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• Part IV
  Report of the Auditor-General
  2016

  on the Accounts of Public Authorities and Statutory Bodies established
  under the Act of Parliament and Government Owned Companies
  established under the Companies Act

  __________________________________________________________
  Public Bodies and their Subsidiaries

  National Government Owned Companies

  National Government Shareholdings in Other Companies

  Auditor-General’s Office of Papua New Guinea

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• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: agopng@ago.gov.pg Website: www.ago.gov.pg

  11 August 2017

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

  Dear Sir,

  In accordance with the provisions of Section 214 of the Constitution of the Independent State
  of Papua New Guinea, I forward herewith a copy of my report signed on 11th August 2017
  upon the inspection and audit of the financial statements of the Public Bodies and their
  subsidiaries and National Government owned companies for tabling in the National
  Parliament. This Report (Part IV) also contains information on companies in which the
  Government does not hold majority interest. Section D of this Report contains information on
  the status of certain entities whose audits have been in arrears.

  Yours sincerely,

  PHILIP NAUGA
  Auditor-General

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

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• 2016 AUDITOR-GENERAL’S REPORT – PART IV

  TABLE OF CONTENTS

  PARA SUBJECT PAGE
  NO. NO.

  General ……………………………………………………………………………………………………………………………… v
  A. Foreword …………………………………………………………………………………………………………………………… v
  B. Authority to Audit ………………………………………………………………………………………………………………….vi
  C. Audit of Public Bodies ………………………………………………………………………………………………………… viii
  D. Appointment and use of Authorised Auditors ……………………………………………………………………………ix
  E. Executive Summary …………………………………………………………………………………………………………….. x
  Attachments A – F ……………………………………………………………………………………………………………… xix

  SECTION A – PUBLIC BODIES AND THEIR SUBSIDIARIES

  PARA SUBJECT PAGE
  NO. NO.

  1. Foreword …………………………………………………………………………………………………………………………… 1
  2. Bank of Papua New Guinea …………………………………………………………………………………………………. 3
  3. Border Development Authority and its Subsidiary …………………………………………………………………….. 5
  3A. Papua New Guinea Maritime Transport Limited ………………………………………………………… 12
  4. Civil Aviation Safety Authority of Papua New Guinea ………………………………………………………………. 13
  5. Climate Change and Development Authority … ………………………………………………………………………. 14
  6. Cocoa Board of Papua New Guinea and its Subsidiaries …………………………………………………………. 20
  6A. Cocoa Pod Borer Project Fund…………………………………………………………………………………. 28
  6B. Cocoa Stabilisation Fund ………………………………………………………………………………………… 31
  7. Cocoa Coconut Institute Limited of Papua New Guinea……………………………………………………………. 32
  8. Coffee Industry Corporation Limited and its Subsidiaries ……………………………………………………….. …39
  8A. Coffee Industry Fund………………………………………………………………………………………………. 46
  8B. Patana No. 61 Limited…………………………………………………………………………………………….. 48
  9. Government Printing Office ………………………………………………………………………………………………….. 51
  10. Independence Fellowship Trust …………………………………………………………………………………………. ..57
  11. Independent Consumer and Competition Commission …………………………………………………………….. 59
  12. Industrial Centres Development Corporation ………………………………………………………………………….. 62
  13. Internal Revenue Commission. …………………………………………………………………………………………….. 67
  14. Investment Promotion Authority …………………………………………………………………………………………… 72
  15. Kokonas Indastri Koporesen and its Subsidiaries ……………………………………………………………………. 73
  15A. Papua New Guinea Coconut Extension Fund …………………………………………………………….. 75
  15B. Papua New Guinea Coconut Research Fund …………………………………………………………….. 76
  16. Kumul Consolidated Holdings and its Subsidiaries …………………………………………………………………. 77
  16A. General Business Trust …………………………………………………………………………………………… 80
  16B. PNG Dams Limited ………………………………………………………………………………………………… 84
  16C. Port Moresby Private Hospital Limited ………………………………………………………………………. 86
  17. Legal Training Institute ………………………………………………………………………………………………………… 88
  18. Mineral Resources Authority ……………………………………………………………………………………………….. 89
  19. National Agriculture Quarantine and Inspection Authority …………………………………………………………. 96
  20. National Agricultural Research Institute ……………………………………………………………………………….. 104
  21. National AIDS Council Secretariat……………………………………………………………………………………….. 107
  22. National Broadcasting Corporation ……………………………………………………………………………………… 113
  23. National Capital District Commission and its Subsidiaries . …………………………………………………….. 125
  23A. National Capital District Botanical Enterprises Limited . ……………………………………………… 132
  23B. Port Moresby City Development Enterprises Limited . ……………………………………………….. 133
  23C. Port Moresby Nature Park Limited . ………………………………………………………………………… 134

  -i-

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• PARA SUBJECT PAGE
  NO. NO.

