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• Performance Audit Report on the Effectiveness of the Management
  of the Log Export Development Levy in Papua New Guinea

  Auditor-General’s Office of Papua New Guinea

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• Performance Audit on the Effectiveness
  of the Management of the Log Export
  Development Levy for the fiscal years
  2012 – 2015

  Auditor-General’s Office of Papua New Guinea

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• Telephone: 301 2203 Fax: 325 8295 Website: www.ago.gov.pg Email: [email protected]

  OFFICE OF THE AUDITOR-GENERAL
  29 September, 2017

  The Honourable JOB POMAT, MP
  Speaker of the National Parliament
  Parliament House
  WAIGANI

  National Capital District

  Dear Mr. Speaker,

  In accordance with the provisions of Section 214 of the Constitution of the Independent
  State of Papua New Guinea, and the Audit Act 1989 (as amended), I have undertaken an
  audit examining the effectiveness of the management of the Log Export Development Levy
  within key government agencies in Papua New Guinea.

  I submit the report of this audit and the report is titled “Performance Audit on the
  effectiveness of the management of the Log Export Development Levy in Papua New
  Guinea.”

  Following its tabling in Parliament, the report will be placed on the Auditor-General’s Office
  Homepage-http://www.ago.gov.pg

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• Contents
  CONTENTS ………………………………………………………………………………………………………………………………………………… 7
  ACRONYMS AND DEFINITIONS ……………………………………………………………………………………………………………………………………………………………………………10
  SUMMARY AND RECOMMENDATIONS ………………………………………………………………………………………………………………….11
  INTRODUCTION ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………….11
  OVERALL CONCLUSION ………………………………………………………………………………………………………………………………………………………………………………………..11
  KEY AUDIT FINDINGS BY CHAPTER …………………………………………………………………………………………………………………………………………………………………….12
  Administration and Processing of the Log Export Development Levy (Chapter 2) ……………………………… 12
  Project Funding Requirements and Processes (Chapter 3) ……………………………………………………………. 13
  Monitoring and Reporting (Chapter 4) ………………………………………………………………………………………………… 14
  RECOMMENDATIONS …………………………………………………………………………………………………………………………………………………………………………………………………………………………..14
  1. INTRODUCTION ………………………………………………………………………………………………………………… 16
  POLICY FRAMEWORK……………………………………………………………………………………………………………………………………………………………………………………………………………………………16
  National Forestry Policy …………………………………………………………………………………………………………. 16
  LEGISLATIVE FRAMEWORK ………………………………………………………………………………………………………………………………………………………………………………….16
  Forestry Act 1991………………………………………………………………………………………………………………………………. 16
  Customs and Tariff Act 1990 and Customs Act 1950 …………………………………………………………………….. 17
  Public (Finances) Management Act …………………………………………………………………………………………………….. 17
  Administrative Guidelines for the Management of the LEDL …………………………………………………………. 17
  PNG Forestry Authority (PNGFA) ……………………………………………………………………………………………… 18
  Society Generale de Surveillance Group (SGS)…………………………………………………………………………….. 18

  THE AUDIT………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..19
  Audit Rationale ………………………………………………………………………………………………………………………………… 19
  Audit objective, scope and criteria …………………………………………………………………………………………… 19
  Audit Methodology …………………………………………………………………………………………………………………………… 19
  2. ADMINISTRATION AND PROCESSING OF THE LOG EXPORT DEVELOPMENT LEVY ………………………. 20
  LEDL CALCULATIONS AND BILLING PROCESSES ……………………………………………………………………………………………………………………………………………..20
  LEDL Calculation Rates ………………………………………………………………………………………………………………………. 20
  LEDL Billing Processes …………………………………………………………………………………………………………………………………….. 21

  LEDL Collection and Transfers …………………………………………………………………………………………………………….. 22
  LEDL Collection Procedures ……………………………………………………………………………………………………………….. 22
  LEDL Transfer Procedures …………………………………………………………………………………………………………………. 22
  LEDL Revenue Collections ………………………………………………………………………………………………………………… 22

  CONCLUSION ………………………………………………………………………………………………………………………………………………………………………………25
  RECOMMENDATION 1………………………………………………………………………………………………………………………………………………… 26
  Agency Response ………………………………………………………………………………………………………………………………. 26
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• RECOMMENDATION 2………………………………………………………………………………………………………………………………………………….. 26
  Agency Responses ………………………………………………………………………………………………………………………………. 26
  RECOMMENDATION 3………………………………………………………………………………………………………………………………………………….. 26
  Agency Response ………………………………………………………………………………………………………………………………… 27
  RECOMMENDATION 4………………………………………………………………………………………………………………………………………………….. 27
  Agency Response ………………………………………………………………………………………………………………………………… 27
  3. PROJECT FUNDING REQUIREMENTS AND PROCESSES ……………………………………………………………..28
  LEDL PROJECT PROPOSALS AND FUNDING ………………………………………………………………………………………………………………………………………………………. 28
  PROCEDURES FOR PROJECT SUBMISSION AND APPROVAL…………………………………………………………………………………………………………………………….. 28
  Project Submission and Documentation ……………………………………………………………………………………………….. 28
  Approval of LEDL Project Submissions ………………………………………………………………………………………… 29
  Meeting Minutes of LEDL Committee …………………………………………………………………………………………………… 30
  Accounting Records…………………………………………………………………………………………………………………………….. 30
  APPLICATIONS OF LEDL TRUST FUNDS FOR PROJECTS …………………………………………………………………………………………………………………………………. 31
  Applications of funds inconsistent with LEDL requirements ……………………………………………………………. 31
  Details of LEDL Payments made missing ……………………………………………………………………………………… 32
  K5 Million LEDL funding limit ……………………………………………………………………………………………………………….33
  LEDL Payments in 2015 ………………………………………………………………………………………………………………………..33
  CONCLUSION …………………………………………………………………………………………………………………………………………………………………………………………………………. 35
  RECOMMENDATION 5………………………………………………………………………………………………………………………………………………….. 35
  Agency Response …………………………………………………………………………………………………………………………………35
  RECOMMENDATION 6………………………………………………………………………………………………………………………………………………….. 36
  Agency Response ………………………………………………………………………………………………………………………………… 36
  4. MONITORING AND REPORTING ……………………………………………………………………………………………37
  Project Monitoring and Evaluations …………………………………………………………………………………………… 37
  Project Completion Certifications ………………………………………………………………………………………………. 37

  Log Export Development Levy Committee …………………………………………………………………………………… 37
  PNG Forest Authority ………………………………………………………………………………………………………………………….. 38
  District Administrators ………………………………………………………………………………………………………………………… 38
  RECOMMENDATION 7………………………………………………………………………………………………………………………………………………….. 38
  Agencies Response……………………………………………………………………………………………………………………………… 38
  APPENDIX 1: LEDL COLLECTION FOR THE YEARS 2012 – 2015 ………………………………………………………………………39
  APPENDIX 2: FLOW CHARTS – PROJECT SUBMISSION AND APPROVAL …………………………………………………………40
  APPENDIX 3: FLOWCHART – PROJECT TENDERING AND PAYMENT ………………………………………………………………41
  APPENDIX 4: LEDL PROJECT PROPOSALS EVALUATED BY PNGFA TEC AND SUBMITTED TO LEDL TRUSTEES …..42
  APPENDIX 5: SUMMARY OF TRANSACTION EXTRACTED FROM BANK STATEMENT LEDL PAYMENTS FROM
  THE TRUST ACCOUNT FOR THE PERIOD 2012 – 2015 ……………………………………………………………………………………43
  TABLES
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• Table 1: Inflation and the Log Export Development Levy ………………………………………………………… 21
  Table 2: Total LEDL Collections during the years 2012-2015……………………………………………………… 23
  Table 3: Total LEDL Collections from PNGCS Collectors Statements and total Receipts from Trust
  Account Records – 2012-2015 ………………………………………………………………………………………………………. 23
  Table 4: Records of LEDL Collections 2012-2015…………………………………………………………………….. 24
  Table 5: LEDL Collections – AGO Comparison of PNGCS Collector’s Statements and SGS (PNG) Ltd for
  the years 2012-2015 ……………………………………………………………………………………………………………………. 25
  Table 6: Schedule of LEDL Projects approved by LEDL Trustees………………………………………………… 30
  Table 7: Summary of Payments from the LEDL Trust Account 2012-2015 …………………………………… 31
  Table 8: LEDL Payments with Insufficient Details 2012-2015…………………………………………………….. 32
  Table 9: LEDL Trust Payments over K5 Million 2012-2015 ……………………………………………………….. 33
  Table 10: LEDL Trust Account Payments – 2015 ……………………………………………………………………… 34

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• Acronyms and Definitions
  AGO Auditor General’s Office

  ASYCUDA Automated System for Customs Data

  BSP Bank South Pacific

  CSTB Central Supplies Tenders Board

  DoF Department of Finance

  DPN&M Department of National Planning and Monitoring

  DSIP District Services Improvement Program

  Joint District Planning and Budget Priority Committee. Now called the District
  JDP&BPC
  Development Authority (DDA)

  Joint Provincial Planning and Budget Priority Committee Now called the Provincial
  JPP&BPC
  Development Authority (PDA)

  Log Export Development Levy. A customs duty imposed at the rate of K8/m3 on the
  total volume of logs exported and is applicable to all exported logs under the
  LEDL
  Customs and Tariff Act 1990 except for the plantation logs and payable by the
  exporter to the Customs Office

  MODACC Accounting Module of the Automated System for Customs Data (ASYCUDA)

  MODCBR Customs Module of the Automated System for Customs Data (ASYCUDA)

