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• Part 4
  Report of the Auditor-General
  2017

  PAPUA NEW GUINEA

  Auditor-General’s Office of Papua New Guinea

• Page 2 of 293

• Part IV
  Report of the Auditor-General
  2017

  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

• Page 3 of 293

• Page 4 of 293

• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: [email protected] Website: www.ago.gov.pg

  20 July 2018

  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 20th July 2018 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,

  GORDON KEGA, CPA
  Acting Auditor-General

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

• Page 5 of 293

• Page 6 of 293

• 2017 AUDITOR-GENERAL‟S REPORT – PART IV

  TABLE OF CONTENTS

  PARA SUBJECT PAGE
  NO. NO.

  General …………………………………………………………………………………………………………………………. v
  A. Foreword ……………………………………………………… v
  B. A u t h o r i t y t o A u d i t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
  C. A u d i t o f P u b l i c B o d i e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii
  D. Appointment and use of Authorised Auditors ……………………………………………… viii
  E. E x e c u t i v e S u m m a r y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
  Attachments A – F ……………………………………………………………………………………………………………………. xvii

  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 ………………………………………………………………. 7
  4. Civil Aviation Safety Authority of Papua New Guinea ………………………………………………………………..8
  5. Climate Change and Development Authority ……………………………………………………………………………….. 12
  6. Cocoa Board of Papua New Guinea and its Subsidiaries ……………………………………………………….. 14
  6A Co c o a P o d Bo r e r Pr o je c t Fu n d …………………………………………………… 15
  6B C o c o a S t a b i l i s a t i o n F u n d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
  7. Cocoa Coconut Institute Limited of Papua New Guinea …………………………………………………………… 17
  8. Coffee Industry Corporation Limited and its Subsidiaries……………………………………………………… …18
  8A C o f f e e I n d u s t r y F u n d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
  8B P a t a n a N o . 6 1 L i m it e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
  9. Government Printing Office ………………………………………………………………………………………………………….. 21
  10. Independence Fellowship Trust …………………………………………………………………………………………. 22
  11. Independent Consumer and Competition Commission …………………………………………………………….. 23
  12. Industrial Centres Development Corporation …………………………………………………………………………. 25
  13. Internal Revenue Commission. ………………………………………………………………………………………….. 26
  14. Investment Promotion Authority …………………………………………………………………………………………. 28
  15. Kokonas Indastri Koporesen and its Subsidiaries ……………………………………………………………………. 29
  15A Papua New Guinea Coconut Extension Fund ………………………………………..30
  15B Papua New Guinea Coconut Research Fund …………………………………………31
  16. Kumul Consolidated Holdings and its Subsidiaries …………………………………………………………………. 32
  16A G e n e r a l B u s i n e s s T r u s t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
  16B Kumul Technology Development Corporation Limited………………………………….. 39
  16C P N G D a m s L i m i t e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
  17. Legal Training Institute ………………………………………………………………………………………………………………… 43
  18. Mineral Resources Authority …………………………………………………………………………………………….. 44
  19. National Agriculture Quarantine and Inspection Authority …………………………………………………………. 51
  20. National Agricultural Research Institute ………………………………………………………………………………… 53
  21. National AIDS Council Secretariat ………………………………………………………………………………………………… 55
  22. National Broadcasting Corporation ……………………………………………………………………………………… 57
  23. National Capital District Commission and its Subsidiaries . ……………………………………………………… 58
  23A National Capital District Botanical Enterprises Limited . ……………………………….. 60
  23B Port Moresby City Development Enterprises Limited . …………………………………. 61
  23C Port Moresby Nature Park Lim ited . ……………………………………………… 62

  -I-

• Page 7 of 293

• PARA SUBJECT PAGE
  NO. NO.

  24. National Cultural Commission …………………………………………………………………………………………….. 64
  25. National Economic and Fiscal Commission …………………………………………………………………………… 65
  26. National Fisheries Authority ……………………………………………………………………………………………….. 67
  27. National Gaming Control Board and its Subsidiary ………………………………………………………………….. 69
  27A. National Gaming Control Board Community Benefit Fund Trust. …………………………………….. 70
  28. National Housing Corporation and its Subsidiary …………………………………………………………………….. 72
  28A National Housing Estate Limited. …………………………………………………………………………………. 83
  29. National Information and Communications Technology Authority (NICTA) …………………………………… 84
  30. National Maritime Safety Authority …………………………………………………………………………………………………85
  31. National Museum and Art Gallery ……………………………………………………………………………………….. 87
  32. National Narcotics Bureau……………………………………………………………………………………………………………..88
  33. National Research Institute ………………………………………………………………………………………………. 89
  34. National Road Safety Council ……………………………………………………………………………………………………….90
  35. National Roads Authority……………………………………………………………………………………………………………….92
  36. National Training Council …………………………………………………………………………………………………. 94
  37. National Volunteer Service …………………………………………………………………………………………………………….99
  38. National Youth Commission……………………………………………………………………………………………. 100
  39. Oil Palm Industry Corporation ……………………………………………………………………………………….. 105
  40. Ombudsman Commission of Papua New Guinea………………………………………………………………….. 106
  41. Papua New Guinea Accident Investigation Commission ………………………………………………………. 107
  42. Papua New Guinea Customs Service…………………………………………………………………………………. 109
  43. Papua New Guinea Forest Authority ………………………………………………………………………………… 110
  44. Papua New Guinea Immigration and Citizenship Service Authority ………………………………………… 112
  45. Papua New Guinea Institute of Medical Research …………………………………………………………………. 114
  46. Papua New Guinea Institute of Public Administration ………………………………………………………….. 118
  47. Papua New Guinea Maritime College ……………………………………………………………………………… 119
  48. Papua New Guinea National Institute of Standards and Industrial Technology ………………………….. 120
  49. Papua New Guinea Sports Foundation ……………………………………………………………………………… 122
  50. Papua New Guinea University of Technology and its Subsidiaries …………………………………………. 124
  50A National Analytical and Testing Services Limited. …………………………………. 126
  50B Unitech Development and Consultancy Company Limited ………………………. 127
  51. Parliamentary Members’ Retirement Benefits Fund . ………………………………………………………………….. 128
  52. Public Curator of Papua New Guinea …………………………………………………………………………………. 129
  53. Security Industries Authority …………………………………………………………………………………………… 134
  54. Small and Medium Enterprises Corporation……………………………………………………………………….. 135
  55. Tourism Promotion Authority ………………………………………………………………………………………….. 141
  56. University of Goroka and its Subsidiary …………………………………………………………………………….. 144
  56A. Unigor Consultancy Limited ………………………………………………………………………………………. 146
  57. University of Natural Resources and Environment (UNRE) …………………………………………………….. 147
  58. University of Papua New Guinea and its Subsidiaries …………………………………………………………. 149
  58A U n i s a v e L i m i t e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
  58B U n i v e n t u r e s L i m i t e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
  59. Water PNG ………………………………………………………………………………………………………………….. 153

  SECTION B NATIONAL GOVERNMENT OWNED COMPANIES
  –

  PARA SUBJECT PAGE
  NO. NO.

  60. Foreword …………………………………………………………………………………………………………………….. 157
  61. Air Niugini Limited and its Subsidiary ……………………………………………………………………………….. 159
  61A. Link-PNG Limited ……………………………………………………………………………………………………. 169
  62. Kumul Petroleum Holdings Limited and its Subsidiaries ………………………………………………………. 170
  62A E d a O i l L i m i t e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
  62B Ku m u l Ex p l o r a t io n ( As ia ) L im it e d . …………………………………………….. 172

  -II-

• Page 8 of 293

• PARA SUBJECT PAGE
  NO. NO.

  62C K u m u l G a s F o r e l a n d 2 3 9 B . V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
  62D K u m u l G a s F o r e la n d 2 6 1 B. V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
  62E K u m u l G a s F o r e la n d 2 6 8 B. V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
  62F K u m u l G a s F o r e la n d 2 6 9 B. V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
  62G K u m u l G a s N i u g i n i B. V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
  62H K u m u l L e n d i n g C o Pt e L im it e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
  62I K u m u l L N G L i m i t e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
  62J Kumul Petroleum (Development) Limited. ………………………………………….. 180
  62K Ku mu l Petr ole u m (In v est m ent s) Lim ite d ………………………………………. 181
  62L Kum ul Petroleum (Kroton) Lim ited. ……………………………………………….182
  62M Ku mu l Petr ole u m ( Pip e lin e) Lim ite d ……………………………………………..183
  62N Kumul Petroleum (Tech & Advisory) Limited. ………………………………………. 184
  62O Kum ul Petroleum M arketing Pte Limited… ……………………………………. 185
  62P K u m u l S e c u r it y A g e n t L i m it e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
  62Q N P C P O il C o m p a n y Pt y L i m it e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
  63. Livestock Development Corporation Limited…………………………………………………………………………. 188
  64. Mineral Resources Development Company Limited ……………………………………………………………… 189
  65. Motor Vehicles Insurance Limited ……………………………………………………………………………………… 190
  66. National Airports Corporation Limited and its Subsidiaries…………………………………………………….. 192
  66A Air po rt Cit y Dev e lop m e nt L imit e d ……………………………………………….193
  66B A ir p o r t s I n v e s t m e n t s L im it e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
  67. NCD Water and Sewerage Limited (Eda Ranu) …………………………………………………………………….. 195
  68. Papua New Guinea Ports Corporation Limited ……………………………………………………………………… 196
  69. PNG Air Services Limited ……………………………………………………………………………………………….. 199
  70. PNG DataCo Limited ……………………………………………………………………………………………………… 200
  71. PNG Power Limited …………………………………………………………………………………………………………………… 202
  72. Post (PNG) Limited ……………………………………………………………………………………………………….. 204
  73. Telikom (PNG) Limited and its Subsidiaries………………………………………………………………………….. 208
  73A DA TE C ( PNG ) L im it e d …………………………………………………………….210
  73B Ka la n g Ad v e r t is in g L im it e d ……………………………………………………….211
  73C M ed ia Niu g ini L im it e d ( EM TV) …………………………………………………….212
  73D P N G D ir e c t o r ie s L i m it e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213

  SECTION C NATIONAL GOVERNMENT SHAREHOLDINGS IN OTHER COMPANIES
  –

  PARA SUBJECT PAGE
  NO. NO.

  74. Foreword ……………………………………………………………………………………………………………………… 217
  75. Bougainville Copper Limited …………………………………………………………………………………………….. 219
  76. Gogol Reforestation Company Limited ………………………………………………………………………………………… 221
  77. Ok Tedi Mining Limited………………………………………………………………………………………………………………. 222
  78. PNG Sustainable Development Program Limited …………………………………………………………………. 223

  -III-

• Page 9 of 293

• SECTION D PROBLEM AUDITS (AUDITS IN ARREARS)
  –

  PARA SUBJECT PAGE
  NO. NO.

  79. F o r e w o r d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
  80. A u d i t s i n A r r e a r s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
  80.1 General ………………………………………………………………………………………………………………….. 229
  80.2 Responsibility for preparation of Financial Statements ………………………………………………… 229
  80.3 Legislative Requirements ……………………………………………………………………………………………………..230
  80.4 Current Year Audits (2017 Audits) ……………………………………………………………………………… 230
  80.5 Status of Current Year Audits ……………………………………………………………………………………. 232
  80.6 Audits in Arrears (2016 and prior years) ……………………………………………………………………… 234
  80.7 Long Outstanding Financial Statements …………………………………………………………………….. 237
  80.8 Status of Audits as at 30 June 2018……………………………………………………………………………. 240
  Acknowledgements ………………………………………………………………………………………………………………………………243
  Schedule A – Current Year Audits…………………………………………………………………………………………….. 247
  Schedule B – Status of Audits in Arrears…………………………………………………………………………………… 250
  Schedule C – Long Outstanding Financial Statements ……………………………………………………………… 253
  Schedule D – Government Shareholding in Companies ……………………………………………………………. 255
  Schedule E Audit in Arrears (2016 and Prior years) completed during 2017/2018 ……………………. 256
  –

  -iv-

• Page 10 of 293

• GENERAL

  A. FOREWORD

  My Annual Report to the National Parliament for the 2017 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 effective delivery of
  government policies and programs particularly by the public sector and their
  contribution through the Medium Term Development Strategies (MTDS) including:

  • Welfare
  • Health
  • Economic Development and Growth
  • Contribution to Nation Building
  • Good Governance
  • Rural Development
  -v-

• Page 11 of 293

• General

  • Poverty Reduction
  • Employment
  • Strengthening Public Expenditure
  • Management System including:

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

  In addition, my audit findings that have been repeatedly highlighted show 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 risks falling short
  of its objectives.

  Besides the audit of Financial Statements, I have extended my audit programs into the
  audit of service delivery, performance audit and major public work 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.
  This Act was amended in 1995 and the relevant provisions of the amended Act are
  explained below.

  -vi-

• Page 12 of 293

• General

  B.2.1 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.2.2 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.2.3 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.3 Public Finance (Management) (Amendment) Act 2016 (PFMA)

  The submission of the financial statements of statutory bodies for audit is required
  under Section 63(1) and (3) of the Public Finance (Management) (Amendment) Act
  2016. The Section requires each statutory body to prepare and furnish to its Minister
  before end of fourth calendar month from close of a fiscal 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.

  B.4 Companies Act

  I am required to audit National Government owned Companies and their
  Subsidiaries 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 Section 63 of the PFMA and Section 3 of the Audit Act.
  -VII-

• Page 13 of 293

• General

  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 holds 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.

  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.

  -VIII-

• Page 14 of 293

• 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 2017 to
  June 2018 (2017/2018 Audit Cycle). The Report covers the audits of these entities‟
  financial statements for a number of years, not just 2017.

  In 2017 there were 115 public entities subject to audit by my Office, consisting of
  78 Public Bodies and their Subsidiaries and 37 National Government Owned
  Companies.

  I am also responsible for reporting on the audits of 4 Companies, in which the
  National Government has shareholding. These entities are audited by private
  company auditors and 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 a
  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.

  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.
  -ix-

• Page 15 of 293

• Executive Summary

  E.3 Submission of current year Financial Statements

  Section 63(1) and (3) of the PFMA requires „…a statutory body to prepare and
  furnish to the Finance Departmental Head before end of fourth calendar month
  from close of a fiscal year, a performance and management report of its operations
  for the year ended 31 December preceding, together with financial statements to
  enable the Finance Minister to present such report and statements to the
  Parliament…‟

  Before submitting the financial statements to the Minister, Section 63(3)(c) requires
  a statutory 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, 63 entities had not submitted their 2017
  financial statements to be audited and overall some 87 financial statements for
  2016 and prior years had not been submitted for audit (Refer Table A). However,
  the situation has deteriorated during this cycle.

  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 2017 (END OF 2017/2018
  CYCLE)

  Audits Audits to Financial
  Audits Substantially Audits in Commence Statements Total Total
  Year
  Completed Completed Progress Shortly not Submitted 2017/2018 2016/2017

  2017 – 14 27 11 63 115 –
  2016 8 24 16 7 34 89 104
  2015 11 21 7 4 21 64 84
  2014 3 13 6 2 13 37 60
  2013 3 5 1 – 10 19 37
  2012 1 2 1 – 5 9 16
  2011 – – – – 2 2 6
  2010 – – – – 2 2 2
  2009 – – – – – – 1
  2008 – – – – – – 1
  2007 – – – – – – 1
  2006 – – – – – – 1
  2005 – – – – – – 1
  Total 26 79 58 24 150 337 314

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  Table A above shows that 163 audits were either completed, substantially completed
  or still in progress as at 30 June 2018. The details are graphically depicted in
  Attachment „C‟, which also included the arrears of prior years.

  As shown also in Table A there were no current year audits (2017) issued however,
  41 audits were either substantially completed or were in progress. A further 11 audits
  were to commence shortly. Graphical description of the status of current year 2017
  audits (excluding arrears) is given in Attachment „A‟. The list of entities is at
  Schedule „A‟ (i), (ii), (iii) & (iv).

  A further 40 audit reports were being finalised and awaiting approval at 30 June
  2018. The total reports at finalised stage and issued amounted to 66.

  E.4 Type of Audit Opinions Issued1

  In the period covered (July 2017 to June 2018) by the audit, 26 audit reports were
  issued. Of the 26 audit reports issued, 11 were unqualified, 9 were qualified and 6
  were Disclaimer Opinions. The details are captured in Attachment „D‟.

  Types of Audit Opinions issued for each entity over the period of five years from
  2013 to 2017 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.

  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.

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  E.6 Non-Submission of Financial Statements

  As stated earlier, Section 63(3) of the PFMA requires each statutory body to prepare
  and furnish to its Minister before end of fourth calendar month from close of a fiscal
  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 before 30 April each year for my audit and
  inspection. However, out of 115 public entities only 52 entities have submitted their
  financial statements for 2017 (Refer Schedule A (i), (ii), (iii) & (iv) for my audit and
  inspection up to the time of preparing this Report. A total of 63 entities have failed to
  comply with these provisions (Refer Schedule A (v)). The public entities referred to
  above exclude the 4 Companies with 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.

  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.

  Recommendation

  My Office recommends that there is rigorous 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.

  This recommendation is to help achieve financial management accountability and
  good governance in the public sector.

  During the cycle, 34 entities have audits in arrears totaling to 87. Details of audits that
  have gone into arrears due to non-submission of financial statements from 2010 are
  given below in Table B and Schedule „C‟.

  -xii-

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• Executive Summary

  Table B
  Financial Statements Not Submitted
  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 3A Papua New Guinea Maritime Transport Limited 2013-2016 4
  2 A 5 Climate Change and Development Authority 2013-2016 4
  3 A 8 Coffee Industry Corporation Limited 2015 & 2016 2
  4 A 8A Coffee Industry Fund 2015 & 2016 2
  5 A 8B Patana No. 61 Limited 2015 & 2016 2
  6 A 12 Industrial Centres Development Corporation 2016 1
  7 A 18 Mineral Resources Authority 2016 1
  8 A 21 National AIDS Council Secretariat 2016 1
  9 A 22 National Broadcasting Corporation 2016 1
  10 A 23A National Capital District Botanical Enterprises Limited 2013-2016 4
  11 A 23B Port Moresby City Development Enterprises Limited 2013-2016 4
  12 A 24 National Cultural Commission 2015 & 2016 2
  13 A 27 National Gaming Control Board 2016 1
  National Gaming Control Board Community Benefit
  14 A 27A 2016 1
  Fund Trust
  15 A 28A National Housing Estate Limited 2010-2016 7
  16 A 31 National Museum and Art Gallery 2016 1
  17 A 32 National Narcotics Bureau 2013-2016 4
  18 A 34 National Road Safety Council 2016 1
  19 A 39 Oil Palm Industry Corporation 2012-2016 5
  20 A 43 Papua New Guinea Forest Authority 2015 & 2016 2
  21 A 45 Papua New Guinea Institute of Medical Research 2016 1
  22 A 46 Papua New Guinea Institute of Public Administration 2015 & 2016 2
  23 A 49 Papua New Guinea Sports Foundation 2016 1
  24 A 50A National Analytical and Testing Services Limited 2014-2016 3
  Unitech Development and Consultancy Company
  25 A 50B 2014-2016 3
  Limited
  26 A 52 Public Curator of Papua New Guinea 2015 & 2016 2
  27 A 53 Security Industries Authority 2016 1
  28 A 56A Unigor Consultancy Limited 2014-2016 3
  29 A 57 University of Natural Resources and Environment 2015 & 2016 2
  30 A 58A Unisave Limited 2012-2016 5
  31 A 58B Univentures Limited 2012-2016 5
  32 B 63 Livestock Development Corporation Limited 2010-2016 7
  33 B 67 NCD Water and Sewerage Limited (Eda Ranu) 2016 1
  34 B 69 PNG Air Services Limited 2016 1
  87

  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;

  -XIII-

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• Executive Summary

  • 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:

  Civil Aviation Safety Authority of PNG;
  – –

  University of Papua New Guinea;
  National Housing Corporation;
  –

  -University of Goroka;
  Internal Revenue Commission;
  –

  -PNG Customs Service; and
  Papua New Guinea University of Technology.
  –

  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. This can only be achieved by timely submission of
  financial statements and cooperation of the entities‟ management to clear the arrears.

  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. Despite these recommendations, 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 and the Constitution. The following state owned entities
  have appointed their own Auditors:

  -xiv-

• Page 20 of 293

• Executive Summary

  • Kumul Minerals Holding Limited (formerly Petromin Limited);
  • National Development Bank Limited; and
  • PNG Air Services 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;
  • 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 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.
  -xv-

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  E.11 Recommendations for Improvement

  &RQisJ}nJ Z IJhEFRP P }nJs ~~ ST}MRXV }aB‟ J5 }SRIJs, EI Z RlX}SRIt 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 my audit recommendations.

  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.

  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).

  -xvi-

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• Executive Summary

  ATTACHMENT „A

  ‟

  STATUS OF CURRENT YEAR AUDITS 2017

  No. Status of Current Year Audits Number of Entities
  2017/2018 2016/2017
  1 Audits completed and reports issued thereon (Schedule A) 0 20
  2 Audits substantially completed (Schedule A) 14 4
  3 Audits in progress (Schedule A) 27 15
  4 Audits to commence shortly (Schedule A) 11 5
  5 Financial Statements not submitted (Schedule A) 63 60

  Status of Current Year Audits 2017
  Audits completed
  and reports issued
  Ceased Companies thereon
  (Schedule D) (Schedule A) Audits substantially
  0% 0% completed
  (Schedule A)
  12%
  Audits in progress
  (Schedule A)
  23%

  Financial Statements
  not submitted
  (Schedule A) Audits to commence
  55% shortly
  (Schedule A)
  10%

  6 Ceased Entities (Schedule D) 0 1
  115 105

  Please refer to details in Schedule A on Pages 247 to 249.
  ‘ ’

  -xvii-

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• Executive Summary

  ATTACHMENT „B‟

  STATUS OF AUDITS IN ARREARS BY NUMBER OF AUDITS
  (2016 AND PRIOR YEARS)

  No. Status of Audits in Arrears by No. of Audits (2016 & prior years) Number of Audits
  2017/2018 2016/2017
  1 Audits substantially completed (Schedule B) 65 21
  2 Audits in progress (Schedule B) 31 24
  3 Audits to commence shortly (Schedule B) 13 10
  4 Financial Statements not submitted (Schedule B) 87 70
  196 125

  Status of Audits in Arrears by number of Audits
  (2016 and prior years)
  Audits substantially
  Financial Statements completed
  not submitted
  (Schedule B)
  (Schedule B)
  33%
  44%

  Audits in progress
  Audits to commence (Schedule B)
  shortly 16%
  (Schedule B)
  7%

  Please refer to details in Schedule ‘B’ on Pages 250 to 252.

  -XVIII-

• Page 24 of 293

• Executive Summary

  ATTACHMENT „C

  ‟

  STATUS OF AUDITS AS AT 30 JUNE 2018

  Number of Audits
  No. Status of Audits
  2017/2018 2016/2017
  1 Audits completed and reports issued thereon (Schedules A & E) 26 105
  2 Audits substantially completed (Schedules A & B) 79 25
  3 Audits in progress (Schedules A & B) 58 39
  4 Audits to commence shortly (Schedules A & B) 24 15
  5 Financial Statements not submitted (Schedules A & B) 150 130
  337 314

  Status of Audits as at 30 June 2018

  Audits completed and
  reports issued thereon
  Financial Statements (Schedule A & E)
  not submitted 8%
  (Schedule A & B) Audits substantially
  45% completed
  (Schedule A & B)
  23%

  Audits to commence Audits in progress
  shortly (Schedule A & B)
  (Schedule A & B) 17%
  7%

  Please refer to details in Schedules ‘A’, ‘B’ and ‘E’ on Pages 247 to 249, 250 to 252 and 256 to 267

  -xix-

• Page 25 of 293

• respectively.

  Executive Summary

  ATTACHMENT „D

  ‟

  TYPES OF AUDIT OPINIONS ISSUED

  (i) UNQUALIFIED OPINION
  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 16 Kumul Consolidated Holdings 2015 1
  2 A 50 Papua New Guinea University of Technology 2015 & 2016 2
  3 A 51 Parliamentary Members’ Retirement Benefits Fund 2016 1
  4 A 55 Tourism Promotion Authority 2016 1
  5 B 61A Link-PNG Limited 2015 1
  6 B 65 Motor Vehicles Insurance Limited 2016 1
  7 B 68 Papua New Guinea Ports Corporation Limited 2016 1
  8 B 72 Post (PNG) Limited 2016 1
  9 B 73A DATEC (PNG) Limited 2015 1
  10 B 73D PNG Directories Limited 2015 1
  11

  (ii) QUALIFIED OPINION

  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 4 Civil Aviation Safety Authority of Papua New Guinea 2016 1
  2 A 16A General Business Trust 2015 1
  3 A 16C PNG Dams Limited 2015 1
  4 A 18 Mineral Resources Authority 2014 1
  5 A 36 National Training Council 2016 1
  6 A 54 Small and Medium Enterprises Corporation 2013 – 2015 3
  7 B 61 Air Niugini Limited 2015 1
  9

  (iii) DISCLAIMER OPINION
  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 16B Kumul Technology Development Corporation Limited 2015 1
  2 A 28 National Housing Corporation 2014 1
  3 A 38 National Youth Commission 2012 & 2013 2
  4 A 45 Papua New Guinea Institute of Medical Research 2015 1
  5 A 52 Public Curator of Papua New Guinea 2013 1
  6

  -xx-

• Page 26 of 293

• 26

• Page 27 of 293

• Executive Summary

  ATTACHMENT „E‟
  COMPARATIVE AUDIT OPINIONS ISSUED (2013–2017)
  Comparative Years
  Para.
  No. Section Entity
  No. 2017 2016 2015 2014 2013

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

  -xxi-

• Page 28 of 293

• Executive Summary

  Para. Comparative Years
  No. Section Entity
  No. 2017 2016 2015 2014 2013
  42 A 28A National Housing Estate Limited
  National Information and Communications
  43 A 29 Disclaimer Disclaimer
  Technology Authority (NICTA)
  44 A 30 National Maritime Safety Authority Unqualified Unqualified Qualified Qualified
  45 A 31 National Museum and Art Gallery Disclaimer Disclaimer
  46 A 32 National Narcotics Bureau
  47 A 33 National Research Institute Qualified Unqualified Unqualified Unqualified
  48 A 34 National Road Safety Council Unqualified Unqualified Unqualified
  49 A 35 National Roads Authority Unqualified Qualified Qualified
  50 A 36 National Training Council Qualified Qualified Qualified Qualified
  51 A 37 National Volunteer Service Qualified Qualified Qualified Qualified
  52 A 38 National Youth Commission Disclaimer
  53 A 39 Oil Palm Industry Corporation
  54 A 40 Ombudsman Commission of Papua New Guinea Unqualified Qualified Unqualified
  Papua New Guinea Accident Investigation
  55 A 41
  Commission
  56 A 42 Papua New Guinea Customs Service New Inclusion
  57 A 43 Papua New Guinea Forest Authority
  Papua New Guinea Immigration and Citizenship
  Disclaimer Disclaimer Qualified
  58 A 44 Service Authority
  59 A 45 Papua New Guinea Institute of Medical Research Disclaimer Disclaimer Disclaimer
  Papua New Guinea Institute of Public
  60 A 46 Qualified
  Administration
  61 A 47 Papua New Guinea Maritime College Disclaimer Disclaimer
  Papua New Guinea National Institute of
  62 A 48 Qualified Qualified Qualified
  Standards and Industrial Technology
  63 A 49 Papua New Guinea Sports Foundation Disclaimer
  64 A 50 Papua New Guinea University of Technology Unqualified Unqualified Qualified Qualified
  65 A 50A National Analytical and Testing Services Limited
  Unitech Development and Consultancy Company
  66 A 50B Adverse
  Limited
  67 A 51 Parliamentary Members‟ Retirement Benefits Fund Unqualified Unqualified Unqualified Unqualified
  68 A 52 Public Curator of Papua New Guinea Disclaimer
  69 A 53 Security Industries Authority Qualified Qualified
  70 A 54 Small and Medium Enterprises Corporation Qualified Qualified Qualified
  71 A 55 Tourism Promotion Authority Unqualified Unqualified Unqualified Unqualified
  72 A 56 University of Goroka Disclaimer Disclaimer
  73 A 56A Unigor Consultancy Limited Disclaimer
  74 A 57 University of Natural Resources and Environment Disclaimer Qualified
  75 A 58 University of Papua New Guinea Qualified
  76 A 58A Unisave Limited
  77 A 58B Univentures Limited
  78 A 59 Water PNG Disclaimer Disclaimer
  79 B 61 Air Niugini Limited Qualified Qualified Qualified
  80 B 61A Link-PNG Limited Unqualified
  81 B 62 Kumul Petroleum Holdings Limited Unqualified Unqualified Unqualified
  82 B 62A Eda Oil Limited Unqualified
  83 B 62B Kumul Exploration (Asia) Limited New Inclusion
  84 B 62C Kumul Gas Foreland 239 B.V New Inclusion
  85 B 62D Kumul Gas Foreland 261 B.V New Inclusion
  86 B 62E Kumul Gas Foreland 268 B.V New Inclusion
  87 B 62F Kumul Gas Foreland 269 B.V New Inclusion
  88 B 62G Kumul Gas Niugini B.V New Inclusion
  -xxii-

• Page 29 of 293

• Executive Summary

  Para. Comparative Years
  No. Section Entity
  No. 2017 2016 2015 2014 2013
  89 B 62H Kumul Lending Co Pte Limited New Inclusion
  90 B 62I Kumul LNG Limited Unqualified Unqualified Unqualified
  91 B 62J Kumul Petroleum (Development) Limited Unqualified Unqualified Unqualified
  92 B 62K Kumul Petroleum (Investments) Limited Unqualified Unqualified Unqualified
  93 B 62L Kumul Petroleum (Kroton) Limited Unqualified
  94 B 62M Kumul Petroleum (Pipeline) Limited Unqualified
  95 B 62N Kumul Petroleum (Tech and Advisory) Limited Unqualified
  96 B 62O Kumul Petroleum Marketing Pte Limited New Inclusion
  97 B 62P Kumul Security Agent Limited New Inclusion
  98 B 62Q NPCP Oil Company Pty Limited New Inclusion
  99 B 63 Livestock Development Corporation Limited
  Mineral Resources Development
  100 B 64 Disclaimer Disclaimer
  Company Limited
  101 B 65 Motor Vehicles Insurance Limited Unqualified Qualified Qualified Qualified
  102 B 66 National Airports Corporation Limited
  103 B 66A Airport City Development Limited
  104 B 66B Airports Investments Limited New Inclusion
  105 B 67 NCD Water and Sewerage Limited (Eda Ranu) Qualified Qualified
  106 B 68 Papua New Guinea Ports Corporation Limited Unqualified Unqualified Qualified Qualified
  107 B 69 PNG Air Services Limited Qualified Qualified Qualified
  108 B 70 PNG DataCo Limited Unqualified
  109 B 71 PNG Power Limited Disclaimer Disclaimer Disclaimer
  110 B 72 Post (PNG) Limited Unqualified Unqualified Unqualified Unqualified
  111 B 73 Telikom (PNG) Limited Qualified Qualified
  112 B 73A DATEC (PNG) Limited Unqualified Unqualified
  113 B 73B Kalang Advertising Limited Unqualified
  114 B 73C Media Niugini Limited (EMTV) New Inclusion
  115 B 73D PNG Directories Limited Unqualified Unqualified Unqualified

  -XXIII-

• Page 30 of 293

• Executive Summary

  ATTACHMENT „F‟
  AUDITS IN ARREARS (2016 AND PRIOR YEARS) COMPLETED
  DURING 2017/2018 AUDIT CYCLE
  Audits
  Audits
  Para. Completed Total Total
  No. Section Entity Substantially
  No. and Reports Units Units
  Completed
  Issued
  1 A 3 Border Development Authority 2014 1
  Civil Aviation Safety Authority of Papua
  2 A 4
  New Guinea 2016 1
  3 A 6 Cocoa Board of Papua New Guinea 2016 1
  4 A 6A Cocoa Pod Borer Project Fund 2016 1
  5 A 6B Cocoa Stabilisation Fund 2016 1
  Cocoa Coconut Institute Limited of Papua
  6 A 7
  New Guinea 2014-2016 3
  7 A 9 Government Printing Office 2015 1
  8 A 13 Internal Revenue Commission 2014 & 2015 2
  9 A 16 Kumul Consolidated Holdings 2015 1 2016 1
  10 A 16A General Business Trust 2015 1 2016 1
  Kumul Technology Development
  11 A 16B 2015 1 2016 1
  Corporation Limited
  12 A 16C PNG Dams Limited 2015 1 2016 1
  13 A 17 Legal Training Institute 2014-2016 3
  14 A 18 Mineral Resources Authority 2014 1
  National Agriculture Quarantine and
  15 A 19
  Inspection Authority 2016 1
  16 A 23 National Capital District Commission 2014 & 2015 2
  17 A 23C Port Moresby Nature Park Limited 2014 & 2015 2
  18 A 24 National Cultural Commission 2014 1
  19 A 26 National Fisheries Authority 2015 1
  20 A 27 National Gaming Control Board 2015 1
  National Gaming Control Board
  21 A 27A
  Community Benefit Fund Trust 2015 1
  22 A 28 National Housing Corporation 2014 1
  National Information and Communications
  23 A 29
  Technology Authority (NICTA) 2015 1
  24 A 31 National Museum and Art Gallery 2015 1
  25 A 35 National Roads Authority 2016 1
  26 A 36 National Training Council 2016 1
  27 A 38 National Youth Commission 2012 & 2013 2 2014-2016 3
  Papua New Guinea Accident Investigation
  28 A 41
  Commission 2013-2016 4
  29 A 43 Papua New Guinea Forest Authority 2013 1
  Papua New Guinea Immigration and
  30 A 44
  Citizenship Service Authority 2016 1
  Papua New Guinea Institute of Medical
  31 A 45
  Research 2015 1
  Papua New Guinea Institute of Public
  32 A 46
  Administration 2014 1
  33 A 47 Papua New Guinea Maritime College 2015 & 2016 2
  Papua New Guinea National Institute of
  34 A 48
  Standards and Industrial Technology 2016 1

  35 A 50 Papua New Guinea University of
  Technology 2015 & 2016 2

  -xxiv-

• Page 31 of 293

• Executive Summary

  Audits
  Audits
  Para. Completed Total Total
  No. Section Entity Substantially
  No. and Reports Units Units
  Completed
  Issued
  Parliamentary Members’ Retirement
  36 A 51 1
  Benefits Fund 2016
  37 A 52 Public Curator of Papua New Guinea 2013 1
  38 A 53 Security Industries Authority 2015 1
  39 A 54 Small and Medium Enterprises Corporation 2013-2015 3
  40 A 55 Tourism Promotion Authority 2016 1
  41 A 56 University of Goroka 2015 & 2016 2
  42 A 58 University of Papua New Guinea 2014 1
  43 A 59 Water PNG 2015 1
  44 A 61 Air Niugini Limited 2015 1
  45 A 61A Link-PNG Limited 2015 1
  Kumul Petroleum (Tech and Advisory)
  46 A 62N.
  Limited 2016 1
  47 A 65 Motor Vehicles Insurance Limited 2016 1
  48 A 66 National Airports Corporation Limited 2013-2016 5
  49 A 66A Airport City Development Limited 2013-2016 5
  50 A 66B Airports Investments Limited 2016 1
  Papua New Guinea Ports Corporation
  51 A 68 1
  Limited 2016
  52 A 70 PNG DataCo Limited 2015 1
  53 A 71 PNG Power Limited 2016 1
  54 A 72 Post (PNG) Limited 2016 1
  55 A 73A DATEC (PNG) Limited 2015 1 2016 1
  56 A 73B Kalang Advertising Limited 2014-2016 3
  57 A 73D PNG Directories Limited 2015 1
  26 65

  -xxv-

• Page 32 of 293

• -xxvi-

• Page 33 of 293

• SECTION A

  PUBLIC BODIES AND

  THEIR SUBSIDIARIES

  -xxvii-

• Page 34 of 293

• -xxviii-

• Page 35 of 293

• 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 59 of this part of my Report.

  -1-

• Page 36 of 293

• -2-

• Page 37 of 293

• 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 additional responsibilities to the Bank. These other Acts are:

  -3-

• Page 38 of 293

• 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 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Bank for the year ended 31 December 2017 had been completed and the audit
  reports were being finalised.

  -4-

• Page 39 of 293

• 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.

  3.1.2 Objectives of the Authority

  The objectives of the Authority are to manage and fund development activities in the
  Border Provinces of PNG and to make provision for the functions and powers of the
  Authority and for related purposes.

  3.1.3 Functions of the Authority

  The functions of the Authority generally are to consult with relevant agencies and to
  supervise and co-ordinate all development activities in each of the border provinces
  and, without prejudice to the generality of the foregoing, are:

  • The co-ordination of the planning and implementation of capital works,
  infrastructure and socio-economic programs in respect to:
  – Education, health care, road networks, communications, transport system,
  electricity, water, sewerage and all activities relevant to the improvement of
  basic living standards in the border provinces;
  – Liaison with public bodies, non-government organisations and private
  enterprise in identifying and negotiating sources of funding for short to
  medium-term activities;
  – The co-ordination of the development of specifications for contracts for all
  capital and infrastructure works and the advertising, evaluation and awarding
  of such contracts;
  – The supervision and monitoring of the implementation of all contracts relating
  to such capital and infrastructure works;
  – The transformation of border provinces into agro-financial sectors by
  developing their respective natural resources; and
  – The promotion of investors, both foreign and local, into the border provinces
  and to encourage and facilitate international cross-border and inter-border
  trade.

  • The establishment of programs and regulatory framework for immigration
  including the monitoring of immigrants and immigrant activity along the border
  with respect to:
  -5-

• Page 40 of 293

• Border Development Authority

  – Establishment of proper state of the art offices and facilities for relevant
  government agencies, including customs, immigration, quarantine, police,
  defence force, such as security monitoring systems, communications,
  transport, electricity, water, sewerage, staff accommodation, computers and all
  other facilities that would be relevant to the administration of border activities;
  – Establishment of dialogue and co-operation with the respective cross-border
  authority or government for the prevention of diseases, drug trafficking,
  human smuggling, money laundering and other illicit activities; and
  – The development of long-term activities for the establishment of infrastructure
  and other facilities.

  . Such other functions as are likely to assist in the border administration activities.

  3.1.4 Subsidiary of the Authority

  The Subsidiary of the Authority is Papua New Guinea Maritime Transport Limited.
  Comments in relation to the Company are contained in paragraph 3A of this Report.

  3.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Authority for the year ended 31 December 2014 had been completed and the audit
  reports were being finalised.

  The Authority had submitted its financial statements for the years ended 31 December
  2015, 2016 and 2017 for my inspection and audit and arrangements were being made
  to commence the audits shortly.

  -6-

• Page 41 of 293

• 3A. PAPUA NEW GUINEA MARITIME TRANSPORT LIMITED
  (Subsidiary of the Border Development Authority)

  3A.1 INTRODUCTION

  The Papua New Guinea Maritime Transport Limited was incorporated under the
  Companies Act on 3 September 2009. The Company is wholly owned by the Border
  Development Authority.

  3A.1.1 Functions of the Company

  The primary function of the Company is to take charge of the management and
  operations of seven vessels acquired and maintained by the Border Development
  Authority. The vessels are to serve the border provinces and other maritime provinces
  in the Country.

  3A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not submitted its financial
  statements for the years ended 31 December 2013, 2014, 2015, 2016 and 2017 for my
  inspection and audit despite numerous reminders.

  -7-

• Page 42 of 293

• 4. CIVIL AVIATION SAFETY AUTHORITY OF PAPUA NEW
  GUINEA

  4.1 INTRODUCTION

  4.1.1 Legislation

  The Civil Aviation Safety Authority of Papua New Guinea was established on 1
  January 2010 after the enactment of the Civil Aviation Act 2000 (as amended).

  4.1.2 Functions of the Authority

  The principal functions of the Authority are to:

  • Undertake activities that promote safety in civil aviation at a reasonable cost;
  • Ensure the provision of air traffic services, aeronautical communications
  services and aeronautical navigation services; and
  • Ensure the provision of meteorological services and science.

  4.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  4.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on the financial
  statements of the Authority for the year ended 31 December 2016 was issued on 21
  August 2017. The report contained a Qualified Opinion.

  BASIS FOR QUALIFIED OPINION
  “

  Revenue and receivables from the National Airport Corporation (NAC) and the
  PNG Air Services Limited (PNGASL)

  Section 147E of the Civil Aviation Act 2000 stipulates for the NAC and the PNGASL
  to remit a percentage of airport facility charges, security levies and upper airspace
  aeronautical charges to CASA. Given the technical and logistical difficulties, it has
  been difficult for CASA to have independent data to compute its share of the revenue.
  As a result, CASA could not compute the amount of revenue receivable from the two
  entities. The current situation places CASA in a position where it is unable to
  accurately record and collect the income owing by NAC and PNGASL. The income
  and the related receivables from those two entities are material, which can potentially
  affect the financial statements and disclosures of CASA as at the reporting date.

  .8.

• Page 43 of 293

• Civil Aviation Safety Authority of PNG

  Due to those limitations, I was not able to verify the completeness and accuracy of
  revenue and receivable balances reported in the financial statements for the year
  ended 31 December 2016.

  Fixed Assets

  In 2010, the former Civil Aviation Authority (CAA) was restructured into three new
  separate entities, namely National Airport Corporation (NAC), PNG Air Services
  Limited (PNGASL) and Civil Aviation Safety Authority (CASA). However, at the
  time of separation there has been disagreement amongst the three entities over the
  ownership of the assets owned by the former CAA. On 29 January 2016, the Minister
  for Civil Aviation allocated the former CAA assets to the three entities through the
  National Gazettal No. G39. Although determination for ownership and use of the
  former CAA assets and properties was done by the Minister, CASA had not
  accounted for its share of the assets in the books in 2016. I also noted that no
  valuation was performed of the assets and properties used in the operations.

  Further, it had not been possible for me to confirm whether all the property assets
  recorded on the fixed assets register at the year end were owned by the Authority.
  Consequently, I was unable to satisfy myself on the completeness, existence,
  valuation, accuracy and ownership of the fixed assets and the related depreciation
  charges for the year ended 31 December 2016.

  QUALIFIED OPINION

  In my opinion, except for the effects of the matters described in the Basis for
  Qualified Opinion paragraphs above:

  (a) the financial statements of Civil Aviation Safety Authority for the year ended 31
  December, 2016:

  (i) give a true and fair view of the financial position and the results of its
  operations for the year then ended;

  (ii) the financial statements have been prepared in accordance with the
  Finance Instructions issued under the Public Finances (Management)
  Act, 1995.

  (b) proper accounting records have been kept by the Authority as far as it appears
  from my examinations of those records; and

  (c) I have obtained all the information and explanation that were required.”

  -9-

• Page 44 of 293

• Civil Aviation Safety Authority of PNG

  4.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act, on the inspection and
  audit of the accounts and records of the Authority for the year ended 31 December
  2016 was issued on 21 August 2017. The report contained the following observations:

  GST Reconciliation

  CASA had not performed GST reconciliations between the general ledger balances
  JQdIWHTstJteP eQ RIEJFFR)QtfSR QtMQJl 5 IMQ)EI&RP P IWRQ E~5 &LL [&$ 6$ IN
  bRR,TFJlJQFI IRI ~67 Z Js 1 F16,5I T JQaVd ~5 &WMJteP eQt RI JFFR)Qt FJlJQFIfl
  showed K34,125 giving an unreconciled difference of K282,455. Also, penalty for
  late GST payment of K105,280 was imposed by IRC in 2016. I recommended the
  management to lodge GST returns on time to avoid penalties and obtain statement of
  account from IRC for preparation of timely reconciliations.

  The management responded as follows:

  “There is ongoing dialogue with the IRC to address account reconciliation issues
  both for Group Tax and GST. Monthly reconciliations will be done on the basis of
  IRC statement. CASA has opted for GST Accounting Option of “Cash Accounting”
  which will fairly record the GST liability for actual debit output collected.”

  Group Tax payments

  I noted that Group Tax Returns for certain months of 2016 were not lodged within the
  time set by IRC. As a result, K193,387 was charged as penalty by the Internal
  Revenue Commission (IRC). I recommended to the management that group tax must
  be paid to IRC within the prescribed time. The management responded that, “Group
  Taxes are remitted monthly to avoid penalty charges.”

  Bank Reconciliations

  I noted that reconciling items in the monthly bank reconciliation were not corrected in
  a timely manner. These reconciling items included:

  • Cancelled cheques were still shown in the general ledger;
  • Duplicated cheques were noted as outstanding. CASA used both manual and
  system generated cheques in 2016 promoting the duplication; and
  • Cheques cleared by bank not recorded in the general ledger.

  I recommended that management should minimize the issuance of manual cheques to
  avoid cheques duplication and all bank reconciliation should be reviewed and
  approved by the appropriate person other than the preparer.

  – 10 –

• Page 45 of 293

• Civil Aviation Safety Authority of PNG

  Management responded that; “the main cause of delayed action on reconciliation was
  maintenance of dual bank reconciliations. The system based bank reconciliation was
  not updated due to its functionalities not being fully understood by finance staff and
  the situation will improve and monthly bank reconciliations maintained. Issuance of
  manual cheques will cease and automated account disbursements will be installed.”

