Public Accounts Committee Report to Parliament on the Inquiry into the Sepik Highway, Roads and Bridge Maintenance and Other Infrastructure Trust Account

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    Report by the Public Accounts Committee on the serious failings in the management of the trust account

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  • THE NATIONAL PARLIAMENT
    OF PAPUA NEW GUINEA

    PUBLIC ACCOUNTS COMMITTEE REPORT TO

    PARLIAMENT ON THE INQUIRY INTO THE

    SEPIK HIGHWAY, ROADS AND BRIDGES

    MAINTENANCE AND OTHER

    INFRASTRUCTURE TRUST ACCOUNT

    PRESENTED ON:

  • Page 2 of 101

  • (i)

    TABLE OF CONTENTS

    CONTENT PAGE

    INTRODUCTION 1

    EXECUTIVE SUMMARY 2

    CHRONOLOGY 6

    LIST OF ABBREVIATIONS 7

    COMPOSITION OF THE COMMITTEE 7

    JURISDICTION AND PURPOSE OF THE
    INQUIRY 8

    JURISDICTION 9

    THE PUBLIC FINANCES (MANAGEMENT) ACT 11

    PERMANENT PARLIAMENTARY COMMITTEES ACT 11

    PURPOSE OF THE INQUIRY 11

    THE AUTHORITY TO REPORT 12

    THE AUTHORITY TO REFER 13

    METHOD OF INQUIRY 14

    PRIVILEGES AND PROTECTION OF WITNESSES 14

    RELEVANT STATUTES 14

    THE DUTIES, POWERS AND RESPONSIBILITIES 18
    OF A TRUSTEE

    THE DUTIES ETC. OF THE HEAD OF DEPARTMENT 20
    OF FINANCE

    (ii)

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  • TRUST ACCOUNTING REQUIREMENTS 22

    THE INQUIRY 24

    WITNESS UNDERSTANDING OF THEIR 25
    OBLIGATIONS

    THE TRUST INSTRUMENT 27

    THE OBJECTIVES OF THE TRUST 28

    BANK STATEMENTS 37

    ANALYSIS OF RECEIPTS AND PAYMENTS
    FROM BANK ACCOUNTS 38

    CASH BOOKS 39

    BANK RECONCILIATIONS 40

    RECEIPTS INTO THE TRUST ACCOUNT 40

    PROJECT EXPENDITURE 42

    TRANSFER OF TRUST ACCOUNT TO WAIGANI 65

    PAYMENTS PROCESSED AT WAIGANI 67

    AN ANALYSIS OF EXPENDITURE 81

    DISALLOWANCE OF EXPENDITURE BY THE 84
    COMMITTEE

    CONCLUSIONS AND FINDINGS 84

    RESOLUTIONS OF THE COMMITTEE 92

    REFERRALS 93

    RECOMMENDATIONS 95

    CONCLUSIONS 97

    1

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  • THE PUBLIC ACCOUNTS COMMITTEE

    INQUIRY INTO THE SEPIK HIGHWAY, ROADS AND BRIDGES

    MAINTENANCE AND OTHER INFRASTRUCTURE TRUST ACCOUNT.

    REPORT TO THE NATIONAL PARLIAMENT

    1. INTRODUCTION

    1.1. On the 8th – 9th May 2006 the Permanent Parliamentary
    Committee on Public Accounts conducted an Inquiry into
    the Department of Finance.

    1.2. At that Inquiry, the Committee requested the Auditor
    General to undertake a review of the Sepik Highway,
    Roads and Bridges Maintenance and Other Infrastructure
    Trust Account for the period May 2002 to the 31st May
    2006.

    1.3. The Committee resolved this particular phase of the
    Inquiry was a matter of National importance and
    convened a further Inquiry into the Sepik Highway Roads
    and Bridges Maintenance and Other Infrastructure Trust
    Account in accordance with Section 17 of the Permanent
    Parliamentary Committees Act.

    1.4. On the 9th day of May 2006 a letter of Request moved
    from the Public Accounts Committee to the Office of the
    Auditor General, seeking a full Audit and Report on the
    Sepik Highway Roads and Bridges Maintenance and Other
    Infrastructure Trust Account for the period May 2002 to
    the 31st May 2006.

    1.5. The Office of the Auditor General considered the Request
    and held it to be of interest to the general public. The
    Auditor General directed that an investigation be

    2

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  • 1.6. undertaken by this Office in accordance with Section
    8(2) of the Audit Act as requested.

    1.7. The Auditor General’s Office completed its investigation
    and provided Management Letters to the East Sepik
    Provincial Administrator and the Acting Secretary of the
    Department of Finance on the 12th July 2006. Those
    Management Letters requested responses by the 26th July
    2006.

    1.8. The East Sepik Provincial Administrator met with the
    Auditor General’s Office staff on the 26th July 2006 to
    discuss audit issues and subsequently responded in
    writing to the Management Letter in writing on the 1st
    August 2006.

    1.9. The Acting Secretary of the Department of Finance, Mr.
    Gabriel Yer, did not meet with the Auditor General’s Office
    staff, but provided a written response to the Office on the
    5th October 2006.

    2. EXECUTIVE SUMMARY

    2.1 The primary aims of the Inquiry conducted by the Public
    Accounts Committee were to:

    • Examine the Financial Reports that are required to be
    submitted by the Trustees to the Department of Finance;
    and

    • Ascertain whether the financial transactions conducted by
    the Trustees were in accordance with the Trust
    Instrument and Sections 15 – 20 of the Public Finance
    (Management) Act ; and

    • Ascertain whether the Department of Finance, the
    responsible Provincial Administrations and Public
    Servants have complied with the requirements of Law in
    the keeping of accounts and records in respect of the
    Trust Account; and

    • Consider the standard of management and decision
    making by Trustees of the Account with particular

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    emphasis on establishing compliance with requirements
    of Law for the accounting for and management of public
    monies held in and paid from the Trust Account.

    2.2 A summary of the conclusions of the Committee are as follows:

    • The Committee has found serious continuous breaches
    of the Public Finances (Management) Act by Trustees
    and Officers of relevant Provincial Governments, the
    Department of Finance and the Office of Rural
    Development; and

    • The Committee has found serious continuous breaches of
    the requirements of the Trust Instrument by Trustees;
    and

    • That monies in the Trust Account may not have been
    spent appropriately and for purposes set out in the Trust
    Instrument; and

    • The contracting of projects funded from the Trust
    Account have not met the requirements of the Public
    Finances (Management) Act and a number of
    contracts were identified which have been entered into
    outside the required processes – including the failure to
    process contracts through the Provincial Supply &
    Tenders Board.; and

    • Contracts have been let to companies that were not
    viable or did not exist and the Trustees and responsible
    Officers of the Department of Finance have failed in their
    duty to ensure effective management of contracts; and

    • There has been poor or non-existent management and
    supervision of Contracts and Contractors funded from the
    Trust Account; and

    • The Trustees failed in their obligation to ensure that
    payments were made only for properly completed work;
    and

    4

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  • • Contracts were not completed or were inadequately
    performed and in some cases not even commenced; and

    • The former Secretary for Finance Mr. Thaddeus Kambanei
    completely failed to meet his duties and obligations as
    either or both the Head of the Department of Finance
    and/or as a Trustee of the Trust Account. As the senior
    accountable officer, his failures deserve the strongest
    possible censure; and

    • Proper accounts and records have not been maintained
    and it has not been possible for the Committee to confirm
    the validity of payments from the Trust Account; and

    • Proper accounts and records were not maintained and
    therefore it has not been possible for the Committee to
    develop an understanding of the contracting and contract
    management processes adopted by the Trustees; and

    • Proper accounts and records have not been maintained
    and it has not been possible for the Committee to
    ascertain the source of more than K 20 million which
    passed through the Trust Account; and

    • Reports on the financial management of the Trust
    Account have not been provided to the Department of
    Finance as required; and

    • The Department of Finance has failed to fulfill its
    obligations under the Public Finance (Management)
    Act to ensure appropriate financial management of the
    Trust Account; and

    • There was no documented reason for the control of the
    Trust Account to be transferred to the Department of
    Finance in 2005. As a result, this decision lessened the
    perception of accountability and transparency relating to
    the operation of the account; and

    • There have been continual and blatant breaches of Trust
    and breaches of the requirements of the Trust
    Instrument; and

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    • K 30 million of public monies passed through the Trust
    Account. The source of only K 7 million can be identified
    because there are no proper records; and

    • Only one Contract was apparently properly tendered,
    evaluated and granted and even then the records are
    incomplete and inadequate; and

    • Failure to obey the Law and a failure to account at all for
    public monies is evident at every level of administration
    that dealt with the Trust Account throughout its entire
    existence; and

    • The Department of Finance and the Provincial
    Administrations which dealt with this Trust Account
    comprehensively failed to keep records, account for
    public monies or acquit monies applied from the Trust
    Account as they were required to do; and

    • Negligence and reckless disregard for the requirements of
    Law and the duties of a Trustee characterize all
    transactions into and out of the Trust Account – with the
    exception of only one Contract; and

    • The Committee cannot identify virtually any tangible
    benefit to the country from the expenditure of K 30
    million of public monies; and

    • The Department of Finance and the relevant Provincial
    Governments from which the Committee sought
    assistance, failed to provide any or any adequate
    documentation or information to the Committee.

    2.3 The evidence clearly shows that the Trustees of this Account
    and senior Public Servants whose duty it was to maintain
    accounts and records failed or refused to fulfil their roles to any
    acceptable standard.

    2.4 These failures were blatant and clearly the individuals
    concerned acted (or failed to act) with impunity and immunity
    – never expecting to be called to account for their behaviour.

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    2.5 Trustees failed to act lawfully, acted unlawfully, failed to act
    independently and did not begin to meet their obligations and
    duties in the management of the Trust Account and the
    expenditure of money from it.

    2.6 That a Trust Account could be abused by the very persons
    whose duty it was to protect and prudently manage such funds
    and that the operation of the Account could have reached such
    a level of incompetence and illegality with no attempt to
    require accountability, is a matter of profound National
    concern.

    2.7 There is reason to believe that similar failings and unlawful
    conduct may well attend the other 2,500 Government Trust
    Accounts.

    2.8 The Committee concludes that the Trust Account devolved to
    little better than a slush fund and that over K 30 million of
    public money passed through the Account to little benefit and
    almost no acceptable level of accountability. In almost all cases
    there were no records or accountability at all.

    2.9 There has been widespread abuse of these Trust monies and no
    desire or ability to control the excesses of the Trustees by
    responsible Officers.

    2.10 Neither the Trustees nor the Officers who failed to maintain
    records and accounts should ever again be permitted to
    assume any degree of responsibility for management of public
    monies in any capacity – but particularly as a Trustee.

    2.11 The Department of Finance has failed at all levels to protect the
    State by properly monitoring and recording the expenditure of
    public monies through this Trust Account and/or by requiring
    and enforcing accountability from either the Trustees or its own
    responsible Officers.

    3. CHRONOLOGY

    3.1 The Public Accounts Committee commenced its Inquiry into the
    Sepik Highway, Roads and Bridges Maintenance and Other
    Infrastructure Trust Account on the 8th May 2006 and

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    continued on the 13th December 2006 and the 15th January
    2007.

    4. LIST OF ABBREVIATIONS

    4.1 “PF(M)A” Public Finances Management Act

    4.2 “PAC” Public Accounts Committee.

    4.3 “The Constitution” The Constitution of the Independent State
    of Papua New Guinea

    4.4 “The Committee” The Permanent Parliamentary Public Accounts
    Committee.

    4.5 “The Secretary” The Secretary of the Department of
    Finance.

    4.6 “The Department” The Department of Finance.

    4.7 “The Trustees” The Trustees from time to time of the Sepik
    Highway, Roads and Bridges Maintenance and
    Other Infrastructure Trust Account.

    4.8 “Trust Account” The Sepik Highway, Roads and Bridges
    Maintenance and Other Infrastructure Trust
    Account.

    5. COMPOSITION OF THE COMMITTEE

    5.1 The Public Accounts Committee which made inquiry into the
    Sepik Highway, Roads and Bridges Maintenance and Other
    Infrastructure Trust Account was constituted as follows:

    5.2 13th December 2006

    Hon. Leo Hannett – Chairman

    Hon Dr. Bob Danaya MP – Deputy Chairman

    Hon Malcolm Smith-Kela MP – Member

    Hon. John Koigiri MP – Member

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    Hon. James Togel MP – Member

    Hon. Tony Aimo MP – Member

    Hon. Mathew Gubag MP – Member

    Hon. Ekis Ropenu MP – Member

    5.3 15th February 2007

    Hon. Leo Hannett MP – Chairman

    Hon. Dr. Bob Danaya MP – Deputy Chairman

    Hon. James Togel MP – Member

    Hon. Andersen Vele MP – Member

    Hon Michael Mas Kal MP – Member

    5.4 The Chairman, Deputy Chairman and Members of the
    Committee were properly and lawfully appointed and
    empowered to sit as a Public Accounts Committee.

    6. JURISDICTION AND PURPOSE OF THE INQUIRY

    INTRODUCTION

    6.1 The Public Accounts Committee, at the request of certain of its
    Members, resolved to conduct an Inquiry into the
    administration of and accountability for monies passing through
    the Sepik Highway, Roads and Bridges Maintenance and Other
    Infrastructure Trust Account.

    6.2 The Public Accounts Committee requested that a special audit
    of that Trust Account be performed by the Office of the Auditor
    General. The Auditor General conducted the audit and
    presented a Report to the Committee.

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    6.3 The Public Accounts Committee received oral and documentary
    evidence from responsible Heads of Department and current
    and former Trustees.

    6.4 The Public Accounts Committee resolved to make a Report to
    the Parliament on the Inquiry and the Committee findings.

    6.5 The Committee also resolved that its Report to the Parliament,
    should contain certain referrals and recommendations.

    6.6 At all times, the Committee has taken great care to enable
    witnesses to make full and complete representations and
    answers to any matter before the Committee – in particular
    those matters about which the Committee may make adverse
    findings against individuals or other entities.

    6.7 The Public Accounts Committee has taken care to fully consider
    all responses and evidence given before the Committee.

    6.8 All evidence was taken on oath and full and due inquiry was
    made of all relevant State Agencies where the Committee
    considered those inquiries to be necessary.

    6.9 This Committee has carefully questioned Mr. Kambanei and all
    and other Officers involved in the management of the Trust
    Account.

    6.10 Their evidence was often not responsive, was self-serving and
    ultimately these Officers sought refuge in a claim that the
    Committee had no jurisdiction to hold the Inquiry at all.

    6.11 It is perfectly clear to this Committee that these Officers
    believe that they would never be called to account for their
    actions and did not intend to account for them.

    6.12 However, on the second day of the Inquiry, Mr. Gabriel Yer,
    current Secretary for Finance, co-operated with and assisted
    the Committee – for which we are grateful.

    7. JURISDICTION

    THE CONSTITUTION OF THE INDEPENDENT STATE OF PAPUA
    NEW GUINEA.

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    7.1 The Committee finds its jurisdiction firstly, pursuant to Section 216
    of the Constitution of the Independent State of Papua New
    Guinea. That Section reads:

    “216. Functions of the Committee

    (1) The primary function of the Public Accounts
    Committee is, in accordance with an Act of the
    Parliament, to examine and report to the
    Parliament on the public accounts of Papua New
    Guinea and on the control of and on transaction
    with or concerning, the public monies and property
    of Papua New Guinea”.

    (2) Sub-section (1) extends to any accounts, finances
    and property that are subject to inspection and
    audit by the Auditor General under Section 214 (2)
    … and to reports by the Auditor General under that
    Sub-section or Section 214 (3)…”.

    7.2 The Committee has taken care to restrict its Inquiry to an
    examination of the control of and on transactions with or
    concerning the public monies of Papua New Guinea.
    .
    7.3 Whilst considering the relevant provisions of the Constitution,
    the Committee has had regard to the Final Report of the
    Constitutional Planning Committee 1974 and been guided
    by or applied the stated intentions of that Committee wherever
    necessary.

    7.4 The Public Accounts Committee has had due regard to reports
    by and conclusions of the Auditor General, but has conducted
    its own Inquiry into matters deemed by the Committee to be of
    National Importance or which arise naturally from primary lines
    of Inquiry and which are within the jurisdiction and function of
    the Committee as set forth in the Constitution.

    7.5 Whilst engaged in the Inquiry the Committee was guided by
    two definitions contained in the Constitution, which are directly
    relevant to Section 216 of the Constitution. They are:

    “Public Accounts of Papua New Guinea” includes all
    accounts, books and records of, or in the custody,
    possession or control of, the National Executive or of a

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    public officer relating to public property or public
    moneys of Papua New Guinea;”

    and

    “Public moneys of Papua New Guinea” includes moneys
    held in trust by the National Executive or a public
    officer in his capacity as such, whether or not they are
    so held for particular persons;”

    Schedule 1.2 of the Constitution.

    8. THE PUBLIC FINANCES (MANAGEMENT) ACT.

    8.1 The Public Accounts Committee also finds its jurisdiction to
    Inquire into the Sepik Highway, Roads and Bridges
    Maintenance and Other Infrastructure Trust Account in
    Section 86 of the Public Finance (Management) Act.

    8.2 That Section empowers the Committee to examine accounts
    and receipts of collection and expenditure of the Public
    Account and each statement in any Report of the Auditor
    General presented to the Parliament.

    9. PERMANENT PARLIAMENTARY COMMITTEES ACT:

    9.1 The Committee received very serious allegations of
    misconduct and maladministration by Trustees of the Trust
    Account from Members of Parliament and Members of the
    Public Accounts Committee itself.

    9.2 The Committee resolved that a full Inquiry into the operation
    of the Trust Account was a matter of National importance and
    found further jurisdiction for the inquiry in Section 17 of the
    Permanent Parliamentary Committees Act.

    9.3 That Section provides that the Public Accounts Committee can
    consider any matter to be of national importance and worthy
    of Inquiry. The Committee, as we have stated, considers this
    Trust Account and the allegations surrounding its
    administration, to be such a matter.

    10. PURPOSE OF THE INQUIRY

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    10.1 The purpose of the Inquiry conducted by the Public Accounts
    Committee was to make full and complete examination of the
    manner in which the Trustees of the Sepik Highways, Roads
    and Bridges Maintenance and Other Infrastructure Trust
    Account controlled transactions with or concerning public
    monies passing into and out of the Account, accounted for
    those monies , protected the position of the Independent
    State of Papua New Guinea, complied with the Trust
    Instrument, complied with the requirements of Law for the
    operation of such an Account, controlled and monitored
    expenditure and generally conducted themselves as Trustees.

