Report of the Auditor-General Part IV 2018 on the Accounts of Public Authorities and Statutory Bodies

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    Auditor-General's annual report for 2018 on the Accounts of Public Authorities and Statutory Bodies established under the Act of Parliament and Government Owned Companies established under the Companies Act.

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  • Auditor-General’s Office of Papua New Guinea

    Part IV
    Report of the Auditor-General
    2018

    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

    AUDITOR GENERALS OFFICE
    PAPUA NEW GUINEA

    Telephone: 301 2203 Fax: 325 8295 Website: www.ago.gov.pg Email:
    agopng@ago.gov.pg

    OFFICE OF THE AUDITOR-GENERAL

    22 October 2019

    Honourable Job Pomat, MP

    Speaker of the National Parliament

    Parliament House

  • Page 2 of 553

  • WAIGANI

    National Capital District

    Dear Mr Speaker,

    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 22nd October 2019

    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,

  • Page 3 of 553

  • GORDON KEGA MBA, CPA

    Acting Auditor-General

    Level 6 P.0 Box 423
    TISA Investment Haus sia4VPACT WAIGANI, NCD
    Kumul Avenue, NCD Papua New Guinea

    Page 1 of 1

    2018 AUDITOR-GENERAL’S REPORT – PART IV

    TABLE OF CONTENTS

    PARA SUBJECT PAGE
    NO. NO.

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

    SECTION A – PUBLIC BODIES AND THEIR SUBSIDIARIES
    PARA SUBJECT PAGE
    NO. NO.
    1. Foreword 1
    2. APEC Papua New Guinea 2018 Co-ordination Authority 3
    3. Bank of Papua New Guinea 5
    4. Border Development Authority and its Subsidiary 7
    4A. Papua New Guinea Maritime Transport Limited 9
    5. Civil Aviation Safety Authority of Papua New Guinea 10
    6. Climate Change and Development Authority … 15
    7. Cocoa Board of Papua New Guinea and its Subsidiaries 18
    7A. Cocoa Pod Borer Project Fund. 27
    7B. Cocoa Stabilisation Fund 30
    8. Cocoa Coconut Institute Limited of Papua New Guinea 32
    9. Coffee Industry Corporation Limited and its Subsidiaries 33
    9A. Coffee Industry Fund 39

  • Page 4 of 553

  • 9B. Patana No. 61 Limited 42
    10. Conservation and Environment Protection Authority 45
    11. Government Printing Office 47
    12. Independence Fellowship Trust 52
    13. Independent Consumer and Competition Commission 54
    14. Industrial Centres Development Corporation 56
    15. Internal Revenue Commission. 61
    16. Investment Promotion Authority 64
    17. Kokonas Indastri Koporesen and its Subsidiaries 65
    17A. Papua New Guinea Coconut Extension Fund 66
    17B. Papua New Guinea Coconut Research Fund 67
    18. Kumul Consolidated Holdings and its Subsidiaries 68
    18A. General Business Trust 71
    18B. Kumul Technology Development Corporation Limited 74
    18C. PNG Dams Limited 77
    19. Legal Training Institute 78
    20. Mineral Resources Authority 79
    21. National Agriculture Quarantine and Inspection Authority 81
    22. National Agricultural Research Institute 85
    23. National AIDS Council Secretariat 88
    24. National Broadcasting Corporation 93

    -I-

    PARA SUBJECT
    PAGE
    NO.
    NO.
    25. National Capital District Commission and its Subsidiaries .
    95
    25A. National Capital District Botanical Enterprises
    Limited . 103
    25B. Port Moresby City Development Enterprises Limited .
    104
    25C. Port Moresby Nature Park Limited .
    105
    26. National Cultural Commission
    107
    27. National Economic and Fiscal Commission
    113
    28. National Fisheries Authority
    116
    29. National Gaming Control Board and its Subsidiary
    123
    29A. National Gaming Control Board Community Benefit Fund
    Trust. 128
    30. National Housing Corporation and its Subsidiary
    132
    30A National Housing Estate Limited.
    133

  • Page 5 of 553

  • 31. National Information and Communications Technology Authority
    (NICTA) 134
    32. National Maritime Safety Authority
    139
    33. National Museum and Art Gallery
    142
    34. National Research Institute
    148
    35. National Roads Authority
    149
    36. National Training Council
    155
    37. National Volunteer Service
    157
    38. National Youth Development Authority
    158
    39. Office of the Insurance Commissioner
    163
    40. Oil Palm Industry Corporation
    171
    41. Ombudsman Commission of Papua New Guinea
    172
    42. Papua New Guinea Accident Investigation Commission
    177
    43. Papua New Guinea Customs Service
    183
    44. Papua New Guinea Forest Authority
    189
    45. Papua New Guinea Immigration and Citizenship Service
    Authority 191
    46. Papua New Guinea Institute of Medical Research
    194
    47. Papua New Guinea Institute of Public Administration
    197
    48. Papua New Guinea Maritime College
    198
    49. Papua New Guinea National Institute of Standards and
    Industrial Technology 202
    50. Papua New Guinea Sports Foundation
    207
    51. Papua New Guinea University of Technology and its
    Subsidiaries 212
    51A. National Analytical and Testing Services Limited.
    213
    51B. Unitech Development and Consultancy Company Limited
    214
    52. Parliamentary Members’ Retirement Benefits Fund
    215
    53. Public Curator of Papua New Guinea
    216
    54. Road Traffic Authority
    217
    55. Security Industries Authority
    220

  • Page 6 of 553

  • 56. Small and Medium Enterprises Corporation
    228
    57. Tourism Promotion Authority
    229
    58. University of Goroka and its Subsidiary
    231
    58A. Unigor Consultancy Limited
    240
    59. University of Natural Resources and Environment (UNRE)
    241
    60. University of Papua New Guinea and its Subsidiaries
    243
    60A. Unisave Limited
    250
    60B. Univentures Limited
    251
    61. Water PNG
    252

    -II-

    SECTION B – NATIONAL GOVERNMENT OWNED COMPANIES

    PARA SUBJECT PAGE
    NO. NO.

    62. Foreword 261
    63. Air Niugini Limited and its Subsidiary 263
    63A. Air Niugini Cargo Limited 265
    63B. Air Niugini Properties Limited 266
    63C. Business Travel Centre Limited 267
    63D. Link-PNG Limited 268
    64 Bemobile Limited and Subsidiary 269
    64A. Bemobile (Solomon Islands) Limited 270
    65. Kumul Agriculture Limited 271
    66. Kumul Petroleum Holdings Limited and its Subsidiaries 272
    66A. Eda Oil Limited. 273
    66B. Kumul Exploration (Asia) Limited. 274
    66C. Kumul Gas Foreland 239 B.V. 275
    66D. Kumul Gas Foreland 261 B.V . 276
    66E. Kumul Gas Foreland 268 B.V . 277
    66F. Kumul Gas Foreland 269 B.V . 278
    66G. Kumul Gas Niugini B.V. 279
    66H. Kumul Lending Co Pte Limited . 280
    66I. Kumul LNG Limited. 281

  • Page 7 of 553

  • 66J. Kumul Petroleum (Development) Limited. 282
    66K. Kumul Petroleum (Investments) Limited 283
    66L. Kumul Petroleum (Kroton) Limited. 284
    66M. Kumul Petroleum (Pipeline) Limited 285
    66N. Kumul Petroleum (Tech & Advisory) Limited. 286
    66O. Kumul Petroleum Marketing Pte Limited… 287
    66P. Kumul Security Agent Limited . 288
    66Q. NPCP Oil Company Pty Limited . 289
    67. Livestock Development Corporation Limited 290
    68. Mineral Resources Development Company Limited 291
    69. Motor Vehicles Insurance Limited 295
    70. National Airports Corporation Limited and its Subsidiaries 399
    70A. Airport City Development Limited 304
    70B. Airports Investments Limited 306
    71. NCD Water and Sewerage Limited (Eda Ranu) 307
    72. Papua New Guinea Ports Corporation Limited 308
    73. PNG Air Services Limited 309
    74. PNG DataCo Limited 310
    75. PNG Power Limited 313
    76. Post (PNG) Limited 322
    77. Telikom (PNG) Limited and its Subsidiaries 324
    77A. DATEC (PNG) Limited 326
    77B. Kalang Advertising Limited 327
    77C. Media Niugini Limited (EMTV) 328
    77D. PNG Directories Limited 330

    SECTION C – NATIONAL GOVERNMENT SHAREHOLDINGS IN OTHER COMPANIES

    PARA SUBJECT PAGE
    NO. NO.

    78. Foreword 333
    79. Bougainville Copper Limited 335
    80. Gogol Reforestation Company Limited 337

    -III-

    SECTION D – PROBLEM AUDITS (AUDITS IN ARREARS)
    PARA SUBJECT
    PAGE
    NO.
    NO.
    81. Foreword
    341
    82. Audits in Arrears
    343
    82.1 General
    343
    82.2 Responsibility for preparation of Financial
    Statements 343
    82.3 Legislative Requirements

  • Page 8 of 553

  • 344
    82.4 Current Year Audits (2018 Audits)
    344
    82.5 Status of Current Year Audits
    346
    82.6 Audits in Arrears (2017 and prior years)
    348
    82.7 Long Outstanding Financial Statements
    351
    82.8 Status of Audits as at 30 June 2019
    354
    Acknowledgements
    357
    Schedule A – Current Year Audits
    361
    Schedule B – Status of Audits in Arrears
    364
    Schedule C – Long Outstanding Financial Statements
    367
    Schedule D – Government Shareholding in Companies
    369
    Schedule E – Audit in Arrears (2017 and Prior years)
    completed during 2018/2019 370

  • Page 9 of 553

  • -iv-

    GENERAL

    A. FOREWORD

    My Annual Report to the National Parliament for the 2018
    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
    minority 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,

  • Page 10 of 553

  • 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-

    General

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

    v’ Fiscal Sustainability
    v’ Prioritisation of Resources, and
    v’ 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

  • Page 11 of 553

  • 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-

    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

  • Page 12 of 553

  • 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 553

  • 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

  • Page 14 of 553

  • 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-

    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 2018 to
    June 2019 (2018/2019 Audit Cycle). The Report covers the audits
    of these entities’
    financial statements for a number of years, not just 2018.

    In 2018 there were 123 public entities subject to audit by my
    Office, consisting of
    80 Public Bodies and their Subsidiaries and 43 National
    Government Owned
    Companies.

    I am also responsible for reporting on the audits of 2
    Companies, in which the
    National Government has minority 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

  • Page 15 of 553

  • 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
    policies, 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-

    Executive Summary

    E.3 Submission of current year Financial Statements

  • Page 16 of 553

  • Section 63(1) and (3)(a) 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, 72 entities had not
    submitted their 2018

    financial statements to be audited and overall some 86
    financial statements for

    2017 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’.

  • Page 17 of 553

  • Table A

    STATUS OF AUDITS AS AT 30 JUNE 2019 (END OF 2018/2019 CYCLE)

    Audits Audits to Financial
    Audits Audits in
    Total Total
    Year Substantially Commence Statements
    Completed Completed Progress Shortly not
    Submitted2018/20192017/2018

    2018 6 5 23 17 72
    123 –

    2017 36 21 13 13 36
    119 115

    2016 33 12 12 8 16
    81 89

    2015 27 6 4 7 11
    55 64

    2014 15 5 1 3 9
    33 37

    2013 4 – 1 1 8
    14 19

    2012 2 – 1 1 4
    8 9

    2011 – – – 1 1
    2 2

    2010 – – – 1 1
    2 2

    Total 123 49 55 52 158
    437 337

  • Page 18 of 553

  • Table A above shows that 227 audits were either completed,
    substantially completed

    or still in progress as at 30 June 2019. The details are
    graphically depicted in

    Attachment ‘C’, which also included the arrears of prior
    years.

    -x-

    Executive Summary

    Table A also shows that out of the 123 current year audits
    (2018), only 6 were
    completed, with 28 audits were either substantially completed
    or were in progress. A
    further 17 audits were to commence shortly. Graphical
    description of the status of
    current year 2018 audits (excluding arrears) is given in
    Attachment ‘A’. The list of
    entities is at Schedule ‘A’ (i), (ii), (iii) & (iv).

    E.4 Type of Audit Opinions Issued1

    In the period covered (July 2018 to June 2019) by the audit,
    123 audit reports were
    issued. Of the 123 audit reports issued, 48 were unqualified,
    36 were qualified
    and 39 were Disclaimer Opinions. The details are captured in
    Attachment ‘D’.

    Types of Audit Opinions issued for each entity over the period
    of six years from 2013
    to 2018 are detailed in Attachment ‘E’.

    E.5 Key Findings

  • Page 19 of 553

  • 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, lack of staff capacity and competence and
    ineffective internal
    control systems. Other issues noted are also highlighted below.

    • Bank reconciliations not being prepared in a timely manner or
    not at all;
    • Transactions not having the required supporting documents;
    • Fixed asset registers not being properly kept or maintained
    and improper and
    inconsistent valuation of assets;
    • Physical count of assets/stock-take not being carried out
    properly and property
    acquired or disposed off without proper procedures being
    followed;
    • Failure to comply with IFRS/IAS in the preparation of
    financial statements and
    breach of public finances management and other statutory
    provisions;
    • Travel and other allowances not being fully acquitted;
    • Payments of taxes to IRC not being followed;
    • Accounting, administrative and procedural manuals not being
    available;
    • Employment contracts, salaries and contract gratuities not
    available; and
    • Integrated Financial Managements System (IFMS) limitation in
    producing
    general purpose financial statements.

    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.

    -xi-

  • Page 20 of 553

  • Executive Summary

    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 123 public entities only 51
    (41%) entities have
    submitted their financial statements for 2018 (Refer
    Schedule A (i), (ii), (iii) & (iv))
    for my audit and inspection up to the time of preparing this
    Report. A total of 72
    entities have failed to comply with these provisions (Refer
    Schedule A (v)). The
    public entities referred to above exclude the 2 Companies
    with minority Government
    shareholdings.