  ORD Office of Rural Development

  PNGFA Papua New Guinea Forest Authority

  PNGCS Papua New Guinea Customs Service

  PPET Provincial Project Evaluation Team

  PSTB Provincial Supplies Tenders Board

  SGS Societe Genarale de Surveillance

  TEC Technical Evaluation Committee

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• Summary and Recommendations
  Introduction
  1. The Log Export Development Levy (LEDL), (the Levy) was established by the
  Government in 2006, in response to concerns that many areas of the country that had been
  logged were being left without any tangible or durable developments after logging
  operations were complete. The primary objective of the Levy is to provide funds to assist in
  the provision of basic infrastructure and facilities for services such as health, education, law
  and justice, infrastructure and agricultural projects in the logging areas of PNG.
  2. The Levy is a customs duty imposed on the exporter at the rate of 8 Kina per cubic
  metre (K8/m3) of the total volume of logs exported, and is applicable to all logs subject to
  the Customs and Tariff Act 1990, except plantation logs. Funds collected under the levy are
  paid into a trust account for subsequent disbursement. The Forestry Act 1991 (as amended
  in 2006) establishes the Governance arrangements for the management of the trust fund,
  including a Committee which has responsibility for managing the trust account. The Act and
  related guidelines also provides the criteria for the Committee in the approval of
  expenditure from the Levy trust fund.
  Overall Conclusion
  3. The Levy is potentially a large investment in local, logging communities. Between
  2012 and 2015, more than 14 million cubic metres of logs were exported from PNG and
  more than K105 million has been paid into the trust account for future expenditure on
  projects in the logging districts. However, since the establishment of the Levy trust account
  in 2006, the rate of collection at K8/m3 has not been reviewed or adjusted. At the same
  time, the rate of inflation over the last ten years means that the purchasing power of 8 kina
  has fallen by almost 40 percent, notwithstanding that overall levy collections have increased
  over the period.
  4. A total of eighty-four project proposals were received and registered for Levy
  funding between January 2007 and January 2015. However, out of this total, the Papua New
  Guinea Forestry Authority (PNGFA) has only evaluated and considered twelve proposals
  with a total value of K24.52 million. This means that less than 25 per cent of the funds raised
  over the last four years have been committed to projects since the program’s inception. On
  this measure alone, the Log Export Development Levy program is falling short of its
  objectives.
  5. A key aspect of program design is that exporters pay the levy to the Papua New
  Guinea Customs Service (PNGCS) which deposits the funds into a withholding trust account.
  Funds from the withholding trust account are then transferred to a main trust account. The
  transfer from one trust account to another appears to be an unnecessary step and there has
  been an unexplained leakage of funds in the transfer process. The amounts deposited into
  the withholding account do not reconcile with the amounts received in the main trust
  account either cumulatively or individually in any year since 2012. The overall shortfall in
  the main trust account is almost K4 million. There are other weaknesses and leakages in the
  Levy collection system which requires immediate attention. Overall, there has been a lack of
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• coordination between the key agencies involved in the reporting of log export volumes and
  levy collections.
  6. The responsibility for monitoring and reporting performance of the Levy program is
  shared by the Levy Committee, the PNGFA and the Provincial and Local Level Governments
  in the logging areas. The design of the monitoring and reporting arrangements set out in the
  legislation and guidelines adequately reflects the devolved nature of the project
  implementation and recognises that detailed monitoring at the project level is most suited
  to arrangements between local authorities and government agencies. However, under
  current arrangements, authorities at all levels have not provided the required data and
  central agencies have not been able to effectively monitor or report on the projects or the
  Levy program more broadly.
  7. The conduct of this audit has been significantly influenced by one of its findings;
  recordkeeping and documentation. There was a lack of adequate documentation
  maintained by the responsible departments in relation to deposits and withdrawals from
  the trust fund and transfers between the funds. Neither the responsible departments nor
  the Committee were able to provide documentation that showed recommendations as to
  which project applications should be approved, and those that should be rejected. The
  responsible departments and the Committee also did not undertake any value for money
  analysis in respect to the claims made by project proponents in their applications. Such
  documentation is generally accepted as a key element of sound administration and
  accountability, and the minimum that should be maintained.
  8. The AGO has made seven recommendations to improve the systems and
  management of the Log Export Development Levy, but there are broader lessons for all
  agencies in the findings. To support agency business, and meet legal and policy
  requirements, entities need to manage information and processes need to operate so that
  records can be proven to be genuine; are accurate and can be trusted; are complete and
  unaltered; are secure from unauthorised access, alteration and deletion; are findable and
  readable; and are related to other relevant records. Such documentation also would have
  assisted in better informing Government of the progress with the implementation of the Log
  Export Development Levy and is the first line of defence against allegations of
  maladministration or fraud.
  9. In addition, in light of experience as to how the Log Export Development Levy has
  operated over its first ten years and the findings of this report, there would be benefit in the
  relevant departments and entities reviewing key elements of the program design and
  making recommendations to Government so as to confirm their continuing commitment to
  the program and also the relevance and effectiveness of program objectives.
  Key Audit Findings by Chapter
  Administration and Processing of the Log Export Development Levy (Chapter 2)
  10. The AGO considers that since 2012 and the demerger of PNGCS and IRC, the
  Customs service now has well-documented processes for assessing and examining LEDL
  statements and the collection of funds into the withholding trust account. However, the
  delays in setting up signatories to the main trust account following the demerger reflect
  poorly on the administrations of both departments, as there are unexplained discrepancies
  in accounting for transfers in the years prior to 2012. The overall amount involved is almost
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• 4 million kina. The existence of a withholding trust account and a main trust account is an
  unnecessary duplication of effort and could be contributing to the discrepancies.
  11. Between 2012 and 2015, more than 14 million cubic metres of logs were exported
  from PNG. The AGO attempted to further analyse the volume and value of the levy that
  should have attached to these exports. However, the data was not readily available from
  PNGCS and analysis of the volumes exported needed to be conducted using third party
  records from SGS Limited. Although the SGS records are not matched against PNGCS
  records, the AGO identified significant inconsistencies in collections data from both entities,
  with levy collections somewhere between K6 million and K7 million lower than expected
  when compared to the volume of logs exported.
  12. The levy was introduced by the Government in 2006 and set at 8 kina per cubic
  metre (K8/m3) and has not been adjusted since it commenced. However, the rate of
  inflation has significantly eroded its purchasing power, notwithstanding that overall
  collections have increased over the period. The AGO considers that a review of the levy
  would be beneficial to include the addition of an outturn factor to adjust for inflation
  particularly as the LEDL Committee has considerable influence on the direction of the
  projects and the funding capacity needed to support them.
  Project Funding Requirements and Processes (Chapter 3)
  13. The LEDL was intended to address the problem that a significant amount of logging
  was taking place in various communities in PNG with little or no compensation to those
  communities to compensate them for the natural resources given up. The levy was a way
  that these communities could fund agriculture and infrastructure projects that would
  otherwise have been beyond the capacities of provincial and local level government. It was
  for this reason that the funding provided under the program was to be additional to existing
  funding provided under DSIP or Function Grants.
  14. The delivery of these projects was intended to be progressed through the
  development and implementation of new legislative and inter-agency funding
  arrangements. Under these arrangements and as noted above, between 2012 and 2015,
  more than K106 million has been collected and paid into the trust account for expenditure
  on authorised construction projects. From January 2007 to January 2015, the PNGFA
  received and registered a total of eighty-four project proposals for LEDL funding. However,
  out of this total, PNGFA has only evaluated and considered twelve development project
  proposals to the value of K24.52 million. Direct comparisons between these two data sets
  are not reliable, but it can be seen that less than 25% of the funds raised in the last four
  years has been spent over the eight years that has elapsed since the program’s inception. In
  part this is due to the lack of awareness of the program in the logging regions and the funds
  available through the levy, and in part the administration of the fund by the LEDL
  Committee has been ineffective, due to inadequate administrative practices.
  15. Examples of inadequate administrative practices included decision making records
  not being completed, maintained or retained; the required documentation not being
  provided; breaches of trust account provisions in relation to withdrawals; and failure to
  follow program guidelines. The AGO notes that weaknesses in these matters extends to
  record keeping generally and a low standard of accountability and transparency by the
  agencies involved.

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• Monitoring and Reporting (Chapter 4)
  16. The responsibility for monitoring and reporting performance of the LEDL program is
  shared by the Treasury, the LEDL Committee, the PNGFA and the Provincial and Local Level
  Governments. Section 121A of the Forestry Act 1991 (as amended in 2006) and the
  administrative guidelines for LEDL establishes the monitoring and reporting framework. The
  framework requires administering agencies and relevant entities to monitor and report
  compliance with funding conditions and project implementation.
  17. The design of the monitoring and arrangements set out in the legislation and
  guidelines adequately reflects the devolved nature of the project implementation and
  recognises that detailed monitoring at the project level is most suited to arrangements
  between local authorities and central government agencies. However, under current
  arrangements, authorities have not provided the required data and central agencies have
  not been able to effectively monitor or report on the projects or the LEDL program more
  broadly.
  Recommendations
  Set out below are the recommendations identified during the course of this performance
  audit and the department’s responses.
  Recommendation 1 The AGO recommends that the PNGFA considers an amendment to the
  legislation to include an outturn estimate for the LEDL, as an adjustment
  Paragraph 2.26
  for inflation and to be reviewed annually, to protect the purchasing
  power of the levy.
  PNGFA Response: No response

  Recommendation 2 To ensure consistent and verifiable reporting of LEDL collections, the
  AGO recommends that PNGFA in consultation with SGS Ltd and
  Paragraph 2.27
  members of the LEDL Committee, regularly reconcile their log and levy
  records with PNGCS to provide decision makers with accurate and up to
  date data.

