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• Papua New Guinea INVESTIGATION TASK FORCE SWEEP

  Investigating Allegations of Corruption at the Department of National Planning and Monitoring

  FINAL REPORT Containing Findings, Implementations and Recommendations

  Dated the 5th Day of May, 2012

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• THE INDEPENDENT STATE OF PAPUA NEW GUINEA

  INVESTIGATION TASK-FORCE SWEEP

  – FINAL REPORT

  Prepared by

  Sam Koim, LLB [Hons] Chairman

  Draft Report 1 Last printed 4/27/2012 4:24:00 PM

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• FINAL REPORT TABLE OF CONTENTS 1 -PRELIMINARY ………………. 6 1 ABBREVIATIONS USED IN THIS REPORT ……………………………………………………………….. 2 GLOSSARY …………………………………………………………………………………………………………………………………….. 6 3 ACKNOWLEDGEMENT ………………………………………………………………………………………………………………. 4 INTRODUCTION ………………………………………………………………………………………………………………………… 7 4.1 Executive Summary ……………………………………………………………………………………………………….. 7 4.2 Terms of Reference 7 4.3 Scope of Investigations ………………………………………………………………………………………………….. 8 4.4 The Team Structure ……………………………………………………………………………………………………….. 8 4.5 Investigations Methodology ……………………………………………………………………………………………. 9 PART II —LEGAL PROCESSES AND ESTABLISHMENT …………………………………………………………….. 10 5 ESTABLISHED STATE PROCUREMENT PROCESS …………………………………………………………… 10 3.1 Budgetary Process and Appropriations ………………………………………………………………………….. 10 5.2 The Law Governing State Tenders and Contracts …………………………………………………………… 12 5.2.1 Issuance of Certificate of Inexpediency (COI) ……………………………………………………………………….. 13 5.2.2 The use of Authority to Pre Commit Expenditures ……………………………………………………………….. 14 5.2.3 Rational behind Public Tender Process …………………………………………………………………………………. 15 5.3 Established position by the Courts on illegal contracts and their enforcements ………………… 15 6 DEPARTMENT OF NATIONAL PLANNING AND MONITORING ……. 15 6.1 Establishment of DNPM ………………………………………………………………………………………………. 15 6.2 Core Functions of DNPM ……………………………………………………………………………………………. 16 6.3 Project Appraisal Guidelines …………………………………………………………………………………………. 17 6.3.1 The PIP Guidelines ……………………………………………………………………………………………………………… 17 6.3.2 The Development Projects Documentation Guidelines …………………………………………………………. 18 6.4 DNPM’s Capacity ………………………………………………………………………………………………………… 18 PART III —FINDINGS ……………………………………………………………………………………………………………………….. 19 PART III.1 -GENERAL FINDINGS ………………………………………………………………………………………………. 19 PART 111.2 -DETAILED FINDINGS ……………………………………………………………………………………………. 19 7 DNPM’S DEVIATION FROM PRIMARY ROLE …………………………………………………………………….. 19 7.1.1 Mischievous Gazettal of Ministerial Functions 19 7.1.2 Observations on the Gazettal Notices conferring of powers to successive National Planning Ministers 21 7.1.3 DNPM turned into a Cash Cow ……………………………………………………………………………………………. 22 7.1.4 Corruption and Malpractices ………………………………………………………………………………………………… 23 7.1.4.1 DNPM peormingCST7.3 .Roles ………………………………………………………………………………………… 23 7.1.4.2 Lack of Capacity to implement Projects ………………………………………………………………………………….. 24 7.1,4.3 DNPM’s Lack of Capaci ty to Monitor Pr jectr ………………………………………………………………………. 25 7.1.4.4 Lack of proper documentation and record keeping …………………………………………………………………….. 26 7.1,4.3 Release of payments in full amounts ……………………………………………………………………………………… 26 7. 1.4.6 Conflicts of Interest Situations ……………………………………………………………………………………………… 26 7.1.4.7 Lack of Due Diligence ………………………………………………………………………………………………………. 27 7.1.4.8 Deviation of Payment Votes ………………………………………………………………………………………………. 27 8 ABUSE OF CERTIFICATE OF INEXPEDIENCIES ……………………………………………………………… 27 8.1 Some examples of Abuse of COI: …………………………………………………………………………………. 28 8.2 Recommendations ……………………………………………………………………………………………………….. 31 9 ILLEGAL CONTRACTS …………………………………………………….. 31 10 INDIVIDUAL CASES ………………………………………………………………………………………………………………….. 31 10.1 Detailed Investigations …………………………………………………………………………………………………. 31 CASE 1: PAYMENT AND RELEASE OF K180,000 TO KAJAH DEVELOPMENT & BUSINESS SERVICE CENTRE ……………………………………………………………………………………………….. 32 CASE 2: PAYMENT OF K100,000 TO KEREKAMB ISLAND CORPORATIVE SOCIETY ………….. 34 Case 3: Payment and Release of K547,000 to K-Island Builders Ltd ………………………………………….. 36 CASE 4: PAYMENT AND RELEASE OF K1.0 MILLION TO XONINGI COFFEE LIMITED ….. 39

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• FINAL REPORT- CASE 5: PAYMENT AND RELEASE OF K1.5 MILLION 0 METTLE LIMITED …………… 42 Case 6: Payment and Release of K3.5 million and K1,108,650.18 to Niugini Star Transport Limited45 Case 7: Payment and Release of K5.0 million to Niugini Star Transport Limited …………………… 49 Case 8: Payment and Release of K5.0 million to Niugini Star Transport Limited ……………………..54 CASE 9: PAYMENT AND RELEASE OF K3.0 MILLION TO HILAND FARMS LIMITED .58 Case 10: Payment and Release of K3.0 million to Agricultural Development Limited …………………… 61 Case 11: Payment and Release of K3.0 million to Rait Hela Coffee Limited …………………………………… 63 Case 12: Payment and Release of K2.0 million to Yapiok Contractors Limited …………………………………… 66 Case 13: Payment and Release of K700,000 to Tild Coffee Estate Limited ……………………………………… 69 Case 14: Payment and Release of K2.0 million to Wando No.2 Coffee Estate Limited ………………….. 72 Case 15: Payment and Release of K7.5 million to Rait Fama Limited ……………………………………………. 75 -4- CASE 16: PAYMENT OF KI MILLION TO NEW STAR CENTURY LIMITED FOR ESA-ALA DISTRICT ……………………………………………………………………………………………………………………………………. 78 CASE 17: COMMUNITY COLLEGE CONCEPT ……………………………………………………………………… 81 CASE 18: KOGE COFFEE AND PYRETHRUM PROJECT —K5 MILLION ………………………….. 94 CASE 19: K3,400,000.00 PAYMENTS TO TOL PORT SERVICES FOR FUNDING REHABILITATION OF KARL PLANTATION. …………………………………………………………………….. 97 Case 20: Payment and Release of K10 million to Travel Air Limited ………………………………………….. 105 10.2 More cases in Brief …………………………………………………………………………………………………….. 110 10.2.1 Sarakolok West Transport Ltd and Chain of Companies ………………………………………………………. 110 11 SCITB (K125 MILLION KOKOPO COMMUNITY PROJECTS) …………………………………………… 114 11.1 Introduction 114 11.2 Treasury Bills 115 11.3 SCITB and Chronology of Events ………………………………………………………………………………. 115 11.4 Findings 120 11.4.1 Legality of the SCITB …………………………………………………………………………………………………………. 120 11.4.2 Private Individuals/Companies Performing Functions of State institutions ………………………………………………………………………………………………………………………………………… 121 11.4.3 Directorship and Expenditure of Funds ………………………………………………………………………………. 121 11.5 Actions Taken …………………………………………………………………………………………………………….. 124 11.6 Recommendation ……………………………………………………………………………………………………….. 124 12 HEALTH ……………………………………………………………………………………………………………………………………. 124 13 OTHERS ……………………………………………………………………………………………………………………………………. 125 PART IV — REPORTS ……………………………………………………………………………………………………………………….. 125 14 ACTIONS UNDER THE CRIMINAL CODE ACT ……………………………………………………………….. 125 15 RECOVERY ACTIONS —TAX …………………………………………………………………………………………………. 125 15.1 Introduction 125 15.2 Background 126 15.3 Methodology 126 15,4 Assessments 127 15.4.1 Compliant taxpayers …………………………………………………………………………………………………………… 127 15.4.2 Non-compliant taxpayers ……………………………………………………………………………………………………. 127 15.4.3 Desk and Field Audit ………………………………………………………………………………………………………….. 127 15.4.4 Desk Audit …………………………………………………………………………………………………………………………. 127 15.4.5 Field Audit …………………………………………………………………………………………………………………………. 127 15.4.6 Objections, Review or Appeal and Request for Amendments ………………………………………………. 128 15.5 Recovery of Tax Raised ………………………………………………………………………………………………. 128 15.6 Facts & Findings ……………………………………………………………… 128 15.7 Outcomes. 128 i. Listed and registered seventy (70) recipients of funds from DNPM, SCITB and NDOH for tax. ……. 128 ii. Field audit to three (3) provinces which resulted in tax assessments raised. ……………………………………. 129 iii. Gross receipts from DNPM and SCITB deemed assessable income derived by taxpayers taken as a basis and from it no deductions were allowed to arrive at taxable income on which taxes are raised. 129 iv. Raised tax assessments for fourteen (14) taxpayers ………………………………………………………. 129

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• FINAL REPORT v.Garnishee order under section 272 of the Income Tax Act served on banks holding money on account of the fourteen (14) taxpayers. …………………………………………………………………………………………………………… 129 vi. Only two (2) taxpayers lodged their return of income after receiving special assessments raised and issued under sections 229 and 230 of the Income Tax Act ………………………………………………….. 129 vii. One objection was made by a taxpayer to an assessment which has been disallowed in full. 129 viii. Four (4) amendment under section 232 of the Income Tax Act to assessments raised under sections 229 and 230 of the Income Tax Act were effected to reduce taxable income and tax payable after taxpayers lodged their income tax returns and request for amendment …………………………………………….. 129 15.8 Tax Revenue ………………………………………………………………………………………………………………. 129 15.8.1 Actual Tax Raised ………………………………………………………………………………………………………………. 129 15.8.2 Estimate Tax ……………………………………………………………………………………………………………………… 129 15.9 Recommendations ……………………………………………………………………………………………………… 129 i. Companies, businesses and individuals for tax purposes must register with Internal Revenue Commission; ……….. 129 16 RECOVERY ACTIONS —PROCEEDS OF CRIMES ……………………………………………………………… 130 17 REFERRALS —DISCIPLINARY ACTIONS ……………………………………………………………………………. 130 18 REFERRALS —LEADERSHIP CODE ACTIONS ……………………………………………………………………. 131 19 COURT CHALLENGES AGAINST ITFS ……………………………………………………………………………….. 132 19.1 National Court Proceedings ………………………………………………………………………………………… 132 PART V —REMEDIAL ACTIONS ….. 132 PART V.1 GENERAL …………………………………………………………………………………………………………………. 132 PART V.2 DETAILED ……………………………………………………………………………………………………………………… 137 20 PRODUCTION NOTICES IN FINANCIAL FRAUD AND CORRUPTION RELATED CASES INVESTIGATION ……………………………………………………………………………………………………….. 137 20.1 The Current Law (Problem) ………………………………………………………………………………………… 137 20.2 Proposed Law (Solution) …………………………………………………………………………………………….. 139 20.3 Recommendation ……………………………………………………………………………………………………….. 140 20.4 Justifications on the Proposed Law ……………………………………………………………………………… 140 21 BAIL CONDITIONS ……………………………………………………………………………………………………… 142 21.1 The Current Law (Problem) ………………………………………………………………………………………… 142 21.2 Proposed Law (Solution) …………………………………………………………………………………………….. 143 22 REFORMING THE JUDICIARY …………………………………………………………………………………………….. 143 22.1 Integrity of District Court Committal Proceedings ………………………………………………………. 143 22.1.1 Current Practice (Problem) 143 Justice Cannings echoed the same sentiments in Abel v Hargy Oil Palms Ltd [2006] PGNC 179; N4150 (8 June 2006) where he said. 145 22.1.2 Recommendation ………………………………………………………………………………………………………………. 145 22.2 Giving Priority to Corruption related cases …………………………………………………………………… 146 22.3 Courts Interference into Authorities vested with Investigatory Powers ………………………….. 146 22.3.1 Current Situation ……………………………………………………………………………………………………………….. 146 22.3.2 Recommendation ………………………………………………………………………………………………………………. 147 23 ENACTMENT OF PUBLIC CONTRACTS ACT …………………………………………………………………… 147 23.1 State Contracts ……………………………………………………………………………………………………………. 147 23.2 Proposal …………………………………………………………………………………………………………………….. 148 23.3 Standard Terms and Conditions in State Contracts ……………………………………………………….. 148 2)Project Implementation Schedules ………………………………………………………………………………………………. 149 3)Prohibition Clauses …………………………………………………………………………………………………………………….. 149 4)Voidable Clauses ………………………………………………………………………………………………………………………… 150 5)Maintenance of Records ……………………………………………………………………………………………………………… 150 23.4 Establishment of an Ad Hoc Project Implementation Committee …………………………………. 151 23.4.1 Current Problem ……………………………………………………………………………………………………… 151 23.4.2 I mportance of Monitoring Contract Performance ………………………………………………………………… 151 23.4.3 Is there a Monitoring Committee in place? ………………………………………………………………………….. 152 23.4.4 Proposed Solution ………………………………………………………………………………………………………………. 152 24 ESTABLISHMENT OF AN ANTI-CORRUPTION INSTITUTION ………………………………….. 153

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• 24.1.1 Background ………………………………………………………………………………………………………………………. 153 24.1.2 PNG’s Existing Anti-Corruption Mechanisms …………………………………………………………………….. 154 24.1.3 The New Agency ……………………………………………………………………………………………………………….. 157 24.1.4 Proposed Structure …………………………………………………………………………………………………………….. 157 25 APPENDICES ……………………………………………………………………………………………………………………………. 158 25.1 References on Materials used in this Report …………………………………………………………………. 158 25.2 Financial Report of ITFS ……………………………………………………………………………………………. 158 25.3 Organizational Chart of ITFS ……………………………………………………………………………………… 158 25.4 National Gazettes ……………………………………………………………………………………………………….. 158 25.5 Criminal Prosecutions Status Report ……………………………………………………………………………. 158 . 25.6 Tax Recovery Status Report ………………………………………………………………………………………… 158 25.7 Summary of Legislative Changes Proposed ………………………………………………………………….. 158

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•  

  PART I —PRELIMINARY

  1 Abbreviations used in this report APC -Authority to Pre-Commit COC —Certificate of Compliance COI —Certificate of Inexpediency GSM —Central Supplies and Tenders Board DNPM —Department of National Planning and Monitoring DoF —Department of Finance DoT —Departillent of Treasury FF3 FF4 IPA —Investment Promotion Authority IRC —Internal Revenue Commission ITFS —Investigation Task-Force Sweep NACA —National Anti-Corruption Affiance . NADP —National Agriculture Development Program cc _ OC —Ombudsman Commission PFMA —Public Finances (Management) Act 1995 PIP -Public Investment Program PPP —Public Private Partnership PSTB —Provincial Supplies and Tenders Board SCITB –

  2 Glossary K2 Companies —

  3 Acknowledgement The Bank of Papua New Guinea is acknowledged in providing information and clarifying issues relating to the K125 on Kokopo Sovereign Community Infrastructure Treasury Bill (SCITB).

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• INTRODUCTION

  There were allegations of massive corruption at the Department of National Planning and Monitoring being raised in the media in early 2011. It was triggered by a dispute between the Minister for DNPM and the Secretary for DNPM During the period of dispute and media circus, both sides of the dispute raised serious allegations of corruption against each other. When the O’Neill/Namah Government came into power on August 2, 2011, ITFS was appointed to investigate the allegations 4.1 Executive Summary

  4.2 Terms of Reference

  The Terms of Reference of this investigation, inter alia, were: 1. Inquire into and ascertain: i. That Public funds (Development budget component) administered by the Department of National Planning & Monitoring of the 2009, 2010 & 2011 Budgets were appropriated in compliance with their respective Appropriation Acts. ii. That those who applied for and received the funds vier accordance with the Appropriation Act. iii That the project submissions were consistent with the Appropriation Act and passed the screening criteria used by DNPM without undue influence. iv. That the proponents of the project did not place themselves in a conflict of interest position. v. If those funds were diverted, who orchestrated the diversion and who benefited from such diversion. vi. If the Funds were paid outside of the Appropriation Act, who applied for and benefited from the funds, vii. Whether the funds were xxx used for the purpose to which it was applied and granted. viii. Whether certain laws including the Public Finance (Management) Act, Public Service (Management) Act and the Criminal Code Act etc were breached ix. Who orchestrated the breach of those laws x. Whether the person(s) implicated were public servants, whether their conduct also amounted to conflict of interests, 2. Prosecute the persons criminally implicated during the inquiry under the laws of Papua New Guinea including but not limited to the Criminal Code Act and Proceeds of Crimes Act 2005

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• Er:AL REPORT – 3. Take all steps under the Proceeds of Crimes Act 2005 and the Mutual Assistance in Criminal Matters Act 2005 to recoup all proceeds of all funds found to have been diverted and misappropriated, such proceeds as are defined by Section 10 of the Proceeds of Crime Act.