  4.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and examination of the financial statements of the
  Authority for the year ended 31 December 2017 had been completed and the results
  were being evaluated.

  – 11 –

• Page 46 of 293

• 5. CLIMATE CHANGE AND DEVELOPMENT AUTHORITY
  (formerly Office of Climate Change and Development)

  5.1 INTRODUCTION

  5.1.1 Legislation

  The Office of Climate Change and Development (OCC&D) was created on 22 March
  2010 through NEC Decision No. 54/2010. On the same date, the NEC in its Decision
  No. 53/2010 had noted and approved NEC Decision No. 181/2009 which abolished
  the former Office of Climate Change and Environmental Sustainability (OCC&ES).
  The former OCC & ES was created in 2009 and operated under the Department of
  Environment and Conservation.

  On 10 November 2011, the NEC through its Decision No. 96/2011 had approved to
  rescind and amend NEC Decision No. 53/2010, 54/2010 and 55/2010 and approved
  for creation and establishment of PNG Climate Change Authority (PNGCCA).
  However, SCMC in its meeting held on 22 May 2012 had withheld the submission of
  the organisational structure as the certified governing Act was not in place.

  Then on 27 November 2012, the NEC approved to rescind whole of NEC Decision
  No. 96/2011 of 10 November 2011. As a result, establishment of the PNG Climate
  Change Authority was abandoned. However, on 28 July 2015, the National
  Parliament passed the Climate Change (Management) Act 2015 (No. 19 of 2015) and
  certified by the Acting Speaker of the National Parliament on 20 November 2015.
  Finally, the Climate Change and Development Authority came into existence on that
  date.

  5.1.2 Objectives of the Authority

  The objectives of the Authority are to provide a coordination mechanism at the
  national level for research, analysis and development of the policy and legislative
  framework for the management of climate change within the Government‟s National
  Strategy on Climate-Compatible Development (CCD) as per NEC Decision No.
  55/2010.

  5.1.3 Functions of the Authority

  Major functional responsibilities of the Authority are:

  ~ Policy development:
  ‒ Adopt and incorporate national strategies and plans on climate change
  compatible development into the national development strategies and
  plans;

  – 12 –

• Page 47 of 293

• Climate Change and Development Authority

  – Coordinate and facilitate the implementation of the National Strategy on
  Climate Compatible Development;
  – Align national development policies and plans to ensure climate
  compatibility across different government departments;
  – Commission research and development to support the development of a
  comprehensive greenhouse gas inventory and a more comprehensive
  understanding of the impacts of climate change in the country; and
  – Formulate and refine the policy framework and legislation.

  ~ Coordination of projects and programs:
  – Coordinate with relevant government departments, NGOs, Private Sectors
  and indigenous landowners (or local forest custodians) to implement and
  manage pilot projects, demonstration projects and programs.

  ~ Stakeholder management and consultation:
  – Collaborate and coordinate with development partners to inform and
  improve upon the Government‟s preliminary policy initiatives;
  – Coordinate the development of a robust Measurement, Reporting and
  Verification (MRV) system and a fair and equitable benefit sharing
  mechanism to protect rights and interest of resource owners; and
  – Communicate to the people of PNG the benefits (economic, social and
  environmental) arising from the implementation of the National Strategy
  for Climate Compatible Development.

  ~ Funding and international negotiations:
  – Implement a national financial strategy in collaboration with development
  partners to build capacity for Reducing Emissions from Deforestation and
  Forest Degradation Plus Conservation, Sustainable Forest Management
  and Carbon Stocks Enhancement (REDD+) and other aspects of climate
  compatible development; and
  – Support the Government of PNG with the international climate change
  negotiations and climate change funding in order to provide consistent and
  reliable data and finances to improve and sustain forest governance and
  livelihoods of the forest communities.

  5.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Authority had not submitted its financial
  statements for the years ended 31 December 2013, 2014, 2015, 2016 and 2017 for my
  inspection and audit despite my numerous reminders.

  – 13 –

• Page 48 of 293

• 6. COCOA BOARD OF PAPUA NEW GUINEA

  6.1 INTRODUCTION

  6.1.1 Legislation

  The Cocoa Board of Papua New Guinea was established under the provisions of the
  Cocoa Act 1981.

  6.1.2 Functions of the Board

  The principal functions of the Board are:

  • To control and regulate the growing, processing, marketing and export of cocoa
  and cocoa beans and the equalisation and stockholding arrangements within the
  cocoa industry;
  • To promote research and development programmes for the benefit of the cocoa
  industry; and
  • To promote the consumption of PNG cocoa beans and cocoa products.

  6.1.3 Subsidiary of the Board

  The Cocoa Coconut Institute Limited of PNG (formerly PNG Cocoa and Coconut
  Research Institute) was amalgamated with PNG Cocoa and Coconut Extension
  Agency Limited in 2003. The Institute is owned equally by the Cocoa Board and the
  Kokonas Indastri Koporesen (KIK) of PNG. Comments in relation to the Cocoa
  Coconut Institute Limited of PNG are contained in paragraph 7 of this Report.

  6.1.4 Stabilisation Funds and Projects

  The Board as a Trustee administers the Cocoa Stabilisation Fund as required under
  Part IV and VI of the Cocoa Act 1981. Further, the Board manages the Cocoa Pod
  Borer Project Fund as well. Comments in relation to the Funds are contained in
  paragraphs 6A and 6B of this Report.

  6.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts records and the examination of the financial statements of the
  Board for the period ended 30 September 2016 had been completed and the audit
  reports were being finalised.

  The financial statements for the period ended 30 September 2017 had not been
  submitted for my inspection and audit.

  – 14 –

• Page 49 of 293

• 6A. COCOA POD BORER PROJECT FUND

  6A.1 INTRODUCTION

  6A.1.1 Framework

  The National Government has funded the Cocoa Pod Borer Project based on the
  Project Proposal for Cocoa Pod Borer Management Project submitted by the Cocoa
  Board of Papua New Guinea. The Project is administered by the Cocoa Board of
  Papua New Guinea and was implemented in 2010.

  6A.1.2 Objectives of the Project Fund

  The Principal objectives of the Project Fund are:

  • To facilitate the impartation of skills and knowledge on better management
  practices that will result in the reduction of Cocoa Pod Borer (CPB) infestation
  to less than 10% of production, and increase cocoa yields;
  • To introduce and/or enhance farmers skills and knowledge in the combined use
  of basic CPB management via the five Golden rules and the Integrated Pest
  Disease Management Technology; and
  • To provide farmer support by way of making high yielding cocoa planting
  materials, tools, equipment and chemicals readily available or accessible to
  cocoa farmers which would enable effective adaption of good management
  practices.

  6A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Project
  Fund for the period ended 30 September 2016 had been completed and the audit
  reports were being finalised.

  The Project Fund had not submitted its financial statements for the period ended 30
  September 2017 for my inspection and audit.

  – 15 –

• Page 50 of 293

• 6B. COCOA STABILISATION FUND (Subsidiary of Cocoa Board of
  PNG)

  6B.1 INTRODUCTION

  6B.1.1 Legislation

  The Cocoa Stabilisation Fund was established under Section 19 of the Cocoa Act
  1981. The Fund is administered by the Cocoa Board of PNG with the objective of
  establishing price stabilisation, price equalisation and stockholding arrangements
  within the cocoa industry.

  6B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Fund for
  the period ended 30 September 2016 had been completed and the audit reports were
  being finalised.

  The financial statements of the Fund for the period ended 30 September 2017 had not
  been submitted for my inspection and audit.

  – 16 –

• Page 51 of 293

• 7. COCOA COCONUT INSTITUTE LIMITED OF PAPUA NEW
  GUINEA

  7.1 INTRODUCTION

  7.1.1 Legislation

  The Cocoa Coconut Institute Limited of Papua New Guinea (formerly PNG Cocoa
  and Coconut Research Company Limited) was amalgamated with PNG Cocoa and
  Coconut Extension Agency Limited in 2003. The Company is owned equally by the
  Cocoa Board of PNG and the Kokonas Indastri Koporesen (KIK) of PNG.

  7.1.2 Functions of the Company

  The principal functions of the Company are:
  • To conduct research into all aspects of Cocoa and Coconut growing and
  production and all aspects of the Cocoa and Coconut industries;
  • To promote research and beneficial programs for these industries;
  • To provide assistance to all persons and bodies engaged in any aspect of the
  Cocoa and Coconut industries;
  • To produce planting materials for the Cocoa and Coconut industries; and
  • To provide consultancy services.

  7.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Company
  for the years ended 31 December 2014, 2015 and 2016 were completed and the results
  were being evaluated.

  The Company had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 17 –

• Page 52 of 293

• 8. COFFEE INDUSTRY CORPORATION LIMITED

  8.1 INTRODUCTION

  8.1.1 Legislation

  The Coffee Industry Corporation Limited was incorporated under the Companies Act
  as a company limited by guarantee and was conferred with statutory powers relating
  to the control and regulation of the production, processing, marketing and export of
  coffee by the Coffee Industry Corporation (Statutory Functions and Powers) Act
  1991. Under this Act, the undertakings of the Coffee Industry Board, the Coffee
  Development Agency and the Coffee Research Institute were, on 1 October 1991,
  transferred to and vested in the Coffee Industry Corporation Limited.

  The members of the Corporation according to the Articles of Association are from the
  Growers Associations, the Coffee Exporters Association, the Plantation Processors
  Association, the Block Development Association, the Secretary – Department of
  Agriculture and Livestock, the Secretary – Department of Finance, and the Secretary –
  Department of Trade and Industry. The liability of each member is limited to an
  amount not exceeding one hundred kina.

  8.1.2 Functions of the Corporation

  The principal functions of the Corporation are:

  • To engage in research, extension, promotion, marketing, administration,
  management and control of the coffee industry in PNG;
  • To act in the best interests of coffee producers; and
  • To promote development of the coffee industry in PNG.

  8.1.3 Subsidiaries of the Corporation

  The Corporation has a Fund and a Subsidiary Company, Coffee Industry Fund and
  Patana No. 61 Limited. Comments in relation to the Fund and the Subsidiary are
  contained in paragraphs 8A and 8B respectively of this Report.

  8.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the
  Corporation for the year ended 31 December 2014 was in progress.

  The Corporation had not submitted the financial statements for the years ended 31
  December 2015, 2016 and 2017 for my inspection and audit.

  – 18 –

• Page 53 of 293

• 8A. COFFEE INDUSTRY FUND

  8A.1 INTRODUCTION

  The Coffee Industry Corporation (Statutory Functions and Powers) Act 1991
  provided for the establishment of the Coffee Industry Fund (CIF). The main purpose
  of the Coffee Industry Fund is to stabilise the coffee industry by giving the Coffee
  Industry Corporation the financial ability to implement schemes relating to
  stabilisation and equalisation of coffee prices and stock holdings of coffee.

  8A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Fund for
  the year ended 31 December 2014 was in progress.

  The Fund had not submitted the financial statements for the years ended 31 December
  2015, 2016 and 2017 for my inspection and audit.

  – 19 –

• Page 54 of 293

• 8B. PATANA NO.61 LIMITED (Subsidiary of Coffee Industry Corporation
  Limited)

  8B.1 INTRODUCTION

  Patana No.61 Limited was incorporated under the Companies Act. The Company was
  acquired by the Coffee Industry Corporation Limited on 10 February 1994 and has a
  total issued capital of two ordinary shares of K1.00 each. The Company is wholly
  owned by the Coffee Industry Corporation Limited. The principal activity of the
  Company is to invest in property.

  8B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Company
  for the year ended 31 December 2014 was in progress.

  The Company had not submitted the financial statements for the years ended 31
  December 2015, 2016 and 2017 for my inspection and audit.

  – 20 –

• Page 55 of 293

• 9. GOVERNMENT PRINTING OFFICE

  9.1 INTRODUCTION

  The Government Printing Office was established by the British Colonial
  Administration in 1888.

  The functions of the Printing Office are empowered by Section 252 of the
  Constitution, Interpretation Act (Chapter 2) and Printing of the Laws.

  9.1.1 Objective of the Office

  The main objective of the Government Printing Office is to provide efficient and
  quality printing services to the executive arm of the government, judicial arm of the
  government, government departments and various statutory bodies at an affordable
  cost.

  9.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Printing Office for the year ended 31 December 2015 had been completed and the
  audit reports were being finalised.

  The financial statements of the Printing Office for the year ended 31 December 2016
  had been submitted and arrangements were being made to commence the audit
  shortly.

  The Printing Office had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 21 –

• Page 56 of 293

• 10. INDEPENDENCE FELLOWSHIP TRUST

  10.1 INTRODUCTION

  10.1.1 Legislation

  The Independence Fellowship Trust was established under the Independence
  Fellowship Trust Act (Chapter 1040).

  10.1.2 Objective of the Trust

  The objective of the Trust is to benefit village development by making annual awards
  to selected citizens for the purposes of broadening their knowledge and experience, as
  well as implementing and encouraging that development.

  10.1.3 Functions of the Trust

  The functions of the Trust are to:

  • Make selections of candidates to receive the awards of fellowships;
  • Determine the number and value of awards; and
  • Invest the funds of the Trust.

  10.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Trust for
  the year ended 31 December 2017 had been completed and the audit reports were
  being finalised.

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• 11. INDEPENDENT CONSUMER AND COMPETITION
  COMMISSION

  11.1 INTRODUCTION

  11.1.1 Legislation

  The Independent Consumer and Competition Commission was established by the
  Independent Consumer and Competition Commission Act 2002. The Act came into
  operation in January 2003.

  11.1.2 Functions of the Commission

  The main functions of the Commission are:

  • To formulate and submit to the Minister policies in the interest of consumers;
  • Consider and examine and where necessary, advise the Minister on the
  consolidation or updating of legislation providing protection to the consumers;
  • Liaise with Departments and other agencies of Government on matters relating
  to consumer protection legislation;
  • Receive and consider complaints from consumers on matters relating to the
  supply of goods and services;
  • Investigate any complaint received;
  • Make available to consumers general information affecting the interests of
  consumers;
  • Liaise with business, commercial and professional bodies and associations in
  order to establish codes of practice to regulate the activities of their members in
  their dealings with consumers;
  • Advise consumers of their rights and responsibilities under laws relating to
  consumers protection;
  • Promote and participate in consumer education activities;
  • Establish appropriate systems whereby consumer claims can be considered and
  redressed;
  • Liaise with consumer organisations, consumer affairs authorities and consumer
  protection groups overseas and to exchange information on consumer issues
  with those bodies;
  • Arrange for the representation of consumers in court proceedings relating to
  consumer matters; and
  . To do all other things relating to consumer affairs.

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• Independent Consumer and Competition Commission

  11.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the
  Commission for the year ended 31 December 2017 had been completed and the audit
  reports were being finalised.

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• 12. INDUSTRIAL CENTRES DEVELOPMENT CORPORATION

  12.1 INTRODUCTION

  12.1.1 Legislation

  The Industrial Centres Development Corporation was established under the Industrial
  Centres Development Corporation Act 1990 which came into operation on 23 August
  1990. The Corporation commenced trading on 5 January 1994.

  12.1.2 Functions of the Corporation

  The main functions of the Corporation are:

  • Overall planning and implementation of the Government‟s industrial centre
  development programme;
  • Preparation of feasibility studies in order to identify appropriate forms of
  industrial development;
  • To identify therewith or otherwise, regions and sites in the country for industrial
  centres; and
  • To do such supplementary, incidental or consequential acts, as are necessary for
  the development and promotion of industrial centres in PNG.

  12.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Corporation had not submitted its financial
  statements for the years ended 31 December 2016 and 2017 for my inspection and
  audit despite numerous reminders.

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• 13. INTERNAL REVENUE COMMISSION

  13.1 INTRODUCTION

  13.1.1 Legislation

  The National Executive Council (NEC) in its meeting on 5 December 2013, Decision
  No: 419/2013 approved that the Internal Revenue Commission (IRC) be transformed
  into an Independent Statutory Authority through a separate Act of Parliament.

  In accordance with the NEC Decision, the Internal Revenue Commission Act 2014
  was certified on 5 August 2014. In September 2014, the Internal Revenue
  Commission started carrying out its operations as a Statutory Authority.

  Prior to September 2014, the Internal Revenue Commission was operating as a
  Department of the National Public Service under the Department of Finance.

  13.1.2 The Objective of the Commission

  The objective of the Internal Revenue Commission is to raise revenue for the
  government from taxes imposed on income that is liable to be taxed under the taxation
  laws it administers. The Commission assesses and collects taxes. It conducts tax
  education and awareness campaigns, and proposes tax administration reform
  measures to ensure that a conducive business environment is established for collecting
  right amount of taxes.

  13.1.3 The Powers and Functions of the Commission

  The powers and functions of the Internal Revenue Commission are to enable the
  Commissioner General to:

  • administer and enforce the revenue laws;
  • promote compliance with the revenue laws;
  • take such measures as may be required to improve service provided to taxpayers
  with a view to improving efficiency and maximising revenue collection;
  • take such measures as may be required to counteract tax fraud and other forms
  of tax evasion;
  • advise the State on matters relating to taxation and to liaise with relevant
  stakeholders on such matters;
  • represent the State internationally in respect of matters relating to taxation; and
  • carry out such functions as are given to the Internal Revenue Commission under
  this Act or any other law.

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• Internal Revenue Commission

  13.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records, and the examination of the financial statements of
  the Commission for the year ended 31 December 2014 had been completed, and the
  audit report was being finalised.

  The fieldwork associated with the inspection and audit of the accounts and records
  and the examination of the financial statements of the Commission for the year ended
  31 December 2015 had been completed and the results were being evaluated.

  The financial statements of the Commission for the years ended 31 December 2016
  and 2017 were submitted and arrangements were being made to commence the audit
  shortly.

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• 14. INVESTMENT PROMOTION AUTHORITY

  14.1 INTRODUCTION

  14.1.1 Legislation and Objective of the Authority

  The Investment Promotion Authority was established under the Investment Promotion
  Act 1992. The objective of the Act was to provide for the promotion of investment in
  the interests of national, social and economic development. This Act repealed the
  National Investment and Development Act (Chapter 120) and the Investment
  Promotion Act 1991.

  14.1.2 Functions of the Authority

  The principal functions of the Authority are to:

  • Provide information to investors in the country and overseas;
  • Facilitate the introduction of citizens and foreign investors to each other and to
  activities and investments of mutual benefits;
  • Provide a system of certification of foreign enterprises;
  • Advise the Minister on policy issues which relate to the Act; and
  • Maintain a register of foreign investment opportunities.

  14.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Authority for the year ended 31 December 2017 had been completed and the
  management responses were being awaited to finalise the audit reports.

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• 15. KOKONAS INDASTRI KOPORESEN (Formerly Copra Marketing
  Board of PNG)

  15.1 INTRODUCTION

  15.1.1 Legislation

  The (NEC) through its Gazettal Notice No. G19 abolished the Copra Marketing
  Board Act 1992 on 4 June 2002 and replaced it with Kokonas Indastri Koporesen Act
  2002 which established the Kokonas Indastri Koporesen (KIK). The new Act
  decentralised copra buying and selling in PNG and required KIK to only regulate the
  copra price in PNG.

  The Kokonas Indastri Koporesen Act subsequently established PNG Coconut
  Extension Fund and PNG Coconut Research Fund. Comments in relation to these
  Funds are contained in paragraphs 15A and 15B respectively, of this Report.

  15.1.2 Functions of the Koporesen

  The principal functions of the Koporesen are to regulate and assist in the export and
  marketing of copra in the best interest of the copra producers of PNG and to
  administer the PNG Coconut Extension Fund and the PNG Coconut Research Fund.

  15.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the inspection and audit of the accounts and
  records and the examination of the financial statements of the Koporesen for the year
  ended 31 December 2017 had been completed and the audit reports were being
  finalised.

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• 15A. PAPUA NEW GUINEA COCONUT EXTENSION FUND

  15A.1 INTRODUCTION

  The Copra Marketing Board (Amendment) Act 1997 provides for the establishment
  of the Papua New Guinea Coconut Extension Fund for the purpose of receiving
  levies and engaging in extension services and related programmes in accordance
  with the terms of the Act.

  15A.1.1 Objective of the Fund

  The objective of the Fund is to engage in extension services and related programs
  by itself or in co-operation with other persons or bodies for the benefit of the Copra
  Industry.

  The Fund was administered by the Copra Marketing Board up to 3 June 2002 and
  has since been administered by Kokonas Indastri Koporesen.

  15A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Extension Fund for the year ended 31 December 2017 had been
  completed and the audit reports were being finalised.

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• Page 65 of 293

• 15B. PAPUA NEW GUINEA COCONUT RESEARCH FUND

  15B.1 INTRODUCTION

  15B.1.1 Legislation and Objective of the Fund

  The Papua New Guinea Coconut Research Fund was established by the Kokonas
  Indastri Koporesen Act following the repeal of the Copra Marketing Board
  (Amendment) Act and the cessation of the PNG Copra Research Fund. The Kokonas
  Indastri Koporesen deducts a copra research fee of K4 per tonne of copra purchased
  from producers and pays it to the Research Fund. The Research Fund in turn, pays
  this cess to the Cocoa Coconut Institute Limited of PNG.

  15B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Research Fund for the year ended 31 December 2017 had been
  completed and the audit reports were being finalised.

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• Page 66 of 293

• 16. KUMUL CONSOLIDATED HOLDINGS (Formerly Independent Public
  Business Corporation)

  16.1 INTRODUCTION

  16.1.1 Legislation

  The Independent Public Business Corporation (IPBC) was established under the
  Independent Public Business Corporation of Papua New Guinea Act 2002 (as
  amended) which came into operation on 27 March 2002.

  The above Act was amended through the Independent Public Business Corporation of
  PNG (Amendment) Act 2007 at which time the objectives and functions of the
  Corporation were changed.

  A major impact of the amendments made was that the Corporation, the Trusts, the
  State Owned Enterprises or any other enterprises in which the Corporation, the Trusts
  or a State Owned Enterprise holds any interest shall not be subject to the PFMA. The
  amended Act also excludes the Corporation from the application of the Public
  Services (Management) Act 1995 and the Salaries and Conditions Monitoring
  Committee Act 1988. These amendments came into operation on 8 June 2007.

  The Principal IPBC Act was amended on 12 August 2015. The name of the
  Independent Public Business Corporation was repealed and replaced with Kumul
  Consolidated Holdings. The objectives and functions of the principal Act were not
  amended and all dividends declared by Kumul Consolidated Holdings shall be paid
  into the Sovereign Wealth Fund.

  16.1.2 Objectives of the Corporation

  The objectives of the Corporation are to:

  • act as trustee of the Trust and hold assets and liabilities that have been vested in
  or acquired by it, on behalf of the State;
  • act as a financial institution for the benefit of and the provision of financial
  resources and services to State Owned Enterprises and the State, where this is
  approved by the NEC;
  • enhance the financial position of the State or State Owned Enterprises; and
  • enter into and perform financial and other arrangements that in the opinion of
  the Corporation have as their objective either:

  – the advancement of the financial interests of the State or State Owned
  Enterprises; or
  – the development of the State or any part thereof.

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• Kumul Consolidated Holdings

  16.1.3 Functions of the Corporation

  • The Corporation shall administer the Trusts and monitor the performance of the
  assets of the Trusts in such manner as provided under this Act and shall perform
  such other functions as are required under this Act.
  • Without limiting the generality of Section (1) but subject to the provisions of
  this Act, the Corporation may:
  ‒ Undertake the function of holding and monitoring corporation for State
  owned assets and Majority State Owned Enterprises;
  ‒ Undertake the function of planning, coordinating and managing State
  assets, infrastructure and projects;
  ‒ Determine policies regarding:
  ‒ The conduct of its affairs and the affairs of any of the Trusts; and
  ‒ The administration, management and control of the Corporation
  and any of the Trusts;
  ‒ Borrow, raise or otherwise obtain financial accommodation in PNG;
  ‒ Advance money or otherwise make financial accommodation available
  to the State or State Owned Enterprises;
  ‒ Act as a central borrowing and capital raising authority for State Owned
  Enterprises;
  ‒ Act as agent for State Owned Enterprises in negotiating, entering into
  and performing financial arrangements;
  ‒ Provide a medium for the investment of funds of State Owned
  Enterprises;
  ‒ Manage or cause to be managed the Corporation‟s financial rights and
  obligations; and
  ‒ Such other functions and duties as are prescribed by the Act or any other
  Act.

  16.1.4 Trust of the Corporation

  The Trust of the Corporation is General Business Trust. Comments in relation to the
  Trust are contained in paragraph 16A of this Report.

  16.1.5 Subsidiaries of the Corporation

  The subsidiaries of the Corporation are Kumul Technology Development Corporation
  Limited (formerly Port Moresby Private Hospital Limited) and PNG Dams Limited.
  Comments in relation to these subsidiaries are contained in paragraphs 16B and 16C
  of this Report.

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• Kumul Consolidated Holdings

  16.1.6 Projects of the Corporation

  The Corporation manages Lae Port Development Project. It also implements the Port
  Moresby Sewerage and Supply Upgrading Project. Comments in relation to these
  Projects are contained in my Special Project Audits Report to Parliament.

  16.2 AUDIT OBSERVATIONS

  16.2.1 Comments on Financial Statements

  My report to the Minister under Section 8(4) of the Audit Act on the financial
  statements of the Corporation for the year ended 31 December 2015 was issued on 26
  October 2017. The report did not contain any qualification.

  16.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the
  Corporation for the year ended 31 December 2016 had been completed and the results
  were being evaluated.

  The fieldwork associated with the audit of the accounts and records and the
  examination of the financial statements of the Corporation for the year ended 31
  December 2017 was in progress.

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• Page 69 of 293

• 16A. GENERAL BUSINESS TRUST (Trust under Kumul Consolidated
  Holdings)

  16A.1 INTRODUCTION

  The General Business Trust was established under Section 31 of the Independent
  Public Business Corporation of PNG Act 2002 (as amended) which came into
  operation on 20 June 2002.

  16A.1.1 Objectives of the Trust

  • The Kumul Consolidated Holdings (KCH) (formerly Independent Public
  Business Corporation of PNG) was appointed as Trustee of the Trust and all
  moneys belonging to the Trust shall be invested or dealt with by KCH in
  accordance with the Act;
  • At any time before or after the commencement date of the Act, the Minister
  responsible for privatisation matters may vest certain assets and liabilities in the
  Kumul Consolidated Holdings as Trustee of the Trust; and
  • All the State Owned Enterprises and other investments owned by the State of
  PNG are vested in the Trust by the Minister responsible for privatisation as
  approved by the NEC from time to time.

  16A.2 AUDIT OBSERVATIONS

  16A.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act R f1Jfff7 ~~1~~f
  financial statements for the year ended 31 December 2015 was issued on 15
  November 2017. The report contained a Qualified Opinion.

  “BASIS FOR QUALIFIED OPINION

  Measurement of Unquoted Equity Investments in State Owned Enterprises
  (SOE‟s)

  Note 2(d) to the financial statements of the Trust classifies its investments in
  unquoted equity securities as available for sale financial assets in accordance with
  International Accounting Standards (IAS) 39, Financial Instruments: Recognition
  and Measurement at 31 December 2015. Further, Note 14 to the financial statements
  disclosed K4,781,355,435 as the total Investments under Non-Current Assets of
  which K3,846,815,394 was stated as investments under State Owned Enterprises
  (SOEs).

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• General Business Trust

  The fair value increment recorded for the investments in Kumul Technology
  Development Corporation Limited (formerly, Port Moresby Private Hospital
  Limited (POMPH) at a carrying value of K100,145,000 (2014: K79,601,000) and
  recorded a fair value gain of K20,544,000 in the Comprehensive Income for the
  year ended. However, I was unable to obtain sufficient appropriate audit evidence to
  determine the fair value of this investment as at 31 December 2015 and the gain
  recognised in the other comprehensive income for the year then ended.

  Further, the investment in PNG Dams Limited was carried at K304,300,000 (2014:
  K466,500,000) and has recorded a reduction in fair value of K162,200,000 in other
  comprehensive income for the year then ended at 31 December 2015. I was unable
  to obtain sufficient appropriate audit evidence to determine the fair value of this
  investment as at 31 December 2015 and the reduction in fair value recorded in the
  other comprehensive income for the year then ended.

  As such, I was unable to determine whether any adjustments might have been
  required to the carrying value of the Trust‟s Investments for POMPH and PNG
  Dams Limited for the year ended. Consequently, I was unable to determine the
  accuracy and the measurement of the Trust‟s unquoted investments in the State
  Owned Enterprises as at 31 December 2015.

  Investments in Lae-Port Project

  Note 14(b) of the financial statements disclosed K278,571,300 as total investments
  in Projects under construction. Included in the above investments was
  K268,950,312 (2014: K230,300,279) as investment made in the Lae-Port
  Development Project (LPDP) as at 31 December 2015. However, I was unable to
  obtain sufficient appropriate audit evidence to determine the completeness of costs
  incurred and monies advanced by the Trust for the LPDP. As a result, I was unable
  to determine whether any adjustments are required to be made to the carrying value
  of the Trust‟s investments in Lae-Port Development Project (LPDP) disclosed at
  K268,950,312.

  Investment in Properties

  Note 2(f) to the financial statements, investment properties are carried by the Trust
  at fair value in accordance with International Accounting Standard (IAS) 40,
  Investment Properties. The POM Fairfax Harbour Investment property is recorded
  at K771,204,508, which reflects its purchase cost including capitalized interest, and
  the Trust has not recorded a fair value gain or loss in the net income for the year
  ended. I was unable to obtain sufficient appropriate audit evidence to support the
  fair value of this investment property at 31 December 2015 and gain or loss
  recognised in net income for the year then ended. Consequently, I was unable to
  determine whether any adjustment to these amounts was necessary for the accuracy
  and measurement of the Trust‟s Projects under construction as at 31 December
  2015.

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• General Business Trust

  QUALIFIED OPINION

  In my opinion, except for the effects of matters described in the basis for qualified
  opinion paragraphs above:

  (a) the financial statements of General Business Trust for the year ended 31
  December 2015:

  (i) give a true and fair view of the financial position and cash flows for the
  year ended on that date; and

  (ii) the financial statements have been presented in accordance with
  International Financial Reporting Standards and other generally
  accepted accounting practice in Papua New Guinea; and

  (b) proper accounting records have been kept by the Trust; and

  (c) I have obtained all the information and explanations as required. ”

  16A.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Trust for the year ended 31 December 2015
  was issued on 15 November 2017. The report contained the following comments:

  Investment Corporation of Papua New Guinea (ICPNG)

  This Corporation (ICPNG) was vested with KCH (formerly: IPBC) in pursuant to
  Gazettal Notice No. 33 dated 6 April 2004. The value of this property was taken up in
  the financial statements as K8,660,957 for the last ten (10) years. The conditions
  attached with the vesting notice was not to use the GBT assets (money) for the
  disposal of remaining assets and settle the liabilities and submit all the outstanding
  financial statements to my office to enable me to complete the audit and issue the
  reports. However, my repeated requests to provide the financial statements for the
  years since 2002 were not responded positively by the respective managements in
  place in the years.

  Investments in Niugini Insurance Corporation Limited (NIC)

  This Niugini Insurance Corporation was corporatized and the business was transferred
  to Pacific MMI Insurance limited in 1998 except to keeping the insurance liability and
  assets attached with the liabilities remained with the Corporation. However, in 2010,
  KCH (formerly: IPBC) informed my office that they filed an application for
  deregistration of the company but no documentation was made available for my
  review to determine the appropriateness of the claim.

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• General Business Trust

  Investment made in Aquarius No. 21 Limited by Motor Vehicles Insurance Trust
  Limited, now owned by IPBC

  The Aquarius No. 21 Limited (the Company) which owns this vacant land portion
  1570 (now 2500) was acquired by the Motor Vehicles Insurance Trust Limited
  (MVITL) in 1998 at a cost of K5.0 million, whereas the valuation report of the vacant
  land subsequent to the purchase indicated that the market value was K2.5 million.
  However, since 1999 the value of the land was taken up at K950,000 in the books, by
  which MVITL (now MVIL) has incurred a loss of K4.0 million through this
  investment.

  This company was transferred to KCH (formerly: IPBC) as per restructured deed of
  agreement entered into between Motor Vehicles Insurance Limited (MVIL) and
  Privatisation Commission dated 3 April 2002.

  The document made available for review disclosed that an Urban Development Lease
  (UDL) over Portion 1570 (now 2500) was granted to Glory Estate Limited (then
  known as Kembis Holding Limited) in 2009. Further, the advice given by a law firm
  evident that KCH (formerly: IPBC) lost all avenues to reclaim this vacant land.

  IPBC and MVIL had failed to apply for a new State lease for this vacant land, in spite
  of mentioning this requirement in my management letters and reports since 2002.

  KCH (formerly: IPBC) Board had written-off this investment in the GBT books and
  advised me that the Company was deregistered in 2015. However, no deregistration
  certificate from IPA was made available for my review and verification.

  16A.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Trust for the year ended 31 December 2016 had been completed and the results
  were being evaluated.

  The fieldwork associated with the audit of the accounts and records and the
  examination and inspection of the financial statements of the Trust for the year ended
  31 December 2017 was in progress.

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• 16B. KUMUL TECHNOLOGY DEVELOPMENT CORPORATION
  LIMITED (Subsidiary of Kumul Consolidated Holdings)

  16B.1 INTRODUCTION

  16B.1.1 Legislation

  This Company was initially registered under the Companies Act on 1 August 1994
  with a name Negliw No. 81 Limited. On 30 September 1994, Negliw No. 81
  Limited was acquired as a subsidiary by the Motor Vehicles Insurance (PNG) Trust,
  now the Motor Vehicles Insurance Limited and on 20 March 1996 changed its name
  to Port Moresby Private Hospital.

  Port Moresby Private Hospital Limited was later transferred to the General Business
  Trust on 2 August 2002. Subsequently, on 20 April 2016 the Company changed its
  name from Port Moresby Private Hospital Limited to Kumul Technology
  Development Corporation Limited.

  16B.1.2 Objective of the Company

  The objective of Kumul Technology Corporation Limited is to construct, furnish
  and equip a building to operate as a hospital.

  16B.2 AUDIT OBSERVATIONS

  16B.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act on the financial
  statements of the Company for the year ended 31 December 2015 was issued on 25
  October 2017. The report contained a Disclaimer of Opinion.

  BASIS FOR DISCLAIMER OF OPINION
  “

  Fair Valuation of Investment Properties

  Statement of Comprehensive Income of the financial statements disclosed K5.01
  million (2014: K6.92 million) as gain on change in fair value of investment
  properties for the year ended 31 December 2015. However, I was unable to obtain
  sufficient and appropriate audit evidence that would support the fair value
  recognised in the statement of financial position at K100,145,000 (2014:
  K95,131,000) and the gain on change in fair value as shown in the statement of
  comprehensive income as at 31 December 2015.

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• Kumul Technology Development Corporation Limited

  Therefore, I was unable to determine whether any adjustment might have been
  found necessary to the statement of financial position as at 31 December 2015 or the
  statement of comprehensive income, statement of cash flows or statement of
  changes in equity and related notes to the financial statements for the year then
  ended.

  DISCLAIMER OF OPINION

  Because of the significance of the matter described in the Basis for Disclaimer of
  Opinion, I have not been able to obtain sufficient and appropriate audit evidence
  and accordingly, I am unable to express an opinion on the financial statements of
  Kumul Technology Development Corporation Limited for the year ended 31
  December 2015. ”

  16B.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the year ended 31 December 2016 had been completed and the
  results were being evaluated.

  The audit of the accounts and the records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

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• Page 75 of 293

• 16C. PNG DAMS LIMITED (Subsidiary of Kumul Consolidated Holdings)

  16C.1 INTRODUCTION

  16C.1.1 Legislation

  PNG Dams Limited was incorporated under the Companies Act on 5 June 2002.
  This Company was established under Section 3(1) of the Electricity Commission
  (Privatisation) Act 2002 (the „Act‟) by transferring to it the Sirinumu Dam and
  Yonki Dam from PNG Electricity Commission (ELCOM). This was gazetted
  through Gazettal Notification No. G114 dated 16 July 2002. The Company was
  vested with the IPBC through the Gazettal Notification No. G125 dated 2 August
  2002.

  16C.1.2 Objective of the Company

  The objective of the Company is to store water in the two dams for the controlled
  release of water from the storage for the generation of electricity.

  16C.2 AUDIT OBSERVATIONS

  16C.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act on the financial
  statements of the Company for the year ended 31 December 2015 was issued on 25
  October 2017. The report contained a Qualified Opinion.

  BASIS FOR QUALIFIED OF OPINION
  “

  Limitation of Scope on Opening Balances

  My report for the prior year, 31 December 2014 was a disclaimer of opinion as a
  result of lack of sufficient and appropriate audit evidence to support the fair value of
  the investment properties which are fundamental in the preparation of the financial
  statements. I was unable to obtain the necessary audit evidence on the opening
  balances through other audit procedures. Since these opening balances entered into
  the determination of the results of the financial performance for the year ended 31
  December 2015, I was unable to determine whether any adjustment to the results of
  the operation and changes in financial position might have been necessary for the
  year ended 31 December 2015.

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• PNG Dams Limited

  QUALIFIED OPINION

  Certain balances as at 31 December 2014 also entered into the determination of
  financials for the year ended 31 December 2015. Because of the existence of a
  disclaimer of opinion in opening balances as described in the basis for qualification
  above, I am unable to form an opinion on the statement of comprehensive income,
  statements of changes in equity and the related disclosures for the year ended 31
  December 2015.

  In my opinion, except for the matter described in the basis for qualified opinion
  paragraph above, and except for the possible effects of such adjustments, if any, as
  might have been determined to be necessary to the statement of comprehensive
  income had the limitations on the scope of work as described above in the paragraph
  of basis of qualification not existed:

  (a) the financial statements of PNG Dams Limited for the year ended 31
  December 2015:

  (i) give a true and fair view of the financial position and cash flows for the
  year ended on that date; and

  (ii) the financial statements have been presented in accordance with
  International Financial Reporting Standards and other generally
  accepted accounting practices in Papua New Guinea;

  (b) proper accounting records have been kept by the Company; and

  (c) I have obtained all the information and explanation as required. ”

  16C.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2016 had been
  completed and the results were being evaluated.

  The fieldwork associated with the audit of the accounts and records and the
  examination and inspection of the financial statements of the Company for the year
  ended 31 December 2017 was in progress.

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• 17. LEGAL TRAINING INSTITUTE

  17.1 INTRODUCTION

  17.1.1 Legislation

  The Legal Training Institute was established in 1972 under the Post Graduate Legal
  Training Act (Chapter 168).

  17.1.2 Functions of the Institute

  The functions of the Institute are to provide practical training in law, the conduct and
  management of legal offices, trust accounts and related subjects for candidates for
  admission, to a standard sufficient to qualify them for admission to practice as
  lawyers under the Admission Rules as contained in the Lawyers Act of 1986.

  17.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Institute for the years ended 31 December 2014, 2015 and 2016 were completed
  and results were being evaluated.

  The financial statements for the year ended 31 December 2017 had not been
  submitted by the Institute for my inspection and audit.

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• 18. MINERAL RESOURCES AUTHORITY
  18.1 INTRODUCTION

  18.1.1 Legislation

  The Mineral Resources Authority was established by the National Parliament under
  the Mineral Resources Act 2005 on 9 November 2005. This Act came into force on
  January 2006 but the Authority commenced operations in June 2007.

  18.1.2 Objectives of the Authority

  The objectives of the Authority are to achieve stability, industry growth and a degree
  of assurance of future revenues from the mineral industry. More effective
  management of issues concerning landowners and their participation in the
  development process and allow for the development of a more settled investment
  climate and industry development.

  18.1.3 Functions of the Authority

  The functions of the Authority are described as follows:

  • To advise the Minister on matters relating to mining and the management,
  exploitation and development of Papua New Guinea‟s mineral resources;
  • To promote the orderly exploration for the development of the country‟s mineral
  resources;
  • To oversee the administration and enforcement of the Mining Act 1992, the
  Mining (Safety) Act (Chapter 195A), the Mining Development Act (Chapter
  197), the Ok Tedi Acts and the Ok Tedi Agreement, the Mining (Bougainville
  Copper Agreement) Act (Chapter 196) and the agreements that are scheduled to
  that Act, and any other legislation relating to mining or to the management,
  exploitation or development of PNG‟s mineral resources;
  • To negotiate mining development contracts under the Mining Act as agent for
  the State;
  • To act as agent for the State, as required, in relation to any international
  agreement relating to mining or to the management, exploitation or development
  of PNG‟s mineral resources;
  • To receive and collect, on its own account and on behalf of the State, any fee,
  levy, rent, security, deposit, compensation, royalty, costs, penalty, or other
  money, or other account payable under the Mining Act, the Mining (Safety) Act,
  the Mining Development Act, the Ok Tedi Acts and the Ok Tedi Agreement, the
  Mining (Bougainville Copper Agreement) Act and the agreements that are
  scheduled to that Act, or any other Act the administration of which is the
  responsibility of the Authority from time to time;

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• Mineral Resources Authority

  • On behalf of the State, to receive and collect from persons to whom a tenement
  has been granted under the Mining Act the security for compliance with the
  person‟s obligations under the Act required to be lodged with the Registrar, and
  to hold and such security received or collected;
  • On behalf of the State, to administer and be responsible for the administration of
  any public investment program relating to mining;
  • To conduct systematic geoscientific investigations into the distribution and
  characteristics of PNG‟s mineral and geological resources, located on, within or
  beneath the country‟s land mass, soil, subsoil and the sea-bed;
  • To provide small scale mining and hydrogeological survey data services, and
  occupational health and safety community awareness programs;
  • To collect, analyse, store, archive, disseminate and publish (in appropriate maps
  and publications) on behalf of the State geoscientific information about PNG‟s
  mineral and geological resources;
  • To carry out such other functions as are given to the Authority by this Act or by
  any other law; and
  • Generally to do such supplementary, incidental, or consequential acts and things
  as are necessary or convenient for the Authority to carry out its functions.

  18.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  18.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on the financial
  statements of the Authority for the year ended 31 December 2014 was issued on 15
  June 2017. The report contained a Qualified Opinion.

  “ BASIS FOR QUALIFIED OPINION

  Production Levies

  Reported in the statement of comprehensive income is an amount of K21,832,817
  being for production levies (Non-Alluvial) income. During the audit, completeness
  and accuracy of the production levies account could not be verified. I noted that the
  Authority does not have proper controls and procedures to capture all production
  levies.

  Production levies are calculated based on 0.25% of assessable income of producing
  mines. I noted during audit that not all producing mines remit their production levies.

  Additionally, the Authority does not have a process to verify and ascertain the base
  and assessable income as declared by the producing mines to calculate and remit the
  production levies.

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• Mineral Resources Authority

  Unallocated Receipts

  Reported in the statement of financial position is an amount of K1,706,765 being for
  unallocated receipts. During the audit, the nature of these funds received could not be
  determined. Most of the funds were dated back as far as 2009. This could result in
  material misstatements to the revenue and debtor accounts.

  QUALIFIED OPINION

  In my opinion, except for the effect of the matters described in the Basis for Qualified
  Opinion paragraph, the financial statements of the Mineral Resources Authority for
  the year ended 31 December 2014:

  (a) give a true and fair view of the financial position and the results of its operations
  for the year then ended; and

  (b) with exception of instances of non-compliance described under Other Matter,
  the financial statements have been prepared in accordance with the Finance
  Instructions issued under the Public Finances (Management) Act 1995.

  Reported on Other Legal and Regulatory Requirements

  Internal Audit

  I have noted non-compliance with the MRA Act, 2005, Section 39 (5) which states that
  MRA is required to appoint an internal auditor who is to provide a written audit report
  not less than quarterly to the Minister and Treasury. My enquiries revealed that whilst
  an internal auditor was appointed, no internal audit work was carried out for the
  financial year ended 31 December 2014.

  Statutory Audit

  The audit of the 2014 Statutory Financial Statements was not finalised by 31 May
  2015 due to weaknesses in the Authority‟s accounting system and overall internal
  control environment. As such, management was unable to meet the deadline required
  by Section 36(1) of the Mineral Resource Authority Act 2005 which requires audited
  financial statements of the Authority to be furnished to the Minister before 31 May
  2015.”

  18.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act, on the inspection and
  audit of the accounts and records of the Authority for the year ended 31 December
  2014 was issued on 15 June 2017. The report contained the following observations:

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• Page 81 of 293

• Mineral Resources Authority

  OTHER MATTERS

  . Internal Control Environment

  During the course of my audit, I identified several weaknesses in the Authority‟s
  accounting system and overall internal control environment operated during the
  year ended 31 December 2014: Management information are insufficient and
  reconciliations are not performed for items included in the Statement of
  Financial Position and/or reconciliations between the general ledger and sub
  ledgers wh _ ich resulted in significant delays in receipt of information for the I
  audit. I

  I recommended that management implement a system whereby reconciliations
  are prepared for each item stated on the Statement of Financial Position and that
  reconciling items followed up promptly and resolved. Management should also
  ensure that reconciliations are performed between the general ledger and sub
  ledgers __ and that reconciling items followed up promptly in order to ensure
  completeness and accuracy of data for reporting purposes.

