Inquiry into the Funding and Resourcing of the Office of the Auditor General. Report to the National Parliament

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  • THE PERMANENT PARLIAMENTARY COMMITTEE
    ON PUBLIC ACCOUNTS

    INQUIRY INTO THE FUNDING AND RESOURCING OF

    THE OFFICE OF THE AUDITOR GENERAL.

    REPORT TO THE NATIONAL PARLIAMENT.

    1. EXECUTIVE SUMMARY

    1.1. The Office of the Auditor General has, for many years,
    been inadequately funded by Government.

    1.2. The Office of the Auditor General has, for many years
    been under resourced and undermanned.

    1.3. Successive Governments have failed to fulfill their
    Constitutional duties to provide adequate facilities,
    staff and other arrangements to enable the Office of
    the Auditor General to properly perform its
    Constitutional duties, under Section 225 of the
    Constitution.

    1.4. As a result of this failure by Governments the full
    Constitutional rigour of Audit and oversight of the use
    and management of public monies, by the Auditor
    General, has not been possible.

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    1.5. The Office of the Auditor General does not have
    sufficient staff to carry out its duties.

    1.6. As a result of funding and staffing shortfalls, the Office
    of the Auditor General cannot adequately or properly
    audit all agencies of Government.

    1.7. This inability of the Auditor General has led to a failure
    of oversight and control of the use of public monies for
    many years.

    1.8. Government agencies can and do avoid audit by
    refusing or failing to produce financial statements and
    records.

    1.9. This failure has contributed to a collapse of accounting
    and fiscal record keeping across the entire span of
    every tier of Government.

    1.10. This collapse has contributed to the rise and spread of
    fiscal mishandling, misappropriation and illegal dealing
    with public monies in all areas of Government.

    1.11. This misconduct has led to a huge deviation of monies
    from appropriated purposes to inappropriate and
    improper purposes.

    1.12. The inability of the Auditor General to oversee and
    properly audit Government agencies has contributed

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    to the rise of a culture of impunity in the Public
    Service insofar as the handling of and accounting for
    public monies is concerned.

    1.13. The failure to adequately fund and resource the Office
    of the Auditor General has led to a failure in the power
    and authority of that Office.

    1.14. The collapse of Government accountability for and
    control of the use of public monies, has been
    accompanied by a loss of control and authority by the
    Executive and the National Parliament and the
    improper arrogation of fiscal power by unelected and
    unaccountable Public Servants.

    1.15. The lack of oversight and proper and enforceable audit
    has directly and adversely impacted on service
    delivery and development – largely due to a collapse
    in accountability for the management of Trust
    Accounts.

    1.16. The Office of the Auditor General has failed to comply
    with Section 20B of the Audit Act 1986 for many
    years, in that it has not submitted its estimates to the
    Public Accounts Committee for review.

    1.17. The Public Accounts Committee has failed to require
    compliance with Section 20B of the Audit Act 1986 for
    many years.

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    1.18. The National Parliament should immediately address
    the funding and resourcing of the Office of the Auditor
    General to ensure that it is able to competently and
    fully perform its Constitutional duties.

    2. INTRODUCTION

    2.1 The Public Accounts Committee conducted an Inquiry
    concerning the resourcing and funding of the Office of
    the Auditor General with the intention of ascertaining
    why that Office was experiencing problems in
    completing its Constitutional duties in a timely and
    complete manner.

    2.2 In the period 2002 – 2006, the Committee had
    considered the annual Reports of the Auditor General
    and, particularly in the Parts 3 and 4 Reports, found
    incomplete and outdated audits.

    2.3 Much of the problem was due to non-cooperation by
    Government agencies, but when financial statements
    were not produced for audit, the Auditor General did
    not have the resources or manpower to either enforce
    their delivery or to audit the agencies concerned due
    to pressure of work and inadequate manpower.

    2.4 The Office of the Auditor General is the first guarantee
    of fiscal reporting and propriety. Unless that Office is
    properly funded and resourced, fiscal oversight and
    accountability will suffer.

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    2.5 The Committee decided to investigate and establish
    the true state of affairs insofar as funding of the
    Auditor General was concerned. It conducted this
    Inquiry as part of a series of Inquiries concerning
    fiscal management in all agencies and tiers of
    Government.
    .
    3. CHRONOLOGY

    3.1. The Public Accounts Committee commenced its Inquiry
    into the funding and resourcing of the Office of the
    Auditor General on the 4th December 2007 and
    completed it on the 11th November 2008.

    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.

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    5. COMPOSITION OF THE COMMITTEE

    5.1 The Public Accounts Committee which made inquiry
    into the keeping of Government Trust Accounts was
    constituted as follows:

    4th December 2007

    Hon. Sam Basil MP – Acting Chairman.

