Report of the Auditor-General Part IV 2016 on the Accounts of Public Authorities and Statutory Bodies

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    Auditor-General's annual report for 2016 on the Accounts of Public Authorities and Statutory Bodies

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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-

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  • 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-

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  • 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