  . Internal Audit Function

  I also noted non-compliance with the Mineral Resources Act (MRA) Act section
  39 (5) which states that MRA is required to appoint an internal auditor who is to
  provide a written audit report not less than quarterly to the Minister and
  Treasury. There was no internal audit work undertaken by an internal auditor.
  Further, my discussions with the internal auditor revealed non existence of
  adequate audit manuals, work programs and written work programs.

  I recommended that management ensure internal audit manuals and work plans
  are___developed to assist the internal audit department in performing tasks against
  a __ set of guidelines and to furnish reports to the Minister and Treasury as
  required by the MRA Act.

  The management responded as follow

  “An internal audit manual is not developed for MRA as yet. Currently we have
  adopted the “Practice Guide for Internal Auditors” being applied as an Internal
  Audit Manual in the Public Sector, issued by the Department of Finance for
  National Departments, Statutory Bodies and Provincial Local Level
  Governments in PNG. Internal Audit Work Plans are incorporated as part of the
  yearly Internal Audit Plan which is endorsed by the Audit Committee. Internal
  Audit written Test Programs are developed for each business unit or branch
  once sanctioned for audit review. Development of audit programs for each
  respective branch are continuing and updated regularly as an ongoing
  process.”

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• Page 82 of 293

• Mineral Resources Authority

  . Royalty Trust Deeds

  It was noted during my review that the MRA keeps in its books royalty funds for
  Simberi Gold and New Guinea Gold landowners. These monies or funds were
  noted to be held without a proper royalty trust deed in place setting out the rights
  and responsibilities of all parties including the operator, the mine, the
  landowners and MRA. In the absence of a royalty trust deed, any legal issues
  arising from the use of those funds would affect MRA in the future.

  I recommended to the management that all future trust funds held for and on
  behalf of land owners should come with a properly executed trust deed.

  The management responded as follows:

  “Board has asked management to look into this matter and pay money back to
  the various custodians by June 2017.”

  . Fixed Assets Register Maintenance

  During my review, I noted that there were no proper controls in place in
  maintaining the Fixed Assets Register (FAR). Further, there was no physical
  asset verification conducted in 2014. Best practice requires that companies
  should perform a physical inventory at least annually to ensure the physical
  accountability of all fixed assets and the completeness and accuracy of financial
  records. No regular physical verification of assets may result in control
  deficiencies in monitoring the assets existence and condition as the assets may
  not be able to be identified or located or some assets may have been fully
  depreciated and disposed of during the year and not considered in the financial
  statements.

  I also noted that the fixed asset verification exercise was carried out in 2015. As
  such, I recommended that management should develop cost-effective physical
  asset verification procedures to ensure its fixed assets are properly safeguarded,
  maintained, utilized and monitored and controls around the maintenance of the
  fixed assets should be improved.

  The management responded as follows:

  “Fixed Asset verification is now a regular exercise and the fixed asset register
  continually updated. Monthly depreciation is now being captured in the
  system.”

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• Page 83 of 293

• Mineral Resources Authority

  . Ineffective Controls in Invoicing

  I noted that all accounts receivable/sales transaction have no (sequential) invoice
  nor substantial documentation for the calculation of the assessable income and
  production levy except for receipt copies and payment advise from miners. As a
  result of this, I was unable to perform testing to address the misstatement in the
  revenue account. Ineffective ways of raising invoices can encourage fraudulent
  activities.

  I recommended that the Authority should establish an effective accounting
  method to address the risk of inaccurate billing which may result in potential
  losses and other impeding issues leading to incorrect revenue recognition.

  The management responded as follows:

  “We have now in placed an improved invoicing system in our new computerized
  accounting system which requires an invoice for all debtors and creditors.”

  . Acquittal of Staff Advance

  I noted that MRA personnel were not in compliance with the acquittal process as
  stipulated in Section 8.5 of the MRA policy. For the six (6) samples selected for
  testing, no supporting documents were provided for an advance payment of
  K49,700. I was unable to verify that these payments were acquitted because
  100% of the sample tested had no supporting documents. As a result of the
  reconciliation performed after the audit, K102,276 was written off to the
  expense account.

  I recommended that management should reiterate the importance of complying
  with the policy for acquitting funds and also ensure that non-compliance
  measures are effected to avoid such issues in the future.

  The management responded as follows:

  “Taken up in the audit adjustment. All staff advances are now being reconciled
  monthly and recovered by salary deduction through payroll.”

  . PIP Reimbursable

  I noted that MRA had a total of K604,049 that is reimbursable from PIP that is
  classified as a current debtor in the financials. Although we verified that these
  amounts were receivable, we were not certain that these are current (receivable
  within 12 months from 31/12/14). MRA had made a provision of K526,170 for
  this balance.

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• Mineral Resources Authority

  I recommended that management take into consideration feasible ways of
  ensuring that a written agreement and consensus is reached by both parties (PIP
  & MRA) for any services carried out by MRA to be reimbursed.

  The management responded as follows:

  “Expenditures paid by MRA are now being reimbursed as soon as PIP
  authorised signatories are available. Management is now embarking on
  recovering amounts owed which were all prior to 2014.”

  . Production Levy (Non-Alluvial Income)

  I noted that the production levies are being calculated and remitted by producing
  P iQffsTI(W)sTI fflf-iQYRiFiQJ’LJ TI3 rRd)FtiRQTIlffYiffsTIiQFRP ffTIi~TIF11F)lDtffdTIEDffdTIRQTI
  0.25% of assessable income of producing mines and accounts for almost 70% of
  hffTI$ )~IRTiE~~~TIiQFRP ff. TI7 EffTI$ )tJRriWTIdid QRtTItffstTItJff TIYffiIFityTIRITIMffTI3fflD-
  iQYRiFffd’ TI1ffYffQ)ffTILQ3TIVffTI$ )tJRriWTIdid not maintain a register of mining
  companies that are required to pay these production levies.
  As a result, of the lack of control around the raising of production levy income,
  it is highly likely that not all producing mines are remitting the required
  production levy to the Authority. This causes uncertainty around the
  completeness and accuracy of production levy income recorded.

  I recommended that management implement policies and procedures whereby it
  is mandatory for all producing mines to declare their assessable income to the
  Authority regardless of whether they made a profit or a loss for the relevant
  financial period.

  The management responded as follows:

  “This is now being addressed through a concerted effort whereby our
  regulatory operations compiles the annual data, which is collected every month
  through Form 25 and this forms the basis of determining the production levy
  due (in best approximate value). There will be a small variance and this will be
  due to the underlying fact that this levy is based on all assessable income and
  therefore the Mining Company will have to report all that on top of the
  production levy which will be based production data we (MRA) collect.”
  18.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the fff IP iQaJiRQTIRITIMffTI$ )~~R~i~v~~TI1iQaQFiIlTI
  statements for the year ended 31 December 2015 was in progress.

  The Authority had not submitted its financial statements for the years ended 31
  December 2016 and 2017 for my inspection and audit.

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• Page 85 of 293

• 19. NATIONAL AGRICULTURE QUARANTINE AND INSPECTION
  AUTHORITY

  19.1 INTRODUCTION

  19.1.1 Legislation

  The National Agriculture Quarantine and Inspection Authority (NAQIA) was
  established by the National Agriculture Quarantine and Inspection Authority Act
  1997. This Act came into operation on 29 May 1997.

  Under this Act, all assets used for Quarantine and Inspection Services (other than land
  held by the State) and previously held by the Department of Agriculture and
  Livestock which were necessary to be transferred to the Authority for the purposes of
  the Authority, were transferred to and became the assets of the Authority at
  commencement.

  19.1.2 Objectives of the Authority

  The main objectives of the Authority as mentioned in the Act are the conduct of
  quarantine and inspection of: any animal and species; any fish species; any plant
  species; any products derived from animals, fish and plants; and to prevent pests or
  diseases from entering in or going out of PNG.

  19.1.3 Functions of the Authority

  The functions of the Authority, as mentioned in the Act are to:

  • Advise the Ministry and the National Government on policy formulations and
  legislative changes pertaining to agriculture quarantine and inspection matters;
  • Monitor and inspect all imports of animals, fish and plants and their parts and
  products, including fresh, frozen and processed food to ensure that the imports
  are free from pests, diseases, weeds and any other symptoms;
  • Regulate and control all imports of animals, fish and plants and their parts and
  products, including fresh, frozen and processed food to ensure the imports are
  free from pests, diseases, weeds and any other symptoms;
  • Undertake all necessary actions to prevent arrival and spread of pests, diseases,
  contamination, weeds, and any undesirable changes pertaining to animals, fish
  and plants and their parts and products, including fresh, frozen and processed
  foods;
  • Monitor, inspect and control the export of animals, fish and plants and their
  parts and products to ensure that they are free from pests, diseases, weeds and
  any other symptoms;

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• National Agriculture Quarantine and Inspection Authority

  • Undertake all necessary actions to ensure that the export of animals, plants, fish
  and their parts and products are free from pests, diseases, weeds and any other
  symptoms so as to provide quality assurance to meet the import requirements of
  importing countries;
  • Issue permits, certificates and endorsements pertaining to imports and exports of
  animals, fish and plants and their parts and products to provide quality assurance
  and to ensure that they are free from pests, diseases, weeds and any other
  symptoms;
  • Inspect and treat vessels, aircraft, vehicles, equipment and machinery that are
  used in importing and exporting animals, fish and plants to ensure that they are
  free from pests, diseases, weeds and any other symptoms;
  • Regulate the movement of animals and plants from one part of the country to
  another to control and prevent the spread of pests, diseases, weeds and any other
  symptoms;
  • Undertake and maintain inspection and quarantine surveillance pertaining to
  pests, diseases, weeds and any other symptoms on animals, fish and plants
  within and on the borders of the country;
  • Monitor, assess and carry out tests on animals, fish and plants and their parts
  and products that are introduced into the Country, to ensure that they are free of
  pests, diseases, weeds and any other symptoms;
  • Liaise with other countries, international agencies and other organisations in
  developing policies, strategies and agreements relating to quarantine, quality and
  inspection matters in respect of animals and plants;
  • Provide quarantine and inspection information and services to individuals,
  agencies and other organisations within the Country and overseas in respect of
  animals and plants;
  • Levy fees and charges for any of the purposes of this Act and any regulations
  made there under;
  • Exercise all functions and powers and perform all duties which, under any other
  written law, are or may be or become vested in the Authority or are delegated to
  the Authority; and
  • Do such matters and things as may be incidental to or consequential upon the
  exercise of its power or the discharge of its functions under this Act.

  19.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Authority for the year ended 31 December 2016 had been completed and the
  results were being evaluated.

  The financial statements of the Authority for the year ended 31 December 2017 had
  not been submitted for my inspection and audit.

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• 20. NATIONAL AGRICULTURAL RESEARCH INSTITUTE

  20.1 INTRODUCTION

  20.1.1 Legislation

  The National Agricultural Research Institute (NARI) was established by the National
  Agricultural Research Institute Act 1996. This Act came into operation on 10 October
  1996.

  Under this Act, all monies allocated to or standing to the credit of the research
  division of the Department of Agriculture and Livestock and all assets used for
  research and research related functions (other than land held by the State) and
  previously held by the Department of Agriculture and Livestock prior to the
  operationalisation of the Act were transferred to the Institute to become the assets at
  commencement.

  20.1.2 Objectives of the Institute

  The main objectives of the Institute stated in the Act are to conduct and foster
  research into:

  • Any branch of biological, physical and natural sciences related to agriculture;
  • Cultural and socioeconomic aspects of the agricultural sector, especially of the
  smallholder agriculturalists; and
  • Matters relating to rural development, relevant to PNG.

  20.1.3 Functions of the Institute

  The primary functions of the Institute spelt out by the Act are to:

  • Generate and adapt agricultural technologies and resource management
  practices appropriate to the needs, circumstances and goals of smallholder
  agriculturalists;
  • Promote and facilitate applied and adaptive research in food crops, livestock,
  alternative cash crops, and resource management;
  • Promote the use of appropriate agricultural technologies and provide essential
  technical services to improve the productivity, income, nutritional status and
  food security, resource base and quality of life of rural households and
  communities;
  • Develop and promote ways of improving the output, quality, harvesting, post-
  harvesting, handling and processing, and marketing of food crops, livestock
  produce and alternative crops;

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• National Agricultural Research Institute

  • Maintain and conserve the diversity of genetic resources for food and
  agriculture, act as custodian for these resources and promote the effective
  utilisation of these resources in the country;
  • Update and maintain the national inventory on soil resources and to develop,
  promote and maintain sustainable practices in agriculture;
  • Provide agricultural information services, extension service support and other
  such assistance packages to the agricultural sector and to provide liaison and
  access to international agencies that promote agricultural development;
  • Perform such other functions as are given to it under this Act or any other law;
  • Formulate national agricultural research policies, define sectoral research
  priorities and allocate funds and advise the Minister and the NEC on these
  matters; and
  • Generally, do all such things as may be incidental or consequential upon the
  exercise of its powers and the performance of its functions.

  20.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the inspection and audit of the accounts and
  records and examination of the financial statements of the Institute for the year ended
  31 December 2017 had been completed and the results were being evaluated.

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• 21. NATIONAL AIDS COUNCIL SECRETARIAT

  21.1 INTRODUCTION

  21.1.1 Legislation

  The National AIDS Council Secretariat was established under the National AIDS
  Council Act 1997. This Act was certified and became operational on 19 January 1998.

  21.1.2 Objectives of the Council

  The objectives of the Council are to take multi sectoral approaches with a view to:

  • Prevent, control and to eliminate HIV/AIDS transmission in PNG;
  • Organise measures to minimise the personal, social and economic impact of
  HIV/AIDS; and
  • Safeguard personal privacy, dignity and integrity in the face of the HIV/AIDS
  epidemic in PNG.

  21.1.3 Functions of the Council

  The functions of the Council include formulation, implementation, review and
  revision of national policy in accordance with its objects for the prevention, control
  and management of HIV/AIDS:

  • Make recommendations and provide guidelines on the related issues to the
  National Executive Council (NEC), Provincial Governments (PGs) and Local
  Level Governments (LLGs);
  • Foster, co-ordinate and monitor HIV/AIDS prevention, control and management
  strategies and program;
  • Accept, administer and account for the funds and other resources allocated to it;
  • Consult and co-ordinate with the appropriate state agencies and other persons
  and organisations on matters related to its activities;
  • Initiate, encourage, facilitate and monitor preparation and dissemination of
  information, counselling, care and legal services, research on or in relation to
  HIV/AIDS; and
  • Perform such other functions given to it under Section 5 of this Act or any other
  law.

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• National AIDS Council Secretariat

  21.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of the Council for the
  year ended 31 December 2015 were submitted and arrangements were being made to
  commence the audit shortly.

  The Council had not submitted the financial statements for the years ended 31
  December 2016 and 2017 for my inspection and audit, despite numerous reminders.

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• 22. NATIONAL BROADCASTING CORPORATION

  22.1 INTRODUCTION

  22.1.1 Legislation

  The National Broadcasting Commission (NBC) was established under the
  Broadcasting Commission Act (Chapter 149). This Act was amended in 1995 by the
  National Broadcasting Commission (Change of Name and Corporate Structure) Act
  1995.

  In terms of Section 4 of the Broadcasting Commission (Change of Name and
  Corporate Structure) Act No.49 of 1995 the name of the Commission was changed to
  Corporation.

  The Amendment Act No.49 of 1995 came into operation on 23 April 1996 as per
  Gazettal Notification No.G.32.

  22.1.2 Functions of the Corporation

  The principal functions of the Corporation are to provide balanced, objective and
  impartial broadcasting services and in so doing, to take in the interests of the
  community, all such measures as in its opinion are conducive to the full development
  of suitable broadcasting programs.

  The Corporation‟s other functions are to:

  • Ensure that the services that it provides, when considered as a whole, reflect the
  drive for national unity and at the same time give adequate expression to the
  culture, characteristics, affairs, opinions and needs of the people of the various
  parts of the country and in particular of rural areas;
  • Do all in its power to preserve and stimulate pride in the indigenous and
  traditional cultural heritage of PNG;
  • Take extreme care in broadcasting material that could inflame racial or sectional
  feelings; and
  • Co-operate with the Government in broadcasting social, political, economic and
  educational programs.

  22.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Corporation for the year ended 31 December 2015 was in progress.

  The Corporation had not submitted its financial statements for the years ended 31
  December 2016 and 2017 for my inspection and audit.
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• 23. NATIONAL CAPITAL DISTRICT COMMISSION

  23.1 INTRODUCTION

  23.1.1 Legislation

  The National Capital District Government (Preparatory Arrangements) Act 1982
  established the National Capital District Interim Commission. The purpose of this Act
  was to establish an interim government for the NCD and make preparatory
  arrangements for the establishment of a government for the NCD as required by
  Section 4(4) of the National Constitution. The National Capital District Government
  (Preparatory Arrangements) (Amendment) Act 1986 came into operation in 1987.

  The National Capital District Commission Act 1990, which became operational on 5
  November 1990, established the NCD Commission. The introduction of this Act
  resulted in the amalgamation of Motu Koitabu Interim Assembly with the NCD
  Commission. Consequently, the assets, liabilities and the obligations of the Interim
  Assembly were absorbed by the Commission on the commencement date.

  Amendments through the National Capital District Commission (Amendment) Act
  1992 which came into effect on 30 November 1992 resulted in the establishment of
  the Motu Koitabu Council.

  That was followed by the establishment of the system of government for the NCD
  through the National Capital District Commission (Amendment) Act 1995 which came
  into operation on 19 July 1995. The NCD comprises the NCD Commission, the Motu
  Koitabu Council and Local-level Governments in the NCD.

  23.1.2 Functions of the Commission

  The functions of the NCD Commission are to:

  • control, manage and administer the NCD to ensure its welfare and that of the
  persons in its jurisdiction; and
  • ensure that an adequate level of assistance is given towards the successful
  operation of Tabudubu Limited – the Company established by the Motu Koitabu
  Interim Assembly for the Motu Koitabu people of the NCD.

  23.1.3 Subsidiaries of the Commission

  The subsidiaries of National Capital District Commission are National Capital District
  Botanical Enterprises Limited, Port Moresby City Development Enterprises Limited
  and Port Moresby Nature Park Limited. Comments in relation to these subsidiaries are
  contained in paragraphs 23A, 23B and 23C of this Report.

  – 58 –

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• National Capital District Commission

  23.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Commission for the years ended 31 December 2014 and 2015 had been completed
  and the results were being evaluated.

  The fieldwork associated with the inspection and audit of the accounts and records
  and examination of the Commission‟s financial statements for the year ended 31
  December 2016 was in progress.

  The financial statements of the Commission for the year ended 31 December 2017
  had not been submitted for my inspection and audit.

  – 59 –

• Page 94 of 293

• 23A. NATIONAL CAPITAL DISTRICT BOTANICAL ENTERPRISES
  LIMITED (Subsidiary of NCDC)

  23A.1 INTRODUCTION

  The NCD Botanical Enterprises Limited was incorporated under the Companies Act
  on 17 January 2000. Port Moresby City Development Enterprises Limited (a 100%
  owned subsidiary of the NCD Commission) holds 94% of the shares and the NCD
  Commission holds the remaining 6% shares directly or indirectly through trust.

  23A.1.1 Objective of the Company

  The main objective of the Company is to take control over the operations of the
  Botanical Gardens.

  23A.1.2 Functions of the Company

  The CRP SI~~ ~ activities include the sale of flowers and conducting research
  relating to orchids and horticulture.

  23A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not submitted its financial
  statements for the years ended 31 December 2013, 2014, 2015, 2016 and 2017 for
  my inspection and audit, despite numerous reminders.

  – 60 –

• Page 95 of 293

• 23B. PORT MORESBY CITY DEVELOPMENT ENTERPRISES
  LIMITED (Subsidiary of NCDC)

  23B.1 INTRODUCTION

  The National Capital District Commission acquired 100% shares of Vatar No.16 Pty
  Limited in 1994 with the intention to utilise the land called „Duran Farm‟ for the
  construction of houses for its staff on the Home Ownership Scheme. The Company
  changed its name in November 1996 to Port Moresby City Development Enterprises
  Limited. This Company is a fully owned subsidiary of the National Capital Disrict
  Commission.

  23B.1.1 Functions of the Company

  The Company‟s activities include business promotions in the National Capital
  District and the management of the Taurama Leisure Centre‟s gymnasium.

  23B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not submitted its financial
  statements for the years ended 31 December 2013, 2014, 2015, 2016 and 2017 for
  my inspection and audit. The Commission advised that this entity was no longer in
  operation and in the process of deregistering from the Investment Promotion
  Authority (IPA). However, no documents were produced to my Office in relation to
  deregistration.

  – 61 –

• Page 96 of 293

• 23C. PORT MORESBY NATURE PARK LIMITED (Subsidiary of NCDC)

  23C.1 INTRODUCTION

  23C.1.1 Legislation

  Port Moresby Nature Park Limited was incorporated on 1 December 2011 under the
  Companies Act. The Company is a subsidiary of the National Capital District
  Commission (NCDC).

  In early 2012, a Deed of Trust was signed between Port Moresby Nature Park
  Limited (being the Trustee) and the National Capital District Commission (being the
  Settlor). The Trust Deed provided the intention of the Settlor (NCDC) to make Port
  Moresby Nature Park Limited a charitable body to be known as “Port Moresby
  Nature Park Trust.”

  On 11 June 2012, the Port Moresby Nature Park Limited was granted status of a
  charitable body based on the nature of its business operations. Hence, the Company
  has been exempted from Income Tax.

  23C.1.2 The Objective of the Company

  The objective of the Company is to allow the residents and visitors to Papua New
  Guinea (PNG) enjoy a botanical and zoological experience consisting of the flora
  and fauna of PNG in a safe, secure setting in Port Moresby, for the purposes of
  education and for purposes beneficial to the community, including:

  • Allowing persons, including residents of, and visitors to, PNG to enjoy the
  benefits of flora and fauna of PNG in a peaceful, well-ordered and secure
  recreational settings in the grounds of the Port Moresby Nature Park;
  • Encouraging a greater understanding of the cultural significance of the flora,
  fauna and environment of PNG;
  • Furthering the appreciation and learning of PNG in relation to the flora, fauna
  and environment of PNG;
  • Promoting the use of the Port Moresby Nature Park to stimulate interest and
  research into PNG flora, fauna and environment and assisting the
  conservation efforts of the Government of PNG and the National Capital
  District Commission (NCDC) in relation to the environment; and
  • Allowing students from any educational institute to gain practical training,
  education and research opportunities on specific terms.

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• Port Moresby Nature Park Limited

  23C.1.3 Functions of the Company

  The functions of the Company include:

  • Encouraging, promoting and supporting the use of new and established
  technologies to make the unique natural environment of PNG more accessible
  to the public of PNG;
  • Promoting, assisting and initiating research in PNG into the study of PNG
  flora, fauna and the environment including the provision of such financial
  assistance as may be necessary to enable or assist such research;
  • Promoting, supporting and initiating research in PNG on the flora, fauna and
  environment of PNG and educating and informing different communities
  about the results of such research;
  • Providing a forum for information from international contributors from the
  global community for the purpose of educating the PNG public in relation to
  the flora, fauna and environment of PNG;
  • Doing such other lawful acts and things as are incidental to or conducive to the
  attainment of any of the foregoing activities; and
  • Generally:

  • Carrying out fund raising schemes and charitable projects for the
  purpose of the Company, including exhibition and competitions; and
  • Establishing, promoting and fostering workshops and other educational
  activities for the purpose of the Company.

  23C.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the inspection and audit of the accounts and
  records and the examination of the financial statements of the Company for the years
  ended 31 December 2014 and 2015 had been completed and the results were being
  evaluated.

  The fieldwork associated with the inspection and audit of the accounts and records
  and examination of the financial statements of the Company for the year ended 31
  December 2016 was in progress.

  The Company had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 63 –

• Page 98 of 293

• 24. NATIONAL CULTURAL COMMISSION

  24.1 INTRODUCTION

  24.1.1 Legislation

  The National Cultural Commission was established under the National Cultural
  Commission Act 1994. This Act came into operation on 15 November 1994, there by
  repealing the National Cultural Committee (Interim Arrangements) Act 1993.

  Under the Act, all assets held by and obligations and liabilities imposed on the former
  National Cultural Committee immediately before the operationalisation of the Act
  were on that date transferred to the Commission.

  24.1.2 Functions of the Commission

  The main functions of the Commission are to:

  • Perform the cultural functions of the former National Cultural Committee and
  in this connection, to assist and facilitate, preserve, protect, develop and
  promote the traditional cultures of the indigenous people of PNG;
  • Encourage the development, promotion and protection of the contemporary
  cultures of PNG;
  • Facilitate the marketing of selected and approved aspects of the cultures of
  PNG;
  • Co-ordinate with related Government and Non-Government agencies on
  cultural matters;
  • Co-ordinate cultural activities with provincial cultural bodies;
  • Liaise with Non-Government organisations on cultural matters; and
  • Liaise with international cultural organisations.

  24.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Commission for the year ended 31 December 2014 had been completed and the
  management responses were being awaited to finalise the audit reports.

  The Commission had not submitted its financial statements for the years ended 31
  December 2015, 2016 and 2017 for my inspection and audit.

  – 64 –

• Page 99 of 293

• 25. NATIONAL ECONOMIC AND FISCAL COMMISSION

  25.1 INTRODUCTION

  25.1.1 Legislation

  The National Economic and Fiscal Commission was established in April 1996 under
  the National Economic and Fiscal Commission Act 1996 and Section 117 of the
  Organic Law on Provincial and Local-level Governments.

  25.1.2 Functions of the Commission

  The main functions of the Commission are to:

  • Provide assessment and views on national macro and micro economic issues
  and their relevance on the overall development of rural and urban communities;
  • Consider and co-ordinate requests by Provincial Governments and Local-level
  Governments for foreign grants, loans and other financial assistance for
  development purposes;
  • Ensure that Provincial Governments and Local-level Governments obtain a fair
  share of the national wealth and make recommendations to the NEC on the
  allocation of grants to Provincial Governments and Local-level Governments;
  • Recommend suitable economic development strategies and sound fiscal
  management policies to the Minister responsible for financial matters;
  • Carry out cost and benefit analysis on the development of all natural resources
  and the impact of such development on national development and make such
  analysis available to the NEC;
  • Review public accounting and related practices;
  • Make yearly reports and recommendations to the NEC through the Minister
  responsible for financial matters;
  • Assist the Provincial and Local-level Service Monitoring Authority with
  assessments and views on the planning and implementation systems of the
  Provincial Governments and Local-level Governments;
  • Establish and maintain a gradation system for the purpose of classifying
  provinces and districts according to the stages of development of each;
  • Assist the Provincial and Local-level Service Monitoring Authority in carrying
  out its other functions; and
  • Provide advice to the Minister responsible for Provincial Government and
  Local-level Government (now Inter Government Relations) matters as and
  when required.

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• National Economic and Fiscal Commission

  25.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the
  Commission for the year ended 31 December 2017 had been completed and the audit
  reports were being finalised.

  – 66 –

• Page 101 of 293

• 26. NATIONAL FISHERIES AUTHORITY

  26.1 INTRODUCTION

  26.1.1 Legislation

  The National Fisheries Authority was established under the Fisheries Management
  Act 1998. This Act came into operation on 11 February 1999 and replaced the
  Fisheries Act 1994. Under this Act, all assets including monies held in trust accounts
  which were held or occupied by the National Fisheries Authority established under
  the Fisheries Act were transferred to and became assets of the Authority.

  26.1.2 Functions and Powers of the Authority

  The primary functions and powers of the Authority are to:

  – Manage the fisheries within the fisheries waters in accordance with this Act,
  taking into account the international obligations of PNG in relation to tuna and
  other highly migratory fish stocks;
  – Make recommendations to the Board on the granting of licences and implement
  any licensing scheme in accordance with this Act;
  – Liaise with other agencies and persons, including regional and international
  organisations and consultants, whether local or foreign, on matters concerning
  fisheries;
  – Operate research facilities aimed at the assessment of fish stocks and their
  commercial potential for marketing;
  -Subject to the Pure Foods Act, the Commerce (Trade Descriptions) Act, the
  Customs Act, the Customs Tariff Act and the Exports (Control and Valuation) Act
  control and regulate the storing, processing and export of fish and fish products;
  -Appraise, develop, implement and manage projects, including trial fishing
  projects;
  – Prepare and implement appropriate public investment programmes;
  – Collect data relevant to aquatic resources;
  – Act on behalf of the government in relation to any domestic or international
  agreement relating to fishing or related activities or other related matters to which
  the Independent State of PNG is or may become a party;
  – Make recommendations on policy regarding fishing and related activities;
  – Establish any procedures necessary for the implementation of this Act, including
  tender procedures; and
  – Implement any monitoring, control, and surveillance scheme, including co-
  operation, agreements or arrangements with other States or relevant international,
  regional or sub-regional organisations, in accordance with this Act.

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• National Fisheries Authority

  • The Authority has, in addition to the powers otherwise conferred on it by this
  Act and any other law, full powers to do all things that are necessary or
  convenient to be done for or in connection with the performance of its functions
  and the achievement of its objectives.

  26.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Authority for the year ended 31 December 2015 had been completed and the audit
  reports were being finalised.

  The fieldwork associated with the inspection and audit of the accounts and records
  and the examination of the financial statements of the Authority for the year ended 31
  December 2016 was in progress.

  The Authority had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 68 –

• Page 103 of 293

• 27. NATIONAL GAMING CONTROL BOARD

  27.1 INTRODUCTION

  27.1.1 Legislation

  The National Gaming Control Board was established under the Gaming Control Act
  2007. The Act came into operation on 1 May 2007. The objective of the Act is to
  provide for the control of all forms of gaming; including lotteries, games and wagers,
  gaming machines and casinos and for their operations, and for related purposes. This
  Act repealed the Gaming Machine Act 1993.

  27.1.2 Functions of the Board

  The principal functions of the Board are to:

  • Promote probity and integrity in gaming;
  • Maintain the probity and integrity of persons engaged in gaming in the country;
  • Promote fairness, integrity and efficiency in the operations of persons engaged in
  gaming in the country;
  • Reduce any adverse social impact of gaming;
  • Promote a balanced contribution by the gaming industry to general community
  benefit and amenity; and
  • Consider applications for and where appropriate grant permits and licenses under
  this Act and to control the operations of gaming machines as specified in this
  Act.

  27.1.3 Subsidiary of the Board

  National Gaming Control Board Community Benefit Fund Trust is a subsidiary of the
  Board. Comments in relation to this subsidiary are contained in paragraph 27A of this
  Report.

  27.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Board for the year ended 31 December 2015 had been completed and the audit
  reports were being finalised.

  The Board had not submitted its financial statements for the years ended 31 December
  2016 and 2017 for my inspection and audit.

  – 69 –

• Page 104 of 293

• 27A. NATIONAL GAMING CONTROL BOARD COMMUNITY
  BENEFIT FUND TRUST (Subsidiary of National Gaming Control Board)
  27A.1 INTRODUCTION

  27A.1.1 Legislation

  The Community Benefit Fund (CBF) was established under the provision of Section
  163(6)(a) of the Gaming Control Act 2007 on 1 May 2007 when the Act was passed
  and certified by the Parliament.

  The Gaming Control Act authorises the Board of National Gaming Control Board
  (NGCB) to establish a “Community Benefit Fund” and shall open a trust account to
  be called the “Community Benefit Fund Account” in which payments of 14% of
  monthly gaming revenues are made.

  The Trust is managed and operated by a Board of Trustees comprised of the
  Chairman of the NGCB Board and four additional Trustees as members appointed
  by the Minister in a notice in the National Gazette, and in accordance with the terms
  of a trust deed that is settled by the Board.

  The CBF started its operations in 2008.

  27A.1.2 Objectives of the Fund

  The objectives of the Fund Trust are to:

  • provide for and apply the income and capital of the Trust Fund towards
  generally charitable purposes, including without limitation, the alleviation of
  poverty, the advancement of education, sports development and other purposes
  generally beneficial to the people of Papua New Guinea;
  • undertake research into the problems associated with gambling activities
  including the social and economic impact of gambling on individuals, families
  and the communities at large; and
  • promote community awareness and education in respect of problem gambling
  and the provision of counselling, rehabilitation and support services for problem
  gamblers and their families.

  27A.1.3 Functions of the Fund

  The principal function of the Fund is to provide for and apply the income and
  capital of the fund towards generally charitable purposes, including but not
  exclusive of the following areas:

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• Page 105 of 293

• National Gaming Control Board Community Benefit Fund Trust

  • provision and improvement of social welfare;
  • development of sports and improvement of recreational facilities;
  • improvement of education and learning tools (not including school fees);
  • assistance to churches and religious groups;
  • provision of medical assistance;
  • assistance to education, health and law and order projects; and
  • undertake research into problems on gambling and promote community
  awareness and education on negative aspects of gambling.

  27A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Fund for
  the year ended 31 December 2015 had been completed and the audit reports were
  being finalised.

  The Fund had not submitted its financial statements for the years ended 31
  December 2016 and 2017 for my inspection and audit.

  – 71 –

• Page 106 of 293

• 28. NATIONAL HOUSING CORPORATION

  28.1 INTRODUCTION

  28.1.1 Legislation

  The National Housing Commission Act (Chapter 79) was repealed by the National
  Housing Corporation Act 1990. The assets and liabilities of the former National
  Housing Commission were transferred to the National Housing Corporation in March
  1990.

  28.1.2 Functions of the Corporation

  The principal functions of the Corporation are to:

  • Improve housing conditions;
  • Provide adequate and suitable housing or letting to eligible persons;
  • Sell houses to eligible persons;
  • Make advances to eligible persons and approved applicants to enable them to
  become the owners of houses occupied by them;
  • Develop residential land by way of providing adequate services for human
  settlements;
  • Carry out and promote research or investigations into matters connected with
  urban development and human settlements; and
  • Maintain dwellings and associated buildings vested in the Corporation.

  28.1.3 Subsidiary of the Corporation

  The National Housing Corporation has a subsidiary Company, National Housing
  Estate Limited. Comments in relation to the National Housing Estate Limited are
  contained in paragraph 28A of this Report.

  28.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  28.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on the Corporation‟s
  financial statements for the year ended 31 December 2014 was issued on 21
  November 2017. The report contained a Disclaimer of Opinion.

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• Page 107 of 293

• National Housing Corporation

  “BASIS FOR DISCLAIMER OF OPINION

  Management‟s Declaration of Disclaimer on Financial Statements

  The management made a declaration on deficiencies in the preparation and fair
  presentation of the financial statements of the Corporation due to ongoing major
  internal control lapses including lack of proper accounting system, lack of proper
  record keeping, non-existence of accounting manual, absence of fixed assets
  management and registers and lack of debtors control system.

  The declaration indicates that the Directors and the Management had failed to comply
  with the requirements of the Public Finances (Management) Act 1995 (as amended)
  (PFMA) by not maintaining proper records and books of accounts to enable me to
  conduct the audit in time as required by Section 63(3) (c) of the PFMA.

  Limitation of Scope due to Opening Balances

  My Report for the prior year, 31 December 2013 was a disclaimer of opinion. I was
  not able to satisfy myself as to the accuracy and completeness of the opening balances
  of fixed assets, trade payables, provisions and other liabilities, cash and cash
  equivalents, advance from PNG government, and government equity. Since these
  opening balances entered into the determination of the results of operations and cash
  flows of the Corporation for the financial year ended 31 December 2014, I was unable
  to determine whether adjustments to the results of operations and cash flows might
  have been necessary for the year then ended.

  Revenues and Expenses

  The Income Statement reported total revenue of K17,348,235, total expense of
  K18,660,119 and a net loss of K1,311,884 for the year ended 31 December 2014.
  However, I could not confirm these figures as there was no reliable system in place to
  ensure that all billed amounts in rental, mortgage and other revenues were collected
  and properly accounted for through a debtor‟s ledger system. In addition, schedules
  and accounting records for all the revenue and expense account balances reported in
  the financial statements were not made available for my review. I also noted serious
  internal control weaknesses with payment procedures that could affect the balance
  and classification of various expense items stated in the financial statements. Further,
  included in Note 11 of the financial statements was an amount of K10,388,900 stated
  as Proceed from Disposal of Properties. This figure could not be confirmed as
  documents and records in respect of the sale of the properties were not made available
  for my review. As a result, I could not confirm the accuracy and completeness of the
  revenue and operational costs as reported for the year ended 31 December 2014.

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• Page 108 of 293

• National Housing Corporation

  Cash and Cash Equivalents (K1,230,351)
  –

  The Cash and Cash Equivalents balance was an overdraft of K1,230,351 as reported
  in the financial statements as at 31 December 2014. There were no bank reconciliation
  statements, cash books and ledgers. I was therefore unable to verify and confirm the
  accuracy and existence of the cash and cash equivalent balance existed as at 31
  December 2014.

  Trade Receivables K-Nil
  –

  The Trade Receivables had nil balance as at 31 December 2014. This was a major
  omission as the Corporation would have debtors while it operates property rentals and
  sales schemes. A proper debtors‟ ledger system has not been maintained from which a
  reliable debtors‟ balance could be obtained.

  Other Debtors K356,277
  –

  Other debtors balance as at 31 December 2014 comprised of Prepayment of K32,936,
  Staff Emergency Assistance Fund of K25,747 and Salary Advance of K297,594. All
  these balances were not supported by schedules and accounting records.

  Fixed Assets K10,981,938
  –

  The carrying value of Properties, Plants and Equipment as at 31 December 2014 was
  K10,981,938 as reported in the balance sheet. A Fixed Assets Register was not
  maintained and listings and schedules were not available in support of the carrying
  value. A physical stock-take was not carried out on fixed assets and periodic
  valuations were not done on properties owned by the Corporation. As a result, I was
  unable to confirm the completeness, existence, valuation and accuracy of the fixed
  assets balance as reported.

  Investments

  The National Housing Estate Limited (NHEL), a subsidiary of the National Housing
  Corporation was established and incorporated in 2007. However, the Corporation had
  not taken up the value of the investment in NHEL in the financial statements for the
  year ended 31 December 2014.

  Accruals, Provisions and Other Liabilities

  The balance for Accruals, Provisions and Other Liabilities as at 31 December 2014
  was K9,316,484 as stated in the financial statements. According to Note 9 of the
  financial statements this value consisted of Accrued Expenses of (K66,900), GST
  Refund of (K4,822), Group Tax Provision of K9,496,119 and Payroll Liabilities of
  (K107,914).

  – 74 –

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• National Housing Corporation

  There was no acceptable accounting records, documentation and schedules available
  to substantiate these balances. As such, I was not able to verify and confirm the
  existence and accuracy of the balances as at 31 December 2014.

  Government Advance

  The financial statements reported a balance of K7,779,200 as Government Advance as
  at 31 December 2014. No acceptable record, document or confirmation was available
  for me to confirm this balance.

  State‟s Equity

  An amount of K27,668,800 was stated as balance of State‟s Equity as at 31 December
  2014. There was no acceptable record, document or confirmation to confirm the
  accuracy and existence of this balance as at year end.

  Retained Earnings

  A value of K1,630,715 was stated as the balance of retained earnings as at 31
  December 2014. I could not rely on the balance due to lack of supporting schedules
  and documentations to confirm the opening balance.

  Historical Balancing

  A value of K31,778,745 (2013: K27,994,279) was reported in the Balance Sheet as at
  31 December 2014. Note 2.3 of the financial statements disclosed that the balance was
  MYOB reconciliation items for posting to correct accounts. The historical balancing
  has been reported in the financial statements for a number of years without taking
  necessary steps to reconcile and allocate to correct accounts. Therefore, I was unable
  to determine the validity of the amount reported in the financial statements.

  DISCLAIMER OF OPINION

  Because of the significance of the matters described in the Basis for Disclaimer of
  Opinion paragraphs, I have not been able to obtain sufficient appropriate audit
  evidence and accordingly I am unable to and do not express an opinion on the
  financial statement of the National Housing Corporation for the year ended 31
  December 2014. ”

  28.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Sections 8(2) of the Audit Act, on the inspection and
  audit of the accounts and records of the Corporation for the year ended 31 December
  2014 was issued on 21 November 2017. The report contained the following
  observations:

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• Page 110 of 293

• National Housing Corporation

  Financial Statements

  The Corporation‟s financial statements for the year ended 31 December 2014 was not
  prepared from a properly maintained accounts and records and lacked sufficient
  supporting documentation and evidence. The errors, omissions, irregularities and
  misstatements were so significant which formed the basis for a Disclaimer of Opinion
  in my Section 8(4) Report on the 2014 financial statements.

  Internal Control Environment

  The internal control weaknesses in management accounting, record keeping and
  payment procedures had negatively impacted the reliability, validity, completeness
  and correctness of the financial information disclosed in the financial statements. I
  noted following weaknesses in relation to internal control environment:

  i) Accounting System

  The Corporation‟s financial transaction records in the MYOB accounting system
  were not properly maintained and up to date. I noted lengthy time lag between
  the dates of transactions and postings to the cash book and general ledgers. Also,
  the general ledgers maintained in the MYOB accounting system were not
  integrated.

  The cashbook, revenue and expenses, and accounts payable ledgers were
  maintained in the MYOB accounting system while the debtors‟ ledger was kept
  in a standalone database called the “Housing Debtors System”. Payroll was also
  done using another standalone system.

  I noted that lack of skills and training on information technology had
  contributed to the ineffective use of the management accounting system. In
  addition, the Corporation had no accounting manual in 2014.

  I recommended to the management to seriously consider taking appropriate
  actions to improve on management accounting system and general record
  keeping.

  ii) Revenue and Accounts Receivables

  Controls over billing, collection of revenues, and accounting of debtors and
  revenues were very deficient. The Corporation‟s incomes were not properly
  managed and exposed to abuse and fraud. The debtors‟ subsidiary ledger system
  was not properly maintained and lacked integration with the general ledger.

  I recommended to the management to create a debtors subsidiary ledger system
  to integrate with billing and cash receipting system, and general ledger.
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• National Housing Corporation

  iii) Fixed Assets Management

  The Corporation did not maintain a Fixed Assets Register in 2014. This is a very
  serious internal control lapse. Non existence of Fixed Assets Register poses a
  high risk for loss of its properties. Also, valuation of the properties had not been
  done periodically to establish fair values at any given point of time. I carried out
  property inspection in NCD, Lae, Madang and Goroka and noted that the
  Corporation had in its custody properties with values that could run into
  hundreds of millions of Kina.

  I recommended to the management to maintain a Fixed Asset Register to form
  evidence of ownership and control over them and to ensure their values at any
  given point of time are fair and reliable.

  Payment Procedures and Anormalies

  a) The Corporation issued many cashable cheques in 2014 to its staff members and
  other service providers. I advised that issuing cashable cheque promotes fraud,
  abuse and corruption and is not an acceptable business practice;

  b) Segregation of duty was lacking in certain payments. In two instances payments
  totaled K142,000 was made to a company for capital works done dating back to
  2010. I noted that the Managing Director solely approved the purchase
  requisition, direct immediate payment and signed the cheques. There was no
  sufficient documentation to justify the formal contract entered into and work
  done in 2010.

  c) I noted instances of tax evasion in the payment procedures. The Corporation did
  not withhold 10% GST on a payment of K12,446 made to a firm having no
  certificate of compliance from the IRC. I also noted two payments totaled
  KII,III LZT{TLIPflTLR LflLaFFR)QWJ Lfi{IP L~~L“3$ < L&$ 6+’ LZI31R)tL{TtMning
  the 10% GST.

  d) In three (3) instances, payments totaled K36,500 made to consultants did not
  have contract of engagement and detailed terms of reference in the vouchers.
  Further, the consultants were not appointed using proper procurement
  procedures but done at the sole discretion of the Managing Director.

  e) Two (2) payments totaled K89,000 made to a legal firm lacked full and proper
  supporting documentations.

  f) In six (6) instances, officers of the NHC were paid money in lieu of sick leave
  credits totaled K44,835. Payment of money in lieu of sick leave credits is not
  allowed as per provisions of the General Orders.

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  g) An amount of K80,000 was paid through cheque no. 248696 on 17 March 2014
  to Pacific International Hospital. The payment was stated as “being payment for
  emergency medical services for NHC employees and management”. I was not
  provided with all the necessary documentations including management
  resolution and formal agreement entered into with the hospital.

  h) A payment of K10,000 was made to a senior executive at NHC on a “Pay
  Cash” cheque no. 249415 on 23 October 2014. The amount was to assist him to
  meet medical cost of his spouse. It is compulsory that any salary advance to staff
  member is recoverable through payroll deduction. I was not provided with any
  documentary evidence to indicate the amount was recovered.

  i) In eight (8) instances, monthly rental payments totaled K81,439 were made for
  certain staff members. No documentary evidence was available to confirm
  whether the officers were fully entitled to housing being condition of their
  employment.

  j) Six (6) payments for motor vehicle hires in Port Moresby cost NHC K151,000.
  Most of the vehicle hires were committed by the Managing Director at the rate
  of K1,000 per day. The very high daily rate of K1,000 in big cities like Port
  Moresby had been considered extravagant.

  k) An amount of K34,677 was paid to a firm for construction of billboards. There
  was in-adequate supporting documentation including evidence of three quotes
  obtained and subsequent award of the contract to the firm, nature and scope of
  the work to be undertaken and formal contract agreement.

  l) A former Managing Director
  ‟s final entitlement payout was set at K1,000,000.
  In September 2014, final balance of K619,112 was paid. The amount was
  beyond the authority to pre-commit expenditure limit of K100,000 for any
  CEO. Therefore, Board and Minister‟s approval was necessary.