    Hon Philip Kikala MP – Member

    Hon. Mal Smith-Kela MP – Member

    Hon. Malachi Tabar MP – member.

    14/07/2008.

    Hon. Timothy Bonga OL MBE M.P. – Chairman.

    Hon. Benjamin Poponawa M.P. – Member

    Hon. Francis Marus M.P. – Member

    Hon. Koni Iguan M.P. – Member.

    Hon. Lucas Dekena M.P. – Member.

    Hon. Malakai Tabar M.P. – Member.

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    Hon. Malcolm Smith-Kela MBE CMG DFC M.P. –
    Member.

    Hon Philip Kikala M.P. – Member.

    Hon. Sai Beseo M.P. – Member.

    22/09/2008.

    Hon. Timothy Bonga OL MBE M.P.

    Hon. Dr. Bob Danaya M.P. – Member

    Hon. Benjamin Poponawa M.P. – Member.

    Hon. Francis Marus M.P. – Member.

    Hon. Jack Cameron M.P. – Member.

    Hon. Fr. John Garia M.P. –Member.

    Hon. Hon. Lucas Dekena M.P. – Member.

    Hon. Malcolm Smith-Kela MBE CMG DFC M.P. –
    Member.

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    24/09/2008.

    Hon. Timothy Bonga OL MBE M.P. – Chairman.

    Hon. Dr. Bob Danaya M.P. – Deputy Chairman.

    Hon. Benjamin Poponawa M.P. – Member.

    Hon. Francis Marus M.P. – Member.

    Hon. Jack Cameron M.P. – Member.

    Hon. Fr. John Garia M.P. – Member.

    Hon. Koni Iguan M.P. – Member.

    Hon. Lucas Dekena M.P. – Member.

    Hon. Malakai Tabar M.P. – Member.

    Hon Malcolm Smith-Kela MBE CMG DFC MP – Member.

    Hon. Philip Kikala M.P. – Member.

    Hon. Sai Beseo M.P. – Member.

    Hon. Sam Basil M.P. – Member.

    11/11/2008.

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    Hon. Timothy Bonga OL MBE M.P. – Chairman.

    Hon. Dr. Bob Danaya M.P. – Deputy Chairman.

    Hon. Benjamin Poponawa M.P. – Member.

    Hon. Jack Cameron M.P. – Member.

    Hon. Fr. John Garia M.P. – Member.

    Hon. Malcolm Smith-Kela M.P. – Member.

    Hon. Philip Kikala M.P. – Member.

    Hon. Sai Beseo M.P. – Member.

    Hon. Sam Basil M.P. – 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. METHOD OF INQUIRY.

    6.1 The Public Accounts Committee decided to consider
    the state of the funding and resourcing of the Office of
    the Auditor General after considering the annual

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    Reports of that Office for the financial years 2000 –
    2007.

    6.2 It had become clear to this Committee that despite all
    its efforts the Office of the Auditor General was
    struggling to meet its Constitutional mandate due
    mainly to inadequate resourcing and financing.

    6.3 In this Inquiry, the Public Accounts Committee
    received oral and documentary evidence from the
    Office of the Auditor General and sought information
    and documents from the Departments of Finance and
    Treasury. We received considerable assistance from
    the Auditor General but unsatisfactory and
    unresponsive oral evidence from the Secretaries of
    both Departments.

    6.4 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.

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

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    6.6 No evidence was taken on oath but full and due
    inquiry was made of all relevant State Agencies where
    the Committee considered those inquiries to be
    necessary.

    7. JURISDICTION.

    THE CONSTITUTION OF THE INDEPENDENT STATE OF
    PAPUA NEW GUINEA.

    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)…”.

    7.1 Whilst considering the relevant provisions of the
    Constitution, the Committee has had regard to the

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    Final Report of the Constitutional Planning
    Committee 1974 and been guided by or applied the
    stated intentions of that Committee wherever
    necessary.

    7.2 The Public Accounts Committee has had due regard to
    evidence from 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.

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

    and

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    “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.

    THE PUBLIC FINANCES (MANAGEMENT) ACT 1995.

    7.4 The Public Accounts Committee also finds its
    jurisdiction to Inquire into the funding and resourcing
    of the Auditor General in Section 86 of the Public
    Finance (Management) Act 1995.

    7.5 That Section empowers the Committee to examine
    each statement in any Report of the Auditor General
    presented to the Parliament. Reports of the Auditor
    General were also carefully considered by the
    Committee.

