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• REPORT OF THE AUDITOR-GENERAL

  On the Accounts

  of

  Milne Bay Provincial Health Authority

  For the year ended

  31st December, 2016

  AUDITOR GENERAL’S OFFICE
  PAPUA NEW GUINEA

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

  OFFICE OF THE AUDITOR-GENERAL

  30 June, 2020

  The Honourable Job Pomat,
  MP Speaker of the National
  Parliament
  Parliament House
  WAIGANI
  National Capital District

  Dear Mr. Speaker

• Page 2 of 64

• In accordance with the provisions of Section 214 of the
  Constitution of the Independent
  State of Papua New Guinea, I have the honor to present to
  the National Parliament the

  audit report on the Milne Bay Provincial Health Authority
  for the year ended 31
  December, 2016.

  Yours sincerely,

  GORDON KEGA, CPA, MBA
  Acting Auditor-General

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• Level 6 P.0 Box 423
  TISA Investment Haus daaPPACT WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

  Page 1 of 1

  TABLE OF CONTENTS
  ACRONYMS 1
  EXECUTIVE SUMMARY 2
  1.0 MILNE BAY PROVINCIAL HEALTH AUTHORITY 4
  1.1 Enabling Entity Legislation 4
  1.2 Policies and Budget 4
  1.3 Corporate Plan 5
  1.4 Organization Operational Structure 5
  2.0 AUDITOR-GENERAL 6
  2.1 Role of the Auditor-General 6
  2.2 Audit Scope 6
  2.3 Nature of Audit
  2.4 Period of Reporting 6
  3.0 RESULTS OF AUDIT 7
  3.1 Disclaimer of Audit Opinion 7
  3.2 Financial Statement 7
  3.3 Significant Internal Control Issues 7
  4.0 ENTITY COMMENTS AND RESPONSES 10
  5.0 FOLLOW UPS 10
  6.0 STAKEHOLDER EXPECTATIONS 10
  7.0 RECOMMENDATIONS 11
  8.0 WAY FORWARD 12
  9.0 ATTACHMENTS 12
  Attachment A — Audit Opinion 13
  Attachment B — 2016 Annual Financial Statement 17
  Attachment C — MBPHA Management Letter Response 30

  Milne Bay Provincial Health Authority

  ACRONYMS

  AGO Auditor General’s Office
  CEO Chief Executive Officer
  GO General Orders, Public Service General Orders are issued
  under the
  Public Service Management Act, 1995
  DoF Department of Finance
  DSIP District Services Improvement Programme
  HFG Health Functional Grants
  HSSIP Health Sector Services Improvement Program
  KRAs Key Result Areas
  MBPHA Milne Bay Provincial Health Authority
  INTOSAI International Organization of Supreme Audit Institutions
  ISSAI International Standards of Supreme Audit Institutions

• Page 4 of 64

• (Issued by
  INTOSAI)
  LLG Local Level Government
  LLGSIP Local Level Government Service Improvement Program
  MTDS Medium Term Development Strategies
  NDoH National Department of Health
  PFMA Public Finance Management Act, 1995 (as amended)
  PGAS Provincial Government Accounting System
  PHA Provincial Health Authority
  PHAA Provincial Health Authority Act, 2007
  PSIP Provincial Services Improvement Programme

  2016 Audit Report Page 1

  Milne Bay
  Provincial Health Authority

  EXECUTIVE SUMMARY

  Purpose

  Pursuant to Section 7 of the Audit Act, 1989 (as amended) requires
  the Auditor-General to
  report to Parliament on the results of audits undertaken, this
  Report concludes the audit results
  arising from my review of MBPHA financial statement and internal
  control environment for
  the year ended 31 December, 2016. The audit findings and
  recommendations have been
  communicated to the Authority by way of a Management Letter for
  which MBPHA
  Management responded accordingly. My conclusion on the audit
  findings was a Disclaimer
  Audit Opinion issued to the Minister for Health and HIV & AIDS and
  Finance Minister on
  the 25 May, 2020.

• Page 5 of 64

• Financial Performance Results

  MBPHA’s financial performance results for the year ended with an
  operating surplus fund
  balance of K242,596 as at 31 December, 2016, however, because of the
  significant errors
  noted on the data reported in the financial statement arising from
  inadequate maintenance of
  the books of accounts and incorrect opening account balances
  inherited from previous years
  financial operations, I am not able to determine the financial
  position of MBPHA as at 31
  December, 2016. Figure 1 below outlines a comparative summary of the
  2016 and 2015
  financial statements data.

  Figure 1: Financial Performance Results 2016 &2015

  2016 ‘IC 2015
  le Variance ‘IC
  Total Revenue 37,225,958
  (46,034,014) (8,808,056)
  Less: Total Expenditure 40,376,162
  (81,513,426) (41,137,264)
  Operating Results (current year) (3,150,203)
  (35,479,412) (32,329,209)
  Add: Accumulated Fund Balance 3,392,799
  3,392,799 0
  Results as at 31 December, 2016 242.596
  (3,392,799) (3,150,203)

  Cash Balances as at 31 December, 2016 242.596
  (3,392,799) (3,150,203)

  Based on the financial statement data reported for the current
  year’s operations as illustrated in Figure 1 above, revealed the
  following financial results:

  a) MBPHA financial performance for the current year ended with an
  operating deficit fund balance of (K3,150,203), directly resulted
  from total annual expenditure of K40,376,162 exceeded total revenue
  of K37,225,958.

  b) The overall financial performance as at 31 December, 2016 was an
  operating surplus fund balance of K242,596, an improvement from the
  previous year’s deficit balance of (K3,392,799) which reduced the
  accumulated deficit balance by (K3,150,203).

  c) The year-end accumulated fund balance of K3,392,799 reported for
  the 2015 fiscal year was incorrectly reported as the opening fund
  balance for the 2016 fiscal year and as such affects the accumulated

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• fund balance of K242,596 reported as at 31 December, 2016.

  2016 Audit Report
  Page 2

  Milne Bay Provincial Health Authority

  In view of errors noted on the financial statement and related
  source documents, the
  appropriate adjustments were not carried out to correct the cash
  books and ledger account balances during the year and as such the
  financial statement is materially misstated by these errors.

  Organization’s Performance Results as Against Key Health Indicators

  As at 31 December, 2016, MBPHA was in its sixth year of existence as
  a Provincial Health Authority since the signing of the Health
  Partnership Agreement on the 4th April, 2011. The development of the
  Corporate Plan 2016-2018 provides the way forward as it underpins
  the organization’s effort to roll out the reform initiative of the
  National Government to strengthen the health system in order to
  improve health services delivery, health outcomes and ultimately the
  quality of life for the people of Milne Bay Province. Generally, the
  reform has improved the organization’s performance as according to
  key health indicators over the last three years.

  Making the Report publicly available

  My Audit Report on MBPHA Accounts for the fiscal year ended 2016 is
  presented as an
  Individual Report and will be made available through the AGO website
  (www.ago.gov.pg)
  once it is table in Parliament.

• Page 7 of 64

• 2016 Audit Report Page 3

  Milne Bay Provincial Health Authority

  1.0 MILNE BAY PROVINCIAL HEALTH AUTHORITY

  1.1 Enabling Entity Legislation

  Provincial Health Authority Act, 2007

  Since the interception of the Organic Law on Provincial and
  Local Level Governments
  (OLPLLG), every district took ownership of health services
  delivery throughout the
  country. However as years went by health service delivery
  deteriorated with health
  indicators worsening while infrastructure maintenance upkeep
  failed resulting in theft
  and abuse due to fragmented health systems at the provincial
  level.

  The Provincial Health Authority Act, 2007 (PHAA) was enacted by
  the National
  Parliament in 2007 to create a unified entity for purposes of
  managing and delivering
  integrated health services to the people at the provincial
  level. The Provincial Health
  Authority Act, 2007 removes the impediments and barriers in the
  delivery of health
  services which caused separation of roles and responsibilities
  between public hospitals
  and provincial health services. This new law allows for the
  unification of the two
  systems and for the establishment of a single authority on
  health in every province.