  4. Refer the person(s) to the Ombudsman Commission if he/she is a leader covered by the Leadership Code.

  5. Recommend for immediate termination of employment he or she is a public servant who is implicated in the investigations.

  6. Furnish to the NEC within 3 months from the date of commencement, a report on the investigations conducted, persons implicated, prosecutions done, funds recouped, referrals made to the Ombudsman Commission and further actions to be taken

  7. Recommend to the NEC through the Minister for Panning and Attorney General, possible legislative changes to patch up loopholes discovered during the investigation.

  The NEC, in its Decision No. NG10/2012 extended the terms reference to cover all other cases referred to ITFS.

  4.3 Scope of Investigations The scope of the investigations as per 1 EC Decision No. NG ,O 3/2011 cover allegations of corruption in the DNPM -ertend s-t other departments and State , envies insofar as development budgets of 2009, 2010 and 2011/was-appropriat4p ,,-L ..-i others, the controversial K125 Million Sovereign Community _t.,1 e-,,t4.4-( 0.. g’71nd ., among Infrastructure Treasury Bills for Kokopo Community Projects and the KlOmillion that was paid to Travel Air Limited owned by Kokopo Businessman, Eremas Wartoto.

  On le September 2011, the NEC, through its Decision No: NG 25/2011, included the National Department of Health to be investigated by ITFS. Further, on 27 th January 2012, the NEC, through its Decision No: NG 10/2012, extended the teens of reference of ITFS to include any cases that the Government and/or any cases the general public lodge with the ITFS from time to time.

  With the combined powers of each agencies co-opted to ITFS, ITFS was able to extend its investigations into wide range of areas including financial fraud, administrative malpractices, recoverability of tax dues and proceeds of climes and leadership code breaches arn_o_iag_othets-7-

  4.4 The Team Structure

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• FINAL REPORT –

  • The Committee as per Annexure “A” of NEC Decision No: NG 03/2011 is J comprised of: Chairman, Mr Sam Koim, a Principal Legal Officer at the Office of the Solicitor General, Department of Justice & Attorney General 1.1 Superintendent Sylvester Kalaut, PPC of East New Britain as Deputy •k) Chairman a Chief Inspector Timothy Gitua, Director of Frauds & And Corruption Squad

  < together with 6 Investigators, 1 Forensic Expert, 1 Police Prosecutor, 2 Financial Intelligence Unit officers and 6 Mobile Squads. Y A Lawyer with the POCA Division at the Office of the Public Prosecutor 74 , An Officer with Department of Treasury r,) o An Accountant from the Auditor General’s Office v.., 4. An Officer with the Tax Compliance Division of the Internal Revenue Commission. 0 An auditor with Department of Provincial Affairs

  The structure of ITFS was adopted from National Anti-Corruption Alliance (NACA) ) however certain members of NACA were not included in that Decision. Those members were coopted to ITFS including Ombudsman Commission and Department of Personal Management. The ToR does captures these two agencies’ involvement .$) however faqe short of listing them on Annexure “A”. “) the Papua New Guinea and Australian Law and Justice Partnership Program (PALJP) was gracious enough to second Mr John ToGuata to the Team to assist the team as a technical advisor, a role he plays with NACA. cc Ct teL 4 ‘4 4 • ck_t. p T-FC The constitutionality and/or legality of bringing the different State agencies together r through ITFS by NEC as tested in three different National Court proceedings. Two those proceedings Tutted in,a deaswieortin our favour whilst one of them is still pending decision. Team- structure Pias therefore fortified by two National Court Decisions ) namely, Tiensten v Koim [2011] PGNC 127: N4420 (14 October 2011) and Golu v National Executive Council [2011] PGNC 134: N4425 (21 October 2011). .e.yo C.I; v-11 3 ectd- The organizatic l. at Appendix A shows the sttucture of the ITFS.

  4.5 Investigations Methodology c’L •

  },_. The operation of the Task Force Svieep fundamen is one where all the agencies come together and share r sour5es t, ,anainforrnaticin. ,.,40K . There are operational links between the age esigtei – infor tion collated, assessed and then we- Iv discuss. as a team ow leads are to be followed. This is essentially where each agency uses its constituti tin powers and clout to follow cases.

  re v ;.

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• yL. REPD[ITT „ ,pli Li ‘1–;:-V jo e. g7-” I %ay-for-instance if tkt.. is a disciplinary matter, then the relevant body is the Department – of Personnel Management. If it is a leadership case, then it becomes a ase for the, Ombudsman Commission. If it is a ‘K2 company’ purposely created vernight / 6′) benefit from certain allocated sums of money, then it becomes an issue f r the I C to OZ-vit thAdlt . follow-up. If it is a criminal matter, then the police fraud squad is equi ped fr that.-Frr t t-cco I ct,44 . . .c,-TI -4,,, L/ ww-i ii- Police use their normal lawful process of collecting evidence and arres g using their ‘t t 4,44.A Nei/1.i- , powers The Task Force Sweep therefore is exactly what the name Gays ; we-‘sweep’,$/. t.,,Jk. t .„, . -elq.- it/ – , .,5 4. ,,..4 – Ireitie LA C1.4…j- 0 viAluch-is-similarisLasiragnet. t -5 1 _ + ,, Are 4,U. all 44 4-6… t i,i 4441 e 4- 1 AA C al-49-4 4 C-iPc .44 4 6’i’2 -G 12.-e. , ‘ ..t.h- i- c 5 -i- -A0 e- °E ‘” i 1- ,c…, t „ ,– – — . – r4- 4 ,

  q 4,,,,,t, There is no overlappirpw4isscrossing of anotheN ncy’s constitutional loGuudalie-s. k 61, ,,A..1A-‘, ) -L-1,Let All the team membersToiro is sharing 9f information and collaborating their efforts in taking a thorough action to combat corruption.

  PART H —LEGAL PROCESSES AND ESTABLISHMENT

  5 Established State,Frocurement Process L-0-‘14’ 5.1 ‘ticagetary ‘ Zess and Appropriations

  CE -1 64/the raising and expenditure of finance by the National Government is subject to a •• thotization d control by the National Parliament and is regulated by an Act of f.)( ° Pa;lirent ma-terfrts-ef . Section 209 of the Constitution. That-Autisl -he Public Finance (Management) Act, 1995 vzhich was enacted for the purposes of managing public funds 1 Public money is defined by PFMA includes all revenue and loans, trust and other moneys raised or received, and all bonds, debentures and other securities received, by any person on behalf of the State’; or by an officer in his capacity as such on behalf of any other person. 3

  PFMA is defined under section 2 of the Act itself. Pursuant to section 2, PFMA includes the Regulations, Rules and Financial Instructions. The Regulations, Rules and Financial Instructions are not subordinate to PFMA itself but forms’ part of PFMA. The Court per Davani J in Robmost Ltd State [2008] N3372 affirm s position when she held that PFMA also includes Financial Instructions.

  Pursuant to Section 210 of Constitution, the Executive Government takes the initiative in formulating the National Budget. There are two components of the

  1 Preambles of the Public Finance Management Act 1995 2 1n line with judicial interpretations and, as encompassed in the PFMA, the State herein also includes Provincial Governments and Local Level Governments, See, SCA No.1 of 1998 [2001] PGSC 8; SC 672 (8 November 2001), a decision by five member supreme Court. 3 Section 2 of the PFMA

  27 April 2012 Page 10 Fir5t PrAft lavestigatka Tas!i-Fone 37nee9 MelooTi to DcevalAve T’.cuncH ai als Thr2Ings, lart32eznazazons, s72.0 Fulrlhe:r Recommendallens.

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• p

  EINAL REPDET . budget, namely recurrent and development. Budget Process on Development Budget takes the following pha&e,s_i_:=4, 3, – ;r 7 o All development proposals by line agencies, provinces, Statutory Bodies and private sector agencies are documented in the Project Fohnulation Document and submitted to the Secretary 9f–11011•1′ M and a copy sent to Development Planning and Programming Division(PI3 P1 )) Notegl5that the development initiatives of the Government are driven b4vernraent through submitting the respective policies. t■ A private company cannot use the government’s budget process to benefit itself.

  o Proposals that meet all requirements are submitted to the Departmental Technical Screening Committee (PIP) for deliberation and selection. The Committee further provides technical appraisal and consolidates the proposals.

  ‘ After clearing from the Technical Screening Committee, the proposals will proceed to the Department of National Planning & Monitoring Budget Management Committee for final screening and approval. The Committee after deliberations approves new list of development projects and existing ones for inclusion in the Budget and forwarded to Budget Steering Committee.

  © The Budget Screening Committee co-chaired by Deputy Secretary for Treasury and National Planning (PIP) after consultations with national agencies, statutory bodies and relevant provincial governments, the list is finalized by Treasury and Planning and together witk.tecommendations presents to the Central Agencies Coordinating Committee (CACC). • flV a The Central Agencies Coordinating Committee ( CO) made up of the Secretaries of the Central Agencies Treasury, Finance, DPM, M a NEC, Attorney General and Provincial Affairs, This committee then further deliberated and justified as to why these development projects need funding. With the reco endations, Treasury & Planning Departments prepare the • f projects for CC to be presented to Ministerial Economic Committee

  e The MEC finally makes recommendations either to cut or increase for particular projects. At this stage, certain projects that are not on the list of projects that ULA initially A.vG.e. recommended for funding at the Planning and Screening process are included at th , requtesof the Ministers and such request is taken note of and e -ffc-u t- e –, e the request by ylarining & Treasury. /V G The National Executive Council (NEC) deliberates on the recommendations by &IEC. Again, new projects are also recommended for inclusion. The NEC will be mindful of the government’s commitments and would want to ensure all are reflected. After the NEC process, the Development Budget is now finalized to be tabled at the floor of P arliament, with the endorsement of the I lead of State, who acts with and in accordance with the advice of NEC.

  27 April 2012 Page 11 irtPrAfrt lavesVmattlon 1as21-Fone Smola Tizta:1 3o9ori go the ZalAorill DSCCTith72 ,CO438IC11.1 oii hs Thltdins, brapRemogesagions, Tzgylhel Reco ma. enola;iAons.

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• FINAL PAEPOEMT

  e Parliament approves the Budget through an Appropriation Bill, thus makes the policies legal for funding. The Appropriation Act provides for expenditure to be incurred during the year for the purposes and services set out in a Schedule to the Appropriation Bill.

  ® After Parliament approves the expenditure of ublic funds and money is available, Department of Finance and Treasury en r leases warrants to implementing agencies, be it a government department, LLG, rovincial Government, etc. 11 • When money is transferred to implementing agencies, it is not up for grabs or to be paid to private contractors at the will of that implementing agency. The expenditure of that money is again sub ect to the PFMA, hence the obligations for tender apply. &L , Section 211 of Constitution es it illegal for any expenditure of public funds that is not authorised by Parliame t through the Appropriation Act. All expenditures of public funds within a fiscal y must be in accordance with the law, be it ‘ rcilistitution, PFMA, Appropriation Act The expenditure, whether development or recurrent, must be in accordance with thee relevant relevantlaws.

  5.2 The Law Governing State Tenders and Contracts 6 4 • – QA IN & b v‘itA 4. .N Q-:(/’ to vo V 7 LiA P’ ’11 . ‘ VN

  The Constituti n, s. 247(1), provides that the Governme4, lan , the capacity to make contracts. Som enabling legislations empower respectiveRgencies to make contracts whilst others ciatt. Unless specifically provided in any other law to the contrary, the mandatory requirements of the PFMA in terms of the expenditure of public funds cannot be replaced or ignored. / Part VII of the PFMA ….._th (sections 38 A — 47D) provides for public contracts. Public ,– . contracts can be si ded into two categories, Minor and mj or contracts. Minor contracts cgae contracts valued up to IC100 000 but any value beyond that is defined as major contracts. Major contracts are executed through a public tender and minor contracts are executed through quotations. 4 Mi / The Central Supply and Tenders Board (c.S”,__B -f ) is established under section 39 (1) of PFMA. The composition and appointment of CSTB is provided for under subsection , , 3, 4, 5 & 6. As the name suggest, CSTB is the public body that amongst ethers, tl -P ) .L-. ””’ tenders and executes public contracts on behalf of the government. Its primacy role is to control and regulate all purchase and disposal of property and stores and the supply of works and services unless it falls within the Specialized Supply and Tenders Boards established under section 39A of PFMA such as the Pharmaceutical Supply and Tenders Board and Gazelle Restoration Authority Supply and Tenders Board. Section 39B of the PFMA establishes a Provincial Supplies and Tenders Board (PSTB) and

  ‘See Part 12 Division 2 Clause 8.

  27 April 2012 Page 12 . , 7int Hzavesflgaflon TIsl?t-rone Sweelp 3r2 the. Nalienal Iltec7.2qive Conaci2 oil. -As hygilemeagalions, and ITturthey Ttlecommemiatloas.

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• FMAIL REPORif gives a Leiling of K3,000,000 as the maximum amount that it can tender.

  CSTB is generally the legitimate authority to control and regulate all public contracts. The control and regulatory jurisdiction of CSTB is extended to minor procurements, major procurements and Provincial Supply and Tenders Board (PSTB)’.

  The requirement fof,public /ender is compulsory except as provided by Section 40(3) of the PFMA whichi-erx,septi r vP tr ” – • t (a) if that project to be undertaken or purchased by a public body, authority or institution; a Provincial Government; Local Level Government or an approved overseas agency; or (b) If Certificate of Inexpediency is necessary; or (c) If Minister for Finance approves it to be exempted, but the amount should not exceed a limit of K500, 000 and also it must relate to a natural disaster related cause; or (d) where the terms of an agreement concluded, or proposed to be concluded, with any international organization under which the State is to receive moneys, make specific provision for the manner in which tenders will be invited for contracts to be performed in relation to the agreement.

  1. The value based tender process goes as follows: (e) less than K5000- Verbal quotation is required (f) K5000 to K100 000 — written quotation is required. (g) Section 32 officer, amount up to K300,000. (h) K300,000 to 1(3,000,000 —PSTB and/or CS 1 ’13 pursuant to s 39B(1)(b) of PFMA (i) CSTB — amounts up to K10 million pursuant to s 39(2)(b) of PFMA (j) Any Amount beyond K1Omillion goes to NEC.

  5.2.1 Issuance of Certificate of Inexpediency (COI)

  As stated hereinabove, a COI is one of the exceptions to the compulsory requirement for public tender. Section 40 (3) (b) of the PFMA states that tenders shall not be publicly invited and contracts met if a board certifies that the inviting of tenders is impracticable or inexpedient. That is when certificate of Inexpediency is issued. Division 4 of Part 13 of the Financial Instructions states what a Certificate of Inexpediency is and ,when it can be issued. The Court in Robmos o State [supra] extensively elaborateci,this provision. In light of the provisions in the PFMA including the Financial Instructions and the Court decision following could be noted;

  5 See Part 15 Division 1, Clause 4 of Financial Instructions

  27 April 2012 Page 13 First Prol,ft hivestigailon Tash-Torce Sweep Final nericzt lo the IlTational Executive of its Findings, ;inap3enienlations, and Fuzfctert gleconmendallions.

• Page 15 of 159

• EHALL REPOR7 1) The CSTB must ensure that there is a valid approved APC 6 for the procurement before approving a Certificate of Inexpediency.

  2) That certificate “‘mut cearly identify” the requirement set out in Div. 4 Clause 12 of the Financial Instructions, namely;

  Supplier, and Department / agency requesting the certificate, and Name and signature of the Departmental/agency head requesting the certificate, and Goods, works or services being procured, and Value of the procurement, and Name and signature of the Chairman of the Supply and Tenders Board issuing the certificate Reason for the certificate to be issued, and Date on which the Certificate is awarded, and Name of those Board members issuing the Certificate, and

  3) Certificate of Inexpediency cannot and should not be issued, to retrospectively cover a contract already executed.

  4) Certificate of expediency is only necessary where a declared Natural Disaster, or. Defence Emergency, or Health Emergency, or Situation of Civil Unrest exists, and procurement processes must be undertaken urgently, to remedy the situation.

  In the absence of any of the four situations enumerated and (4), the Certificate of Inexpediency issued or intended to be issued is invalid and enforceable. A COI should not be used because there is one suitable supplier or because the implementing agency/Department has “run out of time” to conduct a proper tendering process.