  There was no evidence of Board authorization for the final payout made. Also,
  I could not obtain all necessary schedules required to determine correctness
  and validity of the provision made for the final entitlement payout.

  m) A special Board meeting (SB 3/2014) was convened in Madang on 22 May
  2014. Total costs incurred valued at K79,014 which comprised of K15,969 in
  airfares and K63,045 in other costs. I noted that the meeting was for one day
  only, however, the Minister, Managing Director and Board Secretary each
  received K5,000 in travelling allowances. Also, the Managing Director had
  taken with him K3,000 as entertainment allowance and K5,000 being
  emergency funds. No acquittals were available as required under the General

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• Orders.

  National Housing Corporation

  n) In four (4) instances, stipend payments totaled K115,747 were made to the
  Board members for the first quarter of 2014. Schedules and documentations to
  ensure compliance with Board Fees and Allowance Act were not available.
  The basis used for calculation and accuracy of the payments made could not
  be verified.

  o) A Pay Cash cheque worth K23,100 was raised on 13 May 2014 to meet
  ” ”

  duty travel expenses. The Managing Director, Legal Principal Officer and
  General Manager (properties) were to take official trip to Kerema from 13-14
  May 2014 (two days). However, the allowances calculated were for three days
  at K567 per day. The daily allowance exceeded the required daily allowance
  of K200. Also, the Managing Director received K5,000 as entertainment
  allowance. There were no acquittals for me to ascertain whether the official
  trip had actually taken place.

  p) My review of a number of payments made to the Minister for Housing and
  Urbanization in 2014 revealed irregularities and noncompliance issues as
  detailed below:

  1) On 17 April 2014 a “PAY CASH” cheque no. 559939 for an amount of
  K10,000 was made to the Minister upon his request to personally donate
  it to Paramana United Church. There was no receipt and any form of
  acknowledgement from the church to confirm the payment was actually
  received by the church;

  2) On 25 June 2014 a “PAY CASH” cheque no. 248987 for an amount of
  K60,000 was paid to the Minister as assistance towards his wife‟s
  funeral expense. The amount was so significant and for personal
  expenses which was outside of the normal business operations.
  Therefore, Board approval was necessary. However, the caretaker
  Managing Director alone approved the payment;

  3) The Minister for Housing instructed the Managing Director to make
  available K10,000 to meet protocol expenses for a foreign delegate of
  investors in relation to the Duram Farm Housing Project through his
  memo dated 11 June 2014. A “PAY CASH” cheque no. 248967 was
  raised on 12 June 2014. There was no acquittal to confirm whether the
  money was used for the right purpose;

  4) A “PAY CASH” cheque no. 249447 valued K70,415 was paid to the
  Minister for an overseas trip. The Minister indicated to take with him a
  delegate of six (6) officers from the Corporation. The Managing Director
  while approving the payment narrated that the Prime Minister had
  endorsed the travel.

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• National Housing Corporation

  I could not sight the endorsement letter from the Prime Minister‟s
  Office, and also there was no acquittal to substantiate the travel had
  actually taken place;

  5) Rental arrears for accommodation of the Minister for Housing and
  Urbanization valued K66,328 was paid for by cheque no. 248747 to a
  company on 31 March 2014. Housing allowance and accommodation of
  Members of Parliament were determined by the Salaries and
  Remuneration Commission and provided for through the budget and paid
  through fortnightly salaries. This payment resulted in “double dipping”
  by the Minister;

  6) In five (5) instances, payments totaled K57,307 were made to a security
  firm for security services provided at the residence of the Minister for
  Housing and Urbanization. The payments were in breach of the Salary
  and Remuneration Commission (SRC) determinations;

  7) On 18 August 2014 the Minister for Housing and Urbanization directed
  the acting Managing Director through a memo to provide some funds for
  his trip to overseas for medical treatment. The acting Managing
  Director‟s approval footnote read Approved. Kindly prepare ticket for
  “

  both Minister and wife, including hospital bills and accommodation. I
  suggest we pay K50,000 in total . A “PAY CASH” cheque no. 249228
  ”

  was raised on 2 September 2014. The payment was in breach of the
  Public Finance Management Act and Salaries and Remunerations
  Committee determinations;

  8) Two (2) payments totaled K14,666 were made to a company for hire of
  motor vehicles for the Minister‟s electoral use. Per the invoice, the above
  payments were for two days hire of vehicle and for damages caused to
  the vehicle during the period of the hire. Electoral vehicle allowances for
  Members of Parliament are provided for under the SRC determinations
  and paid through Minister‟s fortnightly salary. This expense had been
  extravagant and in breach of the SRC determinations.

  q) In a number of instances, unlawful and irregular payments were made to the
  Managing Director which amounted to double dipping and breach of SRC
  determinations, General Orders and Financial Instructions. These observations
  are detailed as follows:

  1) In eight (8) instances, payments totaled K26,000 were made as
  entertainment allowances to the Managing Director. These payments
  even exceeded the annual entertainment allowances provided for and
  paid through payroll as per the SRC determinations.

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  The Managing Director did not acquit the business entertainment
  allowances paid to him;

  2) In three (3) instances, payments totaled K24,000 were made to a
  company for production of the Managing Directors portrait. The expense
  was personal in nature and could not use the public funds;

  3) In four (4) instances, payments totaled K20,100 were paid to guards
  escorting the movements of the Managing Director. This was in
  contravention of the SRC determinations and double dipping by the
  Managing Director as security allowances were paid fortnightly through
  his pay;

  4) On 17 April 2014 the Managing Director‟s Office through a memo
  directed a payment of K5,000 donation to Paramana United Church. A
  “PAY CASH” cheque no. 248816 was raised on the same day. There
  was no receipt and any form of acknowledgement from the church to
  confirm the payment was actually received by the church; and

  5) In four (4) instances, “PAY CASH” cheques totaled K4,000 were issued
  to the Managing Director‟s Office for purchase of phone credits. The
  practice was fraudulent in nature as the Managing Director‟s telephone
  allowances are determined by the SRC and paid together in fortnightly
  pays.

  r) In fifteen (15) instances, payments totaled K131,500 were issued as cashable
  cheques to meet various expenses for which acquittals were not made
  available. Most of the payments related to Duram Farm Housing Project
  funded under the Public Investment Program (PIP).

  Sale of Properties

  The Corporation in 2014 sold some of its properties with a total value of K10,388,900
  as disclosed in the income statement. Documents and records in relation to sale of the
  properties including tender documents, contract of sale, and settlement statements were
  not provided for my review. Record keeping was very deficient and the management
  was unable to retrieve and provide all the necessary information and documents on the
  properties sold.

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  Governance

  (i) Minutes of Board Meetings

  I was not provided with minutes of all Board meetings held in 2014. Therefore, I
  was unable to determine the implication of the decisions made by the Board on the
  financial statements and affairs of the Corporation.
  (ii) Internal Audit

  My review of the internal audit function noted that the Internal Audit Unit had not
  fully implemented its work plans partly due to staff constraints. Also, work plans
  performed in 2014 were on ad hoc instructions received from the top
  management.

  The matters contained in this report had been conveyed to the management on 20
  August 2017, however, no responses were received from the management.

  28.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of the Corporation for
  the years ended 31 December 2015, 2016 and 2017 had been submitted and
  arrangements were being made to commence the audit shortly.

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• 28A. NATIONAL HOUSING ESTATE LIMITED (A Subsidiary of National
  Housing Corporation)

  28A.1 INTRODUCTION

  28A.1.1 Legislation

  National Housing Estate Limited (NHEL) was incorporated on 28 September 2007
  under the Companies Act. The incorporation of the company was based on the
  National Executive Council (NEC) Decision No. 304/2006 in accordance with
  Section 27 of the National Housing Corporation Act 1990.

  Subsequently, the NEC Decision No. 70/2007 endorsed its establishment as a
  Special Purpose Company of the National Housing Corporation.

  The Company commenced its normal operations from 1 January 2010.

  28A.1.2 Objective of the Company

  The principal purpose of the company was to manage certain National Housing
  Corporation owned properties for commercial development in Port Moresby, to
  generate income for the National Housing Corporation to deliver its mandate.

  28A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not provided the financial
  statements for the years ended 31 December 2010, 2011, 2012, 2013, 2014, 2015,
  2016 and 2017 for my inspection and audit despite my numerous reminders.

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• 29. NATIONAL INFORMATION AND COMMUNICATIONS
  TECHNOLOGY AUTHORITY (NICTA)

  29.1 INTRODUCTION

  29.1.1 Legislation and Objectives of the Authority

  The National Information and Communications Technology Authority (NICTA) was
  established on 1 November 2009 by the National Information and Communications
  Technology Act 2009. The Authority succeeds the PNG Radio Communications and
  Telecommunication Technical Authority (PANGTEL) which was established on 1
  -[1Ju[{y EL fl[V S[{WRILVFTK RM{1J ~1J~~VISRlIF L~R E corporatise the Post and
  Telecommunication Corporation (PTC) and to have it divided into three different
  organisations namely: Telikom PNG Limited, Post PNG Limited and PANGTEL.

  NICTA is a 100% Government-owned statutory authority, established to regulate the
  telecommunication industry in PNG.

  Under the Post and Telecommunication Corporation (Corporatisation) Act 1996
  assets, rights and liabilities as well as employees of the Corporation were transferred
  to PANGTEL as per the allocation statement approved by the then Minister for
  Communications at the net book value recorded in the books of the Corporation as at
  31 December 1996. In the same manner, the assets, rights and liabilities as well as
  employees of PANGTEL were transferred to NICTA by virtue of Section 305 of the
  National Information and Communications Technology Act.

  29.1.2 Functions of the Authority

  The main functions or principal activities of the Authority are to exercise all licensing
  and regulatory functions in relation to the Information and Communications
  Technology Industry and perform all other functions as stated under Section 9 of the
  National Information and Communications Technology Authority Act 2009.

  29.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Authority
  for the year ended 31 December 2015 had been completed and results were being
  evaluated.

  The inspection and audit of the accounts and records and the examination of the
  financial statements of the Authority for the year ended 31 December 2016 was in
  progress.

  The Authority had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.
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• 30. NATIONAL MARITIME SAFETY AUTHORITY

  30.1 INTRODUCTION

  30.1.1 Legislation

  The National Maritime Safety Authority was established by the National Maritime
  Safety Authority Act 2003.

  30.1.2 Functions of the Authority

  The functions of the Authority are to:
  • Perform the functions and exercise the powers as are conferred upon it by this
  Act or under any other law;
  • Co-ordinate search and rescue operations for vessels in distress or lost at sea
  pursuant to the terms and conditions of a search and rescue plan prepared by the
  Minister, from time to time, and approved by the Authority;
  • Co-ordinate with other agencies and persons, including regional and
  international organisations and consultants, whether local or foreign, on matters
  concerning maritime safety, marine pollution prevention or search and rescue
  operations at sea;
  • Collect data relevant to maritime safety, marine pollution prevention and search
  and rescue operations at sea;
  • Act on behalf of the State in relation to any domestic or international agreement
  relating to maritime safety, marine pollution prevention or search and rescue
  operations at sea to which the State is or may become a party;
  • Make recommendations on policy to the Minister regarding maritime safety,
  marine pollution prevention and search and rescue operations at sea;
  • Provide consulting services, training and management services relating to any of
  its functions whether in PNG or overseas;
  • Where appropriate to consult with:

  ‒ Other agencies of National Government;
  ‒ Provincial Governments;
  ‒ Local-level Governments; or
  ‒ Commercial, industrial and other relevant bodies and organisations, in
  relation to matters affecting them in the performance of its functions.

  • Generally to do such supplementary, incidental or consequential acts and things
  as are necessary or convenient for carrying out its functions.

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• National Maritime Safety Authority

  30.2 STATUS OF FINANCIAL STATEMENTS

  At the of time preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Authority
  for the year ended 31 December 2017 had been completed and the audit reports were
  being finalised.

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• 31. NATIONAL MUSEUM AND ART GALLERY

  31.1 INTRODUCTION

  31.1.1 Legislation

  The National Museum and Art Gallery of Papua New Guinea was established under
  the provisions of the National Museum and Art Gallery Act 1992. This Act came into
  operation on 15 April 1992.

  31.1.2 Functions of the Museum

  The main functions of the Museum are to:

  • Protect and conserve the cultural and natural heritage of PNG;
  • Research and document the prehistory of PNG and manage the national
  archaeological collections, and monitor archaeological research in PNG;
  • Maintain the national register of traditional and archaeological sites;
  • Identify and maintain a register of national cultural property and monitor the
  collection and export of artefacts; and
  • Issue permits and perform other duties as required by the National Cultural
  Property (Preservation) Act (Chapter 156).

  31.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Museum
  for the year ended 31 December 2015 had been completed and the audit reports were
  being finalised.

  The Museum had not submitted its financial statements for the years ended 31
  December 2016 and 2017 for my inspection and audit despite my reminders.

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• 32. NATIONAL NARCOTICS BUREAU

  32.1 INTRODUCTION

  32.1.1 Legislation

  The National Narcotics Bureau was established in April 1992 by the enactment of the
  National Narcotics Control Board Act 1992.

  32.1.2 Functions of the Bureau

  The principal functions of the Bureau are to:

  • make recommendations to the Board on policies, plans, matters or projects
  relating to abuse of drugs;
  • coordinate and monitor the Government and Non-Government drug education,
  awareness and rehabilitation programs, and
  • conduct surveys and gather and evaluate information, on the consumption
  cultivation, trafficking and manufacture of drugs.

  32.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Bureau had not submitted its financial
  statements for the years ended 31 December 2013, 2014, 2015 and for the period
  ended 01 January to 12 May 2016. As per Ministerial Determination in National
  Gazette No. G228 of 12 May 2016, the functions of the National Narcotics Bureau
  was transferred to the Department of Justice and Attorney-General. It is unlikely that
  the financial statements for the above period will be submitted to enable me to carry
  out the audit. As such, I intend to dispense the audit of the outstanding financial
  statements for the above mentioned periods in the next audit cycle. The subsequent
  audits and reports will be covered in my Part II Report to Parliament.

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• 33. NATIONAL RESEARCH INSTITUTE

  33.1 INTRODUCTION

  33.1.1 Legislation

  The National Research Institute (NRI) was established under the Institute of Applied
  Social and Economic Research Act (Chapter 165). The name of the Institute was
  changed from „PNG Institute of Applied Social and Economic Research‟ to „National
  Research Institute‟ following the approval of the NEC through its Decision No. 42/90
  of 7 March 1990.

  The Institute of Applied Social and Economic Research (Amendment) Act 1987 came
  into operation on 1 January 1988, and on this date, the promotion and cultural
  functions of the former Institute of PNG Studies; and functions to do with Educational
  Research for National and Provincial Departments of Education carried out by the
  former Educational Research Unit (UPNG), formed part of the National Research
  Institute.

  33.1.2 Functions of the Institute

  The functions of the Institute include:

  • the promotion of research into PNG society and economy;
  • the undertaking of research into social, political and economic problems of PNG
  in order to formulate practical solutions to such problems;
  • where practicable, the provision, by agreement with the body concerned, of
  consultancy services to the Government and to Government institutions;
  • the promotion of the functions and objects of the Institute of PNG Studies; and
  • research into all aspects of education for National and Provincial Departments of
  Education.

  33.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Institute
  for the year ended 31 December 2017 had been completed and the results were being
  evaluated.

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• 34. NATIONAL ROAD SAFETY COUNCIL

  34.1 INTRODUCTION

  34.1.1 Legislation

  The National Road Safety Council was established under the National Road Safety
  Council Act 1997. This Act came into operation on 1 May 1998. The Council
  commenced its operational activities from May 1998.

  34.1.2 Functions of the Council

  The principal functions of the Council are to:

  • Determine the goals and objectives in the promotion of road safety in PNG;
  • Advise the National Government on all matters relating to road safety which
  the Council may from time to time consider desirable or which the National
  Government may refer to the Council;
  • Recommend to appropriate authorities the adoption of precautionary measures
  of all kinds calculated to prevent accidents involving the use of motor vehicles;
  • Foster, promote and conduct educational campaigns designed to stimulate
  compliance with acceptable and proven principles of road safety;
  • Enlist the aid of all agencies and individuals who in the opinion of the Council
  are able to promote any acceptable and proven principles of road safety;
  • Procure sufficient personnel and finance for purposes of the Council and to co-
  ordinate and control their use;
  • Foster and promote road safety research;
  • Determine measures which will lead to the improvement of road safety and
  implementation of such measures;
  • Monitor and evaluate the effectiveness of programs and strategies of
  organisations involved in the promotion of road safety;
  • Formulate, monitor and update an appropriate long-term national program for
  the improvement of road safety in PNG and to supervise its implementation;
  • Consider and implement any other aspects of road safety as may be referred to
  it from time to time;
  • Perform such other functions as are given to it under this Act or any other law;
  • Advise the Minister and the NEC on all or any of its functions specified in this
  section; and
  • Generally to do all such things as may be incidental or consequential upon the
  exercise of its powers and the performance of its functions.

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• National Road Safety Council

  34.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of the Council for the
  years ended 31 December 2016 and 2017 had not been submitted for my inspection
  and audit despite my reminders.

  On 5 August 2014, Road Traffic Authority succeeded National Road Safety Council
  but the Authority came into operation only in 2016 as such my next report for
  National Road Safety Council will be issued under the Road Traffic Authority.

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• 35. NATIONAL ROADS AUTHORITY
  35.1 INTRODUCTION

  35.1.1 Legislation

  The National Roads Authority was established by the National Roads Authority Act
  2003 and came into operation in 2004.

  35.1.2 Objectives of the Authority

  The objectives of the Authority are to:

  • Raise funds for the maintenance of public roads;
  • Ensure the efficient preparation of effective annual road maintenance
  programmes; and
  • Ensure that all routine, specific and emergency maintenance of roads and road
  rehabilitation and reconstruction funded by the Authority are executed in a
  transparent, effective and efficient manner, in order to optimise the contribution
  of road assets to the economic and social development of Papua New Guinea.

  35.1.3 Functions of the Authority

  The functions of the Authority are to:

  • Establish and operate a Road Fund from road user charges, budget and other
  sources;
  • Establish resources and an organisation to enable the Authority to perform its
  functions;
  • Maintain and manage updated data on asset conditions using the Road Asset
  Management System, Bridge Inventory and Bridge Maintenance and other
  approved systems;
  • Formulate and determine prioritised annual road maintenance plans and
  programmes using the Road Asset Maintenance System, Bridge Inventory and
  Bridge Maintenance and other approved systems to be supported by the road
  sector cost recovery revenues;
  • Establish annual road maintenance funding requirements in accordance with the
  future annual road maintenance plans;
  • Determine and implement road user charges in accordance with the financial
  resource requirements of the annual road maintenance plans;
  • Deliver the required routine, specific and emergency road maintenance in
  accordance with the maintenance service levels established for each class or type
  or road, through the contracting of independent contractors, and to monitor and
  supervise the contracts as they are executed;

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• National Roads Authority

  • Deliver road improvement, and road restoration when required, by undertaking the
  design studies necessary for the programmed road improvement or rehabilitation
  projects by:

  ‒ Prepairing corresponding construction plans, specifications, cost
  estimates, and the other documents required for the proper tendering of
  the programmed works;
  ‒ Monitoring and supervising the works as are executed, by such qualified
  consultants and/or contractors as are engaged; and
  ‒ Ensuring safety audits on design, construction, maintenance and safety
  aspects of road;

  • Establish and sustain contract management capacity to ensure the validity of
  contracts and the effective management of contracts awarded for the execution of
  agreed road maintenance works and rehabilitation and reconstruction projects;
  • Ensure that all contracts are tendered through a transparent and competitive
  procedure to ascertain economic efficiency and sustainability in delivery of road
  maintenance and rehabilitation works;
  • Keep adequate records and to maintain a management information system which
  provides the Board and staff with accurate and timely information on
  commitments, expenditures and revenue for the purchase of consultancy and
  contracting services and other purchases and outlays;
  • Report publicly and transparently on collection of user charges, revenues, and in
  detail on the use of the revenues on the road maintenance programs in accordance
  with internationally accepted accounting principles;
  • Establish environmental management capacity;
  • Provide a continuing programme of professional staff development and required
  skills training for non-professional staff; and
  • Construct, erect or affix signs or marks on road transport infrastructure in
  accordance with the Motor Traffic Act (Chapter 243).

  35.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statement of the
  Authority for the year ended 31 December 2016 had been completed and the audit
  reports were being finalised.

  The fieldwork associated with the inspection and audit of the accounts and records
  and the examination of the financial statements of the Authority for the year ended 31
  December 2017 had been completed and the results were being evaluated.

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• 36. NATIONAL TRAINING COUNCIL

  36.1 INTRODUCTION

  36.1.1 Legislation

  The National Training Council was established under the National Training Council
  Act 1991. Although the Act came into operation on 5 December 1991, the Council
  formally began operating in April 1992 following its inauguration.

  36.1.2 Objectives of the Council

  The objectives of the Council are to:

  • Foster the comprehensive development of training with regard to the needs and
  the resources of the country;
  • Foster the co-ordination of training institutions so that the most effective use can
  be made of resources available for training which ensures increased productivity
  and capacity building in the workforce;
  • Make the benefits of training as widely as possible;
  • Plan and encourage the development of a system of training fitted to the
  requirements of the country and its people;
  • Establish, preserve and improve standards of training throughout the country;
  • Make the most effective use of the resources available for training related
  purposes in so far as this can be done by legislative and administrative measures;
  and
  • Generally augment and support the role and functions of the Commission for
  Higher Education as specified in the Higher Education Act (Chapter 397).

  36.1.3 Functions of the Council

  The principal functions of the Council are to be responsible for supervising and
  managing the implementation of the National Training Policy and for monitoring,
  reviewing and revising the National Training Policy when necessary; to provide
  guidelines to the NEC, Provincial Government, and the in-service Training
  I nstitution‟s Governing Councils on any issues related to training; and to formulate
  and publish guidelines on human resource requirements, localisation and
  indigenisation issues and related matters.

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  36.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  36.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on the financial
  statements of the Council for the year ended 31 December 2016 was issued on 28
  February 2018. The report contained a Qualified Opinion.

  “BASIS FOR QUALIFIED OPINION

  Fixed Assets K703,940
  –

  My review of the Fixed Assets Register maintained by the Council revealed that it
  was not properly maintained. The Fixed Assets Register was kept in Microsoft
  Access Database but not updated. As a result, there was a difference of K510,223
  between the general ledger closing balance of K193,717 and the financial statement
  balance of K703,940. Further, I noted that the Council disclosed assets totalling
  K278,960 disposed during the year. However, there was no supporting
  documentations to verify the disposals made. In addition, there was no stock-take
  undertaken by the Council during the year under review. As such, I was unable to
  determine the value, condition and existence of assets totalling K703,940 disclosed
  by way of notes in the financial statements.

  QUALIFIED OPINION

  In my opinion, except for the effects of the matter referred to in the Basis for
  Qualified Opinion paragraph above:

  (a) the financial statements of the Council are based on proper accounts and
  records; and
  (b) the financial statements are in agreement with those accounts and records, and
  show fairly the state of affairs of the Council as at 31 December 2016 and the
  results of its operations for the year then ended.
  ”

  36.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Council for the year ended 31 December 2016
  was issued on 28 February 2018. The report contained the following observations:

  1. Accounting System

  My review of the accounting system maintained by the Council revealed that
  the transactions were manually maintained on excel spread sheets.

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  The manual recording and accounting was susceptible to errors, omissions and
  lack proper backup for loss of data and information. There was no proper
  accounting system/software used for accounting and reporting purposes.
  Further, the general ledger (cashbook) details were not systematically kept.

  I recommended Management to liase with Finance Department for the use of
  the Integrated Financial Management System (IFMS) as a basis for recording
  transactions and producing reports.

  The Management concurred with my comments and added that they would do
  their best to shop for small suitable accounting software compatible to
  National Training Council.

  2. Personnel Files Management

  My review of the human resources and payroll management revealed that
  most of the personnel files for employees did not contain the following vital
  personnel information;

  • The updated salary/wages declaration forms;
  • Dependants‟ declarations and identifications such as marriage certificates,
  birth certificates for children or statutory declarations for dependants were
  not filed.

  These vital information are needed to properly determine their taxes, rebates
  and leave fare entitlements. Consequently, Section 23.3 of the General Orders
  was breached.

  I recommended Management to ensure that the annual salaries/wages
  declaration forms were completed with proper declaration of dependants and
  timely updated.

  I brought these issues to the attention of the Management and was advised
  that corrective actions would be taken.

  3.0 Expenditure Control Weaknesses

  3.1 Travel Advance Register and Acquittals

  My review of the travel and subsistence expenses revealed that the Council did
  not maintain a proper Travel Advance Register with acquittal files. I noted that
  advances totalling K178,472 were not acquitted at year end. Consequently, the
  Council had breached the provisions of Public Finances Management Act,
  Financial Management Manual and the Finance Instructions in relation to
  travel advances.

  – 96 –

• Page 131 of 293

• National Training Council

  I recommended Management to take necessary steps to address this issue.

  Management concurred with my comments and advised that necessary steps
  will be taken to address it.

  3.2 Payments Made as “Pay Cash” Cheques

  I noted that on numerous instances cheques were raised as “pay cash” for
  expenses instead of raising cheques in suppliers‟ or person‟s name. Such
  practises create opportunities for malpractices to occur and must be avoided.

  I recommended Management to ensure “pay cash” cheques be limited only to
  petty cash transactions and all cheques be raised in the payee name.

  Management took note of my comments and agreed to ensure compliance.

  3.3 Director‟s Financial Assistance

  I noted that the Training Council had assisted the Director with a total of
  K9,500 as its contribution towards the repatriation of his late father‟s body to
  his village in November 2015. At the same time, a total of K39,500 was split
  and paid in two (2) different pay cash cheques for the same purpose. Again in
  July 2016, the Training Council paid a sum of K38,100 which was also split
  into two (2) different pay cash cheques to meet some traditional obligations
  for his late father bringing the total to K87,100. The expenses were classified
  under other operational expenses.

  Per his contract, such entitlements including costs of repatriation of deceased
  bodies of his declared dependents and his parents were not included or
  provided. In addition, I noted that his contract is between the Secretary for
  Department of Labour and Industrial Relations. As such, the Director can
  approve any request by officers under him within his limits whilst his own
  request should be approved by the Chairperson or the Secretary.

  In my view, the raising of separate cheques for the same purpose was a
  deliberate way to circumvent the proper approval process via splitting
  payments. Finally, with the exception of K9,500, the additional financial
  assistance totalling K77,600 was excessive and considered as abuse of
  procuring procedures and misuse of public funds thus should be fully
  recovered within his contract term.

  – 97 –

• Page 132 of 293

• National Training Council

  36.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of the Council for the
  year ended 31 December 2017 had not been submitted for my inspection and audit.

  – 98 –

• Page 133 of 293

• 37. NATIONAL VOLUNTEER SERVICE

  37.1 INTRODUCTION

  37.1.1 Legislation

  The National Volunteer Service was established on 12 April 1990 under the National
  Volunteer Service Act 1990.

  37.1.2 Functions of the Service

  The principal functions of the National Volunteer Service are to promote a spirit of
  sacrifice and service to the people of PNG; to provide labour, skills, education and
  training to the community for development projects; to cooperate and assist National
  and Provincial Government agencies as well as other organisations whose goals
  include the development of the people of PNG, in achieving their plans and purposes;
  and to encourage and participate generally in the advancement of the development of
  PNG.

  37.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Service had not submitted the financial
  statements for the year ended 31 December 2017 for my inspection and audit.

  – 99 –

• Page 134 of 293

• 38. NATIONAL YOUTH COMMISSION

  38.1 INTRODUCTION

  38.1.1 Legislation

  The National Youth Commission was established under the National Youth Service
  Act 1991. This Act came into operation on 3 July 1991.

  38.1.2 Functions of the Commission

  The functions of the National Youth Commission are to:

  • Train youths in vocational and related livelihood skills and in self-discipline;
  • Provide opportunities to enable youths to participate meaningfully in community
  activities;
  • Promote self-reliance among youths and to discourage dependability on outside
  assistance;
  • Provide the means to enable youths to contribute actively towards the
  maintenance of law and order, and establish better relationship between law
  enforcing agencies and the community;
  • Assist and encourage youths to improve their education, and attain competency
  in numerical and communication skills;
  • Provide the means for tertiary students to enter into the Service;
  • Promote and maintain amongst youths acceptable social norms and values; and
  • Generally do such supplementary, incidental or consequential acts and things as
  are necessary or convenient for carrying out its functions.

  38.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  38.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act on the financial
  statements of the Commission for the years ended 31 December 2012 and 2013 were
  issued on 29 November 2017. The reports contained similar Disclaimer of Opinions,
  hence, only the 2013 report is reproduced as follows:

  “ BASIS FOR DISCLAIMER OF OPINION

  Variances between the General Ledger and Financial Statements

  The general ledger forms the basis of the balances on the financial statements. During
  P EIJvieZ ERT MHI&RP P i~~iRQVIfSH it)cr}taFFR)cQV, fl EREFUIRIMDWHKZ Ril
  significant variances between the general ledger balances and the financial statement
  balances totaled K2,120,817. As such, I was unable to verify the accuracy of these
  balances.
  – 100 –

• Page 135 of 293

• National Youth Commission

  Consequently, I was unable to conclude on the accuracy of the closing balance of the
  Statement of Receipts and Payments disclosed in the financial statements at year end.

  Internal Control Environment

  During my examination of accounts and records and the internal control system of
  the Commission for the year ended 31 December 2013, I noted that the
  Commission‟s overall internal control environment was very weak. The internal
  control processes and procedures were not implemented in the Commission. I also
  noted frequent staff reshuffle and lack of segregation of duties within the Corporate
  Services Division of the Commission. The staff employed by the Commission both
  permanent and casual lacked necessary skills and qualifications to undertake the
  accounting and finance and other tasks allocated to them. I further noted that they
  were not familiar with the Public Finance (Management) Act (1995), General
  Orders and other Financial Manuals and Instructions to strengthen the internal
  control system of the Commission. As such, I was unable to rely on the overall
  internal control system of the Commission during the year under review.
  Consequently, I was unable to place reliance on the Commission‟s financial
  statements for the year ended 31 December 2013.

  Cash at Bank K888,044
  –

  My review of the Commission‟s both Operating and Commonwealth Youth Ministers
  Meeting Fund Account bank reconciliations revealed that the bank reconciliations
  were not prepared, checked and approved by senior finance officers of the
  Commission in the year under review but were prepared in 2014. I was also not
  provided with the independent bank confirmation of the Commonwealth Youth
  Ministers Meeting Fund Account to ascertain the completeness and accuracy of the
  bank account disclosed in the financial statements. As a result, I was not able to verify
  and confirm the accuracy and completeness of the balance nor place reliance on the
  effectiveness of the controls maintained by the Commission over cash.

  Fixed Assets K1,844,988
  –

  My review of the Fixed Assets Register of the Commission for the year ended 31
  December 2013 revealed that the Commission did not maintain a complete Fixed
  Assets Register to record details of all fixed assets worth K1,844,988. There was also
  no physical stock take undertaken by the Commission to confirm the existence of
  assets. The Assets Register provided for my verification was incomplete and did not
  capture all assets purchased during the year. As such, I was unable to conclude on the
  accuracy, valuation, existence and ownership of the fixed assets disclosed by the
  Commission as at 31 December 2013.

  – 101 –

• Page 136 of 293

• National Youth Commission

  Consultancy Fees K812,641
  –

  During my review, I noted that the Commission engaged a number of consultants to
  provide various consultancy services to the Commission. However, there were no
  valid or proper consultancy contracts or terms of references drawn up to engage them
  during the year under review. I further noted that most consultants were engaged on
  engagement letters or notice of engagements without specifying any fee for
  engagements and scope of work to be done. As a result, I was unable to verify the
  validity and correctness of the payments made to the consultants totaled K812,641.

  DISCLAIMER OF OPINION

  Because of the significance of the matters referred to in the Basis for Disclaimer of
  Opinion paragraphs, I have not been able to obtain sufficient appropriate audit
  evidence to provide a basis for an audit opinion. Accordingly, I do not express an
  opinion on the financial statements of the Commission for the year ended 31
  December 2013.’

  38.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Commission for the years ended 31 December
  2012 and 2013 were issued on 29 November 2017. The reports contained similar
  significant matters, hence only the 2013 report is reproduced:

  Accounting and Administration Procedural Manual

  During my review, I noted that the Commission did not have an accounting and
  administration procedural manual in place for its staff to carry out tasks in accordance
  with the required procedures and guidelines applicable to the Commission. I observed
  that t’H &RP P IVV~RQ~V VtMI Z H}IQRWG’HiQJ ~R t’e SrRTeVVeVMQGFSrRTHGMV R~ t’eI
  Public Finance (Management) Act 1995, General Orders and other Financial
  Manuals and Instructions. As a result, I noted significant internal control weaknesses
  within the Commission during the year under review.

  I drew this to the attention of the management and they responded as follows;

  “The Accounting and Administration Manual has been developed and in its draft
  form, the Management still needs to finalise this Manual before it can be used for the
  operations of the Commission.”

  – 102 –

• Page 137 of 293

• National Youth Commission

  MYOB General Ledger Postings

  My review of the MYOB general ledger account postings and updates revealed that
  the Commission‟s data entry were not done in a timely manner during the year under
  review, but were done after a year in 2014. I further noted that the data entry was
  done by Officers with no experience at all in MYOB. The Officers were on training
  whilst doing data entry into the MYOB. Hence, there were no verifications and
  approvals for account codes and amounts posted to the MYOB system. As a result, I
  observed misclassification and mispostings to wrong accounts almost in all the
  expenditure accounts. The management responded to my query as follows;

  “There was no accounting system in place during this period, the system/software
  that the acting Manager Finance and Administration and the Senior Accounts Officer
  were using was excel. When the MYOB system was installed, the finance officers were
  on in-house training on the MYOB system that was when the time entries were done
  for 2012, thus the accounts for 2012/2013 were entered during that period.”

  Travel Advance Acquittal Register

  During my review, I noted that there was a complete breakdown in the internal
  control system of payments and monitoring of the usage and acquittals of the various
  travel related expenses and advances that were paid to officers of the Commission.
  The Commission provided an incomplete acquittal register. However, these registers
  lacked full supporting documents of hotel receipts/statement of accounts, hire car
  receipts; airline tickets/boarding passes, incidental allowances receipts, and cash
  advance acquittals etc. Most of the duty travels taken were not properly and fully
  acquitted by the concerned officers. As a result, I was unable to trace and authenticate
  travel advances and related expenses amounting to K463,504 during the year under
  review. The management responded that the management through the Corporate
  Services Division had continuously been issuing internal memorandums reminding
  officers of the importance of acquitting, however, it is through ignorance and
  carelessness of officers that this measure was not fully addressed.

  Internal Control Weaknesses

  Following internal controls breakdown and weaknesses were noted during my audit:

  (i) I observed on a number of instances that the Commission did payments without
  obtaining three (3) written quotations from reputable suppliers when making
  payments for expenditure exceeding K5,000 and totaled K134,727. I further
  noted that some payments were executed on quotations and not on the basis of
  official suppliers invoice.

  – 103 –

• Page 138 of 293

• National Youth Commission

  (ii) During my review, I noted some payments had no delivery dockets/consignment
  and other supporting documents attached to confirm if the actual goods
  purchased had been delivered to the Commission for their intended purposes.

  (iii) My review on pay cash payments made to paymaster totaled K172,939 for
  various expenses had no proper acquittals attached to determine or confirm if
  the funds had been utilized for the intended purposes.

  (iv) I noted cheques were issued open for encashment. I further noted that this
  practice was in place in the prior years and continue to exist up to the time of
  audit in 2016. It was the Commission‟s practice to raise pay cash cheques for
  most of its payments and not directly to the suppliers of goods and services. It
  was further noted that these payments were not properly acquitted with proper
  supporting documents. This practice makes the internal control system very
  weak and exposes the Commission to irregularities and malpractices.

  (v) I was unable to comment on the Commission‟s spending on its operational and
  ,

  programs/projects expenditure against its budget due to non-provision of revised
  and approved budgets and annual work plans for 2013.

  (vi) My review of overtime revealed that overtime was claimed by officers who
  occupied positions at grade 10 levels and above. Further, hours claimed on
  overtime sheet were not approved by immediate supervisor or manager to verify
  the hours claimed by staff before payments were made.

  (vii) My review on motor vehicles revealed that one (1) motor vehicle was
  purchased in 2013 and nine (9) in prior years were all not registered under
  government Z plates.

  I drew management‟s attention to these weaknesses and I was advised that steps have
  been taken to address the issues.

  38.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the
  Commission for the year ended 31 December 2014, 2015 and 2016 had been
  completed and the audit reports were being finalised.

  The financial statements of the Commission for the year ended 31 December 2017
  had been submitted for my inspection and audit and arrangements were being made to
  commence the fieldwork shortly.

  – 104 –

• Page 139 of 293

• 39. OIL PALM INDUSTRY CORPORATION

  39.1 INTRODUCTION

  39.1.1 Legislation

  The Oil Palm Industry Corporation was established by the Oil Palm Industry
  Corporation Act 1992 which came into operation on 1 June 1992. Under the Act, all
  assets (other than land held by the State) and liabilities previously held or occupied by
  the Division of the Department of Agriculture and Livestock responsible for the
  provision of extension services to oil palm industry, were transferred to the
  Corporation at commencement date.

  39.1.2 Functions of the Corporation

  The main functions of the Corporation are to:

  • promote the development of the oil palm industry;
  • encourage the increase in productivity by efficient provision of extension services
  to smallholders;
  • provide advice and disseminate information and educate smallholders regarding
  oil palm production methods; and
  • consult, liaise and collaborate with the State and other agencies involved in the oil
  palm industry.

  39.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Corporation had not submitted its financial
  statements for the years ended 31 December 2012, 2013, 2014, 2015, 2016 and 2017
  for my inspection and audit, despite numerous reminders from my Office.

  – 105 –

• Page 140 of 293

• 40. OMBUDSMAN COMMISSION OF PAPUA NEW GUINEA

  40.1 INTRODUCTION

  40.1.1 Legislation

  The Ombudsman Commission was established under Section 217 of the Constitution
  of the Independent State of PNG. The principal objectives of the Commission are: to
  ensure that all governmental bodies are responsive to the needs and aspirations of the
  people; to help in the improvement of the work of governmental bodies and the
  elimination of unfairness and discrimination by them; to help in the elimination of
  unfair or otherwise defective legislation and practices affecting or administered by
  governmental bodies; and to supervise the enforcement of the Leadership Code.

  40.1.2 Functions of the Commission

  The functions of the Commission are:

  • To investigate on its own initiative or on complaint by a person affected, any
  conduct on the part of any State or provincial or local governmental, or other
  governmental body or a member or officer or employee of any such body, any
  member of the personal staff of the Governor-General, Minister or the Leader
  or Deputy Leader of the Opposition, or any other body or person as may be
  declared by an Organic Law or an Act of Parliament, to which the Leadership
  Code applies;
  • To investigate any defects in any law or administrative practice appearing from
  any such investigation;
  • To investigate any case of an alleged or suspected discriminatory practice
  within the meaning of a law prohibiting such practices; and
  • Any functions conferred upon it by Part III Division 2 (Leadership Code) of
  the National Constitution.

  40.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Commission had submitted its financial
  statements for the year ended 31 December 2016 and arrangements were being made
  to commence the audit shortly.

  The Commission had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 106 –

• Page 141 of 293

• 41. PAPUA NEW GUINEA ACCIDENT INVESTIGATION
  COMMISSION

  41.1 INTRODUCTION

  41.1.1 Legislation

  The Papua New Guinea Accident Investigation Commission was established under
  Section 218 of the Civil Aviation Act 2000 (as amended) and came into operation in
  January 2011.

  41.1.2 Objectives of the Commission

  The principal purpose of the Commission is to determine the circumstances and
  causes of accidents and incidents with a view to avoiding similar occurrences in the
  future, rather than to ascribe blame to any person.

  41.1.3 Functions of the Commission

  • The principal function of the Commission is the Investigation of aviation
  accidents and incidents;
  • The Minister may, by notice in the National Gazette, direct the Commission to
  investigate any serious land or marine transport accident or incident;
  • Where a direction is given under Subsection (2) all references to an “aircraft”
  shall be read as a reference to the vehicle or vessel or other form of transport
  involved in the accident or incident to be investigated;
  • Without limiting the principal function under Subsection (1) the Commission
  shall also have the following functions:

  ‒ Make such inquiries and investigations as it considers appropriate in
  order to ascertain the cause or causes of accidents or incidents;
  ‒ Co-ordinate and direct all such inquiries and investigations and to
  determine which other parties, if any, should be involved in the
  investigation;
  ‒ Prepare and publish findings and recommendations, if any, in respect
  of any such inquiries and investigation;
  ‒ Where requested by the Minister, to deliver a written report on each
  investigation to the Minister, including any recommendations for
  changes or improvements that it considers will ensure avoidance of
  accidents and incidents in the future;
  ‒ Co-ordinate and co-operate with other accident investigation
  organisations of Contracting States, including taking or collecting
  evidence on their behalf;

  – 107 –

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• Papua New Guinea Accident Investigation Commission

  ‒ Request from the Authority or PNG Air Traffic Services (PNGATS) or
  any other person such information as it considers appropriate regarding
  any accident or incident that the Commission believes that it is
  required to investigate under this Act;
  ‒ Perform any other function or duty conferred on the Commission under
  any Act or prescribed by regulations; and
  ‒ With the consent of the Minister, to provide consulting services,
  training and management services relating to any of its functions,
  whether in PNG or overseas.

  41.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and examination of the financial statements of the
  the Commission for the years ended 31 December 2013, 2014, 2015 and 2016 had
  been completed and the results were being evaluated.

  The financial statements of the Commission for the year ended 31 December 2017
  had been submitted for my inspection and audit and arrangements were being made to
  commence the audit shortly.

  – 108 –

• Page 143 of 293

• 42. PAPUA NEW GUINEA CUSTOMS SERVICE

  42. INTRODUCTION

  42.1.1 Legislation

  The National Executive Council (NEC) in its meeting on 24 July 2014, Decision No:
  216/2014 approved that the Papua New Guinea Customs Service be transformed from
  the National Public Service into an Independent Statutory Authority through a
  separate Act of Parliament.

  In accordance with the NEC Decision, the Papua New Guinea Customs Service Act
  2014 was drafted and certified on 21 October 2014, establishing the Papua New
  Guinea Customs Service as a Statutory Authority.

  Prior to November 2014, the Papua New Guinea Customs Service was operating as a
  Department of the National Public Service.

  42.1.2 The Functions of the Service

  The functions of the Papua New Guinea Customs Service are to:
  • administer and enforce the customs laws;
  • promote compliance with the customs laws;
  • take such measures as may be required to improve service provided to importers
  and exporters with a view to improving efficiency and maximising revenue
  collection;
  • take such measures as may be required to counteract customs fraud and other
  forms of duty evasion;
  • advise the State on matters relating to customs and to liaise with relevant
  stakeholders on such matters;
  • represent the State internationally in respect of matters relating to customs; and
  • carry out such functions as are given to the Papua New Guinea Customs Service
  under this Act or any other law.

  42.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Service for the period ended 21 October 2014 to 31 December 2014 and for the
  years ended 31 December 2015 and 2016 were in progress.

  The Service had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 109 –

• Page 144 of 293

• 43. PAPUA NEW GUINEA FOREST AUTHORITY

  43.1 INTRODUCTION

  43.1.1 Legislation

  The Papua New Guinea Forest Authority was established under the Forestry Act 1991
  which came into operation on 25 June 1992.

  The prime objective of the Authority is to provide for and to give effect to the
  National goals and the directive principles regarding:

  ~ Management, development and protection of the Nation‟s forest resources and
  environment in such a way as to conserve and renew them as an asset for
  succeeding generations;
  • Maximisation of PNG‟s participation in the wise use and development of the
  forest resources as a renewable asset;
  • Utilisation of the Nation‟s forest resources to achieve economic growth,
  employment creation and increased “downstream” processing of the forest
  resources;
  • Encouragement of scientific study and research into forest resources so as to
  contribute towards a sound ecological balance, consistent with the national
  development objectives;
  • Increased acquisition and dissemination of skills, knowledge and information
  in forestry through education and training; and
  • Pursuit of effective strategies, including improved administrative and legal
  machinery, for managing forest resources and the management of National,
  Provincial and Local interests.

  The Authority was formed by the amalgamation of the Department of Forests, the
  Forest Industries Council, the Provincial Divisions of Forestry, the Forestry College
  in Bulolo, the Timber Industry Training College and the Research Institute in Lae.

  With the establishment of the Authority the following Acts were repealed: the Forest
  Industries Council Act (Chapter 215); the Forestry Act (Chapter 216); and the
  Forestry (Private Dealings) Act (Chapter 217).