    10.2 The Inquiry also sought to make a full and complete
    examination of the manner in which the Department of
    Finance, its responsible Officers and the relevant Provincial
    Administrations controlled, recorded, accounted for and
    acquitted transactions of public monies into and out of the
    Trust Account and thereby protected the State by complying
    with and requiring in others a compliance with all relevant
    Laws.

    10.3 The purpose of the Inquiry was not to improperly pursue or
    criticize any person or company, but to make a constructive
    and informed Report to the Parliament on any changes which
    the Committee perceives to be necessary to any item or matter
    in the accounts, statements or reports or any circumstances
    connected with them, of the Sepik Highway, Roads and Bridges
    Maintenance and Other Infrastructure Trust Account and any
    matter considered by the Committee to be worthy of report to
    the Parliament.

    10.4 Further, the intention of the Inquiry was to enable the
    Committee to report to the Parliament in a meaningful way on
    alterations that the Committee thinks desirable in the form of
    the public accounts as manifested in the operation of the Sepik
    Highway, Roads and Bridges Maintenance and Other
    Infrastructure Trust Account, in the method of keeping them, in
    the method of collection, receipt, expenditure or issue of public
    monies and/or in the control and accountability of Trustees of
    public monies.

    11. THE AUTHORITY TO REPORT

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    11.1 The Public Accounts Committee finds authority to make this
    Report in Section 17 of the Permanent Parliamentary
    Committees Act and Section 86(1) (c) and (d) (i), (ii), (iii)
    and (iv) and (f) of the Public Finances (Management)
    Act 1995.

    12. THE AUTHORITY TO REFER

    12.1 Where satisfied that there is a prima facie case that a person
    may not have complied with the provisions of the Constitution
    of the Independent State of Papua New Guinea and / or
    the Public Finances (Management) Act in connection with
    the control and transaction with and concerning the accounts of
    a public body or public moneys and property of Papua New
    Guinea, it may make referrals of that person to the Office of
    the Public Prosecutor in accordance with Section 86A of the
    Public Finances (Management) Act.

    12.2 The Public Accounts Committee is not a true investigatory body
    capable of investigating and/or prosecuting persons for
    breaches of the law. The Committee is required to refer such
    matters to the appropriate authorities and may make such
    recommendations as it thinks fit in relation to any referral
    made pursuant to Section 86A.

    12.3 The Committee is also empowered to refer for prosecution, any
    witness who fails to comply with a Notice to Produce any
    document, paper or book and / or any person who fails to
    comply with a Summons issued and served by the Committee.
    See Section 23 Permanent Parliamentary Committees Act
    1994.

    12.4 Further, Section 20 of the Parliamentary Powers and
    Privileges Act permits the Committee to refer for prosecution
    any person who, inter alia, fails to comply with a Summons to
    produce books, papers or documents specified in the
    Summons.

    12.5 As a result of the evidence taken by the Public Accounts
    Committee, it has resolved to make certain referrals of
    individuals for further investigation and possible action by law
    enforcement agencies.

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    12.6 The Committee is cognisant that to make referrals, particularly
    of a senior public servant is a very serious matter which will
    adversely reflect on the individual concerned.

    12.7 These referrals are not made lightly but only after careful
    consideration of all the evidence and unanimous resolution by
    the Committee.

    13. METHOD OF INQUIRY

    13.1 The Inquiry by the Public Accounts Committee into the Sepik
    Highway, Roads and Bridges Maintenance and Other
    Infrastructure Trust Account was a public hearing at which
    sworn evidence was taken from a small number of witnesses.

    14. PRIVILEGES AND PROTECTION OF WITNESSES

    14.1 The Public Accounts Committee has taken care to recognise
    and extend to all witnesses the statutory privileges and
    protection extended by the Public Finances (Management)
    Act 1995 and the Permanent Parliamentary Committees
    Act 1994 and the Parliamentary Powers and Privileges
    Act 1964.

    15. RELEVANT STATUTES

    15.1 The Committee was required to consider the following
    Statutes during the course of the Inquiry:

    PUBLIC FINANCES (MANAGEMENT) ACT 1995.

    15.2 The Public Finances (Management) Act prescribes the
    method and standard of the Administration of and accounting
    for public monies, public properties and assets by State
    entities in Papua New Guinea.

    15.3 Further, the Act imposes certain obligations on Public
    Servants for collection of State revenue and controls the
    expenditure of State or public monies.

    15.4 Relevant sections of the Act which were considered by the
    Public Accounts Committee during the course of the Inquiry

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    into the Sepik Highway, Roads and Bridges Maintenance
    and Other Infrastructure Trust Account are:

    (i) Section 5 – Responsibilities of Heads of Department

    This Section prescribes the duties, powers and obligations
    of Head of Department.

    (ii) Section 3 – Responsibilities of the Minister

    This Section prescribes the obligations and duties of
    relevant Ministers of State.

    (iii) Part X – The Public Accounts Committee

    This Part empowers and imposes functions and
    obligations on the Public Accounts Committee. In
    particular, the Committee was required to consider
    Section 86 (A) – power to refer officers of the
    Department to the Office of the Public Prosecutor for
    investigation and possible prosecution relating to
    breaches of the Public Finances (Management) Act
    1995 and/or the Constitution.

    (iv) Part XI – Surcharge

    This Section prescribes personal liability for certain public
    servants who fail in their obligations to collect and
    protect certain public monies.

    (v) Section 112 – Offences

    This Section prescribes disciplinary action which may be
    taken against certain public servants or accountable
    officers who fail to comply with the terms of the Public
    Finances (Management) Act 1995.

    (vi) Section 4 – Responsibilities of the Departmental
    Head of the Department responsible for financial
    management.

    This Section prescribes the function and obligations of
    the Secretary for Finance. It is relevant to assessing the

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    performance of the former Secretary (and Trustee of
    the Account), Mr. Thaddeus Kambanei.

    (vii) Section 6 – Accountable Officers -.

    This Section imposes duties on all Officers who, inter
    alia, authorizes the payment of public money. In this
    Inquiry, the Trustees were or, as a result of their
    appointment as Trustees, became Accountable Officers.

    (viii) Section 9 – Powers of Departmental Head and
    Finance Inspectors.

    This Section sets out the powers given to the Secretary
    for Finance and his Inspectors to enable access to and
    inspection of accounts and records. At all times during
    the life of the Trust Account, the Secretary for Finance
    and his Inspectors had power to enforce the terms of
    the Public Finances (Management) Act and the
    Financial Instructions and thereby bring
    accountability and responsible and lawful management
    to the operation of the Trust Account.

    (ix) Section 15 – Establishment of Trust Accounts.

    This Section prescribes the power to establish Trust
    Accounts and the manner in which that establishment
    must be done.

    (x) Sections 16 and 17 – Payments into and out of
    Trust Accounts.

    This Section sets out the nature of deposits into Trust
    Accounts and the purposes for and circumstances in
    which money may be paid out of Trust Accounts.

    (xi) Section 19 – Management of Trust Account.

    This Section was carefully considered by the
    Committee. It imposes on the Head of Department
    absolute responsibility to properly and lawfully manage
    the Trust Account – including and in particular the

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    keeping of prescribed records and monthly submission
    of those records to the Department of Finance.

    (xii) Section 21 – Closing of Trust Accounts.

    This Section became relevant when the Committee
    considered its recommendations to the Minister for
    Finance.

    (xiii) Part VIII – State Tenders and Contracts

    This Part prescribes the lawful procedures for
    procurement by the State and almost all its agencies.

    The Committee had particular regard to this Part when
    considering the legality of certain Contracts funded from
    the Trust Account – in particular Section 47A which
    prescribes Offences for breach of the prescribed
    procedures.

    (xiv) Section 68 – Accounting Records, etc.

    This Section imposes a duty on Provincial Governments
    to keep proper accounts and records of their
    transactions and affairs. This Section applied to the
    relevant Provincial Governments which benefited from
    the Trust Account.

    FINANCIAL INSTRUCTIONS

    15.5 Section 117 of the Public Finances (Management) Act
    enables the promulgation of certain Financial Instructions
    which establish detailed procedures for the handling,
    collection, expenditure, disposal of and accounting for public
    monies, property and stores.

    15.6 The Public Accounts Committee had regard to these Financial
    Instructions or Directives in the course of this Inquiry.

    15.7 In particular, the Committee had regard to Part 6 Division 1
    Para. 2.1– Accountable Officers. That paragraph reads, in
    part:

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    “…..the Departmental Head is liable under the doctrine
    of personal accountability to make good any sum which
    the Public Accounts Committee recommends should be
    “disallowed”.

    ORGANIC LAW ON THE DUTIES AND RESPONSIBILITIES OF
    LEADERSHIP

    15.8 The Public Accounts Committee has had regard to this
    Organic Law in the course of this Inquiry. Referrals and
    resolutions were considered within the terms of this Organic
    law and are more fully developed (infra).

    AUDIT ACT

    15.9 The Audit Act establishes and empowers the office of the
    Auditor General to carry out its work of overseeing and
    supervising the handling of public monies, stores and
    property by all arms of the National Government. The Public
    Accounts Committee had regard to the terms of this Act
    during the course of this Inquiry

    15.10 The Committee received considerable assistance from the
    Office of the Auditor General in the course of this Inquiry.

    PERMANENT PARLIAMENTARY COMMITTEES ACT 1994

    15.11 The Committee has had regard to Sections 17, 22, 23, 25,
    27, and 33 of the Permanent Parliamentary Committees
    Act during the course of this Inquiry.

    PARLIAMENTARY POWERS AND PRIVILEGES ACT 1964

    15.12 The Parliamentary Powers and Privileges Act 1964 sets
    forth those privileges and powers extending to Members of
    Parliament, Committees of Parliament and Officers or
    Parliamentary Staff.

    15.13 In the course of this Inquiry, the Committee had cause to
    examine this Statute.

    16. THE DUTIES, POWERS AND RESPONSIBILITIES OF A
    TRUSTEE

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  • 19

    16.1 The Committee accepts that the basic duties of a Trustee are
    at least to:

    (i) Know and obey the requirements of the Public Finances
    (Management) Act and the Financial Instructions in
    the management of the Trust Account and the keeping of
    records and accounts thereof; and

    (ii) Know and obey the requirements of all other relevant
    Laws governing the operation of the Trust; and

    (iii) To acquaint himself with the terms of the Trust
    Instrument; and

    (iv) To adhere to and carry out the terms of the Trust; and

    (v) To act impartially and independently in his administration
    of the Trust Account – particularly in deciding to make
    payments from the Account; and

    (vi) To keep proper accounts and to give full information
    when required; and

    (vii) To exercise reasonable care in the management of the
    Trust. The Trustee should apply the same diligence and
    prudence as a normal man of business would to his own
    affairs.

    16.2 The statutory duties imposed on the Trustees by the Public
    Finances (Management) Act are at least:

    (i) To ensure that the Trust is properly established – Section
    15.

    (ii) To ensure that payments into the Trust Account are
    properly and lawfully available for deposit and are within
    the terms of Section 16.

    (iii) To ensure that any deposit of money into the Trust
    Account from Consolidated Revenue is properly
    authorized by an Appropriation Act.

    (iv) To ensure that all payments out of the Trust Account are
    only made for the purposes of the Account or as

  • Page 23 of 101

  • 20

    authorized by Law and if there is sufficient credit in the
    Account for that purpose – See Section 17.

    (v) To ensure proper management and operation of that
    Trust Account – Section 19 (2).

    (vi) To submit to the Secretary for Finance before the
    commencement of each fiscal year an estimate in the
    prescribed form, of receipts and payments expected to be
    made into and withdrawn from the Trust Account –
    Section 19 (3).

    (vii) To ensure that the Departmental Head of the Department
    of Finance has authorized payment from the Trust
    Account in accordance with the estimates approved by
    him – Section 19 (4) (a).
    (viii) Ensure that all contracts, Projects and other recipients of
    payments from the Trust Account are lawfully and
    properly established and actually exist or have performed
    before payment is approved – Part VIII.

    16. THE DUTIES, POWERS AND RESPONSIBILITIES OF THE
    HEAD OF THE DEPARTMENT OF FINANCE FOR MANAGEMENT
    OF THE TRUST ACCOUNT

    17.1 The Secretary for Finance has certain obligations for
    management of a Trust Account imposed by the Public
    Finances (Management) Act.

    17.2 The Public Finances (Management) Act makes no special
    provision for circumstances where the Secretary for Finance is
    also a Trustee of a Trust Account.

    17.3 In that circumstance, the Secretary is in the untenable
    position of directing and controlling his own actions and
    purporting to independently oversee, monitor and be
    accountable, as a Secretary, for his own performance as a
    Trustee. There can be no transparency or credibility in such
    an arrangement.

    17.4 In our opinion, this is a clear conflict.

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  • 21

    17.5 In the operation of this Trust Account there was clearly a
    failure on the part of the then Secretary for Finance, Mr.
    Thaddeus Kambanei, to properly understand or perform his
    duties in either role and this conflict situation may, in part,
    explain the problems attending the management of the Trust
    Account – particularly the failure of the Department of
    Finance to perform any of its obligations to any acceptable
    standard.

    17.6 The basic duties of the Head of the Department of Finance
    imposed by the Public Finances (Management) Act, in
    respect of the management of a Trust Account, are at least:

    (i) To ensure that all the requirements of the Public
    Finances (Management) Act and the Financial
    Instructions are met by the Trustees and all responsible
    Officers of the Department; and

    (ii) To ensure that all accounts and records relating to the
    functions and operations of the Trust Account are
    properly maintained; and

    (iii) To ensure that all expenditure is properly authorized and
    applied to the purposes for which it was appropriated;
    and

    (iv) To ensure that Trustees comply with the Trust
    Instrument and all other requirements of Law in the
    operation of the Trust; and

    (v) To ensure that expenditure from the Trust is proper,
    lawful and made with due regard to economy, efficiency
    and effectiveness; and

    (vi) To safeguard public funds and ensure propriety and
    regularity in the expenditure of funds appropriated by
    Parliament. In this context the Head of any Department
    is personally liable to make good any sum that the Public
    Accounts Committee may disallow.

    (vii) Information required by the Public Accounts Committee is
    submitted to that Committee accurately and promptly;
    and

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  • 22

    (viii) Proper estimates are given by the Trustees and himself;
    and

    (ix) All Reports and records including and in particular
    acquittals and accounts are given in a timely fashion and
    in proper form; and

    (x) Officers of the Department of Finance deployed at
    Provincial and District level perform their duties – in
    particular that of record keeping and accounting for the
    Trust Account and all Contracts, Projects and other
    recipients of expenditure from the Trust Account; and

    (xi) To oversee the operation of the Trust Account and ensure
    compliance by the Trustees and Officers of his
    Department with Sections 15 – 20 of the Public
    Finances (Management) Act.

    17.7 These are the basic duties imposed on Mr. Thaddeus Kambanei
    in his capacity as Secretary for Finance in respect of the
    operation and recording of the Trust Account was concerned.
    The Financial Instructions confirm these duties – Para 14.

    17. TRUST ACCOUNTING REQUIREMENTS

    18.1 The duty of the Department of Finance under the Public
    Finances (Management) Act is to ensure that complete and
    proper accounts are maintained in respect of all transactions
    involving public monies – see Para 13.4 Financial
    Instructions.

    18.2 Accounting systems and principles are prescribed by the
    Financial Instructions Appendix 1 and Part 12 et seq.

    18.3 The Trust Fund is part of the Public Account and public monies
    are payable into the Trust Account only if such payments are
    within the specific scope of any individual trust account – if
    not, the monies must be paid into the Consolidated Revenue
    Fund.

    18.4 The basic accounting requirements for Trust Accounts of the
    nature of the Sepik Highway Roads and Bridges Maintenance
    and Other Infrastructure Trust Account are at least:

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  • 23

    (i) The Departmental Head responsible for the Trust
    Account will ensure proper management and operation;
    and

    (ii) Receipts and payments will be accounted for by
    Provincial and District Treasuries through the
    Department of Finance; and

    (iii) Statement of cash account will be submitted to the
    Department of Finance monthly and not later than
    seven days after the end of the month; and

    (iv) Statements of receipts and payments and the closing
    balance will be accompanied by bank reconciliation
    statements. This is necessary for incorporation of the
    trust transactions in the monthly and quarterly
    Statement of Public Accounts compiled by the
    Department of Finance; and

    (v) The Trust Account must be reconciled on a monthly
    basis with copies sent to the Public Accounts Division of
    the Department of Finance. This was the responsibility
    of the Secretary for Finance of the time; and

    (vi) All requirements of commitment control and all other
    requirements in the Financial Instructions and the
    Financial Management Manual apply to this Trust
    Account; and

    (vii) Expenditure of monies from the Trust Account will be
    processed on the prescribed Finance Forms such as
    requisitions for Expenditure, ILPOC and General
    Expenses and related forms with certain modifications
    set out in part 12 Para 14.; and

    (viii) The prescribed accounting procedures for Provincial and
    District Treasuries apply to this Trust Account and in
    particular in respect of accounting for and acquitting
    payments made in respect of projects or Contracts
    given or awarded by the Provincial authorities.

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  • 24
    19. THE INQUIRY

    19.1 The Public Accounts Committee held two informal Meetings
    with prospective witnesses and persons and entities served
    with Notices to Produce information and documents, to ensure
    that the Inquiry was fully and properly prepared.

    19.2 The Committee convened the Inquiry proper on the 13th
    December 2006. The Inquiry lasted for a full day and the
    following witnesses were summoned and appeared to give
    evidence:

    • The former Acting Secretary of the Department of
    Finance and a Trustee of the Trust Account, Mr Thaddeus
    Kambanei.

    • The Chief Secretary to Government, Mr Joshua Kalinoe;

    • The then Acting Secretary for the Department of Finance
    (since confirmed in the substantive position) Mr Gabriel
    Yer.

    19.3 Research conducted by the Committee and information before
    the Inquiry suggested significant failures by the Trustees of the
    Trust Account, the Executive Managers and staff of the East
    Sepik Provincial Government, the Department of Finance, the
    Department of Planning and the Office of Rural Development to
    comply with requirements of law in the handling of and
    accounting for monies passing through this Trust Account.

    19.4 By far the most serious of these failures was that of the
    Trustees to the Account – and in particular Mr. Thaddeus
    Kambanei who was not only a Trustee of the Trust Account but
    was also Chief Accountable Officer to Government in his
    position as Secretary of the Department of Finance.

    19.5 The Committee therefore resolved to question the witnesses
    and give every possible opportunity for those persons to
    explain or correct information obtained by the Committee and
    the contents of the Report of the Auditor General. The
    Committee received no submission or further assistance from
    any person.