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

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

    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

  • Page 21 of 553

  • 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, 36 entities have audits in arrears
    totaling to 86. 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-

    Executive Summary

    Table B

    Financial Statements Not Submitted

    Para.
    No. of
    No. Section Entity
    Year
    No.
    Audits

    1 A 4A Papua New Guinea Maritime Transport Limited
    2013 to 2017 5

    2 A 8 Cocoa Coconut Institute Limited of Papua New
    Guinea 2017 1

    3 A 10 Conservation and Environment Protection
    Authority 2017 1

    4 A 19 Legal Training Institute

  • Page 22 of 553

  • 2017 1

    5 A 20 Mineral Resources Authority
    2017 1

    6 A 25A National Capital District Botanical
    Enterprises Limited2013 to 2017 5

    7 A 25B Port Moresby City Development Enterprises
    Limited 2013 to 2017 5

    8 A 28 National Fisheries Authority
    2017 1

    9 A 29 National Gaming Control Board
    2016 & 2017 2

    National Gaming Control Board Community
    Benefit
    10 A 29A
    2016 & 2017 2
    Fund Trust

    11 A 30A National Housing Estate Limited
    2015 to 2017 3

    12 A 37 National Volunteer Service
    2017 1

    13 A 40 Oil Palm Industry Corporation
    2012 to 2017 6

    14 A 44 Papua New Guinea Forest Authority
    2017 3

    Papua New Guinea National Institute of
    Standards and
    15 A 49
    2017 1
    Industrial Technology

    16 A 50 Papua New Guinea Sports Foundation
    2016 & 2017 2

    17 A 51A National Analytical and Testing Services
    Limited 2013 to 2017 5

    Unitech Development and Consultancy Company
    18 A 51B
    2014 to 2017 4
    Limited

    19 A 54 Road Traffic Authority
    2017 1

  • Page 23 of 553

  • 20 A 55 Security Industries Authority
    2016 & 2017 2

    21 A 58A Unigor Consultancy Limited
    2017 1

    22 A 59 University of Natural Resources and
    Environment 2017 1

    23 A 60A Unisave Limited
    2012 to 2017 6

    24 A 60B Univentures Limited
    2012 to 2017 6

    25 B 63 Air Niugini Limited
    2017 1

    26 B 63A Air Niugini Cargo Limited
    2017 1

    27 B 63C Business Travel Centre Limited
    2017 1

    28 B 63D Link-PNG Limited
    2017 1

    29 B 66C Kumul Gas Foreland 239 B.V
    2017 1

    30 B 66D Kumul Gas Foreland 261 B.V
    2017 1

    31 B 66E Kumul Gas Foreland 268 B.V
    2017 1

    32 B 66F Kumul Gas Foreland 269 B.V
    2017 1

    33 B 66G Kumul Gas Niugini B.V
    2017 1

    34 B 67 Livestock Development Corporation Limited
    2010 to 2017 8

    35 B 68 Mineral Resources Development Company Limited
    2017 1

    36 B 73 PNG Air Services Limited
    2016 & 2017 2

    86

  • Page 24 of 553

  • 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:

    -XIII-

    Executive Summary

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

    – Civil Aviation Safety Authority of PNG;

  • Page 25 of 553

  • – 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 audit in 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 with the Salaries and Conditions Monitoring
    Committee Act
    (SCMC)

    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.”

    -xiv-

    Executive Summary

    E.8 Non-Compliance with the Audit Act 1989

  • Page 26 of 553

  • 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:

    • Kumul Minerals Holding Limited (formerly Petromin Limited);
    • National Development Bank Limited;
    • PNG Air Services Limited; and
    • Ok Tedi Mining 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;
    • 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;
    • Ineffective budget controls; and
    • Lack of training on new accounting system (IFMS).

    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

  • Page 27 of 553

  • the year, as shown in Attachment ‘D(iii)’.

    -xv-

    Executive Summary

    E.10 Poor Financial Management

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

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

    E.11 Recommendations for Improvement

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

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

    • Timely submission of financial statements;
    • Improved record keeping and documentation;
    • Maintenance and provision of quality information;
    • Effective implementation of internal control systems;
    • Sound financial management implemented and adopted by qualified
    and
    experienced accountants;
    • Implementation of my audit recommendations;
    • Regular, adequate and timely training on new accounting system
    (IFMS).

    E.12 Improvement Strategies

    In my view, for improvement to occur:

    • Chief Executive Officers must employ well trained and

  • Page 28 of 553

  • 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.

    -xvi-

    Executive Summary

    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).

  • Page 29 of 553

  • -xvii-

    Executive Summary

    ATTACHMENT ‘A’

    STATUS OF CURRENT YEAR AUDITS 2018

    No. Status of Current Year Audits Number
    of Entities
    2018/2019
    2017/2018
    1 Audits completed and reports issued thereon (Schedule A)6
    0
    2 Audits substantially completed (Schedule A) 5
    14
    3 Audits in progress (Schedule A) 23
    27
    4 Audits to commence shortly (Schedule A) 17
    11
    5 Financial Statements not submitted (Schedule A) 72
    63
    6 Ceased Entities (Schedule D) 0
    0
    123
    115

    Status of Current Year Audits 2018
    Audits completed Audits
    substantially
    Ceased Companies and reports issued completed

  • Page 30 of 553

  • (Schedule A) thereon (Schedule A) (Schedule A)
    0% 5% 4%

    Audits in progress

    (Schedule A)

    19%

    Audits to commence

    shortly (Schedule A)

    14%
    Financial Statements
    not submitted
    (Schedule A)
    58%
    Please refer to details in Schedule ‘A’ on Pages 361 to 363.

    -XVIII-

    Executive Summary

    ATTACHMENT ‘B’

  • Page 31 of 553

  • STATUS OF AUDITS IN ARREARS BY NUMBER OF AUDITS

    (2017 AND PRIOR YEARS)

    No. Status of Audits in Arrears by No. of Audits (2017 & prior
    years) Number of Audits

    2018/2019 2017/2018
    1 Audits substantially completed (Schedule B)
    44 65
    2 Audits in progress (Schedule B)
    32 31
    3 Audits to commence shortly (Schedule B)
    35 13
    4 Financial Statements not submitted (Schedule B)
    86 87

    197 196

    Status of Audits in Arrears by number of Audits

    (2017 and prior years)

    Audits substantially
    Financial Statements
    completed
    not submitted
    (Schedule B)
    (Schedule B)
    22%
    44%

    Audits in progress

    (Schedule B)

    16%

    Audits to commence

  • Page 32 of 553

  • shortly (Schedule B)
    18%

    Please refer to details in Schedule ‘B’ on Pages 364 to 366.

    -xix-

    Executive Summary

    ATTACHMENT ‘C’

    STATUS OF AUDITS AS AT 30 JUNE 2019

    Number of Audits
    No. Status of Audits

    2018/2019 2017/2018

  • Page 33 of 553

  • 1 Audits completed and reports issued thereon (Schedules A &
    E)123 26

    2 Audits substantially completed (Schedules A & B) 49
    79

    3 Audits in progress (Schedules A & B) 55
    58

    4 Audits to commence shortly (Schedules A & B) 52
    24

    5 Financial Statements not submitted (Schedules A & B)
    158 150

    437
    337

    Status of Audits as at 30 June 2019

    Audits completed
    Financial Statements
    and reports issued
    not submitted
    thereon
    (Schedule A & B)
    (Schedule A & E)
    36%
    28%

  • Page 34 of 553

  • Audits to commence
    shortly
    Audits substantially
    (Schedule A & B) Audits in progress
    completed
    12% (Schedule A & B)
    (Schedule A & B)
    13%
    11%

    Please refer to details in Schedules ‘A’, ‘B’ and ‘E’ on Pages 361
    to 363, 364 to 366 and 370 to 372

    respectively.

    -xx-

    Executive Summary

  • Page 35 of 553

  • ATTACHMENT ‘D’

    TYPES OF AUDIT OPINIONS ISSUED

    (i) UNQUALIFIED OPINION

    Para.
    No. of
    No. Section Entity
    Year
    No.
    Audits

    1 A 3 Bank of Papua New Guinea
    2017 & 2018 2

    2 A 7B Cocoa Stabilisation Fund
    2016 & 2017 2

    3 A 12 Independence Fellowship Trust
    2017 1

    4 A 13 Independent Consumer and Competition
    Commission 2017 1

    5 A 15 Internal Revenue Commission
    2014 & 2015 2

    6 A 16 Investment Promotion Authority
    2017 1

    7 A 17 Kokonas Indastri Koporesen
    2017 1

    8 A 17A Papua New Guinea Coconut Extension Fund
    2017 1

    9 A 17B Papua New Guinea Coconut Research Fund

  • Page 36 of 553

  • 2017 1

    10 A 18 Kumul Consolidated Holdings
    2016 1

    11 A 18C PNG Dams Limited
    2016 1

    12 A 22 National Agricultural Research Institute
    2017 1

    13 A 23 National AIDS Council Secretariat
    2016 & 2017 2

    14 A 25C Port Moresby Nature Park Limited
    2014 & 2015 2

    15 A 27 National Economic and Fiscal Commission
    2017 1

    16 A 32 National Maritime Safety Authority
    2017 1

    17 A 35 National Roads Authority
    2016 & 2017 2

    18 A 42 Papua New Guinea Accident Investigation
    Commission 2013 to 2017 5

    Papua New Guinea Immigration and Citizenship
    Service
    19 A 45
    2017 1
    Authority

    20 A 54 Road Traffic Authority
    2016 1

    21 A 57 Tourism Promotion Authority
    2017 1

    22 B 66 Kumul Petroleum Holdings Limited
    2017 1

    23 B 66B Kumul Exploration (Asia) Limited
    2017 1

    24 B 66H Kumul Lending Co Pte Limited
    2017 1

    25 B 66L Kumul Petroleum (Kroton) Limited
    2017 1

    26 B 66O Kumul Petroleum Marketing Pte Limited

  • Page 37 of 553

  • 2017 1

    27 B 66P Kumul Security Agent Limited
    2017 1

    28 B 69 Motor Vehicles Insurance Limited
    2017 1

    29 B 70B Airports Investments Limited
    2016 to 2018 3

    30 B 72 Papua New Guinea Ports Corporation Limited
    2017 1

    31 B 76 Post (PNG) Limited
    2017 1

    32 B 77A DATEC (PNG) Limited
    2016 1

    33 B 77B Kalang Advertising Limited
    2014 & 2015 2

    34 B 77C Media Niugini Limited (EMTV)
    2016 1

    35 B 77D PNG Directories Limited
    2016 1

    48

    -xxi-

    Executive Summary

    (ii) QUALIFIED OPINION

  • Page 38 of 553

  • Para.
    No. of
    No. Section Entity
    Year
    No.
    Audits

    1 A 5 Civil Aviation Safety Authority of Papua New
    Guinea 2017 1

    2 A 7 Cocoa Board of Papua New Guinea
    2016 & 2017 2

    3 A 7A Cocoa Pod Borer Project Fund
    2016 & 2017 2

    4 A 10 Conservation and Environment Protection
    Authority 2015 & 2016 2

    5 A 14 Industrial Centres Development Corporation
    2016 1

    6 A 18A General Business Trust
    2016 1

    7 A 18B Kumul Technology Development Corporation
    Limited 2016 1

    8 A 21 National Agriculture Quarantine and
    Inspection Authority 2016 1

    9 A 23 National AIDS Council Secretariat
    2015 1

    10 A 28 National Fisheries Authority
    2015 1

    11 A 29 National Gaming Control Board
    2015 1

    National Gaming Control Board Community
    Benefit Fund
    12 A 29A Trust
    2015 1

    13 A 33 National Museum and Art Gallery
    2018 1

    14 A 41 Ombudsman Commission of Papua New Guinea
    2016 1

    15 A 43 Papua New Guinea Customs Service
    2014 to 2016 3

  • Page 39 of 553

  • Papua New Guinea Immigration and Citizenship
    Service
    16 A 45
    2016 1
    Authority

    17 A 46 Papua New Guinea Institute of Medical
    Research 2016 & 2017 2

    18 A 48 Papua New Guinea Maritime College
    2015 to 2017 3

    Papua New Guinea National Institute of
    Standards and
    19 A 49
    2016 1
    Industrial Technology

    20 A 55 Security Industries Authority
    2015 1

    21 A 60 University of Papua New Guinea
    2014 1

    22 B 69 Motor Vehicles Insurance Limited
    2018 1

    23 B 70 National Airports Corporation Limited
    2012 to 2016 5

    24 B 74 PNG DataCo Limited
    2015 1

    36

  • Page 40 of 553

  • -xxii-

    Executive Summary

    (iii) DISCLAIMER OPINION

    Para.
    No. of
    No. Section Entity
    Year
    No.
    Audits

    1 A 6 Climate Change and Development Authority
    2013 1

    2 A 9 Coffee Industry Corporation Limited 2014
    & 2015 2

    3 A 9A Coffee Industry Fund 2014

  • Page 41 of 553

  • & 2015 2

    4 A 9B Patana No.61 Limited 2014
    & 2015 2

    5 A 11 Government Printing Office
    2015 1

    6 A 25 National Capital District Commission 2014
    & 2015 2

    7 A 26 National Cultural Commission
    2014 1

    8 A 28 National Fisheries Authority
    2016 1

    National Information and Communications
    Technology
    9 A 31
    2015 1
    Authority (NICTA)

    10 A 33 National Museum and Art Gallery 2015
    to 2017 3

    11 A 38 National Youth Development Authority 2014
    to 2016 3

    12 A 39 Office of the Insurance Commissioner 2016
    & 2017 2

    13 A 50 Papua New Guinea Sports Foundation 2014
    & 2015 2

    14 A 58 University of Goroka 2015
    & 2016 2

    15 A 61 Water PNG 2016
    & 2016 2

    16 B 68 Mineral Resources Development Company Limited
    2015 1

    17 B 70 National Airports Corporation Limited 2017
    & 2018 2

    18 B 70A Airport City Development Limited 2012
    to 2018 7

    19 B 75 PNG Power Limited 2016
    & 2017 2

  • Page 42 of 553

  • 39

  • Page 43 of 553

  • -XXIII-

    Executive Summary

    ATTACHMENT ‘E’

    COMPARATIVE AUDIT OPINIONS ISSUED (2013–2018)

    Para.
    Comparative Years
    No. Section No. Entity
    2018 2017 2016 2015 2014
    2013

    APEC Papua New Guinea 2018 Co-ordination
    1 A 2 Authority
    New Inclusion

    2 A 3 Bank of Papua New Guinea
    Unqualified Unqualified Unqualified Unqualified
    Unqualified Unqualified

    3 A 4 Border Development Authority
    Disclaimer

    4 A 4A Papua New Guinea Maritime Transport
    Limited

    Civil Aviation Safety Authority of Papua

  • Page 44 of 553

  • New
    5 A 5 Guinea
    Qualified Qualified Qualified Qualified Qualified

    6 A 6 Climate Change and Development Authority
    Disclaimer

    7 A 7 Cocoa Board of Papua New Guinea
    Qualified Qualified Qualified Qualified Qualified

    8 A 7A Cocoa Pod Borer Project Fund
    Qualified Qualified Unqualified Unqualified Unqualified

    9 A 7B Cocoa Stabilisation Fund
    Unqualified Unqualified Unqualified Unqualified Unqualified

    Cocoa Coconut Institute Limited of Papua
    New
    10 A 8
    Disclaimer
    Guinea

