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• Part IV Report of the
  Auditor General

  This Report contains:
  – Public Bodies and their Subsidiaries
  – National Government Owned Companies
  – National Government Shareholdings in Other Companies

  Part IV

  Report of the Auditor-General

  2019

  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

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

  OFFICE OF THE AUDITOR-GENERAL

  10 September 2020

• Page 2 of 475

• Honourable Job Pomat, MP
  Speaker of the National Parliament
  Parliament House
  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 10th September 2020
  upon the inspection and audit of the financial statements of the
  Public Bodies and their
  subsidiaries and National Government owned companies for tabling in
  the National Parliament.
  This Report (Part IV) also contains information on companies in
  which the Government does
  not hold majority interest. Section D of this Report contains
  information on the status of certain
  entities whose audits have been in arrears.

  Yours sincerely,

  GORDON KEGA MBA, CPA
  Acting Auditor-General

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD

• Page 3 of 475

• Kumul Avenue, NCD Papua New Guinea

  2019 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-
  xxvii

  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 8
  4A. Papua New Guinea Maritime Transport Limited 10
  5. Civil Aviation Safety Authority of Papua New Guinea 11
  6. Climate Change and Development Authority … 14
  7. Cocoa Board of Papua New Guinea and its Subsidiaries 18
  7A. Cocoa Pod Borer Project Fund 19
  7B. Cocoa Stabilisation Fund 20
  8. Cocoa Coconut Institute Limited of Papua New Guinea 21
  9. Coffee Industry Corporation Limited and its Subsidiaries 22
  9A. Coffee Industry Fund 28
  9B. Patana No. 61 Limited 31
  10. Conservation and Environment Protection Authority 33
  11. Government Printing Office 38
  12. Independence Fellowship Trust 39
  13. Independent Consumer and Competition Commission 40
  14. Industrial Centres Development Corporation 42
  15. Internal Revenue Commission. 48
  16. Investment Promotion Authority 50
  17. Kokonas Indastri Koporesen and its Subsidiaries 53
  17A. Papua New Guinea Coconut Extension Fund 55
  17B. Papua New Guinea Coconut Research Fund 56
  18. Kumul Consolidated Holdings and its Subsidiaries 57
  18A. General Business Trust 60
  18B. Kumul Technology Development Corporation Limited 64
  18C. PNG Dams Limited 67

• Page 4 of 475

• 19. Legal Training Institute 68
  20. Mineral Resources Authority 71
  21. National Agriculture Quarantine and Inspection Authority 73
  22. National Agricultural Research Institute 77
  23. National AIDS Council Secretariat 80
  24. National Broadcasting Corporation 85

  -I-

  PARA SUBJECT
  PAGE
  NO.
  NO.
  25. National Capital District Commission and its Subsidiaries
  95
  25A. National Capital District Botanical Enterprises Limited
  100
  25B. Port Moresby Nature Park Limited
  101
  26. National Cultural Commission
  103
  27. National Economic and Fiscal Commission
  108
  28. National Fisheries Authority
  111
  29. National Gaming Control Board and its Subsidiary
  113
  29A. National Gaming Control Board Community Benefit Fund
  Trust. 114
  30. National Housing Corporation and its Subsidiary
  116
  30A National Housing Estate Limited.
  117
  31. National Information and Communications Technology Authority
  (NICTA) 118
  32. National Maritime Safety Authority
  120
  33. National Museum and Art Gallery
  124
  34. National Research Institute
  125
  35. National Roads Authority
  126
  36. National Training Council
  133
  37. National Volunteer Service
  134
  38. National Youth Development Authority
  135
  39. Office of the Insurance Commissioner
  140

• Page 5 of 475

• 40. Oil Palm Industry Corporation
  141
  41. Ombudsman Commission of Papua New Guinea
  142
  42. Papua New Guinea Accident Investigation Commission
  147
  43. Papua New Guinea Customs Service
  154
  44. Papua New Guinea Forest Authority
  155
  45. Papua New Guinea Immigration and Citizenship Service Authority
  166
  46. Papua New Guinea Institute of Medical Research
  168
  47. Pacific Institute of Leadership and Governance
  169
  48. Papua New Guinea Maritime College
  174
  49. Papua New Guinea National Institute of Standards and
  Industrial Technology 177
  50. Papua New Guinea Sports Foundation
  179
  51. Papua New Guinea University of Technology and its Subsidiaries
  181
  51A. National Analytical and Testing Services Limited.
  182
  51B. Unitech Development and Consultancy Company Limited
  183
  52. Parliamentary Members’ Retirement Benefits Fund .
  184
  53. Public Curator of Papua New Guinea
  185
  54. Road Traffic Authority
  186
  55. Security Industries Authority
  191
  56. Small and Medium Enterprises Corporation
  198
  57. Tourism Promotion Authority
  204
  58. University of Goroka and its Subsidiary
  207
  58A. Unigor Consultancy Limited
  209
  58B. Unigor Humi Catering Limited
  215
  59. University of Natural Resources and Environment (UNRE)
  216
  60. University of Papua New Guinea and its Subsidiaries
  218
  60A. Unisave Limited
  220
  60B. Univentures Limited
  221

• Page 6 of 475

• -II-

  SECTION B – NATIONAL GOVERNMENT OWNED COMPANIES

  PARA SUBJECT PAGE
  NO. NO.

  61. Foreword 225
  62. Air Niugini Limited and its Subsidiary 227
  62A. Air Niugini Cargo Limited 229
  62B. Air Niugini Properties Limited 230
  62C. Business Travel Centre Limited 231
  62D. Link-PNG Limited 232
  63 Bemobile Limited and Subsidiary 233
  63A. Bemobile (Solomon Islands) Limited 234
  64. Kumul Agriculture Limited 235
  65. Kumul Petroleum Holdings Limited and its Subsidiaries 243
  65A. Eda Oil Limited. 244
  65B. Kumul Exploration (Asia) Limited. 245
  65C. Kumul Gas Foreland 239 B.V. 246
  65D. Kumul Gas Foreland 261 B.V . 247
  65E. Kumul Gas Foreland 268 B.V . 248
  65F. Kumul Gas Foreland 269 B.V . 249
  65G. Kumul Gas Niugini B.V. 250
  65H. Kumul Lending Co Pte Limited . 251
  65I. Kumul LNG Limited. 252
  65J. Kumul Petroleum (Development) Limited. 253
  65K. Kumul Petroleum (Investments) Limited 254
  65L. Kumul Petroleum (Kroton) Limited. 255
  65M. Kumul Petroleum (Pipeline) Limited 256
  65N. Kumul Petroleum (Tech & Advisory) Limited. 257
  65O. Kumul Petroleum Marketing Pte Limited… 259
  65P. Kumul Security Agent Limited . 260
  65Q. NPCP Oil Company Pty Limited . 261
  66. Livestock Development Corporation Limited 262
  67. Mineral Resources Development Company Limited 263
  68. Motor Vehicles Insurance Limited 267
  69. National Airports Corporation Limited and its Subsidiaries 271
  69A. Airport City Development Limited 272
  69B. Airports Investments Limited 273
  70. NCD Water and Sewerage Limited (Eda Ranu) 274
  71. Papua New Guinea Ports Corporation Limited 280
  72. PNG Air Services Limited 284

• Page 7 of 475

• 73. PNG DataCo Limited 285
  74. PNG Power Limited 288
  75. Post (PNG) Limited 290
  76. Telikom (PNG) Limited and its Subsidiaries 293
  76A. DATEC (PNG) Limited 295
  76B. Kalang Advertising Limited 298
  76C. Media Niugini Limited (EMTV) 300
  76D. PNG Directories Limited 302
  77. Water PNG Limited 303

  SECTION C – NATIONAL GOVERNMENT SHAREHOLDINGS IN OTHER COMPANIES

  PARA SUBJECT PAGE
  NO. NO.

  78. Foreword 311
  79. Bougainville Copper Limited 313
  80. Gogol Reforestation Company Limited 315

  -III-

  SECTION D – PROBLEM AUDITS (AUDITS IN ARREARS)
  PARA SUBJECT
  PAGE
  NO.
  NO.
  81. Foreword
  319
  82. Audits in Arrears
  321
  82.1 General
  321
  82.2 Responsibility for preparation of Financial
  Statements 321
  82.3 Legislative Requirements
  322
  82.4 Current Year Audits (2019 Audits)
  322
  82.5 Status of Current Year Audits
  324
  82.6 Audits in Arrears (2018 and prior years)
  326
  82.7 Long Outstanding Financial Statements
  329
  82.8 Status of Audits as at 30 June 2020
  332
  Acknowledgements
  335
  Schedule A – Current Year Audits
  339
  Schedule B – Status of Audits in Arrears
  342
  Schedule C – Long Outstanding Financial Statements

• Page 8 of 475

• 345
  Schedule D – Government Shareholding in Companies
  348
  Schedule E – Audit in Arrears (2018 and Prior years)
  completed during 2019/2020 349

  -iv-

  GENERAL

  A. FOREWORD

  My Annual Report to the National Parliament for the 2019
  financial year is presented
  in four Parts. Part I deals with the Public Accounts of Papua
  New Guinea (PNG), Part

• Page 9 of 475

• 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 and other audits as
  mandated. These Statutory Bodies 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 to the Medium Term Plan III 2018-2022 by attaining
  an inclusive
  sustainable economic growth through the following key result
  areas:

  • Increase Revenue and Wealth Creation;
  • Quality Infrastructure;
  • Sustainable Social Development;
  • Improved Law, Justice and National Security;
  • Improved Service Delivery;
  • Improved Governance;

• Page 10 of 475

• -v-

  General

  • Responsible Sustainable Development; and
  • Sustainable Population.

  In addition, my audit findings that have been repeatedly
  highlighted show slow progress
  in making improvements to governance structures and public
  accountability
  mechanisms in relation to expending public finances. Without
  strong governance
  support, service delivery as envisaged by the National
  Government risks falling short
  of its objectives.

  Besides the audit of Financial Statements, I have extended my
  audit programs into the
  audit of service delivery, performance audit and major public
  work projects to enhance
  my Office’s ability to deliver reports to Parliament on how well
  and effective the
  government programs are being delivered.

  B. AUTHORITY TO AUDIT

  B.1 Constitution

  Under Section 214(2) of the Constitution of the Independent
  State of Papua New
  Guinea, I am required to inspect and audit all bodies set up by
  Acts of the Parliament,
  or by Executive or Administrative Act of the National Executive
  for governmental or
  official purposes unless other provisions are made by law in
  respect of their inspection
  and audit.

  I am also empowered under Section 214(3) if I consider it proper
  to do so, to inspect
  and audit and report to the Parliament on any accounts, finances
  or property of a body,
  in so far as they relate to, or consist of, or are derived from
  public moneys or property
  of Papua New Guinea.

  B.2 Audit Act

  By virtue of Section 214(4) of the Constitution, the Audit Act
  1989, which became
  effective from 1 May 1989, provides more details of my functions

• Page 11 of 475

• 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.

  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.

  -vi-

  General

  B.2.2 Matters of Significant Importance

  Under Section 8(2) of the Act, I am required to inspect and
  audit the accounts and
  records of financial transactions and the records relating to
  the assets and liabilities
  of these public bodies and their subsidiaries, and to report to
  the Minister vested with
  the responsibility for the public body and the Minister in
  charge of Finance any
  irregularities found during the inspection and audit.

  B.2.3 Audit Opinion on Financial Statements

  Section 8(4) of the Audit Act requires me to audit the
  financial statements of the public
  bodies and to report an opinion to the aforementioned Ministers
  on:
  • Whether the financial statements are based on proper accounts
  and records;
  • Whether the financial statements are in agreement with those
  accounts and
  records; and
  • Whether they show fairly the financial operations for the
  period which they cover
  and the state of affairs at the end of that period.

  B.3 Public Finances (Management) (Amendment) Act 2018 (PFMA)

  The submission of the financial statements of statutory bodies

• Page 12 of 475

• for audit is required
  under Section 63(1) and (3) of the Public Finances (Management)
  (Amendment) Act
  2018. 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 1997

  I am required to audit National Government owned Companies and
  their Subsidiaries
  under the provisions of the Companies Act 1997. Though these
  companies are
  registered under the Companies Act 1997, my responsibility to
  audit them is by virtue
  of Section 63 of the PFMA and Section 3 of the Audit Act.

  -VII-

  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

• Page 13 of 475

• owned companies and
  their subsidiaries, and the companies in which the government
  holds minority interest.

  C.2 Audit Objectives

  Under the Companies Act, I am required to ascertain whether
  proper accounting
  records have been kept; whether the financial statements comply
  with generally
  accepted accounting practice; and whether those financial
  statements give a true and
  fair view of the matters to which they relate. The Act also
  requires me to report the
  instances of non-compliance with these requirements. More
  details on the audit
  responsibilities under the Companies Act are provided in Section
  B of this Report
  which covers the National Government owned companies.

  C.3 Reporting Framework

  My audits are conducted in accordance with the International
  Standards on Auditing
  to provide reasonable assurance that the financial statements
  are free of material
  misstatements. The audit procedures include examination, on a
  test basis, of evidence
  supporting the amounts and other disclosures in the financial
  statements, evaluation
  of accounting policies and significant accounting estimates, and
  ensuring that the
  financial statements are presented fairly and in accordance with
  the International
  Financial Reporting Standards (IFRS) and statutory requirements.

  D. APPOINTMENT AND USE OF AUTHORISED AUDITORS

  Section 8(5) of the Audit Act empowers me to employ registered
  company auditors to
  assist me in undertaking my constitutional duties, where such
  assistance is required.

  During the period covered in the Report, I engaged a number of
  registered company
  auditors to perform audits of numerous Statutory Bodies and
  National Government
  owned companies.

  -VIII-

• Page 14 of 475

• 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 2019 to
  June 2020 (2019/2020
  Audit Cycle). The Report covers the audits of these entities’
  financial statements for a
  number of years, not just 2019.

  In 2019 there were 123 public entities subject to audit by my
  Office, consisting of 79 Public
  Bodies and their Subsidiaries and 44 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 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

• Page 15 of 475

• 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

  Section 63(1) and (3)(a) of the PFMA requires Wa 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

• Page 16 of 475

• 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, 78 entities had not
  submitted their 2019 financial

  statements to be audited and overall some 101 financial
  statements for 2018 and prior

  years had not been submitted for audit (Refer Table A).
  Moreover, the situation has

  deteriorated during this cycle.

  Due to Covid-19 pandemic outbreak, Government response has
  resulted in virus lock-downs

  and reduced economic activities which has resulted in
  reduction of current year audits to 3

  during 2019/2020 cycle. Further, 42 audits were either
  substantially completed, in progress

  or to commence shortly and 78 audits were unable to commence
  due to the non-submission

  of the financial statements during the cycle.

  The details of the audits in arrears and those entities
  whose financial statements have been

  outstanding for a number of years are shown in Attachment
  ‘B’.