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  • 25

    THE INQUIRY – EVIDENCE AND FINDINGS

    20. WITNESSES UNDERSTANDING OF THEIR OBLIGATIONS

    20.1 Considering the serious lapses by senior Public Servants
    suggested by evidence and information held by the Committee,
    the Committee carefully questioned Mr Yer, Mr Kambanei, Mr
    Kalinoe and Mr John Alman, the Provincial Administrator of the
    East Sepik Province, as to their understanding and knowledge
    of the basic duties of accountability and accounting for public
    monies imposed on them by the Public Finances
    (Management) Act.

    20.2 The Committee also questioned Mr. Thaddeus Kambanei and
    Mr. Yer as to their understanding of the obligations of a Trustee
    both generally and as imposed on them by the Public
    Finances (Management) Act and Financial Instructions
    promulgated thereunder and their the duties an obligations
    imposed on Officers of the Department of Finance.

    20.3 Both witnesses were further questioned about their knowledge
    and understanding of the terms of the Trust Instrument
    establishing the Sepik Highway, Roads and Bridges
    Maintenance and Other Infrastructure Trust Account.

    20.4 All witnesses gave unequivocal sworn evidence that they had
    read, were familiar with and understood the requirements
    imposed on them by the Public Finances (Management) Act
    – particularly in respect of the management of Trust
    Instruments and accounting for trust monies, payment of trust
    monies and obligations and duties at law generally arising from
    the position of a Trustee or accountable Officers of
    Government.

    20.5 This Committee concludes that each of these very senior Public
    Servants, quite properly, clearly knew their duties and
    obligations.

    20.6 This Committee also concludes that Mr. Kambanei failed to
    comply with or fulfill these legal obligations – and did so
    knowingly and intentionally.

    20.7 Mr. Yer as the newly appointed Secretary for Finance, has
    accepted responsibility to deal with the failings of the Trustees

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  • 26

    as best he now can and the Committee commends his stated
    attitude.

    20.8 Mr. Alman, in his capacity as the Provincial Administrator of the
    East Sepik Province, is apparently attempting to rectify the
    excesses of the previous administration, but with no records or
    accounts of any significance to assist him.

    20.9 Further, in light of the very serious allegations and information
    before this Committee, Mr. Kalinoe, Mr. Kambanei, Mr. Yer, and
    Mr. Alman, the Provincial Administrator of the East Sepik
    Provincial Government were each asked to advise the
    Committee as to whether they had been subject to any
    pressure, influence, or directive from any source whatsoever
    (in particular political pressure) to make any payment from the
    Trust Account or for any particular purpose and if so, what
    pressure had been brought on them, by whom and for what
    purpose.

    20.10 Each witness – particularly Mr. Kambanei – clearly stated that
    at no time had any pressure been brought upon any of the
    Trustees from any quarter to achieve any particular result or to
    influence them in any way in their conduct of the Trust Account
    and all matters associated with it.

    20.11 Mr. Kambanei’s evidence is particularly relevant. He told the
    Committee:

    “As far as the administration of the Trust Accounts are
    concerned, there is absolutely no pressure on anybody
    whatsoever insofar as expenditures out of the Trust
    Account is concerned. The prerogative of determining
    whether we … that expenditure is genuine is legitimate
    and confines within the Trustees that spells particularly
    the purpose of the Trust Account.

    …There has been no pressure at any point in time even
    to myself and in my previous capacity as Secretary …”

    20.12 In light of these clear and unqualified answers, this Committee
    accepts that every decision, action and therefore every failure

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  • 27

    of the Trustees and all other responsible Officers were entirely
    their own.

    20.13 Every decision, every payment, every cheque and every failure
    to provide accounts, records or documents in accordance with
    law and therefore every failure and/or breach of law was wholly
    the responsibility of the relevant Officers and not the result of
    any duress or compliance with political or any other pressure or
    influence.

    20.14 Considering the almost total failure by the Trustees – and in
    particular Mr. Thaddeus Kambanei – to obey virtually any
    requirement of law in the management of this Trust Account or
    to comply with the Trust Instrument itself and the failure of the
    Department of Finance and other Government entities to act
    lawfully, properly and transparently in the conduct of this Trust
    Account, this Committee can only conclude that the Trustees
    and Officers responsible for these failures were totally unfit to
    hold the position which they did and that they should be
    referred to appropriate investigatory agencies to be made fully
    accountable for conduct, decisions and failures which, as we
    have said, were entirely their own.

    21. THE TRUST INSTRUMENT

    21.1 The Trust Instrument was issued by the then Minister for
    Finance, Planning and Rural Development, the Honorable Andrew
    Kumbakor MP on the 15th May 2002.

    21.2 He exercised his power as a National Minister and established
    the Trust Account under Section 15 of the Public Finances
    (Management) Act 1995.

    21.3 The Account was styled Sepik Highway Roads and Bridges
    Maintenance and Other Infrastructure Trust Account and this
    Committee finds that it was properly established in accordance
    with the terms of Section 15 of the Public Finance
    (Management) Act.

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  • 28

    22. THE OBJECTIVES OF THE TRUST

    22.1 The objectives of the Trust are clearly stated in Sections 1(b)
    and 2(c) and (d) of the Trust Instrument. That Instrument was
    received into evidence by the Committee.

    22.2 The Trust Instrument states the purpose of the Trust Account to
    be:

    “to hold all monies received from the National
    Government, Provincial Government, Local Level
    Government and any other donor agencies”.

    22.3 The Trust Instrument has been carefully considered by the
    Committee. The Committee is of the view that the Instrument
    was poorly drafted, loose in its terms and provided very limited
    guidance to the purpose of the Trust. It was, in fact, an open
    invitation to abuse – and this is precisely what occurred.

    22.4 The Committee was unable to conclude whether the terms of
    the Instrument set out in Para. 22.2 were complied with because
    neither the Committee nor the Auditor General can trace the
    source of deposits into the Account.

    22.5 The Instrument states that all purchases and withdrawals on the
    Trust Account shall be for the purposes established by the Trust
    Account and shall comply with the Public Finances
    (Management) Act subject to the prescribed procedures and
    sufficient balance being available in the Account. This must
    include the proper accounting and record keeping required by
    that Act and the Financial Instructions.

    22.6 It is notable that the Provincial Administrator of the East Sepik
    Province Mr. Alman expressed the view to the Committee that
    the term “other infrastructure projects” would include
    maintenance, houses and construction of buildings and extend to
    contracts for service.

    22.7 Upon that definition, the Trust Instrument could be used for
    almost anything, provided that the purpose of the expenditure
    was physically located with the Sepik Province. It is notable that
    even this wide definition was breached when payments were

    29

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  • made or in projects and other matters outside the Sepik area
    and for purposes such as “financial assistance”.

    22.8 The Committee tried to ascertain how the Trustees understood
    the meaning and purpose of the Trust Instrument.

    22.9 Mr. Kambanei described his understanding of the Trust
    Instrument and the purpose of the Account in the following way:

    “It should be noted that the Trust Account itself is not
    called East Sepik Highway Trust, not only for road and
    bridge infrastructure, meaning that other
    infrastructures in relation to projects in the East Sepik
    Province. The East Sepik Highway Trust Account is
    actually a vehicle that actually delivers project
    implementation in the East Sepik and West Sepik
    Provinces. The initial purpose of the Trust when it was
    first established by former Minister for Finance and
    Planning, Honorable Andrew Kumbakor there was no
    demarcation insofar as whether it was for East Sepik or
    West Sepik Provinces.

    It was called “Sepik Highway Roads and Bridges and
    Other Infrastructure Trust Account” because the
    infrastructure cuts through both East and West Sepik
    Provinces.

    So, it became a vehicle for any funds that had been
    identified as savings to be put into the Trust Account
    then the Trust Account facilitates the payment out.
    … I would like to make it very clear that there has also
    been expenditure that goes out of the Trust Account
    which pertains to projects that are not within the fiscal
    framework of the Government.

    For instance, if you have MPs who chose to identify
    projects and get the Prime Minister to approve the
    project without having it actually included in the
    budget, then they use the Sepik Highway Trust Account
    as the vehicle. ( Our emphasis.)

    22.10 The Committee considers this evidence to be an important
    description of the understanding of the former Secretary for

    30

  • Page 33 of 101

  • Finance and Trustee of the Trust Account. It is particularly
    relevant evidence when the actual management and conduct of
    the Trust Account by the Trustees and Mr. Kambanei in particular,
    is considered.

    22.11 The Trust Account was not regarded as part of any Budgetary
    process but as a conduit for any money identified (presumably
    by Mr. Kambanei) as “savings” (no matter what their original
    designated purpose) to be applied to any unfunded project that
    attracted political favour but for which there was no approved or
    budgeted funding.

    22.12 Indeed Mr. Kambanei also told this Committee that if he was told
    to fund any particular project for which funding was not allocated
    or budgeted, it was his duty to find the money.

    22.13 In other words, as Head of Department and Trustee, his job was
    to do what he was told – not to act independently in protection
    of the public purse.

    22.14 This Committee concludes that Mr. Kambanei, by his evidence
    has demonstrated that he did not understand his role as Head of
    the Department of Finance or a Trustee.

    22.15 If Mr. Kambanei is correct, all it took to get money from the
    Trust Account was to attract the support of the Prime Minister
    and Mr. Kambanei’s only function was to find the money and pay
    it.

    22.16 This attitude is well illustrated by Mr. Kambanei’s claim that he
    made payment from the Trust Account to Jubilee University not
    on a basis of a measured decision by an independent Trustee,
    but because the Prime Minister told him to do so – a contention
    that, in fact, is incorrect.

    22.17 Not once did Mr. Kambanei state to this Committee that he was
    required to act independently as a Trustee and to comply with
    Law when exercising his discretion to make payments from the
    Trust Account.

    22.18 The Committee concludes that in his evidence is the principal
    cause of the subsequent unlawful conduct of the Trust Account
    and the complete failure to keep records and accounts of almost

    31

  • Page 34 of 101

  • any money passing through that Account and the apparent
    paralysis of the Department of Finance to oversee the Account
    and enforce the Law.

    22.19 In short, the Trustees and the Department of Finance had
    subsumed or abandoned their duties at Law in favour of
    administering public money as political facilitators rather than
    guardians.

    Accountability

    22.20 The Trust Instrument states that for proper control and
    management of the Trust Account and in accordance with
    Section 19 of the Public Finances (Management) Act, an
    account is to be established and opened with a reputable
    commercial Bank approved by the Minister for Finance. Such an
    account was opened and maintained at the Bank of South
    Pacific.

    22.21 The Committee has carefully considered the requirements in the
    Trust Instrument for the signing of cheques from the Trust
    Account. The Committee concludes that at least three and
    probably four signatories are required on all cheques and for
    transfers from the Trust Account.

    22.22 The signatories to the Account were the Secretary for Finance or
    his delegate, the Assistant Secretary Public Accounts, the
    Provincial Administrator, the Provincial Treasurer and the
    Provincial Works Manager.

    22.23 Ideally this process should have ensured strict control over
    payments from the Trust Account. In fact, the Trust Instrument
    was completely ignored in the payment of cheques from the
    Trust Account and this Committee has identified circumstances
    where cheques were signed by a Senior Government Official who
    was not a Trustee.

    Reporting Requirements

    22.24 In light of the apparent failures to adequately, properly and
    lawfully maintain reports and accounts of transactions into and
    out of this Trust Account, the Committee gave careful

    32

  • Page 35 of 101

  • consideration to Section 3 of the Trust Instrument which
    provides reporting requirements.

    22.25 Section 3 of the Trust Instrument requires that the Provincial
    Administrator of East Sepik Provincial Government or his
    delegate maintain records pertaining to the Account as required
    by the Public Finances (Management) Act.

    22.26 Further, the Trust Instrument requires that the Provincial
    Administrator furnish to the First Assistant Secretary of the
    Public Accounts Division of the Department of Finance within
    fourteen days at the end of each month, bank statements and
    bank reconciliations for the Trust Account and a Statement of
    Expenditure of the Trust Account on a monthly basis by program
    and activity.

    22.27 Section 19 (4) (d) Public Finances (Management) Act
    requires that the Provincial Administrator submit to the
    Secretary of the Department of Finance at the end of each fiscal
    year, a statement of account for the previous year.

    22.28 The Committee could not obtain evidence from the Provincial
    Administrator that this reporting obligation had been met. As a
    result neither the Trustees nor responsible Officers have met
    their responsibilities under the Public Finances
    (Management) Act or the Trust Instrument.

    22.29 In this regard, the Department of Finance has completely failed
    to maintain any responsible control over the Trust Account at all.
    It has failed to comply with the requirements of law in the
    accounting for and control of the monies passing through the
    Trust Account.

    22.30 Further, Mr. Thaddeus Kambanei, the then Secretary for Finance
    and a Trustee of the Trust Account has failed to fulfil his duties in
    either or both capacities, to any degree.

    22.31 That such incompetence and dereliction can exist at the senior
    level of the Public Service and, in particular, in the person of the
    Head of the Department responsible for financial matters is a
    matter of National concern. This is particularly so when that
    Officer took personal control of the Trust Account and seemingly
    managed it with no control or accountability that this Committee
    could identify.
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  • Page 36 of 101

  • 22.32 The failures of that Officer are compounded by his admission to
    this Committee that he understood the requirements of Law
    attending his positions as both the Head of Department
    responsible for financial matters and as a Trustee of the Account
    – yet failed to perform them.

    22.33 The net result of these failures by all Trustees is that over K 30
    million of public money has disappeared for little or no tangible
    benefit.

    22.34 These failures to keep accounts and records have also rendered
    this Committee and the Auditor General unable to find the
    source of all the money paid into the Account or any bases of
    Law for the payment out of almost all the money that passed
    through the Account.

    22.35 Neither could or would the Department of Finance tell this
    Committee the source of K 23 million paid into the Trust
    Account or produce any evidence showing that any payment
    from the Trust Account was lawful.

    22.36 The following Trustees were appointed during the period of the
    Trust Instrument. The Committee could find no relevant bank
    documentation for most of these Trustees who were apparently
    never made signatories to the Account. The appointments were:

    Trustees Designations Period of Appointment

    Nelson Hungraboss Provincial Administrator 2000 – Nov. 2001

    Raymond Kamnobi Provincial Administrator Nov.2001–Sept. 2002

    Fantson Yaninen Provincial Administrator Oct. 2002-Aug. 2005

    John Alman Provincial Administrator Sept. 2005 – to date

    Fantson Yaninen Provincial Treasurer Up to Sept. 2002

    Haru Yahamani Provincial Treasurer 2002 – 2005

    Binus Naugre Provincial Treasurer 2005 – June 2006

    Stanford Nahuet Provincial Treasurer June 2006 to date

    34

  • Page 37 of 101

  • Joe Asinumbu Works Manager Dow 1998 – 2003

    Brian Alois Works Manager Dow 2003 – 2005

    Paul Enemba Works Manager Dow 2005 – to date

    Accounting Books and Records

    22.37 The Trust Instrument provides that the Provincial Administrator
    maintain proper accounts and records as required by Section 19 of
    the Public Finance (Management) Act.

    22.38 This Committee finds that accounting books and records were
    completely inadequate in many respects and were not properly
    maintained as required. The Department of Finance did nothing to
    rectify this defect, – even after management of the Trust Account
    was removed to Mr. Thaddeus Kambanei in Waigani.

    22.39 The Office of the Auditor General conducted a search of the
    relevant books and records maintained in the Provincial
    Government Offices in Wewak and found the following:

    Name of records Year Status
    Computer Cashbook 2002- Incomplete compared with Bank
    2005 Stmt
    Computer Trust Transaction 2002- Incomplete compared with Bank
    Detail 2005 Stmt
    Bank Statements 2002- Incomplete
    2005
    Bank Reconciliation 2002- Partly provided, incomplete
    Statements 2005
    Payment Vouchers 2002- Incomplete – material payments
    2005 missing
    Related PEC Decisions 2002- Incomplete
    2005
    Related PSTB Minutes 2002- Incomplete
    2005
    Authority to Pre-Commit 2002- Not provided as Treasury Office
    2005 closed at the time of audit
    Paid cheques 2002- Not provided
    June 2005

    22.40 This Committee sought to obtain better documentation or records

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  • by serving Notices to Produce on the Department of Finance, the
    East Sepik Administrator, the Department of Planning and the Office
    of Rural Development.

    22.41 The Committee received a small bundle of documents from the
    Secretary of Finance which did not add anything or relevance to
    the documents obtained by the Auditor General.

    22.42 In particular there was a complete absence of any records of
    tender procedures, assessments and awarding of tenders for
    virtually any Contract or Project funded from the Trust Account.

    22.43 This Committee finds that vouchers with a total value of K
    2,847,709 paid from the Trust Account, are missing.

    22.44 This Committee examined the relevant vouchers which were
    available for procedural and legal compliance and makes the
    following findings:

    • Payment vouchers were not signed by Financial
    Delegates, Examiners and the Certifying Officer prior to
    payments being effected. This is a breach of the Public
    Finance (Management) Act. It also represents a
    failure of essential internal controls of expenditure from a
    Trust Account and a complete breach of obligation by the
    Trustees and the Department of Finance.

    • In many instances, payment vouchers were signed by the
    same person as the Financial Delegate, Examiner and
    Certifying Officer. This is a breach of the Public Finance
    (Management) Act which requires effective separation
    of duties in the processing of payments. Such “single
    officer” processing payments represents a failure of
    essential internal controls over expenditures out of the
    Trust Fund.

    • Many instances of payments without proper supporting
    documents were also noted, indicating a failure to ensure
    proper internal controls over expenditures and the
    absence of the Certifying Officer’s role provided by
    Section 32 of the Public Finance (Management) Act.

    36

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  • • Payments for contracts were completely unsupported by
    any relevant contract documents such as Supply &
    Tenders Board approvals, company profiles, copies of
    actual contracts and other necessary documents such as
    progress and completion certificates to authenticate the
    payments made. This is a fundamental requirement and
    represents a complete breach of duty by all Officers
    concerned – in particular the Trustees of the Account and
    by Officers of the Department of Finance.

    • In many instances three quotations from potential
    suppliers of goods and services were not obtained and
    compared to ensure selection of the best value for money
    supplier of goods and services. This is a breach of
    Section 40 of the Public Finances (Management) Act.

    22.45 The most disturbing aspect of these failures is the fact that
    they must have been known to the Department of Finance
    and to the Trustees of the Account, yet it troubled them not
    at all.

    22.46 This appalling situation constitutes a breach of the Public
    Finances (Management) Act by every Trustee and by the
    responsible Officers of the Provincial Administration, the
    Department of Finance and the Head of that Department and
    calls for deeper and expert investigation.

    Conclusion

    22.47 Information and evidence gathered by the Committee prior to
    the opening of the Inquiry suggested that there were failures
    by Trustees to comply with almost every requirement of the
    Trust Instrument and thereby that they failed to carry out the
    duties of Trustees.