    11 A 9 Coffee Industry Corporation Limited
    Disclaimer Disclaimer Disclaimer

    12 A 9A Coffee Industry Fund
    Disclaimer Disclaimer Disclaimer

    13 A 9B Patana No.61 Limited
    Disclaimer Disclaimer Disclaimer

    14 A 10 Conservation and Environment Protection
    New Inclusion
    Authority

    15 A 11 Government Printing Office
    Disclaimer Disclaimer Disclaimer

    16 A 12 Independence Fellowship Trust
    Unqualified Unqualified Qualified Qualified Unqualified

    Independent Consumer and Competition
    17 A 13
    Unqualified Unqualified Qualified Qualified Unqualified
    Commission

    18 A 14 Industrial Centres Development Corporation
    Qualified Qualified Qualified Qualified

  • Page 45 of 553

  • 19 A 15 Internal Revenue Commission
    Unqualified Unqualified

    20 A 16 Investment Promotion Authority
    Unqualified Unqualified Unqualified Unqualified Unqualified

    21 A 17 Kokonas Indastri Koporesen
    Unqualified Unqualified Unqualified Unqualified Unqualified

    22 A 17A Papua New Guinea Coconut Extension Fund
    Unqualified Unqualified Unqualified Unqualified Unqualified

    23 A 17B Papua New Guinea Coconut Research Fund
    Unqualified Unqualified Unqualified Unqualified Unqualified

    24 A 18 Kumul Consolidated Holdings
    Unqualified Unqualified Unqualified Unqualified

    25 A 18A General Business Trust
    Qualified Qualified Qualified Disclaimer

    Kumul Technology Development Corporation
    26 A 18B Limited
    Qualified Disclaimer Disclaimer Disclaimer

    27 A 18C PNG Dams Limited
    Unqualified Qualified Disclaimer Disclaimer

    28 A 19 Legal Training Institute
    Qualified

    29 A 20 Mineral Resources Authority
    Qualified Qualified

    National Agriculture Quarantine and
    Inspection
    30 A 21 Authority
    Qualified Qualified Qualified Qualified

    31 A 22 National Agricultural Research Institute
    Unqualified Unqualified Unqualified Unqualified Unqualified

    32 A 23 National AIDS Council Secretariat

  • Page 46 of 553

  • Unqualified Unqualified Qualified Disclaimer Disclaimer

    33 A 24 National Broadcasting Corporation
    Disclaimer Disclaimer

    34 A 25 National Capital District Commission
    Disclaimer Disclaimer Disclaimer

    National Capital District Botanical
    Enterprises
    35 A 25A Limited


    xxiv-

    Executive Summary

    No. Section Para Entity
    Comparative Years
    No. 2018
    2017 2016 2015 2014 2013

    36 A 25B Port Moresby City Development Enterprises
    Limited

    37 A 25C Port Moresby Nature Park Limited
    UnqualifiedUnqualifiedQualified

    38 A 26 National Cultural Commission
    DisclaimerDisclaimer

    39 A 27 National Economic and Fiscal Commission
    Unqualified Qualified Qualified Qualified Qualified

    40 A 28 National Fisheries Authority
    Disclaimer Qualified Qualified Qualified

    41 A 29 National Gaming Control Board
    Qualified Qualified Qualified

    National Gaming Control Board Community
    42 A 29A
    Qualified Qualified Qualified

  • Page 47 of 553

  • Benefit Fund Trust

    43 A 30 National Housing Corporation
    DisclaimerDisclaimer

    44 A 30A National Housing Estate Limited

    National Information and Communications
    45 A 31
    Disclaimer DisclaimerDisclaimer
    Technology Authority (NICTA)

    46 A 32 National Maritime Safety Authority
    UnqualifiedUnqualifiedUnqualified Qualified Qualified

    47 A 33 National Museum and Art Gallery Qualified
    Disclaimer Disclaimer Disclaimer DisclaimerDisclaimer

    48 A 34 National Research Institute
    Qualified UnqualifiedUnqualifiedUnqualified

    49 A 35 National Roads Authority
    UnqualifiedUnqualifiedUnqualified 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 Development Authority
    Disclaimer Disclaimer DisclaimerDisclaimer

    53 A 39 Office of the Insurance Commission New
    Inclusion

    54 A 40 Oil Palm Industry Corporation

    55 A 41 Ombudsman Commission of Papua New Guinea
    Qualified Unqualified Qualified Unqualified

    56 A 42 Papua New Guinea Accident Investigation
    UnqualifiedUnqualifiedUnqualifiedUnqualifiedUnqualified
    Commission

    57 A 43 Papua New Guinea Customs Service
    Qualified Qualified Qualified

    58 A 44 Papua New Guinea Forest Authority

    Papua New Guinea Immigration and Citizenship

  • Page 48 of 553

  • 59 A 45
    Unqualified Qualified Disclaimer DisclaimerQualified
    Service Authority

    Papua New Guinea Institute of Medical
    60 A 46 Research
    Qualified Qualified Disclaimer DisclaimerDisclaimer

    61 A 47 Papua New Guinea Institute of Public
    Qualified
    Administration

    62 A 48 Papua New Guinea Maritime College
    Qualified Qualified Qualified DisclaimerDisclaimer

    63 A 49 Papua New Guinea National Institute of
    Qualified Qualified Qualified Qualified
    Standards and Industrial Technology

    64 A 50 Papua New Guinea Sports Foundation
    Disclaimer DisclaimerDisclaimer

    65 A 51 Papua New Guinea University of Technology
    UnqualifiedUnqualified Qualified Qualified

    66 A 51A National Analytical and Testing Services Limited

    67 A 51B Unitech Development and Consultancy
    Adverse
    Company Limited

    Parliamentary Members’ Retirement Benefits
    68 A 52
    UnqualifiedUnqualifiedUnqualifiedUnqualified
    Fund

    69 A 53 Public Curator of Papua New Guinea
    Disclaimer

    70 A 54 Road Traffic Authority
    UnqualifiedUnqualifiedUnqualifiedUnqualified

    71 A 55 Security Industries Authority
    Qualified Qualified Qualified

    72 A 56 Small and Medium Enterprises Corporation
    Qualified Qualified Qualified

  • Page 49 of 553

  • 73 A 57 Tourism Promotion Authority
    UnqualifiedUnqualifiedUnqualifiedUnqualifiedUnqualified

    74 A 58 University of Goroka
    Disclaimer DisclaimerDisclaimer

    75 A 58A Unigor Consultancy Limited
    Disclaimer

    -xxv-

    Executive Summary

    No. Section Para Entity
    Comparative Years
    No 2018
    2017 2016 2015 2014 2013

    76 A 59 University of Natural Resources and
    Environment
    Disclaimer Qualified

    77 A 60 University of Papua New Guinea
    Qualified Qualified

    78 A 60A Unisave Limited

    79 A 60B Univentures Limited

    80 A 61 Water PNG
    Disclaimer Disclaimer Disclaimer Disclaimer

    81 B 63 Air Niugini Limited
    Qualified Qualified Qualified

    82 B 63A Air Niugini Cargo Limited New
    Inclusion

    83 B 63B Air Niugini Properties Limited New
    Inclusion

    84 B 63C Business Travel Centre Limited New

  • Page 50 of 553

  • Inclusion

    85 B 63D Link-PNG Limited
    Unqualified

    86 B 64 Bmobile Limited New
    Inclusion

    87 B 64A Bmobile (Solomon Islands) Limited New
    Inclusion

    88 B 65 Kumul Agriculture Limited New
    Inclusion

    89 B 66 Kumul Petroleum Holdings Limited
    Unqualified UnqualifiedUnqualifiedUnqualified

    90 B 66A Eda Oil Limited
    Unqualified

    91 B 66B Kumul Exploration (Asia) Limited
    Unqualified

    92 B 66C Kumul Gas Foreland 239 B.V New
    Inclusion

    93 B 66D Kumul Gas Foreland 261 B.V New
    Inclusion

    94 B 66E Kumul Gas Foreland 268 B.V New
    Inclusion

    95 B 66F Kumul Gas Foreland 269 B.V New
    Inclusion

    96 B 66G Kumul Gas Niugini B.V New
    Inclusion

    97 B 66H Kumul Lending Co Pte Limited
    Unqualified

    98 B 66I Kumul LNG Limited
    UnqualifiedUnqualifiedUnqualified

    99 B 66J Kumul Petroleum (Development) Limited
    UnqualifiedUnqualifiedUnqualified

    100 B 66K Kumul Petroleum (Investments) Limited
    UnqualifiedUnqualifiedUnqualified

  • Page 51 of 553

  • 101 B 66L Kumul Petroleum (Kroton) Limited
    Unqualified Unqualified

    102 B 66M Kumul Petroleum (Pipeline) Limited
    Unqualified

    103 B 66N Kumul Petroleum (Tech & Advisory) Limited
    Unqualified

    104 B 66O Kumul Petroleum Marketing Pte Limited
    Unqualified

    105 B 66P Kumul Security Agent Limited
    Unqualified

    106 B 66Q NPCP Oil Company Pty Limited New
    Inclusion

    107 B 67 Livestock Development Corporation Limited

    Mineral Resources Development Company
    108 B 68 Limited
    Disclaimer Disclaimer Disclaimer

    109 B 69 Motor Vehicles Insurance Limited
    Qualified Unqualified Unqualified Qualified Qualified Qualified

    110 B 70 National Airports Corporation Limited
    Disclaimer Disclaimer Qualified Qualified Qualified Qualified

    111 B 70A Airport City Development Limited
    Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer

    112 B 70B Airports Investments Limited
    UnqualifiedUnqualified Unqualified

    113 B 71 NCD Water and Sewerage Limited (Eda Ranu)
    Qualified Qualified

    114 B 72 Papua New Guinea Ports Corporation Limited
    Unqualified UnqualifiedUnqualified Qualified Qualified

    115 B 73 PNG Air Services Limited
    Qualified Qualified Qualified

    116 B 74 PNG DataCo Limited
    Qualified Unqualified

  • Page 52 of 553

  • -xxvi-

    Executive Summary

    Para
    Comparative Years
    No. Section No. Entity 2018
    2017 2016 2015 2014 2013

    117 B 75 PNG Power Limited
    Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer

    118 B 76 Post (PNG) Limited
    UnqualifiedUnqualifiedUnqualifiedUnqualifiedUnqualified

    119 B 77 Telikom (PNG) Limited
    Qualified Qualified

    120 B 77A DATEC (PNG) Limited
    UnqualifiedUnqualifiedUnqualified

    121 B 77B Kalang Advertising Limited
    UnqualifiedUnqualifiedUnqualified

    122 B 77C Media Niugini Limited (EMTV)
    Unqualified

    123 B 77D PNG Directories Limited
    UnqualifiedUnqualifiedUnqualifiedUnqualified

  • Page 53 of 553

  • Page 54 of 553

  • -xxvii-

    Executive Summary

  • Page 55 of 553

  • ATTACHMENT ‘F’

    AUDITS IN ARREARS (2017 AND PRIOR YEARS) COMPLETED

    DURING 2018/2019 AUDIT
    CYCLE

    Audits Completed
    Para.
    Total Audits Substantially Total
    No. Section No. Entity
    and Reports Units Completed Units

    Issued

    1 A 3 Bank of Papua New Guinea
    2017 1

    2 A 4 Border Development Authority
    2014 1

    3 A 5 Civil Aviation Safety Authority of Papua
    New Guinea 2017 1

    4 A 6 Climate Change and Development Authority
    2013 1

    5 A 7 Cocoa Board of Papua New Guinea
    2016 & 2017 2

    6 A 7A Cocoa Pod Borer Project Fund
    2016 & 2017 2

    7 A 7B Cocoa Stabilisation Fund
    2016 & 2017 2

    8 A 8 Cocoa Coconut Institute Limited of Papua
    New Guinea 2014 to 2016
    3

    9 A 9 Coffee Industry Corporation Limited

  • Page 56 of 553

  • 2014 & 2015 2

    10 A 9A Coffee Industry Fund
    2014 & 2015 2

    11 A 9B Patana No.61 Limited
    2014 & 2015 2

    12 A 10 Conservation and Environment Protection
    Authority 2015 & 2016 2

    13 A 11 Government Printing Office
    2015 1 2016 & 2017 2

    14 A 12 Independence Fellowship Trust
    2017 1

    15 A 13 Independent Consumer and Competition
    Commission 2017 1 2018
    1

    16 A 14 Industrial Centres Development
    Corporation 2016 1 2017
    1

    17 A 15 Internal Revenue Commission
    2014 & 2015 2 2016 & 2017 2

    18 A 16 Investment Promotion Authority
    2017 1 2018

    19 A 17 Kokonas Indastri Koporesen
    2017 1

    20 A 17A Papua New Guinea Coconut Extension Fund
    2017 1

    21 A 17B Papua New Guinea Coconut Research Fund
    2017 1

    22 A 18 Kumul Consolidated Holdings
    2016 1

    23 A 18A General Business Trust
    2016 1

    24 A 18B Kumul Technology Development Corporation
    Limited 2016 1

    25 A 18C PNG Dams Limited
    2016 1

    26 A 19 Legal Training Institute
    2014 to 2016 3

  • Page 57 of 553

  • 27 A 21 National Agriculture Quarantine and
    Inspection Authority 2016 1

    28 A 22 National Agricultural Research Institute
    2017 1

    29 A 23 National AIDS Council Secretariat
    2015 to 2017 3

    30 A 24 National Broadcasting Corporation
    2015 & 2016 2

    31 A 25 National Capital District Commission
    2014 & 2015 2 2016 1

    32 A 25C Port Moresby Nature Park Limited
    2014 & 2015 2 2016 1

    33 A 26 National Cultural Commission
    2014 1 2015 to 2017 3

    34 A 27 National Economic and Fiscal Commission
    2017 1

    35 A 28 National Fisheries Authority
    2015 & 2016 2

    36 A 29 National Gaming Control Board
    2015 1

    37 A 29A National Gaming Control Board Community
    Benefit Fund Trust 2015 1

    38 A 31 National Information and Communications
    Technology 2015 1
    Authority (NICTA)

    39 A 32 National Maritime Safety Authority
    2017 1

    40 A 33 National Museum and Art Gallery
    2015 to 2017 3

    41 A 34 National Research Institute
    2017 1

    42 A 35 National Roads Authority
    2016 & 2017 2

    43 A 36 National Training Council
    2017 1

    44 A 38 National Youth Development Authority

  • Page 58 of 553

  • 2014 to 2016 3 2017 1

    45 A 39 Office of the Insurance Commissioner
    2016 & 2017 2

    46 A 41 Ombudsman Commission of Papua New Guinea
    2016 1 2017 1

    47 A 42 Papua New Guinea Accident Investigation
    Commission 2013 to 2017 5

    48 A 43 Papua New Guinea Customs Service
    2014 to 2016 3

    Papua New Guinea Immigration and
    Citizenship Service
    49 A 45
    2016 & 2017 2
    Authority