  5.2.2 The use of Authority to Pre Commit Expenditures Op c ) Section 47B of the PF1VIA provides thegookigns for the use of APC. The co biped reading of Part VII under which this .e is accommodated and . t provision itselfi zImp that APCs can be issued, in a case involving contract exceeding K100,000,ggua4ntee that funds for that particular project is available to be released in due course. It gives the assurance to the private contractor that the State will honour its side of the deal. Hence the APC cannot replace the mandatory .

  .) requirements of tender etc provided under that Part of the PFIVIA. It must also be noted that APCs are requested by the head of the implementing agency but is issued by the Secretary for Finance matters. Note also that section 47C makes it illegal for any supply of goods and services without an APC on credit basis , hence deemed null

  6 Authority to Pre Commit is only issued by the Secretary for Finance and no other persons pursuant to section 47B of PFMA.

  27 April 2012 Page 14 Tir5t Pr linvestigation TasR-Tioyce Swee73 , Find Ele3loyl to the National nocutive Council is “A’Andings, linghntonta.tions, and ITuLlinerz . 12000,Tiantenclations.

• Page 16 of 159

• FINAL F-13. EPORIT and void. Section 47D even bars any claim against the State for supplying goods and services without a prior APC.

  Execution of State Contracts as stipulated under section 47 of the PFMA must be distinguished from awarding of a State contract. Different authorities or persons may exercise the two distinct functions as empowered by the PFMA

  5.2.3 Rational behind Public Tender Process

  The rationale behind public tender is to prevent fraud, waste, corruption or local protectionism; hence the 4rovernment regulates the procurement process. The size and volume of government procurement does, however, give rise to considerable potential for corruption. Both contractors and public officials may resort to corrupt practices, and this may be for personal or political reasons. Whatever the underlying reasons, corruption undermines the attainment of ue for money in government contracting, I the fair treatment of contractors and thrush of procurement as a policy tool.„ c. p„,5 4 The bidding process must therefore be Ipen to public scrutiny and •osen on the basis of price and quality.

  5.3 Established position by the Courts on illegal contracts and their enforj ments isey. •

  The Government’s gFocurement process is defined by law and fist al:41444d by various –

  Court decisions. AbarieuYt ,of National and Supreme Court decisions have made the law trite that a party that contracts with the State is deemedCArwc., to know 4 , u2.-■- 7r ,the legal , . –

  processes stipulated under the relevant laws iicluding the PFMA,and any contract that is executed and performed na iga “r the law is illegal and unenforceable: Panga “exavattr –

  Coffee Factory PO Ltd v. Coffee Industry Corporation Limited (Unreported but numbered judgement delivered on 6 October, 1 999) SC61 9, Fly River Provincial Government v Pioneer Health Services Ltd [2003] PGSC 4; SC705 (24 March 2003, Jack Livinai Patterson a National Capital District Commission (unreported judgement delivered 05/10/01) N2145

  6 DEPA ► .TMENT OF NATIONAL PLANNING AND MONITORING 6.1 Establishment of DNPM

  The Department of National Planning and Monitoring (DNPM) does not have an f Enabling Act of Parliament for its establishment. It is understood that there is a diat-1— National Planning and Monitoring Act being drafted which is yet to be passed by Parliament. Its establishment is by way of Ministerial Determination.

  The DNPM used to be part of the Department of Finance and called Department of Finance & Planning. The separation of National Planning from Finance occurred in 1995. By National Gazette No. G72 dated 3t d August 1995, the National Planning

  27 April 2012 Page 3 it Prf.ft iinves1Agalin l’Es2c-Fogcs swee-9 Ilnaa to 1:itialVaflonal DizecutAve Cazencil oc tis Findings, ilmpleysaeatadons, ead niairlheE Reconarme:Tarlie.Eioas.

• Page 17 of 159

• EMU_ REPOR7 functions wei .e separated from Finance and were vested in the Department of Prime Minister and National Executive Council.

  Almost a month later, a separate ministry called National Planning was established by way of National Gazette No. G89 dated 28 th September 1995. The Minister, Moi Avei (now Sir) was delegated the National Planning functions of the Prime Minister to take charge. A department was yet to be established at that time.

  6.2 Core Functions of DNPM

  The Department of National Planning and Implementation was established in 1997 by National Gazette No G65 dated Tuesday 26 th August 1997. Schedule 2 of that National Gazette outlines the determination of functions of the Department of National Planning and Implementation. The functions are: 1. Monitor and report on implementation of National Executive Council Decisions. 2. Co-ordinate and provide advice to Government on medium and long term development strategies and priorities 3. Provide effective co-ordination and advice for development and improvement plans at the National, Provincial and Local Level of planning in the allocation of resources. 4. Provide advice for the formulation of macro-economic policies in consultation with the Department of Finance and Bank of Papua New Guinea. 5. Provide advice and direction to all Departments and agencies as provided under its enabling legislation on any specific planning aspect of Government operation. 6. Co-ordinate the International organisations in the provision of grants, concessional and/or technical assistance and aid to the country.

  The Investigation Team had not sighted any other Instrument or law replacing the National Gazette No G65 dated Tuesday 26 th August 1997 which initially established the Department of National Planning and Monitoring. In the ab,nce of such t it/ the most likely conclusion is that the core functions of DNPIVI’,’A ipe’r that- ga:zettal remains.

  The DNPM in consultation with DoF is responsible for the compilation of the national budget and for carrying out periodical review of budgetary performance and appraisal of projects. The appraisal of projects in this case is the appraisal of project proposals by State agencies to be included in the budget formulation. It is the role of the Departments of Finance and Planning to appraise the project initiative of the respective agency in line with the overall long/short term Plans of the Government and include them in the Budget for funding. The program budget involves an analytical approach in the allocation of budgetary funds to specific operations, which are identified in the light of sectoral policies to meet national objectives. It also entails establishing suitable indicators for measuring performance of government operations.

  DNPM’s primary role and function as a mandate:l aCintral agency of the Government t of Papua New Guinea (GoPNG) is for the form -uldtion of national development plans

  27 April 2012 Page Ti’ot PrAft 11 -sives’ai0anora Tasir-Fone Stve.ey lo DcecutIve o .,r FiraclAngs, lIsnalemeateldons, and narrlEla ZecommenelatIons.

• Page 18 of 159

• TPA_ REPDPITI and strategies, development programming and budgeting, monitoring and evaluation, donor coordination and mobilization, and giving assistance to provincial and district administration in planning and formulation of their own development plans. DNPM’s responsibility as a central agency is not to involve itself with the actual implementation of the project. Its role is to coordinate the overall plans of the Government, ensure that funds are committed according to those plans, and monitor the implantation of those plans with the support of funding, by each agency.

  6.3 Project Appraisal Guidelines

  The only lawful appraisal of project proposals comes before the budgetary process and it is an integral part of the budget process. The project appraisal process takes place during the budget formulation period where agencies submit their respective project proposals for inclusion in the Budget for the following year. DNPM in consultation with DoF, consider the viability of the project such as impact projects for funding under the Public Investment Program (PIP). If satisfied, that project proposal is appraised to go through the budget process.

  6.3.1 The PIP Guidelines

  The PIP Guidelines outlined the PIP process. It details a step-by-step process for the implementation of PIP from the formulation, submission, and appraisal of proposals, to the composition kf management committee, disbursement procedures, monitoring and evaluation, and reporting procedures. It was envisaged as the planning and budgeting tools that would help guide the design of investment projects and preparation of annual development budget.

  Sub-Section 2.1.1 of the Guidelines stipulates sthe purpose of DNPM being the agency charged with administering PIP of the government, as follows: • Provide a coherent strategy and policy planning process for effective, sustained and equitable national development, ensuring the involvement of all key stakeholders; • Coordinate the public investment program in line with approved strategic directions, mobilizing funding as required; and o Support and monitor implementation of the public investment program. 0 . 1. .) Section 2.2.1 shew’ed the structure of DNPM, to-qt,tete.: “The Public Investment Programme is managed by the PIP Wing of DNPM, headed by the Deputy Secretary. The PIP Wing of DNPM is divided into two major divisions comprising the Development Planning and Programming Division (DPPD) headed by a First Assistant Secretary and a Development Monitoring and Evaluation Division (DMED) also headed by a First Assistant Secretary. The DPPD is responsible for coordination and processing all proposals for funding under the PIP including registration, appraisal and screening. After funding is approved by

  27 April 2012 Page Fir5t Pratt TinvesticrErIlem Tasilt-To3ce Zwee? :71e7ort to t’ ViationalOncentive [(,aiLrincr.111. ,01 45 7. -nElLags, 712Td @^ l aaas an 72.171hez Llecommenc2e2ileins.

• Page 19 of 159

• HINAL REPORT Parliament, the DIvIFD takes over and is responsible for monitoring and reporting on all ongoing projects”.

  6.3.2 The Development Projects Documentation Guidelines

  On the other hand, Development Project Documentation Guidelines was intended to assist planners and development workers access project funding on behalf of communities including districts through proper documented projects. It detailed the development project documentation requirements, namely: the Project Identification Document (PID) and Project Formulation Document (PFD). These documentations were to be used for the identification and formulation of all projects at every level of government and for both GoPNG and donor-funded projects.

  Section 2.0 (Project Endorsement) of the Guidelines required all proposals to be screened, endorsed, and prioritized by the relevant committees, named as follows: o The Joint District Planning and Budgeting Priorities Committee (JDPBPC); O Project Screening Committees within Line Agencies and Statutory Bodies ( if such committee do not exist, endorsement must be provided from the highest level within the agency); e The Working Groups of Sector Coordinating Mechanisms where these mechanisms exist. Section 3.0 listed the organizations eligible to submit proposals for development funding from the GoPNG Public Investment Programme, as follows: • Government Line Agencies; O Provincial Administrations; o District Administrations; o Local-level Government Administration; and o Statutory Bodies and Public Institutions.

  It further reiterated that private individuals and companies were ineligible to apply directly for development funding from the GoPNG’s Public Investment Programme.

  Furthermore, Section 5.0 (Appraisal Criteria) required that: “Projects will be accessed in terms of their anticipated social and economic benefits, cost effectiveness and the capacity of the applicant(s) to carry out the intended tasks on time and within budget. Therefore proponents need to provide sufficient information in the Project Formulation Document to enable the appraising organization and DNPM to assess the proposal….”

  6.4 DNIFM’s Capacity

  Consistent with its primary functions, DNPM operates out of the Vulupindi House in Waigani, National Capital District as its Headquarters. It has Six (6) divisions headed

  27 April 2012 Page 18 Tir5t Prof: , :inves’AgEfilait TE.:s2t T ,DEce SweeTg Final Reloyl lo 1 le NaVtonal EaaclAlve –

  . i3ounel of Tinchngs, Ini. ,,pReanenfaf:Ivms, and. 71.qa -lhe3 Decorenendal:ons.

• Page 20 of 159

• RINAL REP/0E7 by First Assistant Secretaries. Each division have four branches headed by Assistant Secretaries. DNPM has three other regional offices outside of Port Moresby with the staff strength of five (5) each. Of those five, one of them is always a person with Project Management background whilst the others are ancillary staff.

  PART 11! —IFIINDENGS

  PART II11.1 -General Findings Incidences of institutionalised and syndicated corruption had been uncovered where private companies through partnerships with public officials and politicians have infiltrated the Government budgetary processes under the guise of development projects. Funds have been earmarked for project programs for the public at large as it seems but only selected companies appear to be the sole beneficiaries.

  DNPM digressed from its principle function and turned into a cash cow, usurping the powers of DoF, DoT and CSTB without any legislative backing. DNPM institutionalised illegality and corruption by usurping powers that were vested in other authorities such as public tenders board, even to the extent of gazetting those powers in the National Gazette.

  DNPM became a cash cow by dishing out project funds to certain selected private companies at will, most of which were ghost companies that did not have the capacity to deliver.

  Projects were awarded to selective private companies under a thick veil of secrecy witIVa-1..t any public tender. On other occasions, COIs were systematically cleared by the State Solicitor and granted by CSTB on projects that clearly did not qualify for the issuance of a COI but fox collusion and corruption. • 1,

  PART HL2 -Detailed Findings

  7 DNPM’s Deviation from Primary Role 7.1.1 Mischievous Gazettal of Ministerial Functions

  The powers and functions of the Minister who was responsible for the Department of National Planning and Implementation in successive National Gazettes after 26 th August 1997 reflected the primary functions of the Department itself as stipulated in National Gazette No G65 of 1997. Soon after the 2007 National General Elections, Hon Paul Tiensten was appointed the Minister for National Planning and Rural Development. As is ev-ide-ncediby the National Gazette No. G145 of 2007 dated 13 th September 2007, the powers and functions that Mr Tiensten . had as a Minister were

  27 April 2012 Page 19 ir5t PrAli,’ havesii.gaiion TasZt-Tolece Swell) ;anal Repogil to the Natiosaaa 1Z:coo/Vivo !Council of iS5 rhaelhIgis, eziul Tnyll’aeY Deconmenell.allions.

• Page 21 of 159

• FINAL REPOET those that reflectcd_,the primary role of the department. The functions as stipulated in Schedule 5 of tia.t` National Gazette are: All the matters related to the functions of:- (a) Department of National Planning and Monitoring; and (b) Department of Finance and Treasury insofar as relating to- i. International Development Assistance, National, Regional and Provincial Social and Economic Planning and Management; and ii. Department and Regional Audits; and (c) National Statistical Service; and (d) Central Agencies Coordinating Committee insofar as relating to reforms processes and implementation; and (e) Office of Rural Development; and (f) Bilateral and Multilateral negotiations with donor partners except those relating to International Financial Institutions; and (g) International Development Assistance; and (h) Gazelle Restoration Authority. Statutory Responsibilities are: Statistical Services Act (Chapter 386) Gaelle Restoration Authority Act 1995 Mineral Resources Development Company POI Ltd (Privatisation) Act 1996

  In 2011, by National Gazette No. G57 dated 3r j March 2011, interestingly, the scope of the functions of the Minister for National Planning and Rural Development were widened. The functions as stipulated in Schedule 4 of that National Gazette are: All the matters related to the functions of:- (a) Department of National Planning and Rural Development; and (b) Department of Finance and Treasury insofar as or relating to- i. International Development Assistance, National, Regional and Provincial Social and Economic Planning and Management; and ii. Department and Regional Audits; and iii. All financial matters; and (c) National Statistical Service; and (d) Central Agencies Coordinating Committee insofar as relating to reforms processes and implementation; and (e) Office of Rural Development; and (f) Bilateral and Multilateral negotiations with donor partners except those relating to International Financial Institutions; and (g) Only insofar as the powers and functions relate to Supply and Tenders Board under Public Finance (Management) Act 1995; and (h) International Development Assistance; and (i) Gazelle Restoration Authority. Statutory Responsibilities ate: Getelle Restoration Authority Act 1995 Mineral Resources Development Company Pty Ltd (Privatisation) Act 1996 Public Finance (Management)Act 1995, insofar as it relates to matters —

  27 April 2012 ?aka 20 Tint Prrft InveslIgallon Tas-rone Sween 1 t a.1 12e3381 lhe 11%0031E1 Etecullive – Ctuac:11 o a1s :TADARrags, Ilarraz.32e:nezo::ahlons, an 11 71221″2.e:e RattvirsneTrOatIons.

• Page 22 of 159

• EINAL HERDLET (a) Relating to approval of requisition, under section 32 for expenditure ( )f true monies or funds for health and education; and (b) International Development Assistance and DSIP funds. Statistical Services Act (Chapter 386)

  The notable provisions that increased the powers of the Minister for Planning and Rural Development as per National Gazette No. G57 of 2011 are highlighted with underline emphakse,—- e”- 1–f%)

  In the subsequent Determination of Titles and Responsibilities of Ministers after the Change of Government on August 2, 2011, the powers relating to Supply and Tenders Board were omitted whilst the Section 32 requisition powers under the PFMA were retained with the Ministry of National Planning and Monitoring. That is reflected by National Gazettes No G234 dated Thursday 18 t h August 2011 and G374 dated Wednesday 14 th December 2011. The Ministry for National Planning and Rural Development was separated with National Planning and Monitoring to Hon Sam Basil whilst Implementation and Rural Development to Hon Moses Maladina. When that split occurred, both Minister Maladina and Minister Basil appear to have retained section 32 powers under the PFMA as per the National Gazette G374 of 2011.

  7.1.2 Observations on the Gazettal Notices conferring of powers to successive National Planning Ministers

  Why was Department of Finance and Treasury powers relating to all financial matters vested in the National Planning and Rural Development Minister by virtue of National Gazette No. G57 dated 3r d March 2011? What was the legal basis for conferral of powers of Finance and Treasury in all financial matters to the National Planning and Implementation Minister? Why duplicating the role of finance and treasury? Does the DNPM have the capacity to operate as a mini treasury or finance department? Was DNPM structured and equipped to operate finance and treasury functions and responsibilities?