  Table A

  STATUS OF AUDITS AS AT 30 JUNE 2020 (END OF 2019/2020 CYCLE)

• Page 17 of 475

• Audits Audits to Financial
  Audits Audits in
  Total Total
  Year Substantially Commence Statements
  Completed Progress
  2019/20202018/2019
  Completed Shortly not Submitted

  2019 3 1 32 9 78
  123 –

  2018 31 11 27 6 42
  117 123

  2017 22 13 17 6 25
  83 119

  2016 14 8 8 5 13
  48 81

  2015 5 6 5 4 8
  28 55

  2014 5 4 1 2 6
  18 33

  2013 1 1 1 2 5
  10 14

  2012 0 3 0 2 2
  7 8

  2011 0 1 0 2 0
  3 2

  2010 0 1 0 1 0
  2 2

  Total 81 49 91 39 179
  439 437

• Page 18 of 475

• -x-

  Executive
  Summary

  Table A above shows that 221 audits were either completed,
  substantially completed or still
  in progress as at 30 June 2020. The details are graphically
  depicted in Attachment ‘C’, which
  also included the arrears of prior years.

  Table A also shows that of the 123 current year audits (2019),
  only 3 were completed, with
  33 audits either substantially completed or in progress. A
  further 9 audits were to commence
  shortly. Graphical description of the status of current year
  2019 audits (excluding arrears) is
  given in Attachment ‘A’. The list of entities is at Schedule
  ‘A’ (i), (ii), (iii), (iv) & (v).

  E.4 Type of Audit Opinions Issued1

  In the period covered (July 2019 to June 2020) by the audit, 81
  audit reports were issued. Of
  the 81 audit reports issued, 39 were unqualified, 26 were
  qualified, 15 were Disclaimer of
  Opinions and 1 Adverse Opinion. The details are captured in
  Attachment ‘D’.

  Types of Audit Opinions issued for each entity over the period
  of seven years from 2013 to
  2019 are detailed in Attachment ‘E’.

  E.5 Key Findings

  The key findings from the audits centered primarily on the non-
  submission of the financial
  statements, non-compliance with the Salaries and Conditions
  Monitoring Committee (SCMC)
  regulatory mechanisms for salaries and wages, lack of basic
  accounting records, lack of staff
  capacity and competence and ineffective internal control
  systems. Other issues noted are also
  highlighted in paragraph E.9.

• Page 19 of 475

• • 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;
  • Non payments of taxes to IRC (Group Tax & GST);
  • Accounting, administrative and procedural manuals not being
  available;
  • Employment contracts, salaries and contract gratuities not
  available; and

  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-

  Executive Summary

  • Lack of knowledge, understanding and training in Integrated
  Financial Managements
  System (IFMS) in producing general purpose financial
  statements.

  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

• Page 20 of 475

• 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 45 (37%) entities have submitted
  their financial statements for
  2019 (Refer Schedule A (i), (ii), (iii) & (iv)) for my audit and
  inspection up to the time of
  preparing this Report. A total of 78 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
  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

• Page 21 of 475

• accountability and good
  governance in the public sector.

  -XII-

  Executive Summary

  During the cycle, 42 entities have audits in arrears totaling to
  101. Details of audits that have

  gone into arrears due to non-submission of financial statements
  since 2012 are given below in

  Table B and Schedule ‘B(iv)’.

  Table B

  Financial Statements Not Submitted

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

  1 A 4 Border Development Authority
  2018 1

  2 A 4A Papua New Guinea Maritime Transport Limited
  2013 to 2018 6

  3 A 6 Climate Change and Development Authority
  2018 1

  4 A 8 Cocoa Coconut Institute Limited of Papua New
  Guinea 2017 & 2018 2

  5 A 15 Internal Revenue Commission
  2018 1

  6 A 19 Legal Training Institute
  2017 & 2018 2

• Page 22 of 475

• 7 A 20 Mineral Resources Authority
  2017 & 2018 2

  8 A 24 National Broadcasting Corporation
  2018 1

  9 A 25A National Capital District Botanical
  Enterprises Limited 2013 to 2018 6

  10 A 29 National Gaming Control Board
  2018 1

  11 A 29A National Gaming Control Board Community
  Benefit Fund Trust 2018 1

  12 A 30 National Housing Corporation
  2018 1

  13 A 30A National Housing Estate Limited
  2015 to 2018 4

  14 A 34 National Research Institute
  2018 1

  15 A 36 National Training Council
  2018 1

  16 A 37 National Volunteer Service
  2017 & 2018 2

  17 A 40 Oil Palm Industry Corporation
  2015 to 2018 4

  18 A 44 Papua New Guinea Forest Authority
  2017 & 2018 2

  19 A 45 Papua New Guinea Immigration and Citizenship
  Service Authority 2018 1

  20 A 47 Pacific Institute of Leadership and Governance
  2018 1

  Papua New Guinea National Institute of
  Standards and Industrial
  21 A 49
  2017 & 2018 2
  Technology

  22 A 50 Papua New Guinea Sports Foundation
  2016 to 2018 3

  23 A 51A National Analytical and Testing Services
  Limited 2013 to 2018 6

• Page 23 of 475

• 24 A 51B Unitech Development and Consultancy Company
  Limited 2014 to 2018 5

  25 A 52 Parliamentary Members’ Retirement Benefits
  Fund 2018 1

  26 A 53 Public Curator of Papua New Guinea
  2018 1

  27 A 55 Security Industries Authority
  2017 & 2018 2

  28 A 58 University of Goroka
  2018 1

  29 A 58A Unigor Consultancy Limited
  2016 to 2018 3

  30 A 58B Unigor Humi Catering Limited
  2016 to 2018 3

  31 A 59 University of Natural Resources and
  Environment 2016 to 2018 3

  32 A 60 University of Papua New Guinea
  2018 1

  33 A 60A Unisave Limited
  2012 to 2018 7

  34 A 60B Univentures Limited
  2012 to 2018 7

  35 B 65C Kumul Gas Foreland 239 B.V
  2017 & 2018 2

  36 B 65D Kumul Gas Foreland 261 B.V
  2017 & 2018 2

  37 B 65E Kumul Gas Foreland 268 B.V
  2017 & 2018 2

  38 B 65F Kumul Gas Foreland 269 B.V
  2017 & 2018 2

  39 B 65G Kumul Gas Niugini B.V
  2017 & 2018 2

  40 B 67 Mineral Resources Development Company Limited
  2018 1

  41 B 70 NCD Water and Sewerage Limited (Eda Ranu)
  2018 1

• Page 24 of 475

• 42 B 72 PNG Air Services Limited
  2016 to 2018 3

  101

  -xiii-

  Executive Summary

  Arrears Reduction Strategies

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

  • Issuance of reminder letters to entities on a regular basis
  until the submission of the
  financial statements;
  • 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:

  –
  – Internal Revenue Commission;
  – National Capital District Commission;
  – National Housing Corporation;
  – Papua New Guinea University of Technology;
  – PNG Customs Service;
  – University of Goroka; and
  – University of Papua New Guinea;

  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.

• Page 25 of 475

• This can only be achieved by timely submission of financial
  statements and cooperation of the
  entities’ management to clear the arrears. However, the current
  health pandemic (Covid-19)
  may pose a challenge in achieving this objective.

  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. However, 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 have not complied with
  provisions set out in the Section (3) of the Salaries and
  Conditions Monitoring Committee 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

  -xiv-

  Executive Summary

  (b) Whereby or under any law, power is given to a public
  authority, to determine or vary the
  salaries and conditions of employment of employees of
  the public authority, that power
  shall be exercised subject to this Act”

  E.8 Non-Compliance with the Audit Act 1989

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

  • Fresh Produce Development Agency;
  • Kumul Minerals Holding Limited (formerly Petromin
  Limited);
  • National Development Bank Limited;
  • Ok Tedi Mining Limited;

• Page 26 of 475

• • PNG Air Services Limited; and
  • PNG Sustainable Development Program 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).

  -xv-

  Executive Summary

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

  E.10 Poor Financial Management

  Over a number of years, I have expressed my concern about public

• Page 27 of 475

• 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
  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

  -xvi-

• Page 28 of 475

• Executive Summary

  • Parliament must increase its reviews of the management of
  public entities and provide
  Chief Executive Officers with incentives to improve their
  management structures.

  E.13 Structure of the Report

  This Report is structured as follows:

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

  -xvii-

• Page 29 of 475

• Executive Summary

  ATTACHMENT ‘A’

  STATUS OF CURRENT YEAR AUDITS 2019

  No. Status of Current Year Audits Number
  of Entities

  2019/2020
  2018/2019

  1 Audits completed and reports issued thereon (Schedule A)3
  6

  2 Audits substantially completed (Schedule A) 1
  5

  3 Audits in progress (Schedule A) 32
  23

  4 Audits to commence shortly (Schedule A) 9
  17

  5 Financial Statements not submitted (Schedule A) 78
  72

  123
  123

  Status of Current Year Audits 2019

  Audits completed and Audits
  substantially
  reports issued thereon completed
  (Schedule A)
  (Schedule A) 1%
  3%

  Audits in progress

• Page 30 of 475

• (Schedule A)

  26%

  Audits to
  commence
  shortly
  (Schedule A)
  Financial Statements not 7%
  submitted (Schedule A)
  63%

  Please refer to details in Schedule ‘A’ on Pages 339 to 341.

• Page 31 of 475

• -xviii-

  Executive Summary

  ATTACHMENT ‘B’

  STATUS OF AUDITS IN ARREARS BY NUMBER OF AUDITS

  (2018 AND PRIOR YEARS)

  No. Status of Audits in Arrears by No. of Audits (2018 & prior
  years) Number of Audits

  2019/2020 2018/2019
  1 Audits substantially completed (Schedule B)
  48 44
  2 Audits in progress (Schedule B)
  59 32
  3 Audits to commence shortly (Schedule B)
  30 35
  4 Financial Statements not submitted (Schedule B)
  101 86

  238 197

  Status of Audits in Arrears by number of Audits

  (2018 and prior years)

  Audits substantially
  Financial Statements
  completed (Schedule B)
  not submitted
  20%
  (Schedule B)
  42%

• Page 32 of 475

• Audits in progress

  (Schedule B)

  25%
  Audits to commence
  shortly (Schedule B)
  13%

  Please refer to details in Schedule ‘B’ on Pages 342 to 344.

  -xix-

  Executive Summary

  ATTACHMENT ‘C’

• Page 33 of 475

• STATUS OF AUDITS AS AT 30 JUNE 2020

  No. Status of Audits
  Number of Audits

  2019/2020 2018/2019

  1 Audits completed and reports issued thereon (Schedules A & E)
  81 123

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

  3 Audits in progress (Schedules A & B)
  91 55

  4 Audits to commence shortly (Schedules A & B)
  39 52

  5 Financial Statements not submitted (Schedules A & B)
  179 158

  439 437

  Status of Audits as at 30 June 2020

  Financial Statements not
  Audits completed and
  submitted (Schedule A & B)
  reports issued thereon
  41%
  (Schedule A & E)

  18%

  Audits substantially completed

  (Schedule A & B)

  11%

• Page 34 of 475

• Audits in
  progress
  Audits to commence (Schedule
  A & B)
  shortly (Schedule A & B) 21%
  9%

  Please refer to details in Schedules ‘A’, ‘B’ and ‘E’ on Pages 339
  to 341, 342 to 344 and 349 to 351

  respectively.

• Page 35 of 475

• -xx-

  Executive Summary

  ATTACHMENT ‘D’

  TYPES OF AUDIT OPINIONS ISSUED

  (i) UNQUALIFIED OPINION

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

  1 A 3 Bank of Papua New Guinea
  2019 1

  2 A 12 Independence Fellowship Trust
  2018 & 2019 2

  3 A 13 Independent Consumer and Competition
  Commission 2018 1

  4 A 16 Investment Promotion Authority
  2018 1

  5 A 17 Kokonas Indastri Koporesen
  2018 1

  6 A 17A Papua New Guinea Coconut Extension Fund
  2018 1

  7 A 17B Papua New Guinea Coconut Research Fund

• Page 36 of 475

• 2018 1

  8 A 18 Kumul Consolidated Holdings
  2017 1

  9 A 18C PNG Dams Limited
  2017 1

  10 A 22 National Agricultural Research Institute
  2018 1

  11 A 25B Port Moresby Nature Park Limited
  2016 1

  12 A 27 National Economic and Fiscal Commission
  2018 1

  13 A 32 National Maritime Safety Authority
  2018 1

  14 A 35 National Roads Authority
  2018 1

  15 A 51 Papua New Guinea University of Technology
  2017 1

  16 A 54 Road Traffic Authority
  2017 & 2018 2

  17 A 57 Tourism Promotion Authority
  2018 1

  18 B 65 Kumul Petroleum Holdings Limited
  2018 1

  19 B 65A Eda Oil Limited
  2017 & 2018 2

  20 B 65B Kumul Exploration (Asia) Limited
  2018 1

  21 B 65H Kumul Lending Co Pte Limited
  2018 1

  22 B 65I Kumul LNG Limited
  2017 & 2018 2

  23 B 65L Kumul Petroleum (Kroton) Limited
  2018 1

  24 B 65M Kumul Petroleum (Pipeline) Limited
  2017 & 2018 2

  25 B 65N Kumul Petroleum (Tech and Advisory) Limited

• Page 37 of 475

• 2016 to 2018 3

  26 B 65O Kumul Petroleum Marketing Pte Limited
  2018 1

  27 B 65P Kumul Security Agent Limited
  2018 1

  28 B 75 Post (PNG) Limited
  2018 1

  29 B 76A DATEC (PNG) Limited
  2017 1

  30 B 76B Kalang Advertising Limited
  2016 1

  31 B 76C Media Niugini Limited (EMTV)
  2017 1

  32 B 76D PNG Directories Limited
  2017 1

  39

  -xxi-

  Executive Summary

  (ii) QUALIFIED OPINION

• Page 38 of 475

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

  1 A 5 Civil Aviation Safety Authority of Papua New
  Guinea 2018 1

  2 A 10 Conservation and Environment Protection
  Authority 2017 1

  3 A 14 Industrial Centres Development Corporation
  2017 1

  4 A 18A General Business Trust
  2017 1

  5 A 18B Kumul Technology Development Corporation
  Limited 2017 1

  6 A 19 Legal Training Institute
  2014 to 2016 3

  7 A 21 National Agriculture Quarantine and
  Inspection Authority 2017 1

  8 A 23 National AIDS Council Secretariat
  2018 1

  9 A 25 National Capital District Commission
  2017 & 2018 2

  10 A 41 Ombudsman Commission of Papua New Guinea
  2017 & 2018 2

  11 A 42 Papua New Guinea Accident Investigation
  Commission 2018 1

  12 A 47 Pacific Institute of Leadership and
  Governance 2014 1

  13 A 48 Papua New Guinea Maritime College
  2018 1

  14 A 55 Security Industries Authority
  2016 1

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

  16 B 67 Mineral Resources Development Company Limited
  2016 1

• Page 39 of 475

• 17 B 68 Motor Vehicles Insurance Limited
  2019 1

  18 B 70 NCD Water and Sewerage Limited (Eda Ranu)
  2015 & 2016 2

  19 B 71 Papua New Guinea Ports Corporation Limited
  2018 1

  20 B 73 PNG DataCo Limited
  2016 1

  26

  (iii) DISCLAIMER OPINION

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

  1 A 6 Climate Change and Development Authority
  2014 1

  2 A 9 Coffee Industry Corporation Limited
  2016 1

  3 A 9A Coffee Industry Fund
  2016 1

  4 A 9B Patana No.61 Limited
  2016 1

  5 A 24 National Broadcasting Corporation
  2015 1

  6 A 25 National Capital District Commission
  2016 1

  7 A 26 National Cultural Commission
  2015 to 2017 3

  8 A 38 National Youth Development Authority
  2017 1

  9 A 44 Papua New Guinea Forest Authority
  2013 & 2014 2

• Page 40 of 475

• 10 A 58A Unigor Consultancy Limited
  2014 & 2015 2

  11 B 77 Water PNG Limited
  2017 1

  15

  (iv) ADVERSE OPINION

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

  1 B 64 Kumul Agriculture Limited
  2018 1

  1

  -xxii-

  Executive Summary

  ATTACHMENT ‘E’