  PNGFA Response: No response
  PNGCS Response: Agreed. We agreed that there was no close consultation with PNGFA
  and SGS concerning revenue records and reconciliations of LEDL
  collections. Revenue records and reconciliation were done based on
  PNGCS actual revenue collections for the period under review. We
  discussed and resolved that we will implement proper coordination with
  agencies concerned to ensure future LEDL collections are up to date and
  reconciled to each other records so there is proper reporting of LEDL
  revenue to the public.

  Recommendation 3 The AGO recommends that the PNGFA;
  Paragraph 2.28 (a) Establish and maintain accurate and reliable recordkeeping
  systems relating to the volume of log exports at provincial
  headquarters to ensure an adequate audit trail; and
  (b) Report the volume of log exports and levy collected to the
  PNGFA website so that stakeholders, including government
  agencies, the private sector and resources owners can observe
  the management of the country’s resources in close to real

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• time.
  PNGFA Response: No response
  Recommendation 4 The AGO recommends that PNGCS examines the functions of the two
  LEDL Trust Accounts and consider closing the Withholding Trust Account
  Paragraph 2.29
  as it duplicates the functions of the LEDL Trust Account instrument.
  PNGCS Response: Agreed. We agree that we will review the current trust inst
  LEDL Withholding Trust Account by writing to Department of Finance to
  amend the current trust instrument to revoke this account and transfer
  the administration and reconciliation of LEDL Trust Account to PNGFA
  Recommendation 5 The AGO recommends that the LEDL Committee and Trustees:
  Paragraph 3.33 (a) Strictly follow LEDL administrative guidelines for project
  submission, screening and approval before committing LEDL
  funds;
  (b) Commit LEDL funds only to its intended purpose specified in the
  Forest Act and the trust instrument; and
  (c) Establish an effective communication system with key agencies,
  trustees and other stakeholders for proper management and
  control of disbursement of LEDL funds.
  Agencies Responses: No response
  Recommendation 6 The AGO recommends that the Department of PNG Forest Authority:
  Paragraph 3.34 Establish an internal control and management mechanism in place
  to specifically manage LEDL funds;
  (b) Undertake an awareness campaign in the respective logging
  centres in the country in conjunction with District
  Administrations to provide information about the development
  projects that can be funded under the LEDL program; and
  (c) Carry out its roles and responsibilities in accordance with the
  relevant provisions of the Forestry Act, and Public Finance
  (Management) Act, and other relevant legislative, policies and
  guidelines.

  PNGFA Response: No response
  Recommendation 7 To facilitate effective implementation and management of the LEDL
  projects in the logging areas, the AGO recommends that the LEDL
  Paragraph 4.13
  Commi ttee coordi nates cl osely wi th the PNGFA and the
  Provincial/District Administrators to ensure all development projects
  funded through the trust funds are monitored on a regular basis and
  monitoring reports are submitted on a regular basis as required by the
  Governing Legislation and the LEDL Administration Guidelines.
  Agencies Response: No response

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• 1. Introduction
  The chapter discusses the legal and policy framework for the establishment of the Log Export
  Development Levy and the institutional arrangements.
  Policy Framework
  National Forestry Policy
  1.1 The National Forestry Policy issued by the National Executive Council (NEC) in
  September 1991 covers areas of the forestry management, including the forestry industry,
  forest research, forest training and education, and forest organisation and administration.
  This National Forestry Policy prescribes all the charges which may be imposed on the
  forestry industry, including the Log Development Levy.
  Legislative Framework
  1.2 There are three main pieces of legislation which provide the legal basis for the
  establishment and collection of the Log Export Development Levy (LEDL); the Forestry Act
  1991 (amended in 2006); the Customs Act 1950 and the Customs and Tariff Act 1990. The
  Forestry Act establishes the trust accounts and provides for their management, while the
  Customs Acts impose applicable rates of the levy, specifies the goods on which the levy will
  be imposed and provides for its collection.
  1.3 In addition to the governing legislation, the Public (Finances) Management Act
  (PFMA) provides the parameters for the management of trust funds and empowers the
  Minister for Finance with the establishment of trust accounts. The trust instruments issued
  by the Minister provide the guidance for the management of trust funds. The specific
  provisions in the relevant sections of legislation which establish the LEDL trust account are
  briefly discussed below.
  Forestry Act 1991
  1.4 The LEDL was established through a 2006 amendment to Section 121A of the
  Forestry Act 1991. This Section fixes the rate of the levy at 8 kina per cubic metre (8K/m3)
  and sets out the collection and application procedures, in particular that the LEDL is
  applicable to all logs (except plantation logs) exported under item 44.03 of the Customs and
  Tariff Act 1990.
  1.5 The 2006 amendment to the Act also provided for the levy to be paid into the trust
  account established by the Finance Minister. It also identified the government agency that
  would be responsible for the collection of the LEDL and specified that the levy will be paid
  by an exporter to the Commissioner General concurrently with the log export duty
  applicable under the Customs Tariff Act. The Commissioner General is then responsible for
  paying the levy into the LEDL trust account.
  1.6 The Forestry Act also establishes the Governance arrangements for the management
  of the LEDL trust funds, including a Committee which has responsibility for approving
  expenditure from the LEDL trust account. The Committee members are the Secretaries of
  the Departments of Finance and National Planning & Monitoring, and the Managing
  Director of the Forestry Authority, or their nominees. The Act also provides the criteria for

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• the Committee in the approval of expenditure of the LEDL trust funds, namely that
  expenditure from the trust account shall be made only in accordance with plans for
  agricultural or infrastructural development projects in the logging area submitted by the
  relevant local level Government or Provincial Government.
  1.7 The LEDL Committee members act as trustees of the LEDL trust fund.
  Customs and Tariff Act 1990 and Customs Act 1950
  1.8 The responsibility for collection of the log levy is assigned to the Papua New Guinea
  Customs Service (PNGCS) under the Customs Act 1950 and the Customs and Tariff Act 1990.
  Section 80 of the Customs Act 1950 (as amended in 2006) stipulates that export duties
  including the LEDL are payable when the goods are actually exported and the payment shall
  be lodged at the Customs Office.
  1.9 PNG Customs Service is the agency responsible for the administration of the LEDL
  Withholding Trust Account which holds the LEDL collections paid by the Log Exporters.
  PNGCS undertakes pre-shipment inspection jointly with Papua New Guinea Forestry
  Authority (PNGFA) in close consultation with an independent third party (discussed at
  paragraph 1.19 below) and the Log Exporter to ensure all logs exported are in accordance
  with the Exporter’s Statement of Logs to be exported and also verifies the amount of log
  export duties including LEDL payable by the exporter on each shipment of logs. The PNGCS
  is responsible for the collection of the LEDL at its various ports in the country.
  Public (Finances) Management Act
  1.10 The provision of Public (Finances) Management Act (PFMA) details the procurement
  procedures for the expenditure of public monies for the payment of goods and services. The
  LEDL Administrative Guidelines note that this provision applies to the expenditure of LEDL
  funds. Further, the PFMA also empowers the Minister for Finance to issue trust instruments
  for the establishment of trust accounts to hold public monies for specific purposes. The
  instrument for the establishment of the LEDL Trust Account was issued by the then Finance
  Minister in July 2007.
  1.11 The Department of Finance (DoF) was initially assigned the responsibility for
  administration of the LEDL Trust account through the 2007 trust instrument. This
  responsibility was transferred to the Papua New Guinea Forest Authority (PNGFA) by NEC
  Decision in March 2013 and the subsequent issue of an amended trust instrument by the
  Finance Minister. As noted at paragraph 1.6 above, the Secretary of the Department of
  Finance remains one of the members of the LEDL Committee.
  1.12 A revised trust instrument was issued by the then Finance Minister in April 2013 and
  a third revision was issued in July 2013. The July 2013 version is the current Trust
  instrument. The Finance Minister also established a LEDL Withholding Trust Account. The
  purpose of the LEDL Withholding Trust Account was to hold the LEDL collections and
  transfer the collections to LEDL Trust Accounts.
  Administrative Guidelines for the Management of the LEDL
  1.13 To assist the agencies involved in the management and implementation of the LEDL,
  administrative guidelines for the Management of the levy were approved and issued by the
  LEDL Committee in 2009. The guidelines expanded on the provisions of the Forestry Act for

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• the management of the LEDL funds and provided details of the processes and procedures to
  be followed for project proposal, approval and procurement.
  1.14 The AGO noted that the initial version of the guidelines were issued in February 2009
  after the LEDL became operational in 2007. The guidelines were amended in February 2014
  and again in October 2015. However, the two latest amendments to the guidelines were not
  approved by the governing bodies; the National Forest Board and LEDL Committee. The
  approved 2009 version of the guidelines adequately covered the principles of the LEDL, the
  purpose of the fund, the criteria for the eligibility of LEDL funding, procedures for the
  submission and approval of the project proposals and, the monitoring and evaluation of the
  its implementations. However, the 2009 version does not adequately delineate the roles
  and responsibilities of the parties involved in these processes.
  1.15 The 2014 and 2015 revised guidelines have attempted to clarify the roles and
  responsibilities of agencies involved in processing submissions and the procurement
  process. As well, the 2015 revision was to incorporate NEC Decision Nos 163/2014 and
  307/2014 on the approval for the use of the management contractor to assist the LEDL
  Committee in the implementation of the trust fund projects, including the provisions of
  secretariat services to the Committee.
  1.16 The AGO has suggested that the amendments to the guidelines be approved as soon
  as practicable, to avoid misunderstandings in the management of LEDL projects.
  PNG Forestry Authority (PNGFA)
  1.17 The PNGFA is a statutory body responsible for the administration of the Forestry Act
  with the objectives of providing a single, integrated authority for consultation with resource
  owners and for the regulation of forestry harvesting. Amongst its other responsibilities, the
  Forestry Authority is responsible for regulating and approval, and monitoring of the export
  of logs in the country. The PNGFA also coordinates with the PNGCS and an independent
  third party (discussed at paragraph 1.19 below) to ensure the Log Exporters pay the
  appropriate rates of LEDL to PNGCS before shipments of the log exports are made from
  each provincial shipping port.
  1.18 The Authority is also undertakes independent project monitoring visits to project
  sites to verify reports from districts and provinces on the implementation of the LEDL
  projects. A Technical Evaluation Committee (TEC) has also been established within the
  PNGFA to assist the LEDL Committee in the evaluation of LEDL project proposals. As noted
  above, the Managing Director of PNGFA is one of the members of the LEDL Committee
  responsible for the approval of expenditure from the trust fund.
  Society Generale de Surveillance Group (SGS)
  1.19 SGS (PNG Limited) is part of the world wide Society Generale de Surveillence Group,
  an organisation that specialises in inspection and verification services and providing
  independent third party verification of custody transfers of all types of commodities,
  including logs and sawn timber.
  1.20 SGS was contracted by PNGFA to undertake inspections of log exports under the
  LEDL at PNG ports.