  The Section 32 of the PFMA powers that were stated as part of the functions of the Minister for National Planning and Rural Development in National Gazette No G57 of 2011 must be verified against the provision of the .Act itself. Section 32 provides: 32 APPROVAL OF REQUISITIONS. (1) The Departmental Head of a Department may appoint officers to approve requisitions for the expenditure of money in the Department for which he is responsible in accordance with a warrant authority and may spec/ conditions for the exercise of that approval. (2) The Minister may appoint designated officers to approve variations to contracts as regards time, price or other conditions within such limits cis are Jpecified in the Financial Instructions. (3) An officer appointed under this section who wilfully refuses or neglects to comply with the provisions of this section is guilty of an offence under Section 112.

  27 April 2012 Page 21 FirY Prg/11- Halves .liganon Tas:r-Trny Swan Thria2 me .poLi 9a lhailla2iona21,’NeczYnve .:;ataaaciq ‘DI Us :717k1:1.n1s, 1:: ,L .,72 ,?..rne31’la .:ilons, and Flirael: DecanaTraandsnons.

• Page 23 of 159

• NAL HERDEU

  (4) appi .mental Head in relation to the Department of which he is Head may appoint Financial 1)elegates to approve expenditure in accordance with a Cash Fund Certificate.

  It is clear from the above provision that Section 32 power under the PFMA vested in the departmental head and not the political head. How then was section 32 power vested in the Minister by those Gazettal Notices?

  – Put the powers and functions relate to Supply and Tenders Board under the FF . :NIA, there is no provision that leaves a room for any other persons apart from those established by PFMA to exercise those powers. The PFMA gives powers to the Minister for Finance in regards to Supply and Tenders Board in certain circumstances, not Minister for Planning or any other Minister for that matter. evvett4-0 d.e19 S An amendment to the PFMA, if any, was not cited by the Investiga on Team. As it PCIA7t2.. ► ,, is, the,above is the correct position of law. On what legal basis . ere powers of the ublic /tender Board were conferred to the Minister for Pla • by that National : SP4i4fi L. azette? And what specific powers of the Supplies and Tend. Board uticier PFMA aufhten—/-i) 1),5-64‘as- conferred to the Minister for Planning? Vesting of pow in a ter without a,-__elf the legislative foundation and particularly where the law • d already/to usurp the powers of other authorities is illegal and suspicious. A 7.1.3 DNPM turned into a Cash Cow

  DNPM had deviated from its purpose of establishment into a mini-treasury and mini department of finance of its own, thereby duplicating the roles of Departments of Finance and Treasury. It assumed responsibilities that were beyond its purpose and capacity hence, created room for abuse and a culture for corruption. Most of the corruption was facilitated by the officers of DNPM itself.

  Through the investigations, it was discovered that from 2008, DNPM started to have interest in the development funds and opted to implement a number of development initiatives, as such kept a portion of the development budget. In 2009, DNPM decided to keep more of the Government initiatives including the RESI and NADP funds and disbursed on projects that it selected. That continued in 2010 with more development projects vested in DNPM through the annual budget.

  Project Proposals from private companies and individuals were received, appraised and payments made directly to the proponents by DNPIVI. The more payments were made ,,, the more it encouraged others to approach the department with project i propo sal s h1 ence a culture and practice was then established and entrenched. ,) In 2011, the then Acting Prime Minister, Honourable Sam Abal upon taking office as the Acting Prime Minister, deliberately or being misled by the Minister responsible for DNPM, or passively announced that 2011 would be a “Year of Implementation”. In keeping, with that, the DNPM was directed to front-load 90% of the Development Budget to be spent by June 2011. The Annual Development Budget

  27 April 2012 Page 22 PrAft 3:raresngarilen Tas2t-Forrce Sweet’) Irina2Repoini io Wegionai 1:ceculive Zinliags, haDlenaeTaallogas, and Farraere Decommemialions.

• Page 24 of 159

• FINAL EFAF_PORIT foi: 2011 vas K2.066 Billion and K1.9 Billion of that money was anticipated Lo be spent within the first half of the year. The DNPM anticipated to rollout the entire Development Budget by the end of July and to focus on monitoring and ensuring projects are implemented well in the later part of the year.

  Interesting in the year 2011, most of the development projects under the GoPNG Developrrknt budget were parked with the DNPM. Coincidently, the Minister now has absolute power by way of National Gazette No. G57 dated 3r d March 2011 to exercise the public tenders’ powers and section 32 powers. Alined with those powers and in the pretext of executing the Government’s “year of implementation” policy millions of kina were paid out directly to purported contractors without any public tender.

  Minister Tiensten misled the public to believe that the funds were sent to the Government’s sectoral implementing agencies when in fact most of those funds were retained by DNPM. Once such statement was reported in the Post Courier on . th 6 July 2011 where he said: “Under instructions of the acting Prime Minister, Sam Abal, 2011 has been designated the ‘Year of Implementation’. As a result, Treasury and National Planning have front-loaded 80 per cent of development expenditure based on the Appropriations Bill with cash flows going directly to the government’s sectorial implementing agencies.”

  Against the backdrop of financial mismanagement and no proper monitoring of development projects, the then Acting PM, deliberately or was misled, to make that announcement which opened the flood gates for looting of 90% of the Development funds within less than three months in 2011.

  It was discovered that between 2006 and 2011, the DNPM would have directly managed and implemented K3.6 billion worth of projects and programs out of a total development funding of K15 billion for that period. Of the K3.6billion, and based on our investigations with the 2009, 2010 and 2010 development budgets that DNPM administered, it is estimated that more than K1billion of those funds did not translate into tangible development projects to which Parliament had appropriated.

  7.1.4 Corruption and Malpractices

  7.1.4.1 DNPM perforrning CST ales

  The expenditure of public funds, whether recurrent or development, is regulated by law, in particular the PFMA. As soon as Parliament passes the budget, the public funds are not up for grabs or for any one department to spend it at will. Those funds are subject to the PFMA such as calling for public tender. The PIP Guidelines, as well as the Development Projects Documentation Guidelines do not make any provision for a private contractor to access funds directly under the PIP. If there is such provision, then it is inconsistent with the law and is illegal.

  27 April 2012 Page 23 )-=’ Pratt Inves2Aga’non TD.521-Force 37rJeep inziaR ne9o -A the 1∎1a4onal 1:;emtlIve , i1Dmac19. o311s TincliAgs, 1!:•119?:esirtemIalil ms, asul Tr’lrgae:z 7,1eDD:onzentleg10ms.

• Page 25 of 159

• FINAL REPORU

  It was discovered duriLlg our investigations that COIs were either issued on projects that did not qualify for such or were issued to retrospectively cover payments that were already paid.

  The then State Solicitor, Mr George Minjihau, who, by virtue of his position is a member of the CSTB. He is also required to do legal clearance for any issue of COI. It was discovered that he basically defends the decision of CSTB by tailoring legal clearance letters to sanction illegal decisions on issuance of COIs. His legal clearances on projects/contracts that did not qualify for COIs is illegal and highly improper.

  8.1 Some examples of Abuse of COI:

  Certificate of Inexpediency (COI) 001/09 Department of National Planning and Monitoring

  The COI was requested by Joseph Lelang Secretary of the Department of National Planning and Monitoring on . 1. 6 th January 2008 in a letter addressed to Bryan Kimmins for the construction of three (3) houses and a Police Post in Bewani and Amanab in West Sepik Province. Clearance was given by State Solicitor George A. Minjihau in a letter dated 23r d January 2009 to the Acting Board Secretary of CS 1’B. It was approved by the CSTB to the amount of K2 Million as stated in the letter to Joseph Lelang on the 21′ of January 2009.

  2. Certificate of Inexpediency (COI) 001/11 Depaxtuient of Finance

  Request was made by the Department of Finance Secretary Gabriel Yer in a letter dated 13 th of December 2010 for stationary and learning material for various schools in the Talasia District of the West New Britain Province. In a letter dated 26 th January, 2011 State Solicitor George A. Minjihau cleared the application of all legal obligations. Approval was given in a letter dated 05 th January 2011 to the Finance Secretary Gabriel Yer by CSTB Chairman Bryan Kimmins. The amount approved in the letter dated 05 th January 2011 from the Chairman of CSTB to Gabriel Yer Secretary of the Finance Department was Six Million Eight Hundred Thousand Kina (K 6,800,000.00).

  3. Certificate of Inexpedience ( OI) 004/09 Department of Police

  Police Commissioner Gari L. Bald applied for a COI for K20,000,000.00 rehabilitation of the Kerowagi Mobile Squad Barracks in Chimbu Province and the reestablishment of the Kavugara barracks in Kimbe West New Britain Province. The COI request was put through by Commissioner of Police Gari L. Baki on behalf of the Police Department in a letter dated 23r d January 2009 to Brain Kimmins. George A. Minjihau wrote to the Acting Secretary of the Central Supply and Tenders Board on March 09 th 2009 and gave clearance to the COI. Letter of approval was issued on the 04 th of February 2009, attention to Gari L. Bald and signed by the

  27 April 2012 Page 28 7ir-5t PrP,) havesligalion Uash-Fone StAreem Tina?. Livnorg kt. file Zalional E:cecufive Council of its Figaelings, Implentellmtaiions, end Faythey tecommenia2ions.

• Page 26 of 159

• ENA11.. RERDE7 There is no internal Tenders Board established at DNPM by the Minister for Finance pursuant to the PFMA. The Secretary for DNPM, just like all other departmental heads, can authorise commitment and payment of up to K300,000 as his limit.

  Against the standing PIP and Development Project Documentation guidelines restricting the eligibility of PIP project proposals to State agencies only, DNPM officers went out of their way to accept project proposals from private contractors, appraised them and made payments in millions of kina without any tender process.

  There appears to be some sort of appraisal criteria used to appraise the project proposals for the expenditure of public funds. Although the Investigation Team does not have the benefit of such a criteria, we find that purported project appraisal criteria were devised as a substitute for the legally established procurement process under the PFMA. In so doing, DNPM officials assumed the role of mandated authorities such as the CSTB. The actions of DNPM and its officials amount to legitimising illegality and creating a culture ‘of corruption.

  The former Minister for National Planning and Monitoring, Honourable Paul Tiensten, MP did not have the lawful authority to approve project funds yet he approved projects for funding. In doing so, he usurped the public tender powers. The practise went on for some time until it was institutionalised with the Gazettal of his powers in the National Gazette. In the absence of any lawful justification, we find that the Public Tender powers invested in the National Planning Minister by way of National Gazette No. G57 dated 3r d March 2011 was done to backflip and legitimise the illegal authority the Minister purportedly exercised over the years. It was also done to give him the basis to continue the trend.

  Billions of kina in development funds were disbursed on purported projects to certain private companies by incompetent officials who did not have the capacity to perform the role of CSTB. The awarding of the development contracts were single handed by certain officers of DNPM under a thick veil of secrecy hence defeated the role and purpose of public tender process envisaged under the PFMA.

  We find that there was no limit placed as to who should sign and commit on what amount. The PFMA places ceiling on the Departmental Heads, Finance Minister, PSTB, CSIB and NEC respectively. At DNPM, there appears to be no ceiling on who was going to sign on what amount to commit the funds. There was gross abuse of the process. Senior officials appear to have taken turn in approving projects and the signing of FF3 and FF4 documents.

  7.1.4.2 Lack of Capacity to implement Projects

  In an Interview with Dr Kora, the incumbent Secretary of DNPM, it was revealed that DNPM only have three (3) regional offices apart from the Head Office in

  27 April 2012 Page 24 Tics’ P-rAt “Invers -igation Tas1.7 ,xxs veal? Fina:1 3c]pyl le no 111aAemz7. Cou.:a;;A:l. of it .7110.-ags, Lf:a7.71ennaa’2Acns, as1617:3?.(ihe2 ar.3.COarrae.:252a210n5.

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• Waigani. In those, three, other. regional offices, they have less than 5 staff each. Among the five ,nlige r One Project manager and the rest are support staff. The Secretary indicated that he was going to decommission the regional offices and centralise operations from Waigani.

  The DNPM, consistent with its primary function, obviously does not have the capacity for implementation of individual projects on the ground level. DNPM does not have officers in each province or districts throughout the country. Even if DNPM had offices/officers throughout the country, it did not have specialised project managers to manage projects.

  We inquired why the funds for National Agriculture Development Program (NADP), REST, Rural Electrification, Strategic Market Development Program, just to name a few, were retained by DNPM? Did DNPM have the capacity to implement these projects? Or is it for the convenience of controlling the public purse? When these questions were posed to Dr Kora, he said “that was illegal” and that he was directing all these projects and the funds to be transferred to the respective implementing agencies. For instance, REST should be handled by Education Department; NADP should be implemented by Department of Agriculture and Livestock.

  7.1.4.3 DNPM’s Lack of Cpacity to Monitor Projects

  DNPM had a division for monitoring the projects but lacks capacity and most times is dysfunctional. As already highlighted, most of the impact projects that DNPM retained against the respective implementing agencies were funded directly from DNPM. As such, the qualified implementing agencies were not involved in the monitoring of the implementation of the projects. Since the payments were made out of DNPM without the knowledge of the supposedly implementing agencies, DNPM created an enormous responsibility in monitoring its implementation all around the country which it did not have the capacity to do so.

  There were some specialised projects that needed expertise to verify the designs and further monitor the implementation according to the specifications and designs. DNPM did not have those specialists yet it opted to administer the projects. For instance, DNPM did not have qualified electricians yet it retained the rural electrification project to itself as an implementing agency.

  Since DNPM did not have the capacity and did not bother to monitor the implementation of the projects, it opened the door for schemers and scammers to approach the DNPM with more and more ghost project proposals. DNPM therefore turned into a cash cow, dishing out cash without any responsibility,—;/,..– , 7 ( –“-1 4

  27 April 2012 Page 25 – Tir5t P r4fL 7 -swesqlgagion Tzs21-7oreca 1wee3 7 .2e130:: ghe PJaV.,3,-raa?, Corm-I.L.fl ol Ls Th26.11E35, ane. 1nyEae2 :Issama-tamlaCioz1s.

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• FiNAL REPCDOTEf As a result, much needed public funds were wasted and opened to abuse. The projects were either not implemented at all, incomplete or completed but with changed designs and specifications with the cheapest materials.

  7.1.4.4 Lack ofproper documentation and record keeping

  Millions of kina were paid out of DNPM and most of these payments were not supported by proper documentation. DNPM officials failed their duty to maintain proper records of the transactions involving public monies. In some instances, only FF3 and/or FF4 documents were found. In other instances, only the copy of the cheque was placed on the file.

  Since most of the allegations of corruption were raised against the officers of DNPM, it is believed that most of the crucial documents were conveniently disposed by persons with vested interest.

  7.1.4.5 Release ofpayments in full amounts

  For any Government Contracts, unless the nature of the contract allows otherwise and by agreement of both parties, works and supplies have always been done in phases. There is always a clause or schedule in every contract with the State to ensure that each project is implemented in phases. In order for the next phase of payment to be released, a phase completion report is issued by the implementing agency. The implementing agency automatically becomes the project manager if a specific project manager is not nominated.

  DNPM in this case had kept the development budget at its disposal and developed a trend of paying the full value of the contract/project in single cheque payments to private companies on purported contracts. There does not appear to be due diligence checks done on whether the private companies had the capacity to deliver the projects. In many cases, these companies are K2 companies that were just registered to cater for the funds from DNPM. When the monies were released to those companies, withdrawals were made in substantial amounts, and in some cases the funds were depleted and accounts closed.

  The payment of full value of the contract coupled with lack of monitoring mechanisms presented opportunistic contractors the perfect option to squander the funds.

  7.1.4.3 Conflicts of interest Situations

  The level of abuse at the DNPM was such that the development budget was at the disposal of the Minister and the officers. They diverted monies into companies that they themselves have direct interest. The officials appear to have used their knowledge to apply and their position to approve or influence the payments to their

  27 April 2012 Page 26 srt :Draft Lavesgtagion Tiasils-force Sweep InEgaR Zieporri 8© the Nag:log -gal Executive Council of Hs 173nd.In61’s, Implemegagagiagie, and nazaelg1.1e.comngenteggons.

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• [ii[EPOr..!7 companies. In other instances, they facilitated payments to certain front compan;.es and received their kickbacks— Lf ‘

  When conducting search at various houses of officers of DNPM, it was discovered that the officers of DNPM write up project proposals for front companies in accordance with their knowledge of the appraisal guidelines that they set at DNPM. It is believed that they then give the draft proposal to front companies to submit with a cover letter. Once it is submitted, the officers then appraise the proposal without any reservation as it is tailored to comply with every requirement of DNPM. An officer of DNPM having electronic copies of project proposals implies the level of insider trading orchestrated by public officials to syphon public funds, r-‘i’; 6’l)• ‘ 14 F

  It now makes sense as to how front companies whose principals have no knowledge and experience on certain specialised projects yet received funding on very colourful project proposals.

