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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
  25 A 58 University of Natural Resources and Environment (Vudal) 2015 1

  -xiv-

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• Executive Summary

  No. of
  No. Section Para. Entity Year
  Audits
  26 A 59 University of Papua New Guinea 2015 1
  27 A 59A Unisave Limited 2012 – 2015 4
  28 A 59B Univentures Limited 2012 – 2015 4
  29 B 67A Airport City Development Limited 2012 – 2015 4
  30 B 64 Livestock Development Corporation Limited 2010 – 2015 6
  70

  Arrears Reduction Strategies

  During the last Audit Cycle, I took steps as in the past to remind various entities of
  their responsibilities to submit the financial statements on a timely basis. These steps
  include but are not limited to the following:

  Issuance of reminder letters to entities on a regular basis until the submission of
  the financial statements;
  Copies of these reminder letters were forwarded to the Public Accounts
  Committee and to the Secretary for Finance for their necessary action;
  My officers visited various entities and held meetings with the Chief Executive
  Officers regarding non-submission of the financial statements and drew their
  attention to their responsibilities under the PFMA and the resultant breach of
  that Act; and
  Senior officers of the Division attended various audit committee meetings
  during the cycle and emphasised the importance of bringing the audits up to
  date. My officers attended the following audit committee meetings during the
  cycle:

  ‒ National Capital District Commission;
  ‒ Civil Aviation Safety Authority of PNG;
  ‒ University of PNG;
  ‒ National Housing Corporation;
  ‒ University of Goroka;
  ‒ Internal Revenue Commission; and
  ‒ PNG Customs.

  I have set a goal to significantly reduce the arrears situation and the entities listed
  under Attachment ‘F’ indicate the arrears cleared during the audit cycle. This
  reduction largely reflects the collective efforts of all my staff members to better
  manage the audits in arrears.

  -xv-

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• Executive Summary

  E.7 Non-Compliance of the Salaries and Conditions Monitoring Committee Act

  The SCMC was established as the regulatory mechanism for salaries and wages in the
  public sector. Sadly, some public bodies do not comply with the provisions of this Act
  because of legislative changes in their constituent Acts. As a result, these bodies pay
  salaries and allowances without any monitoring from this Committee. Consequently,
  they have contravened Section (3) of the SCMC Act which stipulates:

  “(a) The provisions of this Act apply notwithstanding anything in any other law
  relating to the determination of salaries and conditions or employment of
  employees of a public authority; and
  (b) Whereby or under any law, power is given to a public authority, to determine or
  vary the salaries and conditions of employment of employees of the public
  authority, that power shall be exercised subject to this Act.”

  E.8 Non-Compliance with the Audit Act 1989

  Some entities owned by the State have amended their enabling Acts to exclude my
  Office from performing the audit of those entities and appointed their own auditors
  contrary to the Audit Act. The following state owned entities have appointed their own
  Auditors:

  Kumul Minerals Holding Limited (formerly Petromin Limited);
  National Development Bank Limited.

  E.9 Lack of Basic Accounting Records and Inadequate Control Systems

  As reported in previous years, during the course of audits I noted serious deficiencies
  in accounting and record keeping practices and the maintenance of internal controls.
  These deficiencies, which contributed to the limitation on the scope of my audit
  procedures, included:

  Bank reconciliation statements not being prepared in a timely manner or not
  being prepared at all;
  Transactions not having supporting documentation;
  Fixed asset registers not being properly kept or maintained;
  No consistent and proper valuation of assets;
  Physical asset stock-takes not being carried out;
  Property being acquired or disposed of without proper procedures being
  followed;
  Failure to comply with International Financial Reporting Standards in the
  preparation of the financial statements;
  Travel and other allowances not being fully acquitted;
  -xvi-

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• Executive Summary

  Internal Revenue Commission (IRC) regulations on payment of taxes not being
  followed;
  Entities paying housing allowances and Board members allowances without tax;
  Accounting, administrative and procedural manuals not being available;
  Public servants serving on Statutory Boards receiving Board allowances
  contrary to regulations;
  Ineffective internal audit functions; and
  Ineffective budget controls.

