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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