    PERMANENT PARLIAMENTARY COMMITTEES ACT 1994:

    7.6 The Committee resolved that a full Inquiry into the
    funding and resourcing of the Office of the Auditor
    General was a matter of National importance and found
    further jurisdiction for the Inquiry in Section 17 of the
    Permanent Parliamentary Committees Act 1994.

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    7.7 That Section provides that the Public Accounts
    Committee can consider any matter to be of national
    importance and worthy of Inquiry.

    8 PURPOSE OF THE INQUIRY.

    8.1 The purpose of the Inquiry conducted by the Public
    Accounts Committee was to make full and complete
    examination of the manner in which the Government
    funded and resourced the Office of the Auditor General.

    8.2 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 in the funding and resourcing of the Auditor
    General and any matter considered by the Committee
    to be worthy of report to the Parliament.

    9 THE AUTHORITY TO REPORT

    9.1 The Public Accounts Committee finds authority to make
    this Report in Section 17 of the Permanent
    Parliamentary Committees Act 1994 and Section
    86(1) (c) and (d) (i), (ii), (iii) and (iv) and (f) of the
    Public Finances (Management) Act 1995.

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    10 . PRIVILEGES AND PROTECTION OF WITNESSES

    10.1 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.

    11 . RELEVANT STATUTES

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

    THE CONSTITUTION OF THE INDEPENDENT STATE OF
    PAPUA NEW GUINEA.

    11.2 The Committee had particular regard to various
    Sections of the Constitution – particularly those
    dealing with the establishment and empowerment of
    the Office of the Auditor General and the funding of that
    Office.

    AUDIT ACT 1986.

    11.3 The Audit Act 1986 establishes and empowers the
    office of the Auditor General to carry out its work of
    overseeing and supervising the handling of public

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    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.

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

    PERMANENT PARLIAMENTARY COMMITTEES ACT
    1994.

    11.5 The Committee has had regard to Sections 17, 22, 23,
    25, 27, and 33 of the Permanent Parliamentary
    Committees Act 1994 during the course of this
    Inquiry.

    12. THE OFFICE OF THE AUDITOR GENERAL:

    12.1 The Committee examined the nature and legal functions
    and duties of the Office of the Auditor General.

    12.2 The Office of the Auditor General is a Constitutional Office
    established by Section 213 of the Constitution.

    12.3 The Auditor General himself is appointed by the Head of
    State and the Office is not subject to the control or
    direction of any person or authority.

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    13.1 Clearly, the Office of the Auditor General is intended to
    be independent, autonomous and objective in its
    function and purpose – which are both established by
    Section 214 of the Constitution.

    13.2 By Section 214 of the Constitution the functions of the
    Office of the Auditor General are as follows:

    i) To inspect and audit the Public Accounts of Papua
    New Guinea;

    ii) Report at least once in every fiscal year to the
    Parliament on the Public Accounts of Papua New
    Guinea;

    iii) To inspect and audit the control of and transactions
    with or concerning public monies and property of
    Papua New Guinea;

    iv) Report at least once in every fiscal year to the
    Parliament on the control of and on transactions
    with or concerning public monies and property of
    Papua New Guinea;

    v) To perform such other functions prescribed by or
    under a Constitution of Law.

    13.3 Section 214 (2) of the Constitution prescribes the
    functions of the Auditor General. That Subsection

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    extends the Auditor’s powers of inspection and audit to
    the accounts, finances and property of –

    (a) All arms, departments, agencies and
    instrumentalities of the National Government; and

    (b) All bodies set up by an Act of Parliament, or by
    Executive or Administrative Act of the National
    Executive for Government or official purposes.

    13.4 However, the Auditor General is also vested with a
    discretionary jurisdiction.

    13.5 By Section 214 (3) of the Constitution, the Auditor
    General may, ……..“if he thinks it proper to do so”…
    inspect and audit and report to the Parliament on any
    accounts, finances or a property of an institution
    referred to in that subsection, insofar as they relate to,
    or consist of or are derived from public monies or
    property.

    13.6 The Constitution, by Section 214 (4), makes provision
    for an Act of Parliament to extend or further prescribe
    functions of the Auditor General and to confer on the
    Auditor General additional functions and duties not
    inconsistent with performance of the functions and
    duties conferred and imposed by Section 214.

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    13.7 The establishment of the Office of the Auditor General
    was considered necessary by the framers of our
    Constitution in order that to secure sound and honest
    financial administration.

    13.8 The Final Report of the Constitutional Planning
    Committee in 1974 addressed the matter as follows:

    “Sound and honest financial administration
    is basic to the development of our country,
    and to the effectiveness and reputation of its
    Government. Public monies must be raised
    and spent as the law provides. It is the task
    of the Auditor General to investigate
    whether public monies are properly handled,
    and to report his findings to the National
    Parliament at least once a year.