    22.48 The same information and evidence clearly showed a failure
    by the Provincial Administrator, his staff, the Department of
    Finance and all other responsible officers at every level to
    maintain virtually any accounting records. Those records
    which were provided were almost entirely incorrect or
    otherwise defective and failed to withstand scrutiny of the
    Auditors.

    37

  • Page 40 of 101

  • 22.49 The appalling state of management of the Account as it was
    revealed in information and evidence gathered by the
    Committee, was a matter of very great concern to Committee
    Members.

    22.50 Such failures would be totally unacceptable in junior or even
    middle level management. That such a state of affairs could
    have existed and be the result of decisions and failures of the
    most senior Public Servants in Papua New Guinea required, in
    the opinion of the Committee that these Officers be heard and
    given every opportunity to rebut, qualify, explain or correct
    the information before the Committee.

    22.51 Having given proper and full consideration of all the evidence
    including, and in particular, submissions and oral evidence
    given by Mr. Kambanei, Mr. Yer, Mr. Kalinoe and the
    Provincial Administrator of the East Sepik Province, Mr. Alman
    – the Committee must report as follows on the conduct of this
    Trust Account:

    23. BANK STATEMENTS

    23.1 The Committee finds that Bank Statements and Bank
    Reconciliation Statements were missing and could not be
    provided either to the Committee or to the Office of the
    Auditor General.

    23.2 The requirement to keep such records is absolutely basic.

    23.3 The failure to do so is either the result of complete
    incompetence (in which case all responsible officers should be
    removed from their positions) or was intentional (in which
    case all responsible officers should be removed from their
    positions). The Committee cannot find any other possible
    explanation for the missing and incomplete documentation.

    23.4 Where bank statements were obtained from the Bank,
    reconciliations have not been located and subsequent
    discrepancies revealed by reconciliation of the cash book to
    bank statements confirm that the reconciliations have not
    been carried out at all.

    38

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  • 23.5 That K30 million of public money passed through this account
    with no apparent reconciliation is an appalling revelation.

    23.6 The Auditor General concludes:

    “This represents a significant control weakness in the
    management of the Trust Account and the failure by
    the Trustees to meet the requirements of the Trust
    Instrument and the Public Finances (Management)
    Act”.

    23.7 This Committee agrees completely with that conclusion and
    maintains a very strong suspicion that Trustees and responsible
    Officers in the Department of Finance and the relevant
    Provincial Governments intentionally failed to keep these
    records or perform the accounting tasks in order to leave no
    evidential trail of misconduct.

    24. ANALYSIS OF RECEIPTS AND PAYMENTS FROM BANK
    STATEMENTS

    24.1 Receipts and payments were fully analysed from the Bank
    Statements commencing with the first deposit into the Trust
    Account on the 24th December 2001 and the last noted
    transaction on the 28th April 2006.

    24.2 This process revealed the following:

    Total Receipts 31,012,976

    Total Payments 30,251,473

    Closing balance as at 28.04.2006 761,503__

    Therefore, a total of K 30,251,473 passed through the Trust
    Account. The Law requires that every toea of this money be
    accounted for and acquitted.

    24.3 So derelict was the record keeping, accountability and
    reporting by Trustees, the Provincial Government and the
    Department of Finance that neither this Committee nor the

    39

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  • Office of the Auditor General were able to identify the source of
    funds which were made into the account.

    24.4 This Committee has conducted detailed inquiries and
    demanded production from the Department of Finance of
    information sufficient to rectify this defect. Nothing has been
    forthcoming, despite promises from Mr. Gabriel Yer, the current
    Secretary for Finance, that he would do so.

    24.5 Therefore, the position at the conclusion of this Inquiry is that
    this Committee cannot identify the source of approximately K
    23 million of public funds that passed through this Trust
    Account. The Committee knows where the money went but
    cannot find where it came from. There could be no more basic
    failure of accountability and legal obligation than this.

    24.6 As this Committee has said in the past, there is a very serious
    attitude and competence problem within the Public Service and
    particularly in the Department of Finance.

    24.7 Unless this incapacity to obey the Law is immediately
    addressed by Government – particularly in the area of fiscal
    management – the decline of Governance and the failure to
    deliver services will continue.

    25. CASH BOOKS

    25.1 Computer cash books for the years 2002 to 2005 ( insofar as
    they exist) were found to be materially inconsistent with bank
    statements.

    25.2 The Committee concludes that this is a significant failure by
    Trustees in the management of the Trust Account and a failure
    to meet the requirements of the Trust Instrument and the
    Public Finances (Management) Act and Financial
    Instructions.

    25.3 A huge amount of public money passed through this Account
    and was paid to dubious, and in many cases, plainly improper
    recipients. Cash books are a basic accounting tool. They were
    not produced or were incomplete and incorrect.

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  • 40

    25.4 The Department of Finance and the Provincial Government
    failed completely to maintain proper accounting records and to
    be accountable to any competent degree for the management
    of this Trust Account.

    26. BANK RECONCILIATIONS

    26.1 It was a requirement of Section 3(b) of the Trust Instrument
    that monthly Bank Reconciliation Statements were provided to
    the First Assistant Secretary, Public Accounts of the
    Department of Finance to enable him to meet his obligations to
    monitor the Trust Account. This was not complied with.

    26.2 Further, the evidence before the Committee shows that neither
    the then First Assistant Secretary nor Department of Finance
    made any attempt whatsoever to enforce this requirement and
    had no apparent interest in doing so.

    26.3 This Committee is very concerned at the failures of a First
    Assistant Secretary of the Department of Finance to meet these
    basic requirements of law.

    26.4 The Committee concludes that the Department of Finance and
    the First Assistant Secretary of the time were either completely
    incompetent or acted intentionally to obscure any evidential
    trail and/or control over the movements of money in and out of
    the Trust Account by not requiring the provision of monthly
    Bank Account Statements.

    27. RECEIPTS INTO THE TRUST ACCOUNT

    27.1 This Committee finds that the Provincial Administrator has not
    maintained relevant revenue accounts and records for receipts
    into the Trust Account.

    27.2 Some, but not all receipt copies, collector statements, bank
    deposit butts, bank statements and related correspondence
    were produced to support receipts to the Trust Account.

    27.3 Ledger accounts were not maintained to show the sources of
    receipts and as a result receipts were not identified into each
    project.

    41

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  • 27.4 It was not possible for this Committee or the Auditor General to
    trace sources of funding into the Account and ascertain the
    purposes for which the funds were remitted. This means that
    Trust monies cannot be traced – the most fundamental
    obligation of a Trustee.

    27.5 In this regard, the Trustees failed to keep appropriate accounts
    and records, breached the Trust Instrument and the Public
    Finances (Management) Act thereby and may well be
    personally responsible for any loss arising as a result of these
    failures.

    27.6 The Provincial Administrator of the time failed to manage the
    financial aspects of the Trust Account to any degree of
    competence whatsoever in that he failed to maintain proper
    accounts and records relating to receipts, accounting records
    and bank statements.

    27.7 The Committee notes that the Department of Finance is the
    responsible Department charged with the duty of ensuring that
    these records and accounts were kept and produced as
    required by the Trust Instrument and the Public Finances
    (Management) Act.

    27.8 The Department completely failed in this duty. This is a
    particularly serious matter when it is considered that the
    Secretary of the Department of Finance was also a Trustee of
    the Account and, therefore bore a double responsibility to
    ensure proper management of the Trust Account.

    27.9 For this, and other aspects of mismanagement of the Trust
    Account, Mr. Kambanei is personally accountable but has failed
    to give any or any proper explanation for these failures.

    27.10 Mr. Kambanei, as Secretary for Finance, had a clear conflict.
    He was, by reason of Section 4 and 19 (2) of the Public
    Finances (Management) Act responsible as Secretary for
    overseeing himself as a Trustee and correcting and being
    ultimately accountable for his own shortcomings as a Trustee
    – an impossible position.

    27.11 Equally, as a Trustee, he was required to report to himself in
    the capacity of Secretary for Finance pursuant to Section 19

    42

  • Page 45 of 101

  • (3) and (4) (c) and (d) and then consider the adequacy of his
    own performance and obedience to the requirements of an
    Act that he himself administered.

    27.12 This conflict should have been obvious. The Committee
    supposes that it also exists in respect of every other Trust
    Account of which the Secretary for Finance is a Trustee. If so,
    the Minister for Finance should take steps to replace the
    Secretary as Trustee in order that the appearance of proper
    and transparent oversight can be maintained.

    27.13 Once again, the Committee concludes that the failures were
    systemic and systematic in every single Officer responsible
    either as a Trustee or as an accountable Officer up to and
    including the Head of the Department of Finance.

    27.14 Once again, the Committee concludes that these failures were
    either the result of gross negligence and incompetence or
    were intentional. They cannot be the result of mere oversight.

    27.15 In light of the clear pattern of failures, the Committee
    maintains a very strong suspicion that these failures were
    intentional and were designed to confound any audit in an
    attempt to trace movement of money into and out of the
    Trust Account and in particular to prevent the source of
    deposits from being traced.

    27.16 If so, all those Officers responsible should be referred for
    further investigation by expert investigatory and law
    enforcement agencies.

    28. PROJECT EXPENDITURE

    28.1 The Trust Instrument provides that all withdrawals from the
    Trust Account shall comply with the Public Finances
    (Management) Act.

    28.2 This Committee has identified many instances where
    payments and withdrawals from the Account breached the
    Public Finances (Management) Act.

    28.3 Before addressing the evidence, the Committee iterates that
    the responsible officers were carefully questioned by the

  • Page 46 of 101

  • 43

    Committee on their understanding of the requirements of the
    Public Finances (Management) Act.

    28.4 As would be expected from Officers of the seniority of Mr.
    Kambanei, Mr. Yer, Mr. Kalinoe and Mr. Alman, all those
    witnesses confirmed their knowledge and understanding of
    the requirements of the Public Finances (Management)
    Act.

    28.5 This Committee finds that all officers, including the Trustees,
    that were responsible for management of the Trust Account
    failed to comply with requirements of Law concerning
    expenditure from a Trust Account.

    28.6 The Committee specifically finds:

    Procurement

    28.7 Sections 39 and 40 of the Public Finances (Management)
    Act set forth mandatory steps that must be followed prior to
    contracting for the provision of services to the State.

    28.8 These requirements include the calling of public tenders and
    steps to be taken in the evaluation of these tenders.

    28.9 Clearly this process was established to ensure that the
    procurement process is fair and transparent, that the
    requirements are properly complied with and that the State
    obtains value for money.

    28.10 All tenders are to be evaluated against this specification to
    ensure that a contract protects the interest of the State and
    provides a basis for impartial evaluation of results and
    payments.

    28.11 Further, the Trust Instrument specifies the purposes for which
    Trust money can be expended.

    28.12 This Committee concludes that a number of projects included
    expenditures that were not provided for by the Trust
    Instrument.

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  • 28.13 Further, this Committee finds that there have been
    expenditures from the Trust Account on matters which do not
    form any part of Sepik infrastructure – even taking that term
    at its widest definition.

    28.14 For instance, half a million kina was paid for “financial
    assistance”. The Committee sought detailed explanations as
    to each payment which made up this total, but received
    nothing from the Trustees, the Department of Finance or the
    Provincial Government.

    28.15 The Committee sets forth a summary of each project funded
    by the Trust Account and failures of law, failures to comply
    with the Trust Instrument, breaches of the Public Finances
    (Management) Act and breaches of accountability identified
    by the Committee:

    Contractor Project Amount Comments
    K
    Westco Limited Construction Yangoru 482,300 Did not follow procurement
    2002 -2003 High School processes (PSTB).
    Contractual obligations not
    fulfilled.
    Governor’s House 85,000 Information and accountable
    Maintenance documentation not available.
    Contractual Obligations not
    fulfilled.
    Angoram D.O & 105,670 Did not follow procument
    Brandi H. Sch Design procedures (PSTB).
    Green Hill Ami-Sowom Road 881,590 Did not follow procurement
    Investment Maintenance processes (PSTB).
    2002, 2003 & 2004 Information and accountable
    documentation not available.
    Maia-Nuku Road 1,119,632 Information and accountable
    Maintenance documentation not available.
    CCS Anvil (PNG) Ltd Management 79,500 Certificate of Inexpediency
    2003 Consultancy Services issued.
    May not be related to objectives
    of Trust.
    Information and accountable
    documentation not available.
    Shorncliffe (PNG) Sealing Sepik 2,524,322
    Ltd Highway & Wewak
    2003 – 2004 Town
    Sepik Project Construction 157,870 Did not follow procurement
    Managers and Angoram District processes (PSTB).
    Consultants Office
    2004 – 2005 May not be related to objectives
    of Trust.
    Information and accountable
    documentation not available.
    Baimusu Maintenance District 154,295 Did not follow procurement

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  • Contractor Project Amount Comments
    K
    Construction Ltd Treasury Houses processes (PSTB).
    2005 Ambunti Information and accountable
    documentation not available.
    May not be related to objectives
    of Trust.
    Niugini Builders District Treasury Office 305,000 Did not follow procurement
    2005 Building Pagwi, processes (PSTB).
    Angoram May not be related to objectives
    of Trust.
    Information and accountable
    documentation not available.
    Garamut Pagui Ambunti District 137,797 Did not follow procurement
    Enterprises Treasury Office processes (PSTB).
    2005 Building May not be related to objectives
    of Trust.
    Information and accountable
    documentation not available.
    SBA Limited Maintenance Jama- 50,000 Did not follow procurement
    2004 – 2005 Pagwi Road processes (PSTB).

    Brandi Secondary 632,065 Payments exceeded contracted
    School Hall amount.
    Construction Contractual Obligations not
    fulfilled.
    Department of Supervision & Pmt 1,208,700 Information and accountable
    Works Services documentation not available.
    2002, 2003 & 2004 May not be related to objectives
    of Trust.

    Sepik Highway 6,000,000 Information and accountable
    Counter Funding documentation not available.
    May not be related to objectives
    of Trust.

    Towa Plumbing & Provincial Treasury 37,556 Information and accountable
    Steel residence documentation not available.
    2005 maintenance May not be related to objectives
    of Trust.

    Kipma Builders Mobilisation cost 28,500 May be not related to objectives
    2002 of Trust.
    Information and accountable
    documentation not available.

    Sepik Project Mgrs Supervision Fee 20,934 May not be related to objectives
    2004 Angoram Dist Office of Trust.
    Information and accountable
    documentation not available.

    Melkia Investment Patigo/Pagwi Road 26, 400 Information and accountable
    Ltd Maintenance documentation not available.
    2005
    O’Brian Trust ESPG Contribution SS 1,500,000 May not be related to objectives
    Account Tuna Corp Share of Trust.
    2004 Information and accountable
    documentation not available.

  • Page 49 of 101

  • Contractor Project Amount Comments
    K
    Steamships Kwik Built Houses 491,567 May not be related to objectives
    Hardware Wosera District of Trust.
    2005 Treasury Information and accountable
    documentation not available.

    Telikom PNG Ltd Mt Turu Repeater 600,000 May not be related to objectives
    2005 Station of Trust.
    Information and accountable
    documentation not available.

    Bake Pty Ltd Dambui–Timbunkie 570,000 Did not follow procurement
    2004 Highway processes (PSTB).
    Maintenance May not be related to objectives
    of Trust. (National Project).
    Information and accountable
    documentation not available.

    28.16 This Committee could only find one Contract that appeared to
    have been lawfully and properly instigated and carried out.
    That contract was a project for sealing the Sepik Highway and
    Wewak Town and was given to Shorncliffe (PNG) Limited to a
    value of K 2,524,322.

    28.17 Every other Contract or Project paid for from the Trust
    Account did not, upon the evidence received by the
    Committee, comply with Law in either its procurement,
    assessment, oversight, performance (or lack of it), results,
    payment, accounting or acquittal.

    28.18 The Committee finds that the Department of Finance, the
    Trustees, Provincial Government and every other responsible
    Officer or Government arm, agency, Department or entity
    failed in its duty to identify these failures and to rectify them.

    28.19 In light of evidence and material which will be set forth later in
    this report, it is perfectly clear that incompetent conduct
    existed at the highest level of the Department of Finance and
    within the Provincial Government and that responsible officers
    were prepared to and did ignore requirements of law, their
    duties and the obligations of Trustees to facilitate improper
    ends.

    28.20 Further, requirements of the Public Finances (Management)
    Act requiring Tenders for such work were ignored and no
    records or accountable documentation were maintained.

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  • 28.21 These failures are clearly illustrated by the fact that payments
    were made from the Trust Account to companies which did not
    exist, for work which had not been performed, for projects
    which did not comply with procurement procedures, in advance
    of any work actually starting and/or for projects which did not
    fall within the terms of the Trust Instrument at all.

    28.22 These payments were made without any query, demur, check,
    question or requirement for fulfillment of law by the
    Department of Finance and its officers and, to compound that
    failure, at the direction or order of the then Head of that
    Department.

    28.23 The Committee makes the following specific findings:

    Westco Limited

    28.24 This Company was apparently deregistered on the 31st July
    1995 for not submitting Annual Returns to the Investment
    Promotion Authority.

    28.25 That Company received three payments from the Trust
    Account. The Committee has examined each of those contracts
    and concluded as follows:

    Construction – Yangoru High School – K482,300.00

    28.26 The Provincial Government was not able to provide any related
    contract documents and neither the Auditor General nor this
    Committee is able to confirm any conditions of the contract
    engagement.

    28.27 However, this Committee does find that the contract did not
    follow procurement processes and that the contractual
    obligations have not been fulfilled. This is a breach of the
    Public Finances (Management) Act.

    28.28 Notwithstanding the fact that the construction company did not
    exist, that procurement processes did not occur and that the
    project has not been completed, a total of K 482,300 was paid
    to Westco Limited by the Trustees with no query or check by
    any of the Trustees or the Department of Finance.

    48

  • Page 51 of 101

  • 28.29 The Auditor General reports that his Officers visited the site of
    the project on the 6th June 2006. Two classroom buildings and
    two staff houses were completed and in use, however the two
    dormitories had not been constructed although payment had
    been made from the Trust Account.

    28.30 The Auditor General concludes the two staff houses which had
    been built were not built according to specifications and were
    too small.

    28.31 The Headmaster of Yangoru Secondary School advised that he
    was seeking reimbursement from the Trustees of part of the
    money that the School had secured from the Department of
    Finance through the then Finance Minister, Honourable Andrew
    Kumbakor MP and paid into the Trust Account to fund the
    project.

    28.32 The School has commenced legal proceedings against the
    contractor for recovery of part of the unfulfilled portion of the
    contract sum.

    28.33 This Committee sought explanation as to why contract
    payments have been made to Westco Limited prior to
    completion of the contract and what action had been taken by
    the Provincial Government to ensure completion of the
    contract. No explanation was provided.

    28.34 The Committee finds that the Trustees have failed to meet the
    procurement procedures in Sections 39 and 40 of the Public
    Finances (Management) Act in the engagement of Westco
    Limited for this project.