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• The Audit
  Audit Rationale
  1.21 The Log Export Development Levy (LEDL) came about upon the realisation that after
  the expiry of the logging projects in many areas of the country, over the years very little by
  way of tangible and durable development was achieved in the logging localities.
  1.22 In almost all instances, following the cessation of commercial logging operation
  logging roads disappeared, school buildings deteriorated, people faced diminished
  opportunities for earning cash income, loss of employment associated with logging
  operations, communities suffered from poor and worsening health status including increase
  in incidences of malnutrition especially in children, increase in mother and child mortality
  rates, etc.
  1.23 To address these issues faced by people in the logging areas, the Government
  through the PNG Forestry Authority has established this project financing facility to provide
  tangible and durable benefits to the people whose natural forests have been acquired by
  the State for commercial logging.
  Audit objective, scope and criteria
  1.24 The objective of this performance audit was to assess the effectiveness of the
  management of the Log Export Development Levy (LEDL) with particular emphasis on:-
  • the legal and policy framework to establish the LEDL;
  • the effectiveness of the Levy collection and transfer procedures;
  • the effectiveness of project proposal and approval procedures in the application of
  LEDL funds; and,
  • The monitoring, evaluation and reporting arrangements.
  1.25 The audit was focused on the Log Export Development Levy and did not examine
  other government revenue derived from Log Exports such as Royalties, the Project
  Development Benefit, the Log Export Tax, the Restoration Levy or other Agricultural levies.
  The AGO consulted with responsible agencies; the PNG Forestry Authority, PNG Customs
  Services, Department of Finance and the LEDL Trustees.
  Audit Methodology
  1.26 In order to meet the audit objective the audit took the following approach:
  • examined the legislations, policies and guidelines that governs the establishment,
  operations and management of the trust account;
  • reviewed the export procedure documents, PNG Customs Services reports and
  documents including documented reports from the SGS. Documented reports from
  the PNG FA were also reviewed including the management guidelines;
  • interviewed relevant officers from the audited entities including field inspections and
  observation on the procedures involved in the actual revenue collection on the port
  sites and the project sites funded under the LEDL.

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• 2. Administration and Processing of the Log
  Export Development Levy
  The chapter discusses the calculation of the Log Export Development Levy and the billing
  process, as well as methods of collection and transfer procedures.

  LEDL Calculations and Billing Processes
  LEDL Calculation Rates
  2.1 As noted above, the Log Export Development Levy is calculated at the rate of
  8 kina per cubic metre (K8/m3) of the total volume of round logs exported, excluding
  plantation logs. The rate was established by the 2006 amendment to Section 121A of the
  Forestry Act 1991 and is reflected in the LEDL Trust Instrument.
  2.2 The calculation of the LEDL for all exported logs is automated through a system
  known as the Automated System for Customs Data (ASYCUDA). ASYCUDA is an electronic
  reporting and data processing system used by PNGCS for all import, export and excise
  entries lodged with Customs. However, calculations can also be done manually to confirm
  whatever that has been captured in the system is correct. AGO recalculations of a sample
  of the LEDL revenue collected at Kimbe and Vanimo Custom Ports indicated that the
  correct levy rate was being applied in the calculations of the LEDL received at these
  locations, during the years under audit review.
  2.3 The formula used for calculating LEDL has been consistently applied every year,
  and the AGO noted that the K8/m3 rate has not been reviewed since it was established in
  2006. The application of funds raised is discussed in more detail in Chapter 3. However, it
  is important to note here that LEDL funds are intended to be used for infrastructure and
  agriculture projects. A characteristic of these projects is that particularly for
  infrastructure, prices change over time due to inflation.
  2.4 Table 1 below shows the inflation/deflation effects on the value of 8 kina since
  the levy was introduced in 2006 (using 2006 as the base year).

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• Table 1: Inflation and the Log Export Development Levy
  Rate of Inflation (%)1 Adjusted Value
  Year of 8 kina
  2007 0.91% 7.93 kina
  2008 10.76% 7.07 kina
  2009 6.92% 6.58 kina
  2010 6.01% 6.1 kina
  2011 8.44% 5.67 kina
  2012 2.25% 5.54 kina
  2013 3.55% 5.34 kina

  2014 5.20% 5.06 kina
  2015 6.00% 4.76 kina
  Average 5.56%

  Source: AGO Analysis of Bank of PNG data

  2.5 The analysis in Table 1 suggests that K8 in 2006 would purchase less than K5
  worth of goods in 2015, or another way of saying it is that the value of the levy has fallen
  by more 40 per cent over the period. This is only an illustration of inflationary effects, as
  in the actual economy the prices of materials will vary from published general purpose
  Consumer Price Index figures. However, it is equally important to note that the
  inflationary effects are greater than zero. A more realistic escalation factor should be set
  approximately in line with the long term average of inflation; in this case about 5 and a
  half per cent per annum.
  LEDL Billing Processes
  2.6 The LEDL billing process is an integral part of the Log Export Procedures. A
  commercial invoice is generated from the Statement of Logs to be exported, prepared by
  the exporter and accompanied by the Inspection Report issued by SGS. The commercial
  invoice is issued to the exporter by SGS after the pre-shipment inspection carried out
  jointly by the Forestry and Customs officers to verify the details in the statement of logs
  to be exported.
  2.7 To ensure logs are exported at the prevailing market price, and that export
  shipments are correctly declared with respect to log volume and species, the PNGFA has
  developed internal procedures for exporting logs. These procedural guidelines are
  important because it sets out the processes involved in the control and monitoring of logs
  exported, and assists in the LEDL calculations and billing processes. Shipping
  documentation provided during the audit site visits of Kimbe and Vanimo Ports revealed
  the log export procedures were being followed by the responsible agencies as detailed in
  the PNGFA Log Export Procedures.

  1 Source: Bank of PNG at www.bankpng.gov.pg/statistics/quarterly-economic-bulletin-statistical-tables/ QEB Table 9.27

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• LEDL Collection and Transfers
  LEDL Collection Procedures

  2.8 The LEDL collection process begins after the requirements set out in the
  procedures for exporting logs are fully completed to accord with the Customs Act 1951,
  the Forestry Act 1991, and its regulation. The process provides that the Levy will be paid
  by an exporter together with the log export duty payable under the Customs Tariff Act
  1990 to the Commissioner General who pays the levy into the LEDL trust account. To
  facilitate the collection of export duties, Customs Ports have been established by the
  PNGCS in several locations throughout the country.
  2.9 The collection controls are in place whereby Custom Trade Officers who are in
  charge of Customs ASYCUDA system module called MODCBR to access the custom entry
  send online by the custom broker to confirm against the export documents produced.
  The ASCUDA system then allocates a receipt number for that particular customs entry
  and this is the final stage of all types of duties and taxes collected. During the site
  inspections of Kimbe and Vanimo, the AGO noted that LEDL levies imposed on a shipment
  of the total volume of logs exported were remitted to the PNGCS Office in accordance
  with the procedures.
  LEDL Transfer Procedures
  2.10 A LEDL withholding trust account was established in 2007 through a trust
  instrument issued by the Finance Minister to hold LEDL collections. The withholding
  account is held with the Bank of South Pacific (BSP) and administered by the PNGCS. The
  daily remittances of LEDL revenue from the Customs Ports are held in the LEDL
  Withholding Trust Account and at the end of each month; the funds are transferred into
  the LEDL operating Trust Account (also with BSP) through a direct bank transfer.
  2.11 The AGO found that there were delays in transfers of LEDL funds from the
  Withholding Trust Account to the LEDL Trust Account by the PNGCS for a period of two
  years between 2012 and 2013. The LEDL Trust Account bank statements for the above
  two years showed no funds were transferred for this period from the withholding trust
  account.
  2.12 The delay in transfer of funds was as a result of an administrative error. On 31st
  December 2013, the responsibility for collection of the levy was transferred from the
  Internal Revenue Commission (IRC) to PNGCS following a demerger of functions.
  However, there was a two year delay in transferring management responsibility for the
  fund, including signatories for the withholding account. This reflects a lack of
  coordination between the IRC and PNGCS which adversely affected the flow of Levy funds
  into the trust account, with consequential impacts on the amount of funds available for
  projects.
  LEDL Revenue Collections
  2.13 Review of the PNGCS monthly collector statements shows that LEDL revenue
  totalling K105.8 million was collected during the years 2012-2015. A summary of the LEDL
  revenue collected for each year are shown in Table 2 below, and a monthly distribution
  of LEDL collections for the four year period is shown in Appendix 1.

