary
  skills, knowledge, reliability and accountability to perform their duties efficiently and effectively.
  The main issue has been location of documents, payments vouchers and payroll records after
  APEC 2018 concluded and the majority of these staff had departed and either returned to their
  respective departments or left PNG.

  Accounting Process Records & Filing: APEC Authority

  From January 2018 to June 2018, APEC Authority processed payments through bank account
  held with BPNG. Authority to Transfer Funds (ATF) were signed by APEC CEO and Department
  of Finance. Other supporting documents completed were supplier invoice, procurement services
  Requisition Form (PSR), FF3 signed by Authorised Requisitioning Officer (APEC CEO), FF4
  signed by Financial Delegate (APEC CEO), co tract/Engagement Letter and Purchase Order
  (signed by APEC CEO).

  From June 2018 onwards, payments processed through IFMS accounting system. The same
  documents as noted above were completed and once approved, processed and committed into
  IFMS, then authorized for payment.
  Payment Vouchers (being the paperwork noted above) were prepared by APEC Finance staff at
  International Convention Centre(“ICC”) and then sent to Department of Finance for final
  approval and payment.

  Return of final payment vouchers were meant to be delivered back to ICC but this process was not
  always followed up resulting in filing being incomplete. All signed vouchers were scanned at ICC
  before being sent to Dept Finance, but the hard drive where scanned documents were stored
  became corrupted and back up data was not complete.

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  In June 2018 when payments were processed through IFMS, two APEC finance officers sent to
  Vulupindi Haus ground floor, to process/commit payment vouchers into IFMS. Payment runs were
  then completed as payments were made, and paid vouchers were filed by payment date order in a
  compactus unit at Vulupindi, with each payment having a sequential number as generated on the
  IFMS EFT payment register.

  Accounting Processes, Records & Filing: Other Government Departments

  Other government department that processed payments for APEC related payments were
  PM&NEC, Joint Security Task Force, Department of Finance and PNG Defence Force. Each of
  these government departments have their own payments approval which comply with government
  accounting policies. All of the departments noted above are also subject to separate audit by
  Auditor General’s Office.”

  Lack of Timely Recovery and Disposal of Assets

  Section 26 of the APEC Act, states that upon winding up of the Authority, all assets of the Authority
  are to be transferred to the State. Section 28 further states that surplus funds and assets, after
  discharging liabilities, shall be disposed in consultation with the Operations Plan 2018 (I was not
  provided with a copy of the plan to determine whether the plan has been executed as approved by
  relevant authority).

  I noted that a total of 326 motor vehicles were purchased by the Government of Papua New Guinea
  through the bank account of the Department of PM&NEC. The purchases included 40 Maserati’s
  and 3 Bentleys which were luxury vehicles. In addition, the partner countries donated 166 vehicles.
  Accordingly, a total of 492 vehicles were available for use during the APEC PNG 2018 meetings.
  I further noted that a significant amount of funds were also spent by JSTF and PM&NEC on hire
  cars.

  Under the instruction by the Secretary of the Department of Finance (DOF), all vehicles should be
  returned and accounted for. However, at the time of this report 109 vehicles out of the 492 were
  yet to be recovered from certain individuals still in possession of these vehicles according to
  Department of Finance (DOF) latest information provided to me on 15 February 2021.

  I understand that an APEC Assets Disposal Committee had been set up for the purpose of making
  sure that all vehicles are accounted for and are properly disposed off through public tender process
  or allocated and distributed to public and statutory bodies, provincial and district government
  arms, NGO, hospitals and other charitable organisations.

  The Department of Finance (DOF) latest report further states that 257 vehicles were distributed to
  public and statutory bodies, provincial and district government arms, NGO, hospitals and other
  charitable organisations. 192 vehicles were to be disposed off through public tender, which
  includes the 109 vehicles yet to be recovered from certain individuals.

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  I noted that for the luxury vehicles, in particular, 38 Maserati’s are yet to be sold and are currently
  housed in a warehouse. I further noted that the vehicles are currently lying idle and are also
  uninsured which exposes the State to the risk of losses in an event of a fire or theft. The value of
  these assets may be also depreciated.