    28.35 The Committee finds that the Provincial Administration has
    failed to manage the contractual arrangement to ensure that
    Westco was delivering the services for which they were
    contracted prior to processing invoices for payments of K
    482,300 of public monies.

    28.36 The Committee finds that the Department of Finance failed to
    properly administer or account for this project or the monies
    expended on it and failed to take any steps when it knew that
    the contract and the payments were unlawful.

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  • 49

    28.37 This Committee finds that the Provincial Administration failed to
    ensure that recovery action of monies expended was taken in a
    timely manner and it would appear that the likelihood of
    recovery is nil.

    28.38 The Auditor General reports that Westco Limited, although it
    was deregistered in 1995, continues to operate and obtain
    business from the Provincial Government. How this can occur
    is beyond the understanding of this Committee.

    Governor’s Residence Maintenance – Wewak Hill K85,000

    28.39 The Committee finds that documentation, information and
    accounts records of this Project and Contract do not exist.

    28.40 The Auditor General reports that contractual obligations of
    Westco Limited were not fulfilled, yet K85,000 of public money
    was paid to a non-existent company for work which has not
    been performed.

    28.41 The Provincial Supply & Tenders Board Meeting Minute No.
    07/2003 dated the 16th December 2003 record that the PSTB
    Chairman informed the Board Members that a contract for
    K149,685 was awarded to Westco Limited on the 3rd March
    2003.

    28.42 The Auditor General has ascertained that K85,000 was paid to
    Westco for mobilization and some demolition work was
    performed but the work has not proceeded beyond that point.

    28.43 No documentation, contract, accounts, records or any other
    data at all was received from the Provincial Administrator or
    the Department of Finance in respect of this Contract or its
    payment.

    28.44 The Auditor General inspected the work in May 2006. His staff
    reported that the building was severely damaged and unfit for
    occupation. There was no evidence of maintenance and the
    building stood decaying.

    28.45 Neither the Provincial Administrator nor the Department of
    Finance or the Trustees of the Trust Account had been able to

    50

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  • explain why the contractor was paid prior to completion of the
    work.

    28.46 The Provincial Administration has failed completely to ensure
    that the contractor met contract specifications and the
    payments were made only for completed work.

    28.47 This entire contract and the payments made in pursuance of it
    are unlawful and neither the Provincial Government nor the
    Department of Finance have taken any action to recover
    monies paid to the contractor or in any way attempted to
    address this serious misapplication of public monies.

    28.48 The Trustees of the Trust Account seem not to care that these
    monies have been expended for no benefit or to take any
    responsibility for those failures.

    Angoram D.O. and Brandi High School Design – K105,670

    28.49 The Committee, on the evidence before it, finds that this
    contract apparently did not follow lawful procurement
    procedures, payments were made without any evidence of
    work performed and payments were made without any control
    or accountability on the part of the Provincial Government, the
    Trustees of the Trust Account or the Department of Finance.

    28.50 Once again, the Committee finds a breach of every basic
    obligation of law and a waste and misapplication of public funds
    for no result.

    28.51 Moreover, this payment was made to a company which
    apparently did not exist – but that fact did not seem to give the
    Department of Finance, the Trustees or the Provincial
    Government Administration any concern at all.

    Greenhill Investment Limited

    28.52 This Committee, on the evidence produced to it, finds that
    Greenhill Investment was registered on the 20th November
    1992 and was de-registered on the 1st January 2001.

    51

  • Page 54 of 101

  • 28.53 The Company apparently did not exist in any capacity the time
    that it received payments from the Trust Account or contracts
    from the Provincial Government.

    28.54 These payments are a matter of concern to the Committee.
    Greenhill Investment was paid K 2,001,222 between 2002 and
    2004 for road maintenance work.

    28.55 Procurement processes were apparently not followed but
    despite this fact three payments amounting to K881,590 were
    made to Greenhill Investments for the Sepik Highway Road
    Construction Project.

    28.56 Subsequent to these payments, the Provincial Supply &
    Tenders Board agreed to a contract with Greenhill Investment
    and the balance of K 1,119,632 of the K 2,001,222 appears to
    have been paid upon the approval.

    28.57 Both the Committee and the Auditor General found great
    difficulty in tracing details of the payments due to a lack of any
    records at all.

    28.58 No attempt at all has been made by the Department of Finance
    (or any one else) to bring any accountability to this transaction.

    28.59 How contracts can be given for such large amounts of public
    money (well over the limit prescribed by the Public Finance
    (Management) Act for the calling of Tenders) and how
    contracts can be given to an apparently non-existent company
    without any control from the Department of Finance or the
    Trustees is beyond the understanding of this Committee.

    28.60 The Committee concludes that the Trustees, the Provincial
    Government and the Department of Finance failed completely
    in their duties to properly monitor, control or in any way carry
    out their obligations to properly manage this expenditure of
    public monies.

    CCS Anvil (PNG) Limited

    28.61 This Committee finds that on the 4th February 2003 a Special
    Provincial Supply & Tenders Board Meeting awarded a contract

    52

  • Page 55 of 101

  • to CCS Anvil Limited Consultants on a Certificate of
    Inexpediency.

    28.62 Why that Certificate should have been given and on what legal
    basis it was given, cannot be ascertained by this Committee
    because there are no records.

    28.63 The value of the Consultancy was K300,000. The Auditor
    General was not provided with any documentation regarding
    the basis for the issue of the Certificate of Inexpediency or any
    material showing the extent of the project to be carried out.

    28.64 A Certificate of Inexpediency can only be issued for reasons of
    emergency. What emergency could possibly justify this
    Certificate of Inexpediency is unknown.

    28.65 This Committee concludes that the Certificate was issued to
    evade the requirement of law for competitive tenders and
    therefore, that the State could not be satisfied that it obtained
    value for money.

    28.66 This Committee finds that this Consultancy was not within the
    terms of the Trust Instrument and that conclusion is supported
    by the Office of the Auditor General.

    28.67 There was no information or accountable documentation
    preserved or produced by either the Provincial Administration
    or any other witness to this Inquiry.

    28.68 A corporate plan was produced to the Auditor General but no
    other outcomes were able to be ascertained by the Auditor.

    28.69 Once again, the lack of documentation has frustrated the
    Auditor and this Committee and has made firm conclusions as
    to the propriety of these payments impossible – as no doubt
    they were intended to do.

    28.70 However, a close reading of the Trust Instrument has led this
    Committee to include that funding of CCS Anvil should not have
    been made from the Trust Instrument. There was no
    Infrastructure involved and the payment does not seem to be
    within the terms of the Trust Instrument.

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  • 28.71 Further, the contract was given upon a Certificate of
    Inexpediency which cannot now be justified. The Provincial
    Administration of the time, the Department of Finance and the
    Trustees of the Account failed in their duty to properly manage
    public funds.

    Shorncliffe (PNG) Limited

    28.72 The Committee finds that there are no adverse matters raised
    in respect of this contract. This is the only project and
    payment which, our investigators suggest, was properly and
    lawfully brought about.

    28.73 However, even in this transaction, the Committee was not
    provided with any documents or records despite directing their
    production.

    Baimusu Construction Limited – Maintenance District Treasury
    Houses – Ambunti K154,295

    28.74 The Committee finds that this contract did not follow
    procurement processes as it should have done. The contract
    was therefore not lawfully granted and payment should not
    have been made to the contractor.

    28.75 The Committee and the Auditor General find that there is no
    information or accountable documentation produced or
    available and it is the conclusion of the Committee that
    documentation and records of this project have either been
    deliberately destroyed or hidden – or never existed.

    28.76 Neither the Auditor General nor this Committee can conclude
    that the project or the payments were related to objectives of
    the Trust.

    28.77 The Department of Finance, the Department of Planning, the
    Office of Rural Development and the Provincial Government can
    provide no documentation whatsoever in relation to this
    supposed contract and the Committee concludes that the
    Trustees and the Department of Finance have been derelict in
    failing to properly oversee and ensure that there was full

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  • Page 57 of 101

  • accountability and maintenance of records of the contract and
    the payment.

    Niugini Builders

    28.78 This particular project related to the Department of Finance and
    District Treasury Rollout Program.

    28.79 This program did not go through the PSTB processes and the
    Works Manager maintained no information on the project.

    28.80 This Committee could not ascertain whether Section 40 of the
    Public Finances (Management) Act and Financial
    Instructions Part 9 on Public Tendering Processes had
    been adhered to, but it is certain this payment and the work
    performed does require referral to the PSTB.

    28.81 The Auditor General is of the view that the District Treasury
    Rollout Program may not be related to the objective of the
    Trust Account – and this Committee agrees. That being so, the
    payments are inappropriate.

    28.82 The Provincial Administrator advised that all documentation
    regarding this contract has been removed and could not be
    located. He also advised that the former Provincial Treasurer
    had been removed because of personal involvement in Baimusu
    Construction Limited – See Para 28.7 et. seq.

    28.83 The Committee concludes that documents have been
    deliberately hidden or destroyed to prevent any proper and full
    investigation of the use of this money and that the entire
    contract lacked compliance with the procurement processes
    and may not have been related to the objectives of the Trust.

    Niugini Builders District Treasury Office – Angoram K305,000

    28.84 Once again, the Committee finds that this contract did not
    follow any procurement procedures and that information and
    accountable documentation is not maintained or has been
    deliberately removed or destroyed.

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  • 55

    28.85 Certainly, no documentation was produced to the Auditor
    General or this Committee sufficient to ascertain whether the
    Project and contract were within the terms of the Trust
    Instrument or not.

    28.86 Once again, this Committee finds that payment has been made
    free of any check for legal compliance, or apparent oversight
    by the Trustees or the Department of Finance. Neither of those
    entities appears to have any concern as to these failures.

    Garamut Enterprises – Pagui Ambunti District Treasury Office –
    K137,797

    28.87 The Committee finds that this contract and project did not
    follow procurement procedures in accordance with Law.

    28.88 The Provincial Government, the Department of Finance and the
    Department of Planning have maintained no or no adequate
    information and accountable documentation which would
    enable either the Auditor General or this Committee to be
    satisfied that the project was within the terms of the Trust
    Instrument.

    28.89 Once again, the Committee finds that the Trustees have failed
    to carry out their obligations either pursuant to the Trust
    Instrument, the Public Finances (Management) Act or the
    Financial Instructions promulgated thereunder.

    SPA Limited – Brandi Secondary School Hall Construction –
    K632,065

    28.90 The Committee finds that the Provincial Supply & Tenders
    Board awarded a contract to SPA Limited at a meeting on the
    16th December 2003 (07/2003).

    28.91 The Tender price and contract was for the construction of a
    Hall. The Tender price was K 640,754 but the actual payment
    to the company was K 632,065.

    28.92 For reasons that this Committee cannot ascertain, two
    additional payments were made for the same project. K
    78,330 was paid to Westco Limited and a further K 38,445 to

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    the Receiver of Public Monies, Department of Works totalling
    K 116,776.

    28.93 The Total payment for the project was therefore K 748,841.

    28.94 The Provincial Administrator has confirmed that the increase in
    the tender value was not referred to the Provincial Supply &
    Tenders Board as required by Sections 39 and 40 of the Public
    Finances (Management) Act.

    28.95 Staff of the Office of the Auditor General inspected the
    construction site and reported that the School Hall was not in
    use due to poor engineering and because construction work
    had not been completed.

    28.96 Once again, this Committee finds that the total of K 748,841
    has been spent on construction however the project was
    incomplete and could not be used.

    28.97 The Provincial Administration failed to ensure that the contracts
    were properly managed and that payments were processed
    upon satisfactory completion of the work.

    28.98 The Trustees also failed to ensure that contracts were properly
    carried out and satisfactorily completed before payment was
    made.

    28.99 The Department of Finance failed to do anything at all to
    require or ensure compliance with Law.

    28.100 The Provincial Administrator has advised the Committee that
    the Works Manager will authorize/undertake a full investigation
    into the project “in due course”. The Committee is not
    optimistic that anything will be achieved in this regard.

    Jama-Pagui Road Maintenance – K50,000

    28.101 The Committee finds that this road maintenance project was
    not put through the Provincial Supply & Tenders Board process
    and the Works Division has no information or documents on the
    project.

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  • 57

    28.102 The Provincial Administration has supplied no documents,
    records, files or other information on this project, despite being
    directed to do so by this Committee.

    28.103 As a result of this failure and the complete absence of any
    documents at all, the Committee can make no findings as to
    the propriety or otherwise of the payments, but queries how
    the Trustees could make any payment at all, when documents
    were neither available nor before them.

    28.104 The very basic duty of a Trustee is to ensure that monies are
    paid out lawfully and properly and upon the completion of
    projects or contracts to a satisfactory standard.

    28.105 This cannot have happened in this case and the Trustees
    should be held personally liable if a breach of trust is
    established.

    28.106 To this end, the Committee intends to refer this particular
    payment for full and complete investigation by the relevant law
    enforcement and investigatory agents.

    Department of Works – K 7, 208, 700.

    28.107 These payments are a matter of very grave concern to the
    Committee.

    28.108 Neither the Auditor General nor the Public Accounts Committee
    could find any documentation whatsoever relating to these
    payments which were expressed to be:

    a) Supervision and payment services K1,208,700

    b) Sepik Highway Counterpart Funding K6,000,000

    28.109 The Committee directed production of these documents from
    the Department of Planning, the Department of Finance and/or
    the Provincial Administration. Nothing was forthcoming.

    28.110 How these documents can simply disappear was not explained
    to the Committee.

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    28.111 This Committee concludes that the documents have been
    deliberately removed, destroyed or hidden from the Committee
    by these three agencies.

    28.112 How the Department of Finance – the very Department
    responsible for acquitting and certifying proper accountability
    for these monies can have no records at all is utterly beyond
    the understanding of this Committee.

    28.113 At best, the absence of documents suggests gross negligence
    and incompetence. At worst, it suggests corruption and a
    complete failure by the Trustees to meet any requirement at all
    imposed on them by the Trust Instrument or the Public
    Finances (Management) Act relating to accountability for
    and acquittal of public funds – particularly those funds which
    might, it would seem, have been contributed by Members of
    Parliament.

    28.114 It is the intention of the Committee to refer these two
    payments for full investigation by the Ombudsman and the
    Royal Papua New Guinea Constabulary.

    Towa Plumbing and Steel – Provincial Treasury Residence
    Maintenance – K37,556

    28.115 The Committee finds that no information, documentation, files
    or records relating to or recording this Contract or payment are
    maintained by the Provincial Administration, the Department of
    Finance or the Department of Planning.

    28.116 Neither the Auditor General nor this Committee can make any
    investigation or findings on this payment in the absence of
    documentation.

    28.117 This Committee directed the production of all available
    documents concerning this contract, but nothing has been
    produced.

    28.118 Again, the Committee and the Auditor General are unable to
    make any findings concerning this particular payment other
    than to conclude that the absence of documents was probably

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  • intentional and to refer all responsible Officers for investigation
    by the appropriate Agencies.

    Kipma Builders – Mobilisation Cost – K28,500

    28.119 Neither the Auditor General nor this Committee has any
    evidence concerning the purpose of this payment.

    28.120 No documents, records, files or any other evidence was
    produced to the Auditor General or to this Committee, despite
    directives from this Committee to produce that material served
    on the Department of Finance, the Department of Planning, the
    Office of Rural Development and the East Sepik Provincial
    Government.

    28.121 Once again, neither the Committee nor the Auditor General
    make any investigation or finding on the propriety of this
    payment.

    28.122 The best that the Committee can do is refer the matter to the
    Office of the Ombudsman and the Royal Papua New Guinea
    Constabulary for a full investigation both of the payment itself
    and the missing documentation.

    Sepik Project Managers Supervision Fee – Angoram District
    Office – K20,934

    28.123 Once again, neither the Auditor General nor this Committee
    were able to find any documents, records, files or information
    at all concerning this contract, the payment or the way or ways
    in which the contract or project was procured or approved.

    28.124 Neither the Committee nor the Auditor General can make any
    investigation or finding as to the propriety and the legality of
    the contract or the payment.

    28.125 The fact that there are no documents available, despite the
    Committee having directed their production, suggest either
    that the documents have been deliberately removed or that
    they never existed.

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  • 28.126 In the circumstances, the Committee refers to this contract or
    project and the payment made from the Trust Account to the
    Office of the Ombudsman for a full and complete investigation
    to the Royal Papua New Guinea Constabulary for an
    investigation of the circumstances giving rise to the payment
    and the legality of the actions of all trustees and each Officer
    involved in this particular transaction and the failure to record
    or account for any aspect of it..

    Melkia Investment Limited – Patigo/Pagwi Road Maintenance –
    K26,400

    28.127 Once again, there is no documentation, record, file or
    information available or produced to the Auditor General or this
    Committee, despite directives to do so.

    28.128 Neither the Committee nor the Auditor General can make any
    finding on the propriety and legality of this contract or the
    payment.

    28.129 Accordingly, the Committee again finds that the documents
    were either deliberately removed, destroyed or hidden and/or
    that the Trustees could not possibly have acted in accordance
    with the Trust Instrument in the absence of documentation
    before them.

    28.130 In the circumstances, the Committee refers this transaction
    and the payment to Melkia Investment Limited to both the
    Ombudsman and the Royal Papua New Guinea Constabulary for
    full and complete investigation of the legality of the actions of
    all Officers involved in this payment.

    Purchase of Shares by East Sepik Provincial Government in Tuna
    Corporation

    28.131 The Committee finds that the K 1,500,000 moved from the
    Trust Account as a 30% payment of the total cost of shares
    purchased by the East Sepik Provincial Government in South
    Seas Tuna Corporation.

    28.132 The Committee finds no assistance in the Trust Instrument on
    the question of investment of monies in the Trust Fund.

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    28.133 However, Section 57 of the Public Finance (Management)
    Act sets out the Trustees’ responsibilities in respect of
    investments.

    28.134 Section 57(2) provides for circumstances where investment of
    monies that are not immediately required may be made and
    sets forth the type of investment allowed.

    28.135 Investments of Treasury Bills with the Bank of Papua New
    Guinea are provided for as these are securities guaranteed by
    the State.

    28.136 However, this Committee cannot establish that the investment
    in South Seas Tuna was approved by the Minister for Finance
    as required by the Public Finance (Management) Act and
    concludes that this investment was not legal in that it did not
    fall in the terms of the Trust Instrument and the Trustees were
    not empowered to make it.

    28.137 Provincial Executive Council Decision No. A1/2/2000 directed
    the East Sepik Provincial Government to negotiate with the
    Joint Venture Partners in South Seas Corporation for share
    equity participation in the project.

    28.138 Neither the Auditor General nor this Committee were supplied
    with any investment register, share certificate or status report
    of this investment and the Committee is therefore unable to
    confirm the fact of the investment or the source of money used
    to make it.