  The above factors contributed to the limitations on the scope of my audits which
  resulted in the issuance of Disclaimer of Opinion in respect of many of the reports
  issued during the year, as shown in Attachment ‘D(iii)’.

  E.10 Poor Financial Management

  Over a number of years, I have expressed my concern about public bodies’ poor
  accounting records, weaknesses in internal controls and management information
  systems, and non-compliance with legislative requirements and the International
  Financial Reporting Standards. I also consider that a large number of Chief Executive
  Officers do not pay sufficient attention to financial management in their entities.

  In my view, the concept of effective, prudent and efficient financial management is
  yet to be understood and performed by many Chief Executive Officers.

  E.11 Recommendations for Improvement

  Consistent with comments in previous years’ Reports, I will report to the Parliament
  in future that proper accounting records and adequate internal control systems must
  exist in all public entities subject to my audit.

  For that to be achieved, I believe that Chief Executive Officers are required to
  exercise proper leadership that provides an environment where there is:

  Timely submission of financial statements;
  Improved record keeping and documentation;
  Maintenance and provision of quality information;
  Effective implementation of internal control systems;
  Sound financial management implemented and adopted by qualified and
  experienced accountants; and
  Implementation of all my audit recommendations.

  -xvii-

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• Executive Summary

  E.12 Improvement Strategies

  In my view, for improvement to occur:

  Chief Executive Officers must employ well trained and professionally qualified
  accounting staff to manage the financial affairs of the organisation;
  Chief Executive Officers must understand the value of and how to implement a
  strong governance framework and their performance should be regularly
  assessed against implementation of the framework; and
  Parliament must increase its reviews of the management of public entities and
  provide Chief Executive Officers with incentives to improve their management
  structures; and the Department of Finance must exercise its discretion to invoke
  Section 63(8) of the PFMA by withholding funds for those entities that have not
  submitted their financial statements until the financial statements are submitted
  and/or completion of the audit.

  E.13 Structure of the Report

  This Report is structured as follows:

  Section A – Public Bodies and Their Subsidiaries;
  Section B – National Government Owned Companies;
  Section C – National Government Shareholdings in Other Companies; and
  Section D – Problem Audits (Audits in Arrears).

  -xviii-

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• Executive Summary

  ATTACHMENT ‘A’

  STATUS OF CURRENT YEAR AUDITS 2016

  No. Status of Current Year Audits Number of Entities
  2016/2017 2015/2016
  1 Audits completed and reports issued thereon (Schedule A) 20 16
  2 Audits substantially completed (Schedule A) 4 5
  3 Audits in progress (Schedule A) 15 18
  4 Audits to commence shortly (Schedule A) 5 2
  5 Financial Statements not submitted (Schedule A) 60 58
  6 Ceased Entities (Schedule D) 1 0
  105 99

  Status of Current Year Audits 2016

  Ceased Entities Audits completed
  (Schedule D) and reports issued
  1% thereon (Schedule A)
  19%

  Audits substantially
  completed
  (Schedule A)
  4%

  Audits to commence Audits in progress
  Financial Statements shortly (Schedule A) (Schedule A)
  not submitted 5% 14%
  (Schedule A)
  57%

  Please refer to details in Schedule ‘A’ on Pages 404 to 406.

  -xix-

• Page 24 of 450

• Executive Summary

  ATTACHMENT ‘B’

  STATUS OF AUDITS IN ARREARS BY NUMBER OF AUDITS
  (2015 AND PRIOR YEARS)

  No. Status of Audits in Arrears by No. of Audits (2015 & prior years) Number of Audits
  2016/2017 2015/2016
  1 Audits substantially completed (Schedule B) 21 32
  2 Audits in progress (Schedule B) 24 31
  3 Audits to commence shortly (Schedule B) 10 5
  4 Financial Statements not submitted (Schedule B) 70 58
  125 126

  Status of Audits in Arrears by number of Audits
  (2015 and prior years)

  Audits substantially
  completed
  (Schedule B) Audits in progress
  17% (Schedule B)
  19%

  Financial Statements
  not submitted
  (Schedule B)
  56% Audits to commence
  shortly (Schedule B)
  8%

  Please refer to details in Schedule ‘B’ on Pages 407 to 408.