  I recommended that a full asset register of all assets is prepared and that assets are physically
  verified. The register must include those transferred to State and disposed. I also recommended
  that the relevant government departments take proactive measures to ensure that the remaining
  assets are disposed through transparent tender processes.

  In addition, I highlighted that while the assets remain unsold they should be properly stored,
  monitored and insured to minimise the risk of losses.

  The management responded as follows; “Management of the APEC Authority maintained a
  reconciled vehicle register for all vehicles purchased by and donated to APEC Authority. The
  motor vehicle register was reconciled to records maintained by Department of Transport/MVIL.
  After the completion of APEC in November 2018, APEC Authority recovered vehicles directly
  under its control. Department of Finance requested that all vehicles and keys be handed over to
  the department. In late December 2018, APEC Authority handed all vehicles and keys in its
  possession along with additional vehicles keys to Department of Finance (with vehicles either
  being brought to CT4 wharf or international convention center).

  For those vehicles that had not been returned, APEC Authority handed the details of where the
  vehicles had been allocated over to Department of Finance who then engaged RPNG Police
  Constabulary to assist in recovery of remaining vehicles.

  Donated vehicles have been allocated to various government departments, schools, church groups
  and other community organisations. APEC Authority has been provided with a list of where these
  vehicles have been allocated.

  APEC Asset Disposal Committee (in compliance with NEC Decision NGO3/2019) was formed
  comprising members from Department of Finance, National Procurement Commission, APEC
  Authority, PM&NEC and Department of Works. The Committee was responsible for recouping
  and disposing of all APEC Authority assets.

  The Authority has been advised that remaining purchased vehicles have been allocated to various
  government departments by the Department of Finance, Ministers and Departmental Officers.

  APEC Authority have sought to obtain quotes for insurance for the Maserati vehicles both during
  and after APEC. These quotes have been submitted to Department of Finance but no payment has
  been approved as funding was not available and as a result there is no insurance cover for these
  vehicles.”

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  Liabilities as at the winding up could not be verified of their validity and completeness

  Section 27 of the APEC Act states that upon winding up of the Authority, all liabilities of the
  Authority are to be transferred to the State and discharged by the Department of Finance.

  As per the information disclosed in the financial report in page 13, the liabilities of the Authority
  amounted to K58,385,368 as at 31 December 2019. I was not provided with all relevant supporting
  documentation to verify the validity of the liabilities. As a result, I was unable to determine the
  existence and accuracy of the creditor listings provided and payables recorded as at 31 December
  2019.

  I recommended that going forward the Authority, Department of Finance and other relevant
  stakeholders must perform a thorough and proper reconciliation to ensure the accuracy of the
  creditors which the State is liable to settle.

  The management responded as follows:

  “APEC Authority creditors Outstanding – K38,752,827

  After the completion of APEC meetings in November 2018 a list of outstanding supplier invoices
  was prepared by APEC Authority and reconciled to supplier statements to ensure all invoices were
  included and recorded.

  This list of outstanding APEC Authority creditors has been provided to Department of Finance.

  This list of APEC Authority creditors and supporting documents was not requested as part of the
  audit testing and is available to inspect if required.

  JSTF Creditors and Allowances Outstanding – K19,632,541

  APEC Authority was provided with a list of outstanding supplier and outstanding allowances by
  JSTF. There were no supporting invoices or supplier statements or calculations of outstanding
  allowances. APEC Authority was unable to check or verify these balances. The list includes
  numerous car hire companies (with one company being owed K 11.6 million)

  On 25,26 and 27 December 2018, Department Finance paid K7.6 m for outstanding supplier
  accounts from IFMS code 13114-000-00-227. APEC Authority’s review of the IFMS report
  showed that large amounts were paid to JSTF suppliers & allowances.

  The payment vouchers for these amounts could not be located but it would appear that several
  of these payments were for suppliers that were still showing as outstanding on the JSTF creditor
  lists.”