    The Auditor General should be as
    independent as possible of all involvements
    beyond his official duties. He must be able
    to pursue his lawful investigations without
    any inhibition and report the results of his
    inspections and audits directly to the
    National Parliament.

    The Auditor General’s main function is to
    check that the raising and expenditure of
    Government funds takes place in the manner

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    approved by the Parliament and that all
    transactions involving such funds have been
    properly accounted for.”

    Paras. 25 – 27 Page 9/4 Final Report of the
    Constitutional Planning Committee 1974.

    13.9 In 1999 the National Parliament of Papua New Guinea
    passed the Audit Act 1986.

    13.10 The premise to that Act states that the purpose of the
    Audit Act was to expand and provide in more detail
    further functions of the Auditor General, to confer
    additional functions and duties on the Auditor General,
    to provide for fees and charges payable to the Auditor
    General and to effect repeals and amendments
    consequential thereon.

    13.11 The Audit Act 1986 prescribes in considerable detail
    the purpose, functions, powers, duties and
    responsibilities of the Auditor General. It has been
    slightly amended over the years but no major
    modernization of the Act has yet occurred.

    13.12 The Auditor General has certain coercive powers to
    assist him in fulfilling his constitutional duties. For
    instance, by Section 4 of the Audit Act 1986 the
    Auditor General can issue a Summons to any person,
    authorize persons to inspect and audit any accounts and

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    records, examine persons on oath, ask questions of and
    make observations as he sees fit and make searches at
    free of charge.

    13.13 By Section 5 of the Audit Act 1986, the Auditor
    General is empowered to prosecute where he is satisfied
    that a person is guilty of misappropriation, misuse or
    fraud of public monies, stores or property, if the Public
    Prosecutor has failed to proceed with the matter after
    60 days.

    13.14 By Section 6 of the Audit Act 1986, the Auditor
    General may dispense with any part of a detailed Audit
    of Accounts, admit accounts as evidence in support of
    charges or credits, and waive technical defects in
    accounts and other matters.

    13.15 Most importantly, by Part 3 of the Audit Act 1986, the
    power of the Auditor General is extended to public
    bodies and trading entities.

    13.16 By Part 5 of the Audit Act 1986, the Auditor General is
    required to audit and inspect Provincial Governments
    and Local Level Governments.
    13.17 It is clear that the Office of the Auditor General in
    Papua New Guinea is a very powerful Independent
    Office intended to be the first line of assurance to the
    National Parliament and the Executive that public

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    monies, property and stores are lawfully handled and
    the accounts are properly and legally maintained.

    14. STAFFING AND RESOURCING OF THE OFFICE OF THE
    AUDITOR GENERAL

    14.1 The Constitutional Planning Committee made the
    following statement at Paragraph 9/4 of the Final
    Report in 1974:

    “ It is important that the Auditor General be
    supplied with adequate facilities and suitably
    trained staff to perform his duties
    effectively……..

    The Auditor General must ….. be given
    adequate staff of his own, and that staff as
    well as the Office of the Auditor General
    should be filled as soon as possible by
    citizens with appropriate qualifications.
    Meanwhile shortages of suitable staff in
    Papua New Guinea should be met by
    recruitment and, if necessary, secondment
    from overseas”.

    14.2 We believe that Statement to be particularly pertinent
    to this Inquiry and the obligations of Government to
    properly and fully fund and staff the Office of the
    Auditor General. It is important that the Auditor

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    General be supplied with adequate facilities and
    suitability trained staff to perform these duties
    effectively.

    14.3 Interestingly, the Constitutional Planning Committee
    firmly rejected the notion that the Auditor General be
    permitted to employ as agents, accountants or
    auditors from private enterprise.

    14.4 This recommendation was ignored by the framers of
    our Constitution and the use of contractors by the
    Auditor General is a common practice. The standard of
    many of those audits seen by this Committee varies
    considerably but many are poor in quality and we
    would discourage the practice – which emphasizes the
    need for adequate resourcing and funding of the
    Auditor General by Government.

    14.5 It has become apparent to this Committee that the
    Office of the Auditor General over the past 30 years
    has been allowed to deteriorate in effectiveness and
    focus.

    14.6 It is only in the last five years that the Office has
    undergone a resurgence and the quality of work
    produced in 2007 and 2008 is, on the whole,
    competent and a tribute to the staff of the Office of
    the Auditor General.

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    14.7 However, there are very clear staffing and financing
    problems within that Office.