  -xx-

• Page 25 of 450

• Executive Summary

  ATTACHMENT ‘C’

  STATUS OF AUDITS AS AT 30 JUNE 2017

  Number of Audits
  Status of Audits
  No. 2016/2017 2015/2016
  1 Audits completed and reports issued thereon (Schedules A & E) 105 88
  2 Audits substantially completed (Schedules A & B) 25 37
  3 Audits in progress (Schedules A & B) 39 49
  4 Audits to commence shortly (Schedules A & B) 15 7
  5 Financial Statements not submitted (Schedules A & B) 130 116
  314 297

  Status of Audits as at 30 June 2017
  Financial Statements Audits completed
  not submitted and reports issued
  (Schedules A & B) thereon
  41% (Schedules A & E)
  33%

  Audits to commence
  shortly Audits substantially
  (Schedules A & B) Audits in progress completed
  5% (Schedules A & B) (Schedules A & B)
  12% 8%
  Please refer to details in Schedules ‘A’, ‘B’ and ‘E’ on Pages 404 to 408 and 412 to 414
  respectively.

  -xxi-

• Page 26 of 450

• Executive Summary

  ATTACHMENT ‘D’

  TYPES OF AUDIT OPINIONS ISSUED

  (i) UNQUALIFIED OPINION

  Para. No. of
  No. Section No. Entity Year Audits
  1 A 2 Bank of Papua New Guinea 2015 & 2016 2
  2 A 6A Cocoa Pod Borer Project Fund 2015 1
  3 A 6B Cocoa Stabilisation Fund 2015 1
  4 A 10 Independence Fellowship Trust 2016 1
  5 A 11 Independent Consumer and Competition Commission 2016 1
  6 A 14 Investment Promotion Authority 2016 1
  7 A 15 Kokonas Indastri Koporesen 2016 1
  8 A 15A Papua New Guinea Coconut Extension Fund 2016 1
  9 A 15B Papua New Guinea Coconut Research Fund 2016 1
  10 A 20 National Agricultural Research Institute 2016 1
  11 A 30 National Maritime Safety Authority 2015 & 2016 2
  12 A 34 National Road Safety Council 2015 1
  13 A 35 National Roads Authority 2015 1
  14 A 40 Ombudsman Commission of Papua New Guinea 2015 1
  15 A 41 Pacific Games (2015) Authority 2016 1
  16 A 42 Papua New Guinea Accident Investigation Commission 2011 & 2012 2
  17 A 52 Parliamentary Members’ Retirement Benefits Fund 2015 1
  18 A 56 Tourism Promotion Authority 2015 1
  19 B 63 Kumul Petroleum Holdings Limited 2016 1
  20 B 63A Eda Oil Limited 2016 1
  21 B 63B Kumul LNG Limited 2016 1
  22 B 63C Kumul Petroleum (Development) Limited 2016 1
  23 B 63D Kumul Petroleum (Investments) Limited 2016 1
  24 B 63E Kumul Petroleum (Kroton) Limited 2016 1
  25 B 63F Kumul Petroleum (Pipeline) Limited 2016 1
  26 B 69 Papua New Guinea Ports Corporation Limited 2015 1
  27 B 71 PNG DataCo Limited 2014 1
  30