    50 A 46 Papua New Guinea Institute of Medical
    Research 2016 & 2017 2

    51 A 47 Papua New Guinea Institute of Public
    Administration 2014 to 2017
    4

    52 A 48 Papua New Guinea Maritime College
    2015 to 2017 3

    -xxviii-

    Executive Summary

    Para.
    Audits Completed Total Audits Substantially Total
    No. Section No. Entity
    and Reports Units Completed Units

    Issued

    Papua New Guinea National Institute of
    Standards and
    53 A 49

  • Page 59 of 553

  • 2016 1
    Industrial Technology

    54 A 50 Papua New Guinea Sports Foundation
    2014 & 2015 2

    55 A 52 Parliamentary Members’ Retirement
    Benefits Fund 2017
    1

    56 A 53 Public Curator of Papua New Guinea
    2014 1

    57 A 54 Road Traffic Authority
    2016 1

    58 A 55 Security Industries Authority
    2015 1

    59 A 56 Small and Medium Enterprises Corporation
    2016 & 2017 2

    60 A 57 Tourism Promotion Authority
    2017 1

    61 A 58 University of Goroka
    2015 & 2016 2 2017 1

    62 A 60 University of Papua New Guinea
    2014 1

    63 A 61 Water PNG
    2015 & 2016 2

    64 B 66 Kumul Petroleum Holdings Limited
    2017 1

    65 B 66A Eda Oil Limited
    2017 1

    66 B 66B Kumul Exploration (Asia) Limited
    2017 1

    67 B 66H Kumul Lending Co Pte Limited
    2017 1

    68 B 66I Kumul LNG Limited
    2017 1

    69 B 66J Kumul Petroleum (Development) Limited
    2017 1

    70 B 66K Kumul Petroleum (Investments) Limited
    2017 1

  • Page 60 of 553

  • 71 B 66L Kumul Petroleum (Kroton) Limited
    2017 1

    72 B 66M Kumul Petroleum (Pipeline) Limited
    2017 1

    73 B 66N Kumul Petroleum (Tech & Advisory) Limited
    2016 & 2017 2

    74 B 66O Kumul Petroleum Marketing Pte Limited
    2017 1

    75 B 66P Kumul Security Agent Limited
    2017 1

    76 B 68 Mineral Resources Development Company
    Limited 2015 1

    77 B 69 Motor Vehicles Insurance Limited
    2017 1

    78 B 70 National Airports Corporation Limited
    2012 to 2017 6

    79 B 70A Airport City Development Limited
    2012 to 2017 6

    80 B 70B Airports Investments Limited
    2016 & 2017 2

    81 B 71 NCD Water and Sewerage Limited (Eda Ranu)
    2015 1

    82 B 72 Papua New Guinea Ports Corporation
    Limited 2017 1

    83 B 74 PNG DataCo Limited
    2015 1

    84 B 75 PNG Power Limited
    2016 & 2017 2

    85 B 76 Post (PNG) Limited
    2017 1

    86 B 77A DATEC (PNG) Limited
    2016 1 2017 1

    87 B 77B Kalang Advertising Limited
    2014 & 2015 2 2016 1

    88 B 77C Media Niugini Limited (EMTV)
    2016 1 2017 1

  • Page 61 of 553

  • 89 B 77D PNG Directories Limited
    2016 1 2017 1

    117 44

  • Page 62 of 553

  • -xxix-

    SECTION A

    PUBLIC BODIES AND
    THEIR SUBSIDIARIES

    -xxxi-

    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 61 of this part of my Report.

  • Page 63 of 553

  • – 1 –

    2. APEC PAPUA NEW GUINEA 2018 CO-ORDINATION
    AUTHORITY

    2.1 INTRODUCTION

    2.1.1 Legislation

    The APEC PNG 2018 Co-ordination Authority was established
    by the APEC Papua
    New Guinea 2018 Co-ordination Authority Act 2014. The Act
    came into operation on
    23 December 2014.

    In relation to providing protection and security to the
    delegates of the APEC PNG
    2018, the Joint Task Force (JTF) was established by Asia
    Pacific Economic
    Cooperation (APEC) Safety and Security Act 2017. The Act
    came into operation on
    13 April 2017.

    2.1.2 Functions of the Authority and the Joint Task Force
    1) The functions of the Authority are to:

    • liaise and consult with the relevant government
    departments and State
    agencies and other stakeholders to ensure the
    efficient and successful
    running of the APEC Meetings 2018;
    • enter into and perform contracts for the
    construction and rehabilitation of the
    APEC Papua New Guinea 2018 venues, ancillary
    works and services; and
    • do all things ancillary to the foregoing.

  • Page 64 of 553

  • The Authority shall, in consultation with other
    government departments and
    State agencies, organise all logistical matters to
    ensure that:

    • correct protocols are afforded to all delegates;
    • all APEC related meetings are held on time;
    • all meeting venues and accommodation meet world
    class standards; and
    • all infrastructures associated with APEC meetings
    meet world class
    standards and are completed on time.

    2) The functions of the Joint Task Force are to:

    • assess, detect and respond to threats to the
    safety and security of APEC
    2018, either on land, sea or air, including
    imminent threats;
    • plan, prepare and execute safety and security
    operations;
    • provide logistical and operational support for
    APEC 2018 safety and
    security operations;

    – 3 –

    APEC Papua New Guinea 2018 Co-ordination Authority

    • implement the operations order;
    • plan, design, co-ordinate and
    implement authorised international partner
    support for APEC 2018 safety and
    security operations;
    • declare restricted areas;
    • establish and maintain a system of
    accreditation for safety and security
    purposes;
    • establish sector working groups; and
    • such other functions as are necessary
    or incidental to fulfilling its mission.

    The Joint Task Force shall carry out its
    functions subject to the directions of the
    Commander.

    2.2 STATUS OF FINANCIAL STATEMENTS
    At the time of preparing this Report, the financial
    statements of the Authority for the
    years ended 31 December 2015, 2016, 2017 and 2018 had
    been submitted and
    arrangements were being made to commence the audits

  • Page 65 of 553

  • shortly.

    – 4 –

    3. BANK OF PAPUA NEW GUINEA

    3.1 INTRODUCTION

    3.1.1 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.

    3.1.2 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;
    • formulate financial regulation and prudential

  • Page 66 of 553

  • standards to ensure stability of the
    financial system in PNG;
    • promote an efficient national and international
    payments system; and
    • subject to the above, to promote macro-economic
    stability and economic growth
    in PNG.

    3.1.3 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.

    – 5 –

    Bank of Papua New Guinea

    3.1.4 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:

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

  • Page 67 of 553

  • Each of these Acts provide additional responsibilities to
    the Bank.

    3.2 AUDIT OBSERVATIONS

    3.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit
    Act on the financial
    statements of the Bank for the years ended 31 December 2017
    and 2018 were issued
    on 6 July 2018 and 28 June 2019 respectively. The reports
    did not contain any
    qualification.

    – 6 –

    4. BORDER DEVELOPMENT AUTHORITY

    4.1 INTRODUCTION

    4.1.1 Legislation

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

  • Page 68 of 553

  • 4.1.2 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.

    4.1.3 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

  • Page 69 of 553

  • framework for immigration
    including the monitoring of immigrants and
    immigrant activity along the
    border with respect to:
    – 7 –

    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.

    4.1.4 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 4A of this Report.

    4.2 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

  • Page 70 of 553

  • 2015, 2016 and 2017 for my inspection and audit. However, my
    efforts to conduct
    these audits were unsuccessful as the Authority’s office
    located at the NDB Building
    in Waigani was locked. In addition, my attempts to locate
    the current office location
    were unsuccessful.

    The Authority had not submitted its financial statements for
    the year ended 31
    December 2018 for my inspection and audit.

    – 8 –

    4A. PAPUA NEW GUINEA MARITIME TRANSPORT LIMITED
    (Subsidiary of the Border Development Authority)

    4A.1 INTRODUCTION

    4A.1.1 Legislation

    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.

    4A.1.2 Function 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.

    4A.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, 2017 and 2018
    for my inspection and audit despite numerous reminders.

  • Page 71 of 553

  • – 9 –

    5. CIVIL AVIATION SAFETY AUTHORITY OF PAPUA NEW
    GUINEA

    5.1 INTRODUCTION

    5.1.1 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).

    5.1.2 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.

    5.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    5.2.1 Comments on Financial Statements

  • Page 72 of 553

  • 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 2017 was issued on 14
    August 2018. The report contained a Qualified Opinion.

    “BASIS FOR QUALIFIED OPINION

    Fixed Assets

    In 2010 the former Civil Aviation Authority (CAA) was
    restructured into three new
    separate entities, namely National Airport Corporation
    (NAC), PNG Air Service
    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 and 2017. 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.


    10 –

    Civil Aviation Safety Authority of Papua New Guinea

    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 2017.

    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

  • Page 73 of 553

  • and the PNGASL
    to remit certain 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. 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 2017.

    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 2017:

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

    (ii) the financial statements have been prepared in
    accordance with the
    Finance Instructions issued under the Public
    Finance (Management)
    (Amendment) Act 2016.

    (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.”

  • Page 74 of 553

  • – 11 –

    Civil Aviation Safety Authority of Papua New Guinea

    5.2.2 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
    2017 was issued on 14 August 2018. The report contained
    the following observations:

    Valuation and Registration of Fixed Assets

    I noted that Civil Aviation Safety Authority (CASA) has
    not valued and registered its
    share of fixed assets allotted from the former Civil
    Aviation Authority (CAA). The
    management claimed that the Gazettal Notice issued on 29
    January 2016 was in error
    by allocating certain properties of CASA to National
    Airport Corporation (NAC)
    which are yet to be corrected. I advised that the
    management should consider liaising
    with NAC to correct the misallocation. I also recommended
    that the management
    should consider valuing the allocated assets and have
    them recorded on the current
    Fixed Assets Register.

    The management responded as:

    “The asset transfer project was completed in 2015 and
    gazetted in January 2016.
    However, government gazette No. G39 carried misallocation
    of CASA properties
    which were listed under NAC. This oversight was corrected
    with another government
    gazette.

    The assets will be uploaded in CASA’s Fixed Assets
    Register after a valuation
    exercise and sub division of the land on which CASA
    Office stands. Further, note that
    the residential properties are still subject to pending
    court proceedings over the
    ownership question (CAA, NAC, NHC & the occupants). All
    assets currently in the
    books were purchased by the Authority who has the
    legitimate ownership over them.”

  • Page 75 of 553

  • Revenue Calculation, Billing and Collection from NAC and
    PNGASL

    In 2017, CASA did not have independent data to calculate
    and bill NAC and
    PNGASL and collect its share of revenue from airport
    facility charges, security levies
    and upper airspace aeronautical charges as per Section
    147 E of the Civil Aviation Act
    2000. CASA has been invoicing NAC and PNGASL monthly
    based on information
    provided by them. My discussions with the management of
    CASA revealed that the
    amounts billed to NAC were estimated and not based on
    actual data. I noted that
    CASA continue to face logistical limitation in regard to
    access to accurate data to bill
    NAC and PNGASL. As a result, it has been impossible for
    CASAPNG to compute
    amount of revenue receivable from the two entities. The
    current situation places
    CASAPNG in a position where it is unable to accurately
    record and collect the
    income owed by NAC and PNGASL.


    12 –

    Civil Aviation Safety Authority of Papua New Guinea

    I advised the management that more appropriate and reliable approach
    to charging the
    levy would be to base on prior year audited accounts of the two
    entities. Adjustments
    can be made once the audited accounts are available for the relevant
    year. I also
    recommended that since CASA has the authority over the air transport
    operations
    including PNGASL and NAC, it should be looking at setting reporting
    mechanisms in
    place to capture the data required of levying the fees.

    The management responded as:

    “Recommendations noted and accepted by the management. As reported
    in 2016, the
    Board directed the management to review the Civil Aviation Act with
    a view to
    strengthen and improve the current method of collection of
    passengers’ levy. It would

  • Page 76 of 553

  • be preferable to collect the levy directly from the airlines rather
    than through the
    NAC. The management has tasked the in-house lawyers to work with DoT
    legal team
    to effect the amendment in the Act.”

    Acquittals of Credit Card Transactions and Travel Advance

    I noted that members of the senior management team were issued with
    credit cards.
    However, acquittals of credit cards expenditures were not done on a
    monthly basis. I
    also noted that un-acquitted expenditures from the use of credit
    cards were charged
    against the expense instead of charging the respective credit card
    holders and recoup
    through payroll deductions. I advised that failure to have proper
    control over use of
    credit cards leads to misuse of funds. I also recommended that
    members of the senior
    management team should set a tone by ensuring the use of credit
    cards and cash
    advances are acquitted on time and reconciled monthly.

    The management responded as:

    “The management noted the recommendation. The senior Finance Officer
    is
    responsible to ensure timely monthly reconciliation and acquittal of
    credit cards
    transactions. The Office of Director has issued a Policy on use of
    credit cards
    including mandatory requirement for monthly reconciliations by the
    card holders.
    The full monthly reconciliations are delayed due to inconsistent
    dispatch of Visa
    statements by the bank. However, monthly reconciliations were being
    done on the
    basis of actual vouchers on hand. The travel expenses relating to
    airfares quoted
    above were not Travel Advances but direct expenses. Travel Advances
    only include
    daily travel allowances paid to the staff travelling on business
    trips which are subject
    to acquittal.”

    – 13 –

  • Page 77 of 553

  • Civil Aviation Safety Authority of Papua New Guinea

    General Journals
    I noted that a number of general journals that were
    prepared and entered into the
    system general ledger were without relevant supporting
    documentations. I
    recommended that all relevant supporting documentations
    must be intact with the
    journals to ensure validity and completeness of the
    transactions.
    The management responded as:

    “The recommendation is accepted by the management. All
    general journals are
    approved by the Finance Manager and Executive Manager
    Corporate Services. All
    general journals are supported by relevant
    documentation.”

    5.3 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 Authority for the year ended 31 December 2018 was in
    progress.

  • Page 78 of 553


  • 14 –

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

    6.1 INTRODUCTION

    6.1.1 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 the 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.

    6.1.2 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

  • Page 79 of 553

  • 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.

    6.1.3 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;


    15 –

    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;

  • Page 80 of 553

  • – 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.

    6.2 AUDIT OBSERVATIONS

    6.2.1 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 2013
    was issued on 18 June
    2019. The report contained a Disclaimer of Opinion.

    – 16 –

    Climate Change and Development Authority

    “BASIS FOR DISCLAIMER OF OPINION

    Limitation on the Scope of my Audit

    The Office of Climate Change and Development had used the

  • Page 81 of 553

  • MYOB accounting
    system for its business transactions. However, I was not
    provided with the system
    generated General Ledger, Trial Balance, Profit & Loss
    Statement and Balance Sheet
    from which the financial statements were prepared. There
    was no audit trail for me to
    perform the necessary audit procedures and as a result, I
    was unable to confirm and
    verify the accuracy and completeness of all the amounts
    reported in the financial
    statements for the year ended 31 December 2013. Further,
    I noted significant
    breakdown in the internal control environment including
    financial management
    systems and record keeping by the management during the
    year under review.
    Therefore, I was not able to verify the accuracy and
    completeness of the financial
    statements for the year ended 31 December 2013.