  24. National Cultural Commission …………………………………………………………………………………………….. 136
  25. National Economic and Fiscal Commission ………………………………………………………………………….. 139
  26. National Fisheries Authority ……………………………………………………………………………………………….. 143
  27. National Gaming Control Board and its Subsidiary ………………………………………………………………… 149
  27A. National Gaming Control Board Community Benefit Fund Trust. ……………………………….. 150
  28. National Housing Corporation …………………………………………………………………………………………….. 152
  29. National Information and Communication Technology Authority (NICTA) ………………………………….. 160
  30. National Maritime Safety Authority ………………………………………………………………………………………. 165
  31. National Museum and Art Gallery ……………………………………………………………………………………….. 169
  32. National Narcotics Bureau ………………………………………………………………………………………………….. 175
  33. National Research Institute ……………………………………………………………………………………………….. 176
  34. National Road Safety Council …………………………………………………………………………………………….. 182
  35. National Roads Authority……………………………………………………………………………………………………. 185
  36. National Training Council ………………………………………………………………………………………………….. 191
  37. National Volunteer Service …………………………………………………………………………………………………. 195
  38. National Youth Commission ……………………………………………………………………………………………….. 198
  39. Oil Palm Industry Corporation ……………………………………………………………………………………………. 199
  40. Ombudsman Commission of Papua New Guinea ………………………………………………………………….. 203
  41. Pacific Games (2015) Authority …………………………………………………………………………………………… 208
  42. Papua New Guinea Accident Investigation Commission …………………………………………………………. 210
  43. Papua New Guinea Customs Service ………………………………………………………………………………….. 212
  44. Papua New Guinea Forest Authority ……………………………………………………………………………………. 213
  45. Papua New Guinea Immigration and Citizenship Service Authority ………………………………………….. 215
  46. Papua New Guinea Institute of Medical Research …………………………………………………………………. 221
  47. Papua New Guinea Institute of Public Administration …………………………………………………………….. 225
  48. Papua New Guinea Maritime College …………………………………………………………………………………. 229
  49. Papua New Guinea National Institute of Standards and Industrial Technology …………………………. 235
  50. Papua New Guinea Sports Foundation ……………………………………………………………………………….. 240
  51. Papua New Guinea University of Technology and its Subsidiaries …………………………………………… 243
  51A. National Analytical and Testing Services Limited. ……………………………………………………… 248
  51B. Unitech Development and Consultancy Company Limited …………………………………………. 249
  52. Parliamentary Members’ Retirement Benefits Fund ………………………………………………………………. 250
  53. Public Curator of Papua New Guinea…………………………………………………………………………………… 251
  54. Security Industries Authority ……………………………………………………………………………………………….. 252
  55. Small Business Development Corporation …………………………………………………………………………… 257
  56. Tourism Promotion Authority ……………………………………………………………………………………………… 258
  57. University of Goroka and its Subsidiary………………………………………………………………………………… 260
  57A. Unigor Consultancy Limited …………………………………………………………………………………… 269
  58. University of Natural Resources and Environment (Vudal) ……………………………………………………… 270
  59. University of Papua New Guinea and its Subsidiaries ……………………………………………………………. 276
  59A. Unisave Limited …………………………………………………………………………………………………… 283
  59B. Univentures Limited ……………………………………………………………………………………………… 284
  60. Water PNG ………………………………………………………………………………………………………………………. 285

  SECTION B – NATIONAL GOVERNMENT OWNED COMPANIES

  PARA SUBJECT PAGE
  NO. NO.

  61. Foreword …………………………………………………………………………………………………………………………. 295
  62. Air Niugini Limited and its Subsidiary …………………………………………………………………………………… 297
  62A. Link-PNG Limited ………………………………………………………………………………………………… 305
  63. Kumul Petroleum Holdings Limited and its Subsidiaries …………………………………………………………. 306
  63A. Eda Oil Limited. ……………………………………………………………………………………………………. 307
  63B. Kumul LNG Limited. ……………………………………………………………………………………………… 308

  -ii-

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• PARA SUBJECT PAGE
  NO. NO.