  -xxii-

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• Executive Summary

  (ii) QUALIFIED OPINION

  Para. No. of
  No. Section No. Entity Year Audits
  1 A 6 Cocoa Board of Papua New Guinea 2015 1
  2 A 10 Independence Fellowship Trust 2015 1
  3 A 12 Industrial Centres Development Corporation 2014 & 2015 2
  4 A 16A General Business Trust 2014 1
  5 A 18 Mineral Resources Authority 2012 & 2013 2
  6 A 19 National Agriculture Quarantine and Inspection Authority 2015 1
  7 A 25 National Economic and Fiscal Commission 2016 1
  8 A 26 National Fisheries Authority 2014 1
  9 A 33 National Research Institute 2016 1
  10 A 36 National Training Council 2015 1
  11 A 37 National Volunteer Service 2016 1
  12 A 39 Oil Palm Industry Corporation 2011 1
  13 A 40 Ombudsman Commission of Papua New Guinea 2014 1
  14 A 41 Pacific Games (2015) Authority 2014 & 2015 2
  15 A 47 Papua New Guinea Institute of Public Administration 2012 & 2013 2
  Papua New Guinea National Institute of Standards and
  16 A 49 Industrial Technology 2014 & 2015 2
  17 A 51 Papua New Guinea University of Technology 2013 & 2014 2
  18 A 54 Security Industries Authority 2012 – 2014 3
  19 A 59 University of Papua New Guinea 2013 1
  20 B 62 Air Niugini Limited 2014 1
  21 B 66 Motor Vehicles Insurance Limited 2015 1
  22 B 67 National Airports Corporation Limited 2011 1
  23 B 70 PNG Air Services Limited 2015 1
  24 B 74 Telikom (PNG) Limited 2014 1
  32
  (iii) DISCLAIMED OPINION

  Para. No. of
  No. Section No. Entity Year Audits
  1 A 3 Border Development Authority 2013 1
  2 A 5 Climate Change and Development Authority 2012 1
  3 A 7 Cocoa Coconut Institute Limited of Papua New Guinea 2013 1
  4 A 8 Coffee Industry Corporation Limited 2013 1
  5 A 8A Coffee Industry Fund 2013 1
  6 A 8B Patana No.61 Limited 2013 1
  7 A 9 Government Printing Office 2013 & 2014 2
  8 A 16B PNG Dams Limited 2013 & 2014 2
  9 A 16C Port Moresby Private Hospital Limited 2013 & 2014 2
  10 A 21 National AIDS Council Secretariat 2013 & 2014 2
  11 A 22 National Broadcasting Corporation 2014 1
  12 A 23 National Capital District Commission 2013 1

  -xxiii-

• Page 28 of 450

• Executive Summary

  Para. No. of
  No. Section No. Entity Year Audits
  13 A 24 National Cultural Commission 2013 1
  14 A 28 National Housing Corporation 2011 – 2013 3
  National Information and Communication Technology
  15 A 29 Authority (NICTA) 2013 & 2014 2
  16 A 31 National Museum and Art Gallery 2014 1
  Papua New Guinea Immigration and Citizenship Service
  17 A 45 Authority 2014 & 2015 2
  18 A 46 Papua New Guinea Institute of Medical Research 2014 1
  19 A 48 Papua New Guinea Maritime College 2014 1
  20 A 50 Papua New Guinea Sports Foundation 2005 – 2013 9
  21 A 57 University of Goroka 2014 1
  22 A 58 University of Natural Resources and Environment (Vudal) 2014 1
  23 A 60 Water PNG 2014 1
  24 B 65 Mineral Resources Development Company Limited 2012 – 2014 3
  25 B 72 PNG Power Limited 2015 1
  43

  105

  (iv) INTERNAL CONTROL REVIEW

  Para. No. of
  No. Section No. Entity Year Audits
  1 A 13 Internal Revenue Commission 2014 1

  106

  -xxiv-

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• Executive Summary

  ATTACHMENT ‘E’