  Provincial Health Partnership Agreement

  Pursuant to Section 7 (2) of the Provincial Health Authorities
  Act, 2007, the
  Provincial Health Partnership on Streamlining of Health Services
  was created. The
  legislation requires that in order for PHAs to be fully

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• implemented, a Provincial
  Partnership Agreement between the Provincial Governor and Health
  Minister is
  signed with necessary operational guidelines to be developed as
  guiding principles for
  implementing the Agreement. Some of these necessary arrangements
  are in the areas
  of administration, financing, budgeting, assets transfers, staff
  appointment, personnel
  management, implementation and monitoring.

  Establishment of MBPHA

  Milne Bay Provincial Hospital was one of the first provincial
  hospitals in the country
  to be established as a Provincial Health Authority in 2011 under
  the Provincial Health
  Authorities Act, 2007 and in partnership with the Milne Bay
  Provincial Government,
  the authority was mandated under the Health Administration Act,
  1997 and the
  Organic Law to oversee the implementation of the National Health
  policies and
  programs in the province.

  1.2 Policies and Budget

  Policies

  Policies are formulated from the Corporate Plan. Generic
  compliances are placed on
  the Provincial Health Authority Act, 2007, Health Administration
  Act, 1997, Public
  Finance Management Act and General Orders.

  2016 Audit Report Page 4

  Milne Bay Provincial Health
  Authority

  PHAs Budget

  PHA’s budget are funded by Provincial Government’s
  appropriation of such monies
  as are appropriated by the Provincial Government for the
  delivery of public health

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• services and for the fulfillment of services and policy
  functions as adopted and such
  other delegated functions by the province to the Provincial
  Health Authorities and

  National Government funding through Department of Health of
  such monies as

  development partners’ contributions, donor funding and private
  sector contributions
  through Heath Sector Services Improvement Program (HSSIP) Trust
  Accounts, for

  the fulfillment of services and policy functions on the PHAs.

  1.3 Corporate Plan

  The Milne Bay Provincial Health Authority (MBPHA) Corporate
  Plan (2016-2018) is

  the second corporate plan of the organization since the
  establishment of the PHA
  reforms in Milne Bay Province. The Corporate Plan is a working
  document that has

  been developed by management to provide strategic directions
  for the organization to

  improve overall performance in the delivery of better quality
  health services and
  ultimately health status of the people of Milne Bay Province.

  1.4 Organization Operational Structure

  The Organization Structure is made up of the Corporate
  Management Structure and

  Corporate Governance Structure. Corporate Management Structure
  comprises of
  Curative Health Division Services, Public Health, Corporate
  Services and Planning &

  Coordination. To effectively guide and direct administrative
  functions of the
  Corporate Management Structure, MBPHA has put in place, a Board
  Governance

  Committee, Sub-Committees; and Senior Executive Management.

• Page 10 of 64

• Figure 2: Organization Structure

  Milne Bay
  Provincial Health
  Authority

  Corporate Corporate
  Governance Management

  Curative Health Public Health Corporate Planning &
  Division Services Coordination

  2016 Audit Report Page 5

  Milne Bay Provincial Health Authority

  2.0 AUDITOR-GENERAL

  2.1 Role of the Auditor-General

  Section 214 of the Constitution of the Independent State of
  Papua New Guinea (the
  National Constitution) prescribes that the primary functions of
  the Auditor-General
  are to inspect, audit and report to the National Parliament on
  the Public Accounts of
  Papua New Guinea (PNG) and on the control of and on transactions

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• with or
  concerning the public monies and properties of Papua New Guinea.

  The functions have been amplified by the Audit Act, 1989 (as
  amended). Section 39
  of the Provincial Health Authorities Act, 2007 extends the audit
  provisions that the
  accounts of the Board of a Provincial Health Authority shall be
  audited in accordance
  with Part 3 of the Audit Act, 1989 (as amended).

  2.2 Audit Scope

  The audit of the accounts and records of MB PHA was directed
  primarily at the
  evaluation of internal controls, together with such other
  examinations considered
  necessary. The audit procedures applied were intended to reveal
  system weaknesses,
  which would result in losses or errors, fraud and mismanagement
  of public funds.

  Moreover, the audit was directed to examine the reliability and
  integrity of the
  Financial Statement presented and other information produced and
  determining the
  extent of compliance with applicable laws, regulations and
  directives. In addition,
  internal controls pertaining to receipts and receivables,
  payments, purchases and
  payables, stores and supplies, cash and banking, budget,
  payroll, advances and
  assets owned and in the custody of the MBPHA were appraised
  accordingly.

  2.3 Nature of Audit

  The nature of audit is influenced by factors such as the use of
  professional judgment
  including the assessment of the risks of material misstatements
  of the financial
  statements, whether due to fraud or error. The audit is not
  required to search
  specifically for fraud and therefore the audit cannot be relied
  upon to disclose all such
  matters. However, all audits are planned and executed so that I
  can have a reasonable
  expectation of detecting material misstatements resulting from
  irregularities including
  fraud.

  Compliance with relevant legislation is of paramount importance
  in safeguarding the
  State’s assets. My audits included reviews and tests to

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• ascertain whether key
  provisions of the Public Finance Management Act, 1995 (as
  amended 2016) and
  various Finance Instructions have been adhered to.
  2.4 Period of Reporting

  The audit inspection of MBPHA Financial Statement, accounts and
  records relates
  to the fiscal year ended 31 December, 2016 carried out in the
  month of April 2019.
  The Management Letter Report was issued to the Provincial Health
  Authority on 25

  2016 Audit Report Page 6

  Milne Bay Provincial Health Authority

  May, 2020. The audit was in arrears hence, was completed and now
  reported in the
  2019/2020 Audit Cycle.

  3.0 RESULTS OF AUDIT

  3.1 Disclaimer of Audit Opinion

  Because of the significance of matters described in my Audit
  Opinion Report, I was
  not able to obtain sufficient appropriate audit evidence and
  accordingly, I am not able
  to express an opinion on the financial statement of MBPHA for
  the year ended 31
  December, 2016.

  The Audit Opinion Report was issued to the Minister for Health
  and HIV & AIDS
  and Finance Minister on 25 May, 2020 in accordance with the
  provisions of Audit Act,
  1989 (as amended). Refer Attachment A for copy of Audit Opinion
  Report.
  3.2 Financial Statement

  Provincial Health Authorities are required to prepare their
  financial statement in
  accordance with the Finance Instructions 2/2004 (Financial
  Statement Format for
  Non-Trading Public Bodies). The MBPHA Financial Statement for
  the fiscal year
  ended 31 December, 2016 was prepared on a Cash Basis of
  Accounting in accordance
  with the International Public Sector Accounting Standards
  (IPSASs). Refer
  Attachment B for the Audited Financial Statement.

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• 3.3 Significant Internal Control Issues

  My review of the internal controls concluded that there were
  significant weaknesses
  in the control environment. Specific areas of major concerns are
  related to, budgetary
  controls, maintenance of cashbooks & monthly bank
  reconciliations, procurement
  compliance, paid accounts, salaries and wages management, assets
  management and
  internal audit. The paragraphs below provide detail discussions
  on such controls:

  3.3.1 Budgetary Control
  Financial capacity remains a major factor affecting PHAs ability
  to fully implement
  budgeted programs and activities, I also noted other issues
  which affects PHAs budget
  management as discussed in the paragraphs below;

  a) PHAs including MBPHA have no direct control over their own
  budget because a
  certain portion of the budgeted appropriations are not
  remitted directly to PHAs
  operating accounts, however channel through other agencies
  such as the Health
  Functional Grants remitted through Provincial Governments
  Operating Accounts
  and Salaries and Allowances (item 111) appropriation is
  retained and paid by the
  Department of Finance through the Alesco Payroll System.