  63C. Kumul Petroleum (Development) Limited. ………………………………………………………………… 309
  63D. Kumul Petroleum (Investments) Limited…………………………………………………………………… 310
  63E. Kumul Petroleum (Kroton) Limited. …………………………………………………………………………. 311
  63F. Kumul Petroleum (Pipeline) Limited ………………………………………………………………………… 312
  63G. Kumul Petroleum (Tech and Advisory) Limited. ………………………………………………………… 313
  64. Livestock Development Corporation Limited …………………………………………………………………………. 314
  65. Mineral Resources Development Company Limited ………………………………………………………………. 315
  66. Motor Vehicles Insurance Limited ……………………………………………………………………………………….. 320
  67. National Airports Corporation Limited and its Subsidiary ………………………………………………………… 326
  67A. Airport City Development Limited …………………………………………………………………………… 330
  68. NCD Water and Sewerage Limited (Eda Ranu) …………………………………………………………………….. 331
  69. Papua New Guinea Ports Corporation Limited ………………………………………………………………………. 332
  70. PNG Air Services Limited ………………………………………………………………………………………………….. 339
  71. PNG DataCo Limited ………………………………………………………………………………………………………… 342
  72. PNG Power Limited …………………………………………………………………………………………………………… 344
  73. Post (PNG) Limited ………………………………………………………………………………………………………….. 360
  74. Telikom (PNG) Limited and its Subsidiaries ………………………………………………………………………….. 362
  74A. DATEC (PNG) Limited …………………………………………………………………………………………. 368
  74B. Kalang Advertising Limited …………………………………………………………………………………….. 369
  74C. Media Niugini Limited (EMTV)………………………………………………………………………………… 370
  74D. PNG Directories Limited ………………………………………………………………………………………… 371

  SECTION C – NATIONAL GOVERNMENT SHAREHOLDINGS IN OTHER COMPANIES

  PARA SUBJECT PAGE
  NO. NO.

  75. Foreword …………………………………………………………………………………………………………………………. 375
  76. Bougainville Copper Limited ……………………………………………………………………………………………….. 377
  77. Gogol Reforestation Company Limited…………………………………………………………………………………. 379
  78. Ok Tedi Mining Limited………………………………………………………………………………………………………. 380
  79. PNG Sustainable Development Program Limited ………………………………………………………………….. 381

  SECTION D – PROBLEM AUDITS (AUDITS IN ARREARS)

  PARA SUBJECT PAGE
  NO. NO.

  80. Foreword………………………………………………………………………………………………………………………… 385
  81. Audits in Arrears ……………………………………………………………………………………………………………… 387
  81.1 General ……………………………………………………………………………………………………………… 387
  81.2 Responsibility for preparation of Financial Statements ……………………………………………… 387
  81.3 Legislative Requirements …………………………………………………………………………………….. 388
  81.4 Current Year Audits (2016 Audits) …………………………………………………………………………. 388
  81.5 Status of Current Year Audits ……………………………………………………………………………….. 390
  81.6 Audits in Arrears (2015 and prior years) …………………………………………………………………. 392
  81.7 Long Outstanding Financial Statements …………………………………………………………………. 395
  81.8 Status of Audits as at 30 June 2017 ………………………………………………………………………. 398
  Acknowledgements ………………………………………………………………………………………………………….. 401
  Schedule A – Current Year Audits ………………………………………………………………………………………. 404
  Schedule B – Status of Audits in Arrears ……………………………………………………………………………… 407
  Schedule C – Long Outstanding Financial Statements ………………………………………………………….. 409
  Schedule D – Non-Operational Entities and Others ………………………………………………………………. 411
  Schedule E – Prior year Audits completed during 2016/2017………………………………………………….. 412

  -iii-

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• -iv-

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• GENERAL

  A. FOREWORD

  My Annual Report to the National Parliament for the 2016 financial year is presented
  in four Parts. Part I deals with the Public Accounts of Papua New Guinea (PNG). Part
  II deals with National Government Departments and the Provincial Treasury Offices,
  whilst Part III deals with the audit of the Provincial Governments and Local-level
  Governments.