  COMPARATIVE AUDIT OPINIONS ISSUED (2012–2016)
  Para. Comparative Years
  No. Section Entity
  No. 2016 2015 2014 2013 2012
  1 A 2 Bank of Papua New Guinea Unqualified Unqualified Unqualified Unqualified Unqualified
  2 A 3 Border Development Authority Disclaimer Qualified
  3 A 3A Papua New Guinea Maritime Transport Limited Qualified
  Civil Aviation Safety Authority of Papua New
  4 A 4 Guinea Qualified Qualified Qualified Qualified
  5 A 5 Climate Change and Development Authority Disclaimer
  6 A 6 Cocoa Board of Papua New Guinea Qualified Qualified Qualified Qualified
  8 A 6A Cocoa Pod Borer Project Fund Unqualified Unqualified Unqualified Unqualified
  7 A 6B Cocoa Stabilisation Fund Unqualified Unqualified Unqualified Qualified
  Cocoa Coconut Institute Limited of Papua New
  9 A 7 Guinea Disclaimer Disclaimer
  10 A 8 Coffee Industry Corporation Limited Disclaimer Qualified
  11 A 8A Coffee Industry Fund Disclaimer Qualified
  12 A 8B Patana No.61 Limited Disclaimer Qualified
  13 A 9 Government Printing Office Disclaimer Disclaimer Disclaimer
  14 A 10 Independence Fellowship Trust Unqualified Qualified Qualified Unqualified Unqualified
  Independent Consumer and Competition
  15 A 11 Commission Unqualified Qualified Qualified Unqualified Qualified
  16 A 12 Industrial Centres Development Corporation Qualified Qualified Qualified Qualified
  17 A 13 Internal Revenue Commission New Inclusion
  18 A 14 Investment Promotion Authority Unqualified Unqualified Unqualified Unqualified Unqualified
  19 A 15 Kokonas Indastri Koporesen Unqualified Unqualified Unqualified Unqualified Unqualified
  20 A 15A Papua New Guinea Coconut Extension Fund Unqualified Unqualified Unqualified Unqualified Unqualified
  21 A 15B Papua New Guinea Coconut Research Fund Unqualified Unqualified Unqualified Unqualified Unqualified
  22 A 16 Kumul Consolidated Holdings Unqualified Unqualified Qualified
  23 A 16A General Business Trust Qualified Disclaimer Qualified
  24 A 16B PNG Dams Limited Disclaimer Disclaimer Disclaimer
  25 A 16C Port Moresby Private Hospital Limited Disclaimer Disclaimer Qualified
  26 A 17 Legal Training Institute Qualified Qualified
  27 A 18 Mineral Resources Authority Qualified Qualified
  National Agriculture Quarantine and Inspection
  28 A 19 Authority Qualified Qualified Qualified Qualified
  29 A 20 National Agricultural Research Institute Unqualified Unqualified Unqualified Unqualified Unqualified
  30 A 21 National AIDS Council Secretariat Disclaimer Disclaimer Disclaimer
  31 A 22 National Broadcasting Corporation Disclaimer Disclaimer Disclaimer
  32 A 23 National Capital District Commission Disclaimer Disclaimer
  National Capital District Botanical Enterprises
  33 A 23A Limited Disclaimer
  34 A 23B Port Moresby City Development Enterprises Ltd Disclaimer
  35 A 23C Port Moresby Nature Park Limited Qualified Qualified
  36 A 24 National Cultural Commission Disclaimer Disclaimer
  37 A 25 National Economic and Fiscal Commission Qualified Qualified Qualified Qualified Qualified
  38 A 26 National Fisheries Authority Qualified Qualified Qualified
  39 A 27 National Gaming Control Board Qualified Qualified Qualified
  National Gaming Control Board Community
  40 A 27A Benefit Fund Trust Qualified Qualified
  41 A 28 National Housing Corporation Disclaimer Disclaimer
  National Information and Communication
  42 A 29 Technology Authority (NICTA) Disclaimer Disclaimer Disclaimer
  43 A 30 National Maritime Safety Authority Unqualified Unqualified Qualified Qualified Qualified