  43.1.2 Functions of the Authority

  The principal functions of the Authority are to:

  • Provide advice to the Minister on forest policies and legislation pertaining to
  forestry matters;

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• Page 145 of 293

• Papua New Guinea Forest Authority

  • Prepare and review the National Forest Plan and recommend it to the NEC for
  approval;
  • Through the Managing Director, to direct and supervise the National Forest
  Service;
  • Negotiate Forest Management Agreements;
  • Select operators and negotiate conditions on which timber permits, timber
  authorities and licences may be granted in accordance with the provisions of
  the Forestry Act;
  • Appoint and supervise the State Marketing Agency;
  • Subject to the Customs Act Customs Tariff Act and Exports (Control and
  Valuation) Act to control and regulate the export of forest produce;
  • Oversee the administration and enforcement of the Forestry Act and any other
  legislation pertaining to forestry matters, and of such forestry policy as
  approved by the NEC;
  • Undertake the evaluation and registration of persons desiring to participate in
  any aspect of the forestry industry;
  • Act as agent for the State, as required, in relation to any international
  agreement relating to forestry matters; and
  • Carry out such other functions necessary to achieve its objectives or given to it
  under the Act or other relevant law.

  43.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Authority for the year ended 31 December 2013 was completed and the results
  were being evaluated.

  The fieldwork associated with the inspection and audit of the accounts and records
  and the examination of the financial statements of the Authority for the year ended 31
  December 2014 was in progress.

  The Authority had not submitted its financial statements for the years ended 31
  December 2015, 2016 and 2017 for my inspection and audit.

  – 111 –

• Page 146 of 293

• 44. PAPUA NEW GUINEA IMMIGRATION AND CITIZENSHIP
  SERVICE AUTHORITY

  44.1 INTRODUCTION

  44.1.1 Legislation

  The Papua New Guinea Immigration and Citizenship Service Authority was
  established under the Immigration and Citizenship Service Act 2010. This Act came
  into operation on 9 July 2010.

  Under this Act, all assets used for the Authority services (other than land held by the
  State) which immediately before the coming into operation of this Act, were held by
  the Department of Foreign Affairs and Trade and which, by agreement between the
  Departmental Head of that Department and the Authority are necessary to be
  transferred to the Authority for the purposes of the Authority are on that coming into
  operation, transferred to and become assets of the Authority.

  44.1.2 Objectives of the Authority

  The objectives of the Authority are the following:

  • The management, development and protection of the nation‟s interest in so far as
  the security of the nation is protected;
  • Elimination of corruption and increase in accountability;
  • Provision of a more flexible operational working environment;
  • Increased operational and management efficiency in financial management,
  accountability and performance management;
  • Provision of a mechanism for the achievement of best practice;
  • Provision of financial and administrative autonomy;
  • Increased levels of client service delivery;
  • Encouragement of study and research in areas which will contribute to the
  protection and security of the nation;
  • Increased acquisition and dissemination of skill, knowledge and information in
  immigration and citizenship through education and training;
  • Pursuit of effective strategies including improved administrative and legal
  machinery for managing immigration, citizenship and passport matters; and
  • Ensure the Authority retains its primacy and leadership role with regard to the
  provision of effective border control and security through the effective
  management of entry and stay of people in PNG.

  – 112 –

• Page 147 of 293

• Papua New Guinea Immigration and Citizenship Service Authority

  44.1.3 Functions of the Authority

  The functions of the Authority are to:

  • Perform the functions and exercise the powers conferred on an authorised
  person or an officer under the Migration Act (Chapter 16) or the Passports Act
  (Chapter 17);
  • Assist the Minister responsible for the administration of the Migration Act
  (Chapter 16) and Passport Act (Chapter 17) in the performance of their
  functions under those Acts respectively;
  • Assist the Minister responsible for citizenship in the performance of his/her
  functions under Part IV of the Constitution and the Citizenship Act (Chapter
  12);
  • Collect fees, penalties and other revenue authorised under the Migration Act
  (Chapter 16), Passport Act (Chapter 17) and Citizenship Act (Chapter 12);
  • Administer the APEC Business Travel Card Scheme under the Migration Act
  (Chapter 16);
  • Collect, monitor, secure and maintain information and technological systems to
  enable fully integrated and supported immigration, citizenship and passport
  operations;
  • Undertake development of legislation and policy to support the operations of the
  Authority and the effective administration of the Migration Act (Chapter 16),
  Passport Act (Chapter 17) and the Citizenship Act (Chapter 12);
  • Advise the Minister on policy issues which relate to this Act and the effective
  administration of the Migration Act (Chapter 16), Passport Act (Chapter 17)
  and the Citizenship Act (Chapter 12);
  • Exercise and carry out such functions and powers and perform all duties which
  under any other written law are or may be or become vested in the Authority or
  delegated to the Authority by this Act or any other law; and
  • Carry out such other duties as are necessary, supplementary, incidental to or
  consequential to achieve the objectives or the discharge of its functions under
  this Act.

  44.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Authority for the year ended 31 December 2016 had been completed and the audit
  reports were being finalised.

  The Authority had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 113 –

• Page 148 of 293

• 45. PAPUA NEW GUINEA INSTITUTE OF MEDICAL RESEARCH

  45.1 INTRODUCTION

  45.1.1 Legislation

  The Papua New Guinea Institute of Medical Research was established by the Institute
  of Medical Research Act (Chapter 166) on 1 January 1980.

  45.1.2 Functions of the Institute

  The primary functions of the Institute are to conduct and foster research into any
  branch of medical science or biology, anthropological and sociological aspects of
  health, and matters relating to public health generally, that are of relevance to PNG.

  45.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  45.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on the Institute‟s
  financial statements for the year ended 31 December 2015 was issued on 28 February
  2018. The report contained a Disclaimer of Opinion.

  BASIS FOR DISCLAIMER OF OPINION
  “

  LIMITATION OF SCOPE

  Closing Balance K7,638,636
  –

  I was unable to confirm the correctness of the opening balance as at 1 January 2015
  due to a material difference of K8,581,190 noted between the closing balance of the
  Statement of Receipts and Payments (K10,189,157) and the aggregate closing bank
  balance (K18,770,346) in 2014. As a result of this material variance, I was unable to
  perform the necessary audit procedures to verify the completeness and the accuracy of
  the opening balance for the year ended 31 December, 2015. Since the opening balance
  has a bearing on the closing balance of the Institute, I was unable to state whether the
  closing balance of Statement of Receipts and Payments (K7,638,636) and aggregate
  closing bank balance (K15,953,457) had been fairly stated in the accounts at the year
  end. Since the Institute adopts the “cash basis” of accounting, the closing balance of
  Statement of Receipts and Payments must agree to the aggregate closing bank balance
  at year end. I noted these discrepancies over the years.

  . 114 .

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• Papua New Guinea Institute of Medical Research

  Bank Accounts K15,953,457
  –

  I noted that during 2015, the Institute maintained thirty-six (36) bank accounts and
  three (3) fixed term deposit accounts. My review of the bank reconciliations and their
  related records revealed that bank reconciliations for six (6) bank accounts were not
  provided to my Office for my review and examination. Further, three (3) bank
  accounts were not properly and timely reconciled resulting in variances. I was not
  provided any explanation for these variances.

  As such, I was unable to determine the accuracy of the bank balances and their
  aggregate closing balance of K15,953,457 as at 31 December 2015.

  Statement of Receipts and Payments and the Ending Bank Balance

  I noted that the Institute‟s accounts are prepared using the cash basis of accounting.
  This accounting method recognizes cash transactions and does not take into account
  those that are payable and receivable on an accrual basis. The difference between total
  receipts and payments should agree to the bank balance. During my review, I noted a
  material difference of K8,581,190 between the total bank balances and the Statement
  of Receipts and Payments net balance. I was not provided any valid explanations for
  this variance. As such, I was unable to conclude on the accuracy of the closing
  balance of the receipts and payments and the aggregate bank balance stated at year
  end.

  Fixed Assets K38,129,000
  –

  My review of the Fixed Assets Register and capital expenditures revealed that the
  Register was not properly maintained and updated on a timely basis. The Register did
  not contain details of asset classes for Boat and MB-F Equipment disclosed in the
  financial statements. In addition, the closing balance in the Asset Register did not
  reconcile with the balance disclosed in the financial statements. The Institute‟s
  accounts are prepared using the “cash basis” of accounting therefore; the Fixed
  Assets Register not only forms part of the financial statements but is the only record
  that keeps track of the Institute‟s fixed assets. Consequently, I could not perform all
  my planned audit procedures to satisfy myself on the amount stated in the accounts.
  As such, I was unable to conclude on the accuracy, valuation and existence of the
  fixed assets balance of K38,129,000 disclosed in the financial statements.

  DISCLAIMER OF OPINION

  Because of the significance of the matters described in the Basis for Disclaimer of
  Opinion paragraphs, I have not been able to obtain sufficient appropriate audit
  evidence to provide a basis for an audit opinion. Accordingly, I do not express an
  opinion on the financial statements of Papua New Guinea Institute of Medical
  Research for the year ended 31 December 2015.”

  – 115 –

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• Papua New Guinea Institute of Medical Research

  45.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act, on the inspection and
  audit of the accounts and records of the Institute for the year ended 31 December
  2015 was issued on 28 February 2018. The report contained the following
  observations:

  Budget and Reviews

  I was not provided with the Institute‟s budget for the year under review. As a result, I
  was unable to verify whether a budget was prepared to monitor the expenses of the
  Institute. Further, I noted that the Institute‟s management did not conduct periodic
  review of annual receipts and expenditures against its budget or appropriation records.
  This exercise would help management to ensure that receipts were flowing in as
  forecasted and expenditures were kept within their approved ceilings.

  I recommended that the Institute prepare a comprehensive budget and follow the
  approved budget. Any amendments to the budget should be submitted to management
  for approval. In addition, regular review on spending should be done and monthly
  reports should be prepared for the management purposes to ensure expenditures were
  kept within their approved levels.

  Management concurred with my comments.

  Fixed Assets Register

  My review of the Fixed Assets Register (FAR) and capital expenditures for the year
  revealed that the FAR provided for audit verification was incomplete and did not
  capture all assets under the custody of the Institute as at 31 December 2015. The
  Institute‟s accounts are prepared using the “cash basis” of accounting. As such, FAR
  not only forms part of the financial statements but is the only record that keeps track
  of an entity‟s fixed assets which are off the “cash radar”.

  Again I drew management‟s attention to Section 62 of the Public Finances
  (Management) Act, 1995 that requires all Public Bodies to maintain adequate controls
  over their assets or assets in their custody. I recommended management to conduct a
  thorough stock-take of all its assets and record them accordingly in the Fixed Assets
  Register. Assets should also be labeled for custody, control, movement and
  monitoring purposes. The management acknowledged my comments and stated that
  Fixed Assets Management has been an issue that they were continuously working on
  to improve.

  – 116 –

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• Papua New Guinea Institute of Medical Research

  Income Tax Payable

  I noted that the Institute had not filed its income tax returns with the Internal Revenue
  Commission since 2013. I brought this to the attention of management and cautioned
  the Institute that possible additional tax penalties may be imposed for not complying
  with the Income Tax Act, 1959.

  The management responded that they have a positive dialogue with the Taxation
  Office and was making payments on an installment basis for the arrears.

  Non-Acquittal of Travel Advances

  My review of the travel and subsistence expenses revealed that the advances were not
  acquitted on a timely manner. The Travel Advance Register maintained and provided
  for my verification was not a complete representation of all travels taken during the
  year. The Register was not updated as it only recorded travel and subsistence for
  Corporate Affairs section only and did not have records of travels from other cost
  centers. In addition, an acquittal file for travels and subsistence was not kept for the
  year under review.

  It is a requirement as per the Financial Management Manual Part 20 paragraph 11.2
  that cash advanced to officers travelling overseas on official duty to acquit travel
  advances within 14 days of return from duty travel. Also, Part 20 paragraph 12.10 of
  the same manual stipulates that advances to officers for domestic duty travels to be
  acquitted within 7 days of return from duty travel by submitting an acquittal form. As
  such, the Institute had breached the Public Finances (Management) Act 1995 by not
  maintaining a proper Travel Advances Register.

  45.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Institute had not submitted its financial
  statements for the years ended 31 December 2016 and 2017 for my inspection and
  audit.

  – 117 –

• Page 152 of 293

• 46. PAPUA NEW GUINEA INSTITUTE OF PUBLIC
  ADMINISTRATION

  46.1 INTRODUCTION

  46.1.1 Legislation

  The Papua New Guinea Institute of Public Administration was established in 1993
  under the Papua New Guinea Institute of Public Administration Act 1993.

  46.1.2 Functions of the Institute

  The functions of the Institute are to plan, organise, conduct and assess a wide range of
  practices and relevant training programmes in the Country and, if applicable, in the
  South Pacific Region and to undertake relevant research and consultancies on issues
  and problems of management and administration and to act as a centre for collection,
  storage, retrieval and dissemination of information.

  46.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Institute for the year ended 31 December 2014 had been completed and results
  were being evaluated.

  The financial statements for the years ended 31 December 2015, 2016 and 2017 had
  not been submitted by the Institute for my inspection and audit despite my reminders.

  – 118 –

• Page 153 of 293

• 47. PAPUA NEW GUINEA MARITIME COLLEGE

  47.1 INTRODUCTION

  47.1.1 Legislation

  The Papua New Guinea Maritime College was established under the Papua New
  Guinea Maritime College Act (Chapter 355). It was previously known as the Nautical
  Training Institute. However, by virtue of the Nautical Training Institute (Change of
  Name) Act 1985 which became effective on 25 July 1985, the names of Nautical
  Training Institute and Nautical Training Institute Act were changed to PNG Maritime
  College and PNG Maritime College Act respectively.

  47.1.2 Functions of the College

  The principal functions of the College are to provide training and other instructional
  facilities for the theoretical and practical training of persons in maritime skills and any
  other objects incidental or ancillary thereto.

  47.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the College
  for the years ended 31 December 2015 and 2016 were completed and the audit reports
  were being finalised.

  The College had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 119 –

• Page 154 of 293

• 48. PAPUA NEW GUINEA NATIONAL INSTITUTE OF
  STANDARDS AND INDUSTRIAL TECHNOLOGY

  48.1 INTRODUCTION

  48.1.1 Legislation

  The Papua New Guinea National Institute of Standards and Industrial Technology
  was established by the National Institute of Standards and Industrial Technology
  Act 1993 and came into operation on 3 January 1994.

  The National Standards Act (Chapter 378) and the National Technical Standards
  Act (Chapter 379) were repealed, and all funds standing to the credit of and on
  accounts operated under the authority of the repealed acts and all assets and
  liabilities owned or held by the bodies established under the repealed acts were
  transferred to and became the assets and liabilities of the Institute on the
  commencement of the new Act.

  48.1.2 Objectives of the Institute

  The objectives of the Institute are: to carry out scientific and technological research
  and to develop a National Standards system; to co-operate with international
  organisations of measurement and technical standards; to promote and undertake
  industrial integrated standardisation and quality assurance; and to enter into any
  agreement both within and outside PNG to further the objectives and functions of
  the Institute.

  48.1.2 Functions of the Institute

  The main functions of the Institute are to:

  • Safeguard PNG against the dumping and supply of unsafe, unhealthy and
  inferior or substandard products;
  • Establish and co-ordinate the National Standardisation system;
  • Provide education, training and industrial extension and consultative services
  to assist industries;
  • Promote public and industrial welfare, health and safety;
  • Recognise as testing authorities, bodies and institutions;
  • Establish a National Certification System of conformity;
  • Assist industries overcome technical barriers on its products and services to
  international trade; and
  • Assist industries to produce quality products and services.

  – 120 –

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• Papua New Guinea National Institute of Standards and Industrial Technology

  48.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Institute for the year ended 31 December 2016 had been completed and
  management responses were being awaited to finalise the audit report.

  The financial statements of the Institute for the year ended 31 December 2017 had not
  been submitted by the Institute for my inspection and audit.

  – 121 –

• Page 156 of 293

• 49. PAPUA NEW GUINEA SPORTS FOUNDATION

  49.1 INTRODUCTION

  49.1.1 Legislation

  The Papua New Guinea Sports Foundation was established by the Papua New Guinea
  Sports Foundation Act 2005. This Act was certified on 8 August 2006 and became
  operational on the same date and replaced the Papua New Guinea Sports Commission
  Act 1992.

  Under this Act, all assets held or occupied by and all liabilities and obligations of the
  Papua New Guinea Sports Commission prior to the operation of this Act were
  transferred to and became assets and liabilities and obligations of the Foundation at
  commencement.

  49.1.2 Objectives of the Foundation

  The principal objectives of the Foundation are: to encourage the private sector to
  contribute to the funding of sports to supplement assistance by the government of
  Papua New Guinea; to provide leadership in the development of Papua New Guinea‟s
  performance in sports; and to encourage increased participation and „Sport for All‟ by
  Papua New Guineans in sports.

  49.1.3 Functions of the Foundation

  The principal functions of the Foundation are to:

  • Advise the Minister in relation to the development of sports;
  • Co-ordinate activities in Papua New Guinea for the development of sports and
  to develop and implement programs to promote equality of access to and
  participation in sports by all Papua New Guinea;
  • Develop and implement programs for the recognition and development of
  persons who excel, or who have the potential to excel in sports and persons
  who have the potential to achieve standards of excellence as sports coaches,
  umpires, referees or officials essential to the conduct of sports;
  • Initiate, encourage and facilitate research and development in relation to
  sports;
  • Undertake research development related to sports science and sports medicine
  and to provide sports medicine services and sports science services to persons
  participating in programs of the Foundation;
  • Establish, manage, develop and maintain facilities for the purposes of the
  Foundation;

  – 122 –

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• Papua New Guinea Sports Foundation

  • Collect and distribute information and provide advice on matters related to the
  activities of the Foundation;
  • Fostering co-operation in sports between Papua New Guinea and other
  countries and to provide access to persons from other countries to the
  resources, services and facilities of the Foundation;
  • Raise money through the National Sports Trust or by other means for the
  purposes of the Foundation and to administer and expend money appropriated
  by the Parliament or raised in accordance with and for the purpose of the
  Foundation;
  • Consult and co-operate with appropriate authorities of the National
  Government or the Provinces and Local-level Governments and with other
  persons, associations and organisations on matters related to the activities of
  the Foundation;
  • Provide advice on matters related to sports to the Papua New Guinea National
  Olympic Committee or other persons, bodies or associations; and
  • Co-operate with districts, provincial, national and international sporting
  organisations in aiming to foster a sporting environment that is free from the
  unsanctioned use of performance enhancing drugs and doping methods.

  49.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of the Foundation for the
  years ended 31 December 2014 and 2015 were submitted and arrangements were
  being made to commence the audit shortly.

  The Foundation had not submitted its financial statements for the years ended 31
  December 2016 and 2017 for my inspection and audit.

  – 123 –

• Page 158 of 293

• 50. PAPUA NEW GUINEA UNIVERSITY OF TECHNOLOGY

  50.1 INTRODUCTION

  50.1.1 Legislation and Objectives of the University

  The Papua New Guinea University of Technology was established under the
  University of Technology Act (Chapter 170). The University‟s aims are to provide
  tertiary educational facilities and to produce qualified men and women to play an
  important part in the development of Papua New Guinea.

  50.1.2 Functions of the University

  The University‟s principal functions are to encourage and provide facilities for study,
  education and training of technological subjects and branches of learning at tertiary
  level, and to assist in research and the practical application of technological branches
  of learning.

  50.1.3 Subsidiaries of the University

  The University has two wholly owned subsidiary companies, National Analytical and
  Testing Services Limited and Unitech Development and Consultancy Company
  Limited, which were incorporated under the Companies Act.

  Comments in relation to the subsidiary Companies are contained in paragraphs 50A
  and 50B of this Report respectively.

  50.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  50.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act on the University‟s
  financial statements for the years ended 31 December 2015 and 2016 were issued on
  25 October 2017 and 07 December 2017 respectively. The reports did not contain any
  qualification.

  50.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the University for the years ended 31 December
  2015 and 2016 were issued on 25 October 2017 and 07 December 2017 respectively.
  The reports contained similar comments, hence only the 2016 report is reproduced as
  follows:

  – 124 –

• Page 159 of 293

• Papua New Guinea University of Technology

  Salaries and Wages

  I had reviewed the salaries and wages of the University and noted that the tax value of
  both motor vehicle and housing benefit, as prescribed by the Income Tax Act 1959 (as
  amended), was not included in the gross taxable income of each employees to
  calculate the salary income tax. Therefore, the staff of the University were paying
  lesser salaries and wages tax. I recommended to management to ensure that group tax
  had been calculated correctly and remitted to tax office.

  The management responded that:

  “It has been discussed with Finance and General Purpose Committee (FGPC) and
  Senior Executive Management Team (SEMT) meeting for non-compliance of the tax
  calculation. Registrar advised that it will be implemented from 01-01-2018 onwards
  through new payroll system, Chris HR software.”

  Non-compliance with the Public Finances (Management) Act 1995

  The Papua New Guinea University of Technology had not prepared and submitted its
  financial statements prior to 30 June for the year ending 31 December proceeding, to
  enable me to conduct audit and report the results before these deadline, resulting in
  breach of Section 63(2) and Section 63(4) of the Public Finances (Management) Act
  1995.

  50.3 STATUS OF FINANCIAL STATEMENTS

  The University had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 125 –

• Page 160 of 293

• 50A. NATIONAL ANALYTICAL AND TESTING SERVICES
  LIMITED (Subsidiary of University of Technology)

  50A.1 INTRODUCTION

  The National Analytical and Testing Services Limited was initially incorporated as
  Champion No: 67 Limited on 10 March 2011. However, on 24 March 2011 the
  former Company name (Champion No: 67 Limited) was changed to what is now the
  National Analytical and Testing Services Limited.

  The shareholders of the Company are Unitech Development and Consultancy
  Limited and Star Mountains Institute of Technology Limited, each holding 61% and
  39% of the total issued shares respectively.

  50A.1.1 Functions of the Company

  The functions of the Company are to provide analytical, pathological and mineral
  testing services:

  • Analytical testing including tests for food, water, soil, mining or industrial
  waste;
  • Pathology testing relating to test for human diseases; and
  • Mineral (geo) testing involving testing for mineral compositions.

  50A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the years ended 31 December 2012 and 2013 were in
  progress.

  The Company had not submitted its financial statements for the years ended 31
  December 2014, 2015, 2016 and 2017 for my inspection and audit.

  – 126 –

• Page 161 of 293

• 50B. UNITECH DEVELOPMENT AND CONSULTANCY COMPANY
  LIMITED (Subsidiary of University of Technology)

  50B.1 INTRODUCTION

  Unitech Development and Consultancy Limited is a Company incorporated under
  the Companies Act.

  50B.1.1 Functions of the Company

  The primary function of the Company is to carry on the business and activities of
  consultants, and to render management, industrial, commercial, financial,
  secretarial, public relations, industrial relations and other related services to any
  person, firm or corporation engaged in any business, trade or activity. The Company
  also carries on a business of insect farming.

  50B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of the Company for the
  years ended 31 December 2014, 2015, 2016 and 2017 had not been submitted for
  my inspection and audit.

  – 127 –

• Page 162 of 293

• 51. PARLIAMENTARY MEMBERS‟ RETIREMENT BENEFITS
  FUND

  51.1 INTRODUCTION

  51.1.1 Legislation

  The Parliamentary Members‟ Retirement Benefits Fund was established under the
  Parliamentary Members‟ Retirement Benefits Fund Act 1997 which came into
  operation on 16 July 1997.

  51.1.2 Objectives of the Fund

  The objectives of the Fund are to provide pensions and retirement benefits for
  Members and former Members of Parliament and the former House of Assembly and
  to provide benefits to dependant spouses and juvenile dependants. This Act repealed
  the Parliamentary Members‟ Retirement Benefits Act which came into operation in
  1982.

  51.2 AUDIT OBSERVATIONS

  51.2.1 Comments on Financial Statements

  My report to the Minister under Section 8(4) of the Audit Act on the Fund‟s financial
  statements for the year ended 31 December 2016 was issued on 28 February 2018.
  The report did not contain any qualification.

  51.2.2 Audit Observations Reported to the Minister

  My examination in accordance with Section 8(2) of the Audit Act generally revealed
  satisfactory results.

  51.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Fund had not submitted its financial
  statements for the year ended 31 December 2017 for my inspection and audit.

  – 128 –

• Page 163 of 293

• 52. PUBLIC CURATOR OF PAPUA NEW GUINEA

  52.1 INTRODUCTION

  52.1.1 Legislation

  The Office of the Public Curator of Papua New Guinea was established under the
  Public Curator Act (Chapter 81).

  52.1.2 Functions of the Public Curator

  The main functions of the Public Curator are to act as an administrator of estates; an
  executor appointed under a will by a member of the public; and/or an official trustee.

  52.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  52.2.1 Comments on the Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on the Public Curator‟s
  Office financial statements for the year ended 31 December 2013 was issued on 18
  October 2017. The report contained a Disclaimer of Opinion.

  “BASIS FOR DISCLAIMER OF OPINION

  Limitation of Scope – Opening Balances

  My reports for the years ended 31 December, 2009 to 2012 were disclaimed due to
  limitation on the scope of audit on opening balances. I was unable to confirm the
  opening balances resulting from non-submission of financial statements for the years
  ended 31 December 2004 to 2008. I was therefore, unable to satisfy myself as to the
  accuracy and completeness of the opening balances of term deposits, deceased estate
  accounts, minor & insolvency accounts and suspense accounts of Port Moresby, Lae
  and Rabaul.

  Since these opening balances entered into the determination of the results of
  operations and cash flows of the Public Curator‟s Office in 2013, I was unable to
  determine whether adjustments to the results of operations, receipts and payments
  might have been necessary for the year ended 31 December 2013.

  Limitation of Scope – Accounting Records

  The Public Curator‟s Office did not maintain proper books of accounts in 2013 and in
  prior years. The financial statements were prepared from manually maintained records
  on excel spread sheets.

  – 129 –

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• Public Curator of Papua New Guinea

  The statements were prepared from incomplete and insufficient records without
  proper supporting reconciliations and documentations resulting in the limitation on
  the scope of my audit. As a result, it was impracticable for me to carry out all my
  planned audit procedures to determine the accuracy of the year end balances as
  disclosed in the financial statements.

  Receipts and Payments

  I noted that the Curator‟s Office disclosed total receipt of K12,775,282 and total
  payment of K12,224,732 in its financial statements during the year. However, of these
  totals I was not provided with the detailed receipts together with their summaries. I
  was unable to establish the total net deceased estate funds received during the year,
  total amount charged for Public Curator‟s commission and fees, rental fees for estate
  properties managed by the Regional Offices, repayment of advances and other
  receipts.

  Further, I was unable to determine the total payments made to beneficiaries out of
  their respective Deceased Estate Trust Accounts, payments made in relation to the
  operations of each Regional Offices as well as Head Office, advances made to
  beneficiaries of the Estate Accounts and costs incurred in relation to the maintenance
  of properties managed by the Regional Offices.

  As such, I was unable to determine the accuracy and completeness of the total receipts
  of K12,775,282 and payments of K12,224,732 made during the year.

  Suspense Account K17,773,063
  –

  My examination of this account revealed that the account has been maintained as a
  clearing account to keep track of proceeds from deceased individuals and transfers
  between various estate accounts pending reconciliation, proper identification and
  allocation to their respective estate accounts. However, I noted that proper, accurate
  and timely reconciliations were not done over the years to allocate these funds to their
  respective estate accounts to clear this Suspense Account. In addition, the records in
  relation to this cumulative balance over the years were not made available to me for
  my examination and verification. Consequently, the beneficiaries to these estate
  accounts may have been denied of their rights to have access to these funds.
  Accordingly, I was unable to determine the validity and accuracy of this account as at
  year end.

  Deceased Estate Trust Accounts K6,166,573
  –

  My review of the Deceased Estate Trust Accounts maintained by the Regional Offices
  revealed that the accounts not only hold and maintain records of the deceased estate
  accounts but also transactions of the Public Curator‟s Corporate Trust Accounts from
  the same Cash Book and Bank Accounts.

  – 130 –

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• Public Curator of Papua New Guinea

  The income generated in terms of the commissions, administrative fees, interests
  charged on advance payments made to beneficiaries and other receipts for the year
  and their related payments thereon were not identified, dissected and properly
  recorded in separate ledgers in each region.

  Further, I noted that the Momase Regional Office had been making payments to
  purported beneficiaries using the Kundupei banking facility. I noted that there was no
  audit trail maintained using this banking facility. I was unable to link the payees to
  their respective deceased estates‟ records to determine
  whether the payees were the
  proper beneficiaries.

  As such, I was unable to establish and determine the accuracy of the year end
  balances for the Deceased Estate Trust Accounts at the year.

  Deceased Estate Properties

  I noted that the Public Curator‟s Office was in possession of unrealised and personal
  properties of deceased estates that were identified and administered by the Office.
  These properties were not valued and disclosed by way of notes to the financial
  statements as the proceeds from the disposal of these assets would be properly
  identified and credited to their respective estate accounts or transferred (non-liquid
  form) to the beneficiaries at a later date. As such, I was unable to satisfy myself as to
  the completeness and accuracy of the final trust balances disclosed in the financial
  statements at year end.

  DISCLAIMER OF OPINION

  Because of the significance of the matters described in the Basis for Disclaimer of
  Opinion paragraphs, I have not been able to obtain sufficient appropriate audit
  evidence to provide a basis for an audit opinion. Accordingly, I do not express an
  opinion on the financial statements of Public Curator‟s Office for the year ended 31
  December 2013.”

  52.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Public Curator‟s Office for the year ended 31
  December 2013 was issued on 18 October 2017. The report contained the following
  comments:

  Accounting System and Lack of Audit Trail

  I noted that the financial statements of the Curator‟s Office were prepared on excel
  spread sheets from records manually entered and maintained. The receipts and
  payments for all deceased estate trust accounts are manually maintained in each region
  and Head Office.
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• Public Curator of Papua New Guinea

  There was no proper audit trail for the trust accounts maintained in the regions. I
  recommended Management to source a suitable computer application software that
  will integrate deceased estate data from the Regions as well as Head Office and
  produce timely reports. Management concurred with my comments and stated that to
  replace the current system with an appropriate integrated system had not been fruitful
  due to funding constraints.

  Internal Control Weakness

  During my review, I noted that the internal control environment of the Public
  Curator‟s Office was generally weak. I observed that some key positions like the
  assistant estate officers, property officers and officers responsible for basic accounting
  functions had not been properly assessed in each region and filled. Consequently, a
  single officer was made to perform functions that could better be done by several
  officers. This could compromise the effective control as a result of lack of segregation
  of duties. I brought this issue to the attention of the Management for necessary action
  and Management concurred with my comments and added that Management had taken
  necessary steps to fill some positions.

  Bank and Deceased Estate Account Reconciliations

  My review of the Public Curator‟s bank and deceased estate account reconciliations
  for Head Office and the Regional Offices revealed that the reconciliations had not
  been properly done. As a result, there was a significant material balance in the
  suspense (clearing) account that had been accumulated over the years which
  Management had to reconcile and clear. I recommended Management to ensure that
  bank and estate accounts reconciliations be done on a monthly basis to correctly
  identify individual estate receipts/proceeds and post them to their respective individual
  estate accounts.

  Trust Instruments (Deeds)

  My review of the Public Curator‟s trust accounts revealed that there were no trust
  instruments or deeds maintained by the Office governing the operations of each trust
  bank account. Trust Instruments and deeds govern the operations of every trust
  account operated by any government agencies. In the absence of trust instruments and
  deeds maintained by the Public Curator as the Official Trustee of deceased estates, the
  trust funds could be susceptible to misapplication, misuse and abuse.

  Kundupei and Single Cheque Payment (Batch files)

  My review of the deceased estate payments made to beneficiaries during the year
  revealed that the Momase Regional Office had been making payments using the
  Kundupei banking facility.

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• Public Curator of Papua New Guinea

  My examination of two (2) batch payments made available to me revealed that a total
  of K151,621 was paid to various payees without stating their respective estate names.
  Further, I observed that a total of K94,921 was paid to persons other than the
  beneficiaries apart from the service providers. I was unable to link all the payments
  made to various payees using this banking facility. In addition, I noted that Port
  Moresby Office had raised single cheques for various deceased estate accounts. Both
  of these methods lack proper audit trails therefore I was unable to determine whether
  the payees were the proper beneficiaries. These payment methods were in breach of
  trust instruments.

  Management responded to my concern as follows; “Kundu batch payments totaling
  K151,621 and K94,921, all payments were made fraudulently without any deceased
  estate involved. The Kundu Batch Payment listing that was detected during your audit
  engagement was only the tip of an ice berg and there are even more similar payments
  made through Kundu Payment System that requires further investigation
  immediately. ”

  52.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of the Public Curator‟s
  Office for the year ended 31 December 2014 was submitted and arrangements were
  being made to commence the audit shortly.

  The financial statements for the years ended 31 December 2015, 2016 and 2017 had
  not been submitted by the Public Curator‟s Office for my inspection and audit.

  – 133 –

• Page 168 of 293

• 53. SECURITY INDUSTRIES AUTHORITY

  53.1 INTRODUCTION

  53.1.1 Legislation

  The Security Industries Authority was established under the Security (Protection)
  Industry Act 2004. This Act came into operation on 1 March 2005. The Authority
  commenced its operations in April 2005.

  53.1.2 Functions of the Authority

  The principal functions of the Authority are to:

  • Grant licenses and permits under the Act;
  • Fix minimum standards of training applicable to holders of licenses and permits
  respectively;
  • Establish, provide or approve training institutions and facilities or permit such
  training institutions or facilities as it may approve, to conduct training or to be
  used for training for the purpose of training of persons who intend to perform
  security officers duties or security guard duties;
  • Approve any equipment other than firearms used by a holder of a license or
  permit or required by a customer to be installed on his premises or property;
  • Ensure that the holder of a license or permit operates or carries out his duties or
  performs his functions in accordance with the terms and conditions of the
  license or permit and subject to the provisions of this Act;
  • Formulate a Code of Conduct governing the disciplinary matters and work
  ethics within the Industry; and
  • Undertake such other functions and exercise such powers as may be conferred
  on it by this Act or any other law.

  53.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the audit of the
  accounts and records and the examination of the financial statements of the Authority
  for the year ended 31 December 2015 had been completed and the audit reports were
  being finalised.

  The Authority had not submitted its financial statements for the years ended 31
  December 2016 and 2017 for my inspection and audit.

  – 134 –

• Page 169 of 293

• 54. SMALL AND MEDIUM ENTERPRISES CORPORATION
  (Formerly Small Business Development Corporation)

  54.1 INTRODUCTION

  54.1.1 Legislation

  The Small and Medium Enterprises Corporation (formerly Small Business
  Development Corporation) was established under the Small and Medium Enterprises
  Corporation Act 2014. This Act came into operation on 10 February 2015.

  54.1.2 Functions of the Corporation

  The functions of the Corporation are to:

  (a) co-ordinate, monitor and evaluate the implementation of the policies,
  strategies and programs for small and medium enterprises in accordance with
  the Small and Medium Enterprises Policy, the Master Plan of the Government
  as directed by the Small and Medium Enterprises Development Council and
  the Ministry responsible for trade, commerce and industry matters;
  (b) undertakestudiesconcernigthedevelopmentofsmalndmedium
  enterprises;
  (c) liaise with the National Executive Council or relevant Ministry in the
  implementation of the policies, strategies and programmes for small and
  medium enterprises;
  (d) being responsible for collecting, sourcing, keeping and disseminating
  information on small and medium enterprises;
  (e) act as the Secretariat to the Council;
  (f) in the manufacturing and services sectors
  –

  (i) to undertake promotional activities to promote growth of small and
  medium enterprises;
  (ii) to promote co-operation amongst small and medium enterprises;
  (iii) to encourage industrial linkages with the large industries;
  (iv) to develop human resource in the small and medium enterprises; and

  (g) undertake any work and investments necessary to promote and grow the small
  and medium enterprises sector in the economy.

  – 135 –

• Page 170 of 293

• Small and Medium Enterprises Corporation

  54.2 AUDIT OBSERVATIONS AND RECOMMENDATION

  54.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act on the financial
  statements of the Corporation for the years ended 31 December 2013, 2014 and 2015
  were issued on 14 September 2017. The reports contained similar qualified opinions,
  hence, only the 2015 report is reproduced.

  “BASIS FOR QUALIFIED OPINION

  Fixed Assets – K3,154,755

  During my review of the fixed assets of the Corporation for the year ended 31
  December 2015, I noted that the Fixed Assets Register maintained by the Corporation
  was incomplete and has not been updated with necessary details. I further noted that
  no proper stock-take carried out during the year and prior years to ascertain the proper
  value, condition and existence of assets held at year end. Consequently, I was not able
  to confirm and conclude on the accuracy and completeness of the fixed assets amount
  disclosed as K3,154,755 in the financial statements.

  Non-Consolidation – Small Industry Centre (SIC)

  The Small Industry Centre (SIC) is one of the divisions of the Corporation
  maintaining its own financial transactions and records separately. Although the
  division is part of Small and Medium Enterprises Corporation (SMEC), the accounts
  of SIC were not consolidated in the Corporation‟s books for the year ended 31
  December 2015 to comply with the requirements of the International Accounting
  Standards (IAS 1 and 27). Further, I was not able to rely on the financial transactions
  and records provided by SIC for my examination which contained material
  differences and lacked integrity. As such, the financial statements of SMEC for the
  year ended 31 December 2015 did not fairly reflect the results of the entire entity.

  Financial Incentive Scheme – K1,987,847

  As disclosed by the Corporation at 31 December 2015, the Financial Incentive
  Scheme amounted to K1,987,847. The scheme was established with various financial
  institutions as a security deposit to assist small to medium enterprises owned by PNG
  citizens. During my review, I noted that K1,000,000 and K150,000 were placed with
  the National Development Bank (NDB) in 2005 and Nationwide Microbank in 2008
  respectively. Of these, K411,935 and K133,917 were disclosed by the Corporation at
  balance date.

  – 136 –

• Page 171 of 293

• Small and Medium Enterprises Corporation

  However, I was not provided with sufficient appropriate information relating to the
  amounts received by participants and their respective loan drawdown summaries to
  reconcile with the balance disclosed at the year end. According to the information
  obtained from the banks, the loans with NDB exceeded the security deposit of
  K1,000,000 by K693,386 as at 31 March 2015 while K12,464 remained with the
  Nationwide Microbank as at 31 December 2014 was transferred to the main operating
  account in April 2015. As such, I was unable to confirm and verify whether amounts
  disbursed were properly monitored and used for the intended purposes. Further, I was
  unable to conclude on the accuracy and completeness of the balance disclosed at year
  end.

  Staff and Other Debtors K563,988
  –

  Staff and Other Debtors totalling K563,988 comprised of several sub-accounts
  detailed in Note# 3 in the financial statements. During my review, I was not provided
  with the supporting documentation relating to sundry/other debtors and security
  deposit of K209,113 and K9,933 respectively for my verification. As such, I was
  unable to confirm the accuracy and correctness of these respective balances and the
  overall balance representing Staff and Other Debtors disclosed in the financial
  statements at year end.

  GST Refundable K3,408,589
  –

  My examination of GST Refundable account revealed that the Corporation included
  K132,341 (10% of K1,323,414) pertaining to office rental in determining the
  refundable amount at year end. However, I am of the view that since the amount was
  paid directly by the Government through the Government Office Allocation
  Committee the treatment was incorrect as payment was not made from the
  Corporation. I also noted that the full amount of K1,323,414 was treated as income
  and expensed out during the same financial year. Consequently, the balance
  representing GST refundable was overstated in the financial statements.

  QUALIFIED OPINION

  In my opinion, except for the effect on the financial statements of the matters referred
  to in the Basis for Qualified Opinion paragraphs;

  (a) the financial statements of the Corporation are based on proper accounts and
  records; and

  (b) the financial statements are in agreement with those accounts and records, and
  show fairly the state of affairs of the Corporation as at 31 December 2015 and
  the results of its financial operations and cash flows for the year then ended. ”

  – 137 –

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• Small and Medium Enterprises Corporation

  54.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Corporation for the years ended 31 December
  2013, 2014 and 2015 were issued on 14 September 2017. The reports contained
  similar observations, hence, only the 2015 report is reproduced.

  1. Non-Compliance with the Public Finances (Management) Act 1995

  Section 63(2) and (4) of the Public Finances (Management) Act 1995 requires
  the Corporation to furnish to the Minister before 30 June in each year, a
  performance and management report of its operations for the year ending 31
  December preceding, together with financial statements. Before furnishing
  financial statements to the Minister, the Corporation shall submit them to the
  Auditor-General who shall report to the Minister. However, the Corporation
  had not prepared and submitted its financial statements for the year ended 31
  December 2015 to enable my office to complete the audit as specified in the
  Act. Accordingly, the Corporation had breached Section 63(2) and (4) of the
  Public Finances (Management) Act 1995.

  I brought this to the attention of the management and they responded as
  follows:

  “We take heed of the recommendation made and will ensure the accounts are
  up to date going forward in compliance with the relevant legislations, in
  particular, the Public Finances (Management) Act 1995 and the Audit Act
  1989.”

  2. The Board

  DXiQJ P EHñ1V U EQ]teUtKat tKe ~]~~~~~ terP EFJSllRi]Q llI [O UFK EI[f
  and the positions were not filled until 15 April 2016. The Corporation was
  operating without a governing board for almost two (2) years. As a result, I
  was not able to comment on whether proper procedures were followed when
  making major investments, procurement decisions and other general
  administration of the Corporation. I recommended that management be
  proactive to establish a new board as soon as possible to oversee the
  management of the Corporation.

  Management took note of my finding and recommendation.

  – 138 –

• Page 173 of 293

• Small and Medium Enterprises Corporation

  3. Internal Audit Function

  During my review of the internal audit function, I noted that the Corporation
  did not fully utilize the function to review various processes and systems and
  to provide necessary recommendation for the management to improve on the
  internal control weaknesses noted in the prior year audits. This issue on the
  role of the internal audit function and its lack of performance was brought to
  the attention of the management during my prior year audits, however, I noted
  that not much improvement had taken place. Therefore, I was unable to state
  whether internal processes were systematically and timely reviewed by the
  internal audit division promptly. The management responded to my concern as
  follows:

  “Management will review and ensure it is operationalize to undertake its
  functions with an Audit Charter, Work Plan, Audit Methodologies, etc in place
  for its effectiveness.”

  4. Bank Recon ciliations

  The Corporation maintained four (4) bank accounts in 2015. During my
  review, I noted that these accounts‟ bank reconciliations were not prepared,
  reviewed nor verified by senior officers of the Corporation on a timely basis.
  They were prepared a year later only in 2016. As a result, I was not able to
  place reliance on the effectiveness of the controls surrounding the bank
  reconciliation process during the year under review. I also caution the
  management that lack of timely bank reconciliation pose a risk of fraudulent
  activities to go undetected.

  I brought this issue again to the attention of the management and was advised
  that, bank reconciliations were not prepared on a timely basis due to changes
  in personnel in the accounts section. Management was also utilizing the
  MYOB accounting system which will assist minimize the risk of fraudulent
  activities.

  5. Travel Advance K336, 044
  –

  My review of the duty travel advances revealed that the Corporation did not
  maintain a Travel Advance Register to keep proper records of all the duty
  travel advances and related expenses. I also noted that travel advances
  amounting to K336,044 were not acquitted in 2015. It is a requirement under
  Financial Management Manual Part 20 Paragraph 12.2 that a Financial
  Delegate/Authorizing officer shall maintain a Register of Advances to officers
  on duty travel.

  . 139 .

• Page 174 of 293

• Small and Medium Enterprises Corporation

  Further, it should also be noted, that it is a requirement under the Financial
  Management Manual Part 20 Paragraphs 11.2 and 12.10 that cash advanced
  to officers on official duty overseas must be acquitted within fourteen (14)
  days of return from travel and advances to officers for domestic duty travels to
  be acquitted within seven (7) days of return from duty travel by submitting the
  acquittal form. In the absence of a Travel Advance Register and the
  corresponding travel advance and expense acquittal documents, I was unable
  to confirm whether the travels made were for official purposes.

  6. Recreational Leave Fares

  During the year under review, a total of K109,031 was paid as leave fares to
  officers of the Corporation. However, I was not able to verify and confirm the
  dependents and the amounts claimed and paid due to the absence of birth
  certificates and tax declarations. As such, I was unable to comment whether
  the Corporation had complied with the General Orders (GO 14.41) in the
  administration of leave fares during the year.

  I brought this issue to the attention of management and it responded that
  necessary action would be taken by the Corporation.

  7. Mi ssi n g Asset s

  During my physical examination of fixed assets owned by the Corporation, I
  noted that assets valuing K19,012 were not accounted for. These assets were
  in the custody of former senior employees of the Corporation. In the absence
  of proper stock-take, those assets that were stolen and/or misplaced could not
  be identified and recorded at correct values. As a result, I was unable to
  comment whether the fixed assets balance was fairly disclosed in the financial
  statements. Further, I was not able to place any reliance on the internal
  controls surrounding the use and custody of the fixed assets.