  COMPARATIVE AUDIT OPINIONS ISSUED (2013–
  2019)

  Para.
  Comparative Years

• Page 41 of 475

• No. Section Entity
  No.
  2019 2018 2017 2016 2015 2014
  2013

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

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

  3 A 4 Border Development Authority
  Disclaimer

  Papua New Guinea Maritime Transport
  4 A 4A
  Limited

  Civil Aviation Safety Authority of Papua New
  5 A 5
  Qualified Qualified Qualified Qualified Qualified
  Qualified
  Guinea

  6 A 6 Climate Change and Development Authority
  Disclaimer 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
  10 A 8
  Disclaimer
  New Guinea

  11 A 9 Coffee Industry Corporation Limited

• Page 42 of 475

• Disclaimer Disclaimer Disclaimer Disclaimer

  12 A 9A Coffee Industry Fund
  Disclaimer Disclaimer Disclaimer Disclaimer

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

  Conservation and Environment Protection
  14 A 10
  Qualified
  Authority

  15 A 11 Government Printing Office
  Disclaimer Disclaimer Disclaimer

  16 A 12 Independence Fellowship Trust
  Unqualified UnqualifiedUnqualified Unqualified Qualified
  Qualified Unqualified

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

  18 A 14 Industrial Centres Development Corporation
  Qualified Qualified Qualified Qualified Qualified

  19 A 15 Internal Revenue Commission
  Unqualified Unqualified

  20 A 16 Investment Promotion Authority
  UnqualifiedUnqualified Unqualified Unqualified Unqualified
  Unqualified

  21 A 17 Kokonas Indastri Koporesen
  UnqualifiedUnqualified Unqualified Unqualified Unqualified
  Unqualified

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

• Page 43 of 475

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

  24 A 18 Kumul Consolidated Holdings
  Unqualified Unqualified Unqualified Unqualified Unqualified

  25 A 18A General Business Trust
  Qualified Qualified Qualified Qualified Disclaimer

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

  27 A 18C PNG Dams Limited
  Unqualified Unqualified Qualified Disclaimer Disclaimer

  28 A 19 Legal Training Institute
  Qualified Qualified Qualified Qualified

  29 A 20 Mineral Resources Authority
  Qualified Qualified

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

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

  32 A 23 National AIDS Council Secretariat
  Qualified Unqualified Unqualified Qualified Disclaimer
  Disclaimer

  33 A 24 National Broadcasting Corporation
  Disclaimer Disclaimer Disclaimer

  34 A 25 National Capital District Commission
  Qualified Qualified Disclaimer Disclaimer Disclaimer
  Disclaimer

• Page 44 of 475

• National Capital District Botanical
  35 A 25A
  Enterprises Limited

  36 A 25B Port Moresby Nature Park Limited
  Unqualified Unqualified Unqualified Qualified

  37 A 26 National Cultural Commission
  Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer

  38 A 27 National Economic and Fiscal Commission
  UnqualifiedUnqualified Qualified Qualified Qualified
  Qualified

  -xxiii-

  Executive Summary

  Para.
  Comparative Years
  No. Section Entity
  No. 2019
  2018 2017 2016 2015 2014 2013

  39 A 28 National Fisheries Authority
  Disclaimer Qualified Qualified Qualified

  40 A 29 National Gaming Control Board
  Qualified Qualified Qualified

  National Gaming Control Board Community
  41 A 29A
  Qualified Qualified Qualified
  Benefit Fund Trust

  42 A 30 National Housing Corporation

• Page 45 of 475

• Disclaimer Disclaimer

  43 A 30A National Housing Estate Limited

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

  45 A 32 National Maritime Safety Authority
  UnqualifiedUnqualified UnqualifiedUnqualified Qualified Qualified

  46 A 33 National Museum and Art Gallery
  Qualified Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer

  47 A 34 National Research Institute
  Qualified UnqualifiedUnqualified Unqualified

  48 A 35 National Roads Authority
  UnqualifiedUnqualified UnqualifiedUnqualified Qualified Qualified

  49 A 36 National Training Council
  Qualified Qualified Qualified Qualified

  50 A 37 National Volunteer Service
  Qualified Qualified Qualified Qualified

  51 A 38 National Youth Development Authority
  Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer

  52 A 39 Office of the Insurance Commissioner
  New Inclusion

  53 A 40 Oil Palm Industry Corporation

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

  Papua New Guinea Accident Investigation
  55 A 42
  Qualified Unqualified UnqualifiedUnqualifiedUnqualified Unqualified

• Page 46 of 475

• Commission

  56 A 43 Papua New Guinea Customs Service
  Qualified Qualified Qualified

  57 A 44 Papua New Guinea Forest Authority
  Disclaimer Disclaimer

  Papua New Guinea Immigration and
  58 A 45
  Unqualified Qualified Disclaimer Disclaimer Qualified
  Citizenship Service Authority

  Papua New Guinea Institute of Medical
  59 A 46
  Qualified Qualified Disclaimer Disclaimer Disclaimer
  Research

  Pacific Institute of Leadership and
  60 A 47
  Qualified Qualified
  Governance

  61 A 48 Papua New Guinea Maritime College
  Qualified Qualified Qualified Qualified Disclaimer Disclaimer

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

  63 A 50 Papua New Guinea Sports Foundation
  Disclaimer Disclaimer Disclaimer

  64 A 51 Papua New Guinea University of Technology
  Unqualified UnqualifiedUnqualified Qualified Qualified

  National Analytical and Testing Services
  65 A 51A
  Limited

  Unitech Development and Consultancy
  66 A 51B
  Adverse
  Company Limited

  Parliamentary Members’ Retirement Benefits

• Page 47 of 475

• 67 A 52
  UnqualifiedUnqualifiedUnqualified Unqualified
  Fund

  68 A 53 Public Curator of Papua New Guinea
  Disclaimer

  69 A 54 Road Traffic Authority
  UnqualifiedUnqualified UnqualifiedUnqualifiedUnqualified Unqualified

  70 A 55 Security Industries Authority
  Qualified Qualified Qualified Qualified

  71 A 56 Small and Medium Enterprises Corporation
  Qualified Qualified Qualified Qualified Qualified

  72 A 57 Tourism Promotion Authority
  UnqualifiedUnqualified UnqualifiedUnqualifiedUnqualified Unqualified

  73 A 58 University of Goroka
  Disclaimer Disclaimer Disclaimer Disclaimer

  74 A 58A Unigor Consultancy Limited
  Disclaimer Disclaimer Disclaimer

  75 A 58B Unigor Humi Catering Limited

  University of Natural Resources and
  76 A 59
  Disclaimer Qualified
  Environment

  77 A 60 University of Papua New Guinea
  Qualified Qualified

  78 A 60A Unisave Limited

  79 A 60B Univentures Limited

  80 B 62 Air Niugini Limited
  Qualified Qualified Qualified

• Page 48 of 475

• -xxiv-

  Executive Summary

  No. Section Para. Entity
  Comparative Years
  No. 2019
  2018 2017 2016 2015 2014 2013

  81 B 62A Air Niugini Cargo Limited
  New Inclusion

  82 B 62B Air Niugini Properties Limited
  New Inclusion

  83 B 62C Business Travel Centre Limited
  New Inclusion

  84 B 62D Link-PNG Limited
  Unqualified

  85 B 63 Bemobile Limited
  New Inclusion

  86 B 63A Bemobile (Solomon Islands) Limited
  New Inclusion

  87 B 64 Kumul Agriculture Limited
  Adverse

  88 B 65 Kumul Petroleum Holdings Limited
  UnqualifiedUnqualifiedUnqualifiedUnqualified Unqualified

  89 B 65A Eda Oil Limited
  UnqualifiedUnqualifiedUnqualified

  90 B 65B Kumul Exploration (Asia) Limited
  UnqualifiedUnqualified

• Page 49 of 475

• 91 B 65C Kumul Gas Foreland 239 B.V
  New Inclusion

  92 B 65D Kumul Gas Foreland 261 B.V
  New Inclusion

  93 B 65E Kumul Gas Foreland 268 B.V
  New Inclusion

  94 B 65F Kumul Gas Foreland 269 B.V
  New Inclusion

  95 B 65G Kumul Gas Niugini B.V
  New Inclusion

  96 B 65H Kumul Lending Co Pte Limited
  UnqualifiedUnqualified

  97 B 65I Kumul LNG Limited
  UnqualifiedUnqualifiedUnqualifiedUnqualified Unqualified

  98 B 65J Kumul Petroleum (Development) Limited
  UnqualifiedUnqualified Unqualified

  99 B 65K Kumul Petroleum (Investments) Limited
  UnqualifiedUnqualified Unqualified

  100 B 65L Kumul Petroleum (Kroton) Limited
  UnqualifiedUnqualifiedUnqualified

  101 B 65M Kumul Petroleum (Pipeline) Limited
  UnqualifiedUnqualifiedUnqualified

  102 B 65N Kumul Petroleum (Tech and Advisory)
  UnqualifiedUnqualifiedUnqualifiedUnqualified
  Limited

  103 B 65O Kumul Petroleum Marketing Pte Limited
  UnqualifiedUnqualified

  104 B 65P Kumul Security Agent Limited
  UnqualifiedUnqualified

• Page 50 of 475

• 105 B 65Q NPCP Oil Company Pty Limited
  New Inclusion

  106 B 66 Livestock Development Corporation Limited

  107 B 67 Mineral Resources Development Company
  Qualified Disclaimer Disclaimer Disclaimer
  Limited

  108 B 68 Motor Vehicles Insurance Limited
  Qualified Qualified UnqualifiedUnqualified Qualified Qualified
  Qualified

  109 B 69 National Airports Corporation Limited
  Disclaimer Disclaimer Qualified Qualified Qualified Qualified

  110 B 69A Airport City Development Limited
  Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer
  Disclaimer

  111 B 69B Airports Investments Limited
  UnqualifiedUnqualifiedUnqualified

  NCD Water and Sewerage Limited
  112 B 70
  Qualified Qualified Qualified Qualified
  (Eda Ranu)

  113 B 71 Papua New Guinea Ports Corporation
  Qualified UnqualifiedUnqualifiedUnqualified Qualified Qualified
  Limited

  114 B 72 PNG Air Services Limited
  Qualified Qualified Qualified

  115 B 73 PNG DataCo Limited
  Qualified Qualified Unqualified

  116 B 74 PNG Power Limited
  Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer

  117 B 75 Post (PNG) Limited
  UnqualifiedUnqualifiedUnqualifiedUnqualified Unqualified
  Unqualified

• Page 51 of 475

• 118 B 76 Telikom (PNG) Limited
  Qualified Qualified

  119 B 76A DATEC (PNG) Limited
  UnqualifiedUnqualifiedUnqualified Unqualified

  120 B 76B Kalang Advertising Limited
  UnqualifiedUnqualified Unqualified Unqualified

  121 B 76C Media Niugini Limited (EMTV)
  UnqualifiedUnqualified

  122 B 76D PNG Directories Limited
  UnqualifiedUnqualifiedUnqualified Unqualified Unqualified

  123 B 77 Water PNG Limited
  Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer

  -xxv-

  Executive Summary

  ATTACHMENT ‘F’

  AUDITS IN ARREARS (2018 AND PRIOR YEARS) COMPLETED
  DURING

  2019/2020
  AUDIT CYCLE

• Page 52 of 475

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

  Issued

  1 A 3 Bank of Papua New Guinea
  2019 1

  2 A 4 Border Development Authority
  2014 1

  3 A 5 Civil Aviation Safety Authority of
  Papua New Guinea 2018 1

  4 A 6 Climate Change and Development
  Authority 2014 1

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

  6 A 9 Coffee Industry Corporation Limited
  2016 1

  7 A 9A Coffee Industry Fund
  2016 1

  8 A 9B Patana No.61 Limited
  2016 1

  9 A 10 Conservation and Environment Protection
  Authority 2017 1

  10 A 11 Government Printing Office
  2016 to 2018 3

  11 A 12 Independence Fellowship Trust
  2018 & 2019 2

  12 A 13 Independent Consumer and Competition
  Commission 2018 1

  13 A 14 Industrial Centres Development
  Corporation 2017 1
  2018 1

• Page 53 of 475

• 14 A 15 Internal Revenue Commission
  2017 & 2018 2

  15 A 16 Investment Promotion Authority
  2018 1

  16 A 17 Kokonas Indastri Koporesen
  2018 1

  17 A 17A Papua New Guinea Coconut Extension Fund
  2018 1

  18 A 17B Papua New Guinea Coconut Research Fund
  2018 1

  19 A 18 Kumul Consolidated Holdings
  2017 1 2018 1

  20 A 18A General Business Trust
  2017 1 2018 1

  21 A 18B Kumul Technology Development
  Corporation Limited 2017 1
  2018 1

  22 A 18C PNG Dams Limited
  2017 1 2018 1

  23 A 19 Legal Training Institute
  2014 to 2016 3

  24 A 20 Mineral Resources Authority
  2015 1

  25 A 21 National Agriculture Quarantine and
  Inspection Authority 2017 1

  26 A 22 National Agricultural Research
  Institute 2018 1

  27 A 23 National AIDS Council Secretariat
  2018 1

  28 A 24 National Broadcasting Corporation
  2015 1 2016 1

  29 A 25 National Capital District Commission
  2016 to 2018 3

  30 A 25B Port Moresby Nature Park Limited
  2016 1

  31 A 26 National Cultural Commission

• Page 54 of 475

• 2015 to 2017 3 2018 1

  32 A 27 National Economic and Fiscal Commission
  2018 1

  33 A 28 National Fisheries Authority
  2017 1

  National Information and Communications
  Technology
  34
  A 31 Authority (NICTA)
  2016 1