  Part IV (this Part) of my Report deals with Public Bodies and their Subsidiaries,
  Government Owned Companies and National Government’s shareholdings in Other
  Companies.

  This Report is divided into four sections:

  Section A deals with Public Bodies and their subsidiaries;
  Section B deals with National Government owned companies;
  Section C deals with the Companies in which the National Government has
  shareholdings; and
  Section D is an additional section which provides details of entities that have
  audits which have been in arrears due to non-submission of financial
  statements.

  The audit findings contained in Sections A and B of this Report have been reported to
  management of the respective entities and to the responsible Ministers.

  A.1 Audit and Delivery of Government Program

  I have carried out audits of Statutory Bodies and their Subsidiaries, Provincial
  Government and Local Level Government, Hospital Boards, Business Arms,
  Provincial Authorities and Other audits as mandated. These government entities are
  tasked to deliver government services to the people of Papua New Guinea.

  Although my report provides opinions on the financial affairs of these entities, other
  audit procedures performed by my Office give a picture of effectiveness of the
  delivery, by the public sector, of government policies and programs particularly their
  contribution to Nation building through recovery, development and service delivery
  objectives of the Medium Term Development Strategies (MTDS) including:

  Welfare
  Health
  Economic Development and Growth

  -v-

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• General

  Contribution to Nation Building
  Good Governance
  Rural Development
  Poverty Reduction
  Employment
  Strengthening Public Expenditure
  Management System including:

  Fiscal Sustainability
  Prioritisation of Resources, and
  Cost effective implementation of programs.

  In addition, my audit findings that have been repeatedly highlighted show a slow
  progress in making improvements to governance structures and public accountability
  mechanisms in relation to expending public finances. Without strong governance
  support, service delivery as envisaged by the National Government remains to be
  frustrated.

  Besides the audit of Financial Statements, I have extended my audit programs into the
  audit of service delivery, performance audit and major public works projects to
  enhance my Office’s ability to deliver reports to Parliament on how well and effective
  the government programs are being delivered.

  B. AUTHORITY TO AUDIT

  B.1 Constitution

  Under Section 214(2) of the Constitution of the Independent State of Papua New
  Guinea, I am required to inspect and audit all bodies set up by Acts of the Parliament,
  or by Executive or Administrative Act of the National Executive for governmental or
  official purposes unless other provisions are made by law in respect of their
  inspection and audit.

  I am also empowered under Section 214(3) if I consider it proper to do so, to inspect
  and audit and report to the Parliament on any accounts, finances or property of a
  body, in so far as they relate to, or consist of, or are derived from public moneys or
  property of Papua New Guinea.

  B.2 Audit Act

  By virtue of Section 214(4) of the Constitution, the Audit Act 1989, which became
  effective from 1 May 1989, provides more details of my functions under Sub-sections
  (1), (2) and (3) of the Constitution. The Audit Act that was derived from the
  Constitution elaborates the functions and the duties of the Auditor-General.

  -vi-

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• General

  This Act was amended in 1995 and the relevant provisions of the amended Act are
  explained below.

  B.3 Auditing and Reporting Requirements

  In Section 8, Sub-sections 2 and 4 of the Audit Act were amended to include
  provisions governing the auditing and the reporting requirements of public bodies
  including government owned companies incorporated under the Companies Act
  1997.

  B.4 Matters of Significant Importance

  Under Section 8(2) of the Act, I am required to inspect and audit the accounts and
  records of financial transactions and the records relating to the assets and liabilities
  of these public bodies and their subsidiaries, and to report to the Minister vested
  with the responsibility for the public body and the Minister in charge of Finance any
  irregularities found during the inspection and audit.

  B.5 Audit Opinion on Financial Statements

  Section 8(4) of the Audit Act requires me to audit the financial statements of the
  public bodies and to report an opinion to the aforementioned Ministers on:
  Whether the financial statements are based on proper accounts and records;
  Whether the financial statements are in agreement with those accounts and
  records; and
  Whether they show fairly the financial operations for the period which they
  cover and the state of affairs at the end of that period.

  B.6 Public Finances (Management) Act (PFMA)

  The submission of the financial statements of public bodies for audit is required
  under Section 63(4) of the PFMA. The Section requires each public body to prepare
  and furnish to its Minister before 30 June each year, a report on its operations for
  the year ended 31 December preceding, together with financial statements in respect
  of that year duly audited by me.