  -xxv-

• Page 30 of 450

• Executive Summary

  Para. Comparative Years
  No. Section Entity
  No. 2016 2015 2014 2013 2012
  44 A 31 National Museum and Art Gallery Disclaimer Disclaimer Disclaimer
  45 A 32 National Narcotics Bureau Disclaimer
  46 A 33 National Research Institute Qualified Unqualified Unqualified Unqualified Unqualified
  47 A 34 National Road Safety Council Unqualified Unqualified Unqualified Qualified
  48 A 35 National Roads Authority Unqualified Qualified Qualified Qualified
  49 A 36 National Training Council Qualified Qualified Qualified Qualified
  50 A 37 National Volunteer Service Qualified Qualified Qualified Qualified Qualified
  51 A 38 National Youth Commission
  52 A 39 Oil Palm Industry Corporation
  53 A 40 Ombudsman Commission of Papua New Guinea Unqualified Qualified Unqualified Unqualified
  54 A 41 Pacific Games (2015) Authority Qualified Qualified Qualified Qualified
  Papua New Guinea Accident Investigation
  55 A 42 Commission Unqualified
  56 A 43 Papua New Guinea Customs Service New Inclusion
  57 A 44 Papua New Guinea Forest Authority Disclaimer
  Papua New Guinea Immigration and Citizenship
  58 A 45 Service Authority Disclaimer Disclaimer Qualified Qualified
  Papua New Guinea Institute of Medical
  59 A 46 Research Disclaimer Disclaimer Disclaimer
  Papua New Guinea Institute of Public
  60 A 47 Administration Qualified Qualified
  61 A 48 Papua New Guinea Maritime College Disclaimer Disclaimer Qualified
  Papua New Guinea National Institute of
  62 A 49 Standards and Industrial Technology Qualified Qualified Qualified Qualified
  63 A 50 Papua New Guinea Sports Foundation Disclaimer Disclaimer
  64 A 51 Papua New Guinea University of Technology Qualified Qualified Disclaimer
  National Analytical and Testing Services
  65 A 51A Limited
  Unitech Development and Consultancy
  66 A 51B Company Limited Adverse Qualified
  Parliamentary Members’ Retirement Benefits
  67 A 52 Fund Unqualified Unqualified Unqualified Unqualified
  68 A 53 Public Curator of Papua New Guinea Disclaimer
  69 A 54 Security Industries Authority Qualified Qualified Qualified
  70 A 55 Small Business Development Corporation Qualified
  71 A 56 Tourism Promotion Authority Unqualified Unqualified Unqualified Unqualified
  72 A 57 University of Goroka Disclaimer Disclaimer Disclaimer
  73 A 57A Unigor Consultancy Limited Disclaimer Disclaimer
  University of Natural Resources and
  74 A 58 Environment (Vudal) Disclaimer Qualified Qualified
  75 A 59 University of Papua New Guinea Qualified Disclaimer
  76 A 59A Unisave Limited
  77 A 59B Univentures Limited
  78 A 60 Water PNG Disclaimer Disclaimer Disclaimer
  79 B 62 Air Niugini Limited Qualified Qualified Qualified
  80 B 62A Link-PNG Limited New Inclusion
  81 B 63 Kumul Petroleum Holdings Limited Unqualified Unqualified Unqualified
  82 B 63A Eda Oil Limited Unqualified
  83 B 63B Kumul LNG Limited Unqualified Unqualified Unqualified
  84 B 63C Kumul Petroleum (Development) Limited Unqualified Unqualified Unqualified
  85 B 63D Kumul Petroleum (Investments) Limited Unqualified Unqualified Unqualified
  86 B 63E Kumul Petroleum (Kroton) Limited Unqualified
  87 B 63F Kumul Petroleum (Pipeline) Limited Unqualified
  88 B 63G Kumul Petroleum (Tech and Advisory) Limited Unqualified
  89 B 64 Livestock Development Corporation Limited

  -xxvi-

• Page 31 of 450

• Executive Summary

  Para. Comparative Years
  No. Section Entity
  No. 2016 2015 2014 2013 2012
  Mineral Resources Development Company
  90 B 65 Limited Disclaimer Disclaimer Disclaimer
  91 B 66 Motor Vehicles Insurance Limited Qualified Qualified Qualified Qualified
  92 B 67 National Airports Corporation Limited
  93 B 67A Airport City Development Limited
  NCD Water and Sewerage Limited
  94 B 68 (Eda Ranu) Qualified Qualified Qualified
  95 B 69 Papua New Guinea Ports Corporation Limited Unqualified Qualified Qualified Qualified
  96 B 70 PNG Air Services Limited Qualified Qualified Qualified Qualified
  97 B 71 PNG DataCo Limited Unqualified
  98 B 72 PNG Power Limited Disclaimer Disclaimer Disclaimer Disclaimer
  99 B 73 Post (PNG) Limited Unqualified Unqualified Unqualified Unqualified
  100 B 74 Telikom (PNG) Limited Qualified Qualified Qualified
  101 B 74A Datec (PNG) Limited Unqualified
  102 B 74B Kalang Advertising Limited Unqualified Qualified
  103 B 74C Media Niugini Limited (EMTV) New Inclusion
  104 B 74D PNG Directories Limited Unqualified Unqualified Unqualified