  54.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Corporation had submitted its financial
  statements for the year ended 31 December 2016 and arrangements were being made
  to commence the audit shortly.

  The Corporation had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 140 –

• Page 175 of 293

• 55. TOURISM PROMOTION AUTHORITY

  55.1 INTRODUCTION

  55.1.1 Legislation

  The Tourism Promotion Authority was established under the Tourism Promotion
  Authority Act 1993. This Act came into operation on 3 June 1993 thereby repealing
  the Tourism Development Corporation Act 1990. The Authority commenced its
  operational activities on 1 April 1993.

  Under the Tourism Promotion Authority Act all assets held by and obligations and
  liabilities imposed on the Tourism Development Corporation which related to the
  functions of the Authority were transferred to it (the Authority), and the rest of the
  assets and liabilities were transferred to the National Cultural Committee on 3 June
  1993.

  55.1.2 Functions of the Authority

  The principal functions of the Authority are to:

  • foster the development of tourism in PNG;
  • formulate a tourism policy for consideration by the NEC and to implement the
  tourism policy approved by the NEC;
  • promote PNG overseas as a tourist destination;
  • co-ordinate the overseas promotional efforts of the PNG tourism industry;
  • encourage the provision, development and expansion of tourism infrastructure,
  facilities and products in PNG; and
  • enhance awareness within PNG of the tourism industry and tourism opportunities.

  55.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  55.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on the Authority‟s
  financial statements for the year ended 31 December 2016 was issued on 12 October
  2017. The report did not contain any qualification.

  55.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Tourism Promotion Authority for the year
  ended 31 December 2016 was issued on 12 October 2017. The report contained the
  following matters:

  – 141 –

• Page 176 of 293

• Tourism Promotion Authority

  Staff Debtors K66,779
  –

  The Authority disclosed staff debtors as K66,779 at 31 December, 2016. During my
  review, I noted that the Authority had not effectively managed and monitored the staff
  advances. Further, I observed inconsistencies in repayment through salary deductions
  and huge salary advances granted with low repayment rates. As a result, the staff
  debtors amounting K45,817 were well over 180 days and represented 69% of the total
  staff debtors. The Authority did not have any specific policy guidelines on staff
  advances to provide guidance on staff advances and monitor staff repayments. I
  brought this matter to the attention of the Authority and the management responded as
  follows:

  “The Authority lacks specific written policies in the types of “Staff Advances” and
  “Repayment Schedule and Process” for effective control over management of staff
  advances. This year, we have put in place strict controls regarding salary advances.

  These policies include a complete cessation on salary advances except for emergency
  cases. Our internal Financial Procedures Manual is due for review. However, has
  been shelved due to funding constraints. Management of staff advances will be one of
  the many policies we will incorporate when the review is underway.”

  Contract of Employment for Chief Executive Officer

  I was unable to authenticate the validity of the final entitlements totalled K395,596
  paid to the former Authority‟s Managing Director during the year under review as the
  signed copy of the Contract of Employment effective from 2011 was not provided for
  my audit verification by the Authority. The Authority advised that it had not received
  a signed Contract of Employment from Department of Personnel Management (DPM)
  since his appointment in 2011. The Management had followed up with the National
  Executive Council (NEC) and Department of Personnel Management and were
  advised thereon that the signed contract of employment could not be located.

  I also noted during the review of the personnel files that the Authority‟s current
  Managing Director‟s Contract of Employment was also not available for my
  examination. The Authority advised that the employment contract for the current
  Managing Director was in progress and management would continue to follow up
  with the DPM.

  Staff Salary History Cards

  My review of the personnel files for certain selected officers of the Authority revealed
  that management had maintained the salary history cards in their respective personnel
  files. However, the salary history cards were not updated by the Human Resource
  Section in terms of base salary, higher duty allowances and other allowances.

  – 142 –

• Page 177 of 293

• Tourism Promotion Authority

  I further noted that leave records for each employee such as recreational, sick,
  compassionate and long service were not updated.

  The Authority responded to my observation as follows:

  “We admit that salary history cards for some employees have yet to be maintained
  and updated in their personnel files. The Human Resource section is currently
  transferring all individual employee salary and allowances including leave records
  onto the template. It is hoped that we should have this issue resolved within this year
  for audit inspection next year.”

  55.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Authority had submitted its financial
  statements for the year ended 31 December 2017 and arrangements were being made
  to commence the audit shortly.

  – 143 –

• Page 178 of 293

• 56. UNIVERSITY OF GOROKA

  56.1 INTRODUCTION

  56.1.1 Legislation

  The University of Goroka was established under the University of Goroka Act 1997.
  This Act came into operation on 1 January 1997.

  Under this Act, the Goroka Campus of the University of PNG was transferred to the
  University of Goroka together with all staff and students, buildings and grounds,
  equipment, teaching and research facilities, and other assets and liabilities both within
  and outside the Campus.

  56.1.2 Objectives of the University

  The objectives of the University are dedicated to the pursuit, advancement and
  dissemination of knowledge, understanding and wisdom; the paying of particular
  attention to the human resource development and other development needs of PNG;
  and endeavouring to achieve academic and professional excellence to meet those
  needs through teaching, research and community service.

  56.1.3 Powers of the University

  The University shall have the power to:

  • Grant such degrees as are authorised by the Statutes and such diplomas,
  certificates or other academic awards as it determines;
  • Provide instruction and facilities for study, education and research to persons
  registered as preparing for degrees, diplomas, certificates or other awards of the
  University;
  • Provide facilities for extramural study and continuing education to persons,
  whether members of the University or not, in such fields and in such manner as
  the University may from time to time determine;
  • Co-operate in pursuance of any of the objectives of the University with any
  other bodies or persons to enter into agreements authorised by Statute with
  institutions for their affiliation with or incorporation into the University;
  • Subject to the Salaries and Conditions Monitoring Committee Act to appoint
  academic, administrative and other staff on such terms and conditions of service
  as the University may determine;
  • Provide for promoting the health and general welfare of the students of the
  University, including the establishment and supervision of residence;

  – 144 –

• Page 179 of 293

• University of Goroka

  • Regulate and enforce discipline among the employees and students of the
  University by such measures as the University may determine;
  • Cancel, annul or revoke any act done in the exercise of these powers; and
  • Do all such other acts or things as may be done under the provisions of this Act
  or these powers or as may be conducive to the exercise of the attainment of any
  of the objectives of the University.

  56.1.4 Subsidiary of the University

  The University has a Subsidiary Company, Unigor Consultancy Limited. Comments
  in relation to this Company are contained in paragraph 56A of this Report.

  56.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and examination of the financial statements of the
  University for the years ended 31 December 2015 and 2016 had been completed and
  the results were being evaluated.

  The University had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 145 –

• Page 180 of 293

• 56A. UNIGOR CONSULTANCY LIMITED (Subsidiary of the University of
  Goroka)

  56A.1 INTRODUCTION

  Unigor Consultancy Limited is 100% owned by the University of Goroka. It was
  incorporated in March 2000 as a consultancy company under the Companies Act.

  56A.1.1 Objectives of the Company

  The Company‟s objectives are to:

  • Advance, promote, assist and encourage the educational purposes of the
  University through;

  ‒ Short term programs for and on behalf of the University tailored to the
  needs of clients; and
  ‒ Research, consultancy and publication of all educational materials for
  commercial purposes;

  • Conduct or undertake any other business activity both within and outside of
  PNG; and
  • Expand and diversify business activities to maximise profits and to promote
  the interest of the Shareholder from time to time.

  56A.1.2 Functions of the Company

  The core function of the Company is to provide services in four key areas:

  • Professional consultancy services, teaching and dissemination of knowledge;
  • Merchandising of textbooks, educational supplies and stationary;
  • Printing and publication of educational materials, textbooks, business
  documents and all other forms of print material; and
  • Catering and cafeteria services.

  56A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not submitted its financial
  statements for the years ended 31 December 2014, 2015, 2016 and 2017 for my
  inspection and audit, despite numerous reminders.

  – 146 –

• Page 181 of 293

• 57. UNIVERSITY OF NATURAL RESOURCES AND
  ENVIRONMENT

  57.1 INTRODUCTION

  57.1.1 Legislation

  The University of Vudal was established under the University of Vudal Act 1997. This
  Act came into operation on 1 January 1997. The University changed its name to
  University of Natural Resources and Environment in 2008 and became operative in
  the same year.

  Under this Act, the Vudal University College Campus of the PNG University of
  Technology was transferred to the University of Vudal with all staff and students,
  buildings and land, equipment, teaching and research facilities, and other assets and
  liabilities both within and outside the College Campus.

  Although the new entity was created by the Act in 1997, the finance and accounting
  function was transferred to the University of Vudal only on 1 January 1998.

  57.1.2 Objectives of the University

  The Act states the objectives of the University as: dedication to the pursuit,
  advancement and dissemination of knowledge, understanding and wisdom; the paying
  of particular attention to the human resource development and other development
  needs of PNG; and endeavouring to achieve academic and professional excellence to
  meet those needs through teaching, research and community service.

  57.1.3 Powers of the University

  Section 6 of the Act enshrines the University as having the power to:

  • Grant such degrees as are authorised by the Statutes and such diplomas,
  certificates or other academic awards as it determines;
  • Provide instruction and facilities for study, education and research to persons
  registered as preparing for degrees, diplomas, certificates or other awards of
  the University;
  • Provide facilities for extramural study and continuing education to persons,
  whether members of the University or not, in such fields and in such manner
  as the University may from time to time determine;
  • Co-operate in pursuance of any of the objectives of the University with any
  other bodies or persons to enter into agreements authorised by Statute with
  institutions for their affiliation with or incorporation into the University;

  – 147 –

• Page 182 of 293

• University of Natural Resources and Environment

  • Subject to the SCMC Act appoint academic, administrative and other staff on
  such terms and conditions of service as the University may determine;
  • Provide for promoting the health and general welfare of the students of the
  University, including the establishment and supervision of residences;
  • Regulate and enforce discipline among the employees and students of the
  University by such measures as the University may determine;
  • Cancel, annul or revoke any act done in the exercise of these powers; and
  • Do all such other acts or things as may be done under the provisions of this
  Act or these powers or as may be conducive to the exercise of the attainment
  of any of the objectives of the University.

  57.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the University had not submitted its financial
  statements for the years ended 31 December 2015, 2016 and 2017 for my inspection
  and audit despite numerous reminders.

  – 148 –

• Page 183 of 293

• 58. UNIVERSITY OF PAPUA NEW GUINEA

  58.1 INTRODUCTION

  58.1.1 Legislation

  The University of Papua New Guinea was established under the University of Papua
  New Guinea Act (Chapter 169).

  58.1.2 Objectives of the University

  The objectives of the University include the:

  • Provision of facilities for study and education;
  • Giving of instruction and training in all such branches of learning as are
  provided for by the Statutes;
  • Aiding by research and other means the advancement of knowledge and its
  practical application;
  • Conferring, after examination, of the degrees of Bachelor, Master and Doctorate
  and such other degrees, diplomas, certificates and other academic honours as are
  authorised by the Statutes;
  • Provision of facilities for university education throughout the country by the
  affiliation of educational institutions, and by the establishment of tutorial
  classes, correspondence classes, university extension classes, and vacation
  classes, and by such other means as the Council thinks appropriate; and
  • Liaison, collaboration and reciprocation with other universities and institutions
  of learning, within or outside the country, in the provision of facilities, the
  recognition of degrees and other status, and the interchange of staff, students
  and information, and in any other way not inconsistent with its status as the
  University.

  58.1.3 Subsidiaries of the University

  The University has two subsidiaries, Unisave Limited and Univentures Limited,
  which were incorporated under the Companies Act.

  Comments in relation to the subsidiaries are contained in paragraphs 58A and 58B of
  this Report.

  – 149 –

• Page 184 of 293

• University of Papua New Guinea

  58.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the University for the year ended 31 December 2014 had been completed and the
  audit reports were being finalised.

  The fieldwork associated with the inspection and audit of the accounts and records
  and examination of the University‟s financial statements for the year ended 31
  December 2015 was in progress.

  The University had submitted its financial statements for the year ended 31 December
  2016 for my inspection and audit and arrangements were being made to commence
  the audit shortly.

  The University had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 150 –

• Page 185 of 293

• 58A. UNISAVE LIMITED (Subsidiary of University of Papua New Guinea)

  58A.1 INTRODUCTION

  58A.1.1 Legislation

  Unisave Limited was incorporated under the Companies Act on 18 October 2011.

  The incorporation of Unisave Limited was as a result of a Memorandum of
  Agreement (MOA) signed between the Univentures Limited, (a company 100%
  owned by University of PNG) and S.I.T Co. Limited of the Republic of South
  Korea.

  58A.1.2 Objective of the Company

  The parties to this MOA shall endeavor to create mutual commercial benefits
  through assembly and sales of Information Communication Technology (ICT)
  products and various projects which have price and quality competitiveness
  compared with other organisations in PNG. This will be achieved by combining of
  infrastructures and marketing power in PNG provided by Univentures and the
  technical know-how and successful long-term various experience in Korean ICT
  market provided by S.I.T.

  The main business of the Company is to assemble TVs, PCs, laptops, monitors and
  other items which can be included under mutual consent, such as systems
  integration, systems administration and maintenance in information technology.

  58A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of the Company for the
  years ended 31 December 2012, 2013, 2014, 2015, 2016 and 2017 had not been
  submitted for my inspection and audit, despite numerous reminders.

  – 151 –

• Page 186 of 293

• 58B. UNIVENTURES LIMITED (Subsidiary of University of Papua New
  Guinea)

  58B.1 INTRODUCTION

  58B.1.1 Legislation

  Univentures Limited was incorporated under the Companies Act, on 2 August 2007.
  The Company has a total issued capital of one ordinary share of K1.00 and is
  wholly owned by the University of Papua New Guinea.

  58B.1.2 Functions of the Company

  The activities of the Company are to sell and print books in the Bookshop and the
  Printery respectively, as a business arm of the University of Papua New Guinea.

  58B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not submitted its financial
  statements for the years ended 31 December 2012, 2013, 2014, 2015, 2016 and
  2017 for my inspection and audit despite numerous reminders from my Office.

  – 152 –

• Page 187 of 293

• 59. WATER PNG (Formerly PNG Water Board)

  59.1 INTRODUCTION

  59.1.1 Legislation

  PNG Waterboard was established by the National Water Supply and Sewerage Act
  1986, which came into operation on 1 January 1987. The 1986 Act repealed the
  National Water Supply and Sewerage Act (Chapter 393) and thereby abolished the
  National Water Supply and Sewerage Board. On 10 December 2010 PNG Water
  Board changed its name to Water PNG.

  59.1.2 Functions of Water PNG

  Water PNG is entrusted with co-ordinating, planning, designing, construction,
  management and charging for water supply and sewerage services throughout the
  country.

  59.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Board for the year ended 31 December 2015 had been completed and the audit
  reports were being finalised.

  The fieldwork associated with the inspection and audit of the accounts and records
  and examination of the Board~JIIn1IFI1lJt1t,P IQJIRTJVFJ T1rJHIedJLh J!1 IFFP EHJ
  2016 was in progress.

  The Board had submitted its financial statements for the year ended 31 December
  2017 for my inspection and audit and arrangements were being made to commence
  the audit shortly.

  – 153 –

• Page 188 of 293

• – 154 –

• Page 189 of 293

• SECTION B

  NATIONAL GOVERNMENT

  OWNED COMPANIES

  – 155 –

• Page 190 of 293

• – 156 –

• Page 191 of 293

• 60. FOREWORD

  This Section of my Report deals with Companies in which the Government of PNG
  holds more than 50% of the Issued Share Capital. On 26 January 1983, the NEC‟s
  Decision No. 12/93 expanded my responsibilities to include the audit of National
  Government Owned Companies and subsidiaries thereof. The audit of Government
  Owned Companies is also conferred to me through Section 3 of the Audit Act.

  The auditing and reporting requirements of these companies are stipulated under
  Section 200 of the Companies Act, which includes:

  (a) The work done by the auditor;
  (b) The scope and limitations of the audit;
  (c) The existence of any relationship the auditor has with the Company;
  (d) Whether all information and explanations required have been obtained;
  (e) Whether in the auditor‟s opinion, proper accounting records have been kept;
  (f) Whether in the auditor‟s opinion, the financial statements comply with generally
  accepted accounting practice and, where they do not, the respects in which they
  fail to comply; and
  (g) Whether in the auditor‟s opinion, the financial statements give a true and fair
  view of the matters to which they relate and, if not, the respects in which they
  fail to give such a view.

  My audit of Government owned Companies is conducted in accordance with the
  requirements of the Companies Act. Under Section 8 (2) of the Audit Act, I am also
  expected to report to the Minister for Finance, the matters of significance to do with
  the accounts and records, the financial transactions and the assets and liabilities. The
  management of the Company are also informed of the same.

  Comments in relation to the companies are detailed in paragraphs 61 to 73D.

  – 157 –

• Page 192 of 293

• – 158 –

• Page 193 of 293

• 61. AIR NIUGINI LIMITED

  61.1 INTRODUCTION

  61.1.1 Legislation

  Air Niugini Limited was incorporated under the Companies Act. It was formed to be
  the successor company of National Airline Commission, following the NEC decision
  of 20 June 1996 to corporatise the National Airline Commission in accordance with
  Section 45 of the National Airline Commission Act.

  As a result of the NEC decision, all assets, liabilities, staff and operations of the
  National Airline Commission were transferred at the written down book value (as at
  31 August 1996) to Air Niugini Limited. Air Niugini Limited is a 100% State Owned
  Company.

  61.1.2 Objectives of the Company

  The principal objectives of the Company are to:

  • Carry on the business of airline operators, general carriers, freight forwarders
  and forwarding agents, warehouse operators, shippers and general agents, ship
  owners charterers, hospitality and general traders, stevedores, cool store
  operators, flight contractors, carriers by land, air and water, insurers and
  insurance brokers and other business which may be usefully carried on in
  connection with such business;
  • Provide transport service, carrier freight transport, courier, taxi truck, light or
  heavy haulage and delivery services which involves the use of aircraft,
  railways, ship, road vehicle or any other means of conveyance by land, road,
  railway, sea, river, canal, water or air to carry and convey passengers, mails,
  containers, packages, parcels, bulk commodities, goods, merchandise,
  livestock and produce and property of every description;
  • Carry, collect, receive, load, unload, store, consign, distribute, transfer and
  deliver property of every description by any mode of transportation; and
  • Carry passengers by air, road, rail, land, sea or water and to operate any taxi
  service and to obtain any necessary licences for such purposes.

  61.1.3 Subsidiary of the Company

  The Company has a subsidiary Company, Link PNG Limited. Comments in relation
  to that Company are contained in paragraph 61A of this Report.

  – 159 –

• Page 194 of 293

• Air Niugini Limited

  61.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  61.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act on the inspection
  and audit of the accounts and records of the Company for the year ended 31
  December 2015 was issued on 13 December 2017. The report contained a Qualified
  Opinion.

  BASIS FOR QUALIFIED OPINION
  “

  Valuation of Rotables and Engines

  Air Niugini (the Company) has a policy to revalue its rotables and engines once in
  every three years, with the last valuation being performed in 2010. I noted that the
  company did not perform valuations of these assets in 31 December 2013, 31
  December 2014 and 31 December 2015. The Board has concluded that the book value
  of these assets was an appropriate measure as at 31 December 2015, 31 December
  2014 and 31 December 2013.

  As a result, it is impractical for me to determine the value of rotables and engines as at
  31 December, 2015 and 31 December, 2014 and as such I am unable to determine
  what adjustments might have been necessary to the statement of financial position as
  at 31 December 2015 and 31 December 2014 and the statement of comprehensive
  income, statement of cash flows and statement of changes in equity for the year ended
  31 December, 2015 and for the comparative year ended 2014.

  Componentisation of Assets

  IAS 16 Property Plant and Equipment requires that “for each part of an item of
  property, plant and equipment with a cost that is significant in relation to the total
  cost of the item shall be depreciated separately.” I noted that the Company does not
  depreciate the components of the aircraft that it owns or finance leases in accordance
  with IAS 16, rather the aircraft are depreciated as a whole. Due to the difficulty in
  identifying and separating the rotable components and calculating the estimated
  depreciation over their useful lives, I am unable to quantify the effect on the financial
  statements, however I believe the accumulated effect would be material.

  Due to the fact that the Company records its aircraft at fair value based on valuations
  completed as at 31 December each year, the error would not have any effect on the
  net assets of the Company at year end and any difference in the statement of financial
  position as at year end would be a difference between the Revaluation Reserve and
  the Company‟s Retained Earnings.

  . 160 .

• Page 195 of 293

• Air Niugini Limited

  However, I am unable to determine what adjustments might be necessary to the
  statement of financial position as at 31 December 2015 and 31 December 2014 and
  the statement of comprehensive income, statement of cash flows and statement of
  changes in equity for the year ended 31 December, 2015, and for the comparative year
  ended 31 December, 2014.

  Useful Life of Aircraft

  I noted that when an aircraft is revalued each year subsequent to its year of purchase,
  the original useful life of the aircraft is used to depreciate the new value of the aircraft
  and not the remaining useful life based on the purchase date. I further noted that
  certain aircraft have been in service for periods exceeding their original useful lives
  used for depreciation purposes. As a result, the Company is not formally re-assessing
  the useful lives of the aircraft at each balance date. This may result in a number of
  different errors in depreciation calculations, and also in the revaluation increments
  when aircraft are subsequently revalued.

  As with componentisation of assets, due to the aircraft being revalued every year,
  depreciation errors would not have an effect on the net assets of the Company at year
  end. However, I was unable to determine what adjustments might be necessary to the
  statement of financial position as at 31 December 2015 and 31 December 2014 and
  statement of comprehensive income, statement of cash flows and statement of
  changes in equity for the year ended 31 December, 2015, and for the comparative year
  ended 31 December, 2014.

  Valuation of Land and Building

  The Company carries its land and building at revaluation amounts as required by the
  revaluation model under the IAS 16 Property, Plant and Equipment. In 2015 an
  external valuer was engaged to perform the valuation of land and buildings. Based on
  the revaluation the Company revalued the carrying value of land and buildings from
  PGK207,452,087 to PGK256,879,450 at year end. A revaluation loss of
  PGK1,319,841 was recognized in profit or loss while the revaluation gain of
  PGK50,747,204 was recognized in other comprehensive income.

  I was unable to obtain from the external valuer sufficient appropriate audit evidence
  regarding the inputs used in their valuation, particularly in respect of sales evidence
  underlying selected capitalization rates and estimated income, as well as the
  calculations and inputs underlying the estimated depreciated replacement cost.
  Consequently, I was unable to determine what adjustments might be necessary to the
  statement of financial position at 31 December 2015, the statement of comprehensive
  income, statement of cash flows and statement of changes in equity for the year ended
  31 December 2015.

  – 161 –

• Page 196 of 293

• Air Niugini Limited

  QUALIFIED OPINION

  In my opinion, except for the effects of the matters referred to in the qualification
  paragraphs above:

  (a) the consolidated financial statements of Air Niugini Limited for the year ended
  31 December, 2015:

  (i) give a true and fair view of the financial position and the results of its
  operations and cash flows for the year ended on that date; and
  (ii) the financial statements have been presented in accordance with the
  Companies act 1997, International Financial Reporting Standards and
  other generally accepted accounting practice in Papua New Guinea;

  (b) proper accounting records have been kept by the Company; and

  (c) I have obtained all the information and explanation as required except for the
  matter referred to in qualification paragraphs.”

  61.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Company for the year ended 31 December
  2015 was issued on 13 December 2017. The report contained the following significant
  matters:

  Information Technology (GITC)

  During the 2015 audit and prior years, I was unable to take a full control approach to
  the audit as many of the Company‟s General IT controls (“GITC”) were not effective.
  This results in a far more substantive audit approach including more intrusive and
  time consuming procedures. The lack of effective GITC‟s should also be a concern
  for the Company as it indicates existence of a higher possibility of misstatement or
  fraud.
  A number of GITC controls tested in the past were found to be ineffective. These
  have been set out in my management letter. It is important that a company of Air
  Niugini‟s size and complexity have a functioning internal control environment.

  I recommended for review of all IT controls (general and application) be conducted to
  find all deficiencies, and a project be conducted to work towards eliminating those
  deficiencies. A number of specific deficiencies found had been detailed in my
  management letter.

  – 162 –

• Page 197 of 293

• Air Niugini Limited

  Information Technology (Other)

  Other IT matters noted during the audit include:

  • existence of users who have been terminated from the Company;
  • absence of a formal disaster recovery plan;
  • no IT asset management system in place;
  • the administration of the Skychain (Cargo) application had been performed by the
  staff of the Cargo Group and not managed by the IT team and the IT team had no
  visibility of the status of the application;
  • Air Niugini Limited had been using Microsoft Windows XP which was no longer
  supported by Microsoft; and
  • there is a lack of IT resources and knowledge gaps across critical functions.

  Some of these matters were considered by management and addressing them was in
  progress. However, I believe a full assessment of the IT environment should be
  undertaken and appropriate action taken to ensure a secure and functional
  environment.

  Insufficient Human Resources in the Reporting Function

  I noted that the Company did not possess sufficient human resources to address its
  IFRS reporting needs. The abilities of ANL employees to cope with more complex
  IFRS issues was very limited. These persons also have extensive management duties
  which leave little time to address IFRS reporting requirements. The level of IFRS
  knowledge of accountants in the accounting department was very low. Their level of
  motivation to prepare and provide information necessary for preparation of IFRS
  financial statements on a timely basis seems to be inadequate. On the other side Air
  Niugini Limited is a complex business whose reporting requirements require in-depth
  understanding of the IFRS standards and significant time devoted to this area. These
  situations led to very significant delays in providing financial information necessary
  for preparation of financial statements and audit. Another consequence is lack of
  ability to prepare financial statements (even with external support) within periods
  acceptable for potential external investors which can undermine plans to obtain
  additional capital in the future.

  While I recognized inherent difficulties resulting from severe deficit of IFRS qualified
  accountants across PNG market, and numerous problems inherited from the past, I
  recommended that management should consider allocating additional human
  resources to the IFRS reporting function, combined with IFRS training programs.

  – 163 –

• Page 198 of 293

• Air Niugini Limited

  Hard Close and Pre-year End Procedures

  During the audit, I identified several issues where significant amount of time was
  spent by the Air Niugini finance team during the course of preparing the year-end
  financial statements and audit processes to resolve these issues. This placed
  considerable pressure on both teams to assess and resolve these items. There are
  improvement opportunities in the next financial year for issues to be identified and
  resolved before the year end and as a result, efficiencies to be gained. Assessing all
  significant accounting issues within the appropriate timeframe will assist management
  to comply with its taxation and audit requirements.

  Examples as at 31 December 2015 of areas which could have been addressed through
  proper and detailed hard close and/or pre-year end procedures include:

  • identification of key accounting matters for the year;
  • assessment of systems and controls;
  • adequate timing to allow for a detailed system testing over revenue;
  • interim testing of transactions; and
  • assessment of other key matters in the financial statements.

  Management Contract between Air Niugini Limited and Link PNG Limited

  I noted during the audit that although income for the applicable routes of Link PNG
  Limited and the relevant direct expenditure had been booked to a separate trial
  balance, appropriate supporting agreements for the operations of the subsidiary did
  not appear to be fully formalized.

  Service level agreement between Air Niugini Limited and Link PNG Limited had
  only been finalized towards the end of 2016. However, upon inspection of the
  agreement, I noted differences between the agreement and costs recorded in the trial
  balance. The service level agreement seems to cover only 4% of purchases made by
  Link PNG Limited from Air Niugini Limited. The major part of transactions between
  Air Niugini Limited and Link PNG Limited were not based on any written
  agreements.

  Documentation of Agreements with Other Parties

  I noted that the review procedures over some agreements reached by Air Niugini
  Limited with other parties in the past did not seem to be sufficient. This related to
  agreements such as:

  – 164 –

• Page 199 of 293

• Air Niugini Limited

  • finance lease agreements for lease of PXT and PXU aircraft (clause about transfer
  of ownership at the end of the lease term was unclear or incorrectly worded which
  led to a disagreement with the lessor and Air Niugini Limited finally obtained
  ownership in exchange for an additional payment of USD 7.5 million);

  • agreement entered by Air Niugini Limited and NAC in respect of some airport
  charges – the agreement was reached in verbal form only (not documented in
  writing). NAC honored it over some period, later the change of NAC‟s
  management led to a dispute for over PGK30 million which was settled only in
  2017; and

  • loan agreements with BSP which contained a clause allowing the bank to vary the
  amount and timing of any repayment installment (supplemented by an unwritten
  agreement with BSP that this clause would not be triggered).

  These agreements were entered into several years ago and it is possible that these
  problems have been the oversights inherited from the past. Nevertheless, they indicate
  that review and approval of agreements should be subject to tighter controls. I
  recommended that:

  > all important agreements are formalized in a written form; and

  > all important agreements are subject to a detailed review and approval of both
  operating department requesting them, lawyers and the finance department
  (CFO or his deputy or equivalent) so that their financial consequences are
  analyzed in detail before they are signed off.

  Fixed Asset Register on Cost Basis

  IAS 16, Property, Plant and Equipment, requires that if items of property, plant and
  equipment are stated at revalued amounts, the Company should disclose for each
  revalued class of property, plant and equipment, the carrying amount that would have
  been recognized, had the assets been carried under the cost model.

  I noted that this had not been disclosed and the management had not been able to
  provide me with an asset register containing this information. A fixed asset register
  and depreciation schedule should be maintained based on original cost.

  Operating Leases

  I have noted during the audit that some of the operating leases of the Company have
  escalations rates. In accordance with IAS 17, Leases, “Operating leases shall be
  recognized as an expense on a straight-line basis over the term of the lease term
  unless another systematic basis is more representative of the pattern of the user‟s
  benefit.”

  – 165 –

• Page 200 of 293

• Air Niugini Limited

  The Company did not book its rent expense on a straight-line basis but instead based
  on invoices received from the vendors. I estimated that liabilities could be understated
  by K17 million due to the fact that operating leases were not accounted for on a
  straight-line basis.

  I understand that management do not believe that accounting for rent expense on a
  straight-line basis appropriately reflects the economic basis of the transaction.
  However, it is my opinion that the Company‟s method is not compliant with IAS 17.

  Land valued but without Title

  In 2014 management identified 28 blocks of land for which the Airline was paying
  rates and taxes, however, these were not included in the Airline‟s asset register or
  financial statements until 2015. The Management was unable to provide me the
  acquisition documentation with the original purchase price. Management obtained an
  independent valuation and included the fair value of K7 million as an increment to
  Property, Plant and Equipment and the Revaluation Reserve.

  I had not been provided with title deeds of the properties, nor any information in
  respect of the properties‟ original acquisition. I was unable to determine whether
  ownership of the land remains with the Airline.

  I recommended that management establish clear title to the property and ensure title
  deeds or evidence of clear title is maintained for all the properties.

  Useful Life of Buildings

  During the audit I noted that the useful lives of some buildings appear to be
  inconsistent with most standard expectations for commercial and residential buildings.
  Although there may be reasons for the useful lives used (e.g. asset acquired part way
  through its life), these reasons were not documented and current management was
  unaware as to why these useful lives had been used. No assessment as to what is the
  remaining useful life on these assets has been conducted.

  I believe that an assessment of useful lives of all the buildings should be conducted as
  soon as possible. In addition, the Company should also undertake an assessment of
  useful lives of all property, plant and equipment to ensure they are appropriate.

  Reasonableness of End of Lease Liabilities

  The Company creates 2 types of end of lease accruals (“provisions”) called:

  (a) “Dead Rent” – set up to account for the cost incurred for aircraft not flying
  (thus no revenue recognized) due to required repairs and maintenance to be
  done before the return of the aircraft to a lessor.

  – 166 –

• Page 201 of 293

• Air Niugini Limited

  This provision also includes additional rental expense to be incurred in case a
  lease is extended due to the delay of return of aircraft because of the required
  repairs and maintenance. The balance of dead rent accrual is amortized over
  the lease term of the aircraft.

  The dead rent should not be recognized in the statement of financial position
  because:

  (1) the rent for the period during which an aircraft is subject to repairs and
  maintenance is an integral part of minimum lease payments and shall be
  included in the calculation of lease expense on a straight-line basis.

  (2) additional rental expense will be incurred only when there is a delay in
  the return of the aircraft, thus, this is only a contingent liability rather
  than a liability.

  (b) “General Provision” – made to account for repair and maintenance of an
  aircraft at the end of the operating lease term. The general provision is
  amortized over the lease term of an aircraft.

  The Company provided USD500,000 of general provision for the operating lease
  aircraft (per aircraft) which reflects expected costs to be incurred based on actual
  costs incurred for some aircraft already returned. However, no supporting calculation
  of the USD500,000 was available. I checked reasonableness of the balance based on
  actual costs incurred on C-checks and major overhauls included in deferred
  expenditure and noted that it was underestimated by K3 million.

  The Company should continuously assess the reasonableness of these liabilities and
  appropriately document the assumptions used in their calculations.

  Incorrect Measurement of Refundable Deposits

  I noted that the Company records its long term refundable deposits denominated in
  foreign currencies at its nominal value instead of its fair value and did not
  subsequently measure at amortized cost. These security deposits were not part of lease
  payments and therefore they are within the scope of IAS 39 Financial Instruments:
  Recognition and Measurement. As a result deposits‟ balance was overstated by
  PGK2,004,000 as at 31 December 2015.

  I recommended that management ensure proper accounting treatment of their
  refundable deposits in accordance with IAS 39. If management decides to continue
  using the current simplified method of accounting, the impact of error should still be
  calculated to ensure it is not material.

  – 167 –

• Page 202 of 293

• Air Niugini Limited

  Erroneous Entries in the Tax Fixed Asset Register

  I noted that the Company‟s tax fixed asset register requires improvement in quality as
  it contains erroneous entries; for instance, the aircraft PXP was recorded in the
  register with nil written down value, while the correct written down value should be at
  least PGK 12 million (depending on components to be included in the value of the
  aircraft). As a result, the aircraft was not depreciated for tax purposes and the gain on
  sale of this aircraft was incorrectly calculated.

  This situation can lead to potential errors in current tax and deferred tax calculations.

  I recommended that management considers comprehensive review of the tax fixed
  assets register, covering both its opening balance and any changes (additions and
  disposals), combined with verification of entered amounts to source documents. Such
  review could be re-performed periodically e.g. every quarter, month or at least
  annually.

  61.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the year ended 31 December 2016 was in progress.

  The Company had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 168 –

• Page 203 of 293

• 61A. LINK-PNG LIMITED (Subsidiary of Air Niugini Limited)

  61A.1 INTRODUCTION

  61A.1.1 Legislation

  The Link-PNG Limited came into existence on 26 June 2014 after the name
  changed from PNG Link Limited. Link-PNG Limited was incorporated under the
  Companies Act 1997 on 4 May 2010. This Company was bought by Air Niugini
  Limited from Steamships Limited on 05 August 2014 for a consideration of K100.

  This Company is a 100% subsidiary of Air Niugini Limited. The Company
  commenced the business of air travel for the PNG Domestic markets since
  November 2014.

  61A.1.2 The Objective of the Company

  The key objective of the Company is to:

  ~ Be the leading domestic airline in Papua New Guinea, delivering safest, cost
  effective air travel to the communities.

  61A.2 AUDIT OBSERVATIONS

  61A.2.1 Comments on Financial Statements

  My reports in accordance with the provisions of the Companies Act on the
  inspection and audit of the accounts and records of the Company for the year ended
  31 December 2015 was issued on 13 December 2017. The report did not contain
  any qualification.

  61A.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2016 was in progress.

  The Company had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 169 –

• Page 204 of 293

• 62. KUMUL PETROLEUM HOLDINGS LIMITED (formerly NPCP
  Holdings Limited)

  62.1 INTRODUCTION

  62.1.1 Legislation

  This Company was incorporated under the Companies Act on 4 March 2014 and was
  established in accordance with the NEC Decision No. 108/2011 dated 7 July 2011. As
  a result of the enactment of the Kumul Petroleum Holdings Limited Authorisation Act
  2015 the issued shares of the Kumul Petroleum Holdings Limited previously owned
  by Independent Public Business Corporation (IPBC) was transferred to the Kumul
  Petroleum Trustee. On 25 September 2015, the Company changed its name from
  NPCP Holdings Limited to Kumul Petroleum Holdings Limited.

  62.1.2 Objective of the Company

  Kumul Petroleum Holdings Limited and its wholly owned subsidiaries are the only
  group of State Owned Companies from which the State would nominate one or more
  of them to participate in all future Petroleum Projects as State nominee for the
  purposes of Section 165 of the Oil and Gas Act 1998.

  62.1.3 Subsidiaries of the Company

  The Subsidiaries of the Kumul Petroleum Holdings Limited are; Eda Oil Limited,
  Kumul Exploration (Asia) Limited, Kumul Gas Foreland 239 B.V, Kumul Gas
  Foreland 261 B.V, Kumul Gas Foreland 268 B.V, Kumul Gas Foreland 269 B.V,
  Kumul Gas Niugini B.V, Kumul Lending Co Pte Limited, Kumul LNG Limited,
  Kumul Petroleum (Development) Limited, Kumul Petroleum (Investments) Limited,
  Kumul Petroleum (Kroton) Limited, Kumul Petroleum (Pipeline) Limited, Kumul
  Petroleum (Tech and Advisory) Limited, Kumul Petroleum Marketing Pte Limited,
  Kumul Security Agent Limited and NPCP Oil Company Pty Limited. Comments in
  relation to these Subsidiaries are contained in paragraphs 62A to 62Q of this Report.

  62.2 STATUS OF THE FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the year ended 31 December 2017 was in progress.

  – 170 –

• Page 205 of 293

• 62A. EDA OIL LIMITED (Subsidiary of Kumul Petroleum Holdings Limited)

  62A.1 INTRODUCTION

  This Company was incorporated under the Companies Act. The Company has two
  (2) shares and Petromin was the 100% shareholder of the Company. As a result of
  the enactment of the Kumul Petroleum Holdings Limited Authorisation Bill 2015,
  Eda Oil Limited and Kumul LNG Limited were transferred to Kumul Petroleum
  (Development) Limited, a subsidiary of Kumul Petroleum Holdings Limited on 30
  June 2016 by Petromin PNG Holdings Limited.

  62A.1.2 Objective of the Company

  The main objective of the Company is the investment in development and
  production of hydrocarbons in the Moran Joint Venture in Papua New Guinea.

  The Company has a direct participation on the Moran Petroleum Project, through
  20.3% License Interest it directly holds in PDL 5 and an initial 11.275% Unit
  Interest in Unit Operation under MOUA and an indirect participation in the PNG
  LNG Project through its holdings of the only issued share in the share capital of
  Kumul LNG Limited.

  62A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 171 –

• Page 206 of 293

• 62B. KUMUL EXPLORATION (ASIA) LIMITED (Subsidiary of Kumul
  Petroleum Holdings Limited)

  62B.1 INTRODUCTION

  62B.1.1 Legislation

  The Kumul Exploration (Asia) Limited was incorporated in Singapore under the
  Companies Act of Singapore on 02 March 2017. Kumul Petroleum Holdings
  Limited is the sole shareholder of Kumul Exploration (Asia) Limited.

  62B.1.2 Objective of the Company

  The Company‟s main objective is service activities incidental to oil and gas
  extraction (excluding surveying and engineering design and consultancy services
  supporting mining, oil and gas extraction and offshore exploration activities).

  62B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 172 –

• Page 207 of 293

• 62C. KUMUL GAS FORELAND 239 B.V (Subsidiary of Kumul Petroleum
  Holdings)

  62C.1 INTRODUCTION

  62C.1.1 Legislation

  The Kumul Gas Foreland 239 B.V was incorporated in Amsterdam, Netherlands
  under the Netherlands Civil Code on 12 October 2011 (amended on 30-06-2017).
  Kumul Petroleum Holdings Limited is the sole shareholder of Kumul Gas Foreland
  239 B.V.

  62C.1.2 Objectives of the Company

  The Company‟s objectives are; to incorporate, to finance, to participate in, to
  manage and to supervise companies and other enterprises; to raise funds, to acquire,
  to dispose of, to manage, to exploit, to develop and to commercialise in any other
  way real estate, securities and other assets, including patents, permits, copyrights,
  trademarks, licenses, secret processes or formula’s, designs and other industrial and
  intellectual property rights, to render administrative, technical, financial, economic,
  commercial or managerial services to companies, partnerships and other enterprises;
  engage in all activities, whether or not in collaboration with others, which directly
  or indirectly relate to those objects, all this in the broadest sense.

  62C.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 173 –

• Page 208 of 293

• 62D. KUMUL GAS FORELAND 261 B.V (Subsidiary of Kumul Petroleum
  Holdings Limited)

  62D.1 INTRODUCTION

  62D.1.1 Legislation

  The Kumul Gas Foreland 261 B.V was incorporated in Amsterdam, Netherlands
  under the Netherlands Civil Code on 12 October 2011. Kumul Petroleum Holdings
  Limited is the sole shareholder of Kumul Gas Foreland 261 B.V.

  62D.1.2 Objectives of the Company

  The Company‟s objectives are; to incorporate, to finance, to participate in, to
  manage and to supervise companies and other enterprises; to raise funds, to acquire,
  to dispose of, to manage, to exploit, to develop and to commercialise in any other
  way real estate, securities and other assets, including patents, permits, copyrights,
  trademarks, licenses, secret processes or formula’s, designs and other industrial and
  intellectual property rights, to render administrative, technical, financial, economic,
  commercial or managerial services to companies, partnerships and other enterprises;
  engage in all activities, whether or not in collaboration with others, which directly
  or indirectly relate to those objects, all this in the broadest sense.

  62D.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 174 –

• Page 209 of 293

• 62E. KUMUL GAS FORELAND 268 B.V (Subsidiary of Kumul Petroleum
  Holdings Limited)

  62E.1 INTRODUCTION

  62E.1.1 Legislation

  The Kumul Gas Foreland 268 B.V was incorporated in Amsterdam, Netherlands
  under the Netherlands Civil Code on 12 October 2011 (amended to 30-06-2017).
  Kumul Petroleum Holdings Limited is the sole shareholder of Kumul Gas Foreland
  268 B.V.

  62E.1.2 Objectives of the Company

  The Company‟s objectives are; to incorporate, to finance, to participate in, to
  manage and to supervise companies and other enterprises; to raise funds, to acquire,
  to dispose of, to manage, to exploit, to develop and to commercialise in any other
  way real estate, securities and other assets, including patents, permits, copyrights,
  trademarks, licenses, secret processes or formula’s, designs and other industrial and
  intellectual property rights, to render administrative, technical, financial, economic,
  commercial or managerial services to companies, partnerships and other enterprises;
  engage in all activities, whether or not in collaboration with others, which directly
  or indirectly relate to those objects, all this in the broadest sense.

  62E.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 175 –

• Page 210 of 293

• 62F. KUMUL GAS FORELAND 269 B.V (Subsidiary of Kumul Petroleum
  Holdings Limited)

  62F.1 INTRODUCTION

  62F.1.1 Legislation

  This Company was incorporated in Amsterdam, Netherlands under the Companies
  Act of Netherlands. On 12 October 2011 the Company was incorporated under the
  name of Kumul Gas Foreland 269 B.V. Kumul Petroleum Holdings Limited is the
  sole shareholder of Kumul Gas Foreland 269 B.V.

  62F.1.2 Objective of the Company

  The objective of the Company are to finance, to participate in, to manage and to
  supervise companies and other enterprises; to raise funds, to acquire, to dispose of,
  to manage, to exploit, to develop and to commercialise in any other way real estate,
  securities and other assets, including patents, permits, copyrights, trademarks,
  licenses, secret processes or formulas, designs and other industrial and intellectual
  property rights, to render administrative, technical, financial, economic, commercial
  or managerial services to companies, partnerships and other enterprises; engage in
  all activities, whether or not in collaboration with others, which directly or
  indirectly relate to those objects, all this in the broadest sense.

  62F.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 176 –

• Page 211 of 293

• 62G. KUMUL GAS NIUGINI B.V (Subsidiary of Kumul Petroleum Holdings
  Limited)

  62G.1 INTRODUCTION

  62G.1.1 Legislation

  The Kumul Gas Niugini B.V was incorporated in Amsterdam, Netherlands under
  the Netherlands Civil Code on 12 October 2011 (amended on 11-05-2017). Kumul
  Petroleum Holdings Limited is the sole shareholder of Kumul Gas Niugini B.V.

  62G.1.2 Objectives of the Company

  The Company‟s objectives are; to incorporate, to finance, to participate in, to
  manage and to supervise companies and other enterprises; to raise funds, to acquire,
  to dispose of, to manage, to exploit, to develop and to commercialise in any other
  way real estate, securities and other assets, including patents, permits, copyrights,
  trademarks, licenses, secret processes or formula’s, designs and other industrial and
  intellectual property rights, to render administrative, technical, financial, economic,
  commercial or managerial services to companies, partnerships and other enterprises;
  engage in all activities, whether or not in collaboration with others, which directly
  or indirectly relate to those objects, all this in the broadest sense.