  The Minister is then required to table the report on the operations and the financial
  statements, together with my report on the financial statements, at the first meeting
  of the Parliament after receiving them.

  -vii-

• Page 12 of 450

• General

  B.7 Companies Act

  I am required to audit National Government owned companies and subsidiary
  companies under the provisions of the Companies Act. Though these companies are
  registered under the Companies Act, my responsibility to audit them is by virtue of
  Sections 48 and 63 of the PFMA and Section 3 of the Audit Act.

  C. AUDIT OF PUBLIC BODIES

  C.1 Scope of Audit

  Presently, the limited resources available to my Office are directed primarily
  towards financial attestation and compliance or regularity audit of Public Bodies.
  Due to resource constraints, I have not been able to venture into the audits of
  information systems.

  The full scope of my audit responsibility in respect of Public Bodies covers the
  Statutory Bodies and their subsidiaries, National Government owned companies and
  their subsidiaries, and the companies in which the government has minority interest.

  C.2 Audit Objectives

  Under the Companies Act, I am required to ascertain whether proper accounting
  records have been kept; whether the financial statements comply with generally
  accepted accounting practice; and whether those financial statements give a true and
  fair view of the matters to which they relate. The Act also requires me to report the
  instances of non-compliance with these requirements. More details on the audit
  responsibilities under the Companies Act are provided in Section B of this Report
  which covers the National Government owned companies.

  C.3 Reporting Framework

  My audits are conducted in accordance with the International Standards on Auditing
  to provide reasonable assurance that the financial statements are free of material
  misstatements. The audit procedures include examination, on a test basis, of
  evidence supporting the amounts and other disclosures in the financial statements,
  evaluation of accounting policies and significant accounting estimates, and ensuring
  that the financial statements are presented fairly and in accordance with the
  International Financial Reporting Standards (IFRS) and statutory requirements.

  -viii-

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• General

  D. APPOINTMENT AND USE OF AUTHORISED AUDITORS

  Section 8(5) of the Audit Act empowers me to employ registered company auditors
  to assist me in undertaking my Constitutional Duties, where such assistance is
  required.

  During the period covered in the Report, I engaged a number of registered company
  auditors to perform audits of numerous Statutory Bodies and National Government
  owned companies.

  -ix-

• Page 14 of 450

• E. EXECUTIVE SUMMARY

  E.1 Report Coverage

  This Report covers the audit reports issued by my Office on the audits of Public
  Bodies and their Subsidiaries, Government Owned Companies, and National
  Government’s shareholdings in Other Companies during the period July 2016 to
  June 2017 (2016/2017 Audit Cycle). The Report covers the audits of these entities’
  financial statements for a number of years, not just 2016.

  In 2016 there were 104 public entities subject to audit by my Office, consisting of
  78 Public Bodies and their Subsidiaries and 26 National Government Owned
  Companies.

  I am also responsible for reporting on the audits of 4 Companies, in which the
  National Government has a minority shareholding, that are audited by private
  company auditors. These are reported under Section C of this Report.

  E.2 Consistency in audit findings over a number of years

  The Report’s findings are consistent with those in my previous years’ reports that
  have highlighted my concerns over the number of entities that do not submit current
  year financial statements for audit, and the overall poor state of the financial
  management structure in most public entities whose statements are subject to my
  audit and inspection.

  The overall purpose of financial statements is to provide information about the
  financial position and performance of an organisation. The information is useful to a
  wide range of stakeholders and the statements constitute a formal record of the
  financial and business activities of an organisation. As such, the statements are core
  component of an organisation’s governance and accountability. Non-submission of
  the financial statements for audits in a timely manner greatly limits the ability of
  stakeholders to monitor performance and make informed decisions regarding the
  organisation.

  Financial management in the public sector is the establishment and maintenance of
  polices, processes and procedures to achieve effective and efficient management of
  public funds in such a manner as to achieve the objectives of the organisation. It
  consists of planning, organising, directing, monitoring and controlling the monetary
  resources of an organisation. Unfortunately, many organisations continue to indicate
  they are incapable of managing their financial affairs.

  -x-

• Page 15 of 450

• Executive Summary

  Weaknesses with financial management are contributing to significant wastage of
  financial resources and indicate a serious lack of transparency and accountability.
  Ultimately these weaknesses adversely impact upon the delivery of services to the
  citizens of PNG.