  -xxvii-

• Page 32 of 450

• Executive Summary

  ATTACHMENT ‘F’

  AUDITS IN ARREARS (2015 AND PRIOR YEARS) COMPLETED
  DURING 2016/2017 AUDIT CYCLE
  Audits
  Audits
  Para. Completed Total Total
  No. Section Entity Substantially
  No. and Reports Units Units
  Completed
  Issued
  1 A 2 Bank of Papua New Guinea 2015 1
  2 A 3 Border Development Authority 2013 1 2014 1
  Climate Change and Development
  3 A 5 Authority 2012 1
  4 A 6 Cocoa Board of Papua New Guinea 2015 1
  5 A 6A Cocoa Pod Borer Project Fund 2015 1
  6 A 6B Cocoa Stabilisation Fund 2015 1
  Cocoa Coconut Institute Limited of Papua
  7 A 7 New Guinea 2013 1
  8 A 8 Coffee Industry Corporation Limited 2013 1
  9 A 8A Coffee Industry Fund 2013 1
  10 A 8B Patana No.61 Limited 2013 1
  11 A 9 Government Printing Office 2013 & 2014 2
  12 A 10 Independence Fellowship Trust 2015 1
  Industrial Centres Development
  13 A 12 Corporation 2014 & 2015 2
  14 A 16 Kumul Consolidated Holdings 2015 1
  15 A 16A General Business Trust 2014 1
  16 A 16B PNG Dams Limited 2013 & 2014 2 2015 1
  17 A 16C Port Moresby Private Hospital Limited 2013 & 2014 2 2015 1
  18 A 17 Legal Training Institute 2014 – 2016 3
  19 A 18 Mineral Resources Authority 2012 & 2013 2 2014 1
  National Agriculture Quarantine and
  20 A 19 Inspection Authority 2015 1
  21 A 21 National AIDS Council Secretariat 2013 & 2014 2
  22 A 22 National Broadcasting Corporation 2014 1
  23 A 23 National Capital District Commission 2013 1 2014 1
  24 A 24 National Cultural Commission 2013 1
  25 A 26 National Fisheries Authority 2014 1
  26 A 27 National Gaming Control Board 2015 1
  National Gaming Control Board
  27 A 27A Community Benefit Fund Trust 2015 1
  28 A 28 National Housing Corporation 2011 – 2013 3
  National Information and Communication
  29 A 29 Technology Authority (NICTA) 2013 & 2014 2
  30 A 30 National Maritime Safety Authority 2015 1
  31 A 31 National Museum and Art Gallery 2014 1
  32 A 34 National Road Safety Council 2015 1
  33 A 35 National Roads Authority 2015 1
  34 A 36 National Training Council 2015 1
  35 A 38 National Youth Commission 2012 & 2013 2
  36 A 39 Oil Palm Industry Corporation 2011 1
  Ombudsman Commission of Papua New
  37 A 40 Guinea 2014 & 2015 2
  38 A 41 Pacific Games (2015) Authority 2014 & 2015 2