  7.1.4.7 Lath of Due Diligence 1–Tve> ITFS was not provided a copy of the project appraisal criteria that DNPM used to appraise projects from individuals and companies. What is howeverXDparent is that the officers at DNPM, being blurred by the corrupt and deceitful eyes, failed to even detect the most obvious defects in the project documentations submitted to DNPM. Elementary due diligence checks such as Investment Promotion Authority Certificate of Incorporation, Certificate of Compliance from IRC, specialised trade certificates, register of machinery and equipment, number of skilled employees, company’s track record, surety bonds on contracts requiring contractor to undertake payment in the event of contract not complied with etc, were ignored to be part of the due diligence checks.

  7.1.4.8 Deviation of Payment Votes

  It was discovered through the investigations the Appropriation Act was breached when officers diverted funds appropriated under different votes. In their search to get hold of the funds, they grossly abused the Appropriations by taking monies out of different votes to pay for purported contracts/projects.

  8 Abuse of Certificate of ffnexpediencies Certificate of Inexpediency, as already explained, is only necessary where a declared Natural Disaster, or Defence Emergency, or Health Emergency, or Situation of Civil Unrest exists, and procurement processes must be undertaken urgently, to remedy the situation.

  27 April 2012 Page 27 Pmft kaves2:12a0.0n 7as:i-Tczec3 Jose 2eD071 ‘2 a E.ie Ya’slone. “Lcengv2 Councli 13d :;:reaDae ma:deons, a2 ,. 7a1 FuNhe.re Devormazailanoas.

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• HMO_ E’DCHO’ Chairman of the CSTB Bryan Kimmins. The total value approved in the letter to the :ornmissioner of Police from the Central Supply and Tenders Board was Ten 1

  Million Kina (K10,000,000.00).

  4. COI 008/09A Department of Police

  This is in reference to the construction of the Musu/Wutung Jetty and Wharf in the Sandaun Province in the year 2009 at the cost of K6.5 Million. There was no formal letter written to CSTB applying for a COI. On the 13 th of March 2009 George A. Manjihu the State Solicitor issued a letter of clearance to the CSTB attention to the Secretary of CSTB. In a letter to the Secretary Finance Gabriel Yer on the 26 th February 2009, the COI application was rejected on the basis that the project did not meet the CSTB requirement of it being an emergency situation. However, it was subsequently approved and communicated to Joseph Lelang, Secretary for DNPM in a letter dated 12 th of March 2009 by the CS’•.13 and signed by the Chairman Brain Kimmins. The amount approved per letter from CSTB on the 12 th of March 2009 was Six Million Five Hundred Thousand Kina (K 6,500,000.00).

  5. COI 019/09 — Department of National Planning and Monitoring

  Certificate Of Inexpedience (COI) Application to build a bridge in Aitape Town, Aitape Lumi District in Sandaun Province at the cost of Three Million and Twenty Four Thousand Kina (K3,024,000.00). Proposed contractor was Structural Bridging Systems Ltd. Request made by Joseph Lelang, Secretary of the Department of National Planning and Monitoring in a letter dated 13 th March 2009 to Mr Bryan Kimmins Chairman of the Central Supply and Tenders Board. Clearance letter was signed by George A. Minjihau, State Solicitor on 14′ 1′ May 2009 in a letter addressed to the Acting Board and Secretary of the Central Supply and Tenders Board. CSTB approved the COI on the 23′ d April 2009 as per the letter to the Secretary of the Department of National Planning and Monitoring on the 24 th of April 2009. The project was estimated at the cost of Three Million and Twenty Four Thousand Kina (K3,024,000.00) as per letter from the State Solicitor dated 14 th May 2009.

  In another COI application dated 13 th March 2009 from the Department of National Planning and Monitoring the total amount was stated Nine Million Seven Hundred and Ninety Thousand Kina (K9,790,000.00).

  6. Certificate of Inexpediency (COI) 031/09 Department of Finance

  COI application for the upgrading of the Balam-Kauk-Sowam and Urip-Sapuain feeder road in Wewak District of East Sepik Province. Request was put through by the Department of Finance Caretaker Secretary Chris Kalebo on the 25 th of May 2009. There was also a supporting letter from the Finance Minister Patrick Pruaitch

  27 April 2012 ‘Anal ‘.7.11.resthrja .Mon 7-2sKt-To3va Swe.33 Dep:a. gtv.,? Neflone.1 Councn 7LneLlings, 17n1leaLrnan .;’12V..ons, .s:u1 necommen&?:]icinz.

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• ENAL HERDHT on the 11 6′ May 2009 . to CSTB Chairman Bryan Kimmins. In a lettei dated 28′ h May 2009 State Solicitor George A. Minjihau wrote a letter to the Acting Board Secretary of CSTB giving clearance to the COI. Approval was given in a letter dated 20 d1 May 2009 to Chris Kalebo Acting Secretary in the Department of Finance. The amount approved in the letter dated 20′ 1 ‘ May 2009 from the Chairman of CS173 to Chris Kalebo of the Finance Department was One Million Nine Hundred and Ninety Six Thousand Nine Hundred and Ninety Six Kina Twenty Toea (K1,996,996.20).

  7. COI 008/09A Department of Police

  This was for the construction of the Vanimo market at the cost of K2.5 Million. No formal letter requesting COI, but in the letter of approval from CSTB to Joseph Lelang Secretary of the National Planning and Monitoring approved a COI for the amount of Two Million Five Hundred Kina (K2, 500,000.00). No letter was on file from the State Solicitor’s Office regarding this matter. But on the 3r d of March 2009 John Kwarara Board Secretary of Central Supply and Tenders Board wrote to George Minjihau, State Solicitor requesting legal clearance but the letter was not signed. Letter of approval was issued on the 03` d of June 2009 attention to Joseph Lelang, Secretary of the Department of National Planning and Monitoring from Brain Kimmins Chairman of CSTB. The amount approved per letter from CSTB on the 03r d of June 2009 was Two Million Five Hundred Thousand Kina (2,500,000.00).

  8. COI 036/10 . Department of National Planning and Monitoring

  Construction of the Wapenamanda District Market. No formal letter requesting or applying for a COI was on file. No letter was on file from the State Solicitor’s Office regarding this matter. There is a letter dated 24t h June 2009 from CSTB requesting legal clearance. Letter of approval was issued on the 19 th June 2009 attention to Joseph Lelang Secretary, Department of National Planning from Brain Kimmins Chairman of CSTB. The amount approved per letter from CSTB on the 19 6’ June 2009 was Two Million Kina (K 2,000,000.00).

  9. GOT 088/10 Department of National Planning and Monitoring

  Application for the construction of the second stage of the Yuhama to Pandoka Road in Komo Magarima Electorate in the Southern Highlands Province. No faunal letter requesting COI was on file. No letter was on file from the State Solicitor’s Office regarding this matter. Letter of approval was issued on the 18` h November 2010 attention to Gabriel Yer Secretary, Department of Finance from Brain Kimmins Chairman of CSTB The amount approved per letter from CSTB on the l e of November 2010 was Three Million Five Hundred Thousand Four Hundred and Seventy Five Kina (K 3,500,475.00).

  27 April 20’12 Page 30 r. Li.avesfigation TasZt-Fone sweep a mall Deport lo the National Elteclaqive Co4 ma. of igs .71 -zad1ngis, Impletnemiadons, auaril nerfaere Mec3mraendanons.

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• FINAL BERIMITT Full (100%) payment and released full contract value of K3,500,475.85 on cheque No:44012 dated 20 th October, 2010 but cancelled and replaced with cheque No: 44103 dated 3r d November, 2010 for the same amount. The payment was made first on 20 t h October, 2010 and the contract signed later to retrospectively cover their actions.

  8.2 Recommendations It is recommended that:-

  1) The State Solicitor should not be a member of the Central Supplies and Tenders Board so that he can independently assess the nature of the contract before giving legal clearance for the issuance of a COI.

  2) Mr Brian Kimmins, the Secretary for CSTB and Mr Minjihau should be dealt with under the Public Services Management Act and GOs.

  9 ILLEGAL CONTRACTS It was discovered that most of the contractual arrangements that the State was made a party were illegal hence unenforceable. Contracts that were entered into in breach of the PFMA are illegal and unenforceable. Not many of the payments made were based on properly constituted contracts. The rights of the State were not protected. Therefore it makes it difficult for the State to plead its rights and take actions under the law of contract. The servants of the State who were supposed to protect the rights and interests of the State have failed their responsibilities and failed their employer.

  The course of action available to the State is the recovery under the Proceeds of Crimes Act 2005.

  le INDIVIDUAL CASES 10.1 Detailed Investigations

  The ITFS investigated a number of allegations, some of which actions were taken whilst others are still being pursued by the respective agencies. The following are 20 cases set out in detail for the purposes of substantiating the findings and recommendations in this report. These are only the few of the many cases that ITFS is investigating. The individual cases bear contain the findings and recommendations respectively. Again, the structure of ITFS allows ITFS to implement its own findings.

  27 April 2012 Page 31 First Prxft Envestigation rfash-Fouce Sweep Final Report to the National Executive Caugacil of its Findings, hupleanentations, and Fuzihey Recommendations.

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• IFOINAL REPORT

  Case 1: Payment and Release of K180,000 to Kajah Development & Business Service Centre

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2007 for 2008 and 2010 for 2011 Development Budget. Consequently, We were unable to establish whether this project went through the normal budget process through to NEC.

  The payments were made from vote item 4203-5203-413, earmarked for Districts Markets Program.

  2. Facts involving Project Submission, Appraisal and Approval for the K180,000.00

  The initial project proposal and copy of Contract No: COI — 76/2008 said to be awarded by CSTB for the construction of Mul Baiyer Sub-District Markets to Kajah Development & Business Service Centre for a quoted price of K450,000.(K150,000 each) for three (3) markets in Western Highlands Province are not on file.

  During later part of 2008, all of 2009 and 2010, nothing is said about the project and whether payments were made in relation to this contract but in 2011, cheque No:132 for 1(180,000 dated 22/03/11 was paid, the same date, cheque No:133 for 1(137,000 was paid to K-Island Builders Ltd (refer K-Island Builders Ltd K547,00.

  The letter and Invoice on file and submitted by the Managing Director, Mr Obed Rouri, to the Secretary for DNPM was for the final 10% of Contract No: COI — 76/2008 for 1(37,000.00 to be paid. That is an indication that 1(413,000.00 of the contract value of 1(450,000 was already paid as down payment in 2008. As such, there was an over payment of 1(143,000 when 1(180,000 was paid instead of 1(37,000.00.

  3. Breach of Financial Management and Administrative Process in facilitating the release of K180, 000.00.

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and officer responsible for financial administrative role of the Departmental.

  o The acting Secretary — Ms Ruby Zarriga as Departmental Head and Chief Accountable Officer,

  27 April 2012 Page 32 Tint Pr ft havesggagon TESh-Fone Sweep Flnal alepokt lo the Diagonal IxeczAve Council Fin(Aings, limplenteggations, and 1.rnrcestey Mecornmencladons.

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• i) AppinVed as Section 32 offictr for payment to Kajah Development & Business Service Centre, a private company without proper due diligence checks and its track record of being in the Building Industry.

  ii) The letter and Invoice on file and submitted by the Managing Director, Mr Obed Rouri, to the Secretary for DNPM was for the final 10 0/o of Contract No: COI — 76/2008 for 1(37,000.00 to be paid but instead the requisition officer requested for 1(180,000 and Acting Secretary approved this. As a result, an overpayment of 1(143,000 was made.

  There is NO Project Completion Certificate on file to certify that this contract was fully implemented. Only the Provincial Works Manger’s status report addressed to Secretary but attention made to FAS-IED, a position held by Mr William Sent in an acting capacity recently. The Provincial Works Manager mentioned in his status report that the actual Contract No: Col 76/2008 was not at his disposal to determine whether the project was done according to specifications.

  0 There was very long delay of more than two (2) years from the time the contract was entered into and this payment which should be explained.

  Part II Section 5 (a), (b), (d), (e), (i) and (g) of the Public Finances (Management) Act, 1995 were breached as the Departmental Head.

  The cheque signing officers, Assist Secretary Finance Mr Aloge Alupe and the counter signing officer and the authorized requisition officer, Mr Moses Aihi, as accountable officers are equally responsible for raising, approving and releasing moneys without properly monitoring resulting in excessive payments totaling 1(143,000.00.

  Part II Section 6 of the Public Finances (Management) Act, 1995 and Part 8 of the Finance Instruction were breached as Accountable Officers.

  4. National Tenders & Contracts

  This contract valuing 1(450,000.00 falls within PSTB and/or CS IB threshold and should have been publicly tendered but instead COI – 76/2008 was issued. The nature of the contract does qualify the issuance of a COI yet such was issued.

  5. Missing Source Documents

  The payment vouchers for the first 90% payment and the contract document together with other supporting documents were missing.

  . Possible Contractor & Employer Conflicts

  27 April 2012 Page 33 Pro..ft Inves’thgallon Tas2c-7ons 3weeD 7112.ine.7a11 lirle National Zczcznve r,oancli 91- Lis Fhadings, laniilemea;:anc:ras, end 7 -2.7a9Te73.ecommo.n.0..atIons.

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• FUNAL REPUITI

  It is noted that Mr William Sent, was the Acting First Assistant Secretary – IED within the Department of National Planning & Monitoring at the time of payment and he is the Director of the contractor Kajah Development & Business Services Centre as per the company extract. Mr Sent has awarded a contract to himself

  7. Directorship, Expenditure of Funds and Site Inspections

  The Directors of the company as per the company extract are Obed Rouri and William Sent Keleim.

  The technical valuation of the markets shows that the market does not equate with the value of the money. In the absence of a contract, it is found that the amount was grossly overpaid for a substandard market, hence bulk of the monies were diverted to purposes other than the markets.

  8. Recommendations 1) Firstly;

  a) The Departmental Head should be dealt with under General Order 8.22 and Section 114A of the PFMA. b) Other Accountable Officers mentioned in hereinabove (if a confirmed I Director) should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15. c) Any other captions of the General Order and Public Services (Management) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above.

  2) Concurrently, the Departmental Head and Acting Secretary, Ms Ruby Zartiga, Acting First Assistant Secretary-IED, Mr William Sent, Assistant Secretary Finance Mr Aloge Alupe should be interviewed in relation to this contract by the fraud squad.

  Case 2: Payment of K100,000 to Kerekamb Island Corporative Society

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2010 for 2011 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  The payments were made from vote item 2075 6000 01 252000, earmarked for Social Development Program that should have been administered by the Department of Health.

  27 April 2012 Page 34 Tirst Prof Imesflga2ion Task-?force sweep iTinal 24) the Naeional Enecutive Council of iQs Findings, Imolemenga2lons, and Diythey Ileconurnendaiions.

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• LEDINAL BERM’S 2. Facts involving Project Submission, Appraisal and Approval for th.! K100,000

  o Initial project proposal dated if April, 2011 was submitted for two (2) Lucas Sawmills to do a small scale logging by a Pastor Michael Kui in Mount Hagen, Western Highlands Province.

  • The same address used by K-Island Builders Ltd of which Mr William Sent is a Director and at the same time Acting First Assistant Secretary-IED of DNPM.

  ® Without any project appraisal and screening, Assistant Secretary-Budgets raised FF3 and FF4 on even date.

  • Again, immediately on 1′ April, 2011, Acting Secretary-Ms Ruby Zarriga approved the payment as Section 32 Officer.

  o Finally, on the next day, 2′ d April, 2011, cheque No:189 for K100,000 was paid.

  . is reach of Financial Management and Administrative Process in facilitating the release of K100,000.00.

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and officer responsible for financial administrative role of the Departmental.

  The acting Secretary — Ms Ruby Zarriga as Departmental Head and Chief Accountable Officer,

  (a) Approved as Section 32 Officer for this payment without any project appraisal, assessment or recommendation from her senior staff. Proper due diligence checks including its certificate of incorporation for this corporative society was not done.

  (b) On the same date (01/04/2011), the project proposal done, requisition by requisition officer, approval by Section 32 Officer without the financial delegate and commitment clerk signing and next day cheque was paid even from a wrong vote.

  Part H Section 5 (h), (d), (II and (g) of the Public Finances (Management) Act, 1995were breached as the Departmental Head.

  The cheque signing officers, Assistant Secretary Finance Mr Aloge Alupe and the counter signing officer and the Authorized Requisition Officer, Assistant Secretary- Budgets Mr Paul Daungun, as accountable officers are equally responsible for raising, approving and releasing moneys.

  27 April 2012 Page 35 pintPrAft Hnvestigation Tash-Fonce Sweep Final Repoyl to the National Exec;give Councii of its Findings, Empiententations, and Twine!? Deconmendations.

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• EN AL RE: POR1T 1 3 afi: H Sect lot 6 of the Public Finances (Mam,y,Linent) Act, 1995 was breached as Accountable Officers.