  I also noted potential revenue sources such as, PSIP, DSIP,
  LLGSIP Funds,
  Donor Funds and Christian Health Services Grant are not
  captured in the PHA’s

  2016 Audit Report Page 7

  Milne Bay Provincial Health Authority

  budget which concludes that health services management and
  delivery at the
  provinces are still not fully amalgamated into one single
  system of management
  and reporting;

  b) The release of budget appropriations to PHA either through
  Warrants (NDoF) or
  CFCs (NDoH) is often untimely and unpredictable which results
  in disruptions to
  health service delivery, hinders PHAs capacity to implement

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• plan activities and
  contributes substantially to inefficiencies; and

  c) Free Health Care Policy came into effect on 24 February. There
  are concerns
  about implementation of the policy in terms of its
  effectiveness, implementation
  schedule, and lack of indicators to determine both the extent
  of financial
  protection through the policy and the coverage of health care
  services. Despite the
  name of the new policy, primary health care services have
  officially been free in
  Papua New Guinea since 1975. Nevertheless, due to a lack of
  reliable financing,
  health facilities do, in practice, charge user fees as these
  are often the only source
  of operational revenue.

  3.3.2 Cash Books & Bank Reconciliation

  Provincial hospital’s integration to PHA status commonly
  experienced the problem of
  maintaining proper cash books and compiling accurate monthly bank
  reconciliations. I
  noted the following issues with MBPHA books of accounts
  maintained for the year
  ended 31 December, 2016:

  a) When the new PHA bank accounts commenced operations, there was
  no financial
  instruction issued by either NDoF or NDoH to give specific
  directions on the
  processes and procedures required to close-off the old Alotau
  Provincial hospital
  cash book and transfer operations to the new MBPHA cash book.

  Such oversight directly resulted to confusions leading to
  inconsistencies and
  incompleteness in recording daily transactions that occurred
  during the year and
  compiling monthly bank reconciliations with consequent effects
  on the accuracy
  of the cashbook balances, ledger account balances and bank
  reconciliation
  balances reported in the financial statement; and

  b) Also for those PHAs that adopted the Provincial Government
  Accounting System
  (PGAS), the necessary requirements for the system setup and
  proper training of
  PHA Staffs were not conducted prior to initially operating the
  system. Further,
  the absence of Technical Staffs equipped with PGAS accounting

• Page 15 of 64

• knowledge and
  experience was a major oversight which led to confusion, doubts
  and uncertainties
  in operating the PGAS System.

  I noted that MBPHA cash books were not properly maintained and
  therefore
  incomplete in providing accurate information on financial
  transactions that occurred
  during the year. Furthermore, the application of the appropriate
  accounting processes
  to update the cash books and ledger accounts was not applied and
  therefore resulted to
  material misstatement of the consolidated reconciled cash book
  balance of K242,596
  reported as at 31 December, 2016.

  2016 Audit Report Page 8

  Milne Bay Provincial Health Authority

  3.3.3 Procurement Compliance with PFMA

  I note that MBPHA have in place a procurement process, however
  compliance with
  PFMA was not strictly adhered to simply because the organization
  at present does not
  have a Procurement Policy Manual, developed to arrange its
  procurement process in
  line with provisions of the PFMA requirements such as,
  establishment of positions
  within PHA’s staff organization structure to allow for the
  appointment of expenditure
  procurement officers and also obtain legislative provision to
  delegate the CEO’s
  Financial Authority approval powers.

  3.3.4 Expenditure Accounts

  My analysis of the total expenditure of K37,388,089 incurred for
  the year under
  review, revealed the following discrepancies:

  a) The Salaries and Allowances expenditure of K22,780,400
  reported in the financial
  statement relates to the budget estimated appropriation and
  does not reflect actual
  expenditure for the year. The Alesco payroll report for the
  year was not provided
  for my review and therefore I was not able to confirm the
  accuracy of the reported
  total of K22,780,400 shown in the Financial Statement;

• Page 16 of 64

• b) A total expenditure of K1,433,270 being accommodation rental
  payments for
  medical staffs mostly, Doctors, HEOs and Specialist was
  incurred during the year.
  I was not provided with sufficient supporting documents such as
  housing policy
  guideline, and correspondences relating to any such housing
  privileges, incentives
  and benefits given by an appropriate authority and therefore I
  was not able to
  confirm the appropriateness of payments made in this regard;
  and

  c) A large number of expenditure transactions numbering to two
  hundred forty (240)
  and totaling K226,106 were paid in cash which implies that the
  authority handled
  a lot of cash transactions during the year. However records
  pertaining to advances
  paid were not properly maintained and as such I was unable to
  confirm whether
  payments made in this regard were properly acquitted.

  3.3.5 Salaries and Wages Management

  I observed the following major management issues over the
  processing of salaries and
  wages for the year under review:

  a) Fortnightly Payroll checks on the Salaries and Allowances
  processed through the
  Alesco Payroll System were not done. Consequently, the
  management was not
  able to take stock of the variations in the payroll for each
  period and therefore
  exposing potential risk to irregularities occurring within the
  PHA payroll without
  detection; and

  b) MBPHA had no payroll system for processing casual wages
  instead the normal
  expenditure process of issuing cheques was used. Also the
  Salary and Wages
  Taxes (SWT) were not paid on the wages earned by casual
  employees as well as
  the overtime earned by the PHA staff during the year.

  2016 Audit Report Page 9

  Milne Bay Provincial Health Authority

  3.3.6 Assets Management
  MBPHA since becoming a Health Authority in the year 2011 has not

• Page 17 of 64

• established a
  consolidated assets register to incorporate assets categories
  transferred from Alotau
  Provincial Hospital with those from Milne Bay Provincial
  Government, districts
  health centers and local level government health centers.

  3.3.7 Internal Audit

  Internal Audits were not conducted by the Milne Bay Provincial
  Government or the
  National Department of Health (NDoH) to ensure probity and
  integrity of the
  Authority’s systems and processes to safe guard against loss,
  misuse and abuse during
  the year ended 31 December, 2016.

  4.0 ENTITY COMMENTS AND RESPONSES

  After the completion of my field audits, I normally issue
  Management Letters to the
  Provincial Health Authorities for management to respond
  accordingly to issues that I
  have found to be inconsistent, unlawful, non-compliant and
  incorrectly disclosed in
  the Financial Statement.

  To be reasonable and impartial this avenue facilitates management
  responses so that
  Parliament is acquainted accordingly in relation to the lapses
  that may have been
  committed in the respective financial years. MBPHA had responded
  accordingly to
  the issues raised and were taken into consideration in compiling
  this report. Refer
  Attachment C.

  5.0 FOLLOW UPS

  For the financial year ended 31 December, 2017 inspection, I have
  planned to
  follow up on the recommendations and their responses to my
  Management Letter and
  report the status accordingly in my next Audit Report to
  Parliament.

  6.0 STAKEHOLDER EXPECTATIONS
  I am consoled to report that the MBPHA through the board and its
  management had
  captured and addressed the stakeholder expectations in terms of
  health service
  deliverables as one of its Key Result Areas (KRAs) in its

• Page 18 of 64

• Corporate Plan. The
  MBPHA major stakeholders include the Provincial Government, the
  Districts &
  LLGs in the province, the Civil Societies, Church Health
  Agencies, Development
  Partners, National Agencies, Private Sector and the people of
  Milne Bay at large.

  Without the strong stakeholder support, service delivery as
  envisaged by the National
  Government remains to be frustrated and MBPHA has embarked on
  strengthening its
  stakeholder relationship with effective oversight mechanisms
  including my Office’s
  participating in ensuring good governance and accountability to
  achieve desired

  2016 Audit Report Page 10

  Milne Bay Provincial Health Authority

  goals and objectives in providing the best health deliverables
  to the people of Milne
  Bay Province.