    28.139 The Committee is of the view that this investment was an
    inappropriate use of Trust monies. Further, the investment
    was not an allowable investment provided by Section 66 of the
    Public Finance (Management) Act and no special approval
    had been provided as required by Section 66(2)(c) of that Act.

    28.140 Accordingly, the Committee refers this investment for full and
    complete investigation, to the Office of the Ombudsman
    Commission to the Minister for Finance and the Royal Papua
    New Guinea Constabulary.

    28.141 The Committee recommends a full investigation of the process
    leading to this payment be made together with the role played

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    by each responsible Officer and the Trustees of the Trust
    Account to establish the legality of the investment.

    28.142 The Committee notes that a further investment of K6 million
    was made in Treasury Bills with the Bank of Papua New Guinea
    from the Trust Account.

    28.143 Section 57 of the Public Finances (Management) Act
    permits investment of funds that are not immediately required
    in Treasury Bills with the Bank of Papua New Guinea. The
    Committee makes no adverse finding or recommendation in
    respect of this investment – except to refer it for full
    investigation of the source of funds used for the investment.

    Steamships Hardware – Kwik Built Houses for Wosera District –
    K491,567

    28.144 Once again, no documentation was provided to this Committee
    or to the Office of the Auditor General, despite directives from
    the Committee to produce documents, records, files and
    information concerning this payment.

    28.145 The payments were possibly made as part of the District
    Treasury Rollout Program, but this Committee simply does not
    know and cannot find that fact.

    28.146 Once again, the only conclusion that can be drawn is that the
    documents either never existed or have been deliberately
    removed, destroyed or hidden to frustrate an Inquiry by the
    Auditor General or this Committee.

    28.147 It is impossible to now conclude whether these payments were
    within the terms of the Trust Instrument or not because the
    records have not been produced.

    28.148 We can and do conclude that there may have been a breach of
    the Public Finances (Management) Act in that there are no
    records, accounts, reports or acquittals in respect of this
    contract maintained by either the Provincial Government or the
    Department of Finance.

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    28.149 The Committee therefore refers this payment and contract for
    full and complete investigation by the Office of the Ombudsman
    and the Royal Papua New Guinea Constabulary.

    28.150 This Committee again records grave concern that a significant
    amount of public money cannot be accounted for, was not
    recorded or acquitted by the Department of Finance, appears
    to have been approved by Trustees without any documentation
    and, quite possibly, falls outside the terms of the Trust
    Instrument.

    Telikom PNG Limited – K600,000 – Mt Tururu Repeater Station

    28.151 Neither the Auditor General nor this Committee were able to
    find any documentation or records relating to this payment.

    28.152 The Committee directed the production of all records,
    information and files concerning both the contract and the
    payment, but received nothing from either the Department of
    Finance or the Department of Planning or the Provincial
    Government.

    28.153 Accordingly, neither this Committee nor the Auditor General
    could make any conclusions as to the propriety and legality of
    either the contract or the payment.

    28.154 This Committee is once again left to conclude the missing
    documentation was either intentional or the result of gross
    negligence and incompetence by Trustees and the Department
    of Finance.

    28.155 This Committee cannot understand how the Trustees can
    possibly approve such payments when there were apparently
    no documents before them.

    28.156 Neither can the Committee identify the source of funds or the
    legality of their application for this purpose.

    28.157 Once again, the Committee refers this transaction and the
    payment to the Royal Papua New Guinea Constabulary and the

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  • Office of the Ombudsman with a recommendation that a full and
    complete investigation be carried out to establish the legality of the
    contract, the legality of the payment and whether the actions of each
    Officers involved in this payment were lawful and justified.

    Bake Pty Limited – Dambui – Timbunkie Highway Maintenance –
    K570,000

    28.158 The Committee finds that this project was contracted through
    the Central Supply & Tenders Board and through the Office of
    Rural Development who apparently awarded the contract to the
    company.

    28.159 The total contract price was K 700,000.

    28.160 This Committee cannot establish if and from where any other
    payment was made, but has established that only K 570,000
    was paid from the Trust Account.

    28.161 The Provincial Administrator has advised that K 570,000
    represents counterpart funding for the project, but can provide
    no documentation in this regard.

    28.162 The Committee concludes that proper accounts and records
    have not been maintained by the Provincial Administration, the
    Department of Finance or the Trustees.

    28.163 No documents are held by any Government Department and
    nobody accepts responsibility for maintaining (or failing to
    maintain) those records.

    28.164 The Provincial Administration cannot now demonstrate that K
    570,000 has been lawfully expended or demonstrate any value
    for money – or indeed even demonstrate that the project was
    completed satisfactorily.

    28.165 The Trustees cannot explain why they provided 81% of the cost
    of the project, where the monies came from or how they
    managed to approve payment of K 570,000 with no
    documentation before them.

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  • 28.166 There are no records of account kept by the Trustees, no
    Reports as required, no records at the Department of Finance
    or the Provincial Government and this can only be the result of
    gross negligence and incompetence or the documents have
    been deliberately removed or hidden. Whatever the situation
    all responsible Officers are in breach of their legal obligations.

    28.167 Accordingly, this Committee refers all the transaction with Bake
    Pty Limited for full and complete investigation by both the
    Office of the Ombudsman and the Royal Papua New Guinea
    Constabulary and also refers the Trustees and responsible
    officers of the Department of Finance and the Department of
    Planning and the Office of Rural Development for full
    investigation as to how and why documentary records have
    gone missing or never existed.

    29. TRANSFER OF THE TRUST ACCOUNT TO WAIGANI

    29.1 This Committee was informed by Mr. Kambanei that the
    management of the Trust Account was transferred to Waigani
    and assumed by him as Secretary for the Department of
    Finance in July 2005.

    29.2 Mr. Kambanei stated to the Committee that this transfer was
    the result of the unsatisfactory handling of the Trust Account
    by the Trustees (which this Committee notes, included himself)
    and the poor performance of the Provincial Administration and
    other unspecified Officers in the management and
    accountability standards maintained over the Trust Account.

    29.3 The Provincial Administration was not able to provide any
    formal notification of the transfer and neither this Committee
    nor the Auditor General have seen anything in writing which
    gives effect to the transfer.

    29.4 However, this Committee accepts that Section 19 (5) of the
    Public Finances (Management) Act does permit the return
    or control of the Trust Account to the Department of Finance
    and accepts that, given the appalling state of the Trust Account
    and its records up to July 2005, the transfer was justified if the
    intention was to bring any control and accountability to the
    operations of the Trust Account.

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  • 29.5 This Committee and the citizens of Papua New Guinea had
    every right to expect that the Trust Account be properly,
    lawfully and competently managed by the Trustees and the
    Department of Finance, particularly from July 2005 when the
    transfer to Waigani was made.

    29.6 Regrettably, this Committee concludes that there was no
    improvement in any aspect of Trust management – in some
    respects, the mismanagement and illegality actually worsened.

    29.7 This Committee finds that Mr. Kambanei assumed complete
    and sole responsibility for the management of the Trust
    Account from July 2005. From that point in time, all decisions
    concerning expenditure from the Account were apparently
    made by Mr. Kambanei.

    29.8 Which projects would be paid, who would receive money and
    the amounts paid were his responsibility and these decisions
    were his alone.

    29.9 The evidence shows that Mr. Kambanei personally and without
    any reference to other Trustees, considered and approved each
    and every project or contract and payment out of the Trust
    Account from July 2005 onwards. He also signed the cheques.

    29.10 We reiterate that this Committee and the citizens of Papua New
    Guinea could legitimately expect proper competent, lawful and
    fully accountable management of the Trust Account from Mr.
    Kambanei who was both the Trustee and the Senior
    Accountable Officer to Government during his management of
    the Trust Account.

    29.11 Mr. Kambanei has testified on oath before this Committee, he
    had full knowlege and understanding of the provisions and
    requirements imposed on him both as a Trustee and the Head
    of Department by the terms of the Public Finance
    (Management) Act and the Financial Instructions made
    thereunder.

    29.12 This Committee finds that Mr. Kambanei has absolutely no
    excuse whatsoever for the poor or non-existent management,
    or accountability and failure to comply with the Trust

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  • Instrument and his obligations as a Trustee and Head of
    Department which followed the removal of control of the Trust
    Account to Waigani in July 2005.

    29.13 This Committee has carefully considered each transaction from
    the account from July 2005 and makes the following findings:

    30. PAYMENTS PROCESSED AT WAIGANI

    30.1 Nine payments totaling K 5,813,053 were processed between
    24th November 2005 to the 24th March 2006 from the Sepik
    Highway Roads and Bridges Maintenance and Other
    Infrastructure Trust Account.

    Those payments were:

    Payees Details Cheque No. Amount

    Dept of Works WSP Nat Roads & Bridges Maint 1 2,000,000

    AOG Jubilee University Establishment of Jubilee Uni 4 1,200,000

    Green Hill Investments Upgrading Mai-Nuku Road 5 428,656
    Yangoru High School Donation commited by PM 6 10,000
    SBA Limited Upgrading Ariap-Mari Road 7 244,397
    Telikom PNG Limited Purch 4xVSAT Installation 8 200,000
    Spirit Life Bookshop 500 chairs Brandi High School 9 30,000
    Dept of Works Yambi/Avatip Road 10 200,000
    Nuku District Treasury Transfer for Nuku-Arko Rd 11 1,500,000

    TOTAL 5,813,053

    30.2 The Committee finds that each of these payments was
    variously approved by the First Assistant Secretary
    Accounting Frameworks and Standards, Deputy Secretary
    Operations and the Secretary for the Department of Finance
    in accordance with their financial delegation limits.

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  • 30.3 But these approvals were, upon the few available
    documents, made without consideration of the terms of the
    Trust Instrument and resulted in expenditure that the Auditor
    General has found to be outside the scope and purpose of the
    Trust Instrument.

    30.4 Moreover, Section 2(b) of the Trust Instrument stipulates four
    signatories on all cheques and transfers from the account.

    30.5 The Committee has heard evidence from the Office of the
    Auditor General that, in light of the poor drafting of the Trust
    Instruments, it may be that only three signatures are
    required.

    30.6 However, this Committee interprets the Trust Instrument to
    require four signatories on all cheques and transfers from the
    account.

    30.7 Those signatories were the Secretary for Finance or his
    delegate, First Assistant Secretary Public Accounts, the
    Provincial Administrator, the Provincial Treasurer and the
    Provincial Works Manager.

    30.8 This Committee can find no variation of the Trust Instrument
    to change the control and management of the Trust Account
    in this regard.

    30.9 This Committee finds that the nine cheques issued for
    payment shown in Para. 30.1 hereof, were signed by the
    Secretary of Finance and the Chief Secretary to Government
    Mr. Joshua Kalinoe and the Secretary for Finance – Mr.
    Thaddeus Kambanei.

    30.10 The Secretary for Finance was a Trustee of the Account and a
    signatory to the account.

    30.11 This Committee has found that the Chief Secretary Mr. Joshua
    Kalinoe was a signatory to the Account but was not a Trustee
    at the time he signed the cheques.

    30.12 The Committee summoned Mr. Kalinoe to give evidence. Mr.
    Kalinoe told the Committee that he had been informed by Mr.
    Kambanei that he (Kalinoe) was “a signatory at the Bank”.

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  • 69

    30.13 However, the Chief Secretary apparently never read or
    understood the signature requirements of the Trust
    Instrument.

    30.14 On the 12th January 2007 Mr. Kalinoe submitted to the
    Committee a written statement regarding the fact of signing
    cheques from the Trust Account.

    30.15 A covering letter from the Chief Secretary stated, inter alia,
    as follows:

    “As you are aware, I am a subordinate signatory to the
    Account but not a Manager of the Account. I have
    countersigned cheques on the recommendation of the
    Manager of the Account (Secretary for Finance),
    assuring me that all was in order to be a counter
    signatory”.

    30.16 In relevant part, the Statement of Mr. Kalinoe which was
    annexed to that covering letter states:

    “Trustee to Account

    I have been advised by the Former Secretary for
    Finance Mr Thaddeus Kambanei that the Trust Deeds
    were amended to include me as one of the Trustees. I
    also recall signing bank documents, including my
    signature as one of the alternate signatories. The other
    being the Secretary for Works.

    ……………….

    I confirm that I signed a number of cheques including
    K1.2 million for the Jubilee University on the
    recommendation of the Manager of the Fund, the
    Secretary for Finance, Mr Thaddeus Kambanei.
    I am advised by the Public Accounts Section that the
    former Minister for Finance, Honorable Bart Philemon

    has amended the original Trust Deed to include my
    name and title as one of the Trustees. This can be

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  • confirmed from the Manager of the Trust, the Secretary
    for Finance.

    Illegal Signing of Cheques

    I have not signed cheques illegally. Before
    countersigning cheques I recall effecting bank
    documents with my specimen signature. I was also
    advised by the Trustee Mr Kambanei that all was in
    order and that I can sign the cheques as a
    countersigning officer.

    None of the cheques I countersigned has bounced or
    been refused by the Bank. This means my signature
    was verified and the cheques cleared accordingly.”

    30.17 This Committee sought further information and conducted
    further investigations to establish precisely the identity of the
    signatories and the Trustees to the account from July 2005
    onwards.

    30.18 In particular, the Committee required to know whether and
    when, the Trust Instrument was amended to include Mr.
    Kalinoe as a signatory or Trustee.

    30.19 The Committee finds that the Trust Instrument established by
    the Minister for Finance, Planning and Rural Development,
    Honorable Andrew Kumbakor MP on the 15th May 2002 does
    not specify Mr. Kalinoe as a Trustee and that the Department
    of Finance has confirmed that the Trust Instrument was not
    changed as Mr. Kalinoe was told.

    30.20 The Committee gave Mr. Kambanei and the Department of
    Finance every opportunity to produce evidence that the Trust
    Instrument was, indeed amended by the Honorable Bart
    Philemon MP as claimed by Mr. Kalinoe. No evidence or proof
    of this assertion has been supplied to the Committee.

    30.21 This Committee concludes that Mr. Kalinoe was never a
    Trustee to the Account.

    30.22 Why the most senior Public Servant in the country would
    assume that he was a Trustee or sign cheques without

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    checking the terms of the Trust Instrument is beyond the
    understanding of this Committee.

    30.23 The appointment as a Trustee carries with it onerous
    responsibilities and potentially, personal liabilities. The Chief
    Secretary should have checked to establish his precise
    position.

    30.24 As we have stated, the Trust Instrument required four (or
    three, if the Auditor General is correct) signatures on any
    cheque drawn on the account.

    30.25 At no time was there ever more than one Trustee signature
    on the cheques drawn on the account from July 2005. That
    signature was made by Mr. Thaddeus Kambanei.

    30.26 This Committee finds that the Trustees of the account failed
    to comply with the Trust Instrument by applying only one
    valid and recognized signature on all nine of the cheques
    drawn on the account while the Trust Account was managed
    by Mr. Kambanei.

    30.27 The Trust Instrument required the Secretary, Delegate and
    the First Assistant Secretary Public Accounts to be signatories
    to any cheque drawn on the account and those Officers were
    in a position to control expenditure from the account.

    30.28 The fact that they did not do so prior to July 2005 and the
    fact that illegality and a complete disregard of the
    requirements of the Trust Instrument, Trust obligations and
    the Public Finances (Management) Act had occurred with
    no demur, question or control from the Department of
    Finance or any of the other Trustees (including and in
    particular Mr. Kambanei), was plainly evident to this
    Committee.
    30.29 Further, the effect of Mr. Kamanei taking control of the Trust
    was simply that all payments from the Trust continued
    without the agreement of any other Trustee appointed to
    ensure the rights of the Provincial Administration and/or to
    protect these public monies.

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    30.30 The Committee notes that the action to take control of the
    Trust in July 2005 coincided with the appointment of a new
    Provincial Administrator by the National Executive Council and
    a Provincial Treasurer – appointed by Mr. Kambanei himself.

    30.31 Neither of these senior officials, both signatories to the Trust
    according to the Trust Instrument, were consulted regarding
    the action by the Secretary to assume control of the Trust or
    apparently consulted in any way concerning payments
    amounting to K 5,813,053 drawn on the Trust between the
    24th November 2005 and the 24th March 2006 on the
    authority of Mr. Kambanei.

    30.32 The Trust Account was run as a private and personal account
    by Mr. Kambanei from July 2005 with no apparent regard at
    all to the terms of the Trust Instrument, the Public Finances
    (Management), the Financial Instructions or any of the
    duties imposed on him as a Trustee or Head of Department.

    30.33 It is clear to this Committee that the Department of Finance
    has retained virtually no documentation at all by way of
    accounts, submissions, reports, acquittals or information
    concerning the expenditure from the Trust Account after it
    was managed from Waigani (or has failed to produce same to
    this Committee despite being directed to do so).

    30.34 These continuing failures to obey even the most basic
    requirements of Law in respect of a Trust Account that was
    operated from Waigani and not from a distant Province, is
    baffling and inexcusable.

    30.35 Responsibility for failure as a Trustee to ensure that these
    records were kept and the Trust Instrument obeyed, rests
    squarely with the Trustees of the time – including and in
    particular Mr. Thaddeus Kambanei.

    30.36 The identified breaches of Law and the misuse of the Trust
    Account found by the Auditor General and this Committee can
    only have occurred and continued as a result of the
    incompetence, design or complicity of the Department of
    Finance – which should have controlled the Trustees and the
    Trust Account and kept proper accounts.

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    30.37 Responsibility for these Departmental failures rests with the
    Secretary for Finance at the time – Mr. Thaddeus Kambanei.

    30.38 This Committee notes that the Provincial Administrator of the
    East Sepik Province formed the view that a number of
    payments made from the Trust Account were not provided for
    by the Trust Instrument, and has advised that it is his
    intention to seek the return by the Department of Finance, of
    the expenditure he believes to be inappropriate.

    30.39 As we have said earlier, it was appropriate for the citizens of
    Papua New Guinea to expect full and complete accountability
    and lawful conduct of the Trust Account at all times, but
    particularly from July 2005 onwards.

    30.40 It is proper for citizens to expect that a full Audit and an
    investigation of all that had gone on before that date would
    be instigated by the Department of Finance and positive steps
    taken to prosecute those responsible where failings were
    found or to recover monies which were illegally or
    inappropriately paid. Neither of these developments has ever
    occurred.

    30.41 The Committee has had regard to some of the payments
    made from the Trust Account after July 2005 and we make
    the following findings:

    Assemblies of God – Jubilee University K1,200.000

    30.42 A payment of K1,200,000 was made to the newly established
    Assemblies of God Jubilee University in Port Moresby from the
    Trust Account.