  4. Expenditure of Funds and Site inspections

  The cheque of K100,000.00 was drawn on the name of Kerekamb Island Corporative Society’s account with the ANZ Bank Mt Hagen Branch. On or after 26/4/10 Ps Michael Kui immediately made cash withdrawals and started buying items like one day old chickens for members of the society, stockfeed, cash of K10,000.00 given to their local church as tithes , parts for chain’ saw and other unappropriated items etc. Pastor Micheal Kui himself single handles the funds which were to purchase a complete set Lucas Sawmill. Police findings reveal that the sum of K100, 000.00 that was acquired from the Department of National Planning and Monitoring was not used in purchasing a complete set of Lucas Sawmill but was diverted to other use. Police also confirm that the Society headed by Chairman Pastor Michael Kui misappropriated the sum of K100, 000.00 to the use of others.

  On Wednesday the 9 th of November 2011 at about 9:00am Pastor Micheal Kui was asked to front up at the Mt Hagen fraud office. He voluntarily came where he was interviewed and later arrested and charged for misappropriating the sum of K100,000.00 to the use of others the property of the state. He is out on bail. The prosecution file was served on him and he is awaiting the committal hearing.

  5. Reco mendations

  1. Firstly;

  a) The Departmental Head should be dealt with under General Order 8.22 and Section 114A of the PFMA. b) Other Accountable Officers mentioned hereinabove should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15; and c) Any other captions of the General Order and Public Services (Management) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above. 2. Concurrently, the Acting Secretary, Ms Ruby Zarriga, Assistant Secretary- Budgets Mr Paul Daungun, Assistant Secretary Finance Mr Aloge Alupe and Acting First Assistant Secretary-IED, Mr William Sent should be interviewed in relation to this payment by the fraud squad. 3. The Directors of the Co-operative society be interviewed by the Fraud Squad on the expenditure of the public funds.

  Case 3: Payment and Release of K547,000 to K-Island Builders Ltd

  1. Analysis of the Payment Sc Final Submission to NEC

  27 April 2012 Page 30 7irstPrAft Davestigation gash-lione Zweey rinaiDepril 1`’ne Nattionall DAeculive. ConsuiR or it Findings, implementadons, and iTmigkeR Liecommendatons.

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• REPOR-17

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2009 and 2010 for 2011 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  The payments were made from vote item 229.000.101725, earmarked for Districts Markets Program.

  2. Facts involving Project Submission, Appraisal and Approval for the K547,000.00

  Initial project proposal not on file but on 31st August, 2008, CSTB in its Meeting No: SM-008/2008 awarded and approved the construction of Hagen Central Sub-District Markets to K-Island Builders Ltd for a quoted price of K450,000.(K150,000 each) for three (3) markets in Western Highlands Province through Contract No: COI — 062/2008.

  During later part of 2008, all of 2009 and 2010, nothing is said about the project and whether payments were made in relation to this contract but in 2011, cheque No:111 for K410,000 dated 18/03/11 was paid and again shortly after three (3) days, cheque No:133 for K137,000 dated 22/03/11 was paid.

  3. reach of Financial Management and Administrative Process in facilitating the release of K547, 000.00.

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and officer responsible for financial administrative role of the Departmental.

  The acting Secretary — Ms Ruby Zarriga as Departmental Head and Chief Accountable Officer, (a) Approved as Section 32 officer for payment to K-Island Builders LTD, a private company without proper due diligence checks and its track record of being in the Building Industry. (b) The invoice for the final progressive payment was for K110,000 but requisition and approval was for K137,000, in excess of K27,000. The Contract No: COI — 062/2008 approved value was K450,000.00 but actual payment totaled K547,000.00 resulting in an overpayment of K97,000.00. Also we were unable to ascertain whether any down payment made in 2008 in relation to this project.

  27 April 2012 Page 37 Fir5tPrAft- Invesitigation Tash-Tone Sweep Final Reposi 8o the ilialianal Egeculive Connor of Us Findings, llnwiegnenr,a’sions, and Fzuthey Mecommondeions.

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• ENAL REPORT-

  The full contract value plus additional K97,000 was paid . but there is NO Project Completion Certificate on file to certify that this contract was fully implemented.

  o There was very long delay of more than two (2) years from the time the contract was entered into and this payment which should be explained.

  Part H Section 5 (a), (b), (d), (e), (/) and (g) of the Public Finances (Management) Act, 1995were breached as the Departmental Head.

  The cheque signing officers, Assist Secretary Finance Mr Aloge Alupe and the counter signing officer and the authorized requisition officer, Mr Moses Aihi, as accountable officers are equally responsible for raising, approving and releasing moneys without properly monitoring resulting in excessive payments totaling 1(97,000.00.

  Part II Section 6 of the Public Finances (Management) Act, 1995 and Part 8 of the Finance Instructions were breached as Accountable Officers.

  4. National Tenders & Contracts

  This contract valuing 1(450,000.00 falls within Central Supply & Tenders Board threshold and should have been publicly tendered but instead COI – 062/2008 was issued. This project was not qualified for a COI pursuant to Section 40 (3) (b) of the PFMA hence the issuance thereof was a gross abuse of the established procedures and amounts to fraud.

  5. Missing Source ocuments

  The payment vouchers for cheque No:111 for value 1(410,000 together with the other supporting documents were missing.

  6. Contractor & Employer Conflicts

  It is noted that Mr William Sent, was the Acting First Assistant Secretary- IED within the Department of National Planning & Monitoring at the time of payment and he was also the Director of the contractor, K-Island Builders Limited per the Contract Agreement through his directorship of Kajah Development and Business Services which is the shareholding company of K-Island Builders. As such, Mr Sent has awarded a contract to himself.

  7. Expenditure of Funds and Site Inspections

  27 April 2012 Page 38 Tint PrAft Investigation Tasit-Foyce Sweep Final Repost to the National Executive Council of its Tintings, lannlentenlations, and Irtiniliog Zeconmentlailons.

• Page 40 of 159

• IFFAL [KROFT Upon site inspect-H.1s five of the proposed markets were built. _However, the –

  standard of the markers do not show the value for the money. There were make-shift sheds those various locations which would cost less than 1(10,000 with its existing fittings. Also, the sheds were built at locations distanced from the normal marketing places hence they are not is use.

  8. Recommendations

  1. Firstly;

  a. The Departmental Head should be dealt with under General Order 8.22 and Section 114A of the PFMA. b. Other Accountable Officers mentioned hereinabove should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15. c. Any other captions of the General Order and Public Services (Management) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above.

  2. Concurrently, the Departmental Head and Acting Secretary, Ms Ruby Zarriga, Acting First Assistant Secretary-IED, Mr William Sent, Assistant Secretary Finance Mr Aloge Alupe should be interviewed in relation to this contract by the fraud squad.

  3. The Director of the recipient company, Mr William Sent should be interviewed by the Fraud Squad for the expenditure of the public funds.

  Case 4: Payment and Release of K1.0 tnillion to Koningi Coffee Limited

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2009 for 2010 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  The payment was made incorrectly from vote item 1204-1292-144, eaitnarked for Business Development Grants. Proper vote would be the NADP vote.

  2. Facts involving Project Submission, Appraisal and Approval for the K1.0 million

  0 On 11 th August, 2011, a project proposal was submitted by a Mr Lufai Wan (Managing Director) for establishment of a new coffee project to be located Watabung LLG, Daulo Electorate, EHP.

  27 April 2012 Page 39 T-irstPrxft Jnvesfigalion Task-Tome we Final Repot to ghe Nafional Executive COI4216 01PS nnengs, Implemexteflons, and FuslEari Recommendations.

• Page 41 of 159

• ENAL REPOCF7 • The CVs included in the project proposal are the same ones also included in Rait Hela Coffee Limited a project located in Komo/Magarima District of SHP. See Case 11.

  e On 12 th August, 2010, the Secretary-Mr Joseph Lelang approved and directed K1.0 million for a K4.5 million project proposal without any project assessment, appraisal and screening process.

  • The Acting Assistant Secretary- Budget Mr Japheth Michael. raised the requisition for K1.0 million and was signed by Secretary – Mr Joseph Lelang as Section 32 officer without the commitment clerk and financial delegate signing and the cheque No: 43638 for K1.0 million was processed, signed and released, on 18 th August, 2010.

  • K1.0 million of State’s much needed development funds released to this project, without any project assessment, appraisal, screening and approval process raises the question of whether due regard to economy, efficiency and avoidance of waste have been carefully assessed.

  3. Breach of Financial Management and Administrative Process in facilitating the release of K1.0 mi on

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and officer responsible for financial administrative role of the Departmental.

  The Secretary — Mr lielang as Departmental Head and Chief Accountable Officer,

  iii) Approved as Section 32 Officer for payment to Koningi Coffee Limited, a private company without proper due diligence checks and its track record of rehabilitating and setting up agricultural plantations.

  iv) The Secretary illegally paid from vote item 1204-1292-144 earmarked for Business Development Grants instead of NADP vote.

  Part II Section 5 (a), (b), (d), (e), (I) and (g) of the _Public Finances (Management) Act, 1995 were breached.

  The Acting Assistant Secretary-Budget, Mr Japheth Michael illegally paid from vote item 1204-1292-144, earmarked for Business Development Grants instead of NADP vote. .

  The cheque signing officers Mr Aloge Alupe, Assistant Secretary Finance and the counter signing officer are equally responsible for approving and releasing moneys earmarked for the said projects to a different agricultural project.’

  27 April 2012 Page 40 7int linvestlgalAcn TES:i°70!?7,:? Swee9 Y:.7 52a] neRoal la the Ilagil.anal nceculfrve ‘;„’annet al i. s Taf.ings, lizzoaesmezteAlons, ET2 L” .1, z1 1.2e2LletIonv.rn.eitcia110ns.

• Page 42 of 159

• ENAL EED:TETT

  Part L Section 6 of the Public Finances (Management) Act, 1995 and Part 8 of the Finance Instructions were breached as Accountable Officers.

  4. National Tenders & Contracts

  For the purpose of this, DNPM does not have an internal Supply & Tenders Board. The Department Secretary has the capacity of up to K300,000.00. Any amount beyond that is the responsibility of the CSTB. For the establishment of agricultural project for K1.0 million, falls within PSTB and/or CS threshold for procurement.

  Again, the Secretary — Mr Lelang as Depar uental Head and Chief Accountable Officer has assumed the role of CSTB when K1.0 million was not within his financial limit.

  5. Control Weaknesses

  The DNPM does not have a departmental payment procedure/guideline that would show the financial limits attached to certain positions for approval of requisitions, as financial delegates and Section 32 Officers for payments. This has been a very serious internal control weakness that should have been addressed as the Department was in control of the Development Budget (PIP) and its own Recurrent Budget.

  For the Development Budget, proper established processes were not followed in project assessment, appraisal, screening and approval or planned and approved projects that went through the budget process right through to National Executive Council and Parliament were not implemented.

  6. Expenditure of Funds and Site Inspections

  The Director of the company is Mr. Lufai WARI who is from the Koningi area of the Asaro/Watabung area of EHP. His company according to the extracts from IPA is based in Port Moresby. He wrote a project proposal requesting for K4 million from the DNPM but was only given K1million. The cheque was paid to his company on the 18 111 August 2010 after he opened an account with BSP POM Branch and was the sole signatory to the account. There was no tender process for this payment but was done directly from the DNPM to the company account purposely for rehabilitation of a new coffee plantation in the Watabung area.

  The bank statements indicate that most of the money was diverted for personal use with huge amounts made on cash payment bases with some funds been credited to personal accounts and not on the purposes intended for. This shows a clear case of DEFRAUDING THE INDEPENDENT STATE of Papua New Guinea. Some of these funds were used to purchase Motor vehicles from Ela Motors.

  27 April 2012 Page 41 7-ir)t PrAft Tesa-Troyzie Sweep 2elleyil 1D Metlenei ExecutIve ..3aunc51 efivA.13 ranghtgs, kamaereen1E.ii1do:o.s, Mecommenigel’osis.

• Page 43 of 159

• EINAL REPOR7

  7. Recommendations

  1. Firstly,

  a) The Departmental Head should be dealt with under General Order 8.22 and Section 114A of the PFMA.

  b) Other Senior and Accountable Officers mentioned in 4.3 above should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15; and

  c) Any other captions of the General Order and Public Services (Management) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above.

  2. Concurrently, the Departmental Head, Mr Lelang, Acting Assistant Secretary- Budget, Mr Japheth Michael and the Assistant Secretary Finance, Mr Aloge Alupe should be interviewed by the fratid squad in relation to this payment.

  3. The directors of the recipient company should be interviewed by the Fraud Squad on how these funds were received and used.

  Case 5: Payment and Release of K1.5 million to Mettle Limited

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2010 for 2011 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  The payment was made from vote item 101722, earmarked for Social Development Program that should be transferred to the Public Authorities (Agencies) for implementation.

  2. Observations on Project Submission, Appraisal and Approval for the K1.5 million

  o The project proposal/submission in relation to this payment was not on file. However, per the FF3 and FF4, this was a funding assistance for rehabilitation of Vailala Hiloi Primary School in Gulf Province. 3 On 13 th August, 2009, Minister Paul Tiensten in a letter directed Mr Lelang to release K5.3 million to this project stating that the Governor for Gulf has written to him in relation to this project. However, copy of this letter not on file and this amount did not fell through ‘in 2009 and 2010. Again on 20` h December, 2010, the

  27 April 2012 Page 42 First Pro ft laves2igation Tas?c-Force Sweep Final Repord to the National Eneentive Council of its Findings, lanplemen .ta.tions, and TurtheY Recommendations.

• Page 44 of 159

• F UNA [RE[PBEI-Cf Minister in an official letter titled Urgent Coiiiracts Outstanding, listing twciaty three (23) projects totaling K28.8 million and to whom the payments would be made including K1.5 million for Mettle Limited, wrote to Mrs Ruby Zarriga who was then Acting Secretary. o The Minister further authorized his Research Officer and Special Projects Officer Mr Mildred Tamiloeni and Mr Christopher Hulape respectively to co-ordinate from his office and ensure proper appraisal processes were adhered to. o There is no project appraisal, project screening committee meeting minute or a CoI in relation to this project on file. o The FF3 and FF4 were filled out by Mr Chris Bakwak, an acting principal budget officer that time and signed as the requisition officer on 06t h January, 2011. e The acting Secretary Ms Zarriga approved as Section 32 Officer on 06t h January, 2011 for the funds to be released to Mettle Limited without the commitment clerk and finance delegate signing. O Mettle Limited is a private company and proper due diligence checks and its track record of rehabilitating schools or building and maintenance should have been done. o The cheque No:000047 for K1.5 million was raised and released on 01′ March, 2011 to Mettle Limited. o K1.5 million of State’s much needed development funds was released to this project, without the project proposal and no project appraisal raises the question of whether due regard to economy, efficiency and avoidance of waste have been carefully assessed. o The funds were supposed to have been taken from the REST vote, instead it was paid from funds earmarked for Social Development Program, a clear deviation from what Parliament authorized through the Appropriation Act. O The implementing agency was supposed to be the National Department of Education. The Education department had the capacity to organize for the tender by CSTB and manage the implementation of the project.

  3. Breach of Financial Management and Administrative Process in facilitating the release of K1.5 million

  The Minister responsible for Financial Management stipulated under Section 3 (1) Part II of the PFMA is the Minister for Finance and Treasury and not any other Minister, including the Minister for National Planning. As such, Minister Paul Tiensten had breached the PFMA when he exercised financial directives to departmental staff.

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and officer responsible for financial administrative role of the Department.

  •

  27 April 2012 ?age 43 Tir5t :1:TivsslAgejLY1 Zwee:J 3e;3031 :1AlaneKe. Egeeutive at Us FInellngs, 1.1.1311..T:11,1ydalio;:ls, 1 a1161 :7:12’2:12,3 1201:31::511110:16. 1 6:VICIP.S.

• Page 45 of 159

• IFINNAL REPORIT Part II Section 5 of the Public finance anagement) Act, 1995 among other responsibilities of the Departmental Head, he/she must ensure that;

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

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

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

  (e) all expenditure is incurred with due regard to economy, efficiency and effectiveness and avoidance of waste.

  The acting Secretary — Ms Zarriga, as Departmental Head and Chief Accountable Officer that time had failed to comply with the above provisions and as such, Part II Section 5 (a) (b), (d), and (1) of the Public Finances (Management) Act, 1995 were breached.

  The cheque signing officers Mr Aloge Alupe- Assistant Secretary Finance, Chris Bakwak, Principal Budget Officer and requisition officer and the counter signing officer are equally responsible for facilitating the payment without proper assessment, approval and project documentation.

  Part H Section 6 of the Public Finances (Management) Act, 1995 and Part 8 of the Finance Instructions were breached as Accountable Officers.

  4. National Tenders & Contracts

  DNPM does not have an internal Supply & Tenders Board. For the rehabilitation of this school, although the funds were available at DNPM, if a private company was to be paid for the works, it is subject to the PFMA, hence it would have been tendered by CS 1’13. The amount of K1.5 million clearly falls within the jurisdiction of GS M. As such, the Department of National Planning and Monitoring and its officers had assumed the role of CSTB when 1(1.5 million was not within their financial limit.