  -xxviii-

• Page 33 of 450

• Executive Summary

  Audits
  Audits
  Para. Completed Total Total
  No. Section Entity Substantially
  No. and Reports Units Units
  Completed
  Issued
  Papua New Guinea Accident Investigation
  39 A 42 Commission 2011 & 2012 2
  Papua New Guinea Immigration and
  40 A 45 Citizenship Service Authority 2014 & 2015 2
  Papua New Guinea Institute of Medical
  41 A 46 Research 2014 1
  Papua New Guinea Institute of Public
  42 A 47 Administration 2012 & 2013 2
  43 A 48 Papua New Guinea Maritime College 2014 1
  Papua New Guinea National Institute of
  44 A 49 Standards and Industrial Technology 2014 & 2015 2
  45 A 50 Papua New Guinea Sports Foundation 2005 – 2013 9
  Papua New Guinea University of
  46 A 51 Technology 2013 & 2014 2
  Parliamentary Members’ Retirement
  47 A 52 Benefits Fund 2015 1
  48 A 53 Public Curator of Papua New Guinea 2013 1
  49 A 54 Security Industries Authority 2012 – 2014 3
  50 A 55 Small Business Development Corporation 2013 – 2015 3
  51 A 56 Tourism Promotion Authority 2015 1 2016 1
  52 A 57 University of Goroka 2014 1 2015 1
  University of Natural Resources and
  53 A 58 Environment (Vudal) 2014 1
  54 A 59 University of Papua New Guinea 2013 1
  55 A 60 Water PNG 2014 1
  56 B 62 Air Niugini Limited 2014 1
  Kumul Petroleum (Tech and Advisory)
  57 B 63G Limited 2016 1
  Mineral Resources Development Company
  58 B 65 Limited 2012 – 2014 3
  59 B 66 Motor Vehicles Insurance Limited 2015 1
  60 B 67 National Airports Corporation Limited 2011 1
  Papua New Guinea Ports Corporation
  61 B 69 Limited 2015 1
  62 B 70 PNG Air Services Limited 2015 1
  63 B 71 PNG DataCo Limited 2014 1 2015 1
  64 B 72 PNG Power Limited 2015 1
  65 B 73 Post (PNG) Limited 2016 1
  66 B 74 Telikom (PNG) Limited 2014 1
  67 B 74A DATEC (PNG) Limited 2015 1
  68 B 74B Kalang Advertising Limited 2014 1
  85 24

  -xxix-

• Page 34 of 450

• -xxx-

• Page 35 of 450

• SECTION A

  PUBLIC BODIES AND

  THEIR SUBSIDIARIES

  -xxxi-

• Page 36 of 450

• -xxxii-

• Page 37 of 450

• 1. FOREWORD

  This Section of my Report deals with the audit of public bodies and their subsidiaries.

  The auditing and reporting requirements of the public bodies and their subsidiaries are
  stipulated in Section 8 of the Audit Act. My findings in that regard are detailed in
  paragraphs 2 to 60 of this part of my Report.

  -1-

• Page 38 of 450

• -2-

• Page 39 of 450

• 2. BANK OF PAPUA NEW GUINEA

  2.1 INTRODUCTION

  2.1.1 Legislation

  The Bank of Papua New Guinea (BPNG) was established under the Central Banking
  Act (Chapter 138). This Act was in operation until 16 June 2000 when it was repealed
  and replaced by the Central Banking Act 2000.

  2.1.2 Objectives of the Bank

  The main objectives of the Bank of PNG as stipulated in the new Act are:

  To formulate and implement the monetary policy with a view to achieving and
  maintaining price stability;
  To formulate financial regulation and prudential standards to ensure stability of
  the financial system in PNG;
  To promote an efficient national and international payments system; and
  Subject to the above, to promote macro-economic stability and economic growth
  in PNG.

  2.1.3 Functions of the Bank

  The primary functions of the Bank are to:

  Issue currency;
  Act as banker and agent of the Government;
  Regulate banking, credit and other financial services as empowered by the Act
  or by any other law of the Independent State of PNG;
  Manage the gold, foreign exchange and other international reserves of PNG;
  Perform any function conferred on it by or under international agreement to
  which PNG is a party;
  Perform any other functions conferred on it by or under any other law of PNG;
  and
  Advise the Minister as soon as practicable where the Bank considers that a body
  regulated by the Central Bank is in financial difficulty.

  2.1.4 Structural Reforms at the Bank

  In addition to the Central Banking Act, three (3) other Acts were legislated in 2000
  which gave enormous responsibilities to the Bank. These other Acts are:

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• Page 40 of 450

• Bank of Papua New Guinea

  1. Banks and Financial Institutions Act 2000;
  2. Superannuation Act 2000; and
  3. Life Insurance Act 2000.

  Each of these Acts provides additional responsibilities to the Bank.

  2.2 AUDIT OBSERVATIONS

  2.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act, on the financial
  statements of the Bank for the years ended 31 December 2015 and 2016 were issued
  on 30 June 2016 and 30 June 2017 respectively. The reports did not contain any
  qualification.

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• 3. BORDER DEVELOPMENT AUTHORITY

  3.1 INTRODUCTION

  3.1.1 Legislation

  The Border Development Authority was established under the Border Development
  Authority Act 2008. This Act came into operation on 7 October 2008.