  E.3 Submission of current year Financial Statements

  Section 63(4) of the PFMA requires ‘… a public body to prepare and furnish to its
  Minister before 30 June each year, a performance and management report of its
  operations for the year ended 31 December preceding, together with financial
  statements to enable the Minister to present such report and statements to the
  Parliament …’

  Before submitting the financial statements to the Minister, Section 63(4) requires a
  public body to submit the financial statements to the Auditor-General and for the
  Auditor-General to report to the Minister in accordance with Part II of the Audit Act.

  Despite these legislative requirements, 60 entities had not submitted their 2016
  financial statements to be audited and overall some 70 financial statements for
  2015 and prior years had not been submitted for audit (Refer Table A). However, I
  noted some improvements during the cycle due to strategies implemented by my
  Office by compelling entities to submit their financial statements.

  The details of the audits in arrears and those entities whose financial statements
  have been outstanding for a number of years are shown in Attachment ‘B’.

  Table A

  STATUS OF AUDITS DURING THE YEAR 2016 (END OF 2016/2017 CYCLE)

  Financial
  Year Audits Audits Audits in Audits to Statements Total Total
  Completed Substantially Progress Commence not 2016/2017 2015/2016
  Completed Shortly Submitted
  2016 20 4 15 5 60 104 –
  2015 21 11 15 6 31 84 99
  2014 25 6 4 3 22 60 79
  2013 20 3 3 1 10 37 60
  2012 8 1 2 5 16 34
  2011 5 1 6 14
  2010 1 1 2 5
  2009 1 1 2
  2008 1 1 1
  2007 1 1 1
  2006 1 1 1
  2005 1 1 1

  Total 105 25 39 15 130 314 297

  -xi-

• Page 16 of 450

• Executive Summary

  Table A also shows that 169 audits were either completed, substantially completed or
  still in progress as at 30 June 2017.

  The details are graphically depicted in Attachment ‘C’, which also included the
  arrears of prior years. Table A also shows that of the 105 audits completed, only 20
  were for the current year (2016), with 19 current year audits substantially
  completed or were in progress. A further 5 audits were to commence shortly.
  Graphical description of the status of current year 2016 audits (excluding arrears) is
  given in Attachment ‘A’. The list of entities is at Schedule ‘A’ (i), (ii), (iii) & (iv).

  E.4 Type of Audit Opinions Issued1

  In the period covered by the audit, 105 audit reports were issued. Of the 105 audit
  reports issued, 30 were unqualified, 32 were qualified, 43 were Disclaimer
  Opinions. The details are captured in Attachment ‘D’.

  Of the 30 unqualified opinions issued, 13 related to prior years and only 17 were for
  2016 as follows:

  1. Bank of Papua New Guinea;
  2. Independence Fellowship Trust;
  3. Independent Consumer and Competition Commission;
  4. Investment Promotion Authority;
  5. Kokonas Indastri Koporesen;
  6. Papua New Guinea Coconut Extension Fund;
  7. Papua New Guinea Coconut Research Fund;
  8. National Agricultural Research Institute;
  9. National Maritime Safety Authority;
  10. Pacific Games (2015) Authority;
  11. Kumul Petroleum Holdings Limited;
  12. Eda Oil Limited;
  13. Kumul LNG Limited;
  14. Kumul Petroleum (Development) Limited;
  15. Kumul Petroleum (Investments) Limited;
  16. Kumul Petroleum (Kroton) Limited; and
  17. Kumul Petroleum (Pipeline) Limited.

  1
  The types of audit opinions are: Unqualified Opinion – A Company’s financial statements are presented fairly, in all
  material respects in conformity with generally accepted accounting principles. Qualified Opinion – The financial
  statements “except for” certain issues fairly present the financial position and operating results of the firm. The except for
  opinion relates to inability of the auditor to obtain sufficient objective and verifiable evidence in support of business
  transactions of the Company being audited. Disclaimer Opinion – When insufficient competent evidential matter exists to
  form an audit opinion due to scope limitation or uncertainties. Adverse Opinion – The Company’s financial statements do
  not present fairly the financial position, results of operations, or changes in financial position or are not in conformity with
  generally accepted accounting principles.

  -xii-

• Page 17 of 450

• Executive Summary

  Three of the qualified opinions related to 2016 and others were for prior years. The
  high number of Disclaimer of Opinions issued are a reflection of the poor state of
  accounting, record-keeping and financial management practices in a number of public
  bodies.