  35 A 32 National Maritime Safety Authority
  2018 1

  36 A 34 National Research Institute
  2017 1

  37 A 35 National Roads Authority
  2018 1

  38 A 36 National Training Council
  2017 1

  39 A 38 National Youth Development Authority
  2017 1

  40 A 39 Office of the Insurance Commissioner
  2018 1

  41 A 40 Oil Palm Industry Corporation
  2012 1

  42 A 41 Ombudsman Commission of Papua New
  Guinea 2017 & 2018 2

  43 A 42 Papua New Guinea Accident Investigation
  Commission 2018 1

  44 A 44 Papua New Guinea Forest Authority
  2013 & 2014 2

  45 A 46 Papua New Guinea Institute of Medical
  Research
  2018 1

  46 A 47 Pacific Institute of Leadership and
  Governance 2014 1 2015 to
  2017 3

  47 A 48 Papua New Guinea Maritime College
  2018 1

• Page 55 of 475

• 48 A 51 Papua New Guinea University of
  Technology 2017 1

  49 A 51A National Analytical and Testing
  Services Limited
  2012 1

  50 A 52 Parliamentary Members’ Retirement
  Benefits Fund
  2017 1

  51 A 53 Public Curator of Papua New Guinea
  2014 1

  52 A 54 Road Traffic Authority
  2017 & 2018 2

  53 A 55 Security Industries Authority
  2016 1

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

  55 A 57 Tourism Promotion Authority
  2018 1

  –
  xxvi-

  Executive Summary

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

  56 A 58 University of Goroka
  2017 1

  57 A 58A Unigor Consultancy Limited
  2014 & 2015 2

• Page 56 of 475

• 58 A 59 University of Natural Resources and
  Environment 2015
  1

  59 B 64 Kumul Agriculture Limited
  2018 1

  60 B 65 Kumul Petroleum Holdings Limited
  2018 1

  61 B 65A Eda Oil Limited
  2017 & 2018 2

  62 B 65B Kumul Exploration (Asia) Limited
  2018 1

  63 B 65H Kumul Lending Co Pte Limited
  2018 1

  64 B 65I Kumul LNG Limited
  2017 & 2018 2

  65 B 65J Kumul Petroleum (Development) Limited
  2017 & 2018 2

  66 B 65K Kumul Petroleum (Investments) Limited
  2017 & 2018 2

  67 B 65L Kumul Petroleum (Kroton) Limited
  2018 1

  68 B 65M Kumul Petroleum (Pipeline) Limited
  2017 & 2018 2

  69 B 65N Kumul Petroleum (Tech and Advisory)
  Limited 2016 to 2018 3

  70 B 65O Kumul Petroleum Marketing Pte Limited
  2018 1

  71 B 65P Kumul Security Agent Limited
  2018 1

  72 B 66 Livestock Development Corporation Limited
  2010 to 2017 8

  73 B 67 Mineral Resources Development Company
  Limited 2016 1

  74 B 68 Motor Vehicles Insurance Limited
  2019 1

  75 B 70 NCD Water and Sewerage Limited (Eda Ranu)
  2015 & 2016 2

• Page 57 of 475

• 76 B 71 Papua New Guinea Ports Corporation Limited
  2018 1

  77 B 73 PNG DataCo Limited
  2016 1 2017 1

  78 B 75 Post (PNG) Limited
  2018 1

  79 B 76 Telikom (PNG) Limited
  2015 to 2017 3

  80 B 76A DATEC (PNG) Limited
  2017 1

  81 B 76B Kalang Advertising Limited
  2016 1

  82 B 76C Media Niugini Limited (EMTV)
  2017 1

  83 B 76D PNG Directories Limited
  2017 1

  84 B 77 Water PNG Limited
  2017 1

  81 48

• Page 58 of 475

• Page 59 of 475

• -xxvii-

  SECTION A

  PUBLIC BODIES AND
  THEIR SUBSIDIARIES

  -xxix-

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

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

• Page 60 of 475

• -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

• Page 61 of 475

• services; and
  • do all things ancillary to the foregoing.

  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 fieldwork associated
  with the inspection and
  audit of the accounts and records and examination of the

• Page 62 of 475

• financial statements of the
  Authority for the years ended 31 December 2015, 2016, 2017, 2018
  and 2019 were in
  progress.

  -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;

• Page 63 of 475

• • formulate financial regulation and prudential 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.

  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:

  -5-

  Bank of Papua New Guinea

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

  Each of these Acts provide additional responsibilities to the
  Bank.

  3.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  3.2.1 Comments on Financial Statements

• Page 64 of 475

• My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Bank for the year ended 31 December 2019 was
  issued on 30 June
  2020. The report did not contain any qualification.

  3.2.2 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 bank for the year ended
  31 December 2019 was
  issued on 30 June 2020. The report contained the following
  significant matters:

  OTHER MATTERS

  Inscribed Stock

  As disclosed in Note 10 to the financial statements, the Bank
  has Inscribed stock
  amounting to K2.113 billion as at 31 December 2019 and K2.067
  billion as at 31
  December 2018. The Bank has an accounting policy of carrying the
  Inscribed stock at
  fair value through profit or loss. In my opinion, the current
  Inscribed stock should have
  been classified and carried at amortized cost, and accordingly
  the classification of
  Inscribed stock does not comply with IFRS 9 Financial
  Instruments. Had the Bank
  classified Inscribed stock as measured at amortized cost, a
  carrying value of K1.980
  billion would have been recorded as at 31 December 2019 and
  K2.024 billion as at 31
  December 2018, after recognizing expected credit losses. Total
  equity would have been
  reduced by K181.4 million as at 31 December 2019 and K87.3
  million as at 31
  December 2018. In addition, the fair value revaluation gain on
  domestic investments
  recorded in the statement of profit or loss and other
  comprehensive income would have
  been reduced by K85.1 million for the year ended 31 December
  2019 and K5.3 million
  for the year ended 31 December 2018, interest income would have
  been reduced by
  K10.5 million for the year ended 31 December 2019 and increased
  by K4.7 million for
  the year ended 31 December 2018, and credit loss expense would
  have been decreased
  by K1.4 million for the year ended 31 December 2019, and
  increased by K0.6 million

• Page 65 of 475

• for the year ended 31 December 2018. I raised this issue and
  management responded
  as follows:

  -6-

  Bank of Papua New Guinea

  “In the past ten (10) years, the Bank has been holding the
  Government Inscribed Stock
  (GIS) as “Available for sale” which is consistent with its
  objective of Monetary Policy Implementation and Domestic
  Liquidity Management and will continue to form part of
  Implementation and Domestic Liquidity Management and will
  continue to form part of
  its strategy going forward. The bank continues to maintain
  that even though it collects cash flow while it holds the
  GIS, the objective is not achieved by both collecting
  cash flow while it holds the GIS, the objective is not
  achieved by both collecting
  contractual cash flows and selling the asset. This is
  because the collection of
  contractual cash flows from holding the asset is not
  integral to achieving the Bank’s
  objective of managing liquidity in the financial system;
  instead it is incidental to it”
  ”

• Page 66 of 475

• -7-

  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. However, this
  Act was repealed and abolished Border Development Authority by
  Parliament through
  Border Development Authority (Repeal) Act 2019.

  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

• Page 67 of 475

• 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.

  -8-

  Border Development Authority

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

  – 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

• Page 68 of 475

• – 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 results were
  being evaluated.

  The Authority had submitted its financial statements for the
  years ended 31 December
  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
  years ended 31
  December 2018 and 2019 for my inspection and audit.

  However, I noted that Border Development Authority was abolished
  by Parliament in
  2019.

  -9-

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

  4A.1 INTRODUCTION

  4A.1.1 Legislation

• Page 69 of 475

• 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.

  I noted that the Border Development Authority Act 2008 was
  repealed and abolished
  Border Development Authority by Parliament through Border
  Development Authority
  (Repeal) Act 2019.

  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, 2018 and
  2019 for my inspection and audit despite numerous reminders.

  Since the parent entity was abolished in 2019, I will continue to
  report until Papua New
  Guinea Maritime Transport Limited is fully liquidated and
  deregistered.

  -10-

  5. CIVIL AVIATION SAFETY AUTHORITY OF PAPUA NEW

• Page 70 of 475

• GUINEA
  5.1 INTRODUCTION

  5.1.1 Legislation

  The Civil Aviation Safety Authority (CASA) 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 RECOMMENDATION

  5.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Authority for the year ended 31 December 2018
  was issued on 29
  November 2019. The report contained a Qualified Opinion.

  “QUALIFIED OPINION

  In my Opinion except for the effects of the matter described in
  the Basis for Qualified
  Opinion paragraph below:
  (a) the financial statements of Civil Aviation Safety
  Authority for the year ended
  31 December, 2018:

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

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

  -11-

• Page 71 of 475

• Civil Aviation Safety Authority of
  Papua New Guinea

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

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

  BASIS FOR QUALIFIED OPINION

  Revenue and Receivables from National Airport Corporation (NAC)
  and PNG Air
  Service Limited (PNGASL)

  Section 147E of the Civil Aviation Act 2000 stipulates for the
  NAC and the PNGASL
  to remit a percentage of airport facility charges, security
  levies and upper airspace
  aeronautical charges to CASA. Given the technical and logistical
  difficulties, it has
  been difficult for CASA to have independent data to compute its
  share of the revenue.
  As a result, CASA could not compute the amount of revenue
  receivable from the two
  entities. The current situation places CASA in a position where
  it is unable to accurately
  record and collect the income owing by NAC and PNGASL. The
  income and the related
  receivables from the 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 2018.”

  5.2.2 Audit Observation Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Authority for the year
  ended 31 December 2018
  was issued on 29 November 2019. The report contained the
  following observation:

  Non CASA Business Travels by Ministers

  A total of K531,309 was spent under Minister’s travel allowances
  account during the

• Page 72 of 475

• year. The payments from this account were mostly related to
  electoral business and not
  related to CASA’s normal operational business. I advised that
  costs incurred by the
  Minister for Non CASA sanctioned business related activities
  imposed additional
  financial burden on CASA’s resources. Therefore, I recommended
  that the Minister’s
  Office be notified of the stance going forward and that no
  further unsanctioned Non
  CASA Business travel or associated costs be allowed to be met by
  CASA. The
  management responded as follows:

  3“Recommendation noted. Minister’s Secretariat will be advised
  accordingly.”

  -12-

  Civil Aviation Safety Authority of Papua
  New Guinea

  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 2019 had been completed
  and results were
  being evaluated.

• Page 73 of 475

• -13-

  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.

• Page 74 of 475

• 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 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;
  ‒ coordinate and facilitate the implementation of the National
  Strategy on
  Climate Compatible Development;

  -14-

  Climate Change and Development
  Authority

  – 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

• Page 75 of 475

• – formulate and refine the policy framework and legislation.

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

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

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

  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 2014 was
  issued on 19 March
  2020. The report contained a Disclaimer of Opinion.

• Page 76 of 475

• -15-

  Climate Change and Development
  Authority

  “DISCLAIMER OF OPINION

  Because of the significance of the matters described in the Basis
  for Disclaimer of
  Opinion paragraph below, 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 2014.

  BASIS FOR DISCLAIMER OF OPINION

  Limitation on the Scope of my Audit

  I was unable to confirm and verify all the figures reported in the
  statement of financial
  position, statement of income and expenditure, statement of changes
  in equity, and
  statement of cash flows for the year ended 31 December 2014 due to
  lack of supporting
  documentation and information and anomalies noted as follows:

  • My report on the Office for the year ended 31 December 2013 was a
  disclaimer
  of opinion. As a result, I was unable to ensure accuracy and
  completeness of the
  opening balances entered into the determination of the results of
  operations and
  cash flows of the Office for the year ended 31 December 2014;

  • I was not provided with the general ledgers, trial balances,
  profit & loss statement
  and balance sheet generated from the MYOB system which the
  management used
  to prepare the financial statements. The management stated that
  the MYOB
  accounting system crashed therefore, they were unable to retrieve
  the 2014
  financial transaction records and data;

• Page 77 of 475

• • There were no complete records of payment vouchers available. The
  management
  advised that most of the important records including payment
  vouchers were
  misplaced in the process of the Office moving continuously from
  one location to
  another;

  • There was no audit trail. The amounts allocated to the respective
  income and
  expenditure line items were not supported with all relevant
  documents. I could
  not confirm their accuracy and completeness;

  • There was no evidence of bank reconciliations performed on a
  monthly basis and
  for the whole year. Hence, I could not ensure the accuracy of the
  cash balance at
  year end; and

  • As per the policy disclosed, the accounts of the Office are
  maintained on cash
  basis. However, I noted that the financial statements have been
  prepared and
  presented on accrual basis.”

  -16-

  Climate Change and Development
  Authority

  6.3 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 years ended 31 December 2015, 2016 and 2017
  were in progress.

  The financial statements for the years ended 31 December 2018 and
  2019 had not been
  submitted for my inspection and audit.

• Page 78 of 475

• -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

• Page 79 of 475

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

  7.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Board for the Twelve months period ended 30 September 2018 and
  Three months
  period ended 31 December 2018 were in progress. The Board had
  submitted its
  financial statements for the additional three months period to
  31 December 2018 to
  align its accounting period to match with Papua New Guinea’s
  financial year end.

  The Board had not submitted its financial statements for the
  year ended 31 December
  2019 for my inspection and audit.
  -18-

  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

• Page 80 of 475

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

  7A.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
  Fund for the twelve month period ended 30 September 2018 and
  three month period
  ended 31 December 2018 were in progress. The Board had submitted
  its financial
  statements for the additional three months period to 31 December
  2018 to align its
  accounting period to match with Papua New Guinea’s financial
  year end.

  The Fund had not submitted its financial statements for the year
  ended 31 December
  2019 for my inspection and audit.

• Page 81 of 475

• -19-

  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 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
  Fund for the twelve month period ended 30 September 2018 and
  three month period
  ended 31 December 2018 were in progress. The Board had submitted
  its financial
  statements for the additional three months period to 31 December
  2018 to align its
  accounting period to match with Papua New Guinea’s financial year
  end.

  The Fund had not submitted its financial statements for the year
  ended 31 December
  2019 for my inspection and audit.

• Page 82 of 475

• -20-

  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 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 on 18
  October 2018. Despite numerous reminders, the Company’s signed
  financial statements
  were awaited to enable me to issue these reports.

  The Company had not submitted its financial statements for the
  years ended 31
  December 2017, 2018 and 2019 for my inspection and audit.

• Page 83 of 475

• -21-

  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 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;

• Page 84 of 475

• • 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 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 29
  November 2019. The report contained a Disclaimer of Opinion.

  -22-

  Coffee Industry Corporation Limited
  “DISCLAIMER OF OPINION

  Because of the significance of the matters described in the Basis
  for Disclaimer of
  Opinion paragraphs below, I have not been able to obtain sufficient
  appropriate audit
  evidence and accordingly, I am unable to express an opinion on the
  consolidated
  financial statements of Coffee Industry Corporation Limited as at 31
  December 2016,
  its financial performance and its cash flows for the year then
  ended.

  BASIS FOR DISCLAIMER OF OPINION

  Opening Balances

  My report on the Corporation’s financial statements for the year
  ended 31 December
  2015 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

• Page 85 of 475

• accumulated fund. Since these opening balances entered into the
  determination of the
  results of operations and cash flows of the Company and the Group in
  2016, 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 2016.

  Non Consolidation of Kofi Management Services Limited

  Kofi Management Services Limited (KMSL) was incorporated as a
  subsidiary company
  of Coffee Industry Corporation Limited under the Companies Act on 21
  February 2014.
  The Company has an operating bank account with Bank South Pacific
  Limited (BSP)
  since 2015. However, I noted that no separate set of accounting
  records was maintained
  to capture transactions made through the BSP account for the 2016
  financial year,
  instead in the books of the parent company. A practice that is not
  in compliance with
  the 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 nor
  determine whether the account of the KMSL was appropriately
  consolidated with the
  parent company as required by IAS 27, Consolidated and Separate
  Financial
  Statements.

  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 other
  important reconciliations were not maintained. In addition, I noted
  that the general
  ledgers were not properly reconciled.
  -23-

  Coffee Industry Corporation Limited
  These shortcomings had placed limitations on my efforts to obtain
  sufficient
  appropriate audit evidence for my opinion. As a result, I could not

• Page 86 of 475

• 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 2016.