    DISCLAIMER OF OPINION

    Because of the significance of the matters described in
    the Basis for Disclaimer of
    Opinion paragraph above, I was not able to obtain
    sufficient appropriate audit
    evidence and accordingly, I am unable to and do not
    express an opinion on the
    financial statements of the Office of Climate Change and
    Development for the year
    ended 31 December 2013.”

    6.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial
    statements of the Authority for the
    years ended 31 December 2014, 2015, 2016 and 2017 had
    been submitted for my
    inspection and audit and arrangements were being made to
    commence the audits
    shortly.

    The financial statements for the year ended 31 December
    2018 had not been
    submitted for my inspection and audit.

  • Page 82 of 553


  • 17 –

    7. COCOA BOARD OF PAPUA NEW GUINEA

    7.1 INTRODUCTION

    7.1.1 Legislation

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

    7.1.2 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;
    • promote research and development programmes for
    the benefit of the cocoa
    industry; and
    • promote the consumption of PNG cocoa beans and
    cocoa products.

    7.1.3 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 8 of this Report.

    7.1.4 Project and Stabilisation Funds

    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

  • Page 83 of 553

  • Funds are contained in
    paragraphs 7A and 7B of this Report.

    7.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    7.2.1 Comments on the Financial Statements

    My reports to the Ministers under Section 8(4) of the
    Audit Act on the Board’s
    financial statements for the periods ended 30 September
    2016 and 2017 were issued
    on 31 July 2018 and 18 March 2019 respectively. The
    reports contained similar
    Qualified Opinions, hence, only the 2017 report is
    reproduced.

    – 18 –

    Cocoa Board of Papua New Guinea

    “BASIS FOR QUALIFIED OPINION

    Fixed Assets – K3,611,326

    My review of the fixed assets revealed that the Fixed
    Assets Register (FAR) provided
    by the Board was incomplete and has not been properly
    maintained. I noted the
    following issues during my examination.

    • The vehicle schedule provided for my review had
    29 vehicles listed with
    registration numbers owned by the Board. However,
    the Fixed Assets Register
    disclosed only Fourteen (14) vehicles;
    • Projects’ assets were not captured in the Fixed
    Assets Register nor a separate
    Register maintained (Cocoa Nursery, Quality &
    Freight & Subsidy); and
    • Assets such as vehicles, tractors, motor bikes
    and laptops were not captured in
    the Fixed Assets Register.

    As a result, I was unable to ascertain the accuracy,
    existence, valuation and
    completeness of the fixed assets balance disclosed as
    K3,611,326 at year end.

    QUALIFIED OPINION

  • Page 84 of 553

  • In my opinion, except for the effects on the financial
    statements of the matters
    referred to in the Basis for Qualified Opinion paragraph:

    a) the financial statements of the Board 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 Board
    as at 30 September, 2017 and the
    results of its financial operations and cash
    flows for the year then ended.”

    7.2.2 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 Board for the
    period ended 30 September
    2016 and 2017 were issued on 31 July 2018 and 18 March
    2019 respectively. The
    reports contained similar significant matters, hence,
    only the 2017 report is
    reproduced:

    Non-Compliance with the Public Finance (Management)
    (Amendment) Act 2016

    The Board had not submitted its financial statements for
    the period ended 30
    September 2017 on a timely basis to enable me to conduct
    the audit and submit the
    audit report within the time frame prescribed by the
    Public Finance (Management)
    (Amendment) Act 2016.

    19 –

    Cocoa Board of Papua New Guinea

    Consequently, the Board had breached Sections 63(1) and 63(3) of the
    Public Finance
    (Management) (Amendment) Act 2016.

    “Cocoa Board has taken steps to ensure that in future the financial
    statements are
    prepared and submitted on a timely basis to comply with Sections
    63(1) and 63(3) of
    the Public Finance (Management) (Amendment) Act 2016.”

  • Page 85 of 553

  • Cash at Bank

    My review and the examination of the cash at bank and bank
    reconciliations revealed
    that the bank reconciliations for the Main Operating and Projects
    accounts namely
    Cocoa Quality & Marketing, Cocoa Freight Subsidy and Cocoa Nursery
    were not
    prepared, reviewed and verified by concerned officers of the Board
    on a timely basis
    in 2017. I also noted that stale cheques amounting to K89,867 were
    outstanding over
    12 months. I was not provided with subsequent months’ bank
    reconciliations for my
    verification and further testing of unpresented cheques. As a
    result, I was not able to
    place reliance on the effectiveness of the controls surrounding the
    bank reconciliation
    functions.

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

    “Cocoa Board has taken steps and will ensure it maintain timely
    preparation of bank
    reconciliations including segregated duties in the preparation
    through to verification
    and certification stages of preparation of bank reconciliation. All
    stale cheques have
    been written back and cleared as recommended by the Audit.”

    Fixed Assets

    My review of the fixed assets of the Board revealed the following
    weaknesses:

    . Fixed Assets Register (FAR)

    The Fixed Assets Register (FAR) was incomplete as it was not
    properly up
    dated and has not fully captured all the assets owned by the
    Board. In addition,
    the vehicle list provided for audit verification has twenty-
    nine (29) vehicles
    while the FAR shows only fourteen (14). I further noted that
    additions and
    disposals of motor vehicles used in other Centres including
    Projects were not
    properly registered in the FAR. I recommended the Management
    of the Board to
    do a full stock-take to update the Fixed Assets Register.

    I drew this matter to the attention of the Management of the
    Board and they

  • Page 86 of 553

  • responded to my observation as follows:

    – 20 –

    Cocoa Board of Papua New Guinea

    “Management took note of the audit recommendation and
    adviced that there is
    now a team in place to update and record all assets and to
    carry out stock-take
    of all assets available.”

    . Stock-Take

    The Board had not conducted regular stock-take on its fixed
    assets for a number
    of years. The Board’s assets were not counted and tagged
    with asset numbers for
    verification and control. In the absence of regular fixed
    assets stock-take and
    tagging, assets that were idle, misplaced or stolen cannot
    be identified by the
    Board.

    As a result, I was unable to place reliance on the
    effectiveness of the controls
    surrounding the management of fixed assets. Consequently, I
    was not able to
    comment on the condition, valuation and existence of the
    fixed assets disclosed.

    I brought this issue to the attention of the Management and
    the Management
    responded as follows:

    “The fixed assets update and maintenance exercise has now
    been initiated by
    Management to address this issue. A stock-take exercise has
    commenced at the
    head office to ensure all assets are tagged with
    identification numbers for
    verification and control and will roll out to the regional
    offices and sub-
    branches.”

    Income

    My review of the income of the Board revealed the following
    weaknesses:

  • Page 87 of 553

  • . Cocoa Fermentary Central Database

    I noted that the Board did not have a complete and central
    database of all the
    registered cocoa fermentaries in the country apart from the
    Registered
    Exporters, which was provided for my review. About twelve
    percent (12%) of
    the total income disclosed during the year was generated
    from fermentary
    registrations and other related licenses. As a result, I was
    unable to ascertain the
    total number of registered fermentaries in the country,
    their status, location and
    other statistics and, whether all fermentaries were
    registered and fees collected
    accordingly in 2017. I recommended that a complete central
    database of all
    fermentaries and other related licenses be created and
    maintained by the Board.

    I drew this matter to the Management and they responded to
    my query as
    follows:

    – 21 –

    Cocoa Board of Papua New Guinea

    “A Regional Offices Information Management System Database
    has been
    developed and is in its final review stage. It was
    workshopped in Kokopo in
    October 2018. The database was programmed by a Contractor
    and it’s been
    improved based on Management requirements. Cocoa Fermentary
    Central Data
    will be centralized in Kokopo. Apart from this, work is
    underway to update and
    maintain Fermentary Master Listing at the FS secretariat.
    This is to be evident
    in the 2018 audit.”

    . Reconciliation of Revenue Collections

    I observed that the two revenue generating sections of the
    Board, Economic
    Section (for levy fees collection) and Export Quality
    Section (for export & dry
    beans licences) records of fees collected had not reconciled

  • Page 88 of 553

  • to what was
    recorded by the receipting division and disclosed in the
    financial statements at
    period ended 30 September 2017. As a result, I was unable to
    ascertain the
    accuracy and completeness of the revenue collections
    presented in the financial
    statements for the period ended 30 September 2017. I
    recommended the Board
    to ensure proper coordination and reconciliation be carried
    out on a timely
    manner with effective monitoring and surveillance to ensure
    that cocoa exports
    were done through registered sales contracts.

    I drew this issue to the attention of the Management and the
    Management
    responded as follows:

    “The Account Receivable office has commenced reconciliation
    of data
    collection from the two revenue generating Sections.”

    . Goods and Service Tax Returns

    During my review, I observed that the Board had disclosed
    GST receivable as
    K2,813,875 and GST payable as K840,545 in the financial
    statements during the
    period under review. However, I advised the Board’s
    Management to reconcile
    the GST inputs against the GST outputs and to disclose only
    the difference in
    the financial statements as either payable or receivable. I
    also recommended that
    the Management of the Board to liaise with Internal Revenue
    Commission (IRC)
    to agree on the net payables/receivables for settlement to
    avoid any penalties.

    I drew this issue to the attention of the Board’s Management
    and they responded
    as follows:

    “Tax returns have been submitted for the year under review
    up till March 2018.
    Accounts will need the updated Statement from IRC to then
    update our ledgers
    and Lodgments will be up-to-date as soon as 2018 accounts
    are finalized.”

    – 22 –

  • Page 89 of 553

  • Cocoa Board of Papua New Guinea

    . Group Tax Remittance

    I noted that the Board did not remit the group tax (salary &
    wages) to IRC on a
    timely basis which resulted in the accumulation of the
    balance of group tax of
    K1,419,650 as at 30 September 2017. As a result, the Board
    had not complied
    with the requirement of Section 299G of the Income Tax Act
    1959 (as
    Amended).

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

    “Due to the current financial constraints Cocoa Board was
    not able to lodge
    returns with payments on a timely basis to Internal Revenue
    Commission (IRC).
    Communication with IRC is ongoing in this regard and IRC has
    advised
    Accounts team to continue to lodge monthly SWT without
    payments so, Cocoa
    Board records at IRC are updated.”

    Debtors and Prepayments

    . Staff Advance

    During my review of the Debtors and Prepayments, I observed
    that this account
    balance related to Cash Advances given to officer on duty
    travel and advances
    in-relation to events organised by the Board. However, I
    noted that there was an
    increase during the year by K112,364 compared to prior year.
    Furthermore, I
    noted unpaid or outstanding balances of former employees of
    the Board still
    shown under staff advances. As a result, I was unable to
    place reliance on the
    control environment surrounding the management and control
    of Staff
    Advances. I recommended the Management of the Board to
    ensure proper
    control be put in place to manage the staff advances.
    Further, proper
    reconciliation had to be done regularly to the staff

  • Page 90 of 553

  • advances to accurately and
    fairly state the balance in the financial statements at year
    end.
    I highlighted this issue to the Management of the Board and
    they responded as
    follows:

    “Main reason for significant increase was that Accounts and
    Payroll have not
    recouped these staff advances. Management will ensure that
    these deductions
    are effected immediately.”

    – 23 –

    Cocoa Board of Papua New Guinea

    . Rental Bond – K58,394

    The Board paid rental bonds when renting Staff accommodation
    or offices
    around the country. However, during my review, I observed
    that there were
    certain houses that were already vacated by the Board but
    the bonds paid had
    not been refunded. As a result, I was unable to ascertain
    the accuracy of the
    rental bond balance disclosed in the financial statements
    during the period ended
    30 September 2017.

    I recommend that this balance be properly reconciled and
    updated. Management
    responded to my query as follows:

    “There has been a letter to those landlords that have not
    refunded bond fees and
    until today, there is still no payment from them. The
    Management of the Board
    will issue final 14-days notices/Demand letters to these
    landlords. Failure to
    response will result in GB instituting legal action against
    the defaulters.”

    Personnel Files

  • Page 91 of 553

  • During my review, I noted poor maintenance of staff personnel files
    by the Board.
    There were no IRC tax declarations, birth certificates or statutory
    declarations to
    verify the dependents and Pay Variation Advise to keep track of
    movement in the
    Salaries and Allowances. No history cards were also maintained by
    the Board for each
    staff. As a result, I was unable to confirm the salary and
    allowances and the leave
    records from their personnel files.

    I brought this issue to the attention of the Management and they
    responded to my
    observation as follows:

    “Management agrees with audit findings and has taken note of the
    audit
    recommendations and HR team is now tasked to review and update all
    employee files
    as recommended.”

    Payments without three (3) written Quotations and Public Tender

    During my review of the expenditure, I observed that payment
    totaling K295,248
    were made without obtaining three (3) written quotations from
    different suppliers. As
    a result, the Board has not complied with the requirements of
    Section 61 of the Public
    Finance (Management) (Amendment) Act 2016 and Financial Instruction
    2-2013
    subsection 5.2.

    I brought this matter to the attention of the Board and the
    Management of the Board
    responded to my observation as follows:

    – 24 –

    Cocoa Board of Papua New Guinea

    “Management has taken note of the audit issue. Cocoa Board will also
    establish
    agreements with our main suppliers so to avoid this issue from
    recurring. It was noted
    that most of these expenditures identified were travel related.
    However moving
    forward, we will ensure three (3) quotations are obtained for
    expenditure over

  • Page 92 of 553

  • K5,000. Three (3) quotes policy to be effective immediately.”

    Travel Advance Register

    My review of travel and subsistence expenses amounting to K186,674
    for the period
    ended 30 September 2017 revealed lack of travel acquittals by
    concerned staff of the
    Board. There was Travel Advances Register maintained by the Board in
    2017
    however, there was no proper acquittal forms, receipts and Airline
    Boarding pass
    maintained in the file.

    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
    must acquit travel
    advances within 14 days of return from duty travel. At the same time
    Part 20
    paragraph 12.10 of the Finance Management 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. This issue was also raised
    in my prior year
    audit report.

    I brought this matter to the attention of the Board and they
    responded to my
    observation as follows:

    “The Board will comply with the requirements per the Financial
    Management
    Manual and advised that an officer was appointed to monitor and
    update the Travel
    Advance Register.”