  5. Expenditure of Funds and Site Inspections Site inspections yet to be conducted.

  6. Recommendations

  1. Firstly;

  a) The Departmental Head should be dealt with under General Order 8.22 and Section 114A of the PFMA.

  27 April 2012 Page 44 Tint Pro ;ft IInvestigation Tasic-Fone Sweep, Finai RepoYit to the National Mecutive Council of its Findings, Implementations, and Furthe7 Recommendations.

• Page 46 of 159

• FRIAL REPIDET

  b) Other Accountable Officers mentioned in hereinabove should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15.

  c) Any other captions of the General Order and Public Services (Management) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above.

  2. Concurrently, the Minister Paul Tiensten, the Departmental Head, Ms Zarriga, Assistant Secretary Finance Mr Aloge Alupe and Mr Chris Bakwak should be interviewed in relation to this payment by the fraud squad.

  3. Mr Tiensten and Ms Zarriga should be investigated by the Ombudsman Commission for their part in this payment pursuant to the Leadership Code.

  Case 6: Payment and Release of K3.5 million and K1,108,650.18 to Niug,ini Star Transport Limited

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2009 for 2010 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  The payment was made from vote items 1204-1299-225, K3,500,475.85 earmarked for Business Growth Centre Development.

  2. Observations on Project Submission, Appraisal and Approval for the K3.5 million

  O The initial project proposal was not located at the DNPM in relation to this road upgrading project located in Komo/Magarima District of Southern Highlands Province.

  e Description of Project and Location: According to the Contract Agreement, upgrading of Yuhama to Pandoka Road in the Komo-Margarima District of Sothern Highlands Province.

  ® The project approval process, appraisal and its subsequent approval Minute by the project steering committee (if any) were missing in the accounts section of Department of National Planning & Monitoring.

  o Project Steering Committee or Internal Supply & Tenders Board: There is no such committee or board within DNPM where project proposals are deliberated, screened and approved for funding.

  27 April 2012 Page 46 Fir5t Pratt htvestigation ‘lash-Tome Sweep Repost to the national Executive CouncE of its Iiin&Ings, iLmpResnentaticns, and Tuytheig neconnuendations.

• Page 47 of 159

• EINAL REPOTTI

  o The requisition (FF4) for the 13.5 million and the FF3 signed by Section 32 Officer and the financial delegate were also missing. However, the Section 32 Officer that time was the Secretary – Mr Lelang as he approved as Section 32 Officer for the bridge project for K5.0m by the same company.

  o Contract No: Col: 035/10 for the Road Upgrading and Contract No: Col: 036/10 for construction of three (3) Bridges were both signed and awarded by CSTB to Niugini Star Transport Ltd on 08th November, 2010 and again this Contract No: CoI: 087/10 signed on 08 th December, 2010, a space of just one month.

  o Full (100%) payment and released full contract value of K3,500,475.85 on cheque No:44012 dated 20t h October, 2010 but cancelled and replaced with cheque No: 44103 dated 3r d November, 2010 for the same amount. However, under Section 5.2 of the signed contract, stated the payment schedule as 30%, 30%, 20% and 20% and this was not complied with.

  o The payment was made first on 20t h October, 2010 and the contract signed later on 08 th December, 2010 through Col: 087/10 between CSTB and Niugini Star Transport Ltd a company nominated by the Governor for SHP for the bridge project. This is a serious breach of the Public Finance Management Act.

  o Also the cheque was raised on 20t h October, 2010 first and later the tender bid for this project dated 23r d October, 2010 addressed to the Governor for SHP by the Administration and Finance Manager of Niugini Star Transport Ltd. Mr Lelang and CS1B need to explain why full payment was made first and later tender bids and contract signed.

  o There is no document on file showing due regard to economy, efficiency and avoidance of waste have been carefully assessed and considered; and

  o The monies were taken out of the Business Growth Centre Development vote but the contract was for road/bridge infrastructure. This is deviation from Parliaments approval for the expenditure of public funds.

  o The properly, legislated and equipped Public Authority established by the Government to construct, renovate and maintain the roads and bridges is the Department of Works well established in all provinces. As such, Mr Lelang should be held accountable for not transferring Roads and Bridges funds to Department of Works or the Provincial Treasury through CSTB for proper and value for money implementation.

  27 April 2012 Page 4C.i, pint Pr, r. laves’Aganon Tss2t-4′ Tec2 3riez9 17ao, E …tac -nthre . ‘!:’,DIE:zzAa A’ss 71 4161:Ing3, 212.711emealF.V.a:ns, Der..:039? me3.ila13ans.

• Page 48 of 159

• FINAL REPOEU K3.5 million of titate’s much needed development funds were released to this project. Without a proper project proposal and direct payment made to this private company raises the question of whether due regard to economy, efficiency and avoidance of waste have been carefully assessed and considered.

  3. Breach of Financial Management a d Administrative Process in facilitating the release of K3.5 million

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and Officer responsible for financial administrative role of the Department.

  Part II Section 5 of the Public Finance (Management) Act, 1995 among other responsibilities of the Departmental Head, he/she must ensure that; (a) the provisions of this Act are complied with;

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

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

  all expenditure is incurred with due regard to economy, efficiency and effectiveness and avoidance of waste.

  The Secretary — Mt Lelang as Departmental Head and Chief Accountable Officer that time had failed to comply with the above provisions and as such, Part H Section 5 (a) (b), (d), and (4 of the Public Finances (Management) Act, 1995 were breached.

  The authorized Requisition Officer and the cheque signing Officers Mt Aloge Alupe and the counter signing officer arc equally responsible for the release of moneys without proper documents in place.

  Part H Section 6 of the Public Finances (Management) Act, 1995 and Part 5 of the Finance instructions were breached as Accountable Officers.

  4. National Tenders Sc Contracts

  The amount of K3.5m falls within the jurisdiction of CSTB and payment to a single nominated company without public tender is a serious breach of the PFMA.

  The purported COIs were flawed in that they appear to have been issued well after the payment was made. Even if CSTB was involved, the nature of the works does not fall under the category that would attract a Col. CoI is .for emergency related

  27 April 2012 Page 47 Pr Aft heye.s2ta4ion ?ask-Tone Sweep Final Report lo lhe iUatio as Dreelgive Council el Als Ifraplementaflolas, a iaa li’maTAaez 3ecommeadallions.

• Page 49 of 159

• EF L REPOIE1T situation aid also , Col- cannot be issued retrospectively to cover a contract that was illegal. The issuance of CoI No. 087/10, if ever was issued, was illegal and fraudulent.

  There was no reason for the issuance of a CoI at all except to conceal the fraudulent and illegal payment of funds.

  5. Project Supervision and Completion

  Per the Appendix to the conditions of the contract, the Provincial Works Manager was named as the delegate of the “employer” who is the Independent State of Papua New Guinea. As such there is neither project status report nor a completion report by the Provincial Works Manager stating whether the project was successfully completed according to Department of Works specifications and value for money gained.

  6. Conflict of Interest

  Nuigini Star Transport is owned by Jeffrey Yakopia, an employee of DNPM. The implication of him using his position to orchestrate the payment cannot be ruled out. There is therefore a serious conflict of interest in this payment.

  7. Payment of K1,108,650.18

  Another payment for road works between Paduaga and Yuhama Road, Komo/Magarima District was made to Nuigini Star Transport Ltd on 25t h November 2010, Cheque No. 44239

  The Southern Highlands Provincial Government had engaged Cargen Prett Services, a company based in Mendi to do road works construction of this same road in 2007 through PS’TB. However, Nuigini Star Transport upon variations for road works submitted to DNPM and received the funding to do the same work for the value of K1,108,650.18.

  8. Expenditure of Funds and Site Inspections

  Site Inspections revealed that there is no road being built along that area.

  Mr. Jeffery Yakopiya is the director of the company and is also the signatory of the account himself which is operated at Westpac Bank, Boroko Branch. He has no other Directors apart from himself. The Bank account was opened on the 10/03/10 before getting funds from the Department of National Planning & Monitoring into this account. The company is also registered with IPA and incorporated on the 06t h August 2005. When Mr. YAKOPIYA opened the account, funds totaling about 5 million kina (in separate cheques) deposited into the account for certain construction

  27 April 2012 Page 48 icirt :Draft 3nvesflgelion l’as./A-Foyce Sweep Final Re;ooN go ghe 111e4ionai Executive iS;onacAl oi FindAngs, larikmengaiAons, and Fazraer Recommendations.

• Page 50 of 159

• FINAL REPORT work on bridges along the Komo/Magarirna District Of the Southern Highlands Province.

  The bank statements show most of the funds were on cash payments even in huge amounts with some payments done to companies like Ela Motors, Boroko Motors, Niugini Oil Company Hosting Deering and believed to be for Motor vehicles and Earth Moving Vehicles.

  9. ecommendations

  1. Firstly;

  a) The Departmental Head, Mr Lelang should be dealt with under General Order 8.22 and Section 114A of the PFMA.

  b) Other Accountable Officers mentioned in hereinabove should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15.

  c) Any other captions of the General Order and Public Services .1 anagemeni) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above.

  2. Concurrently, the Departmental Head, Mr Lelang, Authorized Requisition Officer, Assistant Secretary Finance Mr Aloge Alupe, Chairman of CSTB Bryan Kimmins, Hon Anderson Agiru and the project proponent, the Managing Director of Niugini Star Transport Ltd Mr Mr Jeffrey Yakopyia should be interviewed in relation to this payment by the fraud squad.

  Case 7: P ayment and Release of K5.0 million to Niugini Star Transport Limited

  Col # Project Chq No: Amount (K) a 036/10 3x Bridges in SHP 42097 3,900,000.00 b 036/10 3x Bridges in SHP 43635 1,100,000.00 TOTAL: 5,000,000.00

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that went through the above (3.0) development budget process, approved by NEC and subsequently Parliament in 2009 for 2010 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  27 April 2012 Page 49 First Pratt iln.insggaiion TasA-Togce Sweep Final Repo71 to the National Executive Council of its Findings, gainemzentations, and Finthey Recommendations.

• Page 51 of 159

• 5cJI A.L FliPIDEU The payment was made from vote items 4203-2209-225, K3.9 million and 3909- 5201-143, K1.1 million earmarked for Rural Roads and Coastal Vessels Program respectively that should have been transferred to the Public Authorities for proper value for money implementation.

  2. Observations on Project Submission, Appraisal, Type and Location

  o The initial project proposal obtained from the DNPM is for three (3) bailey bridges located in Komo Margarima District of Southern Highlands Province as denoted on the cover namely Wage, Lapae and Guria bridges.

  o Description of Project and Location: The contents of the contract depicts that the scope of works and its locality, relates to a 27 km re-gravelling and sealing on a selected road in East New Britain Province. It has implications of someone doing a copy- paste job in haste just to facilitate the payment.

  • The project was supported by the Governor, Hon. Anderson Agiru through a letter dated 12 th May, 2010. He further requested for the K5.0m to be made payable to Niugini Star Transport Ltd as “Department of Works in Mendi was overloaded with work” an unsubstantiated statement and for reasons only known to the Governor for the K5.0m to be made payable to a private company by-passing all procurement processes.

  9 The project approval process, appraisal and its subsequent approval Minute by the project steering committee (if any) were missing in the accounts section of Department of National Planning & Monitoring.

  © Project Steeling Committee or Internal Supply & Tenders Board: There is no such committee or board within DNPM where project proposals are deliberated, screened and approved for funding.

  o The Assistant Secretary- EID- Mr Jeffery Yakopya raised a requisition for K5.0 million. The Secretary-Mr Lelang approved as Section 32 officer on 31st May, 2010 for K5.0 million however the commitment clerk signed on 02″ June, 2010.

  O It appeared the Secretary approved without knowing whether funds were available or not for K5.0 million. The Assistant Secretary- EID- Mr Jeffery Yakopya then seeing only K3.9 million was available, changed and initialed on the FF4 from K5.0 million to K3.9 million. Further, the financial delegate did not sign and cheque No: 42004 for K3.9 million was processed, signed and released on 02″ June, 2010. However, the balance of K1.1 million was later paid on cheque No:43635 dated 17 t h August, 2010.

  K5.0 million of State’s much needed development funds were released is this project. Without a proper project proposal and direct payment made to this private company

  27 April 2012 Page 5,0 Fir;’t 7.7?.ves2 iga2Acin Tas2t-Toyce atus’a) ilejoTe,lio1he iVa.2:to7./.03 2 .a:diter? 1.2ecomnaexl&ions.

• Page 52 of 159

• E NAL REPOni the (jueshou of whether due regard to economy, efficiency and avoidance of waste have been carefully assessed and considered.

  reach of Financial Management and Administrative Process in facilitating the release of K5.0 million

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and Officer responsible for financial administrative role of the Department.

  Part II Section 5 of the Public Finance (Management) Act, 1995 among other responsibilities of the Departmental Head, he/she must ensure that;

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

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

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

  (d) all expenditure is incurred with due regard to economy, efficiency and effectiveness and avoidance of waste.

  The Secretary — Mr Lelang as Departmental Head and Chief Accountable Officer that time had failed to comply with the above provisions and as such, Part II Section 5 (a) (b), (d), and (I) of the Public Finances (Management) Act, 1995 were breached when he;

  On 14 th May, 2010 on the letter by Hon. Anderson Agiru in a foot note requested acting Deputy Secretary-PIP to appraise and act on it without a project appraisal and its subsequent approval Minute by the project steering committee.

  Approved as Section 32 Officer for;

  9 An initial project submission that was flawed with only the cover stating the three (3) bridges in Southern Highlands Province but the content related to a different project, a road sealing in East New Britain Province.

  0 A contract that was flawed when he approved full (100%) payment on 31″ May, 2010 and cheque No: 42004 for K3.9m raised. This cheque was later cancelled and replaced with cheque No:42097 for K8.9m dated 17 th June , 2010 (K3.9m for the bridges and K5.0m for road construction).The other K1.1m for the bridges was paid on cheque No:43635 dated 17 th August, 2010. The contract was signed on 08 th November, 2010 through Col: 036/10 between CSTB and Niugini Star Transport

  27 April 2012 Page 51 Pr oft linvesgigagion Taec-Fosce Sweep Tina iileport go the National Egecugive Council at A•s Findings, Impementagions, and Tunny Recommendations.

• Page 53 of 159

• F-UNAL REPT)[27 Ltd. aicompany nominated by the Governor for SLIP, payment approved and made first and then Authority to Pre-Commit (APC) and contract concluded and signed later. This is a serious breach of the Public Finance Management Act.

  o A signed contract that contained sections that related to ADB and its payment process but does not contain the payment schedule for this contract thus Mr Lelang and CSTB need to explain why full payment was made first and later contract signed.

  o There is no document on file showing due regard to economy, efficiency and avoidance of waste have been carefully assessed and considered; and

  o The properly, legislated and equipped Public Authority established by the Government to construct, renovate and maintain the roads and bridges is the Department of Works well established in all provinces. As such, Mr Lelang should be held accountable for not transferring Roads and Bridges funds to Department of Works or the Provincial Treasury through CSTB for a value for money implementation for the funds allocated in the Development Budget of which K3.9m million is part of and K1.1m for the Coastal Vessels Program.

  Also, Section 40 of the PFMA stipulates public tenders to be called for “works and services” through public tenders board for value more than 1(300,000.00 and this was breached by approving and paying K5.0m to a single nominated company without proper public tender.

  The Assistant Secretary- EID- Mr Jeffery Yakopya, authorized requisition officer and the cheque signing Officers Mr Aloge Alupe and the counter signing officer are equally responsible for the release of moneys without proper documents in place.

  Pan II Section 6 of the Public Finances (Management) Act, 1995 and Part 5 of the Finance Instructions were breached as Accountable Officers.

  4. National Tenders & Contracts

  For the purpose of this, DNPM does not have an internal Supply & Tenders Board. The Secretary for DNPM can authorize payment of up to 1(300,000.00. The amount of K5million falls within the jurisdiction of CSTB for supply of works and services for and on behalf of the State with properly constituted contracts.

  In this case, payment was flawed as no public tenders were called and payment was made first and then APC and the Col: 036/10. Even if a valid CoI was issued, the nature of works/contract does not qualify the issuance of a CoI on such contracts, hence the Col is illegal and fraudulent.

  5. (Conflict of Interests

  27 April 2012 Page 52 PrAft 231,ves) 7:17nr.z1 Tcle j. 9c:,’,1 2s The 1la21cona2 71;:e.c1.121ve. 1;s717:247:111 TL-101721-i s, ]a? 1. TuyEiray Klesommenclations.

• Page 54 of 159

• FINAL HEMET

  Jeffrey Yakopyia is the director of the recipient of these monies, Nuigini Star Transport Limited and he himself appears to have facilitated the payment using his position as a senior officer of DNPM.