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• Table 2: Total LEDL Collections during the years 2012-2015
  Year LEDL Revenue % Growth Year on
  (PGK,000) Year
  2012 24,408 –
  2013 24,699 1.23%
  2014 27,042 9.31%
  2015 29,656 10.00%
  Total 105,805

  Source: PNGCS monthly Collector’s Statements from 2012-2015

  2.14 Table 2 shows that total annual collections of the levy have increased every year
  from 2012 to 2015, and the rate of growth has been significant since the demerger of IRC
  and PNGCS in 2012, reaching 10 per cent growth in 2015. Notwithstanding this rate of
  growth in collections, internal controls over the recording and accountability of the LEDL
  revenue are is weak. In particular the AGO found there were differences between the
  PNGCS Total LEDL Collections and corresponding transfers from the LEDL Withholding
  Trust Account.
  2.15 Table 3 below provides a comparison between the total LEDL Collections from the
  PNGCS Collectors Statements (withholding account) and the total receipts recorded in the
  LEDL Trust Account Bank Statements. There are differences between years and an overall
  difference of K3.97 million over the period.
  Table 3: Total LEDL Collections from PNGCS Collectors Statements and total Receipts from
  Trust Account Records – 2012-2015
  Year LEDL Witholding Trust Account LEDL Trust Account Difference
  (PGK,000) (PGK,000) (PGK,000)
  2012 24,408 – 24,408
  2013 24,699 – 24,699
  2014 27,042 81,246 -54,204
  2015 29,656 20,586 9,070
  Total 105,805 101,832 3,973

  Source: AGO 2016

  2.16 The AGO was unable to locate records that adequately explain the discrepancy of
  K3.97 million. The most likely explanation is that prior year receipts were held in the
  withholding Trust Account and were transferred during the period under audit review. At
  the same time, the lack of proper records of the receipt of the levy at various Customs
  Ports has contributed to an understatement in the LEDL Collectors Statement.
  2.17 As noted above, currently the levy is banked into the withholding account and
  then transferred to the main trust account. This duplication of effort is unnecessary and
  the evidence suggests there are leakages from the system. If the levy collections were
  accurately and consistently recorded in a single trust account, there would be no need for
  transfers and verification and reporting processes.

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• 2.18 A comparison of total LEDL Revenue collected and compared to PNGCS records as
  well as SGS Ltd records revealed further differences in recordkeeping between the two
  organisations. The comparison is shown in Table 4 below.
  Table 4: Records of LEDL Collections 2012-2015
  Year
  SGS Limited PNGCS Differences in Levy
  Records Records Collected SGS v PNGCS

  Log Levy Log Levy
  Collected Collected (PGK’000)
  (PGK’000) (PGK’000)

  2012 23,708 24,409 -701

  2013 24,923 24,699 224

  2014 28,884 27,042 1,842

  2015 29,251 29,656 -404

  Totals 106,766 105,806 961

  Source: PNGCS Monthly Collector’s Statements and SGS (PNG) Ltd Revenue Statement Summary

  2.19 Table 4 above shows that LEDL revenue was under-stated by 961 thousand kina2
  in the PNGCS records compared to the records of SGS Ltd over the audit period.
  2.20 The audit found there were few PNGCS records available showing the volume of
  logs exported. Records of the logs exported were from SGS Ltd, a contractor to PNGCS.
  Table 5 below shows the total volume of logs exported and the amount of levy that was
  calculated by SGS and PNGCS (difference in levy amounts is also shown in Table 3 above).
  However, neither the SGS record, nor the PNGCS amounts could be reconciled with the
  K8 per cubic metre calculation from the total volume of logs exported. AGO calculations
  of the amount of levy that was due to the trust fund are also shown in Table 4 above.

  2 Whole number differences due to rounding.

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• Table 5: LEDL Collections – AGO Comparison of PNGCS Collector’s Statements and SGS (PNG)
  Ltd for the years 2012-2015
  Year
  LEDL Collections Differences

  Total Volume of
  SGS Records of PNGCS Records of AGO AGO AGO
  Logs Exported
  Levy collections Levy collections at Calculation of compared compared to
  (m3)
  at 8K/m3 8K/m3 Levy at 8K/m3 to SGS PNGCS
  (PGK’000) (PGK’000) (PGK’000) (PGK’000) (PGK’000)

  2012 3,154,266 23,708 24,409 25,234 -825 -1,526

  2013 3,297,384 24,923 24,699 26,379 -1,680 -1,456

  2014 3,800,185 28,884 27,402 30,401 -3,359 -1,517

  2015 3,869,271 29,251 29,656 30,954 -1,298 -1,703

  Total 14,121,106 106,766 105,806 112,969 -7,163 -6,203

  Source: AGO Analysis

  2.21 The LEDL receivable on each shipment of logs is dependent upon the total volume
  of logs exported and the correct application of the levy at the rate of K8 per m3. However,
  the differences in LEDL revenue reported by SGS Ltd on behalf of the PNGFA and the
  PNGCS for the years under audit review against the audit calculations reflected significant
  weaknesses in the system. Table 4 suggests that on average 1.5 million kina for each year
  between 2012 and 2015 was not paid into the trust fund due to these weaknesses.
  2.22 The AGO noted there was a lack of coordination between the key agencies
  involved in the reporting of log export volumes and prices. The AGO suggests that each
  agency should report and monitor LEDL revenue collections and reconcile their respective
  records with each other to facilitate uniformity in the reporting of LEDL collections to the
  public.
  Conclusion
  2.23 The AGO considers that since 2012 and the demerger of PNGCS and IRC, the
  Customs service now has well-documented processes for assessing and examining LEDL
  statements and the collection of funds into the withholding trust account. However, the
  delays in setting up signatories to the main trust account following the demerger reflect
  poorly on the administrations of both departments, as there are unexplained
  discrepancies in accounting for transfers in the years prior to 2012. The overall amount
  involved is almost 4 million kina. The existence of a withholding trust account and a main
  trust account is an unnecessary duplication of effort and could be contributing to the
  discrepancies.
  2.24 Between 2012 and 2015, more than 14 million cubic metres of logs were exported
  from PNG. The AGO attempted to further analyse the volume and value of the levy that
  should have attached to these exports. However, the data was not readily available from
  PNGCS and analysis of the volumes exported needed to be conducted using third party
  records from SGS Limited. Although the SGS records are not matched against PNGCS
  records, the AGO identified significant inconsistencies in collections data from both

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• entities, with levy collections somewhere between 6 million and 7 million kina lower than
  expected when compared to the volume of logs exported.
  2.25 The levy was introduced by the Government in 2006 and set at 8 kina per cubic
  metre and has not been adjusted since it commenced. However, the rate of inflation has
  significantly eroded its purchasing power, notwithstanding that overall collections have
  increased over the period. The AGO considers that a review of the levy would be
  beneficial to include the addition of an outturn factor to adjust for inflation particularly as
  the LEDL Committee has considerable influence on the direction of the projects and the
  funding capacity needed to support them.
  Recommendation 1
  2.26 The AGO recommends that the PNGFA considers an amendment to the legislation
  to include an outturn estimate for the LEDL, to include an adjustment for inflation and to
  be reviewed annually, to protect the purchasing power of the levy.
  Agency Response
  At the time of finalising this report no response was received from the primary client –
  PNG National Forest Authority.
  Recommendation 2
  2.27 To ensure consistent and verifiable reporting of LEDL collections, the AGO
  recommends that PNGFA in consultation with SGS Ltd and members of the LEDL
  Committee, regularly reconcile their log and levy records with PNGCS to provide decision
  makers with accurate and up to date data.
  Agency Responses
  PNGFA response: At the time of finalising this report no response was received from the
  primary client – PNG Forest Authority.
  PNGCS response: We agreed that there was no close consultation with PNGFA and SGS
  concerning revenue records and reconciliations of LEDL collections. Revenue records and
  reconciliation were done based on PNGCS actual revenue collections for the period under
  review. We discussed and resolved that we will implement proper coordination with
  agencies concerned to ensure future LEDL collections are up to date and reconciled to
  each other records so there is proper reporting of LEDL revenue to the public.
  Recommendation 3
  2.28 The AGO recommends that the PNGFA;
  (a) Establish and maintain accurate and reliable recordkeeping systems relating to
  the volume of log exports at provincial headquarters to ensure an adequate audit
  trail; and
  (b) Report the volume of log exports and levy collected to the PNGFA website so that
  stakeholders, including government agencies, the private sector and resources
  owners can observe the management of the country’s resources in close to real
  time.

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• Agency Response
  At the time of finalising this report no response was received from the primary client –
  PNG National Forest Authority.
  Recommendation 4
  2.29 The AGO recommends that PNGCS examines the functions of the two LEDL Trust
  Accounts and consider closing the Withholding Trust Account as it duplicates the
  functions of the LEDL Trust Account instrument.
  Agency Response
  We agree that we will review the current trust instruments of LEDL Withholding Trust
  Account by writing to Department of Finance to amend the current trust instrument to
  revoke this account and transfer the administration and reconciliation of LEDL Trust
  Account to PNGFA.

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• 3 . P r o j e c t F u n d i n g R e q u i r e m e n ts a n d
  Processes
  This chapter considers the Log Export Development Levy Project funding requirements and the
  procedures for project submissions and approval, and including project implementation and
  management processes.