    14.8 The method of financing the Office of the Auditor
    General is set forth in Section 20 B of the Audit Act
    1986. That Section states:

    “20B. Estimates

    The Auditor General shall prepare annual
    estimates of the sums that will be required for
    the payment of salaries, allowances and
    expenses of his Office during the next ensuing
    financial year for consideration by the
    Permanent Parliament Committee on Public
    Accounts for recommendation to the Prime
    Minister for approval and conformity with
    Section 225 of the Constitution”.

    14.9 That Section has not been complied with for many
    years. No estimates have been provided to the
    Permanent Parliamentary Committee on Public
    Accounts and if they had been, the funding situation
    might well have improved.

    14.10 Section 225 of the Constitution imposes a direct
    responsibility on the National Government to properly
    fund staff and resource Government bodies and

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    agencies and Public Office holders – and the Auditor
    General is one such.

    14.11 That Section states:

    “225 – Provision of Facilities Etc.

    Without limiting the generality of any other
    provision of this Constitution, it is the duty
    of the National Government and of all other
    Governmental bodies and of all public office
    holders and institutions that all
    arrangements are made, staff and facilities
    provided and steps taken to enable and
    facilitate, as far as may reasonably be, the
    proper and convenient performance of the
    functions of all Constitutional Institutions
    and of the Offices of all Constitutional office
    holders”.

    14.12 The evidence led before this Committee clearly
    showed that the Office of the Auditor General has not
    been properly and adequately funded, resourced and
    staffed considering the very large range of duties
    imposed on that Office.

    14.13 This lack of funding and resourcing has been
    compounded by a refusal across the span of
    Government agencies to cooperate with the Auditor

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    General and this has resulted in audits and reports
    which are not timely, complete or current.

    14.14 We are pleased to say the Office of the Auditor
    General has, despite these very significant
    shortcomings, improved its performance
    immeasurably over the last five years.

    15. EVIDENCE RECEIVED BY THE COMMITTEE IN THIS
    INQUIRY

    15.1 The Committee sought to establish the purpose and
    function of the Office of the Auditor General.
    Accordingly, the Acting Chairman summarized the
    Committees understanding as follows:

    “Hon. Sam Basil, MP – Acting Chairman:

    The Auditor General is the agency of
    accountability for the handling of public
    money and property in PNG. The
    performance of the Office has improved
    over the last few years and the quality of
    analysis and report emanating from the
    Office is very good and improving every
    year. However, we have seen apparent
    weaknesses and inabilities in the Office
    which, we think, are due to possible under

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    manning, lack of resources and under
    funding.”

    15.2 The Committee questioned the Auditor General
    concerning the adequacy of his budgetary
    appropriation and actual receipts:

    Hon Sam Basil MP – Acting Chairman:

    Mr Auditor what are your Budget requests for
    2008?

    Mr George Sulliman – Auditor General:

    Acting Chairman for 2008 we requested K15.6
    million.

    Acting Chairman:

    What was your Budget allocation in fact?

    Mr George Sulliman:

    We have been allocated K11.2 million.

    Acting Chairman:

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    That is a short fall of K3.8 million almost.
    How much of that will you actually receive
    with past experiences as a guide?

    Mr George Sulliman:

    Acting Chairman, if we go by this year’s
    Budget which is K11.5 but we are getting
    K11 million. But we were told that it was an
    oversight on their part and I hope that it will
    not happen again next year and we are most
    likely to get everything.

    Honourable Philip Kikala, MP – Member:

    Assuming that you receive K15 million for
    next year, can you tidy up the entire
    outstanding Audit work on all Provincial and
    National Departments? Do you think it will
    make your Office more efficient and
    productive?

    Mr George Sulliman:

    Acting Chairman, no. The increase from the
    Budget we had for this year and submission
    we made for next year is basically to redress
    two major issues. Firstly, the substantial
    amount of outstanding tax in the Tax Office

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    and secondly the Audit of POSF that may be
    increased in the Budget if necessary”.

    15.3 This Committee assumes from this evidence that, in
    real terms, in 2008 there has been no significant
    increase in either Budget or resources for the Office of
    the Auditor General and, depending on the amount
    required for the two special purposes advised by the
    Auditor General, the Office may well end up worse off
    in 2008 than was in 2007.

    15.4 The Committee further questioned Mr Sulliman on
    manpower levels in his Office. The following evidence
    is relevant:

    “Hon. Sam Basil MP – Acting Chairman:

    What is your manpower level?

    Mr George Sulliman – Auditor General:

    Acting Chairman the approved ceiling goes
    back about seven or eight years and since
    then a lot things have changed. In the recent
    two or three years we have been operating
    on a 105 – 107 personnel.

    Acting Chairman:

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    How is that made up?