  6. Expenditure of Funds and Site inspections

  Site Inspections revealed that there were no new bailey bridges being built or even maintenance done on the existing bridges. The existing bridges were built by the resource sector companies and are still in good condition.

  Mr. Jeffery Yakopyia is the director of the company and is also the signatory of the account himself which is operated at Westpac Bank, Boroko Branch. He has no other Directors apart from himself. The Bank account was opened on the 10/03/10 before getting funds from the Department of National Planning & Monitoring into this account. The company is also registered with IPA and incorporated on the 06 th August 2005. When Mr’. YAKOPIYA opened the account, funds totaling about 5 million kina (in separate cheques) deposited into the account for certain construction work on bridges along the Komo/Magarima District of the Southern Highlands Province.

  The bank statements show most of the funds were on cash payments even in huge amounts with some payments done to companies like Ela Motors, Boroko Motors, Niugini Oil Company Hosting Deering and believed to be for Motor vehicles and Earth Moving Vehicles.

  7. Recommendations

  1. Firstly;

  a) The Departmental Head, Mr Lelang should be dealt with under General Order 8.22 and Section 114A of the PFMA.

  b) Other Accountable Officers mentioned in 4.3 should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15.

  c) Any other captions of the General Order and Public Services (Management) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above.

  2. Concurrently, the Departmental Head, Mr Lelang, Assistant Secretary- EID- Mr Jeffery Yakopya Assistant Secretary Finance Mr Aloge Alupe and the project proponent, the Managing Director of Niugini Star Transport Ltd should be interviewed in relation to this payment by the fraud squad. Further, the Governor for Southern Highlands Province, Honorable Anderson Agiru should be

  27 April 2012 Page 33 Tint:Draft anves2igaiion Tasit-Tcyce Sweep Fine nep o uo One Natozcie Executive Calancil digs TinciLags, haoienaen3a8lons, Teethes MecoTriznendagons.

• Page 55 of 159

• FOINAL HERMIT qut;stioned by Fraud Squad for his part in requesting payment to be made to the said company.

  3. Further, Honorable Anderson Agiru should be referred to the Ombudsman Commission for further investigations for his part in this payment.

  Case 8: Payment and Release of K5 0 million to Niugini Star Transport Limited

  Col # Project Chq No: Amount (K) a 035/10 Road in SHP 42097 5,000,000.00 5,000,000.00

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2009 for 2010 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  The payment was made from vote item 4203-2209-225, K5.0 million earmarked for Rural Roads that should have been transferred to the Public Authorities, in this case, the Department of Works for proper implementation through CSIB.

  It must be noted that the cheque no 42097 was in the sum of K8.9million of which K3.9 million was for the balance of the construction of bailey bridges as stated in Case No. 7 hereinabove and bears the same cheque number.

  2. Facts involving Project Submission, Appraisal and Approval for the 15.0 million

  ® The initial project proposal was not located at the DNPM in relation to this road maintenance project located in Komo/Margarima District of Southern Highlands Province.

  Description of Project and Location: According to the Contract Agreement, upgrading of Yuhama to Yongle Road in the Komo-Margarima District of Sothern Highlands Province.

  C4 Like the bridge project, the Managing Director of Niugini Star Transport, a Mx Yalop Pakio on 08 th February, 2010 wrote to Honorable Anderson Aigiru. The responses to that letter by the Governor together with other documents in relation to this payment are missing.

  27 April 2012 Page 54 Fir5t PrAft :Investigation Taslr-Foyce Sweep Elnal llepoFt to tie National Executive Council of its Findings, hiapionentations, and Tirane Eleconmendations.

• Page 56 of 159

• FINAL HERDETT

  9 The project approval process, appraisal and its subsequent approval Minute by the project steering committee (if any) were missing in the accounts section of Department of National Planning & Monitoring.

  • Project Steering Committee or Internal Supply & Tenders Board: There is no such committee or board within DNPM where project proposals are deliberated, screened and approved for funding.

  • The requisition (FF4) for the K5.0 million and the FF3 for Section 32 Officer and the financial delegate was also missing. However, the Section 32 Officer that time was the Secretary – Mr Lelang as he approved as Section 32 Officer for the bridge project for K5.0m by the same company and also a single cheque No: 42097 dated 17 s’ June, 2010 for K8.9 million was raised and paid for the two projects.

  41 Contract No: CoI: 035/10 for the Road Upgrading and Contract No: Col: 036/10 for construction of three (3) Bridges were both signed and awarded by CSTB to Niugini Star Transport Ltd on 08 th November, 2010.

  K5.0 million of State’s much needed development funds were released to this project. Without a proper project proposal and direct payment made to this private company raises the question of whether due regard to economy, efficiency and avoidance of waste have been carefully assessed and considered.

  3. Breach of Financial Management and Administrative Process in facilitating the release of K5.0 million

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and Officer responsible for financial administrative role of the Department.

  Part II Section 5 of the Public Finance (Management) Act, 1995 among other responsibilities of the Departmental Head, he/she must ensure that;

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

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

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

  (d) all expenditure is incurred with due regard to economy, efficiency and effectiveness and avoidance of waste.

  27 April 2012 Page 55 pint Proft havestigagion TasEc-irorece Sweep Final Repoz Euecutive CounciR on Rs Flndings, Intplementaflons, and Teolhey Eleconmeadaiions.

• Page 57 of 159

• FiNAL BERDEIT The Secretary Mr Wang as Departmental Head and Chief Accountable Officer that time had failed. to comply with the above provisions and as such, Part II Section 5 (a) (b), (d), , and (1) of the Public Finances (Management) Act, 1995 were breached when he;

  • Failed to keep records in relation to this payment of K5.0m except the contract and actual paid cheque, whilst all other documents supporting this payment were missing from the Department of National Planning & Monitoring.

  9 Approved as Section 32 Officer for;

  o A contract that was flawed when he approved full (100%) payment and cheque No:42097 for K8.9m dated 17t h June , 2010 (K3.9m for the bridges and K5.0m for Road Upgrading) was raised and paid.

  o The payment was made first on 17t h June, 2010 and the contract signed later on 08th November, 2010 through Col: 035/10 between CSTB and Niugini Star Transport Ltd a company nominated by the Governor for SHP for the bridge project. This is a serious breach of the Public Finance Management Act.

  • A signed contract that contained sections of the conditions of contract that related to World Bank and its payment process including advance payments but does not contain the payment schedule for this contract thus Mr Lelang and CSTB need to explain why full payment was made first and later contract signed.

  o There is no document on file showing due regard to economy, efficiency and avoidance of waste have been carefully assessed and considered; and

  o The properly, legislated and equipped Public Authority established by the Government to construct, renovate and maintain the roads and bridges is the Department of Works well established in all provinces. As such, Mr Lelang should be held accountable for not transferring Roads and Bridges funds to Department of Works or the Provincial Treasury through CSTB for proper and value for money implementation.

  • Also, Section 40 of the PFMA stipulates public tenders to be called for “works and services” through CSTB for value more than K300,000.00 and this was breached by approving and paying K5.0m to a single nominated company without proper public tender.

  The authorized Requisition Officer and the cheque signing Officers Mr Aloge Alupe and the counter signing officer are equally responsible for the release of moneys without proper documents in place.

  27 April 2012 Page ZZ : pint P701 i; 3.2weslIgaglon Tas2c-:”Fone Sweep u2 a 3 e or 2c the Nalionai I:cool/five Findingz, :17p1rneTrigallIons, rei6 TuFn2a.,2 iReconamenclalions.

• Page 58 of 159

• FONIAL 031E.PE1)ETI Pail II Section 6 of the Public Finances (Management) Act, 1995 and Part 5 of the Finance Instructions were breached as Accountable Officers.

  4. National Tenders & Contracts

  For the purpose of this, DNPM does not have an internal Supply & Tenders Board The Secretary of DNPM can authorize payment of up to K300,000.00 only. Any amount beyond that is subject to public tender.

  This was flawed as no public tenders were called and payment was made first and then APC and the CoI: 035/10 signed. Even if a valid CoI was issued, the nature of works/contract does not qualify the issuance of a CoI on such contracts, hence the Col is illegal and fraudulent.

  5. Conflict of Interest

  Jeffrey Yakopiya is the director of the recipient of these monies, Nuigini Star Transport Limited and he himself appears to have facilitated the payment using his position as a senior officer of DNPM.

  6. Expenditure of Funds and Site Inspections

  Site Inspections revealed that there were no new bailey bridges being built or even maintenance done on the existing bridges. The existing bridges were built by Exxon Mobil and are still in good condition.

  Mr. Jeffery Yakopiya is the director of the company and is also the signatory of the account himself which is operated at Westpac Bank, Boroko Branch. He has no other Directors apart from himself. The Bank account was opened on the 10/03/10 before getting funds from the Department of National Planning & Monitoring into this account. The company is also registered with IPA and incorporated on the 06t h August 2005. When Mr. YAKOPIYA opened the account, funds totaling about 5 million kina (in separate cheques) deposited into the account for certain construction work along the Komo/Magarirna District of the Southern Highlands Province.

  The bank statements show most of the funds were on cash payments and does indicate huge amounts with some payments done to companies like Ela Motors, Boroko Motors, Niugini Oil Company Hasting Deering and believed to be for Motor vehicles and Earth Moving Vehicles.

  7. Recommendations

  1. Firstly;

  27 April 2012 Page 57 Fir3t PrAft Eavestigatioat Tash-Forme sweep nna Aeooyi to the National Enecutive Coliacli Ats Tindings, Lar..pkalentations, INythey 2ecomateniatioals.

• Page 59 of 159

• Fr:NIALL Er.ELID0127 The Dcivitrnental Head, Mr Lelang should be dealt with cinder General Order 8.22 and Section 114A of the PFMA.

  b) Other Accountable Officers mentioned hereinabove should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15.

  c) Any other captions of the General Order and Public Services (Management) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above.

  2. Concurrently, the Departmental Head, Mr Lelang, Authorized Requisition Officer, Assistant Secretary Finance Mr Aloge Alupe and the project proponent, the Managing Director of Niugini Star Transport Ltd should be interviewed in relation to this payment by the fraud squad.

  3. Hon Anderson Agiru also has to answer for his part in orchestrating the payment. Fraud Squad and Ombudsman Commission should question him accordingly.

  Case 9: Payment and Release of K3.0 million to Hiland Farms Limited

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the Task force team the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2009 for 2010 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  The payment was made illegally from vote item 1204-1280-143, earmarked for Large Plantation Rehabilitation that should be transferred to the Public Authorities (Agencies) for implementation, particularly the Department of Agriculture and Livestock.

  2. Facts involving Project Submission, Appraisal and Approval for the K3.0 minion

  According to the project proposal on file, funds were sought to establish piggery, poultry and chicken processing facilities. The project location is in Rabaul, East New Britain. The proposed finance structure contained in the proposal was for GoPNG to contribute K.2.5 million and the project owners to contribute as equity of K0.5 million. However, the Secretary — Mr Lelang on a foot note directed the Deputy Secretary-PIP, for the release of K3 million from the Large Plantations’ allocation to this project.

  27 April 2012 Page 58 linvesligagion Basic-7cintre Sweep Final llepoyrlio the Nalional E .,ceculive Council of !.t Findings, aniuleFuesalaflons, and. Tunfaes Tleconisuendalions.

• Page 60 of 159

• FRIAL REPOIRU The Dcpury Secrc. y PIP, raised the requisition for 1 –

  officer and the fi.aancith delegate did not sign and cheque No: 43362 for K3.0 million was processed, signed and released on the next day, 21st July, 2010.

  K3.0 million of State’s much needed development funds released to this project, raising the requisition, Section 32 Officer not approving and raising cheque no: 43362 all on the same date, is just fraud and raises the question of whether due regard to economy, efficiency and avoidance of waste have been carefully assessed.

  3. Breach of Financial Management and Administrative Process in facilitating the release of K3.0 million

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and officer responsible for financial administrative role of the Departmental.

  The Secretary — Mr Lelang as Departmental Head and Chief Accountable Officer,

  i) Failed to ensure that Section 32 officer on all payments should approve before cheques were raised and released. Hiland Farms Limited is a private company and proper due diligence checks and its track record of piggery and poultry farming should have been done. ii) The amount requested per the finance structure was K2.5 million but K0.5 million of the owner’s component was also paid by DNPM. iii) The Deputy Secretary-PIP illegally paid from vote item 1204-1280-143 eamiarked for Large Plantation Rehabilitation, even without the section 32 Officer signing and that is fraud.

  Part H Section 5 (a), (d), (i) and (g) of the Public Finances (Management) Act, 1995were breached.

  The cheque signing officers Mr Aloge Alupe- Assistant Secretary Finance, Deputy Secretary-PIP and the counter signing officer are equally responsible for facilitating the payment.

  Part 11 Section 6 of the Public Finances (Management) Act, 1995 and Part 8 of the Finance Instructions were breached as Accountable Offficers.

  4. National Tenders & Contracts

  The DNPM does not have an internal Supply & Tenders Board but even if there was one, K300,000.00 is the maximum limit and K10 million is the maximum limit of CSTB for supply of works and services for and on behalf of the State with properly constituted contracts.

  27 April 2012 Page 5S Tirst Pre ft lavestigaliola Tedc-Farce Sweep Fbriaa avaor 8o t&ae Natio&aaIl ncetugave react of 1115 ErsgRemeatznoms, and FurfEleg ReCOEMORGhtiOHIS.

• Page 61 of 159

• FliNtAL REPIDRU

  For the establishment of a piggery and poultry project for K3.0 million should have been referred to CSTB for procurement. As such, the Department and its officers had assumed the role of CSTB when K3.0 million was not within their financial limit.

  5. Expenditure of Funds and Site Inspections

  Director of the company is Mr. Anton KULIT and Mr. Willie MARUM. Both arc the Directors and signatories of the company (HILAND FARMS LIMITED) which is located along the Warangoi Road of the Pomio District of ENBP. The account of the company was opened on the 05/08/10 at BSP Branch Port Moresby after the Department of National Planning & Monitoring released a sum of K3 million and deposited into the company account on the 21/06/10. Current extracts on the company show the company was incorporated on the 26/07/10. Investigations confirm that there was no tender of this project and the money was paid directly from National Planning to the company.

  The bank statements indicate that most of the money was diverted for personal use with huge amounts made on cash payment bases with some funds being credited to personal accounts and not on the purpose intended for. Some of this funds were used to purchase Motor vehicles from Ela Motors.

  On recent site inspections, in 2012, new buildings have been erected in the vicinity of the HILANDS FARMS area. However, since the funds were released on the month of July 2010, nothing has been done until recently which shows one thing and that is that nothing would have been done if it wasn’t for this investigation.

  6. Recommendations

  1. Firstly;

  a) The Departmental Head should be dealt with under General Order 8.22 and Section 114A of the PFMA. b) Other Accountable Officers mentioned hercinabove should be dealt with under Sections 102, 112 and 113 of the PFMA and General Order 15. c) Any other captions of the General Order and Public Services (Management) Act, 1995 deemed appropriate for all officers stated in (a) and (b) above.

  2. Concurrently, the Departmental Head Mr Lelang, Deputy Secretary-PIP and Assistant Secretary Finance Mr Aloge Alupe should be interviewed in relation to this payment by the fraud squad. 3. The Directors of Hilands Farms Limited have to be interviewed by the Fraud Squad.

  27 April 2012 Page GO ir5t Pmfi; invesiligation Tash-Fone Sweep Final PlepoT.4 to the National Executive Council of fis Findings, Implementations, and repthey llecontmencItations.

• Page 62 of 159

• FINAL HEMET

  Case 10: Payment and Release of K3.0 million to Agricultural Development Limited

  1. Analysis of the Payment & Final Submission to NEC

  The DNPM did not provide to the ITFS the list of projects and their cost estimates by Sectors that were approved by NEC and subsequently Parliament in 2009 for 2010 Development Budget. Consequently, we were unable to establish whether this project went through the normal budget process through to NEC.

  The payment was made illegally from vote item 1204-1280-143, earmarked for Large Plantation Rehabilitation that should be transferred to the Public Authorities (Agencies) for implementation.

  2. Facts involving Project Submission, Appraisal and Approval for the K3.0 millions

  There is no project proposal on file. The payment vouchers including the cheque copies and original cheque slip missing. The funding is to assist pyrethrum processing, a project located somewhere in Wabag per payee history printout. Postal address, C/-JDP & BPC Lagaip.

  The cheque was raised and released on the same date as cheque No:42262 to Yapiok Contractors Limited for K2.0 million also for pyrethrum processing, (some likeness). Refer to case 12 below.

  K3.0 million of State’s much needed development funds released to this project, with all payment vouchers missing raises the question of whether due regard to economy, efficiency and avoidance of waste have been carefully assessed.

  3. Breach of Financial Management and Administrative Process in facilitating the release of K3.0 million

  The primary responsibility for the prevention and detection of fraud rests with the Departmental Head as Chief Accountable Officer and officer responsible for financial administrative role of the Departmen