    PIP Grants

    During my review of the Project grants (PIP) and deferred income
    (unspent grant), I
    noted that K13 million was appropriated for two (2) projects, Cocoa
    Nursery and
    Cocoa Freight Subsidy of K5.1 and K5.950 million respectively while
    Cocoa Quality
    did not receive any funding. However, these funds were not
    transferred to the
    respective Project accounts but retained in the main operating
    account of the Board.
    Out of this, fifteen percent (15%) of the total project grant of K13
    million about
    K1.950 million was deducted by the Board as Project management fees
    and the

  • Page 93 of 553

  • balance was transferred at certain intervals in small amounts to the
    respective Project
    accounts. As a result, I was unable to place reliance on the
    controls surrounding the
    management of these Project accounts by the Board. Consequently, I
    was unable to
    ascertain the accuracy of the Project accounts disclosed for the
    period under review. I
    recommended the Board not to retain Project funds in the Main
    Account but to
    transfer immediately to the respective Project accounts.

    – 25 –

    Cocoa Board of Papua New Guinea

    I also recommended that all Project accounts maintained
    separate MYOB accounts to
    correctly recognise and classify funds movements and
    deferred income accordingly.

    I drew this issue to the attention of the Management and
    they responded as follows:

    “The management of Cocoa Board have taken note of the
    audit recommendation
    where Accounts will ensure that project funds are
    promptly transferred to respective
    project account as soon as they hit the CBPNG operating
    account. Accounts to also
    maintain a separate MYOB system for project accounts.”

    7.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial
    statements of the Board for the year
    ended 31 December 2018 was submitted and arrangements
    were being made to
    commence the audit shortly.

  • Page 94 of 553


  • 26 –

    7A. COCOA POD BORER PROJECT FUND

    7A.1 INTRODUCTION

    7A.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.

    7A.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;
    • 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
    • provide farmer support by way of making high
    yielding cocoa planting

  • Page 95 of 553

  • materials, tools, equipment and chemicals readily
    available or accessible to
    cocoa farmers which would enable effective
    adaption of good management
    practices.

    7A.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    7A.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 Fund for the periods ended 30 September
    2016 and 30 September
    2017 were issued on 31 July 2018 and 18 March 2019
    respectively. The reports
    contained Qualified Opinion.

    “BASIS FOR QUALIFIED OPINION

    Limitation of Scope – Debtors, Creditors and Deferred
    Income

    During my examination of Debtors and Prepayments, Trade
    Creditors and Accruals
    and Deferred Income, I was not provided with schedules
    and supporting documents to
    confirm the account balances totalling K97,232, K70,242
    and K394,212 respectively.
    As a result, I was unable to verify the balances
    disclosed in the financial statements as
    at 30 September 2017.


    27 –

    Cocoa Pod Borer Project Fund

    QUALIFIED AUDIT OPINION

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

    (a) the financial statements of the Fund 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 Fund
    as at 30 September 2017 and the

  • Page 96 of 553

  • results of its financial operations for the
    year then ended.”

    7A.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 Fund for the
    periods ended 30 September
    2016 and 30 September 2017 were issued on 31 July 2018
    and 18 March 2019
    respectively. The reports contained similar observations,
    hence, only the 2017
    comments are reproduced:

    Preparation of Bank Reconciliations

    My review of bank reconciliations of the Fund revealed
    that the bank reconciliations
    were not prepared, reviewed and verified by concerned
    officers of the Project on a
    timely basis in 2017. As a result, I was not able to
    place reliance on the effectiveness
    of the controls surrounding the management of cash and
    the bank reconciliation
    process.

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

    “We take note of the weaknesses highlighted and will
    ensure to maintain timely
    preparation of bank reconciliations including segregation
    of duties.”

    Fixed Assets Register (FAR)

    My review of the Fund’s Fixed Assets Register (FAR)
    revealed that the Register was
    not properly maintained during the period under review. I
    noted that the FAR was
    incomplete as it did not include asset numbers, model and
    serial numbers of the
    different types of assets listed. For instance,
    registration numbers for the motor
    vehicles were not provided in the FAR and assets were not
    tagged for verification or
    easy identification. As a result, I was unable to place
    reliance on the controls
    surrounding the management of the fixed assets acquired
    and used by the Fund during
    the year under review.

  • Page 97 of 553


  • 28 –

    Cocoa Pod Borer Project Fund

    The Management responded to comments as follows:

    “Management take note of your recommendations and there is
    a team in place to
    update and record all assets, also carrying out stock takes
    of all assets available.”

    Going Concern

    The Cocoa Pod Borer Fund’s accounts and records were
    prepared on a Going
    Concern basis during the period ended 30 September 2017.
    However, during my
    review it was revealed that the fund account remained
    dormant during the year. In
    response, the Management explained that the Fund would be
    closed in the future upon
    Board’s approval.

    7A.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial
    statements of the Fund for the year
    ended 31 December 2018 had been submitted for my inspection
    and audit and
    arrangements were being made to commence the audit shortly.
    .

  • Page 98 of 553

  • – 29 –

    7B. COCOA STABILISATION FUND (Subsidiary of Cocoa Board of
    PNG)

    7B.1 INTRODUCTION

    7B.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.

    7B.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    7B.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the
    Audit Act on the Fund’s
    financial statements for the periods ended 30 September
    2016 and 30 September 2017
    were issued on 31 July 2018 and 18 March 2019
    respectively. The reports did not
    contain any Qualification.

    7B.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 Fund for the
    periods ended 30 September
    2016 and 30 September 2017 were issued on 31 July 2018
    and 18 March 2019
    respectively. The reports contained similar observations,
    hence, only the 2017
    comments are reproduced:

    Non-Compliance with the Public Finance (Management)
    (Amendment) Act 2016

    The Board had not submitted the Fund’s financial

  • Page 99 of 553

  • statements for the year ended 30
    September 2017 on a timely basis to enable me to conduct
    the audit and submit the
    audit report within the time frame prescribed by the
    Public Finance (Management)
    (Amendment) Act 2016. Consequently, the Fund has breached
    Sections 63(1) and
    63(3) of the Public Finance (Management) (Amendment) Act
    2016.

    “Cocoa Board has taken steps to ensure that in future the
    financial statements are
    prepared and submitted on a timely basis to comply with
    Sections 63(1) and 63(3) of
    the Public Finance (Management) (Amendment) Act 2016.”


    30 –

    Cocoa Stabilisation Fund

    Going Concern

    The Cocoa Stabilization Fund accounts and records were
    prepared on a Going
    Concern basis during the period ended 30 September 2017.
    However, my examination
    revealed that the fund account remained dormant over the
    years. In response, the
    Management stated that the Board had decided to close
    this account in the future
    based on the NEC decision.

    7B.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Fund had
    submitted its financial statements
    for the year ended 31 December 2018 and arrangements were
    being made to
    commence the audit shortly.

  • Page 100 of 553


  • 31 –

    8. COCOA COCONUT INSTITUTE LIMITED OF PAPUA NEW
    GUINEA

    8.1 INTRODUCTION

    8.1.1 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.

    8.1.2 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

  • Page 101 of 553

  • industries;
    • promote research and beneficial programs for
    these industries;
    • provide assistance to all persons and bodies
    engaged in any aspect of the Cocoa
    and Coconut industries;
    • produce planting materials for the Cocoa and
    Coconut industries; and
    • provide consultancy services.

    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 Company
    for the years ended 31 December 2014, 2015 and 2016 had
    been completed and
    awaiting the signed financial statements from the Company
    to issue the reports.

    The Company had not submitted its financial statements
    for the years ended 31
    December 2017 and 2018 for my inspection and audit.


    32 –

    9. COFFEE INDUSTRY CORPORATION LIMITED

    9.1 INTRODUCTION

    9.1.1 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

  • Page 102 of 553

  • 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.

    9.1.2 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;
    • act in the best interests of coffee producers;
    and
    • promote development of the coffee industry in
    PNG.

    9.1.3 Fund and Subsidiary 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 9A and 9B respectively of this
    Report.

    9.2 AUDIT OBSERVATIONS

    9.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the
    Audit Act on the financial
    statements of the Company for the years ended 31 December
    2014 and 2015 were
    issued on 28 September 2018 and 16 May 2019 respectively.
    The reports contained
    similar Disclaimer of Opinions, hence, only the 2015
    report is reproduced.

  • Page 103 of 553


  • 33 –

    Coffee Industry Corporation Limited
    “BASIS FOR DISCLAIMER OF OPINION

    Opening Balances

    My report on the Company’s financial statements for the year ended
    31 December
    2014 was a disclaimer of opinion. I was not able to satisfy myself
    as to the accuracy
    and completeness of the opening balances of cash and cash
    equivalents, trade
    receivables, inventories, property, plant and equipment, trade
    creditors, bank
    overdrafts, inventories, group tax, other payables, employee
    entitlements and
    accumulated fund. Since these opening balances entered into the
    determination of the
    results of operations and cash flows of the Company in 2015, I was
    unable to
    determine whether adjustments to the financial position, results of
    operations, cash
    flows and changes in equity might have been necessary for the year
    ended 31
    December 2015.

    Non Consolidation of Kofi Management Services Limited

    Kofi Management Services Limited (KMSL) is a subsidiary of Coffee
    Industry
    Corporation Limited. KMSL was incorporated through Investment
    Promotion
    Authority (IPA) on 21 February 2014. KMSL has an operating bank
    account with
    Bank South Pacific Limited (BSP) since 2015. However, the Company
    did not
    maintain separate set of accounting books to capture its
    transactions made through the
    BSP account for the 2015 financial year; instead the transactions
    were captured in the
    books of the parent company. This practice was not in compliance
    with Companies
    Act 1997.

    Since there was no separate set of accounts for KMSL, I could not
    review the
    accounts of the Company and issue an opinion on the financial
    statements for the year
    ended. Also, I was unable to determine whether the account of the

  • Page 104 of 553

  • KMSL was
    appropriately consolidated with the parent company as required by
    IAS 27,
    Consolidated and Separate Financial Statements.

    Consequently, I was unable to determine whether the consolidated
    financial
    statements presented for my review was complete and fairly represent
    the financial
    information for the year ended 31 December 2015.

    Internal Control over Financial Reporting

    My review of the internal controls over financial reporting revealed
    that adequate
    accounting records including important registers such as investments
    registers, Fixed
    Assets Register, registration fees schedule, general journal
    documentations and
    important reconciliations were not maintained. Also, the general
    ledgers were not
    properly reconciled. These shortcomings placed limitations on my
    efforts to obtain
    sufficient appropriate audit evidence for my opinion.

    – 34 –

    Coffee Industry Corporation Limited
    As a result, I could not comment on the completeness, accuracy and
    validity of the
    balances reported in the consolidated statement of financial
    position and the income
    and expenditure statement for the year ended 31 December 2015.

    Cash and Cash Equivalents – K9,674,949 (2014:K28,051,072)

    Included in the Cash and Cash Equivalents balance of K9,674,949 as
    disclosed in
    Note 9 to the consolidated financial statements was an amount of
    K76,966
    representing cash on hand, an amount of K57,025 (Cr) representing
    cash at bank in
    the London Imprest Account, an amount of K45,729 representing Coffee
    Industry
    Fund’s cash at bank, an amount of K117,700 representing CIC Freight
    Surety
    Account and an amount of K5,458,418 representing Coffee Industry
    Fund’s Interest
    Bearing Deposit (IBD). No reconciliations on the above accounts were
    made available
    for my review to determine their accuracy and completeness.

  • Page 105 of 553

  • Further, details on subsequent presentation of the un-presented
    cheques dated back to
    June 2015 valued at K1,720,834 were not made available for my
    review.
    Consequently, I was not able to verify the completeness, existence,
    accuracy and
    validity of the cash and cash equivalents balance as reported in the
    financial
    statements.

    Trade and Other Debtors – K11,452,510 (2014: K5,651,733)

    Included in the Trade and Other Debtors balance of K11,651,733 as
    disclosed in Note
    7 to the consolidated financial statements was an amount of K509,192
    representing
    rental debtors, an amount of K66,614 representing interest
    receivables, an amount of
    K920,493 representing amount due from project partners, an amount of
    K3,211,705
    representing Coffee Industry Fund trade debtors, an amount of
    K5,384,942
    representing sundry debtors and prepayments, an amount of K1,627,671
    as GST
    receivable, an amount of K90,731 as staff debtors, an amount of
    K121,085 as
    receivable from other debtors and an amount of K479,922 (credit)
    representing
    provision for doubtful debts. I was not provided with the required
    audit information or
    other appropriate records to enable me to conduct audit tests on
    these balances and
    their subsequent receipts. Therefore, I was not able to satisfy
    myself as to the
    completeness, existence and accuracy of the trade and other debtors
    balance as
    reported in the consolidated statement of financial position for the
    year ended.
    Inventories – K519,779 (2014: K405,112)

    As at 31 December 2015, the inventories of the Company valued
    K519,779 as
    disclosed in Note 10 to the consolidated financial statements. I did
    not observe and
    witness the physical inventory count conducted by the Company. In
    addition,
    adequate inventory records were not maintained during the period.
    Owing to the
    nature of the Company’s records, I was not able to satisfy myself as
    to the inventory
    quantities by other alternative audit procedures.

    – 35 –

  • Page 106 of 553

  • Coffee Industry Corporation Limited
    Furthermore, the Company did not maintain satisfactory records to
    substantiate
    valuation of its inventories. Consequently, it has not been
    practicable to extend my
    audit procedures to satisfy myself on the completeness, existence,
    accuracy and
    valuation of the inventories.

    Property, Plant and Equipment – K12,592,313 (2014: K12,031,443)

    The Company had not maintained sufficient records, including a Fixed
    Assets
    Register and titles to the lands and buildings to enable me to
    complete my audit tests
    on its properties, plants and equipment valued at K12,592,313 and
    reported in the
    consolidated statement of financial position. Also, physical
    verification was not
    carried out to verify the existence of the same. Further, I was
    unable to determine
    whether a valuation was done to the Company’s lands and buildings
    disclosed at
    K6,939,137 in Note 13 to the consolidated financial statements.
    Consequently, it has
    not been practicable to extend my audit procedures to satisfy myself
    on the
    completeness, existence, accuracy, rights and valuation of the
    Company’s properties,
    plants and equipment and related depreciations valued at K1,232,377
    and charged to
    the consolidated statement of income and expenditure for the year
    ended.

    Trade Creditors and Accruals – K9,008,606 (2014: K9,422,412)

    As at 31 December 2015, trade creditors and accruals have been
    reported at
    K9,008,606 in the consolidated statement of financial position. This
    amount
    represented K782,373 in trade creditors and K8,226,233 in other
    creditors and
    accruals as disclosed in Note 14 to the consolidated financial
    statements. Included in
    the other creditors and accruals balance of K8,226,233 was an amount
    of K6,020,637
    representing sundry creditors and accruals, an amount of K3,094,670
    representing tax
    payables and an amount of K32,138 relating to trade creditors of
    Coffee Industry
    Fund. Adequate records were not maintained to substantiate these

  • Page 107 of 553

  • balances. Due to
    poor record keeping, inadequate accounting procedures and
    significant non-
    compliance issues identified in these areas, I was not able to
    determine the
    completeness, accuracy and validity of the trade creditors and
    accruals balance of
    K9,008,606 reported as at 31 December 2015.