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  Payments made to Circumvent the laws appeared to occur

  My inspection of the Authority’s transaction listings for its five (5) years of operations revealed
  that certain transactions appeared to have duplicate descriptions, dates and amounts. I have
  sampled some of these payments suspected of duplication for testing. Based on the supporting
  evidences I obtained, invoices with large amounts that exceeded K500,000 were broken down into
  smaller parts possibly to slip under the approval limits for the purpose of making the approval and
  payment processes quicker. Such practice has been notably a departure from compliance with
  Section 21 of the APEC Act which requires amounts over K500,000 to be put up for public tender.
  The practice also circumvented and breached requirements under the Public Finances
  (Management) Act, 1995 (as amended).

  Majority of such transactions suspected of duplication remain outstanding for testing and lack of
  supporting documentations for my review. As a result, I was unable to comment on the existence,
  accuracy or appropriateness of these transactions and the impacts they could have on the respective
  years’ Financial Reports.

  I recommended that going forward proper processes and controls in terms of obtaining approvals
  and payments must follow prescribed financial authority limit set under such Authority’s own Act
  and the Public Finances (Management) Act, 1995 (as amended) for transparency, accountability
  and compliance. Having noted the suspected payment duplications, I also recommended that
  reconciling of creditors on a regular basis is necessary to ensure fictitious invoices with intention
  to increase the creditors balance are not included.

  The management responded that, “In relation to supplier payments, APEC Authority dealt with
  many suppliers and each invoice was supported by a purchase order, FF3&FF4 Procurements
  Services Request Form and a Contract of Engagement Letter.

  Aggregated payments to some suppliers may have exceeded K500,000 but the individual invoices
  were for supply of separate goods and services with invoices values under K500,000.

  The Authority has raised concerns over multiple payments of amounts under K500,000 for
  combined amounts of several million kina being made to individual suppliers not associated
  with APEC operations.

  The truncations referred to in this section were processed into IFMS by staff at APEC Authority
  or Department of Finance.

  It would appear that in IFMS there may have been duplicate payments to payees for the same
  amounts which would seem to be duplicate payments.

  Management review of a sample of these payments revealed that many related to staff or
  consultants where the monthly amount was the same but for different months. The description in
  IFMS often did not detail the month that the payment related to.

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  Therefore, the payments identified were not duplicated, the payments were for the same amount
  but for different months.”

  Payments not included in the Authority’s Special Purpose Financial Reports

  The APEC Haus was constructed for the APEC 2018 meetings in Papua New Guinea.

  I understand that the costs to construct the building was done through an arrangement between Oil
  Search Limited (‘OSL’) and the Internal Revenue Commission (the ‘IRC’) in that the tax credits
  of OSL were used to pay for the construction costs of the building rather than being paid to the
  IRC. The construction costs were not taken up in the Financial Reports of the Authority, however,
  I do note that this was a significant cost in relation to the APEC 2018 meetings and should have
  been appropriately disclosed. I have not viewed any documentation on this matter.

  I recommended that a separate audit be done on the APEC Haus. This audit should not only cover
  the appropriateness of the cost of construction of the building but also an assessment of the
  utilisation of the building and its current earning capacity.
  The management responded that, “Management agree with the comment that this matter is outside
  the scope of the APEC audit.”

  State Contribution to Hilton Hotel

  I noted that K100million (US$30million) was paid by the State through Kumul Petroleum
  Holdings Limited as its contribution for the construction of Hilton Hotel, which was purposely
  built to accommodate guests for the APEC events. However, this amount was not disclosed in the
  Financial Reports of the Authority.

  GORDON KEGA MBA, CPA
  Acting Auditor-General

  05 March, 2021

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• Audit Report on APEC Papua New Guinea-2018 Co-ordination Authority for the years ended 31 December 2015 to 31 December 2019

  APEC PAPUA NEW GUINEA 2018 CO-ORDINATINATING AUTHORITY

  SUMMARY OF THE RECEIPTS AND PAYMENTS

  TOTAL TOTAL
  YEAR RECEIPTS EXPENDITURES
  (K) (K)
  2015 9,991,308 9,991,308
  2016 23,470,401 23,215,895
  2017 128,298,613 128,552,700
  2018 333, 297,506 331,025,203
  2019 19,134,750 21,201,364
  TOTAL 514,192,578 512,986,470

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• Attachment: D

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• THE 2018 ANNUAL APEC LEADERS’ SUMMIT
  IN PNG

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