  7.0 RECOMMENDATIONS

  • Organized Finance & Accounts Branch – MBPHA need a properly
  organized
  Finance & Accounts Branch to allow for systematic flow of
  accounting processes
  in maintaining the books of accounts. Also MBPHA needs an
  accountant with
  adequate support staffs and proper setup of an-accounting
  software to incorporate
  all financial data and information in one central data base.

  • Budgetary Control — MBPHA budget at present faces many
  challenges in regard
  to implementation, monitoring and reporting because health
  sector funds to the
  province are not fully controlled and managed by the
  authority. It is therefore
  recommended that all budgeted appropriations for health
  services in provinces
  should be managed by one central agency.

  Also the authority should install a convenient accounting
  system of recording
  budget data and information for ease of reference in compiling
  annual budgets,

• Page 19 of 64

• budget reviews and revisions and accurate record keeping of
  budget documents.

  • Cash Books and Bank Reconciliation — The cash books and bank
  reconciliation
  balances reported as at 31 December, 2016 are materially
  misstated by the
  accumulated errors inherited from prior years, back dated to
  as far as 2012. It is
  recommended that the cash books maintained for the years
  starting from 2012 to
  2016 should be properly analyzed to identify errors, omission
  and misstatements
  so the appropriate adjustments can be effected to correct the
  cash books and bank
  reconciliation balances.

  • Procurement Compliance with PFMA – The MBPHA at present does
  not have
  a Procurement Policy Manual developed to arrange the current
  procurement
  process in line with provisions of the PFMA requirements such
  as establishment
  of positions within PHA’s staff structure to allow for the
  appointment of
  expenditure procurement officers and also obtain legislative
  provision to delegate
  the CEO’s Financial Authority approval powers. The management
  should design
  a Procurement Policy Guideline to guide its procurement
  processes in line with
  the Public Finance Management Act, 1995.
  • Assets Management — Effective assets management controls
  within government
  service oriented agencies do not exist because of ignorance to
  recognize that these
  assets provide an essential pathway for delivering services.
  MBPHA should
  appoint an officer specifically assign to take charge of all
  assets and ensure that
  all asset items transferred by the Milne Bay Provincial
  Government (MBPG) and
  National Department of Health to MBPHA including properties
  and facilities at
  the districts and local level governments are properly
  managed.

  2016 Audit Report Page 11

  Milne Bay Provincial Health Authority

• Page 20 of 64

• • Salaries and Wages Management — Salaries and Wages expenditure
  consumes a
  large portion of PHAs annual expenditure appropriation, it is
  very important that
  proper internal control mechanisms exist to ensure proper
  management of the
  salaries and wages expenditure.

  • Staff Organization Structure — MBPHA urgently needs a new staff
  organization
  structure to merge employees transferred from the provincial
  government with
  those from the previous public hospital administration. Also
  with the extended
  functions of PHAs establishment, the staff structure needs to
  be re-arranged and
  adjusted to create positions in line with the MBPHA’s human
  resource needs and
  requirements.

  8.0 WAY FORWARD

  The establishment of PHAs in the provinces come with numerous
  challenges and
  therefore it is of paramount importance that frontline agencies
  and parties involve
  with the PHA establishment must demonstrate commitment to work in
  partnership to
  pursue reforms in the health sector is address to improve service
  delivery against the
  backdrop of increasing demand due to increasing population,
  rising diseases,
  decreasing resources for health and pressures associated with
  health workforce
  shortage.

  My audits contribute an important part in assisting PHAs
  operations by encouraging
  good governance, transparency and accountability in executing
  their mandated roles
  and responsibilities. The MBPHA is therefore encouraged to
  seriously comply with
  the audit recommendations and where necessary establish the
  required internal
  control measures for improvement.

  9.0 ATTACHMENTS

  For ease of reference in accessing supporting documents and
  records mentioned or
  referred to in this report, the following attachments provided

• Page 21 of 64

• below forms part of this
  Report.
  Attachment A — 2016 Audit Opinion Report
  Attachment B — Financial Statement
  Attachment C — Management Letter Response

  2016 Audit Report Page 12

  Milne Bay Provincial Health Authority

  Attachment A — Audit Opinion

  AUDITOR GENERAL’S OFFICE
  PAPUA NEW GUINEA

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

  OFFICE OF THE AUDITOR-GENERAL

  INDEPENDENT AUDIT REPORT ON THE ACCOUNTS OF MILNE BAY
  PROVINCIAL HEALTH AUTHORITY FOR THE YEAR ENDED 31

• Page 22 of 64

• DECEMBER, 2016

  To the Minister for Health

  In compliance with the requirement of the Audit Act
  1989 (as amended) I have audited the
  accompanying financial statement of the Milne Bay
  Provincial Health Authority (MBPHA) for
  the year ended 31 December, 2016. The financial
  statement comprise of:

  • Management Declaration
  • Consolidated Statement of Receipts and Payments
  • Statement of Receipts and Payments of
  Operational Funds

  • Statement of Receipts and Payments of Trust Fund

  • Notes to and forming part of the Financial
  Statement

  Responsibility for the Financial Statement

  The Chief Executive Officer is responsible for the fair
  presentation of the financial statement and
  the information contained therein in accordance with
  the Finance Instructions issued under
  Section 117 of the Public Finances (Management) Act
  1995.

  The Chief Executive Officer is responsible for the
  efficient management of administrative
  services, for keeping proper accounting records, for
  safeguarding the assets of the Provincial
  Health Authority and for taking reasonable steps for
  the prevention and detection of fraud and
  other irregularities.

  Responsibility of the Auditor-General

  It is my responsibility to form an Independent opinion,
  based on my audit, on the financial
  statement prepared on a Cash Basis and to report in
  accordance with the Audit Act 1989 (as
  amended).

• Page 23 of 64

• The audit was planned and performed in accordance with
  International Standards of Supreme
  Audit Institutions (ISSAI) as promulgated by the
  International Organization of Supreme Audit
  Institutions (INTOSAI) to obtain reasonable assurance
  whether the financial statements are free
  of material misstatement. The audit involved performing
  procedures to obtain audit evidence
  about the amounts and disclosures in the financial
  statement.

  Level 6
  P.O Box 423
  TISA Investment Haus
  WAIGANI, NCD
  Kumul Avenue, NCD
  Papua New Guinea

  Page 1 of 1

  2016 Audit Report
  Page 13

  Milne Bay Provincial Health
  Authority

  The nature of an audit is influenced by factors such as the
  use of professional judgment,
  including the assessment of the risks of material
  misstatements of the financial statement,
  whether due to fraud or error. I have considered the risks,
  based on those assessments on the
  internal controls relevant to the preparation and
  presentation of the financial statement in
  designing audit procedures considered appropriate in the
  circumstances. Because of the matters
  described in the Basis for Disclaimer of Opinion paragraph, I
  am unable to obtain sufficient
  appropriate audit evidence to provide basis for an audit

• Page 24 of 64

• opinion.

  BASIS FOR DISCLAIMER OF OPINION

  1. Financial Statement

  Fund Balances

  Because of a Disclaimer Audit Opinion issued in respect of
  the year ended 31 December,
  2015 and the unexplained variance K26,618,808 noted on the
  opening fund balance of
  K3,392,799 from the previous year’s closing balance of
  K30,011,607. However, I was not
  provided any documentation or necessary explanation and
  therefore I was not able to
  obtain sufficient evidence to satisfy myself as to the
  accuracy of these opening and closing
  fund balances for the year.

  Since the opening balances would affect the determination
  of the financial position and
  cash flow of MBPHA in the current year, I am unable to
  determine whether adjustments to
  the related cashbooks, ledger accounts and bank
  reconciliations might have been necessary
  for the year ended 31 December, 2016.