  Cash and Cash Equivalents – K7,037,895 (2015: K9,674,949)

  During my review of the Cash and Cash Equivalents balance of
  K7,037,895 disclosed
  in Note 7 to the consolidated financial statements, I was not
  provided with any bank
  reconciliations to perform the necessary audit procedures on the
  following accounts:

  Account / Description Amount (K)
  Cash on Hand 67,121
  Coffee Industry Fund (Cash at Bank) (979,054)
  Coffee Industry Fund (IDB) 5,479,806

  Consequently, I could not verify the completeness, existence, rights
  and validity of the
  cash and cash equivalents balance reported in the financial
  statements.

  Trade and Other Debtors – K11,624,573 (2015: K11,452,510)

  Included in the Trade and Other Debtors balance of K11,624,573 as
  disclosed in Note
  10(a) to the consolidated financial statements are the following
  accounts:

  Account / Description Amount (K)
  Rental Debtors – Rent Receivable 1,008,948
  Interest Receivables 105,717
  Amount due from Project Partners (EU)885,467
  Sundry Debtors & Prepayments 4,482,965
  GST Receivable 2,544,321
  Staff Debtors 93,912
  Other Debtors-Impasses 2,861,781
  Provision for Doubtful Debts (479,922)

  During my review, 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 could not satisfy myself as to the
  completeness and
  accuracy of the trade and other debtors balance reported in the
  consolidated statement
  of financial position for the year ended.

• Page 87 of 475

• -24-

  Coffee Industry Corporation Limited
  Inventories – K598,991 (2015: K519,779)

  As at 31 December 2016, the inventories of the Company was valued at
  K598,991 and
  disclosed in the consolidated financial statements. I did not
  observe and witness the
  physical inventory count conducted by the Company and further
  observed that adequate
  inventory records were not maintained during the period. Owing to
  the nature of the
  Company’s records, I could not satisfy myself as to the inventory
  quantities by other
  alternative audit procedures.

  Consequently, it has not been practicable to extend my audit
  procedures to satisfy
  myself on the completeness, existence, ownership and valuation of
  the inventories.

  Property, Plant and Equipment – K12,918,635 (2015: K12,592,313)

  The Company has not maintained sufficient records, including a Fixed
  Assets Register
  and title deeds of the lands and buildings to enable me to complete
  my audit procedure
  on its properties, plants and equipment valued at K12,918,635. No
  physical verification
  was 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
  K6,822,740 in Note 9 to the consolidated financial statements.
  Consequently, it has not
  been practicable to extend my audit procedures to satisfy myself on
  the completeness,
  existence, rights and valuation of the Company’s properties, plants
  and equipment and
  related depreciations valued at K1,105,387 and charged to the
  consolidated statement
  of income and expenditure for the year ended.

  Trade Creditors and Accruals – K9,079,756 (2015: K9,008,606)

  As at 31 December 2016, trade creditors and accruals have been
  reported at K9,079,756
  in the consolidated statement of financial position. Included in the
  balance are the

• Page 88 of 475

• following accounts:

  Account / Description Amount (K)
  Trade Creditors (Control A/c) 826,703
  Sundry Creditors & Accruals 5,115,551
  Business Withholding Tax 222,580
  Group Tax Clearing 744,887
  GST Payable 1,981,600

  During my review, I noted that adequate records were not maintained
  to substantiate
  these balances. Due to poor record keeping, inadequate accounting
  procedures, and
  significant non-compliance issues identified in these areas, I could
  not determine the
  completeness, accuracy and validity of the trade creditors and
  accruals balance of
  K9,079,756 reported at year ended.

  -25-

  Coffee Industry Corporation Limited
  Employee Provision – K145,697 (2015: K145,697)

  Total employee provisions amounted to K145,697 was disclosed in Note
  12 to the
  consolidated financial statements. However, the ledgers of these
  accounts and detailed
  employee provision calculation schedules were not provided for my
  review. I further
  noted that the respective balances were being carried forward from
  previous year and
  current year accruals were not captured in the accounts.
  Consequently, I was unable to
  verify the completeness, accuracy and the validity of the employee
  provisions taken up
  in the financial statements for the year ended.

  Accumulated Funds – K22,954,643 (2015: K25,085,250)

  The total accumulated fund balance of K22,954,643 disclosed in the
  consolidated
  statement of changes in accumulated funds was derived after
  processing an adjustment
  of K3,478,727 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. During my examination, the Company was unable to explain the
  variance in the
  revenue reserve account to which the above adjustment was processed.

• Page 89 of 475

• As a result, I
  could not verify the validity of the balancing adjustment processed
  nor comment on the
  completeness and accuracy of the accumulated funds of K22,954,643.

  Revenue – K21,289,224 (2015: K12,423,017)

  The Company’s total revenue for the year was K21,289,224. Included
  in this balance
  as disclosed in the detailed Statement of Income and Expenditure are
  the following:

  Account / Description Amount (K)
  National Govt’ Funding 3,598,560
  Coffee Export Levy 7,035,180
  Coffee Sales 1,086,154
  Rental Income 1,236,509
  Funding / Grants-Projects 7,000,000

  During my review, I was not provided with sufficient appropriate
  audit evidence to
  verify the balances. I was therefore unable to test these balances
  by other alternative
  means nor comment on the completeness, accuracy and the validity of
  the Company’s
  total revenue of K21,289,224 as reported.

  Expenditure – K19,941,105 (2015: K25,048,944)

  The Company’s total expenditure for the year was K19,941,105 as
  disclosed in the
  detailed Statement of Income and Expenditure. 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.

  -26-

  Coffee Industry Corporation Limited
  I was therefore unable to complete my audit procedures designed
  to verify the
  expenditure balance. Consequently, I could not comment on the
  completeness,
  accuracy and validity of the balance and of the results and cash
  flows for the year then
  ended. I am also unable to place any reliance on the
  effectiveness of the internal controls
  operated during the year.

  EMPHASIS OF MATTER

• Page 90 of 475

• 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” Unless Parliament by an
  Act amends the
  existing Act to corporatize 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 inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the year ended 31 December 2017 was in progress.

  The Company had submitted the financial statements for the year
  ended 31 December
  2018 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 2019 for my inspection and audit.

  -27-

  9A. COFFEE INDUSTRY FUND

• Page 91 of 475

• 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 report to the Ministers under Section 8(4) of the Audit Act on
  the financial
  statements of the Fund for the year ended 31 December 2016 was
  issued on 29
  November 2019. The report contained a Disclaimer of Opinion.

  “DISCLAIMER OF OPINION

  Because of the significance of the matters described in the Basis
  for Disclaimer of
  Opinion paragraphs below, I have not been able to obtain
  sufficient appropriate audit
  evidence and accordingly, I am unable to express an opinion on
  the financial statements
  of the Coffee Industry Fund as at 31 December 2016, and of its
  financial performance
  and financial position for the year then ended.

  BASIS FOR DISCLAIMER OF OPINION

  Opening Balances

  My report on the Fund for the year ended 31 December 2015 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 2016, 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 2016.

• Page 92 of 475

• 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.
  -28-

  Coffee Industry Fund

  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 2016.

  Trade and Other Debtors – K2,479,146 (2015: K3,211,705)

  The financial statements reported K2,479,146 as trade debtors as at
  31 December 2016.
  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 debtors balance reported in the
  financial statements as
  K2,479,146 for the year ended.

  Investments (IBD) – K5,479,806 (2015: K5,458,418)

  Note 2(uu) to the financial statements disclosed K5,479,806 as
  Interest Bearing Deposit
  (IBD). However, I was not provided with IBD reconciliation
  statements or certificates
  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
  K5,479,806 as at 31 December 2016.

  Tax – K166,931 (2015: K170,006)

  As at 31 December 2016 an amount of K166,931 was recorded as tax
  receivable from
  Internal Revenue Commission (IRC). This amount comprised of K32,138
  and
  K134,793 as dividend withholding tax receivable and GST receivables
  respectively.

• Page 93 of 475

• There was a decrease of K3,075 from the prior year balance but no
  relevant
  documentation was made available for my review and verification.
  Further, these
  balances had been carried forward for a number of years. As a
  result, I was unable to
  comment on the completeness, accuracy and appropriateness of the tax
  receivable
  balance disclosed at year end.

  Trade Creditors – K32,138 (2015: K32,138)

  Trade Creditors was disclosed at K32,138 as at 31 December 2016.
  However, no
  appropriate documentation or listing was made available for my
  review to determine
  the validity of this balance which has been carried forward without
  any movement for
  number of years. Consequently, I was unable to ascertain the
  completeness and
  accuracy of the trade payable balance reported at year end.

  Interest Income – K45,839 (2015: K22,919)

  The Fund disclosed in its Profit and Loss statement K45,839 as
  interest income for the
  year. However, no records were made available for my review.
  Therefore, I was unable
  to comment on the accuracy and completeness of the interest income
  for the year
  ended.”
  -29-

  Coffee Industry Fund

  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 its financial
  statements of the Fund for the
  year ended 31 December 2017 was in progress.

  The Fund had submitted its financial statements for the year
  ended 31 December 2018
  for my inspection and audit and arrangements were being made to
  commence the audit
  shortly.

  The Fund had not submitted its financial statements for the year
  ended 31 December
  2019 for my inspection and audit.

• Page 94 of 475

• -30-

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

  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.

• Page 95 of 475

• 9B.2 AUDIT OBSERVATIONS

  9B.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the financial
  statements of the Company for the year ended 31 December 2016 was
  issued on 29
  November 2019. The report contained a Disclaimer of Opinion.

  “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 2016 and of its financial
  performance for the year
  then ended.

  BASIS FOR DISCLAIMER OF OPINION

  Opening Balance

  My report for the year ended 31 December 2015 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 entered into the determination of the
  results of operations and
  cash flows of the Company in 2016, 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 2016.

  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.
  -31-

  Patana No. 61 Limited

  I also noted that the general ledger accounts were not properly
  reconciled. These

• Page 96 of 475

• shortcomings placed limitations on my efforts to obtain
  sufficient appropriate audit
  evidence for my opinion. As a result, I could not 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 2016.

  Inter-Company Loan Payable – (K806,393)

  I was not provided with the loan agreement entered into between
  the Company and its
  parent entity (Coffee Industry Corporation Limited) 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 2016.

  Fixed Assets – K559,705

  The Company has not maintained sufficient records including a
  Fixed Assets Register
  to enable me to complete my audit tests on its fixed assets
  reported at K559,705 in the
  balance sheet. 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 cost of K786,744 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, ownership and valuation
  of the Company’s
  property, plant and equipment and related depreciations of
  K7,713 charged to the profit
  and loss statement.”

  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 2017 was in progress.

  The Company had submitted its financial statements for the year
  ended 31 December

• Page 97 of 475

• 2018 for my inspection and audit and arrangements were being
  made to commence the
  audit shortly.

  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  -32-

  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 (CEPA).

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

  –
  –
  –
  drains and other structures for or in connection with the

• Page 98 of 475

• 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;

  -33-

  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 OBSERVATIONS AND RECOMMENDATIONS

  10.2.1 Comments on Financial Statements

  My report to the Minsters under Section 8(4) of the Audit Act
  on the Authority’s
  financial statements for the year ended 31 December 2017 was
  issued on 22 June 2020.
  The report contained a Qualified Opinion.

• Page 99 of 475

• “QUALIFIED OPINION

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

  (a) the financial statements of Conservation and Environment
  Protection Authority
  for the year ended 31 December 2017:

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

  (ii) the financial statements have been presented in
  accordance with the
  Public Finance (Management) (Amendment) Act 2016 and
  other
  generally accepted accounting practice in Papua New
  Guinea.

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

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

  BASIS FOR QUALIFIED OPINION

  Fixed Assets – K1,108,876

  My review of the Authority’s fixed assets and Fixed Assets
  Register (FAR) revealed
  the following:

  • Assets were not tagged with serial numbers to identify and
  confirm their existence
  and their custodian;
  -34-

  Conservation and Environment Protection
  Authority

  • A vehicle and several computers were donated or given away to
  staff without
  proper approval and documentation;
  • The assets donated/given away were not removed and updated in
  the FAR;
  • No stock take was carried out during the year under review;
  and

• Page 100 of 475

• • No fixed assets policy to properly record and manage the fixed
  assets.

  As a result, I was unable to verify and confirm the
  completeness, accuracy and existence
  of the fixed assets balance presented in the financial
  statements.”

  10.2.2 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 22 June 2020. The report contained the following
  observations:

  Expenditure – Cost Management

  My review of the expenditure of the Authority revealed that
  several expenditure items
  including transport and fuel, travel and subsistence, vehicle
  hire and administrative
  consultancy fees exceeded their budget limits under the GO PNG
  Drawing Account.
  Section 37 of the Conservation and Environment Protection
  Authority Act 2014
  requires the Authority to prepare annual plan and budget
  estimates for receipts and
  expenditures. However, there was no detailed budget of the money
  received from the
  CEPA fees to guide the expenditure. Consequently, the Authority
  expended excessively
  on the hire cars and administrative consultancy fees. As such, I
  was unable to confirm
  whether proper systems and procedures were in place to control
  the expenditure.

  Trade Debtors

  I noted existence of weakness in the collection of debts from
  the permit holders on
  timely basis to comply with Section 33 (7) of the Conservation
  and Environment
  Protection Authority Act 2014. Consequently, about K27 million
  worth of debts were
  more than 90 days due. Poor management of debt collection
  procedures may result in
  cash flow pressures and permit holders may continue to exercise
  the licenses without
  paying the fees; hence, not complying with the Conservation and
  Environment
  Protection Authority Act 2014 and Environment Act 2000.

• Page 101 of 475

• I brought this issue to the management and recommended that a
  strong debt recovery
  policy has to be in place and legal action taken against the
  permit holders with long due
  debts as per the Authority’s Act and the management responded as
  follows:

  “Agree with audit recommendations”

  -35-

  Conservation and Environment Protection
  Authority

  Cash at Bank

  My review of the cash at bank and bank reconciliation process
  revealed that the
  Authority’s monthly bank reconciliations were done systematically by
  the MYOB
  Accounting System. However, the reconciliations lacked manual
  reviewing and
  authorization by senior officers of the Authority. In addition,
  K23,732 cash collected
  from various fees in 2016 were never deposited or had no details of
  deposit between
  2016 and 2017 and remain as undeposited cash in the general ledger.
  As a result, I was
  not able to comment on the effectiveness of the controls surrounding
  the management
  of cash and bank reconciliation process. I raised this issue and
  management responded
  as follows:

  “CEPA to improve internal controls including regular bank
  reconciliations of
  accounts.”

  Lack of Proper Supporting Documentation

  I was unable to ascertain the validity and accuracy of payments
  totaling K1,550,949
  and whether goods and services were received and value for money
  achieved due to
  lack of supporting documentations including proper receipts,
  invoices or delivery
  dockets. Further, several payments made to unknown suppliers which
  carried
  significant amount had no records on file. I brought this issue to
  the management and

• Page 102 of 475

• they responded as follows:

  “CEPA to improve internal controls and set up a procurement unit to
  ensure proper
  documentation, payment processes and acquittals processes are in
  place.”