  62G.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 177 –

• Page 212 of 293

• 62H. KUMUL LENDING CO PTE LIMITED (Subsidiary of Kumul
  Petroleum Holdings Limited)

  62H.1 INTRODUCTION

  62H.1.1 Legislation

  The Kumul Lending Co Pte Limited was incorporated in Singapore under the
  Companies Act of Singapore on 08 August 2016. Kumul Petroleum Holdings
  Limited is the sole shareholder of Kumul Lending Co Pte Limited.

  62H.1.2 Objective of the Company

  The key objective of the Company is to undertake fund management activities.

  62H.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the years ended 31 December 2016 and 2017 were in
  progress.

  – 178 –

• Page 213 of 293

• 62I. KUMUL LNG LIMITED (Subsidiary of Kumul Petroleum Holdings
  Limited)

  62I.1 INTRODUCTION

  This Company was incorporated under the Companies Act. On 19 May 2009 the
  Company was incorporated under the name of Kumul LNG Limited. The Company
  has one (1) share and Eda Oil Limited is the sole shareholder of the Company. Eda
  Oil Limited is 100% subsidiary of Petrolmin PNG Holdings Limited. This Company
  was established as a special purpose entity to hold Petromin‟s interests in the LNG
  Projects. As a result of the enactment of the Kumul Petroleum Holdings Limited
  Authorisation Bill 2015, both Eda Oil Limited and Kumul LNG Limited were
  transferred to Kumul Petroleum Holdings Limited on 30 June 2016 by Petromin
  PNG Holdings Limited.

  62I.1.1 Objective of the Company

  The Company has 0.20% interest in the PNG LNG Project. The Project interest is
  connected to Eda Oil Limited‟s license interest in PDL 5 (20.5% License Interest in
  PDL 5) and the Moran Petroleum Interest.

  62I.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 179 –

• Page 214 of 293

• 62J. KUMUL PETROLEUM (DEVELOPMENT) LIMITED (Subsidiary
  of Kumul Petroleum Holdings Limited)

  62J.1 INTRODUCTION

  62J.1.1 Legislation

  This Company was incorporated under the Companies Act on 19 September 2014 in
  accordance with the NEC Decision No. 108/2011 dated 7 July 2011. Kumul
  Petroleum Holdings Limited is the sole shareholder of Kumul Petroleum
  Development Limited. On 25 September 2015 the Company changed its name from
  NPCP Pipeline and Gas Supply Limited to Kumul Petroleum Development Limited.
  On 28 January 2016 the Company changed its name from Kumul Petroleum
  Development Limited to Kumul Petroleum (Development) Limited.

  62J.1.2 Objective of the Company

  The objective of the Company is to provide pipeline facilities to the upcoming
  various Liquefied Natural Gas (LNG) projects. In 2014, the Company purchased
  100% shareholding in Cue PNG Limited at a cost of US$7 million and changed the
  name as NPCP Oil Company Limited registered in Port Moresby, PNG.

  62J.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 180 –

• Page 215 of 293

• 62K. KUMUL PETROLEUM (INVESTMENTS) LIMITED (Subsidiary of
  Kumul Petroleum Holdings Limited)

  62K.1 INTRODUCTION

  62K.1.1 Legislation

  This Company was incorporated under the Companies Act on 15 October 2014 in
  accordance with the NEC Decision No. 108/2011 dated 7 July 2011. Kumul
  Petroleum Holdings Limited is the sole shareholder of Kumul Petroleum
  Investments Limited. On 25 September 2015, the Company changed its name from
  NPCP Investments Limited to Kumul Petroleum Investments Limited.

  62K.1.2 Objective of the Company

  7 EH J IPQPSLlJREIWPMIRI heI&RP SLQ P~ RFhR@IIF T6L~~~ shareholding interest
  in Oil Search Limited and other Investments by the State in oil and gas in Papua
  New Guinea. In this respect, on 4 March 2014, Independent State of PNG (ISPNG)
  acquired 10.01% shareholding (149,390,244 shares) in Oil Search Limited (OSL) at
  a price of AUD8.20 per share for a total consideration of AUD1.225 million. The
  funding for purchase of the ISPNG interest in OSH was provided by UBS Australia.
  On 23 December 2014, ISPNG transferred its 10.01% shareholding interest in OSL
  and the obligations arising from the loan facilities provided by UBS to Kumul
  Petroleum Investments Limited and Kumul Petroleum Holdings Limited.

  62K.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 181 –

• Page 216 of 293

• 62L. KUMUL PETROLEUM (KROTON) LIMITED (Subsidiary of Kumul
  Petroleum Holdings Limited)

  62L.1 INTRODUCTION

  62L1.1 Legislation

  This Company was incorporated under the Companies Act and was acquired by
  IPBC on 24 November 2008.

  IPBC was approved as the State‟s nominee in the PNG Liquefied Natural Gas (PNG
  LNG) Project as resolved by NEC in its Meeting No.36/2008 through Decision No.
  223/2008. NPCP Holdings Limited is the 100% Shareholder of National Petroleum
  Company of PNG (Kroton) Limited as per NEC Decision No. 108/2011 dated 7 July
  2011, which came into effect in 2013. All the Company‟s shares held by IPBC
  were transferred to NPCP Holdings Limited in 2013. On 25 September 2015, the
  Company changed its name from National Petroleum Company of PNG (Kroton)
  Limited to Kumul Petroleum (PNG LNG) Limited. On 28 January 2016 the
  Company changed its name from Kumul Petroleum (PNG LNG) Limited to Kumul
  Petroleum (Kroton) Limited.

  62L.1.2 Objective of the Company

  The objective of Kumul Petroleum (Kroton) Limited is to invest in the PNG LNG
  Project as PNG State‟s nominee holding 16.57% equity in the Project.

  62L.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 182 –

• Page 217 of 293

• 62M. KUMUL PETROLEUM (PIPELINE) LIMITED (Subsidiary of
  Kumul Petroleum Holdings Limited)

  62M.1 INTRODUCTION

  This Company was incorporated under the Companies Act. On 30 October 2015 the
  Company incorporated under the name of Kumul Petroleum Pipeline Limited. On
  28 January 2016 the Company changed its name to Kumul Petroleum (Pipeline)
  Limited. Kumul Petroleum Holdings Limited is the sole shareholder of Kumul
  Petroleum (Pipeline) Limited.

  62M.1.2 Objective of the Company

  The Company holds the interest of Kumul Petroleum Holdings Limited in the
  Western Pipeline (Strategic Pipeline) Project.

  62M.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 183 –

• Page 218 of 293

• 62N. KUMUL PETROLEUM (TECH & ADVISORY) LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  62N.1 INTRODUCTION

  62N.1.1 Legislation

  The Company was incorporated under the Companies Act on 8 September 2014 in
  accordance with the NEC Decision No. 108/2011 dated 7 July 2011. Kumul
  Petroleum Holdings Limited is the sole shareholder of Kumul Petroleum Technical
  Institute and Consulting Limited. On 25 September 2015, the Company changed its
  name from NPCP Technical Institute and Consulting Limited to Kumul Petroleum
  Technical Institute and Consulting Limited. Subsequently, the Company changed its
  name from Kumul Petroleum Technical Institute and Consulting Limited to Kumul
  Petroleum (Tech & Advisory) Limited on 28 January 2016.

  62N.1.2 Objective of the Company

  The principal objective of the Company is to provide professional and other
  business services. In 2015, the Company bought 12.5% shares in Orion Enga
  Children‟s Fund JV Limited. Orion Enga Children‟s Fund JV owns South Pacific
  Employment Institute which is registered as a business name which runs the Port
  Moresby Technical College (now known as Kumul Petroleum Academy).

  62N.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the inspection and audit of the accounts and
  records and the examination of the financial statements of the Company for the year
  ended 31 December 2016 was completed and the results were being evaluated.

  The fieldwork associated with the inspection and audit of the accounts and records
  and the examination of the financial statements of the Company for the year ended
  31 December 2017 was in progress.

  – 184 –

• Page 219 of 293

• 62O. KUMUL PETROLEUM MARKETING PTE LIMITED (Subsidiary
  of Kumul Petroleum Holdings Limited)

  62O.1 INTRODUCTION

  62O.1.1 Legislation

  The Kumul Petroleum Marketing Pte Limited was incorporated in Singapore under
  the Companies Act of Singapore on 28 April 2017. Kumul Petroleum Holdings
  Limited is the sole shareholder of Kumul Petroleum Marketing Pte Limited.

  62O.1.2 Objective of the Company

  The Company engaged in Marketing of Liquefied Natural Gas, Condensate and
  other related products.

  62O.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2017 was in progress.

  – 185 –

• Page 220 of 293

• 62P. KUMUL SECURITY AGENT LIMITED (Subsidiary of Kumul
  Petroleum Holdings Limited)

  62P.1 INTRODUCTION

  62P.1.1 Legislation

  The Kumul Security Agent Limited was incorporated in Singapore under the
  Companies Act of Singapore on 31 August 2016. Kumul Petroleum Holdings
  Limited is the sole shareholder of Kumul Security Agent Limited.

  62P.1.2 Objective of the Company

  The key objective of the Company is to undertake fund management activities.

  62P.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the years ended 31 December 2016 and 2017 were in
  progress.

  – 186 –

• Page 221 of 293

• 62Q. NPCP OIL COMPANY PTY LIMITED (Subsidiary of Kumul
  Petroleum Development Limited)

  62Q.1 Introduction

  Cue PNG Oil Company Pty Limited, a subsidiary of Cue Energy Limited of
  Australia was incorporated in Australia under the Companies Act of Australia on 8
  February 1996. This Company was bought by Kumul Petroleum (Development)
  Limited on 20 November 2014 at a cost of US$7,109,144. The Company changed
  its name to NPCP Oil Company Pty Limited on 20 January 2015. Kumul Petroleum
  (Development) Limited is the sole shareholder of NPCP Oil Company Pty Limited.
  Now the Company is incorporated in PNG under Companies Act of PNG.

  62Q.1.2 Objective of the Company

  The principal objectives of the Company are exploration and production of
  hydrocarbons. The Company holds certain exploration and development licenses in
  PNG, namely PDL 3, PRL 14, PRL 19, and PL2.

  62Q.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the years ended 31 December 2015, 2016 and 2017
  were in progress.

  – 187 –

• Page 222 of 293

• 63. LIVESTOCK DEVELOPMENT CORPORATION LIMITED

  63.1 INTRODUCTION

  63.1.1 Legislation

  The Livestock Development Corporation Limited was incorporated under the
  Companies Act. The share capital is wholly owned by the National Government.

  63.1.2 Functions of the Corporation

  The main activities of the Corporation are breeding and slaughtering cattle and pigs,
  purchasing and exporting insects, growing vegetables and fruits, and raising poultry.

  63.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Corporation had not submitted its financial
  statements for the years ended 31 December 2010, 2011, 2012, 2013, 2014, 2015,
  2016 and 2017 for my inspection and audit.

  I expressed my concern to the Minister for Agriculture and Livestock through my
  letters dated 11 March 2015 and 26 April 2016 for the long delay by the Corporation
  in submitting its financial statements to enable me to perform the audit for the years
  stated above. I was not formerly notified on the current status of the Company by the
  Minister as such I intend to exclude this entity from my future reports to Parliament.

  – 188 –

• Page 223 of 293

• 64. MINERAL RESOURCES DEVELOPMENT COMPANY LIMITED

  64.1 INTRODUCTION

  64.1.1 Legislation

  The Mineral Resources Development Company Limited (MRDC) was incorporated
  under the Companies Act. The Company is wholly owned by the National
  Government. The authorised capital of the Company was increased from 10,000
  Ordinary Shares to 10,000,000 Ordinary Shares of K1 each, in June, 1992. An
  additional 4,906,015 shares were issued to the Independent State of PNG in June
  1992, converting the Government grant and the shareholders loan to equity. The
  &RP SLQW rIlsRI1F1XET3OItK3 RN3TQP 3Q~~s 20% interest in Misima Mines Limited.

  64.1.2 Objective of the Company

  The principal objective RI[tK3 &RP SEQW [W~R [KRlOItK3 RN3TQP 3Q~~V31XE1W1Q P IQ3TIl
  and petroleum development ventures within PNG.

  64.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the years ended 31 December 2015 and 2016 were in progress.

  The Company had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 189 –

• Page 224 of 293

• 65. MOTOR VEHICLES INSURANCE LIMITED

  65.1 INTRODUCTION

  65.1.1 Legislation

  The Motor Vehicles Insurance (PNG) Trust Limited was incorporated under the
  Companies Act following the NEC Decision No. 4/98 of January 1998. It was formed
  to change the status of the then existing Motor Vehicles Insurance (PNG) Trust to
  conform to the intentions of the NEC for the then PNG Banking Corporation Holding
  Company No. 1 Limited to acquire the business of the Trust as part of the reform of
  the financial services sector.

  The Trust was incorporated under the Companies Act as Motor Vehicles Insurance
  (PNG) Trust Limited (MVITL). The shares of this entity which were held by the
  Independent State of PNG were subsequently sold to the then PNG Banking
  Corporation, an entity also owned and controlled by the State.

  On 31 December 1998, as part of the corporatisation and restructuring programme of
  the then PNG Banking Corporation Group, PNGBC Limited, PNGBC Holding Co.
  No. 1 Limited and Motor Vehicles Insurance (PNG) Trust Limited were amalgamated
  under the provisions of the Companies Act to form an amalgamated Company,
  PNGBC Limited. The ultimate parent Company of PNGBC Limited was Finance
  Pacific Limited, a Company wholly owned and controlled by the Independent State of
  PNG.

  With effect from 1 January 1999, Motor Vehicles Insurance Limited (MVIL) was
  incorporated under the Companies Act to underwrite the third party insurance under
  the Act in succession to the Trust and MVITL.

  The assets of MVITL immediately before the amalgamation with the then PNGBC
  Limited were transferred to MVIL when it took over the responsibility for providing
  third party insurance.

  65.2 AUDIT OBSERVATION AND RECOMMENDATION

  65.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act RQTthET&RP SLQ~ ~T
  financial statements for the year ended 31 December 2016 was issued on 6 February
  2018. The report did not contain any qualification.

  – 190 –

• Page 225 of 293

• Motor Vehicles Insurance Limited

  65.2.2 Audit Observation Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Company for the year ended 31 December
  2016 was issued on 6 February 2018. The report contained the following observation:

  Investments

  In 2016 through an NEC Decision, MVIL was requested through Kumul Consolidated
  Holdings (KCH) to transfer all its shares in Pacific MMI Limited (PMMI) by way of
  vesting notice to be effected through the form of a dividend to KCH for an amount
  equal to the book value of PMMI. The book value of PMMI recorded by MVIL based
  on the 2015 audited financial statements was K20,906,004. There were no MVIL
  board deliberations and approval on this transaction undertaken in 2016.

  I recommended that any transaction undertaken in 2016 should be brought to the full
  board for rectification in subsequent board meetings.

  Management responded as follows:

  The decision to transfer Pacific MMI to KCH was made by way of a vesting by KCH
  “

  as the shareholder to MVIL. At the time the decision was made, it was done in the
  absence of a legally constituted Board of Directors. There was no Board in place as
  this was during the transition period from the old Board to the new Board. The
  appointment of the new Board took some time. The interim Board at the time were not
  in a position to make decision hence the whole process done by the shareholder. ”

  65.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the year ended 31 December 2017 had been completed and the audit
  reports were being finalised.

  – 191 –

• Page 226 of 293

• 66. NATIONAL AIRPORTS CORPORATION LIMITED

  66.1 INTRODUCTION

  66.1.1 Legislation

  National Airports Corporation Limited was incorporated under the Companies Act.
  The Company had begun operations in October 2009 after its incorporation on 6
  October 2009. This Company was established in accordance with Section 132 of the
  Civil Aviation Act 2000 (as amended).

  National Airports Corporation Limited is regulated by the Civil Aviation Authority Act
  2000 (as amended) as a Company having its own operating certificates. Except for the
  governance requirements specified in the Civil Aviation Act, it operates
  independently. The two shares issued by the Company are equally held by the
  Minister for Civil Aviation and the Minister for Finance on behalf of the Independent
  State of Papua New Guinea.

  66.1.2 Functions of the Corporation

  The functions of the National Airports Corporation Limited are derived from Section
  132 of the Civil Aviation Act.

  66.1.3 Subsidiary of the Corporation

  The Corporation has subsidiary companies, Airport City Development Limited and
  Airports Investments Limited. Comments in relation to these companies are contained
  in paragraph 66A and 66B of this Report.

  66.1.4 Project of the Corporation

  The National Airports Corporation Limited also manages the Civil Aviation
  Development Investment Program (CADIP) which is funded by Asian Development
  Bank and counter funded by the Government of PNG (GoPNG). Comments in
  relation to the Project are contained in my Special Project Audit Report to the
  Parliament.

  66.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with inspection and
  audit of the accounts and records and examination of the financial statements of the
  Company for the years ended 31 December 2012, 2013, 2014, 2015 and 2016 had
  been completed and the audit reports were being finalised.

  The financial statements of the Company for the year ended 31 December 2017 had
  been submitted for my inspection and audit and arrangements were being made to
  commence the audit shortly.
  – 192 –

• Page 227 of 293

• 66A. AIRPORT CITY DEVELOPMENT LIMITED (Subsidiary of National
  Airports Corporation Limited)

  66A.1 INTRODUCTION

  The Airport City Development Limited was incorporated on 20 August 2009 and
  was deregistered on 20 April 2010. However, the Company was reinstated on 19
  September 2011 as a subsidiary company of the National Airports Corporation
  Limited. The Company came into operation on 19 September 2012.

  66A.2 CHARTER OF THE COMPANY

  The Company was incorporated to establish and manage the design, construction
  and operating stages of the Airport City Project to ensure economic, technically
  sound and expeditious completion of the Project.

  66A.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the years ended 31 December 2012, 2013, 2014,
  2015 and 2016 were completed and the audit reports were being finalised.

  The financial statements of the Company for the year ended 31 December 2017 had
  been submitted and arrangements were being made to commence the audit shortly.

  – 193 –

• Page 228 of 293

• 66B. AIRPORTS INVESTMENTS LIMITED (Subsidiary of National
  Airports Corporation Limited)

  66B.1 INTRODUCTION

  66B.1.1 Legislation

  The Airports Investments Limited is a wholly owned subsidiary of the National
  Airports Corporation Limited. The Company was initially registered as Helios No.
  129 Limited on 23 October 2014 under the Companies Act. The Company changed
  its name to Airports Investments Limited on 27 April 2015. The Company
  commenced its operations on 1 January 2016.

  66B.1.2 Objective of the Company

  Primary objective of the Airports Investments Limited is to maximize full utilization
  of airport assets to generate revenue to support core airport activities relating to
  safety and security.

  66B.1.3 Function of the Company

  Functions of the Company include: utilization of large assets base of the airports to
  realize large revenue potential; generating revenue to fund the operations of the
  terminal facilities and runways; and utilizing return from commercialising the
  airport assets to assist rural airstrips.

  66B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2016 had been
  completed and the audit reports were being finalised.

  The Company had submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit and arrangements were being made to
  commence the audit shortly.

  – 194 –

• Page 229 of 293

• 67. NCD WATER AND SEWERAGE LIMITED (Trading as Eda Ranu)

  67.1 INTRODUCTION

  67.1.1 Legislation and Objectives of the Company

  The NCD Water and Sewerage Limited was incorporated on 23 February 1996 under
  the Companies Act. The NCDC (Transfer of Assets) Act 1996 provided for the vesting
  in the Company of the assets required for the supply of treated water and the
  treatment of sewerage from the NCDC.

  67.1.2 Functions of the Company

  The principal functions of the Company are to provide the supply of treated water,
  and the treatment and disposal of sewerage within the NCD.

  67.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the year ended 31 December 2015 was in progress.

  The Company had not submitted its financial statements for the years ended 31
  December 2016 and 2017 for my inspection and audit.

  – 195 –

• Page 230 of 293

• 68. PAPUA NEW GUINEA PORTS CORPORATION LIMITED
  (Formerly PNG Harbours Limited)

  68.1 INTRODUCTION

  68.1.1 Legislation

  PNG Harbours Limited was incorporated under the Companies Act on 19 June 2002.
  This initiative was in accordance with the privatisation policy approved by the NEC
  in 1999. The Company changed its name to Papua New Guinea Ports Corporation
  Limited on 7 March 2006.

  68.1.2 Functions of the Company

  The general functions of PNG Ports Corporation Limited include the regulation,
  management, control and operation of declared ports; the movement of shipping
  therein; and the maintenance of light ships, buoys, beacons, moorings, wharves,
  docks, piers, jetties, landing stages, slips, landing ramps and platforms.

  68.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  68.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act on the inspection
  and audit of the accounts and records of the Company for the year ended 31
  December 2016 was issued on 15 November 2017. The report did not contain any
  qualification.

  68.2.2 Audit Observations Reported to the Minister

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  the audit of the accounts and records of the Company for the year ended 31 December
  2016 was issued on 15 November 2017. The report contained the following
  significant matters:

  Internal Audit

  I noted that following issues under internal audit division:

  No regular internal audit reporting system in place. The latest internal audit made
  available to me was dated 25 April 2014.

  Number of critical recommendations by the internal audit division had not been
  implemented to date. Some of them are as follows:

  – 196 –

• Page 231 of 293

• Papua New Guinea Ports Corporation Limited

  a) Existence of standard service agreement with major shipping companies and
  agents;
  b) Utility bills paid by clients; and
  c) Shipping registers operation report.

  I recommended to the management that internal audit to be empowered and
  effectively designed and operate as per their scope and work, and must be approved
  by the management. Also, implement the recommendations of internal audit at the
  earliest for the benefit of the Corporation.

  Management responded that, “the above matter is noted and are working on it to have
  them implemented.”

  Fixed Assets Not Accounted

  In 2016 PNG Ports Corporation Limited (PNGPCL) sold the following Land Sections
  located within Port Moresby Port Area:
  Land Area Value in Kina
  Lot 11, Sec 12, Granville, Port Moresby 1,000,000
  Lot 11, Sec 12, Granville, Port Moresby 1,000,000
  Lot 2, Sec 56, Granville, Port Moresby 2,800,000
  Lot 23, Sec 51, Granville, Port Moresby 2,800,000

  However, these assets were not recorded in the Fixed Assets Register in prior years,
  which raise concern that significant fixed assets owned by the Corporation may not be
  recorded in the Fixed Assets Register, which gives an incomplete Fixed Asset
  Register, and valuation might also be understated. I recommended to the management
  to take a stock count of all unrecognised assets, its value and update the Fixed Assets
  Register of PNGPCL.

  Management responded that, “this is an on-going matter and our lands officer within
  the property section working on to resolve it including having proper titles.”

  Utility Bills – Water Bills Lae Port

  I noted significant variation between budgeted and actual expense of water bills paid
  for Lae Port as follows:

  Amount Budgeted K 700,000.00
  Actual expense incurred K 1,750,527.00
  Excess K 1,050,527.00

  – 197 –

• Page 232 of 293

• Papua New Guinea Ports Corporation Limited

  Further, I noted irregular collection of utility reimbursement from the tenants using
  the port offices and facilities in various ports, mainly in Lae Port, resulted in
  PNGPCL bearing the tenants utility cost and loss of revenue to the Corporation. I
  recommended to the management to justify the significant variance of the water bill
  expense paid in Lae Port; and also to take appropriate action to recover the water
  utility expenses incurred by the tenants regularly and implement proper control and
  monitoring mechanism at the Lae Port.

  Management responded that, “they are working on the issue by putting in place
  process to address the leakage in port services and recoupment thereof.”

  Absence of Accounting Manual

  As noted in prior year audits, the Corporation still had not maintained a proper
  accounting manual. In the absence of a detailed accounting manual, it would be
  difficult for the Corporation to monitor and implement the new and revised
  accounting standards. I suggested the management to consider the implications of the
  foregoing standards on the preparation of the Corporation‟s financial statements, both
  for internal and statutory reporting purposes. I further suggested that the Corporation
  personnel involved in accounting and preparation of financial statements attend
  training courses related to these new standards. This issue was raised in my 2015
  audit and management responded that they were in the process of preparing an
  accounting manual.

  However, the management responded as follows:

  “We are using the IAS as the standard guide to account for major or significant
  transactions undertaken by the Corporation.”

  68.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Corporation for the year ended 31 December 2017 was in progress.

  – 198 –

• Page 233 of 293

• 69. PNG AIR SERVICES LIMITED

  69.1 INTRODUCTION

  69.1.1 Legislation

  PNG Air Services Limited was incorporated under the Companies Act. The
  Company began its operation in January 2008 after its incorporation on 30 April
  2007. The Company was established in accordance with Section 143(6) of the Civil
  Aviation Act 2000 (as amended) which envisaged the establishment of a Company
  to deliver “air traffic services, aeronautical navigation services and aeronautical
  communication services and all related services in Papuan New Guinea and the
  airspace for which it is responsible.”

  PNG Air Services Limited as a State Aviation Enterprise (SAE) is an independent
  self-funding Company. The two shares issued by the Company are equally held by
  the Minister for Civil Aviation and the Minister for Finance on behalf of the
  Independent State of Papua New Guinea. The Company has its own operating
  certificates and operates independently from other Aviation Entities established
  under the Civil Aviation Act 2000 (as amended).

  69.1.2 Functions of the Company

  PNG Air Services Limited was established with a purpose of delivering safe and
  efficient air navigation services to the aviation industry and the travelling public. It
  ensures provision of quality Communication, Navigation, Surveillance (CNS) and
  Air Traffic Management (ATM) services to both domestic and international
  customers who operate within the PNG airspace, at a reasonable cost, hence to be a
  leader in providing world standard air navigation services. PNG Air Services
  Limited makes sure that the radio coverage in PNG both VHF and HF are improved
  and that efficient and effective air traffic services are maintained.

  69.2 STATUS OF FINANCIAL STATEMENTS

  The Company had advised me as per the letter dated 14 November 2016 that it
  would appoint its own auditor for the 2016 audit. However, I advised the Company
  of my responsibility under the PNG Constitution 214(3) to inspect and audit and
  report to Parliament on all bodies set up by the Act of Parliament.

  At the time of preparing this Report, the Company had not submitted its financial
  statements for the years ended 31 December 2016 and 2017 for my inspection and
  audit.

  – 199 –

• Page 234 of 293

• 70. PNG DATACO LIMITED

  70.1 INTRODUCTION

  70.1.1 Legislation

  The PNG DataCo Limited came into existence on 2 December 2010 after the name
  changed from Whittlesea Limited. Whittlesea Limited was incorporated under the
  Companies Act on 21 April 2010.

  On 6 February 2014, the National Executive Council (NEC) in its Decision No.
  32/2014 approved for immediate operations of the PNG DataCo Limited as a 100%
  Majority State Owned Enterprise (SOE) to oversee and implement the National
  Transmission Network (NTN) Impact Project Strategy and Objectives as approved by
  the NEC Decision No. 268 of 2010, NEC Decision No. 107 of 2011 and NEC
  Decision No. 108 of 2012.

  PNG DataCo Limited is governed by the Companies Act, the Independent Public
  Business Corporation of PNG Act, and the regulator – National Information and
  Communication Technology Authority Act. The Company came into operations in
  February 2014.

  70.1.2 Objectives of the Company

  The key objectives of the Company are to:

  • Work towards the PNG Government‟s Policy on ICT to refurbish the existing
  transmission network, extend its availability across the country, allow new
  transmission networks to develop, and to increase technical capabilities to
  support high-speed broadband;
  • Develop the National Transmission Network (NTN) as the efficient domestic
  and international telecommunication transmission network and that the NTN is
  available on a wholesale and non-discriminatory basis to all licensed operators
  of the telecommunication industry to stimulate and foster social and economic
  developments in Papua New Guinea using State Owned assets and new network
  investments;
  • Provide internet gateway services at the international gateway;
  • Improve the availability of broadband transmission telecommunication services
  within PNG and internationally;
  • Improve performance of telecommunication services in terms of responsiveness;
  • Lower the cost of telecommunication services to end users; and
  • Ensure the current network operations are scalable, standardise network and IT,
  invest in required capabilities to build low-cost position, develop deal making
  capabilities, and best-in-class execution capabilities.

  – 200 –

• Page 235 of 293

• PNG DataCo Limited

  70.1.3 Functions of the Company

  The main functions of the Company are to:

  • Develop the National Transmission Network (NTN) as the efficient domestic and
  international transmission network; and

  • Supply high value and market driven suite of data services on a wholesale and
  non-discriminatory basis to all licensed operators and ISPs (i.e. holders of a
  Network or applications licenses) leveraging its exclusive network asset base.

  70.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the year ended 31 December 2015 had been completed and the
  signed financial statements were being awaited to issue the report.

  The fieldwork associated with the inspection and audit of the accounts and records
  and the examination of the financial statements of the Company for the year ended 31
  December 2016 was in progress.

  The financial statements of the Company for the year ended 31 December 2017 had
  been submitted and arrangements were being made to commence the audit shortly.

  – 201 –

• Page 236 of 293

• 71. PNG POWER LIMITED

  71.1 INTRODUCTION

  71.1.1 Legislation

  PNG Power Limited (PPL) was incorporated by the Privatisation Commission under
  Section 3(1) of the Electricity Commission (Privatisation) Act 2002 as the successor
  company to the PNG Electricity Commission (ELCOM), a statutory corporation
  established under the Electricity Industry Act (Chapter 78).

  • The Electricity Commission (Privatisation) Act transferred to PNG Power
  Limited:

  (i) All of ELCOM‟s right, title and interest to any and all assets other than
  those transferred to PNG Dams pursuant to item 1(a) and (c),
  including, without limitation, the electricity generation assets located
  in the areas of Sirinumu Dam and Yonki Dam;
  (ii) All of ELCOM‟s liabilities other than those transferred to PNG Dams
  pursuant to item 2(b); and
  (iii) All water use permits held by ELCOM and referred to in Section 7(1)
  of the Act.

  • Transferred all of the employees of ELCOM to the employment of PNG
  Power Limited;
  • Declared PNG Power Limited as a “Specified Entity” for the purposes of
  Section 8 of the Act;
  • In accordance with the privatisation policy of the Privatisation Commission,
  all the issued shares of PNG Power were transferred to the Privatisation
  Commission (and deemed transferred to the successor to the Privatisation
  Commission, the Independent Public Business Corporation of Papua New
  Guinea (IPBC of PNG) as the trustee of the General Business Trust under the
  IPBC of PNG Act; and
  • The consideration for the transfers referred to in items (i) and (ii) was nil.

  71.1.2 Functions of the Company

  The functions of the Company are to plan and co-ordinate the supply of electricity
  throughout the country; to generate, transmit, distribute, reticulate and sell electricity;
  and to provide to the public bodies and the State, services related to sale, consumption
  and use of electricity.

  – 202 –

• Page 237 of 293

• PNG Power Limited

  71.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the year ended 31 December 2016 had been completed and the audit
  reports were being finalised.

  The fieldwork associated with the inspection and audit of the accounts and records
  and the examination of the financial statements of the Company for the year ended 31
  December 2017 was in progress.

  – 203 –

• Page 238 of 293

• 72. POST (PNG) LIMITED

  72.1 INTRODUCTION

  72.1.1 Legislation

  Post (PNG) Limited was incorporated on 24 December 1996 under the Companies
  Act. This Company was formed following the NEC Decision No. 18/96 of 17 April
  1996 to corporatise the Post and Telecommunications Corporation (PTC) and separate
  it into three entities, namely: Telikom PNG, Post PNG and PNG Telecommunication
  Authority (PANGTEL) now known as National Information and Communications
  Technology Authority (NICTA) as established by Section 8 of the National
  Information and Communications Act.

  As a result of the NEC Decision, all assets, rights, liabilities, staff and regulatory
  powers and business of the PTC relating to Postal Services were, as per the allocation
  statement approved by the Minister for Communications, transferred on 31 December
  1996 at net book value to Post (PNG) Limited. Post (PNG) Limited is a 100% state-
  owned Company and it commenced trading on 1 January 1997.

  72.1.2 Objectives of the Company

  The primary objectives of the Company are to:

  • Provide domestic and international postal services to meet the reasonable
  needs of the people, Government, non-governmental organisations and
  business enterprises of PNG;
  • Manufacture and market postage stamps, philatelic products and other
  products for use in connection with services provided by Post PNG;
  • Provide money transfer services within the Independent State of PNG and
  between PNG and other places;
  • Engage in research relating to postal products and activities;
  • Provide packet and parcel carrying services;
  • Provide courier and freight services;
  • Provide mail house, documents exchange and contract mail management
  services;
  • Carry on any business or activity that is related, incidental, ancillary or
  complementary to the provision of domestic and international postal services;
  • Provide fund transfer services, act as agent on behalf of other entities, bodies
  and organisations in relation to banking arrangements and in the collection of
  premium rates, licence fees, other like services and operate a savings bank;
  and
  • Perform functions relating to the provision of postal services in a manner
  consistent with PNG‟s obligations under any convention.

  – 204 –

• Page 239 of 293

• Post (PNG) Limited

  72.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  72.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act on the inspection
  and audit of the accounts and records of the Company for the year ended 31
  December 2016 was issued on 11 September 2017. The report did not contain any
  qualification.

  72.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Company for the year ended 31 December
  2016 was issued on 11 September 2017. The report contained the following
  significant matters:

  Inventory Management

  My review of the internal controls relating to inventory management revealed that the
  Company‟s stock count sheets had not been signed off by the officers and mangers
  responsible for the count to confirm that the stock counts were conducted and verified
  by officers of the company. I advised the management that stock count must be done
  periodically and officers involved in the count must sign off the count sheets and
  supervisor or manager of a higher rank must also counter sign to certify the stock
  count sheets as true inventory records of the Company. A periodic stock count is
  necessary to safeguard inventories from theft, misuse, obsolescence, and to ensure the
  inventory values are fairly reported at the balance date. I also advised that segregation
  of duties involving counting, recording, verifying, approving and posting to general
  ledger is very important.

  The management‟s response was as follows:

  “We agree and accept recommendation on stock counts and verification. However, it
  would be impractical for some Post Office sites where the company has only 2 staff
  working. The Company cannot afford an independent person for usually smaller post
  offices with not much business activity and carry less or no inventory.

  The company has now recruited a qualified Inventory Manager who commenced in
  early May and will manage stock take issues from Head Office. To have more
  stringent controls, the company has a team of internal auditors to check and ensure
  that inventory is well managed and correctly reported.

  The Management considers this area will not be an issue but to accept the auditor‟s
  recommendation for stock counting and verification going forward.”

  – 205 –

• Page 240 of 293

• Post (PNG) Limited

  Payroll Processes

  I noted from examining the internal controls governing the payroll processes that
  there was a lack of review, verification and confirmation of almost all fortnightly pay
  calculations by the Human Resource (HR) Manager.

  I recommended to the management that the HR Manager must always review, verify
  and authorize every fortnightly pays before funds get disbursed into individual
  employee‟s account as this is an integral part of the control within the payroll cycle. I
  also advised the management that there exists high risks of not detecting fraud,
  intentional or accidental errors and inaccurate pay calculations in a timely manner.

  The management‟s response was as follows:

  “We disagree as payroll is approved by Human Resource Manager and CEO through
  online banking after payroll manager completes his job. The BSP Payroll System is
  programmed or designed in such a way that as long as correct hours are input into
  the system, one person has to process and the other checks and approves the payroll.
  Therefore, Post PNG has a payroll system where checks and balances are done prior
  to approval and payment by different payroll system users at different reporting
  lines.”

  Debt Management Policy: Provision for Doubtful Debts

  I noted that Post PNG Limited had no Board approved policy on Debt Management at
  the time of my review. My discussions with the caretaker CFO of the Company
  revealed that the Company had provided for a full 100% as doubtful for all debts
  sitting over 120 days. I recommended to the management to have a written policy on
  debt management which includes provision for doubtful debts.

  The management responded as follows:

  “We are familiar with the consistency we adopt and that is to provide for total debts
  sitting over 120 days but consider one on one basis on collection remarks made by
  our accounts receivable officers on the debts that fall between 91–120 days as a basis
  for determining Provision for Doubtful Debts at year end. Consistently, we note most
  of these debtors are Government Departments and few corporate companies such as
  Digicel who has a monopolistic market but eventually they pay up. Although we have
  no written policy for debt recovery but the practice we employ above helps recover
  debts initially provided as bad.”

  – 206 –

• Page 241 of 293

• Post (PNG) Limited

  Lodgment of Annual Returns

  I noted that the Company had not lodged Annual Returns for the last five (5) years
  with the Investment Promotion Authority (IPA). I further noted that there was “nil”
  accrual taken up to cater for the expected penalty fees borne by this non-compliance
  relating to the past years without lodgment. I advised that non-compliance with
  statutory and regulatory requirements of the IPA and the Companies Act 1997 may
  result in deregistration of the company and incur unbudgeted costs from late lodgment
  fees.

  The management responded as follows:

  “Disagree. Management has lately confirmed that the Annual Returns were lodged by
  NKA Accountants up to 2014. The company has prepared the 2015 Annual Return
  and awaiting lodgment with the Investment Promotion Authority. The 2016 Annual
  Return is pending completion of the annual external audit. Management obtained
  copies of the annual returns from 2009 to 2014 and will submit to IPA to update their
  online system records. The Company Secretary of Post PNG has liaised and met with
  acting Company Registrar to have our Annual Return files updated in their system.
  Penalty fees are most unlikely at this time given the above situation.”

  Maintenance of Directors Interest Register

  I noted that the Company had not maintained any interest register for the purpose of
  declaring all interests being held by all Directors. Maintenance of interest register is a
  statutory requirement stipulated through Section 164 of the Companies Act 1997.
  This was a non-compliance of statutory requirement. I recommended that the
  Company to maintain an interest register declaring all interest being held by current
  Directors.

  The management‟s response was as follows:

  “Agree and accept recommendation. The Board in its recent meeting accepted as a
  minute discussion to disclose their interests in other businesses or areas. Company
  Secretary will ensure this be implemented where an interest register to be disclosed in
  the next external audit.”

  72.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the year ended 31 December 2017 was in progress.

  – 207 –

• Page 242 of 293

• 73. TELIKOM (PNG) LIMITED

  73.1 INTRODUCTION

  73.1.1 Legislation

  Telikom (PNG) Limited was incorporated under the Companies Act. This Company
  was formed following the NEC Decision No. 18/96 of 17 April 1996 to corporatise
  the Post and Telecommunications Corporation (PTC) and to separate it into three
  entities namely: Telikom (PNG) Limited, Post PNG Limited and National
  Information and Communication Technology Authority (NICTA) formerly known as
  (PANGTEL).

  As a result of the NEC Decision, all assets, rights, liabilities, staff and regulatory
  powers and business of the PTC relating to Telecommunication Services were
  transferred on 31 December 1996 at the net book value to Telikom (PNG) Limited as
  per the allocation statement approved by the Minister for Communications. Telikom
  (PNG) Limited is a 100% state owned Company and it commenced trading on 1
  January 1997.

  73.1.2 Objectives of the Company

  The primary objectives of the Company are to:

  • Be the successor Company to the Telikom Divisions of PTC within the meaning
  of and for the purposes of the Telikom (PNG) Limited Act;
  • Supply telecommunication services within PNG and between PNG and other
  places;
  • Carry on any business or activity relating to telecommunications either inside or
  outside of PNG;
  • Publish telecommunications directories, and to supply directory information
  service;
  • Supply, install and maintain customer equipment and customer lines;
  • Develop, manufacture, market and supply facilities and software;
  • Supply value added services;
  • Utilise its network, installations and facilities for purposes other than
  telecommunications, to the extent that such network installations and facilities
  are not fully utilised in the supply of telecommunications;
  • Carry on any business incidental to telecommunication;
  • Unless otherwise advised to the contrary by the Minister acting in accordance
  with a directive of the NEC to:

  ‒ Act as an adviser to the Government of PNG on matters relating to
  telecommunication activities in PNG;

  – 208 –

• Page 243 of 293

• Telikom (PNG) Limited

  ‒ Represent PNG as a member of, and actively participate, in
  international bodies concerned with the administration of
  telecommunication services;
  ‒ Enter into international agreement relating to telecommunication
  activities; and
  ‒ Perform functions relating to the provision of telecommunication
  services in a way consistent with PNG‟s obligations under any
  convention; and

  • Exercise such powers to negotiate, prepare, execute and perform any contracts
  or management arrangements of the State as may be delegated to it or conferred
  on it.

  73.1.3 Subsidiaries of the Company

  The subsidiaries of Telikom (PNG) Limited are DATEC (PNG) Limited, Kalang
  Advertising Limited, Media Niugini Limited (EMTV) and PNG Directories Limited.
  Comments in relation to these subsidiaries are contained in paragraphs 73A, 73B, 73C
  and 73D of this Report respectively.

  73.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the years ended 31 December 2015 and 2016 were in progress.

  The Company had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 209 –

• Page 244 of 293

• 73A. DATEC (PNG) LIMITED (Subsidiary of Telikom (PNG) Limited)

  73A.1 INTRODUCTION

  73A.1.1 Legislation

  Datec (PNG) Limited was incorporated under the Companies Act. The Company
  was fully acquired by Telikom (PNG) Limited from Steamships Trading Company
  Limited on 1 August 2014. The Company is a wholly owned subsidiary of Telikom
  (PNG) Limited.

  73A.1.2 Functions of the Company

  !1 I~~FLL3 1 * Li EP BMi~VI1STJnF1Sfl0activity is in the provision and support of
  technology applied solutions including business critical ICT consulting, solutions
  and services, IT outsourcing, business process outsourcing, internet services,
  electronics and computer retail, training and wide-ranging technical support.

  73A.2 AUDIT OBSERVATIONS

  73A.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act on the
  &RP SL~N IIQnF’al statJP H IRTJIVF TN HT HJiFflE I!1 IFTP EeT i IIII Z DflWRi on
  29 November 2017. The report did not contain any qualification.

  73A.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the year ended 31 December 2016 had been
  completed and the results were being evaluated.

  The fieldwork associated with the inspection and audit of the accounts and records
  and the examination of the financial statements of the Company for the year ended
  31 December 2017 was in progress.

  – 210 –

• Page 245 of 293

• 73B. KALANG ADVERTISING LIMITED (Subsidiary of Telikom (PNG)
  Limited)

  73B.1 INTRODUCTION

  73B.1.1 Legislation

  Kalang Advertising Limited was incorporated under the Companies Act. The
  Company is wholly owned by Telikom (PNG) Limited.

  The ownership of the Company changed following the National Court Order of 9
  September 1997 which allowed Telikom (PNG) Limited to convert the debt due
  from Kalang Advertising Limited into shareholding. Subsequently, Kalang issued
  535,424 ordinary shares to Telikom (PNG) Limited on 31 October 1997.

  73B.1.2 Functions of the Company

  Kalang Advertising Limited was set up primarily to take over the activity of
  commercial radio broadcasting previously under the National Broadcasting
  Commission.

  The Company carries on the business of producers, consultants and promoters of
  Broadcast Television, Community Television, Video, Audio, Film, Visual,
  Cassettes Recordings, Productions and Recordings.

  73B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection and
  audit of the accounts and records and the examination of the financial statements of
  the Company for the years ended 31 December 2014, 2015 and 2016 were completed
  and results were being evaluated.

  The Company had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 211 –

• Page 246 of 293

• 73C. MEDIA NIUGINI LIMITED (EMTV) (Subsidiary of Telikom
  (PNG) Limited)

  73C.1 INTRODUCTION

  73C.1.1 Legislation

  Media Niugini Limited (EMTV) was incorporated under the Companies Act. The
  Company was acquired by Telikom (PNG) Limited from Fiji Television Limited
  (FijiTV) on 4 February 2016.

  The Company was founded in 1985 by two local businessmen in a joint venture with
  the Nine Network of Australia. In July 1987 the Company commenced broadcasting
  through its national television service. In 1990 Nine Network acquired 100%
  ownership of Media Niugini Limited and later sold its interest in the Company to
  Fiji Television Limited (FijiTV) in December 2004. The Company then operated as
  a subsidiary of FijiTV.

  The Company is now a wholly owned subsidiary of Telikom (PNG) Limited.

  73C.1.2 Functions of the Company

  Media Niugini Limited, trading as EMTV, provides television broadcasting services
  in Papua New Guinea.

  The Company offers:

  • current affairs, national news, weather reports, and special documentaries; and
  • shows in the areas of sports, lifestyle, entertainment, drama, children, religion,
  music and others.

  73C.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial statements
  of the Company for the year ended 31 December 2016 was in progress.

  The Company had not submitted its financial statements for the year ended 31
  December 2017 for my inspection and audit.

  – 212 –

• Page 247 of 293

• 73D. PNG DIRECTORIES LIMITED (Formerly E. H. O‟Brien Limited)
  (Subsidiary of Telikom (PNG) Limited)

  73D.1 INTRODUCTION

  Edward H.O‟Brien Limited is a Company incorporated under the Companies Act.
  The Company is jointly owned by Telikom (PNG) Limited (54%) and Edward
  H.O‟Brien Enterprise of Sydney, Australia (46%). During the year 2002, the
  Company changed its name to PNG Directories Limited.

  73D.2 AUDIT OBSERVATIONS

  73D.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act on the
  Company‟s financial statements for the year ended 31 December 2015 was issued
  on 22 January 2018. The report did not contain any qualification.

  73D.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated with the inspection
  and audit of the accounts and records and the examination of the financial
  statements of the Company for the years ended 31 December 2016 and 2017 were in
  progress.