    Mr George Sulliman:

    From September to October we have about 57
    to 60 actual auditors and the rest support
    staff. I recruited ten new Officers and that
    did not actually improve our situation and a
    good percentage of that was to fill the gaps of
    the ones left over from the past two years.

    Acting Chairman

    What is your actual manpower level?

    Mr George Sulliman:

    At the moment it is on 114.

    Acting Chairman:

    What number of staff do you need to
    properly and fully carry out your
    Constitutional duties?

    Mr George Sulliman:

    Acting Chairman, the restructure that we put
    to the Department of Personnel Management

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    in June last year is still pending and has not
    been approved. This would increase
    manpower from 68 to 183”.

    15.5 This Committee is very concerned at this evidence. An
    application to increase staff numbers has been
    pending for 18 months and still not approved.

    15.6 In the meantime audits go unperformed as a result of
    both a lack of manpower and resources and the
    refusal of agencies to produce financial statements –
    confident in the knowledge that the Auditor has
    inadequate resources to force that delivery or to audit
    them if they are produced and submitted.

    15.7 This is a common problem that comes before this
    Committee very frequently. Such a situation would
    not be tolerated in private enterprise and neither
    should it be tolerated in Government – particularly in
    such a fundamentally important Constitutional Office
    as that of the Auditor General.

    15.8 Constitutional Offices like the Office of the Auditor
    General requires prompt and complete assistance in
    all respects including the approvals of manpower
    levels and funding – as the Constitution requires.

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    15.9 The Committee explored the effect of the lack of
    resources and manpower with the Auditor General.
    The following evidence is relevant:

    “Hon. Sam Basil MP – Acting Chairman:

    Does your Office Audit all agencies, arms or
    Government Departments?

    Mr George Sulliman:

    We are required to audit all agencies but we
    do not get to audit all the agencies because
    of the shortage of resources and also
    because not all of them should make the
    financial statements.

    Acting Chairman:

    Do you audit Local Level Governments as well?

    Mr George Sulliman:

    So far, we have not audited a single rural
    Local- level Government but we have audited
    some Urban Local- level Governments.

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    Acting Chairman:

    Did you audit commercial arms of all the
    Provincial Governments?

    Mr George Sulliman:

    The business arms and commercial arms
    that we have audited are the ones that have
    submitted their financial statements.

    Honorable Philip Kikila, MP – Member:

    But those you have not, shouldn’t that be
    your right to investigate? Even you are
    responding to as and when they submit their
    accounts and if they do not then forget it.
    But it is your constitutional duty to go and
    audit them. Don’t you have the power?

    Mr George Sulliman:

    Mr Acting Chairman its not that we forget
    them. Our resource situation is a factor.
    When they are not ready there is other work
    that we could carry on with.

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    Acting Chairman:

    Are those priorities due to the manpower or
    resource in certain areas of the Government
    miss out on Audits?

    Mr George Sulliman:

    Chairman that is correct. We are forced to do
    what our resource situation allows that we
    have and it is very unfortunate that
    shortcomings only results in keeping our
    backlogs.

    Acting Chairman:

    Have you a presence in Provincial Governments
    and if so where?

    Mr George Sulliman:

    Acting Chairman we do not have any presence
    in Provincial Governments.

    Acting Chairman:

    Have you presence in other parts of PNG than
    Port Moresby and how many staff are at these
    places?

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    Mr George Sulliman:

    Yes we have but we have scaled down our
    presence and we are now left with four
    regional officers.

    Acting Chairman:

    Why scaling down?

    Mr George Sulliman:

    Resource constraints Sir, I think you know.

    Acting Chairman:

    What increase in manpower do you need?

    Mr George Sulliman:

    As for that, we requested for an additional
    86 that was part of our submission that we
    made last year but we have not got any
    indication of approval or some consideration
    from DPM. But in the meantime we can work
    with that if approved.”

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    15.10 This is very disturbing evidence. The Auditor General
    is unable to carry out his Constitutional duty for a mix
    of reasons.

    15.11 Firstly, the collapse of accountability amongst
    Government agencies means that many agencies do
    not deliver financial statements and they are simply
    not audited at all.

    15.12 This is a very dangerous development. Any
    Department or agency which wishes to avoid Audit can
    do so by the simple expedient of not making or
    delivering the financial statements and this Committee
    has seen many examples of this conduct in the last
    five years.

    15.13 Secondly, even if the Auditor General wanted to, he
    does not have sufficient resources or manpower to
    chase up those agencies which do not make financial
    statements.

    15.14 Further, the Auditor General does not have sufficient
    manpower resources to perform in-depth audits and
    reports on those entities which do deliver financial
    statements and such priorities as he is able to set are
    again dictated by resources and finance.