  Operational Policy Manuals

  My review revealed that the operational and procedural manuals such
  as finance and
  accounting procedural manual, fixed assets policy, travel advance
  register and policy
  and debt collection policy were not in place. In the absence of
  clearly designed and
  approved policy manuals and guidelines, there is a high risk of
  abuse and malpractice
  to take place within the Authority. As a result, I was unable to
  measure and comment
  on the standards of operations in relation to the systems and
  controls and whether
  uniform procedures were followed in the respective divisions/
  sections.

  I brought this issue up and management responded that the Authority
  had engaged a
  consultant to draft the policies and Fixed Assets Register. In
  addition, a procurement
  unit was established in 2019 to monitor all advances (including
  acquittals).

  -36-

  Conservation and Environment Protection
  Authority

  Internal Audit Function

  I noted that the Authority did not have in place an internal
  audit function. As such, there
  was no proper control mechanism in place to ensure policies and
  procedures put in place
  by the board of governance are properly followed and applied in
  the Authority’s daily
  operations. I brought this issue up and management responded as
  follows:

  “An internal audit unit be established once the CEPA’s

• Page 103 of 475

• organization restructure is
  completed and approved. Note that in 2013, the Department of
  Personnel Management
  (DPM) gave an instruction by way of circular to all departments
  to halt recruitment of

  internal audit vacancy.”

  Management Information System (MIS)

  The Authority did not have a MIS and kept manual records in
  conjunction with PGAS.
  I also noted that MYOB Accounting System was used to create
  general ledger for the
  purpose of audit. However, MYOB system was only installed in
  external consultant’s
  computer. There was no centralized server or data base installed
  and connected. I raised
  this issue with the management and management responded as
  follows:

  “CEPA to work with the engaged consultant to ensure the MIS and
  server are installed
  and connected immediately.”

  10.3 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.

  The Authority had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  -37-

  11. GOVERNMENT PRINTING OFFICE

• Page 104 of 475

• 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 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
  Office for the years ended 31 December 2016 and 2017 had been
  completed and the
  audit reports were expected to be issued shortly.

  The fieldwork associated with the inspection and audit of the
  accounts and records and
  the examination of the financial statements of the Office for the
  year ended 31
  December 2018 had been completed and the results were being
  evaluated.

  The Office had not submitted its financial statements for the
  year ended 31 December
  2019 for my inspection and audit.

• Page 105 of 475

• -38-

  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

  12.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Trust for the years ended 31 December 2018 and
  2019 were issued on
  29 August 2019 and 29 June 2020 respectively. The reports did not
  contain any
  qualification.

• Page 106 of 475

• -39-

  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 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

• Page 107 of 475

• consumer matters; and
  • do all other things relating to consumer affairs.

  -40-

  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 2018
  was issued on 30
  September 2019. The report did not contain any qualification.

  13.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Commission’s financial
  statements for the year
  ended 31 December 2019 had been submitted and arrangements were
  being made to
  commence the audit shortly.

• Page 108 of 475

• -41-

  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

  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 2017
  was issued on 2
  September 2019. The report contained a Qualified Opinion.

  “QUALIFIED OPINION

• Page 109 of 475

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

  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 2017 and the results of its financial operations and
  cash flows for the
  year then ended.

  -42-

  Industrial Centres Development
  Corporation

  BASIS FOR QUALIFIED OPINION

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

  The Corporation has disclosed its trade debtors balance as
  K3,520,441 (included as part
  of total debtors of K3,810,007) in the financial statements at 31
  December 2017. I noted
  that of the K3,520,441 receivable, K3,026,878 has been 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 a result, I was unable to satisfy myself as to the
  accuracy and collectability of
  the trade debtors as reported at the year end.

  Fixed Assets – K63,527,082

  My review of the fixed assets for 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 2017. I further noted
  that the disposals of
  Land and Building and Computer Equipment during the year were not

• Page 110 of 475

• approved by the
  Corporation’s Board. Further, the Corporation has not conducted any
  stock take of its
  fixed assets for a number of years. As a result, I was unable to
  place reliance on the
  effectiveness of the controls surrounding the management of the
  fixed assets.
  Consequently, I was not able to comment on the condition, valuation
  and existence of
  the fixed assets as disclosed in the financial statements at the
  year end.

  Land Sales Debtors – K289,566

  Included in the total debtors of K3,810,007 were land sales debtors
  totaling K289,566.
  I observed that land sales debtors have 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 2017.

  Provision for Doubtful Debt – K1,492,333

  I noted that the Corporation has made a provision for doubtful debts
  totaling K70,178
  during the year under review, thus brought the total provision of
  doubtful debts to
  K1,492,333. However, there was no policy on provisions and basis of
  calculations of
  provision for doubtful debts. Further, I was not provided with
  either the schedule and
  general ledger transactions listing of the doubtful debts of K70,178
  as disclosed in the
  financial statements. As a result, I was unable to ascertain the
  accuracy, completeness
  and valuation of the provision for doubtful debts as disclosed in
  the financial statements
  at 31 December 2017.

  -43-

  Industrial Centres Development
  Corporation

  Cash at Bank – K2,399,412

  The independent bank confirmation certificate for the Bond
  account with Malahang
  Industry Centre for the year ended 31 December 2017 was not

• Page 111 of 475

• provided for my review.
  As a result, I was unable to confirm the closing bank balance as
  reported in the financial
  statements.”

  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
  2017 was issued on 2 September 2019. The report contained the
  following observations:

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

  The Corporation had not prepared and submitted its financial
  statements to my Office
  before 31 March 2017 to enable me to conduct the audit and issue
  the audit report within
  the time frame stipulated in the Public Finance (Management)
  (Amendment) Act 2016.
  Consequently, the Corporation had breached Section 63(1) and
  63(3) of the above Act.

  Board Minutes

  I noted that there were eleven (11) Board meetings held during
  the year under review.
  Out of the eleven meetings, seven (7) were special meetings and
  four (4) were quarterly
  meetings that were held in February, August, October and
  December respectively.
  However, I noted that all the meeting minutes were not signed by
  the Chairman to
  confirm the minutes were correct and true recording of the
  proceedings at the meetings.
  As a result, I was unable to comment and conclude on whether
  there were proper
  proceedings held and whether all major transactions and
  decisions made and transpired
  were in the best interest of the Corporation. I queried the
  management of the
  Corporation and they responded to my observation as follows:

  “The management has agreed and gave direction to the Board
  Secretary to ensure all
  board meeting minutes are signed chronologically to confirm that
  minutes are true and
  correct resolutions of the Board.”

  Staff Advance

• Page 112 of 475

• My review of the Corporation’s staff debtors revealed that there
  was no proper control,
  monitoring and recovery of the staff advances. As a result,
  recouping staff advances
  was slow and ineffective. I also noted that the Corporation had
  no policy on staff
  advances to control, monitor, recover and deal with those who
  don’t comply with it.

  As such, staff advances amounting to K111,553 had been
  outstanding (without
  movement) for a considerable period of time. The management
  responded to my query
  as follows;
  -44-

  Industrial
  Centres Development Corporation

  “Management also agreed and directed during its meeting that this
  list be checked,
  reviewed and the outstanding balances be confirmed and letters be
  written to the people
  conc erned to pay the outstanding or legal action will be taken
  against them And

  management to seek Board approval to write them off.”

  Business Growth Centre

  My review of the fixed assets revealed that the Fixed Assets
  Register and other
  information in relation to the fixed assets under the Business
  Growth Centre were
  destroyed/lost at the time when the officer in charge of these
  records left employment
  with the Corporation. Consequently, I was unable to establish the
  value of assets under
  the Business Growth Centre at year end. As a result, the accuracy
  and completeness of
  the fixed assets disclosed in the financial statements cannot be
  ascertained as there were
  no records to support the movements of assets under the Business
  Growth Centre. I
  drew my observation to the Management of the Corporation and they
  responded as
  follows:

  “Management will ensure the relevant information is collected from
  the previous
  existing records to be verified and sanctioned by the Head of the
  Division so that a
  proper and authentic record is maintained reflective of the current

• Page 113 of 475

• asset.”

  GST Payable – K1,183,455

  During my review of GST, I observed that the Corporation had not
  submitted the GST
  Returns for the year under review as per the GST Act, 2003 (Section
  63-66) which
  stipulates that GST must be remitted within 21 days for the
  subsequent taxable period
  or (accounting period). This practice would attract penalty by IRC
  in additional tax
  payable at the rate of 10% on the amount owing and 20% calculated on
  annual basis. I
  sought explanation from the ICDC Management and they responded to my
  concern as
  follows:

  “GST payables relates mainly to unpaid invoices from MIC tenants who
  have accounts
  in arrears with rentals. This is directly related to Trade Debtors.
  We have had several
  meetings with IRC POM and Lae with regards to outstanding GST
  returns and we both
  agreed to settle the outstanding liability and moving forward and
  reaching an
  agreement for them (IRC) to waiver the charges/penalties imposed.
  After complying I
  and remitting payments on a timely basis, we are now current with
  GST and SWT IRC
  and ICDC are working together on this.”

  -45-

  Industrial Centres Development Corporation

  Travel Advance / Acquittal Register

  The Corporation had not maintained Travel Advance/Acquittal
  Registers for Head
  Office and Malahang Industrial Centre despite my recommendation in
  my previous
  audits. Due to non-existence of the Advance/Acquittal Register
  during the year under
  review, I was unable to trace the authenticity of advances against
  the acquittals. The
  management responded to my query as follows;

• Page 114 of 475

• “Management has taken note and agrees that this is an ongoing
  problem. The matter
  is now being addressed with management taking steps to appoint a
  qualified accounts
  Officer to handle this issue.”

  Lease Agreement

  During my review, I noted that the Lease Agreement between Telikom
  PNG Ltd and
  the Corporation for the office rental had expired in 2016. As a
  result, I was unable to
  ascertain the monthly payment of K32,500 for office rental with a
  total rental of
  K390,000 incurred during the year under review. I recommended the
  management to
  renew the office lease agreement with Telikom (PNG) Ltd so that
  monthly rental
  payment complies with the rates agreed in the lease agreement and
  the Corporation
  responded as follows:

  “There have been a series of constant dialogue with the Landlord
  (Telikom) through
  telephone, letters and email for new lease Agreement to ensure
  payments of rentals
  were done but to no avail. Hence, ICDC has refused to pay its rental
  fees until a proper
  Lease Agreement is in place.”

  Goods and Service Procurement Process Weaknesses

  My review of the Corporation’s procurement processes revealed the
  following control
  weaknesses:

  • The total cheque payments of K126,869 lacked three (3) quotations
  for goods and
  services worth K5,000 and over as required by the Public Finance
  (Management)
  (Amendment) Act 2016;

  • The total expenses of K413,292 had no proper supporting
  documentations such
  as invoices, receipts and cheques copies to substantiate the
  validity and
  completeness of the expenses incurred for the year ended 31
  December 2017; and

  • The total cheque payments of K99,130 and K93,262 were not
  approved by the
  Managing Director and Corporate Service Director apart from
  signing the

• Page 115 of 475

• cheques for payments

  -46-

  Industrial Centres Development
  Corporation

  As a result, I was unable to place reliance on the effectiveness
  on the controls
  surrounding the procurements process of the Corporation. Also the
  Corporation is in
  breach of Public Finance (Management) (Amendment) Act 2016. I
  brought this to the
  attention of the Management and they responded that:

  “Appropriate measures and steps have been taken to comply with
  the Public Finance
  Management Amendment Act 2016 to address some of the issues
  highlighted such as
  obtaining three (3) quotes for payments over K5,000 and to ensure
  all proper
  documentation are attached with payments vouchers duly signed and
  approved by the
  accountable Officers.”

  Other Internal Control Weaknesses

  Other weaknesses noted during my review were:

  • Certain cost on preliminary activities were over spent by the
  Corporation on the
  projects and they are still incomplete;
  • Salary Sacrifice Approval from IRC was not sought for two
  officers;
  • Inadequate control over cash encashment and payment to
  suppliers;
  • Reconciliations of general ledger accounts were not prepared
  on a periodic basis
  and the expenditure general ledgers for Business Growth Centre
  were not made
  available for my audit inspection;
  • There were no assets identification numbers or tags allocated
  to each assets listed
  in the Fixed Assets Register;
  • The salary history cards for the staff were not updated by the
  HR in terms of base
  salary, higher duty allowance, other allowances and leave
  records such as
  recreational, sick, compassionate and long service leaves;
  • Recreational leave fares were paid to the employees and
  dependents without valid
  supporting documents such as birth and marriage certificates;

• Page 116 of 475

• and
  • There was no Internal Audit Unit established as per Section 9
  Subsection 6 of the
  Public Finances (Management) (Amendment) Act 2016.

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

  14.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection of
  accounts and records and the examination of the financial
  statements of the Corporation
  for the year ended 31 December 2018 had been completed and the
  management letter
  was issued on 12 May 2020. The management letter responses were
  being awaited to
  finalise and issue the audit reports.

  The Corporation had not submitted its financial statements for
  the year ended 31
  December 2019 for my inspection and audit.
  -47-

  15. INTERNAL REVENUE COMMISSION

  15.1 INTRODUCTION
  15.1.1 Legislation

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

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

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

  15.1.2 The Objective of the Commission

  The objective of the Internal Revenue Commission is to raise
  revenue for the

• Page 117 of 475

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

  15.1.3 The Powers and Functions of the Commission

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

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

  -48-

  Internal Revenue Commission

  15.2 STATUS OF FINANCIAL STATEMENTS
  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records, and the examination of the
  financial statements of the
  Commission for the years ended 31 December 2016 and 2017 had been
  completed on
  23 April 2019 and 20 June 2019 respectively. Despite repeated
  reminders, the
  management responses along with the signed financial statements
  were being awaited
  to finalise the audit reports.

• Page 118 of 475

• The Commission had not submitted its financial statements for the
  years ended 31
  December 2018 and 2019 for my inspection and audit.

  -49-

  16. INVESTMENT PROMOTION AUTHORITY

  16.1 INTRODUCTION

  16.1.1 Legislation and Objective of the Authority

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

• Page 119 of 475

• Investment Promotion
  Act 1991.

  16.1.2 Functions of the Authority

  The principal functions of the Authority are to:

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

  16.2 AUDIT OBSERVATIONS

  16.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Authority for the year ended 31 December 2018
  was issued on 27
  January 2020. The report did not contain any qualification.

  16.2.2 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 2018
  was issued on 27 January 2020. The report contained the
  following observations:

  Fixed Assets

  My review of the fixed assets for the year ended 31 December
  2018 revealed that the
  Authority had not fully complied with Part 32 of the Financial
  Management Manual
  by not maintaining an updated Fixed Assets Register. Physical
  assets recorded in the
  Fixed Assets Register were not tagged and labelled with serial
  numbers and no proper
  stock take was carried out during the year to update the Fixed
  Assets Register.

  -50-

  Investment Promotion Authority

• Page 120 of 475

• I brought this issue to the attention of the management and the
  management noted my
  concerns and responded as follows:

  “We have commenced on this project by way of recruiting an
  accounting graduate; and
  purchased a label printer; we have adopted a naming convention; and
  we have
  commenced labeling existing assets here at the head office; the
  final step yet to be
  implemented is to purchase fixed assets register software. We note
  the audit
  recommendation and will address the issue accordingly.”