  Cash Balances

  Reconciled Cash Balances of (K645,629) and K888,225 were
  reported for the operating
  account and trust account respectively. I noted that the
  cashbooks were not adequately
  maintained and bank reconciliations were inconsistence,
  untimely and inaccurate.
  Consequently, I am unable to verify and confirm the
  correctness of the cash books, ledger
  accounts and bank reconciliation balances reported at
  year-end and determine the impact
  these limitations may have on the account balances and
  subsequent financial position of
  MBPHA as at 31 December, 2016.

  Revenue & Expenditure Component of Salaries

  The revenue and expenditure component of Salaries
  appropriation of K29,820,300 as
  reported in the financial statement represent the budgeted
  estimates and not actuals.
  However, I was not provided the Alesco Payroll report for
  the year under review and since
  these disclosures were not accurately presented, I am

• Page 25 of 64

• unable to determine the impact the
  variance between the actual and appropriation may have on
  the revenue and expenditure
  totals as at 31 December, 2016

  2

  2016 Audit Report Page 14

  Milne Bay Provincial Health
  Authority

  Fixed Assets

  MBPHA since becoming an Authority in the year 2012 has not
  established a consolidated
  assets register to incorporate assets categories
  transferred from Alotau Provincial Hospital
  with those from Milne Bay Provincial Government, District
  Health Centers and Local
  Level Government Health Centers. Recurring issues
  associate with assets management
  include, non-existence of an assets policy guideline,
  inconsistency in recording assets
  purchases, non-disclosure of purchase values and failure
  to conduct periodic stocktake.
  Consequently, I am unable to confirm the accuracy of the
  total assets value of 1(3,463,526
  reported in Schedule 4 of the financial statement.
  Liabilities

  An amount of (K104,437) is reported as State of Papua New

• Page 26 of 64

• Guinea under Schedule 5 of
  the Financial Statements. No further explanation was
  provided on this liability and as such
  I am unable to verify and confirm the accuracy of this
  disclosure.
  Advances

  The Advance Registers maintained, reported Salary, Cash
  and Travel Advances totaling
  IC42,810, K43,244 and K186,942 respectively which remained
  outstanding as at year end.
  The Schedule of Advances was not disclosed and therefore I
  am unable to confirm the total
  value of outstanding advances as at 31 December, 2016.

  2.0 Significant Control Weaknesses

  My review of the books of accounts and records revealed
  that there were significant
  control weaknesses and I include herewith

  Budgetary Control

  • Documents and records pertaining to the 2016 budgeted
  appropriation of
  K29,820,300 including the Appropriation Act, budget
  reviews and revision were not
  provided and therefore limited my audit scope in
  performing the necessary audit
  assessments to determining budgetary performance
  results against actuals.

  • The revenue and expenditure component of Salaries total
  of K29,820,300 as reported
  in the financial statement represent the budgeted
  appropriation amounts and not
  actuals. Also no reconciliations were done on the
  payroll expenditure incurred and
  therefore I was unable to compare actual salaries
  against budgeted appropriation to
  determine if there were any payroll overruns.

  • The release of budgeted appropriations to MBPHA either
  through Warrants (NDoF)
  or CFCs (NDoH) is often untimely and unpredictable
  resulting in, disruptions to
  health service delivery, hinders CEO’s capacity to
  implement plan activities,
  contributes substantially to inefficiencies and prevent
  elimination of user fees.

  3

• Page 27 of 64

• 2016 Audit Report Page 15

  Milne Bay Provincial Health Authority

  Revenue Management

  The cash books and revenue ledgers were not properly
  maintained, I also noted delays in
  preparing the monthly bank reconciliations, and therefore I
  am unable to confirm whether
  all revenue receipts for the year were properly accounted
  for and correctly reported in the
  financial statement.

  DISCLAIMER OF AUDIT OPINION

  Because of the significance of the matters described above, I
  am not able to obtain sufficient
  appropriate audit evidence and consequently I do not express
  an opinion on the Financial
  Statement of Milne Bay Provincial Health Authority for the
  year ended 31 December, 2016.

  OTHER MATTERS

  In accordance with the Audit Act, 1989 (as amended) I have
  duty to report on significant matters
  arising out of the financial statement, to which the report
  relates. The paragraph below is a
  matter of significance.

  Section 62(1) of the Public Finances (Management) Act, 1995
  requires all public bodies to keep
  proper accounts and records of its transactions and affairs,
  and to develop adequate controls over
  the assets and liabilities. Milne Bay Provincial Health
  Authority did not maintain proper books
  of accounts and records and consequently breached Section
  62(1) of the Public Finances

• Page 28 of 64

• (Management) Act, 1995.

  GORDON , MBA, CPA
  Acting Auditor-General

  25 May 2020

  5

  2016 Audit Report Page 16

  Milne Bay Provincial Health Authority

  Attachment B — 2016 Annual Financial Statement

  MILNE BAY PROVINCE
  PROVINCIAL HEALTH AUTHORITY
  Lock Bag ALOTAU, Milne Bay Province. Tel:
  (675) 6410665/6411250 Fax: (675) 6410670/6410040

• Page 29 of 64

• ANNUAL FINANCIAL STATEMENT
  For Year Ended 31st December 2016

  2016 Audit Report
  Page 17

  Milne Bay Provincial Health Authority

  Table of Contents

  Contents
  Page #

  Declaration by the Management
  1
  Statement of Cash Receipts and
  Payments – Consolidated Account 2
  Statement of Cash Receipts and
  Payments – Operating Account 3

• Page 30 of 64

• Statement of Cash Receipts and
  Payments – Fees Trust Account 4
  Notes to the Financial Statements
  5
  Note 1- Accounting Policies
  Note 2 – Cash
  5-6
  Note 3a – Operating Account Revenue
  7
  Note 3b – Operating Account
  Expenditure 8
  Note 3c – General Trust Account
  Revenue 9
  Note 3d – General Trust Account
  Expenditure 10
  Schedules
  Note 4 – Schedule of Assets
  11
  Note 5 – Schedule of Liabilities
  11
  Note 6 – Schedule of Contingent
  Liabilities 11
  Note 7 – Schedule of Administrative
  Transactions 11

• Page 31 of 64

• 2016 Audit Report
  Page 18

  Milne Bay Provincial Health Authority

  DECLARATION BY THE MANAGEMENT

  We, the undersigned, do solemnly and sincerely
  declare that, to the best of our knowledge and belief that
  the 2016 Financial Statements is true and fair
  with accompanying:

  1. Statement of Cash Receipts and
  Payments as at 31 December 2016 under the Revenue Fund known
  as Milne Bay Provincial Health
  Authority Operating Account. The purpose of this account is to
  hold monies as Grants from the
  National Government Appropriation and other
  revenues.
  ,/

  2. And Statement of Cash Receipts and
  Payments as at 31 December 2016 under Trust Fund known as
  Milne Bay Provincial Health
  Authority General Trust Account is to hold monies received as
  monies appropriated for the trust
  account, fees and charges imposed for the provision of services to
  the public and other monies allowed
  by the trust instrument. /

  3. And Consolidated Statement of Cash
  Receipts and Payments as at 31 December 2016
  incorporating all the above
  accounts under the Receipts and Payments controlled by the Milne Bay
  Provincial Health Authority .

  4. And the Schedules of Assets,
  Liabilities and Contingent Liabilities and Administered

• Page 32 of 64

• Transactions as at 31 December 2016
  to record Accounts details of the Milne Bay Provincial Health
  Authority. ✓

  And we make this solemn declaration by virtue
  of Oaths, Affirmations and Statutory Declarations Act and
  subject to the penalties provided by the Act
  for making false statements in statutory declarations,
  conscientiously believing the statements
  contained in this Declaration to be true and fair in every
  particular.