    15.15 This is a perfect circle of failure and it is caused by
    Government inaction and indifference.

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    15.16 Further, the Auditor General does not have a presence
    in Provincial Governments or lesser tiers of
    Government – where it would have great impact on
    the standard of accounting for public monies, property
    and stores.

    15.17 This Committee concludes that there is a failure to
    properly resource and fund the Office of the Auditor
    General and that that situation has existed for years.
    This is a direct breach by the National Government of
    Section 224 of the Constitution.

    15.18 The Committee then sought advice as to the resources
    which were required by the Auditor General. The
    following evidence ensued:

    “Hon. Sam Basil MP – Acting Chairman:

    What resources do you need that you do
    not have?

    Mr George Sulliman – Auditor General:

    In that connection Acting Chairman, one of
    the other exercises we have commenced in
    the Offices to carry out a complete review
    of the full scope of our Audit starting from
    Provinces into National Government level.

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    To identify the agencies and then the
    reporting system from the bottom line up
    to the top and it is only then we will be in a
    position to identify the ones we can target
    for Audit.

    Honorable Philip Kikala, MP – Member:

    What the Auditor General is basically
    telling us is as the answers to the last three
    questions that are the requirement for our
    increased Budget. To build up this capacity
    within his Organization, continue on the
    auditing of Departments and Government
    Institutions every year.

    More importantly the backlog that they miss
    out on in any given year and you can see the
    tremendous workload already on the Auditor
    General’s Office.

    Acting Chairman:

    From past experiences is it true that if
    agencies want to avoid investigation they just
    do not produce their financial statements? Is
    that true?

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    Mr George Sulliman:
    We have experienced a lot of that.

    Acting Chairman:

    So what has your Office done about it when
    they do not produce these financial
    statements?

    Mr George Sulliman:

    Like I indicated in my answer that I gave
    previously when they are not prepared for us
    to do the Audit there are a lot more things
    that we have to do so we move on to the ones
    that are ready.

    Honorable Philip Kikala, MP – Member:

    Then they escape?”

    15.19 The Auditor General tabled three documents to the
    Committee.

    15.20 Firstly we received a Corporate Plan for the Office of
    the Auditor General. We have given that Plan very
    careful consideration and commend the Auditor
    General for a precise, carefully written and thoughtful
    document which should, if he receives adequate

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    funding and manpower, improve the performance of
    his Office greatly.

    15.21 Secondly, the Auditor General produced the printouts
    and the information concerning reasons for shortfalls
    in both funding, manpower and audit performance.

    15.22 We have carefully considered those documents and
    found them helpful and informative.

    15.23 The Auditor General also produced a very detailed
    submission concerning funding and resourcing and we
    propose to address that now.

    15.24 The Auditor General reports that like most agencies,
    his Office is constrained by resources available to him.
    His evidence as follows:

    “I am constrained to the extent that I
    cannot meet my mandate to provide even
    the most basic Audit Reports and Opinions
    regarding the Financial Reports and
    Financial Statements produced by State
    bodies and agencies.”

    My current mandate covers:

    • Twenty Eight National Departments and
    their agencies, some of these

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    Departments have a presence across all
    Provinces;

    • Nineteen Provincial Governments and
    their business arms;

    • Two Hundred and Eighty Six Local Level
    Governments and their business arms;

    • Over 330 Financial Statements by
    Authorities and Commercial Agencies.

    • In addition, there are 19 Provincial
    Treasuries, an increase in the number
    of District Treasury Offices, Hospitals
    and their Boards, Schools and other
    Institutions of learning and some
    hundreds of Trust Accounts. To add to
    this, some 10 years of significant under
    funding has resulted in little
    professional development of staff or
    even the capability to recruit or engage
    appropriate resources.”

    15.25 One member of the Committee summarized the
    situation very accurately in the following manner:

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    Hon. Philip Kikala MP – Member:

    …..the backlog that they (the Auditor General)
    miss out in any given year and you can see
    the tremendous workload already on the
    Auditor Generals Office. Now how can they
    perform effectively when they are under
    funded, under resourced and under staffed? I
    mean, I can see this just from the answers
    ………….”

    15.26 This Committee agrees and makes the following
    findings:

    16. FINDINGS.

    16.1 The Government has not funded the Office of the
    Auditor General adequately or fully in the past decade.

    16.2 The Office of the Auditor General has not been
    adequately resourced for a decade.

    16.3 The Office of the Auditor General has not been given
    adequate manpower to perform its Constitutional
    duties for many years.

    16.4 The failure to properly fund and resource the Auditor
    General is a breach of Section 225 of the
    Constitution.

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    16.5 The effect of inadequate funding and resources has
    been to prevent the Auditor General from maintaining
    a presence in Provinces and to prevent that Office
    from performing audits in a timely and complete
    manner – or at all in many cases.