  Personnel Files

  My examination of the Authority’s personnel files revealed lack of
  proper maintenance
  of staff salary ledgers/cards, gratuity records, and leave history
  for employees. I stressed
  the importance of proper filing and regular update of records for
  ease of access to
  employee’s information and to facilitate correct calculation of
  their entitlements. As a
  result, I was unable to confirm on what basis salaries and
  allowances were paid.

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

  “We agree with the audit findings on not maintaining salary history
  cards for all
  officers. Our Human Resource team have been made aware of this
  recommendation,
  hence, will commence preparing salary history cards for all officers
  for 2020 and
  onwards.I We note the recommendation and will adhere.”

  Leave Fares

  I noted that a total of K280,548 was paid by the Authority to its
  employees and their
  dependents as leave fares during the year. However, I was unable to
  verify the validity
  and authenticity of the staff dependents (children) ages for leave
  fares as no birth
  certificates were attached to the payment vouchers or in their
  personnel files.

  I drew management’s attention to the requirements of the General
  Orders 14.41 for
  compliance. The management responded to my observation as follows:

• Page 121 of 475

• “We are not sure why HR team didn’t request birth certificates;
  however, notice will
  be issued to staff to provide legal documentation of their natural
  born children and
  adopted children who are 18 years and below.”

  -51-

  Investment Promotion Authority

  Travel Acquittal and Travel Advance Register

  The Financial Management Manual, Part 20, paragraph 14.1
  stipulates that an
  advance register be maintained to keep record of all advances
  authorized. Also, the
  paragraph 11.2 requires travel advances to be acquitted within 14
  days of return from
  overseas travels whilst paragraph 12.10 requires that travel
  advances from domestic
  travels be acquitted within 7 days from the day of return.

  However, my review revealed that a travel advance register had
  not been maintained
  by the Authority. Hence, the travel and subsistence expenses were
  not acquitted with
  proper acquittal documents such as the receipts/invoices,
  boarding passes and other
  relevant supporting documents. Consequently, I could not verify a
  total of K228,419
  paid for travel and subsistence expenses during the year under
  review.

  This issue was brought to the attention of the management and the
  management noted
  my concerns and responded as follows:

  “We concurred that the travel advance register had not been
  frequently updated during
  the year to ensure acquittals are done after an officer returns
  from duty travel. We note
  the recommendation and will adhere.”

  16.3 STATUS OF FINANCIAL STATEMENTS

• Page 122 of 475

• At the time of preparing this Report, the Authority had submitted
  the financial
  statements for the year ended 31 December 2019 for my inspection
  and audit and
  arrangements were being made to commence the audit shortly.

  -52-

  17. KOKONAS INDASTRI KOPORESEN
  (Formerly Copra Marketing Board of PNG)
  17.1 INTRODUCTION

  17.1.1 Legislation

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

  17.1.2 Functions of the Koporesen

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

  17.1.3 Funds of the Koporesen

• Page 123 of 475

• The Kokonas Indastri Koporesen Act subsequently established PNG
  Coconut
  Extension Fund and PNG Coconut Research Fund. Comments in
  relation to these Funds
  are contained in paragraphs 17A and 17B respectively, of this
  Report.

  17.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  17.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on
  the financial
  statements of the Koporesen for the year ended 31 December 2018
  was issued on 29
  May 2020. The report did not contain any qualification.

  17.2.2 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 Koporesen for the year
  ended 31 December
  2018 was issued on 29 May 2020. The report contained the
  following observations:

  Land & Building – No Land Title Deeds

  I noted that the Koporesen disclosed K20,529,450 as its closing
  balance for Land and
  Buildings at year end. However, my review of its records revealed
  that the Koporesen
  had disclosed two (2) land portions (Section 16 Allotment 13, in
  Kimbe and Section 31
  Allotment 11 Mangola Street, in Lae) as part of its assets
  without obtaining their land
  titles/ownerships.
  -53-

  Kokonas Indastri Koporesen

  The total value of land and improvements disclosed was K2,113,000
  and K1,349,000
  respectively on these portions.

  Further, there were unresolved issues related to those portions
  of land between other
  State entities (NAQIA and PNG Ports) and the Koporesen. In
  relation, I noted that the
  land titles are held by other State entities whilst the sheds
  (buildings) were erected by
  the Koporesen. As such, the Koporesen’s disclosure of both land
  and improvement

• Page 124 of 475

• values would be a departure from IAS 16 as ownership of land was
  in dispute.

  Investments

  Note 7 of the financial statements disclosed that in 2017, the
  PNG Cocoa Coconut
  Institute (PNGCCI) was abolished and its functions and staff
  subsumed by the
  Koporesen commencing this year. As such, the Koporesen’s
  investment of K266,003
  would be reassessed once PNGCCI is finally liquidated and
  deregistered.

  17.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Koporesen had not
  submitted its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

  -54-

  17A. PAPUA NEW GUINEA COCONUT EXTENSION FUND
  17A.1 INTRODUCTION

  17A.1.1 Legislation

• Page 125 of 475

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

  17A.1.2 Objective of the Fund

  The objective of the Fund is to engage in extension services and
  related programs by
  itself or in co-operation with other persons or bodies for the
  benefit of the Copra
  Industry.
  The Fund was administered by the Copra Marketing Board up to 3
  June 2002 and has
  since been administered by Kokonas Indastri Koporesen.

  17A.2 AUDIT OBSERVATIONS

  17A.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 Extension Fund for the year ended 31 December
  2018 was issued
  on 29 May 2020. The report did not contain any qualification,
  however, a going
  concern issue is reproduced as follows:

  “Going Concern

  I refer to Note 1 of the Extension Fund’s financial statements
  which disclose that the
  Fund was abolished in 2017 and its extension functions and staff
  subsumed by the
  Kokonas Indastri Koporesen. A registered liquidator would be
  appointed to formally
  liquidate PNG Cocoa Coconut Institute (PNGCCI) and deregistered
  from the register
  of companies. I will continue to report until PNGCCI is fully
  liquidated and
  deregistered and its related functions are formally transferred
  to KIK and Cocoa
  Board. My opinion is not modified in respect of this matter.”

  17A.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Fund had not submitted
  its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

• Page 126 of 475

• -55-

  17B. PAPUA NEW GUINEA COCONUT RESEARCH FUND

  17B.1 INTRODUCTION

  17B.1.1 Legislation and Objective of the Research Fund

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

  17B.2 AUDIT OBSERVATIONS

  17B.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 Research Fund for the year ended 31 December
  2018 was issued on
  29 May 2020. The report did not contain any qualification,
  however, a going concern
  issue is reproduced as follows:

  “Going Concern

  I refer to Note 1 of the Research Fund’s financial statements
  which disclosed that the
  Fund was abolished in 2017 and its research functions and staff
  subsumed by the
  Kokonas Indastri Koporesen. A registered liquidator would be
  appointed to formally
  liquidate PNG Cocoa Coconut Institute (PNGCCI) and deregistered
  from the register
  of companies. I will continue to report until PNGCCI is fully
  liquidated and
  deregistered and its related functions are formally transferred
  to KIK and Cocoa
  Board. My opinion is not modified in respect of this matter.”

  17B.3 STATUS OF FINANCIAL STATEMENTS

• Page 127 of 475

• At the time of preparing this Report, the Research Fund had not
  submitted its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

  -56-

  18. KUMUL CONSOLIDATED HOLDINGS (Formerly Independent Public
  Business Corporation)

  18.1 INTRODUCTION

  18.1.1 Legislation

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

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

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

  The Principal Independent Public Business Corporation Act was
  amended on 12
  August 2015. The name of the Independent Public Business
  Corporation was repealed

• Page 128 of 475

• and replaced with Kumul Consolidated Holdings. The objectives
  and functions of the
  principal Act were not amended and all dividends declared by
  Kumul Consolidated
  Holdings shall be paid into the Sovereign Wealth Fund.
  18.1.2 Objectives of the Corporation
  The objectives of the Corporation are to:

  • act as trustee of the Trust and hold assets and liabilities
  that have been vested in
  or acquired by it, on behalf of the State;
  • act as a financial institution for the benefit of and the
  provision of financial
  resources and services to State Owned Enterprises and the
  State, where approved
  by the National Executive Council (NEC);
  • enhance the financial position of the State or State Owned
  Enterprises; and
  • enter into and perform financial and other arrangements that
  in the opinion of the
  Corporation have as their objective either:
  – the advancement of the financial interests of the State or
  State Owned
  Enterprises; or
  – the development of the State or any part thereof.

  -57-

  Kumul Consolidated Holdings

  18.1.3 Functions of the Corporation

  The main functions of the Corporation are to:

  • administer the Trusts and monitor the performance of the
  assets of the Trusts in
  such manner as provided under this Act and shall perform such
  other functions as
  are required under this Act.
  • without limiting the generality of Section (1) but subject to
  the provisions of this
  Act, the Corporation may:
  – undertake the function of holding and monitoring
  corporation for State
  owned assets and Majority State Owned Enterprises;
  – undertake the function of planning, coordinating and
  managing State
  assets, infrastructure and projects;
  – determine policies regarding:
  – the conduct of its affairs and the affairs of any of
  the Trusts; and
  – the administration, management and control of the

• Page 129 of 475

• Corporation
  and any of the Trusts;
  – borrow, raise or otherwise obtain financial accommodation
  in PNG;
  – advance money or otherwise make financial accommodation
  available to
  the State or State Owned Enterprises;
  – act as a central borrowing and capital raising authority
  for State Owned
  Enterprises;
  – act as agent for State Owned Enterprises in negotiating,
  entering into and
  performing financial arrangements;
  – provide a medium for the investment of funds of State
  Owned Enterprises;
  – manage or cause to be managed the Corporation’s financial
  rights and
  obligations; and
  – such other functions and duties as are prescribed by the
  Act or any other
  Act.

  18.1.4 Trust of the Corporation

  The Trust of the Corporation is the General Business Trust.
  Comments in relation to
  the Trust are contained in paragraph 18A of this Report.

  18.1.5 Subsidiaries of the Corporation

  The subsidiaries of the Corporation are Kumul Technology
  Development Corporation
  Limited (formerly Port Moresby Private Hospital Limited) and PNG
  Dams Limited.
  Comments in relation to these subsidiaries are contained in
  paragraphs 18B and 18C of
  this Report.

  -58-

  Kumul Consolidated Holdings

  18.2 AUDIT OBSERVATIONS

  18.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Corporation for the year ended 31 December

• Page 130 of 475

• 2017 was issued on 28
  February 2020. The report did not contain any qualification.

  18.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Corporation for the year ended 31 December 2018 had been
  completed and results were
  being evaluated.

  The fieldwork associated with the inspection and audit of the
  accounts and records and
  the examination of the financial statements of the Corporation
  for the year ended 31
  December 2019 was in progress.

  -59-

  18A. GENERAL BUSINESS TRUST (Trust under Kumul Consolidated
  Holdings)
  18A.1 INTRODUCTION

• Page 131 of 475

• 18A.1.1 Legislation

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

  The Kumul Consolidated Holdings (KCH) (formerly Independent
  Public Business
  Corporation of PNG) was appointed as Trustee of the Trust and
  all moneys belonging
  to the Trust shall be invested or dealt with by KCH in
  accordance with the Act;

  At any time before or after the commencement date of the Act,
  the Minister
  responsible for privatisation matters may vest certain assets
  and liabilities in the
  Kumul Consolidated Holdings as Trustee of the Trust; and

  All the State Owned Enterprises and other investments owned by
  the State of PNG
  are vested in the Trust by the Minister responsible for
  privatisation as approved by
  the NEC from time to time.

  18A.2 AUDIT OBSERVATIONS

  18A.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the Trust’s financial
  statements for the year ended 31 December 2017 was issued on
  28 February 2020.
  The report contained a Qualified Opinion.

  “QUALIFIED OPINION

  In my Opinion, except for the effects of the matters described
  in the Basis for
  Qualified Opinion paragraphs below:
  (a) the financial statements of General Business Trust for the
  year ended 31
  December 2017:

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

  (ii) the financial statements have been presented in
  accordance with the

• Page 132 of 475

• International Financial Reporting Standards and other
  generally
  accepted accounting practice in Papua New Guinea.
  -60-

  General Business Trust

  (b) proper accounting records have been kept by the Trust, as far as
  appears from
  my examination of those records; and

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

  BASIS FOR QUALIFIED OPINION

  Value and Ownership of Lancron Naval Base Property

  My report of the Trust for the year ended 31 December 2016 was
  qualified in respect
  of the inability of the Trust to provide the State Lease of the
  Lancron Naval Base of
  the Defence Department valued at K46,628,175 recorded under
  investment
  properties.

  I was unable to perform sufficient audit procedures to satisfy
  myself as to the accuracy
  or existence of the opening balance or comparatives as reported in
  the financial
  statements due to non-provision of requisite documents. Any
  adjustments that are
  found to be necessary on the opening balance of the investment
  property would have
  a consequential effect on the profit and loss for the year ended 31
  December 2017
  and the comparative profit and loss account presented and the
  respective statement of
  financial position and statement of cash flows.

  As at the date of this audit report, I was not provided with the
  State Lease for this
  property. Therefore, I was unable to obtain sufficient appropriate
  audit evidence to
  determine the fair value of this asset reported at K46,628,175 in
  Note 11 and included
  in the statement of financial position as at 31 December 2017.

  Transfer of Lae Port Project (LPP)

  The Lae Port Project (LPP) was completed at a total cost of
  K714,419,665 and
  transferred to PNG Ports Corporation Limited (PPCL) in 2015.
  Included in the total

• Page 133 of 475

• project costs was the GoPNG component recorded in the books of the
  Trust at
  K223,527,155 as disclosed in Note 14(b), Projects Under Construction
  of the
  financial statements as at 31 December 2017.

  I further noted that the General Business Trust under Note 14(a),
  Unquoted Equity
  Securities included investment value in PNG Ports Corporation
  Limited at
  K585,000,000 which was carried at valuation. In the valuation of the
  investment in
  PNG Ports Corporation Limited, the future cash flows of LPP was
  factored. In my
  view, the amount of investment projects valuing K223,527,155 was
  duplicated
  without any explanation.

  As a result, total Investments value of K5,160,523,296 reported in
  the Statement of
  Financial Position of the Trust had been overstated by K223,527,155
  as at 31
  December 2017.

  -61-

  General Business Trust

  Valuation of Investment (Shareholding) in Pacific International
  Hospital

  On 26 July 2016, the Board of Kumul Consolidated Holdings approved
  the transfer
  of the Company’s investment property at a book value of K81 million
  in exchange
  for shares in Pacific International Hospital (PIH) without any
  proper due diligence.
  The share investment in PIH was then recorded at K9.5 million in the
  Company’s
  books and statement of financial position as at 31 December 2016. As
  a result, a loss
  of K71.6 million was recorded for the financial year ended 31
  December 2016.

  In 2017, the Company engaged an independent valuer to perform
  valuation of the
  investment in PIH. The independent valuer asserted that the
  investment in PIH valued
  K41.8 million as at 31 December 2017. This had resulted in a fair
  value gain of K32.3
  million (K41.8 million less K9.5 million) recorded for the financial
  year ended 31
  December 2017.