  – 213 –

• Page 248 of 293

• – 214 –

• Page 249 of 293

• SECTION C

  NATIONAL GOVERNMENT

  SHAREHOLDINGS IN

  OTHER COMPANIES

  – 215 –

• Page 250 of 293

• – 216 –

• Page 251 of 293

• 74. FOREWORD

  This Section of my Report deals with Companies in which the Government owns 50%
  or less of the issued Share Capital of a Company.

  The auditing and reporting requirements of these Companies are stipulated under the
  Companies Act, and these have been elaborated in Paragraph 60 of this Report.

  As the Government of PNG does not hold majority interest in these Companies, the
  accounts of these Companies are audited by Private Auditors.

  However, because public monies are invested in these Companies, my responsibilities
  require the inclusion of the summaries of their accounts and the comments of the
  Private AuditRIs‟ Reports in this Section of my Report. Details of these companies are
  contained in paragraphs 75 to 78.

  – 217 –

• Page 252 of 293

• – 218 –

• Page 253 of 293

• 75. BOUGAINVILLE COPPER LIMITED

  75.1 INTRODUCTION

  Bougainville Copper Limited, formerly Bougainville Copper Pty Limited, was
  incorporated under the Companies Act. The main objectives of the Company are to
  prospect, explore, quarry, develop, excavate, dredge for, open, work, purchase or
  otherwise obtain copper and other various metals and minerals.

  From 1972 until 1989, the Company operated a large open pit mine and processing
  facility at Panguna on the island of Bougainville in the North Solomons Province of
  PNG. It produced concentrate containing copper, gold and silver which was sold
  primarily under long-term contracts to smelters in Asia and Europe. On 15 May 1989
  production was brought to a halt by militant activity and has not recommenced since.

  As at 27 March 2017 the issued capital of the Company were 401,062,500 fully paid
  shares, each carrying one voting right. Of these, the Government of PNG held
  76,430,809 shares or 19.06% of the total shares. A further 69,744,640 (17.34%)
  shares were held through Eda Minerals Limited totalling 36.4%.

  The Autonomous Bougainville Government (ABG) holds 146,175,449 shares (36.4%)
  through Bougainville Minerals Limited.

  75.2 REPORT OF THE COMPANY‟S AUDITORS

  A Private Firm of AutiRWFRQtuFUtII including the accounts and records for the year ended 31 December 2017 and the
  audit report was issued on 27 March 2018. This report contained a Qualified Opinion.

  “BASIS FOR QUALIFIED OPINION

  7 I<UT&RP SLQ~~s subsidiary holds an investment in an unlisted investment fund
  classified as an available-for-sale financial asset with a carrying value of K1.1 million
  at 31 December 2017. Management have not been provided with the 2017 audited
  financial statements of the investee and there is currently no active market for the sale
  of units in the investment fund. As a result, we have been unable to satisfy ourselves
  as to the valuation of K1.1 million of the available-for-sale financial assets recognised
  in the consolidated balance sheet at 31 December 2017.

  – 219 –

• Page 254 of 293

• Bougainville Copper Limited

  QUALIFIED OPINION

  In our opinion, except for the possible effects of the matter described in the Basis for
  qualified opinion section of our report, the accompanying financial statements:

  1. comply with International Financial Reporting Standards and other generally
  accepted accounting practice in Papua New Guinea; and

  2. give a true and fair view of the financial position of the Company and the Group
  as at 31 December 2017, and their financial performance and cash flows for the
  year then ended.”

  – 220 –

• Page 255 of 293

• 76. GOGOL REFORESTATION COMPANY LIMITED

  76.1 INTRODUCTION

  Gogol Reforestation Company Limited was incorporated under the Companies Act.
  The objective of the Company is to be involved in reforestation.

  As at 31 December 2009, the issued and fully paid up capital of the Company
  comprised 102,001 „A‟ class ordinary shares of K1.00 each and 98,001 „B‟ class
  ordinary shares of K1.00 each. Of these, the Government of PNG held 98,001 „B‟
  class ordinary shares of K1.00 each, representing 49% of the issued Capital at a cost
  of K98,001.

  76.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the audited financial statements and the audit
  reports of the Company for the years ended 31 December 2010, 2011, 2012, 2013,
  2014, 2015, 2016 and 2017 had not been submitted for my verification.

  Further, I was informed by management that the Company was no longer in operation
  since 2011 due to the winding down of the Company.

  In 2014, I communicated with IPBC requesting for the winding down documents and
  IPBC responded that they had not received any winding down application nor
  deregistration documents with regards to Gogol Reforestation Co. Limited. A
  Company search with the Investment Promotion Authority (IPA) on 15 June 2018
  revealed that the Company was not deregistered.

  – 221 –

• Page 256 of 293

• 77. OK TEDI MINING LIMITED

  77.1 INTRODUCTION

  Ok Tedi Mining Limited, formerly Mt. Fubilan Development Company Limited, was
  incorporated under the Companies Act. The main function of the Company is mining.

  As at 31 December 2011, the issued and fully paid up capital of the Company was
  K195,102,000 (192,700,000 Ordinary Shares with no par value). Of these, the
  Government of PNG held fully paid 47,000,000 Ordinary Shares valued at
  K47,000,000 representing 24.4% of the Ordinary Share capital. On 19 September
  2013, the Parliament passed the 10th Supplemental Agreement cancelling the
  122,200,000 shares of PNG Sustainable Development Program and issuing
  122,200,000 new shares to the State of PNG, making the Company a 100% State
  owned Enterprise.

  77.2 REPORT OF THE COMPANY‟S AUDITORS

  A Private Firm of Auditors conducted the audit of the &RP SEj~ VlljEjciEDstEt,P ,jtV
  for the year ended 31 December 2017 and the audit report was issued on 2 March
  2018. The report did not contain any qualification.

  – 222 –

• Page 257 of 293

• 78. PNG SUSTAINABLE DEVELOPMENT PROGRAM LIMITED

  78.1 INTRODUCTION

  78.1.1 Legislation

  The PNG Sustainable Development Program Limited was incorporated in Singapore
  under the Singapore Companies Act (Cap. 50) on 20 October 2001.

  As a Company limited by guarantee, PNG Sustainable Development Program Limited
  has no share capital, debentures, share options and unissued shares.

  78.1.2 Objective of the Company

  The objective of the Company is to promote and improve the quality of life of current
  and future generations of the people of PNG, especially of Western Province by:

  • investing and managing wisely the income and resources of the Company;
  • undertaking investments and supporting development programs and projects that
  are sustainable, providing significant benefits in the short and long-term to the
  people, local communities, provinces and the nation;
  • meeting the best international standards financial, physical, cultural, social and
  –

  environmental in our activities; and
  • working together with the people of PNG in partnership with the government,
  churches and other non-government and business partners.

  78.1.3 Functions of the Company

  The primary functions of the Company are to:

  • promote sustainable development in Western Province and PNG more generally;
  and
  • manage the Long Term Fund to support a high level of development expenditure
  in Western Province in particular and PNG in general for at least 40 years after the
  closure of the Ok Tedi Mine.

  78.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not submitted its audited
  financial statements and the audit reports for the years ended 31 December 2012,
  2013, 2014, 2015, 2016 and 2017 for my verification.

  The Company, by way of letter, advised me on 2 July 2018 that the State has no
  shareholding in the Company, as such I intend to exclude this Company from my
  future Reports to Parliament.

  – 223 –

• Page 258 of 293

• – 224 –

• Page 259 of 293

• SECTION D

  PROBLEM AUDITS
  (AUDITS IN ARREARS)

  – 225 –

• Page 260 of 293

• – 226 –

• Page 261 of 293

• 79. FOREWORD

  This Section of my Report deals with problem audits, especially audits in arrears.
  Problem audits denote audit of entities in respect of which I have not been able to
  carry out audits for circumstances detailed in the respective paragraphs.

  79.1 EXCLUSION OF ENTITIES FROM FUTURE REPORTS

  Due to amalgamation with respective Departments or their inability to submit long
  outstanding financial statements, I would exclude the following entities from my
  future Reports to Parliament.

  1. National Narcotics Bureau; and
  2. Livestock Development Corporation Limited.

  – 227 –

• Page 262 of 293

• – 228 –

• Page 263 of 293

• 80. AUDITS IN ARREARS

  80.1 GENERAL

  Audits in arrears are those in respect of which financial statements have not been
  submitted on time for audit to be undertaken, thus placing my Office in a position
  where audits are not able to be conducted on a current year basis consistent with the
  requirements of the Companies Act and the PFMA. Two serious consequences
  develop from this. Firstly, it results in a build-up of audits in arrears, and these are all
  audits other than the current year (2017) audits. The other serious consequence is that
  audit certificates issued more than a year or two in arrears serve only to meet the
  administrative or legislative requirements, but their validity from a decision making
  stand-point may be lost due to the time lag.

  80.2 RESPONSIBILITY FOR PREPARATION OF FINANCIAL STATEMENTS

  The responsibility for the preparation and presentation of financial statements is that
  of the management of the auditee organisation. That being the case, the audit of the
  financial statements by the Auditor-General does not in any way relieve management
  of its responsibility to have financial statements prepared on time.

  This responsibility also requires management to ensure that an adequate and effective
  internal control system is maintained so as to ensure, inter-alia, that complete and
  accurate financial statements are produced on a timely basis. To assist management in
  producing financial statements that meet the qualitative characteristics, the
  management‟s responsibility also extends to ensuring that professionally qualified and
  experienced accounting personnel are engaged.

  It is generally true that irrespective of their completeness, accuracy or reliability,
  financial statements that are unduly delayed, lose their relevance. Although there is no
  consensus regarding the length of time that ought to be allowed to elapse between the
  predetermined reporting date and the date when the financial statements lose their
  relevance, there is a need to weigh the relative merits of preparing them on a timely
  basis, let alone the legislative requirements.

  Relevant and reliable information therefore is useful for decision making when these
  are timely prepared and made available to concerned parties. Relevance here is
  relative to the value and usefulness of the audited financial information to
  management and the parties concerned for decision making. Current information is of
  more relevance in the fight against corrupt practices than information that is out of
  date.

  – 229 –

• Page 264 of 293

• 80.3 LEGISLATIVE REQUIREMENTS

  To ensure the timely preparation of financial statements, Section 63(3)a of the Public
  Finance (Management) (Amendment) Act 2016 makes it mandatory for statutory bodies
  to prepare and furnish audited financial statements to the Finance Departmental Head,
  before end of the fourth calendar month from close of a fiscal year. The fact that audit of
  34 entities as depicted in Schedule B(iv) had been in arrears due to non-submission of
  financial statements is a direct contravention of the requirements of Section 63(3)a
  referred to above.

  Strict adherence of this requirement, despite its mandatory nature, has not been enforced
  by the respective entities‟ managements and the authorities concerned. My strong
  contention is that, enforcement of the above requirements by the authorities concerned
  and the Minister responsible may have been lacking in the past. There may therefore be a
  need, whilst ensuring timely accountability of public resources, to take certain statutory
  bodies to task for non-compliance with mandatory statutory requirements.

  By virtue of Section 63(4) of the Public Finance (Management) (Amendment) Act 2016,
  the Finance Minister is required to table the reports of the respective statutory bodies in
  Parliament after they are received. The following arrears situation implies that a lot of
  statutory bodies reports may not have been tabled in Parliament as required, and thus, the
  accountability to Parliament in these respects has been far short of the desired.

  80.4 CURRENT YEAR AUDITS (2017 AUDITS)

  Entities totalling 115 subject to audit by the Auditor-General comprise 78 Public Bodies
  and their subsidiaries, 37 National Government owned companies and 4 companies in
  which the National Government has shareholdings (referred to as Section „ C‟
  Companies).

  – 230 –

• Page 265 of 293

• TYPES OF ENTITIES SUBJECT TO AUDIT
  Table 1
  Section Types of Audit Number of Entities
  2017/2018 2016/2017
  (A) Public Bodies and their Subsidiaries 78 78
  (B) National Government Owned Companies 37 26
  (C) National Government Shareholdings in other Companies 4 4
  119 108
  Table 1. Shows the total of Types of Entities subject to Audit.

  Chart 1
  Chart 1. Shows the percentages of Types of Entities subject to Audit during 2017/2018 Audit Cycle.

  Types of Audits
  National Government
  Shareholdings in
  National Government other Companies
  Owned Companies 3%
  31%

  Public Bodies and
  their Subsidiaries
  66%

  – 231 –

• Page 266 of 293

• 80.5 STATUS OF CURRENT YEAR AUDITS

  Each of the 115 entities, except Section „C‟ Companies are subject to audit and required
  under Section 63(3)c of the Public Finance (Management) (Amendment) Act 2016 to
  submit annual financial statements for audit. Information available in my Office shows
  that only 52 entities have submitted their financial statements for 2017 (Schedule A) for
  audit up to the time of preparing this Report. A total of 63 entities have not submitted
  their 2017 financial statements (Schedule A) for audit in 2018. It could therefore be
  logically concluded that, about 55% of the public bodies might not have submitted their
  annual reports and financial statements for 2017 together with my reports on them, to the
  respective Ministers for tabling in the National Parliament on or before 30 April 2018.

  Table 2 and Chart 2 shown below, and Schedule A attached show the status of the
  current year audits.

  – 232 –

• Page 267 of 293

• STATUS OF CURRENT YEAR AUDITS 2017
  Table 2
  No. Status of Current Year Audits Number of Entities
  2017/2018 2016/2017
  1 Audits completed and reports issued thereon (Schedule A) 0 20
  2 Audits substantially completed (Schedule A) 14 4
  3 Audits in progress (Schedule A) 27 15
  4 Audits to commence shortly (Schedule A) 11 5
  5 Financial Statements not submitted (Schedule A) 63 60
  6 Ceased Entities (Schedule D) 0 1
  115 105
  Table 2. Shows the total of Status of Current Year (2017) Audits (Schedule A).

  Chart 2
  Chart 2. Shows the percentages of Audit Status for the Current Year (2017) during 2017/2018 Audit Cycle. (Schedule A)

  Status of Current Year Audits 2017
  Audits completed
  and reports issued
  Financial Statements thereon (Schedule A)
  not submitted Ceased Companies 0%
  (Schedule A) (Schedule D) Audits substantially
  55% 0% completed (Schedule
  A)
  12%

  Audits in progress
  (Schedule A)
  23%

  Audits to commence
  shortly (Schedule A)
  10%

  – 233 –

• Page 268 of 293

• 80.6 AUDITS IN ARREARS (2016 AND PRIOR YEARS)

  Records available in my Office show that a total of 110 entities (196 audits) were in the
  Audit in Arrears category due to non-submission of financial statements on time. Table 3
  and Chart 3 shown below, and Schedule B attached provide more details of these.

  – 234 –

• Page 269 of 293

• STATUS OF AUDITS IN ARREARS BY NUMBER OF ENTITIES
  (2016 AND PRIOR YEARS)

  Table 3A
  Status of Audits in Arrears by No. of Entities
  No. Number of Entities
  ( 2016 and Prior Years)
  2017/2018 2016/2017
  1 Audits substantially completed (Schedule B) 41 17
  2 Audits in progress (Schedule B) 25 18
  3 Audits to commence shortly (Schedule B) 9 6
  4 Financial Statements not submitted (Schedule B) 35 31
  110 72
  Table 3A. Shows the Status of Audits in Arrears by number of Entities for 2016 and Prior Years during 2017/2018 Audit
  Cycle. (Schedule B)
  Chart 3A
  Chart 3A. Shows the percentages of Audit Status for Audits in Arrears by number of Entities for 2016 and Prior Years during

  Status of Audits in Arrears by number of
  Entities (2016 and prior years)
  Financial Statements
  not submitted
  (Schedule B)
  32% Audits substantially
  completed
  (Schedule B)
  37%

  Audits to commence
  shortly
  (Schedule B)
  8%
  Audits in progress
  (Schedule B)
  23%

  2017/2018 Audit Cycle. (Schedule B).

  – 235 –

• Page 270 of 293

• STATUS OF AUDITS IN ARREARS BY NUMBER OF AUDITS
  (2016 AND PRIOR YEARS)

  Table 3B

  No. Status of Audits in Arrears by No. Of Audits (2016 & prior years) Number of Audits
  2017/2018 2016/2017
  1 Audits substantially completed (Schedule B) 65 21
  2 Audits in progress (Schedule B) 31 24
  3 Audits to commence shortly (Schedule B) 13 10
  4 Financial Statements not submitted (Schedule B) 87 70
  196 125
  Table 3B. Shows the Status of Audits in Arrears by number of Audits for 2016 and Prior Years during 2017/2018 Audit Cycle.
  (Schedule B).
  Chart 3B

  Status of Audits in Arrears by number of
  Audits (2016 and prior years)

  Financial
  Statements not Audits substantially
  submitted completed
  (Schedule B) (Schedule B)
  44% 33%

  Audits in progress
  Audits to commence (Schedule B)
  shortly 16%
  (Schedule B)
  7%

  Chart 3B. Shows the percentages of Audit Status for Audits in Arrears by number of Audits for 2016 and Prior Years during
  2017/2018 Audit Cycle. (Schedule B).

  – 236 –

• Page 271 of 293

• 80.7 LONG OUTSTANDING FINANCIAL STATEMENTS

  During this Audit Cycle (2017/2018), 34 audit entities were in the arrears category,
  increased by three compared to prior year (2016). Of these 34 entities, 87 financial
  statements for periods ranging from one year to seven years have still not been submitted.
  In other words, they still have financial statements outstanding for the years from 2010 to
  2016. Details of these are shown below in Table 4, Chart 4 and also in Schedule C
  attached.

  – 237 –

• Page 272 of 293

• LONG OUTSTANDING FINANCIAL STATEMENTS
  BY NUMBER OF ENTITIES
  (2016 AND PRIOR YEARS)
  Table 4A
  No. Years Outstanding by Entities Number of Entities
  2017 Report 2016 Report
  1 One Year (Schedule C) 13 9
  2 Two Years (Schedule C) 8 12
  3 Three Years (Schedule C) 3 5
  4 Four Years (Schedule C) 5 4
  5 Five Years (Schedule C) 3 0
  6 Six Years (Schedule C) 0 1
  7 Seven Years (Schedule C) 2 0
  34 31
  Table 4A. Shows the total of Long Outstanding Financial Statements by number of Entities during 2017/2018 Audit Cycle.
  (Schedule C).
  Chart 4A
  Chart 4A. Shows the percentages of Long Outstanding Financial Statements by number of Entities during 2017/2018 Audit Cycle

  Long Outstanding Financial Statements by
  number of Entities
  Six Years (Schedule
  C) Seven Years
  0% (Schedule C)
  Five Years 6%
  (Schedule C) One Year (Schedule
  9% C)
  38%
  Four Years
  (Schedule C)
  15%

  Three Years
  (Schedule C)
  9%

  Two Years
  (Schedule C)
  23%

  (Schedule C).

  – 238 –

• Page 273 of 293

• LONG OUTSTANDING FINANCIAL STATEMENTS
  BY NUMBER OF AUDITS
  (2016 AND PRIOR YEARS)

  Table 4B
  No. Years Outstanding by Audits Number of Audits
  2017 Report 2016 Report
  1 One Year (Schedule C) 13 9
  2 Two Years (Schedule C) 16 24
  3 Three Years (Schedule C) 9 15
  4 Four Years (Schedule C) 20 16
  5 Five Years (Schedule C) 15 0
  6 Six Years (Schedule C) 0 6
  7 Seven Years (Schedule C) 14 0
  87 70
  Table 4B. Shows the total of Long Outstanding Financial Statements by number of Audits during 2017/2018 Audit Cycle.
  (Schedule C ).

  Chart 4B
  Long Outstanding Financial Statements by
  number of Audits (2016 and prior years)
  Chart 4B. Shows the percentages of Long Outstanding Financial Statements by number of Audits during 2017/2018 Audit

  6 Six Years 7 Seven Years 1 One Year
  (Schedule C) (Schedule C) 2 Two Years
  (Schedule C) 16% (Schedule C)
  0% 15%
  19%

  5 Five Years
  (Schedule C)
  17%

  3 Three Years
  (Schedule C)
  10%

  4 Four Years
  (Schedule C)
  23%

  Cycle. (Schedule C).

  – 239 –

• Page 274 of 293

• 80.8 STATUS OF AUDITS AS AT 30 JUNE 2018

  As illustrated in Executive Summary Table 1, during July 2017 and June 2018 Audit
  Cycle, a total of 163 audits were undertaken by the Audit Office. Out of 163 audits
  carried out, 26 audit reports were issued and of the 79 audits substantially completed,
  40 reports were being finalised and expected to be issued shortly. Table 5 and Chart
  5 shown below provide the details of the Status of Audits during the period July 2017
  to June 2018.

  – 240 –

• Page 275 of 293

• STATUS OF AUDITS AS AT 30 JUNE 2018
  Table 5
  Number of Audits
  No. Status of Audits
  2017/2018 2016/2017
  1 Audits completed and reports issued thereon (Schedules A & E) 26 105
  2 Audits substantially completed (Schedules A & B) 79 25
  3 Audits in progress (Schedules A & B) 58 39
  4 Audits to commence shortly (Schedules A & B) 24 15
  5 Financial Statements not submitted (Schedules A & B) 150 130
  337 314
  Table 5. Shows the Status of Audits as at 30 June 2018 for the 2017/2018 Audit Cycle. (Schedules A&E and A&B).

  Chart 5
  Chart 5. Shows the percentages of Audit Status as at 30 June 2018 for the 2017/2018 Audit Cycle (Schedules A&E and

  Status of Audits as at 30 June 2018
  Audits completed
  and reports issued
  thereon
  Financial (Schedule A & E) Audits substantially
  Statements not 8% completed
  submitted (Schedule A & B)
  (Schedule A & B) 23%
  45%

  Audits in progress
  (Schedule A & B)
  17%
  Audits to
  commence shortly
  (Schedule A & B)
  7%

  A&B).

  – 241 –

• Page 276 of 293

• – 242 –

• Page 277 of 293

• ACKNOWLEDGEMENTS

  My audit staff worked conscientiously and successfully completed audits entrusted to them.
  Their devotion to duty, their integrity and loyalty are highly appreciated.

  I extend my appreciation and gratitude to the Government Printing Office staff, for their efforts
  in completing the printing of this Report within the limited time frame available. I also
  acknowledge the co-operation and the assistance of all Heads of Public Bodies and National
  Government Owned Companies, and Registered Company Auditors and their staff who
  assisted as my Authorised Auditors.

  I would also like to thank the Chairman and the members of the Permanent Parliamentary
  Committee on Public Accounts of PNG and the Secretary for the continuous interest shown in
  my work.

  SIGNED AT WAIGANI ON 20TH JULY
  TWO THOUSAND AND EIGHTEEN

  GORDON KEGA
  Acting Auditor-General of Papua New Guinea

  – 243 –

• Page 278 of 293

• – 244 –

• Page 279 of 293

• SCHEDULES

  – 245 –

• Page 280 of 293

• – 246 –

• Page 281 of 293

• Schedule „A

  ‟

  STATUS OF CURRENT YEAR (2017) AUDIT

  (i) AUDITS COMPLETED AND REPORTS ISSUED THEREON
  No. Section Para. No. Entity No. of Audits
  0

  (ii) AUDITS SUBSTANTIALLY COMPLETED
  Para.
  No. Section Entity No. of Audits
  No.
  1 A 2 Bank of Papua New Guinea 1
  2 A 4 Civil Aviation Safety Authority of Papua New Guinea 1
  3 A 10 Independence Fellowship Trust 1
  4 A 11 Independent Consumer and Competition Commission 1
  5 A 14 Investment Promotion Authority 1
  6 A 15 Kokonas Indastri Koporesen 1
  7 A 15A Papua New Guinea Coconut Extension Fund 1
  8 A 15B Papua New Guinea Coconut Research Fund 1
  9 A 20 National Agricultural Research Institute 1
  10 A 25 National Economic and Fiscal Commission 1
  11 A 30 National Maritime Safety Authority 1
  12 A 33 National Research Institute 1
  13 A 35 National Roads Authority 1
  14 B 65 Motor Vehicles Insurance Limited 1
  14

  (iii) AUDITS IN PROGRESS
  Para.
  No. Section Entity No. of Audits
  No.
  1 B 16 Kumul Consolidated Holdings 1
  2 B 16A General Business Trust 1
  3 B 16B Kumul Technology Development Corporation Limited 1
  4 B 16C PNG Dams Limited 1
  5 B 62 Kumul Petroleum Holdings Limited 1
  6 B 62A Eda Oil Limited 1
  7 B 62B Kumul Exploration (Asia) Limited 1
  8 B 62C Kumul Gas Foreland 239 B.V 1
  9 B 62D Kumul Gas Foreland 261 B.V 1
  10 B 62E Kumul Gas Foreland 268 B.V 1
  11 B 62F Kumul Gas Foreland 269 B.V 1
  12 B 62G Kumul Gas Niugini B.V 1
  13 B 62H Kumul Lending Co Pte Limited 1
  14 B 62I Kumul LNG Limited 1
  15 B 62J Kumul Petroleum (Development) Limited 1
  16 B 62K Kumul Petroleum (Investments) Limited 1
  17 B 62L Kumul Petroleum (Kroton) Limited 1
  18 B 62M Kumul Petroleum (Pipeline) Limited 1
  19 B 62N Kumul Petroleum (Tech and Advisory) Limited 1
  20 B 62O Kumul Petroleum Marketing Pte Limited 1
  21 B 62P Kumul Security Agent Limited 1
  – 247 –

• Page 282 of 293

• 22 B 62Q NPCP Oil Company Pty Limited 1

• Page 283 of 293

• Para.
  No. Section Entity No. of Audits
  No.
  23 B 68 Papua New Guinea Ports Corporation Limited 1
  24 B 71 PNG Power Limited 1
  25 B 72 Post (PNG) Limited 1
  26 B 73A DATEC (PNG) Limited 1
  27 B 73D PNG Directories Limited 1
  27

  (iv) AUDITS TO COMMENCE SHORTLY
  Para.
  No. Section Entity No. of Audits
  No.
  1 A 3 Border Development Authority 1
  2 A 13 Internal Revenue Commission 1
  3 A 28 National Housing Corporation 1
  4 A 38 National Youth Commission 1
  5 A 41 Papua New Guinea Accident Investigation Commission 1
  6 A 55 Tourism Promotion Authority 1
  7 A 59 Water PNG 1
  8 B 66 National Airports Corporation Limited 1
  9 B 66A Airport City Development Limited 1
  10 B 66B Airports Investments Limited 1
  11 B 70 PNG DataCo Limited 1
  11

  (v) FINANCIAL STATEMENTS NOT SUBMITTED
  Para. No. of Last Report Date of
  No. Section Entity
  No. Audits Issued Report
  1 A 3A Papua New Guinea Maritime Transport Limited 1 2012 10/29/2015
  2 A 5 Climate Change and Development Authority 1 2012 7/25/2016
  3 A 6 Cocoa Board of Papua New Guinea 1 2015 6/15/2017
  4 A 6A Cocoa Pod Borer Project Fund 1 2015 6/15/2017
  5 A 6B Cocoa Stabilisation Fund 1 2016 6/15/2017
  6 A 7 Cocoa Coconut Institute Limited of Papua New Guinea 1 2013 9/8/2016
  7 A 8 Coffee Industry Corporation Limited 1 2013 10/26/2016
  8 A 8A Coffee Industry Fund 1 2013 11/29/2016
  9 A 8B Patana No.61 Limited 1 2013 5/12/2016
  10 A 9 Government Printing Office 1 2014 5/6/2017
  11 A 12 Industrial Centres Development Corporation 1 2015 2/28/2017
  12 A 17 Legal Training Institute 1 2013 11/2/2016
  13 A 18 Mineral Resources Authority 1 2014 6/15/2017
  National Agriculture Quarantine and Inspection
  14 A 19 Authority 1 2015 4/14/2017
  15 A 21 National AIDS Council Secretariat 1 2014 10/14/2016
  16 A 22 National Broadcasting Corporation 1 2014 11/4/2017
  17 A 23 National Capital District Commission 1 2013 3/14/2017
  18 A 23A National Capital District Botanical Enterprises Limited 1 2012 4/5/2015
  19 A 23B Port Moresby City Development Enterprises Limited 1 2012 4/5/2015
  20 A 23C Port Moresby Nature Park Limited 1 2013 4/5/2016
  21 A 24 National Cultural Commission 1 2013 8/8/2016
  22 A 26 National Fisheries Authority 1 2014 11/25/2016
  23 A 27 National Gaming Control Board 1 2014 5/16/2016
  National Gaming Control Board Community Benefit
  24 A 27A 1 2014 5/16/2016
  Fund Trust

  – 248 –

• Page 284 of 293

• Para. No. of Last Report Date of
  No. Section Entity
  No. Audits Issued Report
  25 A 28A National Housing Estate Limited 1 New Inclusion
  National Information and Communications Technology
  26 A 29 1 2014 7/28/2016
  Authority (NICTA)
  27 A 31 National Museum and Art Gallery 1 2014 3/27/2017
  28 A 32 National Narcotics Bureau 1 2012 9/22/2014
  29 A 34 National Road Safety Council 1 2015 12/5/2017
  30 A 36 National Training Council 1 2015 1/30/2017
  31 A 37 National Volunteer Service 1 2015 5/31/2016
  32 A 39 Oil Palm Industry Corporation 1 2011 9/30/2016
  33 A 40 Ombudsman Commission of Papua New Guinea 1 2015 6/29/2017
  34 A 42 Papua New Guinea Customs Service 1 2013 11/19/2015
  35 A 43 Papua New Guinea Forest Authority 1 2012 2/19/2016
  Papua New Guinea Immigration and Citizenship
  36 A 44 1 2015 6/13/2017
  Service Authority
  37 A 45 Papua New Guinea Institute of Medical Research 1 2014 9/30/2016
  38 A 46 Papua New Guinea Institute of Public Administration 1 2013 8/5/2017
  39 A 47 Papua New Guinea Maritime College 1 2014 3/29/2017
  Papua New Guinea National Institute of Standards and
  40 A 48
  Industrial Technology 1 2015 7/6/2017
  41 A 49 Papua New Guinea Sports Foundation 1 2013 9/3/2017
  42 A 50 Papua New Guinea University of Technology 1 2014 10/4/2017
  43 A 50A National Analytical and Testing Services Limited 1 2011 4/4/2016
  Unitech Development and Consultancy Company
  44 A 50B 1 2013 10/22/2015
  Limited
  45 A 51 Parliamentary Members’ Retirement Benefits Fund 1 2015 2/27/2017
  46 A 52 Public Curator of Papua New Guinea 1 2012 11/30/2015
  47 A 53 Security Industries Authority 1 2014 7/10/2016
  48 A 54 Small and Medium Enterprises Corporation 1 2012 2/11/2015
  49 A 56 University of Goroka 1 2014 10/24/2016
  50 A 56A Unigor Consultancy Limited 1 2013 11/30/2015
  51 A 57 University of Natural Resources and Environment 1 2014 10/29/2016
  52 A 58 University of Papua New Guinea 1 2013 8/12/2016
  53 A 58A Unisave Limited 1 2011 8/25/2014
  54 A 58B Univentures Limited 1 2011 6/24/2014
  55 B 61 Air Niugini Limited 1 2016 9/27/2016
  56 B 61A Link-PNG Limited 1 2015 12/13/2017
  57 B 63 Livestock Development Corporation Limited 1 2009 10/31/2012
  58 B 64 Mineral Resources Development Company Limited 1 2014 1/6/2017
  59 B 67 NCD Water and Sewerage Limited (Eda Ranu) 1 2014 1/19/2016
  60 B 69 PNG Air Services Limited 1 2015 8/8/2016
  61 B 73 Telikom (PNG) Limited 1 2014 7/29/2016
  62 B 73B Kalang Advertising Limited 1 2013 7/12/2015
  63 B 73C Media Niugini Limited (EMTV) 1 New Inclusion
  63

  – 249 –

• Page 285 of 293

• Schedule „B

  ‟

  STATUS OF AUDITS IN ARREARS (2016 AND PRIOR YEARS)

  (i) AUDITS SUBSTANTIALLY COMPLETED
  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 3 Border Development Authority 2014 1
  2 A 6 Cocoa Board of Papua New Guinea 2016 1
  3 A 6A Cocoa Pod Borer Project Fund 2016 1
  4 A 6B Cocoa Stabilisation Fund 2016 1
  5 A 7 Cocoa Coconut Institute Limited of Papua New Guinea 2014-2016 3
  6 A 9 Government Printing Office 2015 1
  7 A 13 Internal Revenue Commission 2014 & 2015 2
  8 A 16 Kumul Consolidated Holdings 2016 1
  9 A 16A General Business Trust 2016 1
  10 A 16B Kumul Technology Development Corporation Limited 2016 1
  11 A 16C PNG Dams Limited 2016 1
  12 A 17 Legal Training Institute 2014-2016 3
  13 A 19 National Agriculture Quarantine and Inspection Authority 2016 1
  14 A 23 National Capital District Commission 2014 & 2015 2
  15 A 23C Port Moresby Nature Park Limited 2014 & 2015 2
  16 A 24 National Cultural Commission 2014 1
  17 A 26 National Fisheries Authority 2015 1
  18 A 27 National Gaming Control Board 2015 1
  19 A 27A National Gaming Control Board Community Benefit Fund Trust 2015 1
  National Information and Communications Technology
  20 A 29 2015 1
  Authority (NICTA)
  21 A 31 National Museum and Art Gallery 2015 1
  22 A 35 National Roads Authority 2016 1
  23 A 38 National Youth Commission 2014-2016 3
  24 A 41 Papua New Guinea Accident Investigation Commission 2013-2016 4
  25 A 43 Papua New Guinea Forest Authority 2013 1
  Papua New Guinea Immigration and Citizenship Service
  26 A 44 2016 1
  Authority
  27 A 46 Papua New Guinea Institute of Public Administration 2014 1
  28 A 47 Papua New Guinea Maritime College 2015 & 2016 2
  Papua New Guinea National Institute of Standards and
  29 A 48 2016 1
  Industrial Technology
  30 A 53 Security Industries Authority 2015 1
  31 A 56 University of Goroka 2015 & 2016 2
  32 A 58 University of Papua New Guinea 2014 1
  33 A 59 Water PNG 2015 1
  34 B 62N Kumul Petroleum (Tech and Advisory) Limited 2016 1
  35 B 66 National Airports Corporation Limited 2012-2016 5
  36 B 66A Airport City Development Limited 2012-2016 5
  37 B 66B Airports Investments Limited 2016 1
  38 B 70 PNG DataCo Limited 2015 1
  39 B 71 PNG Power Limited 2016 1
  40 B 73A DATEC (PNG) Limited 2016 1

  – 250 –

• Page 286 of 293

• 41 B 73B Kalang Advertising Limited 2014-2016 3
  65

• Page 287 of 293

• (ii) AUDITS IN PROGRESS
  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 8 Coffee Industry Corporation Limited 2014 1
  2 A 8A Coffee Industry Fund 2014 1
  3 A 8B Patana No.61 Limited 2014 1
  4 A 18 Mineral Resources Authority 2015 1
  5 A 22 National Broadcasting Corporation 2015 1
  6 A 23 National Capital District Commission 2016 1
  7 A 23C Port Moresby Nature Park Limited 2016 1
  8 A 26 National Fisheries Authority 2016 1
  National Information and Communications Technology
  9 A 29 2016 1
  Authority (NICTA)
  10 A 42 Papua New Guinea Customs Service 2014-2016 3
  11 A 43 Papua New Guinea Forest Authority 2014 1
  12 A 50A National Analytical and Testing Services Limited 2012 & 2013 2
  13 A 58 University of Papua New Guinea 2015 1
  14 A 59 Water PNG 2016 1
  15 B 61 Air Niugini Limited 2016 1
  16 B 61A Link-PNG Limited 2016 1
  17 B 62H Kumul Lending Co Pte Limited 2016 1
  18 B 62P Kumul Security Agent Limited 2016 1
  19 B 62Q NPCP Oil Company Pty Limited 2015 & 2016 2
  20 B 64 Mineral Resources Development Company Limited 2015 & 2016 2
  21 B 67 NCD Water and Sewerage Limited (Eda Ranu) 2014 1
  22 B 70 PNG DataCo Limited 2016 1
  23 B 73 Telikom (PNG) Limited 2015 & 2016 2
  24 B 73C Media Niugini Limited (EMTV) 2016 1
  25 B 73D PNG Directories Limited 2016 1
  31

  (iii) AUDITS TO COMMENCE SHORTLY
  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 3 Border Development Authority 2015 & 2016 2
  2 A 9 Government Printing Office 2016 1
  3 A 13 Internal Revenue Commission 2016 1
  4 A 21 National AIDS Council Secretariat 2015 1
  5 A 28 National Housing Corporation 2015 & 2016 2
  5 A 40 Ombudsman Commission of Papua New Guinea 2016 1
  6 A 49 Papua New Guinea Sports Foundation 2014 & 2015 2
  7 A 52 Public Curator of Papua New Guinea 2014 1
  8 A 54 Small and Medium Enterprises Corporation 2016 1
  9 A 58 University of Papua New Guinea 2016 1
  13

  – 251 –

• Page 288 of 293

• (iv) FINANCIAL STATEMENTS NOT SUBMITTED

  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 3A Papua New Guinea Maritime Transport Limited 2013-2016 4
  2 A 5 Climate Change and Development Authority 2013-2016 4
  3 A 8 Coffee Industry Corporation Limited 2015 & 2016 2
  4 A 8A Coffee Industry Fund 2015 & 2016 2
  5 A 8B Patana No. 61 Limited 2015 & 2016 2
  6 A 12 Industrial Centres Development Corporation 2016 1
  7 A 18 Mineral Resources Authority 2016 1
  8 A 21 National AIDS Council Secretariat 2016 1
  9 A 22 National Broadcasting Corporation 2016 1
  10 A 23A National Capital District Botanical Enterprises Limited 2013-2016 4
  11 A 23B Port Moresby City Development Enterprises Limited 2013-2016 4
  12 A 24 National Cultural Commission 2015 & 2016 2
  13 A 27 National Gaming Control Board 2016 1
  National Gaming Control Board Community Benefit Fund
  14 A 27A 2016 1
  Trust
  15 A 28A National Housing Estate Limited 2010-2016 7
  16 A 31 National Museum and Art Gallery 2016 1
  17 A 32 National Narcotics Bureau 2013-2016 4
  18 A 34 National Road Safety Council 2016 1
  19 A 39 Oil Palm Industry Corporation 2012-2016 5
  20 A 43 Papua New Guinea Forest Authority 2015 & 2016 2
  21 A 45 Papua New Guinea Institute of Medical Research 2016 1
  22 A 46 Papua New Guinea Institute of Public Administration 2015 & 2016 2
  23 A 49 Papua New Guinea Sports Foundation 2016 1
  24 A 50A National Analytical and Testing Services Limited 2014-2016 3
  25 A 50B Unitech Development and Consultancy Company Limited 2014-2016 3
  26 A 52 Public Curator of Papua New Guinea 2015 & 2016 2
  27 A 53 Security Industries Authority 2016 1
  28 A 56A Unigor Consultancy Limited 2014-2016 3
  29 A 57 University of Natural Resources and Environment 2015 & 2016 2
  30 A 58A Unisave Limited 2012-2016 5
  31 A 58B Univentures Limited 2012-2016 5
  32 B 63 Livestock Development Corporation Limited 2010-2016 7
  33 B 67 NCD Water and Sewerage Limited (Eda Ranu) 2016 1
  34 B 69 PNG Air Services Limited 2016 1
  87

  – 252 –

• Page 289 of 293

• Schedule „C‟

  LONG OUTSTANDING FINANCIAL STATEMENTS
  (2016 & PRIOR YEARS)

  (i) FINANCIAL STATEMENTS OUTSTANDING FOR MORE THAN ONE YEAR
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 12 Industrial Centres Development Corporation 1
  2 A 18 Mineral Resources Authority 1
  3 A 21 National AIDS Council Secretariat 1
  4 A 22 National Broadcasting Corporation 1
  5 A 27 National Gaming Control Board 1
  6 A 27A National Gaming Control Board Community Benefit Fund Trust 1
  7 A 31 National Museum and Art Gallery 1
  8 A 34 National Road Safety Council 1
  9 A 45 Papua New Guinea Institute of Medical Research 1
  10 A 49 Papua New Guinea Sports Foundation 1
  11 A 53 Security Industries Authority 1
  12 B 67 NCD Water and Sewerage Limited (Eda Ranu) 1
  13 B 69 PNG Air Services Limited 1
  13

  (ii) FINANCIAL STATEMENTS OUTSTANDING FOR MORE THAN TWO (2) YEARS
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 8 Coffee Industry Corporation Limited 2
  2 A 8A Coffee Industry Fund 2
  3 A 8B Patana No.61 Limited 2
  4 A 24 National Cultural Commission 2
  5 A 43 Papua New Guinea Forest Authority 2
  6 A 46 Papua New Guinea Institute of Public Administration 2
  7 A 52 Public Curator of Papua New Guinea 2
  8 A 57 University of Natural Resources and Environment 2
  16

  (iii) FINANCIAL STATEMENTS OUTSTANDING FOR MORE THAN THREE (3) YEARS
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 50A National Analytical and Testing Services Limited 3
  2 A 50B Unitech Development and Consultancy Company Limited 3
  3 A 56A Unigor Consultancy Limited 3
  9

  (iv) FINANCIAL STATEMENTS OUTSTANDING FOR MORE THAN FOUR (4) YEARS
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 3A Papua New Guinea Maritime Transport Limited 4
  2 A 5 Climate Change and Development Authority 4
  3 A 23A National Capital District Botanical Enterprises Limited 4
  4 A 23B Port Moresby City Development Enterprises Limited 4
  5 A 32 National Narcotics Bureau 4
  20

  – 253 –

• Page 290 of 293

• (v) FINANCIAL STATEMENTS OUTSTANDING FOR MORE THAN FIVE (5) YEARS
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 39 Oil Palm Industry Corporation 5
  2 A 58A Unisave Limited 5
  3 A 58B Univentures Limited 5
  15

  (vi) FINANCIAL STATEMENTS OUTSTANDING FOR MORE THAN SEVEN (7) YEARS
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 28A National Housing Estate Limited 7
  2 B 63 Livestock Development Corporation Limited 7
  14

  – 254 –

• Page 291 of 293

• Schedule „D
  ‟
  GOVERNMENT SHAREHOLDING IN COMPANIES
  (i ) NATIO NAL G O VERNME NT MI NO RI TY SH AREH O LDI NG S IN O TH ER
  COMPANIES
  Para.
  No. Section Entity Remarks
  No.
  1 C 75 Bougainville Copper Limited 2017 Audit Report Completed.
  Audited Financial Statement for 2010 – 2017
  2 C 76 Gogol Reforestation Company Limited
  not Submitted
  PNG Sustainable Development Program Audited Financial Statement for 2012 – 2017
  3 C 78
  Limited not Submitted

  (ii ) NATIO NAL GO VERNMENT MAJO RITY SH AREHO LDING S IN OTHER
  COMPANIES
  Para.
  No. Section Entity Status of Audit
  No.
  1 C 77 Ok Tedi Mining Limited 2017 Audit Report Completed

  – 255 –

• Page 292 of 293

• Schedule „E‟

  AUDIT IN ARREARS (2016 AND PRIOR YEARS) COMPLETED
  DURING 2017/2018 AUDIT CYCLE
  2016 AUDITS – COMPLETED DURING 2017/2018
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 4 Civil Aviation Safety Authority of Papua New Guinea 1
  2 A 36 National Training Council 1
  3 A 50 Papua New Guinea University of Technology 1
  4 A 51 Parliamentary Members’ Retirement Benefits Fund 1
  5 A 55 Tourism Promotion Authority 1
  6 B 65 Motor Vehicles Insurance Limited 1
  7 B 68 Papua New Guinea Ports Corporation Limited 1
  8 B 72 Post (PNG) Limited 1
  8

  2015 AUDITS – COMPLETED DURING 2017/2018
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 16 Kumul Consolidated Holdings 1
  2 A 16A General Business Trust 1
  3 A 16B Kumul Technology Development Corporation Limited 1
  4 A 16C PNG Dams Limited 1
  5 A 45 Papua New Guinea Institute of Medical Research 1
  6 A 50 Papua New Guinea University of Technology 1
  7 A 54 Small and Medium Enterprises Corporation 1
  8 B 61 Air Niugini Limited 1
  9 B 61A Link-PNG Limited 1
  10 B 73A DATEC (PNG) Limited 1
  11 B 73D PNG Directories Limited 1
  11

  2014 AUDITS – COMPLETED DURING 2017/2018
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 18 Mineral Resources Authority 1
  2 A 28 National Housing Corporation 1
  3 A 54 Small and Medium Enterprises Corporation 1
  3

  2013 AUDITS – COMPLETED DURING 2017/2018
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 38 National Youth Commission 1
  2 A 52 Public Curator of Papua New Guinea 1
  3 A 54 Small and Medium Enterprises Corporation 1
  3

  – 256 –

• Page 293 of 293

• 2012 AUDITS – COMPLETED DURING 2017/2018
  Para. No. of
  No. Section Entity
  No. Audits
  1 A 38 National Youth Commission 1
  1

  – 257 –