    Accumulated Funds – K25,085,235 (2014: K36,571,523)

    The total accumulated fund balance of K25,085,235 (2014:K36,571,523)
    stated in the
    consolidated statement of changes in accumulated funds was derived
    after processing
    an adjustment of K1,137,636 in the revenue reserve account. The
    adjustment was
    processed as a balancing adjustment to tie prior year revenue
    reserve balance to that
    of the current year. The Corporation was unable to explain the
    variance in the revenue
    reserve account to which the above adjustment was processed.
    Therefore, I was not
    able to verify the validity of the balancing adjustment processed,
    completeness and
    accuracy of the accumulated funds reported.

    – 36 –

    Coffee Industry Corporation Limited
    Revenue – K12,423,017 (2014: K38,728,051)

    The Company’s total revenue for the year was K12,423,017. Included
    in this balance
    as stated in Note 5(b) to the consolidated financial statements was
    an amount of
    K3,170,080 relating to National Government funding, an amount of
    K4,516,186
    related to coffee export levy, an amount of K959,330 relating to
    coffee sales, an
    amount of K1,137,106 relating to rents received and an amount of
    K268,640 relating
    to sundry income.

    I was not provided with important details including warrants in
    respect of the National
    Government funding of K3,170,080 and supporting documentation on
    various
    journals that were processed in respect of the coffee export levy
    income of
    K4,516,186. Invoices, receipts and bank statements were not provided

  • Page 108 of 553

  • in respect of
    the coffee sales income of K959,330, rent received income of
    K1,137,106 and the
    sundry income of K268,640. I was therefore unable to test these
    balances by other
    alternative means. Consequently, I was not able to obtain sufficient
    appropriate audit
    evidence to comment on the completeness, accuracy and the validity
    of the
    Company’s total revenue of K12,423,017 as reported for the year
    ended.

    Expenditure – K25,048,944 (2014: K19,124,625)

    The Company’s total expenditure for the year was K25,048,944 as
    disclosed in Note
    5(c) to the consolidated financial statements. Due to the weaknesses
    in internal
    controls over financial reporting, the Company was unable to provide
    me the details
    of these expenditures that were requested during my review. I was
    therefore unable to
    complete my audit procedures designed to test for the completeness,
    accuracy and
    validity of the expenditures. Consequently, I was not able to
    comment on the
    completeness, accuracy and validity of the Company’s affairs as at
    31 December 2015
    and of the results and cash flows for the year then ended.

    DISCLAIMER OF OPINION

    Because of the significance of the matters described in the Basis
    for Disclaimer of
    Opinion paragraphs above, 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
    consolidated financial statements of Coffee Industry Corporation
    Limited as at 31
    December 2015, its financial performance and its cash flows for the
    year then ended.

    EMPHASIS OF MATTER

    Status of the Coffee Industry Corporation Limited

    I was provided with the copy of the Coffee Industry Corporation
    (Statutory Functions
    and Powers) Act 1991 and according to this Act, Coffee Industry
    Corporation is a
    Corporation and not a “Limited Company”.

    – 37 –

  • Page 109 of 553

  • Coffee Industry Corporation Limited
    Unless Parliament by an Act amends the existing Act to
    corporatise the Coffee
    Industry Corporation, the word “Limited” used by the
    Corporation is not appropriate.
    I was not provided with the amended Act for me to
    determine the appropriateness of
    incorporating this Corporation under the Companies Act
    1997.”

    9.3 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 Company
    for the year ended 31 December 2016 was in progress.

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

    The Company had not submitted the financial statements
    for the year ended 31
    December 2018 for my inspection and audit.

  • Page 110 of 553


  • 38 –

    9A. COFFEE INDUSTRY FUND
    9A.1 INTRODUCTION

    9A.1.1 Legislation

    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.

    9A.2 AUDIT OBSERVATIONS

    9A.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 Fund for the years ended 31 December
    2014 and 2015 were issued
    on 28 September 2018 and 11 June 2019 respectively. The
    reports contained similar
    Disclaimer of Opinions, hence, only the 2015 report is
    reproduced.

    “BASIS FOR DISCLAIMER OF OPINION
    Opening Balances
    My report on the Fund for the year ended 31 December 2014
    was a disclaimer of
    opinion. I was not able to satisfy myself as to the
    accuracy and completeness of the
    opening balances of trade receivables, trade creditors,
    tax balances and investments.
    Since these opening balances entered into the
    determination of the results of
    operations and cash flows of the Fund in 2015, I was
    unable to determine whether
    adjustments to the balance sheet and profit and loss
    account might have been
    necessary for the year ended 31 December 2015.

  • Page 111 of 553

  • Internal Control over Financial Reporting

    My review of the internal controls over financial
    reporting of the Fund revealed that
    adequate accounting records including important registers
    such as investments
    register, trade and other receivables, trade creditors
    listing and loan schedules were
    not properly maintained. The general ledger was also not
    properly reconciled. These
    shortcomings placed limitations on my efforts to obtain
    sufficient appropriate audit
    evidence for my opinion. As a result, I could not comment
    on the completeness,
    accuracy and validity of the balances reported in the
    balance sheet and the profit and
    loss statement for the year ended 31 December 2015.


    39 –

    Coffee Industry Fund
    Trade and Other Receivables – K3,211,705 (2014: K3,237,603)

    The financial statements reported K3,211,705 as trade debtors as at
    31 December
    2015. The management did not provide the listings or other relevant
    documentation
    for my review. Consequently, I was unable to satisfy myself as to
    the completeness
    and accuracy of the trade and other receivables balance reported in
    the financial
    statements as K3,211,705 for the year ended.

    Investments – K5,458,418 (2014: K5,433,476)

    Note 3 to the financial statements disclosed K5,458,418 as Interest
    Bearing Deposit
    (IBD). However, I was not provided with IBD reconciliation
    statements or certificate
    for my verification. As such, I was unable to determine the
    ownership, completeness
    and accuracy of the Investment (IBD) balance taken up in the
    financial statements as
    K5,458,418 as at 31 December 2015.

    Tax – K170,006 (2014: K154,723)

    As at 31 December 2015 an amount of K170,006 was recorded as tax
    receivable from

  • Page 112 of 553

  • Internal Revenue Commission (IRC). This amount comprised of K35,213
    and
    K134,793 as dividend withholding tax receivable and GST receivables
    respectively.
    There was an increase of K15,283 from the prior year balance but no
    relevant
    documentation was made available for my review. These balances had
    been carried
    forward for a number of years. Therefore, I was unable to comment on
    the
    completeness, accuracy and appropriateness of the tax receivable
    balance disclosed in
    for the year ended.

    Trade Creditors – K32,138 (2014: K32,138)

    Trade Creditors was disclosed at K32,138 as at 31 December 2015.
    However, no
    appropriate documentation or listing was made available for my
    review to determine
    the validity of this balance and also for a number of years the same
    balance had been
    taken up as payable. Consequently, I was unable to ascertain the
    completeness and
    accuracy of the trade payable balance reported for the year ended.

    Interest Income – K22,919 (2014: K54,817)

    The Fund disclosed in its profit and loss statement K22,919 as
    interest income for the
    year. There was a decrease of K31,898 in the interest income over
    past year, however,
    I was not provided with appropriate explanation or documentation for
    the decrease.
    Therefore, I was unable to comment on the accuracy and completeness
    of the interest
    income for the year ended.

    – 40 –

    Coffee Industry Fund
    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 express an opinion
    on the financial

  • Page 113 of 553

  • statements of the Coffee Industry Fund as at 31 December
    2015 and of its financial
    performance, financial position and its cash flows for the
    year then ended.”

    9A.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 Fund for
    the year ended 31 December 2016 was in progress.

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

    The Fund had not submitted the financial statements for the
    year ended 31 December
    2018 for my inspection and audit.

    – 41 –

    9B. PATANA NO.61 LIMITED (Subsidiary of Coffee Industry Corporation
    Limited)

  • Page 114 of 553

  • 9B.1 INTRODUCTION

    9B.1.1 Legislation

    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.

    9B.2 AUDIT OBSERVATIONS

    9B.2.1 Comments on Financial Statements

    My reports in accordance with the provisions of the
    Companies Act on the financial
    statements of the Company for the years ended 31 December
    2014 and 2015 were
    issued on 28 September 2018 and 11 June 2019 respectively.
    The reports contained
    similar Disclaimer of Opinions, hence only the 2015 report
    is reproduced.

    “BASIS FOR DISCLAIMER OF OPINION

    Opening Balance

    My report for the year ended 31 December 2014 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 and intercompany loan which impacted the
    share capital and reserves.
    Since these opening balances enter into the determination
    of the results of operations
    and cash flows of the Company in 2015, I was unable to
    determine whether
    adjustments to the balance sheet, profit and loss
    statement, and notes to the financial
    statements might have been necessary for the year ended 31
    December 2015.

    Internal Control over Financial Statements

    My review of the internal controls over financial reporting
    revealed that adequate
    accounting records including important registers such as
    the fixed assets and loan
    registers were not maintained. Also, the general ledger
    accounts were not properly

  • Page 115 of 553

  • reconciled. These shortcomings placed limitations on my
    efforts to obtain sufficient
    appropriate audit evidence for my opinion. As a result, I
    could not be able to comment
    on the accuracy, completeness and validity of the balances
    reported in the balance
    sheet and the profit and loss statement for the year ended
    31 December 2015.

    – 42 –

    Patana No.61 Limited

    Inter-Company Loan – K806,393

    I was not provided with the loan agreement entered into between the
    Company and its
    parent entity (Coffee Industry Corporation) to verify the terms and
    conditions of the
    loan and the repayment schedule. There was no movement in the loan
    amount since
    the loan was obtained from the parent entity. I was therefore,
    unable to ascertain the
    validity and accuracy of the loan amount of K806,393 reported as
    payable to the
    parent company as at 31 December 2015.

    Going Concern

    The Company was dormant during the year with a net asset position in
    deficit by
    K246,690 as at 31 December 2015. This reflects a company which is
    technically
    insolvent. I was not provided with a business recovery plan by the
    Company detailing
    the measures management intends to take in their endeavor to bail
    the Company out
    of its current position, nor a letter of support from the parent
    entity, Coffee Industry
    Corporation as a parent entity affirms its continued financial
    support to ensure
    continuity of the Company as a separate business entity. As such, I
    was unable to
    comment whether or not the company will continue to operate on the
    going concern
    basis.

    Fixed Assets – K559,704

    The Company has not maintained sufficient records including a Fixed

  • Page 116 of 553

  • Assets Register
    to enable me to complete my audit tests on its fixed assets reported
    at K559,704 in the
    balance sheet. Also, physical verification was not carried out to
    verify the existence of
    the same. Further, I was unable to determine whether a valuation was
    done to the
    Company’s land and buildings reported at a cost of K766,744 in Note
    5 to the
    financial statements. Consequently, it has not been practicable to
    extend my audit
    procedures to satisfy myself on the completeness, existence,
    accuracy and valuation
    of the Company’s property, plant and equipment and related
    depreciations of K7,713
    charged to the profit and loss statement.

    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 express an opinion on the
    financial position
    of Patana No.61 Limited as at 31 December 2015, and of its financial
    performance
    and cash flows for the year then ended.”

    – 43 –

    Patana No.61 Limited

    9B.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 Company
    for the year ended 31 December 2016 was in progress.

    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.

    The Company had not submitted the financial statements for

  • Page 117 of 553

  • the year ended 31
    December 2018 for my inspection and audit.

    – 44 –

    10. CONSERVATION AND ENVIRONMENT PROTECTION
    AUTHORITY

    10.1 INTRODUCTION

    10.1.1 Legislation

    The Conservation and Environment Protection Authority Act
    2014 was drafted and
    Certified on 30 May 2014, establishing the Conservation and
    Environment Protection
    Authority.

    Prior to May 2014, the Conservation and Environment
    Protection Authority was

  • Page 118 of 553

  • operating as a Department of National Public Service.

    10.1.2 Functions of the Authority

    The functions of the Authority are to:

    • do all things necessary for the conservation and
    protection of the environment in
    accordance with the environmental conservation laws
    and any policy directions of
    the Minister and the National Executive Council;
    • co-ordinate with provincial and local-level
    governments and sub-national
    authorities to foster, manage and monitor
    environmental conservation strategies
    and programmes in the country;
    • relation to land under the care, control and
    management of the Authority:

    – to establish and maintain zoological and
    botanical parks and gardens;
    – to permit and assist zoological and botanical
    research; and
    – to construct buildings, walks, drives, fences,
    enclosures, dams, reservoirs,
    drains and other structures for or in connection
    with the purposes of the
    Authority;

    • impose and receive rents, fees, charges and bonds in
    respect of its functions under
    any environmental conservation law, including but not
    limited to providing
    services related to the approval and issue of
    environment permits and the
    investigation and audit of activities under the
    Environment Act 2000;
    • promote Papua New Guinea’s laws, regulations and
    policies relating to
    conservation and environment matters within the
    country and overseas;
    • give advice to the Minister and maintain dialogue with
    other government
    agencies on environmental conservation laws and
    policies;
    • encourage, accept, administer and allocate aid monies,
    whether from within the
    country or elsewhere, for purposes consistent with its
    objects;

    – 45 –

  • Page 119 of 553

  • Conservation and Environment Protection Authority

    • accept donations, gifts, devises and bequests made to
    the Authority and control,
    manage and develop those donations, gifts, devises and
    bequests in accordance
    with any conditions attached to them;
    • where it considers it necessary or convenient to do
    so, to establish committees
    and similar bodies in relation to its functions, in
    accordance with regulations and
    to that effect; and
    • perform such other functions and duties as may be
    conferred on it by the
    Authority’s Act or any other law.

    10.2 AUDIT OBSERVATION

    10.2.1 Comments on Financial Statements

    My reports to the Minsters under Section 8(4) of the Audit
    Act on the Authority’s
    financial statements for the years ended 31 December 2015
    and 2016 were issued on
    22 January 2019. The reports contained similar Qualified
    Opinions, hence, only the
    2016 report is reproduced.

    “BASIS FOR QUALIFIED OPINION

    Accounting for Government Grants

    Government grants were accounted for on cash basis which
    does not comply with
    International Accounting Standards (IAS) 20 on Government
    Grants.

    QUALIFIED OPINION

    In my opinion, except for the effect of the matter
    described in the Basis for Qualified
    Opinion paragraph, the financial statements of the
    Conservation and Environment
    Protection Authority for the year ended 31 December 2016:

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

    (b) the financial statements have been prepared in
    accordance with the Finance
    Instructions issued under the Public Finances

  • Page 120 of 553

  • (Management) Act 1995.”

