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-

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  • 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-

  • Page 19 of 450

  • 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-

  • Page 20 of 450

  • 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-

  • Page 21 of 450

  • 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-

  • Page 22 of 450

  • 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-

  • Page 23 of 450

  • 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-

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  • 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-

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  • 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-

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  • 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-

  • Page 27 of 450

  • 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-

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  • 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.

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  • 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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  • 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.