  Declaredat …… …… ….. …………..
  …….. …… this

  Day of
  2016

  ) Steven Enore

  ) Director Corporate Services – MBPHA

  Declared at this t NA,
  ( X1,0 (VM
  (

  Dayof ………… ……….. . ….. . …..
  204

  )

  ) Billy Naidi

  ) Chief Executive Officer – MBPHA

  Before me:

  Page 1

• Page 33 of 64

• 2016 Audit Report
  Page 19

  Milne Bay Provincial Health Authority
  MILNE BAY PROVINCIAL HEALTH AUTHORITY
  STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31ST
  DECEMBER 2016
  CONSOLIDATED
  Notes
  2016
  201$
  Receipts or
  Payments
  Controlled by
  Entity
  (Kim)
  Comparison
  Receipts or
  Payments
  Controlled by
  Entity
  (King)
  RECEIPTS
  Grants Revenue
  3a
  7,635,350
  9,609,980
  (1,974,630)
  Other Grants & Donor Assistance
  3a
  Other Receipts (Including internally generated)
  3a
  6,810,208 i
  5,645,134 j
  1,165,074 I
  Item 111 (Managed by Dept of Finance)
  3a
  22,780,400
  30,778,900
  (7,998,500)
  Total Receipts
  37,225,958
  [C
  46,034,014
  K
  (8,808,056)
  PAYMENTS
  Item 111 (Managed by Dept of Finance)
  22,780,400
  30,788,900
  (8,008,500)

• Page 34 of 64

• Salaries, Wages and Employee Benefits
  3b
  917,851
  31,720,358
  (30,802,507)
  Supplies and Consumables
  3b
  1,390,248
  1,796,389
  (406,141)
  Utilities
  3b
  1,388,192
  1,739,003
  (350,811)
  Administrative Expenses
  3b
  3,369,199
  4,511,334
  (1,142,135)
  . Other Administrative Expenses

  3b
  4,901,439
  2,652,430
  2,249,009
  Grant &Transfers to Public Authoirty
  3b
  2,158,000
  3,697,000
  (1,539,000)
  Development Expenditure
  3b
  1,894,057
  2,284,077
  (390,020)
  Others – Medivac
  3c1
  301,190
  108,411
  192,779
  Other – Project Grants
  –
  I
  2,215,524
  (2,215,524)1
  0thers Itinlcnown F.Y.1111,2111!;1
  3d
  1,275,587
  1,275,587
  Total Payments
  K
  40,376,162
  K

• Page 35 of 64

• 81,513,426
  K
  (40,390,106) I
  INCREASE/(DECREASE) IN CASH
  K
  (3,150,203) ‘ K
  (35,479,412)1 K
  31,582,050
  Cash at the beginning of the year
  It
  3,392,799
  K
  3,392,799
  K
  Increase/(Decrease) in cash
  K
  (3,150,203)
  K
  (3,150,203) ,
  Cash at the end of the year
  K
  242,596 1 K
  3,392,799 i IC
  (3,150,203) ,
  Represented by
  Milne Bay Health Authority Operating account
  K
  (645,629)
  K
  2,420,113
  Milne Bay Health Authority Trust account
  888,225
  K
  972,686
  FUND BALANCE
  K
  242,596
  I(
  3,392,799
  Page 2
  2016 Audit Report
  Page 20

  Milne Bay Provincial Health Authority

• Page 36 of 64

• MII.NE BAY
  moviNciapcmrsi AUTHORITY

  STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR
  THE YEAR ENDED 31ST DECEMBER 2016

  OPERATING
  ACCOUNT

  2016 2015

  Receipts or Receipts or

  Payments Payments
  Notes
  Controlled by Controlled by Comparison

  Entity Entity

  (Kina) (Kina)
  RECEIPTS
  Grant Revenue 3a
  7,635,350 9,609,980 ; (1,974,630)
  Other Grants & Donor Assistance
  Internal Revenue & Others 3a
  3,906,596 3,929,600 (23,004)
  Item 111 (Managed by Dept of Finance)
  22,780,400 30,778,900 j (7,998,500)
  Total Receipts K
  34,322,346 I K 44,318,480 I K(9,996,134)

  PAYMENTS
  Item 111 (Managed by Dept of Finance)
  22,780,400 30,778,900
  Salaries, Wages and Employee Benefits 3b
  917,851 31,720,358 (30,802,507)
  Supplies and Consumables 3b
  1,147,740 1,138,562 9,178
  Utilities 3b
  1,206,165 1,482,304 (276,139)
  Administrative Expenses 3b
  3,362,453 4,473,685 (1,111,232)
  Other Administrative Expenses 3b
  3,921,423 2,326,343 1,595,080
  Grant & Transfers to Public Authoirty 3b
  2,158,000 3,697,000 (1,539,000)
  Development Expenditure 3h
  1,894,057 1,145,826 748,231
  Others – Medivac
  Other – Project Grants
  2,215,524 (2,215,524)

• Page 37 of 64

• Total Payments K
  37,388,089 IC 78,978,502 K (33,591,913)

  INCREASE/(DECREASE) IN CASH K
  (3,065,742), K(34,660,022)! K 23,595,780

  Cash at the beginning of the year K
  2,420,113 IC 2,420,113 ; K
  Increase/(Decrease) in cash K
  (3,065,742) K (3,065,742)
  Cash at the end of the year K
  (645,629) K 2,420,113 K (3,065,742)

  PGAS Cash Book Account: 1-1 K
  1,957,055
  PGAS Cash Book Account: 32-238K
  (2,602,683)
  K
  (645,629)

  Page 3

  2016 Audit Report
  Page 21

  Milne Bay Provincial Health Authority

• Page 38 of 64

• MILNE BAY
  PROVINCIAL HEALTH AUTHORITY

  STATEMENT OF CASH RECEIPTS AND PAYMENTS
  FOR THE YEAR ENDED 31ST DECEMBER 2016

  TRUST ACCOUNT

  • 2016 2015

  Receipts or Receipts or

  Payments Payments

  Notes Controlled by Controlled by Comparison

  Entity Entity

  (Kina) (Kim)

  RECEIPTS

• Page 39 of 64

• Grant Revenue
  _
  Grants and Other
  Assistances .
  –

  Other Receipts
  3c 2,767,457 287,584 2,479,873

  Internal Trust Receipts
  3c 136,155 1,427,950 i (1,291,795)

  Total Receipts
  K 2,903,612 K 1,715,534 j K 1,188,078

  i

  1
  PAYMENTS
  Salaries, Wages and Employee Benefits
  – _ –

  Supplies and Consumables
  3d 242,508 657,827 (415,319)

  Utilities
  3d 182,027 256,699 (74,672)

  Administrative Expenses
  3d 6,746 37,649 j (30,903)

  Other Administrative
  Expenses ! 3d 980,016
  326,087 653,929

  Grant & Transfers to Public Authoirty

  Development Expenditure
  – 1,138,251 (1,138,251)

  Others – Medivac
  3d 301,190 108,411 192,779
  Other – Project Grants
  – ..

  Others [Unknown Exp items)
  3d I 1,275,587 –
  Total Payments
  K 2,988,073 K 2,524,924 , K (812,438)

  1
  INCREASE/(DECREASE) IN CASH

• Page 40 of 64

• K (84,461) K (809,390)1 K 724,929

  Cash at the beginning of the year
  K 972,686 l K 972,686 ‘ K –

  Increase/(Decrease) in cash
  K (84,461)! K (84,461)

  Cash at the end of the year
  K 888,225 l K 972,686 ; K (84,461)

  Manual Cash Book Account:
  K 888,225

• Page 41 of 64

• Page 4

  2016 Audit Report
  Page 22

  Milne Bay Provincial Health
  Authority

  MILNE BAY PROVINCIAL HEALTH AUTHORITY

  Notes to the Financial Statements

  I. Accounting Policies

  Basis of Preparation
  The financial statements of the Milne Bay Provincial Health
  Authority are prepared based on the converted data from
  PGAS and Accounts maintained on MS Excel Spread sheet. As
  far as been possible the accuracy of the converted data
  has been verified with the source documents and adjustment
  taken up accordingly. The financial statements have been
  prepared in accordance with Cash Basis International Public

• Page 42 of 64

• Sector Accounting Standards (IPSAS). Financial Reporting
  in under the Cash Baisi of Accounting.