  LEDL Project Proposals and Funding
  3.1 The requirements for the LEDL project proposal and funding are set out at
  Section 121A(7) of the Forestry Act 1991. It provides that LEDL funds can be used to
  finance infrastructure and agriculture projects and activities within an area where logging
  and export of logs from a natural forest and from which the LEDL levy has been derived.
  The same requirement for the application of LEDL funds is also provided in the LEDL trust
  instrument issued by the Minister for Finance and the Administrative Guidelines for the
  Management of the LEDL.
  3.2 This means that the eligible beneficiaries of the LEDL funds are resource owner
  groups, Local Level Governments (LLGs), Districts and Provincial Governments from
  logging areas. Funds are not to be used for projects outside a timbered area. The LEDL
  administrative guidelines also provide that project funding is dependent on the
  availability of funds held in the trust account for the respective timber area. The
  maximum threshold established of the project cost totals is less than K5 million. As well,
  in order to qualify for LEDL funding, project proposals submitted by the eligible
  beneficiaries of the fund should meet the project specifications provided in this
  guidelines and the DSIP Guidelines.
  3.3 The AGO noted that the requirements for the application of LEDL funds are
  adequately provided in the legislation and guidelines. However, during the site visits to
  Kimbe and Vanimo, the land owners of timber project areas informed the AGO there was
  a lack of awareness at the local level, of the availability of this project financing facility
  and the requirements to qualify for access to these funds.
  Procedures for Project Submission and Approval
  3.4 The procedures for LEDL project submission and approval are detailed in the
  Administrative Guidelines for the Management of the LEDL. It requires applicants from
  the timber areas to prepare project proposals and make submissions to District
  Administrators through the Joint District Planning and Budget Priority Committee
  (JDP&BPC) or the Provincial Administrator through the Joint Provincial Planning & Budget
  Priority Committee (JPP&BPC) for preliminary screening and evaluation.
  Project Submission and Documentation
  3.5 In the preliminary screening and evaluation of the project proposals, the
  JDP&BPC/JPP&BPC is expected to play a major role in ensuring that project specifications
  are met and necessary measures are undertaken to ensure the LEDL project proposal
  complies with the procurement procedures provided in the Public Finance Management

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• Act (PFMA). The Project Tendering and Payments procedure for the LEDL Trust funds is
  shown in the flowchart at Appendix 2.
  3.6 A Technical Evaluation Committee (TEC) has also been established at the PNGFA
  to assist the LEDL Trustees with screening and evaluations, and the recommendations of
  the TEC are submitted to the LEDL Trustees for their consideration and approval. The
  LEDL project proposal approved by the District/Provincial Administrator is submitted to
  the LEDL Committee for consideration and final approval. If the project proposal meets
  the LEDL project specification and criteria for funding, the LEDL Committee approves it
  for funding. A simplified version of the Project Submission and Approval procedures are
  shown in the flowchart at Appendix 3.
  3.7 The AGO requested copies of project submission documents, endorsements from
  the various committees, tender documents and evaluation reports from PNGFA. This
  information was not readily available and, for reasons that were not explained, PNGFA
  did not provide the necessary records for this audit. These documents are expected to be
  maintained by PNGFA and the Department of Finance as agencies responsible for the
  administration of the trust account and are an essential part of accountability for public
  funds. This has emphasised the need for clear guidance on what information is to be
  recorded and where it is to be recorded.
  Approval of LEDL Project Submissions
  3.8 From January 2007 to January 2015, the PNGFA received and registered a total of
  eighty-four project proposals for LEDL funding. Out of this total, PNGFA has evaluated
  and considered twelve development project proposals to the value of K24.52 million
  submitted for LEDL funding. The detail of the twelve LEDL project proposals considered
  by PNGFA is shown in Appendix 4. These project proposals had passed through the
  PNGFA TEC for screening, evaluation and endorsement and were forwarded to the LEDL
  Trustees together with their recommendations for final evaluations and approval.
  3.9 Of the total project proposals received by the TEC and submitted to the LEDL
  Trustees, only one project proposal with a value of K1.2 million was approved by the
  Trustees in 2014. However, the project has yet to be funded at the time of audit in 2015.
  The balance and a large majority of the LEDL project proposals were not approved due to
  non-compliance with the requirements of the LEDL guidelines.
  3.10 The rate of non-compliance with the guidelines reflects that, as discussed at
  paragraph 3.3 above, applicants were not adequately informed of the requirements for
  project proposals to access LEDL funding. It is clear that there is a lack of awareness of
  residents in the timbered areas about the availability of the project funding facility and
  the project proposal requirements and specifications. This could lead to eligible
  beneficiaries of the trust fund missing out on development in their respective localities
  from the harvesting of their natural resources.
  3.11 In addition to the twelve projects endorsed for LEDL Trustees approval, there
  were nine other project applications with the total value of K36.84 million that had been
  approved by the LEDL Trustees. The details of the projects are presented in Table 6
  below.

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• Table 6: Schedule of LEDL Projects approved by LEDL Trustees
  Project Name Recipient Amount
  (PGK’000)
  1 Hoskins VOP Road Project Keveloho Inc Land Group, Hoskins, WNBP 1,900
  2 Timber Processing Project-Wewak Manibem Timber & Earth Moving Construction 3,200
  Ltd
  3 Cocoa & Coconut Rehabilitation Tavak Investment Ltd, Namatanai, NIP 240
  4 Cocoa Processing & Export Project Tavak Investment Ltd, Namatanai, NIP 2,500
  5 Cocoa Processing & Export Project Asaule Development Corporation Ltd, 500
  Kandrian, WNBP
  6 Rabaul Queen Inquiry Asaule Development Corporation Ltd, 8,000
  Kandrian, WNBP
  7 Watut Timber Processing Project Maya Holdings Ltd, Bulolo, MP 5,000
  8 Agroforestry Oil palm Project Alaba Development Ltd, Bialla, WNBP 5,500
  9 Kusha Pasi Road Sealing Project Global Construction Ltd 9,990
  Total 36,830

  Source: PNGFA 2016

  3.12 The AGO was unable to determine whether all of the project proposals set out in
  Table 6 were approved in a formal LEDL committee meeting, comprising all of the
  committee members, as there were no records kept of committee proceedings. The
  approval of project submissions without the full attendance of the LEDL Committee and
  the failure to keep records of committee meetings reflected a lack of transparency in the
  approval of projects and the application of trust funds. This is a significant risk to the
  program as the LEDL Committee cannot demonstrate that it has managed the trust
  account effectively.
  Meeting Minutes of LEDL Committee
  3.13 To effectively discharge their responsibilities in the approval of expenditure from
  the trust account, the LEDL Trustees are expected to approve the payments in a formal
  meeting of the trustees and to maintain proper records. However, as noted above,
  minutes and other records of the trustees meetings were not available as they were not
  prepared and retained.
  Accounting Records
  3.14 The initial trust instrument issued in July 2007 allocated responsibility for
  administration of the trust account to the Department of Finance. However, this
  responsibility was transferred to the PNGFA through a 2013 NEC Decision (No 96/2013).
  An amended trust instrument to reflect the revised administrative responsibilities was
  issued in July 2013, to reflect the NEC Decision.
  3.15 There has been a lack of adequate documentation maintained by both the
  Department of Finance and the PNGFA in the administration of the trust fund. Accounting
  records (such as cashbook, revenue and expenditure ledgers) and supporting documents
  (such as paid vouchers, and registers of approved projects) could not be located by either
  entity and made available for audit purposes. As a result, there is also a lack of adequate

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• documentation in relation to the development of approved projects, specifically about
  the merits, risks and alternative options in relation to the approval or non-approval of
  projects under consideration. Such documentation is generally accepted as a key element
  of sound administration and accountability. As noted at paragraph 3.13 above, official
  records were not taken or maintained of LEDL Committee meetings and decisions. As a
  consequence, there is limited departmental documentation on the development of the
  key elements of the LEDL, and in particular measurements of effectiveness or value for
  money cannot be made.
  3.16 The lack of documentary evidence shows that the administrative arrangements in
  place lack structure and clarity sufficient to generate the confidence of all stakeholders in
  the LEDL scheme and the public. Without documentation, there is a risk that LEDL funds
  are being applied for unauthorised purposes.
  Applications of LEDL Trust Funds for Projects
  3.17 Analysis of bank statements revealed a total of K169.6 million was expended
  during the four year period (2012-2015) from the LEDL trust account. A summary of the
  payments made for each year are shown in Table 7 below. Additional payment details are
  shown in Appendix 5.
  Table 7: Summary of Payments from the LEDL Trust Account 2012-2015
  Year Payments (PGK’000)
  2012 44,800
  2013 3,800
  2014 80,000
  2015 41,000
  Total 169,600

  Source: 2012-2015 LEDL Trust Account Bank Statements

  Applications of funds inconsistent with LEDL requirements
  3.18 As noted in paragraph 3.1 above, expenditure of funds from the trust account can
  only be made in accordance with the requirements of S121A(7) of the Forestry Act 1991
  and the related guidelines that broadly provide funding for infrastructure and agricultural
  projects from the logging areas. However, there were two payments totalling K85 million
  made from the trust account which were inconsistent with the criteria for LEDL funding.
  The payments were;
  • On 29 February 2012, K5 million was paid to the Morobe Disaster and Emergency
  Committee; and
  • On 17 December 2014, K80 million was transferred from the trust account to the
  Bank of Papua New Guinea (BPNG).
  3.19 With regard to the K80 million transfer to the Bank of PNG, the AGO noted that
  this was to fund the Supplementary (Appropriation) Bill passed by the NEC in 2014.
  However, this transaction was in breach of the trust instrument, as the LEDL trust
  account is not part of the Consolidated Revenue Fund.