    30.43 The following documents were provided to support the
    payment:

    • A brief to the Deputy Secretary Operations from the First
    Assistant Secretary Cash Management and Expenditure
    Division, for approval of payments;

    • National Executive Council Decision No. 191/2005.
    Special Meeting No. 44/2005; and

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    • A letter from the Prime Minister to the Secretary for
    Finance dated the 11th April 2005.

    30.44 This Committee concludes as follows:

    (i) The National Executive Council Decision No. 191/2005 did
    not approve any funding to the Assemblies of God Jubilee
    University in Port Moresby.
    (ii) The Decision only directed the transfer of the Sepik
    Agricultural College excluding its assets, to the
    administration of Jubilee University as a church agency.

    (iii) A letter from the Prime Minister to the Secretary of
    Finance dated the 11th April 2005 did not give any
    instruction to make any payment to the Assemblies of
    God Jubilee University in Port Moresby.

    The letter shown to this Committee only makes mention
    of the Department of Finance delaying the sourcing and
    funding of 16 provincial projects amounting to
    K8,900,000 committed by the Prime Minister and as the
    Provincial Member for East Sepik Province.

    30.45 No documents showing any decision of the National Executive
    Council, Provincial Executive Council, Provincial Supply &
    Tenders Board or Trustees to pay K 1,200,000 to the privately
    run Jubilee University in Port Moresby to undertake
    infrastructure development projects in the East Sepik
    Province was provided for examination of this Committee.

    30.46 This Committee and the Auditor General sought further
    information, advice, records, files and information from the

    Department of Finance regarding the appropriateness of this
    expenditure from the Trust Account, but received nothing.

    30.47 This Committee refers this entire payment to the Office of the
    Ombudsman, to the Commission of Inquiry into the
    Department of Finance and to the Royal Papua New Guinea
    Constabulary for a full and complete investigation of every
    aspect of the payment including and in particular the question
    of whether Mr Kambanei, at the time he signed the cheque,

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    had any conflict of interest or acted in breach of the Trust
    Instrument, the Public Finances (Management) Act, his
    obligation as a Departmental Head, the Financial
    Instructions or any other requirement of law.

    30.48 The Committee refers the matter to the same agencies for full
    investigation of the fact that there is virtually no
    documentation provided and therefore there could have been
    virtually no relevant documentation before the Trustees when
    they decided to make this payment.

    30.49 How could the Trustees have reached an informed decision
    with no apparent submission or assessment of the proposed
    payment, the purpose of the payment and the recipient? How
    could an independent Trustee have concluded that the
    expenditure and its purpose fell within the terms and
    intention of the Trust Instrument with no documents before
    him or them?

    30.50 Where did this money come from? How was it immediately
    available for payment? How could any competent Trustee be
    satisfied that the money was lawfully deposited and available
    for expenditure for this purpose?

    30.51 This only justification made to this Committee for the
    payment was a supposed political directive to do so. We
    cannot find any such directive and must assume that Mr.
    Kambanei acted on his own in making and approving this
    payment, for reasons he has not divulged to this Committee.

    30.52 Whatever the situation, the justification proffered cannot be
    correct if the evidence of Mr. Kambanei given to this
    Committee, that no pressure or directive was given to
    Trustees at any time, is true. By his own admission, he acted
    at all times independently and freely. See Para.20.10 hereof.

    SPA Limited – Ariapan Marianberg Road Upgrading –
    K 244,397

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    30.53 The Committee finds that a part payment of K 244,397 was
    made on the 9th December 2005 to SPA Limited for the road
    upgrading from Ariapan to Marianbeg in the Angoram District.

    30.54 This Committee finds that the tendering process appears to
    have been undertaken through the Central Supply & Tenders
    Board but no documentation relating to this process was
    provided to the Committee or to the Auditor General – despite
    a directive to do so.

    30.55 The Committee finds that the total value of the Contract was
    K1.2 million but neither this Committee nor the Auditor
    General can establish the source of this funding and whether
    it was from a Member for Angoram’s District Development
    Program Funds or from other sources.

    30.56 The Department of Planning, the Office of Rural Development
    and the Department of Finance have failed to provide any
    documentation in this regard, despite directives to do so.

    30.57 Once again this Committee can make no finding as to the
    propriety of the payment except that it is clear that the
    cheque bore only one authorized signatory – when it should
    have three (or four).

    30.58 Whether the project or contract was within the terms of the
    Trust Instrument, where the funds came from and whether
    the contract itself was lawful cannot be ascertained by this
    Committee due to the absence of documentation.

    30.59 This Committee refers this particular payment and the
    circumstances surrounding it to the Office of the Ombudsman
    and the Royal Papua New Guinea Constabulary for full and
    complete investigation.

    30.60 Once again, it is clear to the Committee that there are no
    documents, information, records, files or any other data kept
    or maintained concerning this particular contract and the
    payment from the Trust Account.

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  • 30.61 The Department of Finance and the then Head of that
    Department Mr. Thaddeus Kambanei failed to properly
    account for this payment from the Trust Account and there
    can be no excuse or valid explanation for this failure.

    30.62 The fact of the failure to maintain accountability and
    documentation is referred to the Office of the Ombudsman
    and the Royal Papua New Guinea Constabulary for
    investigation.

    30.63 At the very least, the evidence suggests that there have been
    breaches of the Public Finances (Management) Act and
    the Financial Instructions by accountable Officers and
    Trustees.

    Telikom PNG Limited – District Rollout Program

    30.64 By a cheque signed by Mr. Kambanei and Mr. Kalinoe, K
    200,000 was paid to Telikom PNG Limited on the 7th February
    2006 for the provision of four telesat services including
    installation in four districts of the East Sepik Province.

    30.65 The only document supplied concerning this transaction was a
    brief attached to the payment voucher within the Department
    of Finance stating that the District Treasury Rollout Program
    of the Department of Finance, funded by appropriation in the
    National Budget under Vote and Division 207, did not have
    any funds available for the above purchase.

    30.66 Consequently, approval was sought from the Finance
    Secretary to use the Sepik Trust Fund. Approval was granted
    by the Secretary (presumably in his capacity as Secretary and
    not as a Trustee) and the expenditure was incurred.

    30.67 This Committee finds that the expenditure did not meet the
    objectives of the Trust Account and is an inappropriate use of
    the Trust Account.

    30.68 The District Treasury Rollout Program is appropriated under
    Miscellaneous Vote 207 and the cost of this program should
    be paid from this vote.

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  • 30.69 So far as this Committee can ascertain, the Secretary for
    Finance Mr. Thaddeus Kambanei was both a signatory to the
    Account, the authorizing Officer, the Approving Officer and a
    Trustee of the Account at the time the payment was made.

    30.70 Further, the Secretary was responsible for keeping and
    maintaining full and complete records and accounts of this
    transaction both as a Trustee and a Head of the Department
    of Finance. He failed to do so.
    30.71 It is the conclusion of this Committee that upon all the
    material before us, the Trustees could not have made an
    informed and independent decision to apply Trust Monies to
    this Project, that the purpose of the payment was not within
    the ambit of the Trust Account, that authorization to use the
    Account should not have been given, that no accounts or
    records have been kept of this payment, that none of the
    requirements of the Public Finances (Management) Act
    have been obeyed, that the Trustees did not have any
    relevant material before them to make an independent
    decision and that the Trustee obeyed his own Secretarial
    directive without any consideration at all as to the legality or
    propriety of the payment.

    30.72 The entire transaction appears tainted and is referred to the
    Royal Papua New Guinea Constabulary, the Office of the
    Ombudsman, the Commission of Inquiry into the Department
    of Finance and the Department of Personnel Management and
    the Public Service Commissioner for investigation and action
    as appropriate.

    Nuku District Treasury – K1,500,000

    30.73 This Committee finds that an amount of K1,500,000 was
    approved by the Secretary, Department of Finance, Mr
    Thaddeus Kambanei (who was also a Trustee of the Trust
    Account) and paid to the Nuku District Treasury based on a
    request from the Honourable Andrew Kumbakor MP for
    counterpart funding from the Trust Account.

    30.74 The onus to properly account for the utilization of those funds
    is vested in the Nuku District Treasury through the
    Department of Finance and also in the Trustees and
    ultimately the Secretary of the Department of Finance .

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    30.75 The Committee sought full documentation and records of this
    payment, but nothing was forthcoming from any quarter.

    30.76 There is virtually no documentation available from which this
    Committee can ascertain the purpose and source of that
    funding or payment or what happened to the money.

    30.77 It is entirely unclear whether this payment was merely a
    transfer of the Members District Development Program Fund
    initially deposited into the Trust Account or whether it
    represents additional funding from some unknown source.

    30.78 This Committee was unable to establish the reasons for the
    lump sum transfer to the District Treasury and cannot tell
    what projects may have been involved and how the Trustees
    including the Secretary of the Department of Finance and the
    Provincial Administrator intended to ensure accountability for
    this money.

    30.79 This failure to maintain records and accounts is, again, an
    open invitation to misapplication.

    30.80 Moreover, if this funding was contributed in part or whole by a
    Member of Parliament from some form of Statutory Grant, the
    failure to document, account for and acquit the expenditure
    may have dire results for the Member – who is entitled to rely
    upon Public Servants and the Trustees to carry out their duty
    to properly and lawfully account for and acquit all such
    expenditure.

    30.81 There is no evidence at all that this payment was within the
    terms of the Trust Instrument or a proper use of Trust or
    Public Monies and in the absence of documents or records, no
    way that this could be established – either now by this
    Committee or at the time by the Trustees.

    30.82 The Secretary, Department of Finance, was asked by this
    Committee and by the Auditor General to provide a full
    accountability statement for the expenditure of such a large
    amount of public funds and the reply to the Auditor General
    was as follows:

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    “This money was transferred to the Nuku District
    Treasury to fund road and bridge rehabilitation work

    i.e. consistent with the purpose of the Trust. All
    approvals and tendering will be done through the
    Sandaun PSTB.

    The District Treasury is required to ensure records are
    kept to provide full accountability to the Member and
    the Parliament for all expenditure”.

    This is not a responsive answer.

    30.83 The Committee finds that the Department of Finance has
    failed to provide any information regarding the actual
    programs, projects or contracts that the K 1,500,000 was
    intended to fund.

    30.84 There can be no guarantee that the Trustees had any control
    over the expenditure of this money or that the District,
    Provincial or National Officers responsible for accounting
    overseeing and controlling the use of this money have any
    idea what it was used for or how it was applied.

    30.85 This entire transaction is referred by the Committee to the
    Office of the Ombudsman, the Commission of Inquiry into the
    Department of Finance and to the Royal Papua New Guinea
    Constabulary with a recommendation that a full and complete
    investigation of the payment and use of this money be
    undertaken.

    Construction of Yambi/Evatip Road – K200,00

    30.86 An amount of K 200,000 was paid to the Department of
    Works Wewak for the construction of a road from Yambi to
    Evatip.

    30.87 However, neither the Auditor General nor this Committee was
    able to obtain any payment vouchers at all in respect of this
    contract. This Committee sought that information from the

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  • Department of Finance but that Department failed to provide
    any information regarding the expenditure.

    30.88 There are virtually no documents and no apparent records of
    Contract performance at all.

    30.89 The Committee therefore cannot determine whether this
    payment was an appropriate use of Trust monies or even if
    the work has been carried out. The Committee cannot
    ascertain how the contract came about or where the money
    paid to the Department of Works came from or whether it was
    lawfully available at all.

    30.90 The Committee concludes that, because there were no
    documents, the Trustees could not possibly have made an
    informed or independent decision or properly used their
    discretion when deciding to release funds. They therefore
    could not have carried out their duty to act responsibly and in
    accordance with the terms of the Trust Instrument.

    30.91 Once again, the Committee refers the Department of Finance,
    the Trustees and this entire transaction to the Office of the
    Ombudsman, the Commission of Inquiry into the Department
    of Finance and the Royal Papua New Guinea Constabulary for
    full and complete investigation of the circumstances
    surrounding the payment and the project itself.

    31. AN ANALYSIS OF EXPENDITURE

    31.1 The Committee was concerned to obtain an objective view of
    the payments made from the Trust Account.

    31.2 Our investigators therefore extracted all payments from the
    available cash books for the fiscal years 2002, 2003, 2004
    and 2005 and grouped payments according to the nature of
    the expenditure, to determine the extent to which monies
    paid from the Trust fell within the scope of the Sepik Highway
    Roads and Bridges Maintenance and Other Infrastructure
    Trust Account.

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  • 31.3 The analysis is set out below:

    Expenditure Item Actual Expenditure Percentage (%)
    K of total
    Roads and Bridges 6,177,098 24.48
    Building Contracts 3,560,668 14.11
    Building Material & Maintenance 3,253 0.01
    Legal & Consultancy Services 121,317 0.48
    Department of Works 6,268,079 24.84

    Office Materials 3,181 0.01
    Salaries & Wages 9,238 0.04
    Financial Assistance 551,575 2.19
    Accommodation 1,029 0.00
    Vehicle Hire 61,329 0.24
    Airfares 947 0.00
    Air Charters 42.557 0.17
    Assets 157,805 0.63
    Fuel Charges 14,847 0.06
    Other Expenditure 71,728 0.28
    Cash Advances/Traveling expenses 51,100 0.20
    District Treasury Rollout Program 41,420 0.16
    Mt Turu repeater Station 600,000 2.38
    Investments 7,500,000 29.72
    Total 25,237,177

    31.4 The Committee concludes that there are expenditures shown
    from this analysis that are not related to the objectives of the
    Trust Instrument – or that there are no documents and no
    evidence produced to show that they were within the ambit of
    the Trust Instrument.

    31.5 Air charters, vehicle hire, financial assistance (to a huge sum
    of K 551,575) salary and wages, cash advances and travel
    expenses are a few examples.

    31.6 When this exercise was undertaken it quickly became
    apparent that the Provincial Administration, the Department
    of Finance and the Trustees have retained no information in
    support of these payments or that these records never
    existed.

    31.7 Once again, the absence of documentation is inexplicable.
    The Trustees, the Provincial Administration and, in particular

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  • the Department of Finance have a heavy onus to properly and
    fully account for and acquit all expenses of public money
    made from this account – and this they have failed to do.

    31.8 The effect of these missing documents is to prevent the
    Committee and the Auditor General from assessing whether
    the expenditures meet the objectives of the Trust Account.

    31.9 The Committee sought advice and information from the
    Department of Finance and the Provincial Administration on
    the payments of K 551,575 for “financial assistance”. No
    information at all was forthcoming despite undertakings by
    the Secretary for Finance, Mr. Gabriel Yer, to provide the
    information.

    31.10 In this regard, the Committee refers the Trustees, the
    Department of Finance, the Former Secretary of the
    Department of Finance and Trustee Mr. Thaddeus Kambanei,
    all Officers involved in the administration of the Trust Account
    and the Provincial Administration to the Royal Papua New
    Guinea Constabulary Fraud Squad and the Office of the
    Ombudsman to conduct a full and complete investigation of
    all the payments set forth above – and in particular for
    “financial assistance” – to establish whether any breach of the
    law has occurred in or by this payment.

    31.11 The Committee intends to also refer its Report and the Report
    of the Auditor General to the Commission of Inquiry into the
    Department of Finance for consideration as to whether the
    Terms of Reference of that Commission will permit the
    Commission to examine payments from this Trust Account.

    31.12 This Committee also refers this and every other transaction to
    the attention of the Attorney General and the Solicitor
    General with a strong recommendation that all available
    action be taken to recover this and other money from the
    persons who received and/or the persons who paid it – in
    particular the Trustees.

    31.13 This Committee is of the view that Trustees may be
    personally liable for breaches of their obligations and duties
    and we recommend that the law enforcement agencies and

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    State investigate whether this avenue will enable the recovery
    monies wrongly expended.

    32. DISALLOWANCE OF EXPENDITURE BY THE COMMITTEE.

    32.1 The Public Accounts Committee has had regard to Part 6
    Division 1 Para. 2.1 of the Financial Instructions. That
    paragraph is entitled “Accountable Officers” and states, in
    part:

    “…..the Departmental Head is liable under the doctrine
    of personal accountability to make good any sum which
    the Public Accounts Committee recommends should be
    “disallowed”.

    32.2 The Committee has considered whether, on all the evidence,
    it should, pursuant to this Instruction, disallow any of the
    expenditures made from the Trust Account.

    32.3 The Committee has concluded that the nature of the Trust
    Account and the behaviour of Trustees and responsible
    Officers needs deeper inquiry by properly resourced agencies
    before any definite conclusions as to liability should be made.
    32.4 Accordingly, the Committee will not disallow any payments,
    but instead refer them and all the actions or failures of
    responsible officers to specialist investigatory agencies of the
    State with a general recommendation that those agencies, in
    the course of their investigations, consider if and how
    wrongful payments may be recovered to the State.

    33. CONCLUSIONS AND FINDINGS

    33.1 The Auditor General makes the following conclusion in his
    Report of the 12th December 2006:

    “I am increasingly concerned by the manner in which
    Trustees discharge their obligations and legal
    responsibilities regarding the management of Trust
    Accounts.

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  • Audits undertaken by this Office have found many
    incidents where Trust Accounts do not have effective
    accounting, record keeping and reporting of financial
    transactions.

    Often there is a lack of supporting documentation
    regarding decisions to expend the money from Trust
    Accounts.

    As a result it is not always possible for me to be
    assured that the Trustees are meeting their
    responsibilities regarding accountability and
    transparency of expenditure from these trust
    accounts”.

    33.2 This Committee agrees with that conclusion in respect of the
    Sepik Highway, Roads and Bridges Maintenance and Other
    Infrastructure Trust Account.

    33.3 This Committee finds that the management of this Trust
    Account by Trustees and the Department of Finance and its
    responsible Officers was amongst the worst examples of
    incompetence, ineptitude, negligence and reckless indifference
    to the Law of accountability for public monies that this
    Committee has seen in the last four years.

    33.4 The evidence before this Committee shows at least the
    following breaches of relevant Laws in the conduct of the Trust
    Account:

    (i) Failure by the Secretary for Finance Mr. Thaddeus
    Kambanei to fulfill his duties as Head of Department
    pursuant to Section 4 of the Public Finances
    (Management) Act.