  The accounting policies have been applied consistently
  throughout the period relating to the Public Finances
  (Management) Act, 1995.

  Reporting Entity
  The financial statements are for Milne Bay Provincial Health
  Authority as a Non – Trading Public Body. The financial
  statement encompasses the reporting entity as specified in
  the Public Finances (Management) Act, 1995. Milne Bay
  Provincial Health Authority is controlled by the National
  Government of Papua New Guinea through appropriations
  from Government.

  Milne Bay Provincial Health Authority’s principal activity
  is to provide hospital based health care services and public
  health services to its constituents.

  Payments by other government entities
  Milne Bay Provincial Health Authority benefits from payments
  made by the Government and other government
  entities on its behalf.

  Payments by external parties
  MiMe Bay Provincial Health Authority also benefits from
  payments made by external parties for goods and services.
  These payments do not constitute cash receipts or payment to
  Milne Bay Provincial Health Authority, but do benefit
  the authority through organizations such as interest groups,
  faith based organisation, non governmental and donor
  agencies. Details are disclosed as Other Projects in the
  Payments by external parties in the Statement of Receipts and
  Payments and in other financial statements.

  Reporting Currency
  The reporting currency is in PNG ICina.

  2. Cash
  Cash comprises cash on hand and cash equivalents. Cash
  equivalent comprises balances with banks and investments in
  short term money market instruments. Amounts appropriated to
  Milne Bay Provincial Health Authority are deposited
  in the bank accounts and are controlled by Milne Bay
  Provincial Health Authority. All borrowings are undertaken by a
  central finance entity; hence no borrowings were undertaken
  by Milne Bay Provincial Health Authority.

• Page 43 of 64

• Page S

  2016 Audit Report Page 23

  Milne Bay Provincial Health Authority

  Cash is included in the Statements niCash Receipts
  and Payments and comprises the following:

  Cash On Min&
  Balances with Batik:
  2016 2015
  Milne Bay Provincial Health Authority Operating
  Account (645,629) 2,420,113
  Milne Bay Provincial Health Authority General Trust
  Account 888,225 972,686

  K 242,596 1 K 3,392,799

  Short-term Investments:
  Investment 1
  Investment 2
  Investment 3
  K – IC

• Page 44 of 64

• K 242,596 I IC 3,392,7991

  Page 6

• Page 45 of 64

• 2016 Audit Report
  Page 24

  Milne Bay Provincial Health Authority

  3a. Appropriation Revenue – Operating Account

  Appropriation Revised Revenue Revenue
  Variance

  2016 ‘ 2036 2016 2015
  Grants and Internal Reveiwe
  (K) (K) (It)
  :Going
  • Grant Revenue • Mk(It
  5,676,250 5,080,380 (5,676,250)
  Grant Revenue – M BP Gov’t
  1,959,100 3,929,600 (1,959,100)

  K ii K 7,635,350 K 9,609,980
  K (7,635,350)
  ;Other Grants & Donor Assistance
  K K K –
  I( K (15,270,700)

  iC – K K 7,635,350 K 9,609,980
  K (22,906,050)
  111(0 01 Revenue & tItim
  Internal Revenue (Operating Account)
  Rollover Funds
  3,141,1(10 3,141,100 2,879,101)
  262,000
  Other Receipts
  1,027,496 1,221,1178 (1,027,496)
  Projects
  K 3,141,100 I K 3,141,100 K 3,9O6,59b K 1,221,878
  K (765,496)1

• Page 46 of 64

• Item 111 Dept of
  Finance) 22,700400 22,780,400 j
  30,770,900 –

  K 22,780,400 ] K K 22,780,400 K 30,778,900
  K

  Total Operating Account
  K 25,921,500 1 K 3,141,100 1 K 34,322,346 I I( 41,610,75111
  K (23,671,546)I

• Page 47 of 64

• Page 7

  2016 Audit Report
  Page 25

  Milne Bay Provincial Health Authority

  3c. Appropriation Revenue – Ti ust Account

  Revenue:
  Appropriation Revised Actuals Receipts ; :lanais
  Receipts Variances

  2016 , 21116 2016 2015

  (IC) (K) ((Cl (K)
  (K)
  Grant Revenue
  National Government
  Provincial Government

• Page 48 of 64

• Total
  I( I IC – IC – [ IC
  IC

  Grants and Other Assistances
  Free Primary Health Care Subsidy
  Medivac Grants (Provincial)
  287,584
  Donors
  Final IC
  K K IC 287,584 1-7—-7-1

  Other Receipts
  Internal Transfers Operating Account
  2,492,286 (2,492,286)
  Nursing Association Project Grant
  1,427,950
  Development Funds (Nai)
  – ‘
  Other Receipts
  275,170
  Total
  IC 2,767,457 K 1,427,950 K
  (2,767,457)

  Total Other Receipts
  K 2,767,457 IC 1,715,534 K
  (2,767,457),

  Internal Revenue Trost Account
  Other income
  136,155 (136,155)1
  Outpatients
  20
  Pharmacy
  579
  Accident & Emergency
  10
  Consultation Clinic
  16,07(1
  Pathology
  25

  13,060
  Public Inpatient
  11,090
  Intermediate Inpatient
  Dental Clinic
  3.309
  Services of Private Practisioners
  Other Medical Services
  5,290
  Housing Rental

• Page 49 of 64

• 100 _
  Administration
  185,310
  Decal inns
  Total Internal Revenue IC
  IC IC 136,155 K 235,663 I IC
  (136,155)

  Total Trust Account Revenue
  11 1,911,197 (2,903,612)

  Page 9

• Page 50 of 64

• 2016 Audit Report
  Page 26

  Milne Bay Provincial Health Authority

  3d. Appropriation Expenditure – Trust Account

  Appropriation Revised Expenditure Expenditure
  Variance

  2016 2016 2016 2015

  Recurrent:
  (k) (K) (K) (K)
  (K)

  Salaries Wages,Employee Benefits

• Page 51 of 64

• Salaries and Allowances
  1111

  Wages
  1121

  Overtime
  1131

  Leave Fares
  1141

  Retiremnt Benefits, Pensions, Gratuities and
  Retrenchment 141 – 1

  K – J K K K K
  I
  Supplies and
  Consumables !
  ,

  Office Materials and Supplies
  123; 10,819
  12,914 (10,859)

  Operational Materials and Supplies
  124j 231,648
  644,913 231,640

  K 242,508 K 657,827

  I K
  Utilities

  Utilities
  1221 i 182,027 i
  256,699 : (102,027)1

  IC K 1 K 182,027 1 K 256,699 1
  K (1112,027)1

  Administrative Expenses
  1
  Travel and Subsistence
  121! .
  – . ‘ !
  Transport and Fuel
  125 6.746
  23,220 1 (6,746)

• Page 52 of 64

• Rental of property
  1271 –
  – 1

  Routine Maintenance Expenses
  128! •• ‘
  14,421 ‘ – i

  1 K – 1 K 6,746 1 If 37,649 1
  K (6,746)1

  Other Operational Expenses

  Other Operational Expenses
  135 980,016
  326,007 1 (980,016)1

  Medivac Expenses
  135 301,190
  108,411 1 (301,19(1)1

  (Othera [Unknown Exp items’
  1,275,5117 1,215,587)1

  X K 2,556,792 1 K 434,498 1
  K (2,556,792

  Total Recurrent
  1 K • 1 K 2,988,073 1 K 1,386,673 1 K (2,988,073)1

  Development:

  Acquisition of Lands, Buildings
  221

  Office Furniture and Equipment
  224
  33,143 ;

  Purchase of Vehicles
  222

  Construction, Renovation and Improvement
  225 25,000

  Construction. Renovation and Improvement – Project
  225′ 1,080108

• Page 53 of 64

• Total Development
  K 11.111111.1.11311111Mal

  Total Fees Trust Account Expenditure
  x – 1 K 2,988,073ritT”.•,524,924 1 K
  (2,988,073)1