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• 3.20 Similarly, the nature of the payment of K5 million made from the trust account to
  Morobe Disaster & Emergency Committee in 2012 appears to be not related to a project.
  However, as discussed in paragraph 3.16 above, in the absence of supporting documents
  such as the paid vouchers, or evidence of LEDL Trustees approval, the AGO was not able
  to determine the nature or purpose of the payment.
  Details of LEDL Payments made missing
  3.21 In fifteen instances, there were limited, and in some cases, no records of payees in
  relation to payments made from the trust account totalling K48.55 million. Thirteen of
  these payments were made in 2012 and two payments in 2013. The details of LEDL
  payments with insufficient documentation are shown in Table 8 below.
  Table 8: LEDL Payments with Insufficient Details 2012-2015
  No Date Description Amount1
  (PGK’000)
  1 20 Feb 12 Cheque details not recorded 781
  2 8 Feb 12 Cheque details not recorded 503
  3 10 Feb 12 Cheque details not recorded 3,000
  4 10 Feb 12 Cocoa Processing and Export Project 2,500
  5 29 Feb 12 Morobe Provincial Disaster and Emergency Commit 5,000
  6 2 Mar 12 Cheque details not recorded 494
  7 19 Mar 12 Maniben Timber and Earthmoving 975
  8 24 Apr 12 Watut Timber and Processing Project 5,000
  9 7 May 12 Cheque details not recorded 4,500
  10 25 May 12 Cheque details not recorded 6,000
  11 1 Jun 12 Agro Forestry Oil Palm Project 5,500
  12 13 Jul 12 Global Construction 9,996
  13 4 Sep 12 Cheque details not recorded 517
  Sub Total 2012 44,766
  14 8 Jan 13 Cheque details not recorded 285
  15 15 Jan 13 Cheque details not recorded 3,500
  Sub Total 2013 3,785

  Total 48,552

  Source: AGO Analysis
  Note: 1 Figures Rounded to nearest whole number.

  3.22 In the absence of source records and supporting documents relating to the
  application of trust funds, the AGO could not determine whether approval was granted
  by the LEDL Trustees for the payments and the funds were applied for the purposes
  intended.
  3.23 A key element of sound public administration and accountability is adequate
  recording or documentation of the business of government. There has been an absence

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• of suitable recording by the PNGFA and previously by the Department of Finance in the
  management of the trust fund which is not consistent with good administrative practice.
  K5 Million LEDL funding limit
  3.24 The LEDL administrative guidelines state that for an infrastructure and/or
  agricultural project to qualify for funding, the total project cost should be below
  K5 million. The AGO identified six payments totalling K117.37 million that were over the
  K5 million threshold. The limited details of the payments that were available are shown in
  Table 9 below.
  Table 9: LEDL Trust Payments over K5 Million 2012-2015
  No Date Description Amount1
  (PGK’000)
  1 25 Feb 12 Cheque details not recorded 6,000
  2 1 Jun 12 Cheque details not recorded 5,500
  3 13 Jul 12 Cheque details not recorded 9,997
  4 17 Dec 14 Fund Transfer to BPNG 80,000
  5 8 Dec 15 Kand/Gloucester District 10,293
  6 9 Dec 15 Aitape District 5,582

  Total 117,372

  Source: Extracts from 2012-2015 LEDL Trust Account Bank Statements
  Note 1 Figures Rounded to nearest whole number.
  :

  3.25 The data in Table 9 indicates that a substantial number of payments from the
  trust account were not consistent with the requirements of the LEDL trust instrument.
  There may have been good reasons for the K5 million threshold to be exceeded on these
  occasions. However, in the absence of records there is a low level of confidence that
  controls over the account are working as intended.
  LEDL Payments in 2015
  3.26 Payments totalling K41.05 million were made to fifteen logging districts from the
  LEDL trust fund during 2015. Details of the 2015 payments are shown in Table 10 below.

• Page 35 of 46

• Table 10: LEDL Trust Account Payments – 2015
  No Date Description Amount1
  (PGK’000)
  1 26 Nov 15 Namatanai District 2,242
  2 1 Dec 15 Soe District 895
  3 1 Dec 15 Abau District 3,345
  4 2 Dec 15 Madang District 2,810
  5 2 Dec 15 Talasea District 3,364
  6 3 Dec 15 Security Electronic Service 227
  7 3 Dec 15 Kavieng District 4,013
  8 8 Dec 15 Finscafen District 255
  9 8 Dec 15 Telifomin District 416
  10 8 Dec 15 Kandrian District 10,293
  11 9 Dec 15 Pomio District 3,360
  12 9 Dec 15 Aitape District 5,582
  13 11 Dec 15 Gazelle District 2,678
  14 18 Dec 15 Middle Ramu District 409
  15 22 Dec 15 Wewak District 1,160

  Total 41,049

  Source: AGO Analysis
  Note: 1 Figures Rounded to nearest whole number.

  3.27 The payments listed in Table 10 were made to the respective District Treasuries as
  LEDL grants consistent with Section 3.2(c) of the LEDL Administrative Guidelines issued in
  2013. This particular section in the guidelines allows the Trustees or the Managing
  Director of PNGFA to pay to each District Treasury from which the timber area is located,
  the monies receipted and derived from the LEDL for the previous year on or before
  31 March each year. It also requires that these payments should be conveyed with an
  administrative note to the District Administrator nominating the timber area(s) from
  which the LEDL has been paid from and the level of funding.
  3.28 However, the AGO noted that the 2013 LEDL Administrative Guidelines was not
  endorsed and approved by the LEDL Trustees/Committee for implementation as
  discussed at paragraph 1.13 above. The Administration Guidelines in effect at the time
  was issued in 2009 and this version of the guideline did not provide for this arrangement.
  Although the LEDL Committee clearly intended to change the guidelines, the committee
  processes and procedures have been poor, and as a result, these payments made from
  the trust account to the District Treasuries in 2015 were made in breach of the guidelines.
  3.29 In addition, the respective payment vouchers were not supported with the
  Administrative Notes to the relevant District Administrators as required by the 2013 LEDL
  guidelines. Moreover, the payment vouchers were also not supported with documents
  such as the project proposal submissions from the respective District Administrators for

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• LEDL to validate the release of the trust funds, the endorsement of JDP&BPC, or LEDL
  Trustees approval.
  Conclusion
  3.30 The LEDL was intended to address the problem that a significant amount of
  logging was taking place in various communities in PNG with little or no compensation to
  those communities to compensate them for the natural resources given up. The levy was
  a way that these communities could fund agriculture and infrastructure projects that
  would otherwise have been beyond the capacities of provincial and local level
  government. It was for this reason that the funding provided under the program was to
  be additional to existing funding provided under DSIP or Function Grants.
  3.31 The delivery of these projects was intended to be progressed through the
  development and implementation of new legislative and inter-agency funding
  arrangements. Under these arrangements and as noted in Chapter 2, between
  2012 and 2015, more than K106 million kina has been collected and paid into the trust
  account for expenditure on authorised construction projects. From January 2007 to
  January 2015, the PNGFA received and registered a total of eighty-four project proposals
  for LEDL funding. However, out of this total, PNGFA has only evaluated and considered
  twelve development project proposals to the value of K24.52 million. Direct comparisons
  between these two data sets are not reliable, but it can be seen that less than 25% of the
  funds raised in the last four years has been spent over the eight years that has elapsed
  since the program’s inception. In part this is due to the lack of awareness of the program
  in the logging regions and the funds available through the levy, and in part the
  administration of the fund by the LEDL Committee has been ineffective, due to
  inadequate administrative practices.
  3.32 Examples of inadequate administrative practices included decision making records
  not being completed, maintained or retained; the required documentation not being
  provided; breaches of trust account provisions in relation to withdrawals; and failure to
  follow program guidelines. The AGO notes that weaknesses in these matters extends to
  record keeping generally and a low standard of accountability and transparency by the
  agencies involved.
  Recommendation 5

  3.33 The AGO recommends that the LEDL Committee and Trustees:
  (a) Strictly follow LEDL administrative guidelines for project submission, screening and
  approval before committing LEDL funds;
  (b) Commit LEDL funds only to its intended purpose specified in the Forest Act and the
  trust instrument; and
  (c) Establish an effective communication system with key agencies, trustees and other
  stakeholders for proper management and control of disbursement of LEDL funds.
  Agency Response
  At the time of finalising this report no response was received from the primary client –
  PNG National Forest Authority.

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• Recommendation 6
  3.34 The AGO recommends that the Department of PNG Forest Authority:

  (a) Establish an internal control and management mechanism in place to specifically
  manage LEDL funds;
  (b) Undertake an awareness campaign in the respective logging centres in the country in
  conjunction with District Administrations to provide information about the
  development projects that can be funded under the LEDL program; and
  (c) Carry out its roles and responsibilities in accordance with the relevant provisions of
  the Forestry Act, and Public Finance (Management) Act, and other relevant legislative,
  policies and guidelines.
  Agency Response
  At the time of finalising this report no response was received from the primary client –
  PNG National Forest Authority.

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• 4. Monitoring and Reporting
  This chapter considers the Monitoring and Reporting arrangements for Log Export
  Development Levy Projects.