    (ii) Failure by the Secretary for Finance, Mr. Thaddeus
    Kambanei to comply with and perform his duties pursuant
    to Section 5 (1) (a), (b), (c), (d), (f), (l) and (m) of the
    Public Finances (Management) Act, in that he failed to:

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  • • ensure or take any steps to ensure that the
    Department of Finance complied with the
    requirements of the Public Finances (Management)
    Act in the recording, reporting and accounting for
    monies expended from the Trust Account; and

    • ensure that all accounts and records of the
    Department of Finance relating to the Trust Account
    were properly maintained or maintained at all; and

    • ensure that all necessary precautions were taken both
    by himself and by his Department to safeguard monies
    held in the Trust Account against misapplication; and

    • ensure that all expenditure from the Trust Account
    was properly authorized and applied to the purpose for
    which it was appropriated; and

    • ensure that expenditure from the Trust Account was
    incurred or made with due regard to economy,
    efficiency, and effectiveness and the avoidance of
    waste; and

    • ensure that proper estimates of expenditure of public
    monies are prepared in a form specified in the
    Financial Instructions; and

    • ensure that, at the end of each quarter of each fiscal
    year he submitted a report on financial management
    of the Trust Account in appropriate form

    (iii) Breaches of Section 6 of the Public Finances
    (Management) Act by accountable officers (including
    Trustees) in that they failed to comply with the Public
    Finances (Management) Act in respect of monies in and
    expended from the Trust Account – in particular that they
    failed to make or keep any accounts or records as
    required.

    (iv) There may have been breaches of Section 15 of the Public
    Finances (Management) Act by Trustees and Officers of
    the Department of Finance if money was moved into the

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  • Trust Account from sources not included in this
    Section. This requires further investigation; and

    (v) Similarly, there may have been a breach of Section 16 of
    the Public Finances (Management) Act by Trustees if
    any payment from the Account was outside the terms of
    the Trust; and

    (vi) There are breaches of Section 19 (2), (3) and (4) (c) and
    (d) of the Public Finances (Management) Act by the
    former Secretary for Finance, Mr. Thaddeus Kambanei in
    that he failed to :

    • ensure the proper management and operation of the
    Trust Account; and

    • submit to the Department of Finance in prescribed
    form, an annual estimate of receipts and payments
    expected to be made into and from the Trust Account;
    and

    • maintain or ensure the maintenance of records
    pertaining to the Trust Account and/or to submit
    monthly details of transactions on that account; and

    • submit annual statements of the Trust Account for the
    preceding year.

    (vii) Widespread failure by Provincial authorities and Officers of
    the Department of Finance to comply with Part VII of the
    Public Finances (Management) Act – State Tenders
    and Contracts. The failure to apply properly these
    requirements properly or at all means that the State does
    not gain value for money or the advantage of an
    independent and transparent tender and evaluation process.
    These failures require full investigation and vigorous action
    against any Officer who failed in his duty pursuant to this
    Part.

    Section 47A, which prescribes Offences for any Officer who
    authorizes or permits breaches of this Part should be applied

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  • to any Officer who is found to have authorized or
    permitted such a breach.

    (viii) Of Section 68 of the Public Finances (Management) Act
    by Officers of the East Sepik Provincial Government and
    other Provincial Government or Local-level Governments
    involved in or benefiting from the Trust Account in that it
    and they failed to keep proper records and accounts of
    transactions from or with the Trust Account and all
    Contracts or Projects funded from that Account in the
    manner prescribed by the Financial Instructions.

    (ix) Section 112 (1) (b) will apply to each witness appearing
    before the Committee in that they failed or neglected to
    produce documents and records when asked to do so.

    Section 112 (e) will apply to the former Secretary for
    Finance Mr. Thaddeus Kambanei for failing to provide
    Reports pursuant to Section 4 of the Public Finances
    (Management) Act – see Para 33.4 (i) supra.

    (x) Section 113 of the Public Finances (Management) Act
    will apply disciplinary action against an accountable officer
    who is found responsible for any or all financial irregularities
    in Section 102 and further liability under Section 112 of the
    Public Finances (Management) Act. This Section should
    be considered and applied if there is found to be primary
    liability in any Officer.

    33.5 Further, Section 102 Surcharge may well apply to any Officer
    who, in respect of the operation of the Trust Account, has:

    (i) failed to account for any moneys; or

    (ii) has been responsible for any improper payment of
    public monies or for payment of money that was not
    vouched and authorized; or

    (iii) has authorized or permitted a breach of procedures
    relating to the tendering processes; or

    (iv) has approved requisitions for the expenditure of public
    monies.

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  • 33.6 Considering the manifest failures revealed by the evidence, this
    Committee recommends that the Surcharge provisions be
    considered by the Head of Department of Finance after due
    inquiry.

    33.7 The Committee has considered the provisions of the Public
    Finances (Management) Act, the Permanent
    Parliamentary Committees Act and the Parliamentary
    Powers and Privileges Act prescribing Offences for persons
    who fail to produce documents and information to the Public
    Accounts Committee when directed to do so. As we have
    stated, virtually no documents were produced to this
    Committee, but there is no evidence that this failure was
    deliberate on the part of any witness.

    33.8 Rather, the Committee accepts that the documents either
    never existed or were removed or destroyed before the
    witnesses (with the sole exception of Mr. Thaddeus Kambanei)
    were appointed to their positions.

    33.9 The Committee accepts that Mr. Alman and Mr. Yer were
    truthful when they stated to the Committee that they had
    searched diligently for documents, but were able to find
    virtually no records at all.

    33.10 Accordingly, no referral will be made for the inability to produce
    documents.

    33.11 This Committee is profoundly concerned that very Senior Public
    Servants acting as Trustees of public funds can so misconduct
    themselves as to be incapable of keeping, maintaining,
    producing or even finding accounts, records, information, data,
    documents and acquittals of huge sums of public money
    passing through their hands and for which they are
    responsible. This is a matter that requires further deep and
    searching Inquiry.

    33.12 The administration of this Trust Account shows a deep-rooted
    assumption that public servants can do precisely what they
    please with public funds (including Trust funds) without obeying
    any legal requirement of accountability for and control of the
    use of those public monies. This attitude has existed either
    unknown to or unaddressed by Government, for years.
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  • 33.13 This attitude has also pervaded other Inquiries conducted
    by this Committee – and in fact resulted in a recommendation
    by the Committee for the establishment of the Commission of
    Inquiry into the Department of Finance.

    33.14 If the evidence before this Committee is any indication, there
    seems little or no accountability for expenditure or competent
    management of development budgets or public monies by the
    Public Service – particularly the Departments of Finance and
    Planning.

    33.15 This attitude must stem from a confidence that misconduct will
    never be detected or prosecuted – in other words, that these
    Officers are immune from being called to account for their
    actions.

    33.16 Indeed, when the Head of the Department of Finance and a
    Trustee so conducts himself, all other Officers probably
    assume that they can share that immunity.

    33.17 We have no doubt that Mr. Kambanei yielded to pressure
    from his perceived masters and was not competent or strong
    enough to bring an independent mind to the management of
    this Trust Account or to comply with the requirements of Law
    – which, by his own sworn admission, he understood.

    33.18 This attitude permeated the management of this Trust
    Account from the highest public servants in the land, right
    down to District Administration and beyond and resulted in
    uncontrolled and unproductive expenditure with no evident
    accountability.

    33.19 This situation cannot continue.

    33.20 It is the fear of this Committee that unless the Government
    makes significant changes and reforms to force improvement
    in Governance and accountability at every level, the existence
    of fiscal management in any acceptable form and therefore
    the effective delivery of services, must be doubted.

    33.21 We find money being constantly wasted, diverted, misapplied
    or simply stolen and this results in Contracts that are not
    performed or even begun, Projects that annually absorb
    money from Budgets for no result, Health Centres that do not
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  • operate, schools that do not open and basic services that
    have been paid for but which do not exist (often for years).

    33.22 To our people, this results in poverty, illiteracy, disease,
    isolation, neglect and disenfranchisement from even basic
    services that it is their right to expect from Government. This
    failure will (and in parts of the country may already has)
    resulted in disillusion, disquiet and, eventually, civil unrest.

    33.23 Forcing the Public Service to be accountable for its decisions
    and actions is the first step to rescuing the situation.

    33.24 Members should bear in mind that this Trust Account is one of
    thousands – almost all of which, according to the Auditor
    General, are unaudited and therefore uncontrolled. The
    Auditor General told the Inquiry that there are 2,500
    Government Trust Accounts.

    33.25 If the management of the Sepik Trust Account is any
    indication of the standard of Trustees administration, all these
    Trust Accounts need urgent examination.

    33.26 It is this Committee’s intention to make very strong
    recommendations to the Parliament to achieve two ends:

    1. The Public Service must be brought under immediate
    control and be made accountable for its actions.

    Competence and honesty of a high order must be
    demanded and obtained from Public Servants at all levels
    – particularly from Departments which administer and
    implement Development Budgets and Trust Monies.

    2. As a result of this and other Inquiries made by this
    Committee, it is clear that management of Trust
    Accounts and large amounts of public monies cannot be
    confidently given to public servants.

    They have no ability to manage, account for or supervise
    the purposes to which those monies are allocated.

    A full reform and rebuilding of the system of
    implementation of and accounting for public monies –

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  • particularly Trust monies – should be made to ensure
    the delivery of services that our citizens expect.

    No option should be ruled out – including privatization of
    service delivery.

    If reform requires the recruitment and employment of
    expert and competent Officers from outside Papua New
    Guinea, so be it. A great many other countries do so –
    including Australia – to ensure best practice and skill
    sharing by experts.

    33.27 The Committee now makes resolutions, recommendations and
    referrals:

    34 RESOLUTIONS OF THE COMMITTEE

    34.1 The following Resolutions were made unanimously by the Public
    Accounts Committee:

    1. That the Public Accounts Committee will Report to the
    Parliament on the Inquiry into the Sepik Highway, Roads
    and Bridges Maintenance and Other Infrastructure Trust
    Account pursuant to Section 86 (1) (d) Public Finances
    (Management) Act 1995 and/or Section 18 Permanent
    Parliamentary Committees Act 1994.
    2. That having read and considered a draft Report, the
    Committee resolves to accept the terms of the Report and
    to table same at the earliest opportunity.

    3. That certain matters and findings of the Committee require
    further investigation and possible action by the Royal
    Papua New Guinea Constabulary, the Office of the
    Ombudsman, the Office of the Attorney General and the
    Office of the Solicitor General.

    4. That the Secretariat is directed to make those referrals to
    the named agencies and may release and make known
    sufficient material and evidence to enable those agencies
    to commence and perform their functions.

    5. That the Report of the Public Accounts Committee into the
    Sepik Highway, Roads and Bridges Maintenance and Other
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  • Infrastructure Trust Account be delivered to the Secretary
    to the Commission of Inquiry into the Department of
    Finance for consideration of its contents and such further
    action (if any) deemed appropriate by that Inquiry.

    6. That a copy of this Report be delivered to the Minister for
    Finance forthwith for his consideration.

    7. To accept the recommendations and Findings contained in
    this Report.

    8. This Committee will make a full Report on the involvement
    of the Provincial Administration of the East Sepik Province
    to the Minister of Inter Government Relations forthwith.

    35 . REFERRALS

    35.1 The Public Accounts Committee makes the following referrals
    from the evidence received in this Inquiry:

    (i) This Report is referred to the Royal Papua New
    Guinea Constabulary with a recommendation for a
    full and complete investigation into possible
    breaches of the Public Finances
    (Management) Act by the Trustees of the Sepik
    Highway, Roads and Bridges Maintenance and
    Other Infrastructure Trust Account and the then
    Secretary for Finance Mr. Thaddeus Kambanei and
    other Officers of that Department and relevant
    Provincial Governments for failure to make or
    keep records, accounts, acquittals or requisite

    documents of deposits into and expenditure from
    the Trust Account and in particular to consider
    whether these failures should be prosecuted.

    (ii) This Report is referred to the Royal Papua New
    Guinea Constabulary to consider the actions,
    performance of and claims by various Contractors
    and other recipients of money from this Trust
    Account with a view to identifying any breach of
    the Criminal Law – in particular arising from
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  • incompleted performance or fraudulent or
    improper claims for payment.

    (iii) This Committee refers Mr. Thaddeus Kambanei to
    the Office of the Public Prosecutor, the Royal
    Papua New Guinea Constabulary and the Office of
    the Ombudsman with a recommendation that a
    full and complete investigation be made to
    establish whether, by reason of his failures as a
    Trustee and the Departmental Head. Mr.
    Kambanei may have breached Sections 4, 5, 17
    or 19 – or any other Section – of the Public
    Finance (Management) Act.

    (iv) This Report is referred to the Office of the
    Ombudsman for consideration as to whether any
    breach of the Leadership Code has occurred.

    (v) This Report is referred to the Offices of the
    Attorney General and the Office of the Solicitor
    General with a recommendation that those
    Officers consider the contents of the Report with a
    view to commencing action against the Trustees
    or any other responsible person to recover monies
    wrongly paid or received from the Trust Account
    and to obtain a full and complete account and
    acquittal of all monies which passed through the
    Trust Account – including and particular the
    source of those monies and the exact nature of,
    recipients of and the purposes to which all
    expenditure from the Trust Account was in fact
    applied by the recipient (s).

    (vi) The Report is referred to the Offices of the
    Attorney General and Solicitor General with a
    recommendation that those Officers consider the
    contents of the Report with a view to concluding
    whether the Trustees or any of them, have at any
    time and by any action or decision, breached their
    obligations as Trustees and, if so, to take such
    available action to enforce the rights of the State.

    (vii) The Report is referred to the Department of
    Personnel Management to consider the actions or
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  • failures of Officers of the relevant Provincial
    Governments, the Department of Finance, the
    Trustees and any other person pursuant to the
    Public Finances (Management) Act – and in
    particular identified failures to maintain or
    produce any accounts, statutory records or other
    legally required documentation and to take action
    against any Officer or person who may have
    breached or failed to perform their lawful duty.

    (viii) That the Office of the Solicitor General, the
    Investment Promotion Authority and the Royal
    Papua New Guinea Constabulary investigate the
    Westco Limited, Greenhill Investment, CCS Anvil
    (PNG) Limited, Baimusu Construction Limited,
    SPA Limited and the Nuku District Administration
    in respect of all payments made to those entities
    and the use to which those monies were put,
    including and in particular whether the contracts
    were commenced or satisfactorily concluded and,
    in the case of Westco Limited and Greenhill
    Investments, to ascertain whether those
    companies existed at all. The Committee strongly
    recommends that if any breach of law is found
    against any of these companies or entities that
    prosecution is made by the relevant authorities.

    36. RECOMMENDATIONS

    36.1 This Committee makes the following recommendations:

    1. The Parliament accept this Report to the Public
    Accounts Committee concerning the management and
    operation of the Sepik Highway Roads and Bridges
    Maintenance and Other Infrastructure Trust Account.

    2. The findings and resolutions of the Committee, to be
    effective, need to be actioned by the Government,
    without delay.

    3. That the Parliament accepts the Auditor General’s
    Report dated the 12th December 2006 on the Sepik
    Highway Roads and Bridges Maintenance and Other
    Infrastructure Trust Account.
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  • 4. That this Trust Account be immediately closed and
    brought under the control of the Minister for Finance.

    5. That the Internal Audit services of the Department of
    Finance be strengthened and properly funded to allow it
    to fulfill its functions and to effectively audit all Trust
    Accounts; and

    6. That the Office of the Auditor General be funded and
    resourced to enable it to conduct regular audits of all
    Government Trust Accounts; and

    7. That every Trust Account be referred to the Office of the
    Auditor General for a full and complete review, audit,
    reconciliation of and Report on each account for the last
    five years.

    8. That the Report of the Auditor General on all Trust
    Accounts be immediately tabled in this Parliament when
    it is available.

    9. That a copy of the Report of the Auditor General on
    Trust Accounts be referred to the Public Accounts
    Committee when it is available.

    10. That the persons who were Trustees of this Trust
    Account should never again be allowed to hold any
    position which requires them to manage public monies
    or be accountable for the use to which public money
    may be put in any form at all.

    11. That the Royal Papua New Guinea Constabulary be
    properly resourced and assisted to carry out a detailed
    and competent investigation of the Committee referral
    and, if necessary, to allow the commencement and
    competent presentation of any prosecution (s).

    12. That the Offices of the Attorney General and the
    Solicitor General be properly and fully resourced to
    enable a detailed and competent investigation of the
    referral by this Committee and in particular, to examine

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  • and conclude on the personal liability of the Trustees
    and other Officers for monies unlawfully expended from
    the Trust Account or for which there are no records,
    accounts or acquittals and, if as a matter of law, those
    Officers are liable, to permit proceedings to be
    commenced against them for full recovery of all monies
    wrongfully paid or received.

    36.2 This Committee recommends that every existing Trust
    Instrument be reviewed by the Solicitor General and, where
    necessary, to be redrafted to ensure that the obligations on
    Trustees are firmly established and legally workable and that
    public monies are protected.

    36.3 This Committee strongly recommends that all Trustees, upon
    their appointment, should be subject to tuition and testing to
    establish that they understand the obligations, duties and legal
    position of a Trustee and their obligation to properly manage
    and properly account for all monies passing through a Trust
    Account.

    36.4 All major Trust Accounts should, several times a year, be
    subject to an unannounced and random audit by the Office of
    the Auditor General, intended to identify weaknesses or failures
    in Trust management.

    37. CONCLUSIONS

    This Committee concludes that the Trustees have failed to meet even
    their basic legal obligations under the Public Finance (Management)
    Act.

    The overwhelming attitude displayed to this Committee by these
    responsible Officers was one of disinterest and unconcern.

    This Committee also finds the Trustees and all Officers involved with
    the management of this Trust and payments from it completely failed to
    read, understand or apply the terms of the Trust Instrument – and did
    not appear to care what the document prescribed.

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  • This Committee has been shocked by the completely derelict
    attitude and approach of very senior public servants toward the
    management, control and accounting for very large sums of public money

    This Committee can only conclude that if it can, with relative ease, find
    such serious failures and illegal conduct in respect of one Trust Account,
    there is every reason suppose that there is similar (or worse) misconduct
    in the management of other Trust Accounts.

    This Committee finds that this conduct continued after the Head of
    Department of Finance and a Trustee, Mr. Thaddeus Kambanei, assumed
    control of the Account. This Officer was the Chief Accountable Officer to
    Government bearing onerous obligations of Law in the conduct of this and
    other Trust
    Accounts – yet seems to have done nothing to rectify the
    abuses attending the operation of the Account.

    Indeed, those abuses and the almost total lack of accountability and
    record keeping continued uninterrupted under the supervision of Mr.
    Kambanei. Citizens of Papua New Guinea are entitled to expect and
    demand better performance from their senior Public Servants –
    particularly the Head of the Department responsible for financial matters.

    This Committee hopes that the litany of abuse and misuse of monies in
    this Trust Account will signal to the Parliament the urgent need to bring
    Trustees under control and to make them understand that they are
    accountable for the application of monies as Trustees and not as mere
    functionaries who obey directions.

    There needs to be an immediate system of training and support given
    to Trustees in order that they understand their roles and obligations.

    There needs to be an urgent reform of the Public Service and the
    systems of control and accountability which applies to its Officers.

    This Committee hopes that this Report will start a process of
    accountability and responsible management of public monies held in and
    applied from Trust Accounts and in general.