    16.6 The secondary effect of these failures has been to
    remove from Government agencies the independent
    fiscal oversight and audit prescribed by the
    Constitution. This is an invitation to fiscal misconduct
    and this is exactly what has occurred.

    16.7 The third effect of these failures was that Agencies
    quickly realized the situation and exploited it to avoid
    audit at all by simply refusing to produce Financial
    Statements. The Auditor General was forced to move
    to other Agencies due to a lack of manpower and audit
    could be avoided for years.

    16.8 The National Museum and Art Gallery provides an
    excellent illustration of this collapse of lawful systems
    of administration. That Institution did not produce
    Financial Statements for six years and thereby
    avoided Audit for the same period – during which it
    engaged in large scale illegal “sale” or removal of
    State property in the form of War Surplus, by foreign
    interests.

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    16.9 The Office of the Auditor General has failed to comply
    with Section 20B of the Audit Act 1986 in that he
    has not submitted estimates for future funding to the
    Public Accounts Committee for consideration.

    16.10 This Committee has, for many years, failed to enforce
    Section 20B of the Audit Act 1986.

    16.11 The process of approval for increased manpower is
    slow, non performing and unresponsive. No
    Constitutional Office should have to wait for years to
    obtain approvals to employ and deploy extra officers –
    especially when the need is patently obvious, as it was
    in the case of the Auditor General.

    17. RECOMMENDATIONS

    This Committee makes the following recommendations:

    17.1 The National Parliament should immediately increase
    funding to the Office of the Auditor General and
    ensure that the full appropriation is actually paid to
    the Office.

    17.2 The Auditor General will, in 2009, comply with Section
    20B of the Audit Act 1986 and submit estimates to
    this Committee for the financial year 2010.

    17.3 This Committee will, in 2009, enforce compliance with
    Section 20B of the Audit Act 1986.

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    17.4 Immediate increases in manpower and resources
    should be made to the Office of the Auditor General.

    17.5 The Auditor General should be funded adequately to
    fully and completely perform his Constitutional duties
    in 2010 – in particular to audit fully all agencies of
    Government at all levels of Government.

    17.6 Adequate and sufficient funding and resourcing should
    be given to the Auditor General to reestablish Audit
    Offices in all Provincial Governments.

    17.7 The Office of the Auditor General will, in or before July
    2009, submit to this Committee a report on funding
    and resourcing of the Office of the Auditor General in
    2009.

    17.8 The Government accept this Report, debate same and
    immediately begin the process of reform and the
    reestablishment of the Constitutional scheme of fiscal
    oversight and control.

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

    18. RESOLUTIONS OF THE COMMITTEE.

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

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    1. This Report is accepted as the Report of the
    Committee.

    2. The title of the Report is approved in the form:

    “INQUIRY INTO THE FUNDING AND
    RESOURCING OF THE OFFICE OF THE
    AUDITOR GENERAL.”

    3. The appendices in Schedules to the Report are
    approved.

    4. There is no dissenting Report.

    5. The Committee will make this Report to Parliament
    under Section 86 (1) (c) and (d) Public Finances
    (Management) Act 1995 with findings and
    recommendations concerning the funding and
    resourcing of the Office of the Auditor General.

    6. That the Committee accepts the evidence of the
    Auditor General, and will report to Parliament on
    necessary changes to the funding and resourcing of
    the Office of the Auditor General as set forth in
    Section 86 (1) (d) (i – iv) of the Public Finances
    (Management) Act 1995.

    7. To accept and endorse the recommendations in
    Para. 17 hereof.

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    8. Government must study and implement all the
    recommendations made by the Auditor General and
    endorsed by this Committee.

    19. REFERRALS.

    19.1 There are no referrals made by the Committee.

    20. SUMMARY:

    20.1 The Committee anticipates that the National Parliament
    will consider the contents of this Report and, in 2010,
    fully and adequately fund and resource the Office of the
    Auditor General.

    20.2 This will begin the process of rebuilding the systems of
    fiscal accountability and management of public monies.

    .

    Report adopted by the Public Accounts Committee on the
    day of 25th of May 2009.

    …………………………………….
    Hon. Timothy Bonga OL MBE MP
    Chairman.

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    SCHEDULE 1.

    List of Witnesses appearing on all days of this Inquiry.

    Mr. George Sulliman – Auditor General.

    Mr. Gabriel Yer – Secretary for Finance.

    Mr. Simon Tosali – Secretary for Treasury.

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    SCHEDULE 2.

    Documents received from the Auditor General

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    SCHEDULE 3

    Corporate Plan of the Office of the Auditor General