  Monitoring and evaluation of LEDL Project Implementation
  Project Monitoring and Evaluations
  4.1 Section 121A of the Forestry Act 1991 (as amended in 2006) stipulates that the
  LEDL Committee shall obtain information from the Provincial and Local Level
  Governments that receive funds from the trust account. This information is required so
  that compliance with the terms and conditions of the approval process can be monitored
  throughout the implementation of the projects.
  4.2 The Administrative Guidelines on the Management of the LEDL also identifies
  agencies that should be responsible for the monitoring and evaluation of the
  implementation of the projects funded through the LEDL trust account. The LEDL project
  monitoring responsibility is entrusted to the District and Provincial Administrators with
  the support from Provincial Works Managers.
  4.3 The Guidelines also require PNGFA staff to undertake monitoring visits to projects
  and carry out independent reviews and verify reports from the districts and provinces.
  PNGFA is also to assist Project Management Units (PMU) in the provinces in the
  monitoring of the LEDL contracts and activities under implementation.
  4.4 Notwithstanding the legislative and regulatory guidance in relation to monitoring
  and evaluation, there was no evidence that any kind of monitoring reports from
  monitoring agencies have been compiled. The lack of effective monitoring and evaluation
  of LEDL project implementation could lead to ineffective implementation of the projects
  and mismanagement of trust funds.
  Project Completion Certifications
  4.5 The 2009 Administrative Guidelines on the Management of LEDL provides that
  upon the completion of any project activity, the contractor shall submit a Project
  Completion Report to the Chairman (PMU)/District Administrator/executing agency and,
  in this case the District Administrator for PSTB executed projects and Managing Director –
  PNGFA for CSTB executed projects fulfilling all the terms and conditions of the contract.
  4.6 At the time of audit in March 2016, no single certificate of completion was made
  available to AGO for the projects approved and implemented since the establishment of
  the trust fund in 2007 to indicate that the LEDL projects were successfully implemented
  and the projects were completed in line with the scope planned and approved.
  Reporting Arrangements
  Log Export Development Levy Committee
  4.7 As noted at paragraph 4.1 above, the LEDL Committee or Trustees are required by
  Section 121A of the Forestry Act 1991 (as amended in 2006) to obtain information from
  LLGs and Provincial Governments in receipt of the monies from the LEDL trust account
  about the implementation of funded projects. Based on this information, the LEDL

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• committee is required to provide reports each six months to the Secretary for Treasury
  for inclusion in a periodic report by the Treasury on budget outcomes.
  4.8 However, these reports were not provided and as a result, the AGO was unable to
  ascertain whether such reports were submitted to the relevant authority as required.
  AGO further noted that there were no physical project completion reports of the
  K48.5 million of projects detailed in Table 8 above.
  PNG Forest Authority
  4.9 The PNGFA is required by the LEDL guidelines to provide quarterly reports on the
  physical and financial status of the LEDL to the Committee; however, such reports were
  not made available to audit to suggest that this requirement was complied with.
  District Administrators
  4.10 The LEDL guidelines requires the District administrators from the logging areas to
  provide quarterly management reports on the physical and financial status of the LEDL
  activities to the JDP&BPC and PNGFA. However, there were no reports made available to
  the PNGFA and as a result, the LEDL requirements have not been complied with by the
  District Administrators in the logging areas where projects were approved and
  implemented.
  Conclusion
  4.11 The responsibility for monitoring and reporting performance of the LEDL program
  is shared by the Treasury, the LEDL Committee, the PNGFA and the Provincial and Local
  Level Governments. Section 121A of the Forestry Act 1991 (as amended in 2006) and the
  administrative guidelines for LEDL establishes the monitoring and reporting framework.
  The framework requires administering agencies and relevant entities to monitor and
  report compliance with funding conditions and project implementation.
  4.12 The design of the monitoring and arrangements set out in the legislation and
  guidelines adequately reflects the devolved nature of the project implementation and
  recognises that detailed monitoring at the project level is most suited to arrangements
  between local authorities and central government agencies. However, under current
  arrangements, authorities have not provided the required data and central agencies have
  not been able to effectively monitor or report on the projects or the LEDL program more
  broadly.
  Recommendation 7

  4.13 To facilitate effective implementation and management of the LEDL projects in
  the logging areas, the AGO recommends that the LEDL Committee coordinates closely
  with the PNGFA and the Provincial/District Administrators to ensure all development
  projects funded through the trust funds are monitored on a regular basis and monitoring
  reports are submitted on a regular basis as required by the Governing Legislation and the
  LEDL Administration Guidelines.
  Agencies Response
  At the time of finalising this report no response was received from the primary client –
  PNG Forest Authority.

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• Appendix 1: LEDL Collection for the Years 2012 – 2015

  RECEIPTS (PGK) Total Revenue
  Years
  Month 2012 2013 2014 2015
  January 2,554,073.81 1,984,939.60 1,891,318.19 2,381,850.22 8,812,181.82
  February 1,705,178.27 1,954,528.47 2,004,825.72 1,653,689.27 7,318,221.73
  March 2,124,476.61 1,814,673.24 2,477,745.82 2,378,108.97 8,795,004.64
  April 2,221,335.30 2,302,893.67 2,536,783.07 2,029,922.56 9,090,934.60
  May 2,516,383.26 2,740,832.85 2,241,833.87 2,315,891.40 9,814,941.38
  June 2,072,364.50 1,985,739.90 3,039,812.83 2,299,805.48 9,397,722.71
  July 1,823,328.05 1,842,349.70 2,592,628.68 1,778,623.55 8,036,929.98
  August 2,068,306.17 1,611,726.54 1,558,199.40 1,940,746.66 7,178,978.77
  September 1,117,760.00 1,177,828.83 1,927,863.61 2,660,930.21 6,884,382.65
  October 1,728,642.62 3,085,627.31 2,521,721.60 2,455,127.73 9,791,119.26
  November 1,834,361.37 1,652,631.93 1,999,610.21 3,785,496.97 9,272,100.48
  December 2,642,374.05 2,545,307.68 2,249,247.04 3,975,330.03 11,412,258.80
  Total 24,408,584.01 24,699,079.72 27,041,590.04 29,655,523.05 105,804,776,82

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• Appendix 2: FLOW CHA RTS – PROJECT SUBMISSION A ND
  APPROVAL

  The approval of funds from the log export development levy trust fund can be
  access by following the approved Administrative Guidelines for the Management
  and the Use of the Log Export Development Levy.
  A simplified version of the key steps involved in the processing of a project
  proposal and application for funding is illustrated by flowchart below.

  Project Feasibility and Survey by
  Applicants

  Project formulation, design & costing by
  Applicant

  Application received and appraised by
  District Administrator

  Compliant Reject

  JDP&BPC* approve or reject application

  Approve Reject

  Application submitted to Trustees

  Trustees approve or reject application

  Approve Not approved

  MD Forests and DA and JDP&BPC of
  Trustees Decision

  *JDP&BPC, now called “District
  Development Authority”

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• Appendix 3: Flowchart – Project Tendering and Payment

  After a project application has been approved by the Trustees, procurement of
  Goods and Services may then proceed. For goods and services with total value up
  to K5 million is tendered by the Provincial Supply and Tenders Board (PSTB), and
  for total value of goods and services above K5 million is tendered by the Central
  Supply and Tenders Board (CSTB).
  A simplified version of the key steps involved in the tendering for goods and
  services is illustrated below.

  Approved application submitted to PDMT or DPMT

  PDMT or DPMT endorse to PSTB or CSTB

  PSTB or CSTB proceed to tender

  Tenders received, registered & referred to DPMT for evaluation Trustees Advice

  DPMT recommends to PSTB or CSTB

  PSTB or CSTB approve/reject recommendations

  Accepted Not Accepted

  Chairman PSTB or CSTB award and execute contract

  PDMT – Provincial Development and Management Team
  DPMT – District Project Management Team
  PSTB – Provincial Supply and Tenders Board
  CSTB – Central Supply and Tenders Board

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• Appendix 4: LEDL Project Proposals Evaluated by PNGFA TEC and
  Submitted to LEDL Trustees

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• Appendix 5: Summary of Transaction Extracted from Bank
  Statement LEDL Payments from the Trust Account for the period
  2012 – 2015

  Date Cheque No Description of Payment Amount (PGK)

  20/01/2012 CHQ 6 Chq payment – Unknown 781,056.67

  8/02/2012 CHQ 7 Chq payment – Unknown 503,032.00

  10/02/2012 CHQ 8 Chq payment – Unknown 3,000,000.00

  10/02/2012 CHQ 9 Chq payment – Unknown 2,500,000.00

  29/02/2012 CHQ 11 Chq payment – Unknown 5,000,000.00

  2/03/2012 CHQ 12 Chq payment – Unknown 493,674.14

  19/03/2012 CHQ 14 Chq payment – Unknown 975,000.00

  24/04/2012 CHQ 15 Chq payment – Unknown 5,000,000.00

  7/05/2012 CHQ 19 Chq payment – Unknown 4,500,000.00

  25/05/2012 CHQ 21 Chq payment – Unknown 6,000,000.00

  1/06/2012 CHQ 17 Chq payment – Unknown 5,500,000.00

  13/07/2012 CHQ 25 Chq payment – Unknown 9,996,855.00

  4/09/2012 CHQ 23 Chq payment – Unknown 517,000.00

  8/01/2013 CHQ 28 Chq payment – Unknown 285,440.00

  15/01/2013 CHQ 29 Chq payment – Unknown 3,500,000.00

  17/12/2014 Fund Transfer Fund Transfer to BPNG 80,000,000.00

  26/11/2015 CHQ 50 Namatanai District 2,241,793.00

  1/12/2015 CHQ 63 Sohe District 894,691.00

  1/12/2015 CHQ 38 Abau District 3,345,396.00

  2/12/2015 CHQ 48 Madang District 2,810,037.00

  2/12/2015 CHQ 54 Talasea District 3,364,226.00

  3/12/2015 CHQ 52 Security Electronic Service 226,600.00

  3/12/2015 CHQ 47 Kavieng District 4,012,853.00

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• 8/12/2015 CHQ 42 Finschafen District 255,163.00

  8/12/2015 CHQ 55 Telifomin District 415,646.00

  8/12/2015 CHQ 46 Kand/Gloucester District 10,293,429.00

  9/12/2015 CHQ 51 Pomio District 3,360,016.00

  9/12/2015 CHQ 39 Aitape District 5,581,623.00

  11/12/2015 CHQ 43 Gazelle District 2,677,623.00

  18/12/2015 CHQ 61 Middle Ramu District 409,306.00
  22/12/2015 CHQ 59 Wewak District 1,160,320.00

  Total 169,600,779.81

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