  The list of entities and the type of audit opinions issued during the period July 2016 to
  June 2017 are provided in Attachment ‘D’.

  Types of Audit Opinions issued for each entity over the period of five years from
  2012 to 2016 are detailed in Attachment ‘E’.

  E.5 Key Findings

  The key findings from the audits centered primarily on the non-submission of the
  financial statements, non-compliance with the Salaries and Conditions Monitoring
  Committee (SCMC) regulatory mechanisms for salaries and wages, lack of basic
  accounting records and ineffective internal control systems. These issues are
  highlighted in the paragraphs below.

  E.6 Non-Submission of Financial Statements

  As stated earlier, Section 63(4) of the PFMA requires each public body to prepare and
  furnish to its Minister before 30 June each year, a report on its operations for the year
  ended 31 December preceding together with financial statements in respect of that
  year duly audited by me for tabling in Parliament.

  This legislative requirement has not been strictly adhered to by most respective public
  entities’ management. To comply with this requirement, the financial statements are
  required to be submitted to my Office well before 30 June each year for my audit and
  inspection. Consequently, out of 104 public entities only 44 entities have submitted
  their financial statements for 2016 (Refer Schedule A (i), (ii), (iii) & (iv) for my
  audit and inspection up to the time of preparing this Report. A total of 60 entities have
  failed to comply with these provisions (Refer Schedule A (v)). The public entities
  referred to above exclude the 4 Companies with minority Government shareholdings.

  The non-compliance of the public entities mentioned above has resulted in:

  My Office not being able to report adequately on the accountability of the use of
  public resources in a timely manner;
  A build-up of audits in arrears; and
  The non-tabling of Annual Reports on performance and management by public
  entities in the Parliament.

  -xiii-

• Page 18 of 450

• Executive Summary

  Responsibility for Submission of Financial Statements

  An entity’s management is responsible for preparing and presenting financial
  statements for my audit and inspection. It is also the responsibility of management to
  ensure that an adequate and effective internal control system is maintained to ensure
  that complete and accurate financial statements are produced on a timely basis.

  My Office Recommendation

  There is vigorous enforcement of the provisions of Section 63 of the PFMA and a
  legislative requirement is established to make the renewal of contracts of Chief
  Executive Officers subject to submission of financial statements and implementation
  and maintenance of prudent financial management.

  These recommendations are to help achieve financial management accountability and
  good governance in the public sector.

  During the cycle, 30 entities have audits in arrears totally up to 70. Details of audits
  that have gone into arrears due to non-submission of financial statements from 2015
  or earlier are given below in Table B and Schedule ‘C’.

  Table B
  Financial Statements Not Submitted
  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 3A Papua New Guinea Maritime Transport Limited 2013 – 2015 3
  2 A 5 Climate Change and Development Authority 2013 – 2015 3
  3 A 8 Coffee Industry Corporation Limited 2014 & 2015 2
  4 A 8A Coffee Industry Fund 2014 & 2015 2
  5 A 8B Patana No.61 Limited 2014 & 2015 2
  6 A 21 National AIDS Council Secretariat 2015 1
  7 A 22 National Broadcasting Corporation 2015 1
  8 A 23A National Capital District Botanical Enterprises Limited 2013 – 2015 3
  9 A 23B Port Moresby City Development Enterprises Limited 2013 – 2015 3
  10 A 24 National Cultural Commission 2014 & 2015 2
  11 A 28 National Housing Corporation 2014 & 2015 2
  12 A 31 National Museum and Art Gallery 2015 1
  13 A 32 National Narcotics Bureau 2013 – 2015 3
  14 A 39 Oil Palm Industry Corporation 2012 – 2015 4
  15 A 43 Papua New Guinea Customs Service 2014 & 2015 2
  16 A 44 Papua New Guinea Forest Authority 2015 1
  17 A 47 Papua New Guinea Institute of Public Administration 2014 & 2015 2
  18 A 48 Papua New Guinea Maritime College 2015 1
  19 A 50 Papua New Guinea Sports Foundation 2014 & 2015 2
  20 A 51A National Analytical and Testing Services Limited 2014 & 2015 2
  21 A 51B Unitech Development and Consultancy Company Limited 2014 & 2015 2
  22 A 53 Public Curator of Papua New Guinea 2014 & 2015 2
  23 A 54 Security Industries Authority 2015 1
  24 A 57A Unigor Consultancy Limited 2014 & 2015 2