• Page 54 of 64

• Page 10

  2016 Audit Report

• Page 55 of 64

• Page 27

  Milne Bay Provincial Health Authority
  3d. Appropriation Expenditure – Trust Account
  Appropriation
  Revised
  1 Expenditure ; Expenditure ,
  Variance

  2016
  2016
  2016
  2015
  1
  Recurrent:
  (K)
  (K)
  ,
  Oct
  !
  (it)
  (10
  Salaries, Wages Employee Benefits
  Salaries and Allowances
  ‘ 111.-
  Wages
  1112!
  1 1131
  ‘
  1141
  141-
  –
  i

  –
  !IC
  –
  {IC

  1
  ! K
  IC
  242,500 IT-

  12,914
  (10,859)

  644913
  231,648

  657,827
  IC
  (242,508)

• Page 56 of 64

• 1K

  1123 .
  10,1159

  1124.
  231,648
  11221
  182,027
  256,699
  (182.027)
  1 K
  K
  IC
  182,027 1 K
  256,699 1 IC
  (102,0271
  j
  121.
  –
  .
  –
  1125.
  6,746
  23,228 1
  (6,746)
  ‘1271
  –
  –
  . 128!

  •
  14,421
  .
  –
  j It
  K
  6,746 1 IC
  37,649 1 K
  (6,746)
  135
  135

  980,016 1
  326,0137 !
  (980,016)

  301,190 J
  108,411 i
  (301,190).

  1,275,5117
  ‘
  11,275,:-JJ;i!,

• Page 57 of 64

• –
  1K
  I K
  2,556,792 I K
  434,498 I K (2,556,792)1
  –
  I K
  •
  1 If
  2,988,073 1 K
  1,386,673 1 K
  (2,908,073)
  1221
  224
  222′
  225
  225′
  33,143
  25,000
  1,080,160
  • 1 K
  – 1 K 2,988,073 LK 2,524,924 K 2,988,073

  Overtime
  Leave Fares
  Retiremnt Benefits, Pensions, Gratuities and Retrenchment
  5ountivs_antlSonnunabitx
  Office Materials and Supplies
  Operational Materials and Supplies
  Iltilitie$
  Utilities _
  ,Administrative Expense8
  Travel and Subsistence
  Transport anti Fuel
  Rental of Property
  Routine Maintenance Expenses
  Other Operational Expenses
  Other Operational Expenses
  Meelivac Expenses
  III het s [Unknown lix31 items]
  Total Recurrent
  Development:
  Acquisition of Lands, Buildings
  Office Furniture and Equipment
  Purchase of Vehicles
  Construction, Renovation and Improvement
  Construction. Renovation and Improvement – Project
  Total Development
  Total Fees Trust Account Expenditure
  Page 10
  2016 Audit Report
  Page 28

• Page 58 of 64

• Milne Bay Provincial Health Authority

  Schedules

  As at As at

  31/12/2016 31/12/2015
  1-AdminketWeta
  Land and Landscape
  FormatMn and Buildings
  380.485 380.485
  Medical Equipment
  1,748,763 1,748,763
  Office Furniture,
  Fittings and Equipment
  197,182 197,182
  Tools and Equipment
  60,314 60,314
  Plant and Machinery
  47,712 47,712
  Marine Vessels
  17,000 17,000
  Motor Vehicles
  652,062 652.062
  Housing Furniture
  11.2,424 112,424
  Miscellaneous
  29,084 29,084

  K 3,245,026 3,245,026

  5….Schedule of
  – Expenditure Arrears
  House Rental
  Landlords
  110,436
  Utilities

• Page 59 of 64

• 24,421
  Other Commercial
  Alotau Provincial
  Hospital Board of Management
  Alotau Provincial
  Hospital Staff
  –
  State of Papua New
  Guinea
  (104,437) (56,853)

  K (104,437) 78,004

  7. Schedule of
  Contingent Liabilities
  Milne Bay
  Provincial Health Authority Operating Account
  Alotau General
  Hospital Fees Trust Account
  K

  Schedule of
  Admininstered Transactions

• Page 60 of 64

• Page 1:L

  SO,

  2016 Audit Report
  Page 29

  Milne Bay
  Provincial Health Authority

  Attachment C — MBPHA Management Letter Response

  • • III • • • • • 9■411 • • • ■ ■ • go • ■ • • • • • • gh• •
  01 • ■ • • % % • % • • 106 • lo • • • • •

  MILNE BAY PROVINCIAL HEALTH AUTHORITY

• Page 61 of 64

• LOCKED BAG 402,
  ALOTAU, MILNE BAY PROVINCE,
  PAPUA NEW GUINEA
  6411205 • Digicel: 72319309 • Email:
  [email protected]

  OFFICE OF CHIEF EXECUTIVE OFFICER

  Date: 22’u May
  2020
  The Auditor General Our Reference: CEO: 1:6-21
  Auditor General Office Action Officer: JM/pengo
  PO Box 423 Designation: a/Dep.
  Director Corporate Services
  Waigani Your Reference:
  National Capital District Date: 12’h May
  2020
  Papua New Guinea

  Dear Sir,

  SUBJECT: AUDIT RESPONSE FOR THE. PERIOD ENDED 31 DECEMBER
  2016

  The audit management letter for Milne Bay Provincial Health
  Authority Board for the period ended 31
  December 2016 was received on 21S’ May, 2020. We acknowledge
  the audit findings and our responses to the
  Audit Management letter are as follows;

  1.0 FINANCIAL STATEMENTS
  Audit findings and recommendations have been noted and
  the management of Milne Bay Provincial
  Health Authority continues to assess and noted.
  Improvements and corrections will be accounted in
  the 2017, 2018 and 2019 Financial Statements.

  2.0 BUDGETARY CONTROL
  Audit observations and recommendations have been noted
  and will be accounted for in the 2017, 20I8
  and 2019 Financial Statements.

• Page 62 of 64

• 3.0 CASH BOOKS AND BANK RECONCILIATIONS
  Audit observations and recommendations have been noted
  and will be accounted for in the 2017, 2018
  and 2019 Financial Statements.

  4.0 REVENUE MANAGEMENT
  Audit observations and recommendations have been noted
  by the management and corrective actions
  will be accounted for in the 2017, 2018 and 2019
  Financial Statements.

  5.0 EXPENDITURE ACCOUNT
  Audit observations and recommendations have been noted
  by the management and corrective actions
  should be reflected in the 2017, 2018 and 2019
  Financial Statements.

  6.0 ASSETS MANAGEMENT
  Audit observations and recommendations have been noted
  by the management and corrective actions
  should be reflected in the 2017, 2018 and 2019
  Financial Statements.

  “Milne Bay Provincial Health Authority delivering health
  services, Health is Everyone’s Business”

  2016 Audit Report
  Page 30

  Milne Bay Provincial Health Authority

• Page 63 of 64

• 7.0 ADVANCE MANAGEMENT

  Audit observations and recommendations have
  been noted by the management and corrective actions
  should be reflected in the 2017, 2018 and
  2019Financial Statements.

  8.0 SALARIES AND WAGES
  Audit observations and recommendations have
  been noted by the management and corrective actions
  should be reflected in the 2017, 2018 and
  2019Financial Statements.

  9.0 CORPORATE GOVERNANCE
  Audit comments are noted

  We take the opportunity to thank the Auditor General’s
  Office to continue to highlight system weaknesses that
  will help us to improve our financial systems and
  management.

  Yours faithfully, fikoltiA/ C47(
  tim

  OkASAA>ek,
  J COB MOREW
  ACTING CHIEF EXECUTIVE’
  MILNE BAY PROVINCIAL HEALTH AUTHORITY

• Page 64 of 64

• “Milne Bay Provincial Health Authority delivering
  health services, Health is Everyone’s Business”

  2016 Audit Report
  Page 31