    10.3 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 2017 and 2018
    for my inspection and
    audit.

    – 46 –

    11. GOVERNMENT PRINTING OFFICE

    11.1 INTRODUCTION

    11.1.1 Legislation

    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, the Interpretation Act (Chapter 2) and
    Printing of the Laws Act
    (Chapter 333).

    11.1.2 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.

    11.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    11.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit
    Act on the financial
    statements of the Printing Office for the year ended 31
    December 2015 was issued on
    10 September 2018. The report contained a Disclaimer of
    Opinion.

    “BASIS FOR DISCLAIMER OF OPINION

  • Page 121 of 553

  • Limitation on the Scope of my Audit

    Opening Balances

    I issued a disclaimer of opinion in respect of the year
    ended 31 December 2014 and
    prior years as I was unable to satisfy myself as to the
    accuracy of the opening
    balances. I was also unable to quantify the effects of
    misstatements, if any, which
    might have a bearing on the results of the operations of
    the Office. Since the opening
    balances of 2014 enter into the determination of the
    balances reported in 2015
    financial statements, I was unable to place reliance on the
    closing balances stated in
    the financial statements and the reliability of the
    financial records maintained by the
    Office for 2015.

    – 47 –

    Government Printing Office

    Cash at Bank – K3,297,491

    My examination of the Cash at Bank account and its related records
    revealed that the
    preparation of the financial statements including monthly bank
    reconciliations were
    outsourced to an accounting firm.

    My review of the bank reconciliations and their related records
    revealed the
    following:

    • Bank reconciliations were not timely prepared and reviewed by
    independent
    senior officers for both the GPO Trust Account and the
    Operating Account;
    • The Operating Account of the Government Printing Office had
    not been
    properly reconciled for the year under review. The bank
    reconciliation balance
    of K3,168,682 did not agree with the cashbook balance of
    K3,001,493, resulting
    in a variance of K167,189; and
    • Further, I noted that the bank reconciliation was not
    reconciled to the general

  • Page 122 of 553

  • ledger. As a result, cheques totalling K125,640 which were
    cleared during the
    year were incorrectly shown as unpresented cheques at year
    end.

    Consequently, I was unable to confirm the accuracy of the bank
    balance of the main
    Operating Account disclosed in the financial statements at year end.

    Trade Debtors – K5,626,864

    My review of the Trade Debtors account for the Printing Office
    revealed that the
    Printing Office does not have a properly maintained Debtors Control
    Account for the
    period under review. Further, I noted that there were
    inconsistencies between the
    Debtors Control Account and the amount stated in the original source
    documents
    (invoices). The periodic reconciliation between these records is an
    important internal
    control measure. As a result, I noted the following:

    • Debtors amounting to K5.8 million were still outstanding from
    all credit sales as
    at December 2015;
    • Paid invoices totalled K307,235 were still captured in the
    reconciliation and
    were not cleared at year end;
    • Invoices totalled K174,121 were incorrectly captured in the
    debtors control
    account with particulars different from the original source
    documents;
    • Invoices totalled K160,089 representing cancelled jobs were
    not removed from
    the debtors control account; and
    • Invoices totalled K816,260 which were cancelled and reissued
    as new invoices
    were not correctly reflected in the debtors control account.

    The management in its response stated that some correcting entries
    were made however,
    I was not provided with the details to ascertain the accounts that
    were affected and their
    ending balances. As such, I was unable to satisfy myself as to the
    accuracy and
    completeness of the trade debtors balance disclosed at year end.
    – 48 –

    Government Printing Office

    Property, Plant and Equipment – K4,417,685

  • Page 123 of 553

  • My review of the fixed assets and capital expenditures for the year
    ended 31
    December 2015 revealed that the Printing Office had not fully
    complied with Part 32
    of the Financial Management Manual by not maintaining an updated
    Fixed Assets
    Register.

    The following discrepancies were observed:

    • No proper stock take was carried out to update the Fixed
    Assets Register and
    fairly state the assets value for the year under review;
    • No proper reconciliations were done between the general ledger
    and the Fixed
    Assets Register;
    • Assets (cannon printing equipments) totalled K25,188 purchased
    in 2004 and
    2007 were neither in the custody of the Printing Office nor
    had been disposed;
    and
    • Tangible assets recorded in the Fixed Assets Register were not
    tagged and
    labelled with serial numbers. Consequently, I was unable to
    physically verify
    and locate the assets totalled K825,284.

    As such, I was unable to ascertain and conclude on the accuracy,
    valuation and
    existence on the written down value of K4,417,685 for Property,
    Plant and Equipment
    and their associated depreciation charge of K864,435 disclosed in
    the financial
    statements at year end.

    Revenue – K10,256,013

    My review of the revenue account and its related supporting
    documents revealed that
    there were no timely reconciliations done between the general
    ledgers and the Inward
    Cashbook Register (ICR) for proper recording and disclosure at year
    end. Consequently,
    I noted a variance of K437,598 between the general ledger and
    financial statements
    balance of K11,588,732 and the Inward Cashbook Register balance of
    K11,151,134
    provided to me. The final accounts disclosed revenue as K10,256,013
    resulting in an
    unexplained difference of K1,312,612. As such, I was unable to
    conclude on the
    accuracy and completeness of the revenue balance of K10,256,013
    disclosed in the

  • Page 124 of 553

  • financial statements.

    Provision for Long Service and Recreation Leave

    The Government Printing Office did not disclose long service and
    recreation leave
    provisions for the permanent staff in its financial statements.
    There were no records
    in relation to personnel leave credits that was maintained by the
    Printing Office.
    Without such records, I was unable to ascertain whether payments in
    relation to leave
    credits were properly accounted for in the financial statements.

    – 49 –

    Government Printing Office

    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 Government
    Printing Office for the year ended
    31 December 2015.”

    11.2.2 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 Printing Office
    for the year ended 31
    December 2015 was issued on 10 September 2018. The report
    contained the
    following comments:

    Financial Procedural Manual

    My review of the Printing Office’s reporting framework
    revealed that there was a
    draft Financial Procedural Manual compiled for its staff
    to carry out tasks in
    accordance with the procedures and guidelines that is
    applicable to the Printing
    Office. However, I noted that this draft Procedural
    Manual did not capture all
    processes within the Printing Office like the fixed

  • Page 125 of 553

  • assets, bank accounts, staff
    advances and staff workplace policies. I also noted that
    this Manual was not
    adequately communicated down to all operational and
    administration staff. It would
    be in the best interest of the management to compile a
    Manual to incorporate all
    necessary accounting and reporting processes of the
    Printing Office.

    Management responded that the draft Manual was circulated
    to management for final
    input. Once this process is completed, the final draft
    would be forwarded to
    Departmental Head for endorsement.

    Land Acquisition – K2,595,425

    I noted that the management had taken the corrective
    actions to comply with the
    requirements of Public Finances (Management) Act and
    rectify the procedural errors
    that were overlooked at the time of acquiring twenty (20)
    portions of un-serviced
    blocks of land (Section 480, Allotments 31-50, Hohola)
    purposely for its Staff
    Housing Policy. I recommended that the Printing Office
    expedite the process of
    obtaining the land titles for the Staff Home Ownership
    Scheme for the benefit of staff
    employed by the Printing Office.

    Motor Vehicle – Toyota Prado (BED 986)

    My review and examination of the motor vehicles recorded
    in the Fixed Assets
    Register and disclosed in the financial statements
    revealed that the Printing Office
    purchased the above motor vehicle at a cost of K293,741
    in 2014 through cheque
    number 5821. –
    50 –

    Government Printing Office

    However, I was not provided with the payment details and
    the registration documents.
    Further, physical inspection could not be performed as
    the vehicle had been forcefully
    possessed by the former Government Printer in February
    2015 during his resignation.

  • Page 126 of 553

  • I brought this issue to the attention of management and
    it responded as follows:

    “It was the official vehicle for the former Government
    Printer and is still registered
    under Government Printing Office and pending outright
    purchase by the former
    Printer.”

    Inventory

    My review of the assets of the Government Printing Office
    again revealed that the
    inventory component had not been disclosed as a current
    asset in the financial
    statements for the year under review. The International
    Accounting Standards 2
    requires a proper valuation and disclosure of inventory
    as an asset in the statement of
    financial performance of an entity. I recommended
    management to do a stock take at
    year end and disclose the inventory in the financial
    statements at year end.

    Expenditure

    My review of the expenditure revealed that there had been
    a number of payments
    made without the required supporting documents. I noted
    that payments totalled
    K346,275 had been done without proper delivery dockets.

    I recommended Management to ensure that proper
    procurement processes are
    followed as per the Public Finances (Management) Act 1995
    (as amended) when
    procuring for goods and services. Management concurred
    with my recommendation
    and agreed to take corrective action.

    11.3 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 Printing Office for the years ended 31 December 2016
    and 2017 had been
    completed. The management responses had been received and
    the audit reports are
    expected to be issued shortly.

    The Printing Office had not submitted its financial
    statements for the year ended 31

  • Page 127 of 553

  • December 2018 for my inspection and audit.


    51 –

    12. INDEPENDENCE FELLOWSHIP TRUST

    12.1 INTRODUCTION
    12.1.1 Legislation
    The Independence Fellowship Trust was established under
    the Independence
    Fellowship Trust Act (Chapter 1040).
    12.1.2 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.

    12.1.3 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.

    12.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    12.2.1 Comments on the Financial Statements

    My report to the Ministers under Section 8(4) of the Audit
    Act on the financial
    statements of the Trust for the year ended 31 December
    2017 was issued on 30 July
    2018. The report did not contain any qualification.

    12.2.2 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 2017
    was issued on 30 July 2018. The report contained the
    following observations:

    Fixed Assets

  • Page 128 of 553

  • As reported in my previous reports, the Independent
    Fellowship Trust did not maintain
    proper Fixed Asset Register to record the purchases and
    disposals of its assets. I
    further noted that no stock-take was carried out over the
    years to update the Fixed
    Assets Register and fairly state the assets value. Most
    assets purchased over the years
    were not recorded and updated in the Register.

    – 52 –

    Independence Fellowship Trust

    The Management in its response stated that they would give
    their utmost best to carry
    out a complete stock-take and update the Register
    accordingly.

    Travel and Subsistence

    My review of the expenditures revealed that the Trust had
    not properly maintained the
    Travel Advance/Acquittal Register as required under
    Financial Management Manual
    (Part 20). During my review, I noted internal control
    weaknesses in relation to
    incomplete acquittals and lack of supporting documents for
    duty travels.

    I recommended the Trust to maintain a Travel Advance/
    Acquittal Register to record all
    duty travels taken and to update regularly with all travel
    documents. I drew this matter
    to the attention of the Management and the Management
    responded as follows:

    “We will maintain a travel advance and acquittal register
    to record all duty travels
    taken and the register be maintained and updated regularly
    as of today in preparation
    for 2019 audits.”

    12.3 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 Trust for
    the year ended 31 December 2018 had been completed and the

  • Page 129 of 553

  • audit reports were
    being finalised.

    – 53 –

    13. INDEPENDENT CONSUMER AND COMPETITION
    COMMISSION

    13.1 INTRODUCTION
    13.1.1 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.

    13.1.2 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

  • Page 130 of 553

  • 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
    . do all other things relating to consumer affairs.


    54 –

    Independent Consumer and Competition Commission

    13.2 AUDIT OBSERVATIONS

    13.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the
    Audit Act on the financial
    statements of the Commission for the year ended 31
    December 2017 was issued on 30
    July 2018. The report did not contain any qualification.

    13.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork
    associated with the audit of the

  • Page 131 of 553

  • accounts and records and the examination of the financial
    statements of the
    Commission for the year ended 31 December 2018 had been
    completed and the
    results were being evaluated.


    55 –

    14. INDUSTRIAL CENTRES DEVELOPMENT CORPORATION
    14.1 INTRODUCTION

    14.1.1 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.

    14.1.2 Functions of the Corporation

  • Page 132 of 553

  • 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.

    14.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    14.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the
    Audit Act on the financial
    statements of the Corporation for the year ended 31
    December 2016 was issued on 11
    March 2019. The report contained a Qualified Opinion.

    “BASIS FOR QUALIFIED OPINION

    Trade Debtors – Malahang & Ulaveo Industrial Centres (MIC
    & UIC)

    The Corporation in its financial statements disclosed its
    trade debtors balance as
    K2,939,956 (included as part of total debtors of
    K3,229,549) at year end. I noted that
    of the K2,939,956 receivable, K1,518,618 still remained
    outstanding for a
    considerable period of time, therefore the collectability
    of this amount is in doubt.
    Further, I was unable to establish whether the
    Corporation has made adequate
    provision against these debts. As such, I was unable to
    satisfy myself as to the
    accuracy and collectability of the trade debtors as
    reported at year end.


    56 –

  • Page 133 of 553

  • Industrial Centres Development Corporation

    Fixed Assets – K65,289,199

    My review of the fixed assets of the Corporation revealed that the
    Fixed Assets
    Register (FAR) was incomplete as it was not properly updated and has
    not fully
    captured all the assets owned by the Corporation. There were
    additional purchases of
    fixed assets not recorded and disclosed in the financial statements
    including the
    depreciation calculation as at 31 December 2016. I further noted
    that the disposals of
    Land & Building and Computer Equipment during the year were not
    approved by the
    Corporation’s Board. Further, the Corporation has not conducted any
    stock take on its
    fixed assets for a number of years. As a result, I was unable to
    neither place reliance
    on the effectiveness of the control surrounding the management of
    the fixed assets nor
    comment on the condition, valuation and existence of the fixed
    assets disclosed at the
    year end.

    Land Sales Debtors – K289,566

    Included in the total debtors of K3,229,549 were land sales debtors
    totaled K289,566.
    I observed that land sales debtors had been outstanding since 2008.
    The Corporation
    has not provided adequate provision for doubtful debts in its
    accounts. Consequently,
    I was unable to ascertain the accuracy, correctness and
    collectability of the trade
    debtors as reported in the financial statements at 31 December 2016.

    Cash at Bank – K3,232,586

    The independent bank confirmation certificate for the Business
    Growth Centre (BGC)
    account for the year ended 31 December 2016 was not provided for my
    review. As a
    result, I was unable to confirm the closing bank balance as reported
    in the financial
    statements.

    QUALIFIED OPINION

    In my opinion, except for the effect of the matters referred to in
    the Basis for
    Qualified Opinion paragraphs above:

  • Page 134 of 553

  • a) the financial statements 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 for
    the year ended 31
    December 2016 and the results of its financial operations
    and cash flows for
    the year then ended.”

    – 57 –

    Industrial Centres Development Corporation

    14.2.2 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 Corporation for
    the year ended 31 December
    2016 was issued on 11 March 2019. The report contained
    the following observations:

    Advance / Acquittal