• Page 134 of 475

• I have engaged an expert valuer for review of the valuation and
  raised a number of
  queries to the management regarding appropriateness of the approach
  undertaken and
  sufficiency of the data and estimates utilized in the valuation.
  However, these queries
  have never been addressed by the Company at the time of this report.
  As a result, I
  concluded that the indicative value of the investment in PIH shown
  in the valuation
  report and recorded in the books of the Company were not reasonable
  and may not
  represent fair value in accordance with International Financial
  Reporting Standards
  (IFRS) guidelines. Any adjustment found necessary would have a
  material impact on
  the statement of financial position and statement of comprehensive
  income for the
  year ended.

  EMPHASIS OF MATTER

  Going Concern

  The K800 million loan of the Trust from Bank of South Pacific (BSP)
  required the
  submission of an asset sale plan related to the Fairfax property on
  or before 31
  December 2015. The Trust failed to submit the said requirement until
  the loan
  matured on 30 June 2018. On 6 July 2018, BSP had approved the
  extension of
  maturity of the loan to 30 June 2019 provided that the asset sale
  plan was submitted
  on or before 31 December 2018. However, the Trust is yet to submit
  the required
  asset sale plan as at the date of this report.

  This is in breach of the loan covenant and BSP has the right to
  demand payment of
  the loan at any time. Because of the importance of this non-
  compliance of loan
  agreement by the Trust, I consider necessary to bring this to your
  attention.”

  -62-

  General Business Trust

• Page 135 of 475

• 18A.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Trust for the year ended 31 December 2018 had been completed
  and the results
  were being evaluated.

  The fieldwork associated with the inspection and audit of the
  accounts and records
  and the examination of the financial statements of the Trust for
  the year ended 31
  December 2019 was in progress.

  -63-

• Page 136 of 475

• 18B. KUMUL TECHNOLOGY DEVELOPMENT CORPORATION
  LIMITED (Subsidiary of Kumul Consolidated Holdings)

  18B.1 INTRODUCTION

  18B.1.1 Legislation

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

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

  18B.1.2 Objective of the Company

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

  18B.2 AUDIT OBSERVATIONS

  18B.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the financial
  statements of the Company for the year ended 31 December 2017
  was issued on 28
  February 2020. The report contained a Qualified Opinion.

  “QUALIFIED OPINION

  In my Opinion, except for the effects of the matter described in
  the Basis for Qualified
  Opinion paragraph below:

  (a) the financial statements of Kumul Technology Development
  Corporation
  Limited for the year ended 31 December 2017:

• Page 137 of 475

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

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

  -64-

  Kumul Technology Development Corporation
  Limited

  (b) proper accounting records have been kept by the Company, as far
  as it appears
  from my examination of those records; and
  (c) I have obtained all the information and explanations required.

  BASIS FOR QUALIFIED OPINION

  Valuation of Investment (Shareholding) in Pacific International
  Hospital

  On 25 July 2016, the Board of Kumul Consolidated Holdings approved
  the transfer
  of the Company’s investment property at a book value of K81 million
  in exchange
  for shares in Pacific International Hospital (PIH) without any
  proper due diligence.
  The share investment in PIH was then recorded at K9.5 million in the
  Company’s
  books and statement of financial position as at 31 December 2016. As
  a result, a loss
  of K71.6 million was recorded for the financial year ended 31
  December 2016.

  In 2017, the Company engaged an independent valuer to perform
  valuation of the
  investment in PIH. The independent valuer asserted that the
  investment in PIH valued
  K41.8 million as at 31 December 2017. This had resulted in a fair
  value gain of K32.3
  million (K41.8 million less K9.5 million) recorded for the financial
  year ended 31
  December 2017.

  I have engaged an expert valuer for review of the valuation and
  raised a number of
  queries to the management regarding appropriateness of the approach
  undertaken and

• Page 138 of 475

• sufficiency of the data and estimates utilized in the valuation.
  However, these queries
  have never been addressed by the Company at the time of this report.
  As a result, I
  conclude that the indicative value of the investment in PIH shown in
  the valuation
  report and recorded in the books of the Company does not appear to
  be reasonable
  and may not represent fair value in accordance with International
  Financial
  Reporting Standards (IFRS) guidelines. Any adjustment found
  necessary would have
  a material impact on the statement of financial position and
  statement of
  comprehensive income for the year ended.

  EMPHASIS OF MATTER

  Going Concern

  As of 31 December 2017, the Company’s total current liabilities
  exceed current assets
  by K4.9 million. The management of the Company assessed that the
  Company’s
  ability to continue as a going concern is dependent on the ongoing
  financial support
  of its parent entity, the General Business Trust.”

  -65-

  Kumul Technology Development Corporation
  Limited

  18B.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the year ended 31 December 2018 had been
  completed and the
  results were being evaluated.

  The fieldwork associated with the inspection and audit of the
  accounts and records
  and the examination of the financial statements of the Company
  for the year ended
  31 December 2019 was in progress.

• Page 139 of 475

• -66-

  18C. PNG DAMS LIMITED
  (Subsidiary of Kumul Consolidated Holdings)

  18C.1 INTRODUCTION

  18C.1.1 Legislation

  PNG Dams Limited was incorporated under the Companies Act on
  5 June 2002. This
  Company was established under Section 3(1) of the
  Electricity Commission
  (Privatisation) Act 2002 (the ‘Act’) by transferring to it

• Page 140 of 475

• the Sirinumu Dam and YonkiDam from PNG Electricity Commission
  (ELCOM). This was gazetted through

  Gazettal Notification No. G114 dated 16 July 2002. The
  Company was vested with
  the IPBC through the Gazettal Notification No. G125 dated 2
  August 2002.

  18C.1.2 Objective of the Company

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

  18C.2 AUDIT OBSERVATIONS

  18C.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies
  Act on the financial
  statements of the Company for the year ended 31 December
  2017 was issued on 28
  February 2020. The report did not contain any qualification.

  18C.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the year ended 31 December 2018 had been
  completed and the
  results were being evaluated.

  The fieldwork associated with the inspection and audit of
  the accounts and records
  and the examination of the financial statements of the
  Company for the year ended
  31 December 2019 was in progress.

• Page 141 of 475

• -67-

  19. LEGAL TRAINING INSTITUTE

  19.1 INTRODUCTION

  19.1.1 Legislation

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

  19.1.2 Functions of the Institute

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

  19.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  19.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act
  on the Institute’s
  financial statements for the years ended 31 December 2014, 2015
  and 2016 were issued
  on 22 June 2020. The reports contained similar Qualified
  Opinions, hence, only the
  2016 report is reproduced.

  “QUALIFIED OPINION

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

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

• Page 142 of 475

• and

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

  BASIS FOR QUALIFIED OPINION

  Fixed Assets – K2,645,876

  I noted that the Institute had not maintained a Fixed Assets
  Register during the year
  under review. The assets owned by the Institute had not been
  tagged for easy
  identification and recording purposes. I also noted that the
  Institute had not carried out
  physical count of fixed assets over the years to ensure that
  assets have properly been
  recorded and in existence.
  -68-

  Legal Training Institute

  As a result, I was unable to confirm the valuation, existence
  and accuracy of the fixed
  assets disclosed in Note 6 of the financial statements.

  Limitation of Scope – K164,683

  The Institute did not maintain proper records of payments
  totalling K164,683 during
  the period under review. My review of the expenditures during
  the year revealed that
  payments totalling K164,683 were missing or not provided for my
  verification.
  Consequently, I was unable to perform my audit procedures to
  determine the validity,
  completeness and accuracy of the payments totaling K164,683 as
  reported in the
  financial statements.”

  19.2.2 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 Institute for the years
  ended 31 December 2014,
  2015 and 2016 were issued on 22 June 2020. The reports contained
  similar
  observations, hence, only the 2016 report is reproduced:

• Page 143 of 475

• Budget Against Actual

  A comparison of the budget figures against the actual
  expenditure revealed that the
  Institute had exceeded the budget in its spending. There was a
  significant increase in
  spending by K1,894,933 for the year under review for which the
  audit did not receive
  any satisfactory explanation from the Institute.

  Accounting and Administration Procedural Manual

  I noted that the Institute did not maintain a procedural manual
  for the staff to follow
  and adopt standardized procedures within the Institute for
  effective control purposes.
  In the absence of this manual, I was unable to establish whether
  the uniform procedures
  were followed in the accounting, administration and other
  operational areas. Further, I
  was unable to establish whether the staff members carry out
  tasks in accordance with
  the prescribed procedures and guidelines applicable to the
  Institute.

  Council Meeting Minutes

  I was not provided with the Council meeting minutes for the year
  2016. As such, I was
  not able to state whether the important financial, operational
  and administrative
  decisions were collectively discussed, agreed to and resolutions
  passed accordingly.

  -69-

  Legal Training Institute

  Bank Reconciliations

  My review on the Institute’s bank reconciliations revealed that
  the bank reconciliations
  were prepared without being reviewed on a timely basis by a
  responsible officer. I
  further noted that these bank reconciliations were not signed by
  the preparer and the
  reviewer. Due to lack of timely bank reconciliations, cheques
  totalling K179,791

• Page 144 of 475

• remained outstanding for more than twelve (12) months and had
  become stale.
  Consequently, I was not able to place reliance on the
  effectiveness of the internal
  controls maintained by the Institute over the bank reconciliation
  process.

  Expenditure – K175,463

  I observed that the Institute made payments totalling K175,463
  without obtaining three
  (3) written quotations from reputable suppliers when making
  payments for expenditures
  exceeding K5,000. I further noted that in the absence of three
  (3) written quotations,
  the Institute resorted to using statutory declarations to bypass
  the requirements specified
  under the Public Finances (Management) Act 1995 (as amended). As
  a result, I was
  unable to place reliance on the effectiveness of the internal
  controls surrounding the
  procurement of goods and services of the Institute.

  19.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Institute had not
  submitted its financial
  statements for the years ended 31 December 2017, 2018 and 2019
  for my inspection
  and audit.

  -70-

• Page 145 of 475

• 20. MINERAL RESOURCES AUTHORITY

  20.1 INTRODUCTION

  20.1.1 Legislation

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

  20.1.2 Objectives of the Authority

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

  20.1.3 Functions of the Authority

  The functions of the Authority are to:

  • advise the Minister on matters relating to mining and the
  management,
  exploitation and development of Papua New Guinea’s mineral
  resources;
  • promote the orderly exploration for the development of the
  country’s mineral
  resources;
  • oversee the administration and enforcement of the Mining Act
  1992, the Mining
  (Safety) Act (Chapter 195A), the Mining Development Act
  (Chapter 197), the Ok
  Tedi Acts and the Ok Tedi Agreement, the Mining (Bougainville
  Copper
  Agreement) Act (Chapter 196) and the agreements that are
  scheduled to that Act,
  and any other legislation relating to mining or to the
  management, exploitation or
  development of PNG’s mineral resources;
  • negotiate mining development contracts under the Mining Act
  as agent for the
  State;
  • act as agent for the State, as required, in relation to any
  international agreement
  relating to mining or to the management, exploitation or
  development of PNG’s
  mineral resources;

• Page 146 of 475

• • receive and collect, on its own account and on behalf of the
  State, any fee, levy,
  rent, security, deposit, compensation, royalty, costs,
  penalty, or other money, or
  other account payable under the Mining Act, the Mining
  (Safety) Act, the Mining
  Development Act, the Ok Tedi Acts and the Ok Tedi Agreement,
  the Mining
  (Bougainville Copper Agreement) Act and the agreements that
  are scheduled to
  that Act, or any other Act the administration of which is the
  responsibility of the
  Authority from time to time;

  -71-

  Mineral Resources Authority

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

  20.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated

• Page 147 of 475

• with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Authority for the year ended 31 December 2015 was completed and
  the results were
  being evaluated.

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

  The Authority had not submitted its financial statements for the
  years ended 31
  December 2017, 2018 and 2019 for my inspection and audit.

  -72-

  21. NATIONAL AGRICULTURE QUARANTINE AND INSPECTION
  AUTHORITY

  21.1 INTRODUCTION

  21.1.1 Legislation

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

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

• Page 148 of 475

• 21.1.2 Objectives of the Authority

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

  21.1.3 Functions of the Authority

  The functions of the Authority are to:

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

  -73-

  National Agriculture Quarantine and
  Inspection Authority

  • undertake all necessary actions to ensure that the export of
  animals, plants, fish
  and their parts and products are free from pests, diseases,
  weeds and any other

• Page 149 of 475

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

  21.2 AUDIT OBSERVATIONS AND RECOMMENDATONS

• Page 150 of 475

• 21.2.1 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 2017 was
  issued on 28 August
  2019. The report contained a Qualified Opinion.

  -74-

  National Agriculture Quarantine and
  Inspection Authority

  “QUALIFIED OPINION

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

  (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 affairs of the Authority as at 31 December
  2017, and the results
  of its financial operations and cash flows for the year then
  ended.

  BASIS FOR QUALIFIED OPINION

  Asset Revaluation Reserve

  As at 31 December 2017, asset revaluation reserve was disclosed
  as K18,979,236. The
  asset revaluation reserve was recorded as a result of a
  revaluation exercise conducted
  in 2011. However, since 2011, the Authority has not maintained a
  detailed register to
  reconcile the increment or decrement by individual assets at
  each financial year. As a
  result, the Authority would not comply with the requirements of
  International
  Financial Reporting Standards IAS 16 Property, Plant and
  Equipment in regards to any
  future revaluation or disposals especially in relation to the
  following:

  • If a revaluation results in increase in value, it should be

• Page 151 of 475

• credited to other
  comprehensive income and accumulated in equity under the
  heading “revaluation
  surplus” unless it represents the reversal of a revaluation
  decrease of the same
  asset previously recognized as an expense, in which case it
  should be recognized
  in profit or loss;

  • A decrease arising as a result of a revaluation should be
  recognized as an expense
  to the extent that it exceeds any amount previously credited
  to the revaluation
  surplus relating to the same asset; and/or

  • When a revalued asset is disposed of, any revaluation surplus
  may be transferred
  directly to retained earnings, or it may be left in equity
  under the heading
  revaluation surplus. The transfer to retained earnings should
  not be made through
  profit or loss.

  Accordingly, I was unable to ascertain the validity and accuracy
  of this balance at year
  end.”

  21.2.2 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 the 28 August 2019. The report contained the
  following observations:
  -75-

  National Agriculture Quarantine and
  Inspection Authority

  Lack of Proper Updates and Maintenance of Employment Contracts

  During my examination of the Authority’s payroll, I noted that
  staff employment
  records were not properly maintained and updated on a timely
  basis. I also noted that
  total personnel cost for the year was K17,136,771. However, my
  request for the
  employment contracts and other supporting employment letters
  were not made
  available to me to perform the necessary audit procedures. As a
  result, I was unable to
  verify and confirm whether correct rates of basic salary and

• Page 152 of 475

• allowances were applied,
  calculated and paid in 2017.

  I recommend that a 100% review and update of all staff records
  to be performed and
  the management responded as follows:

  “We have engaged external consultants in 2018. All staff files
  have been reviewed and

  All contract officers’ contracts have been renewed in 2018/2019
  and that includes
  taking up appropriate accounting entries for Long Service Leave,
  Gratuity and Leave
  Accruals in 2018.”

  Payment of Labour and Land Mobilisation Costs to Lands
  Investment Limited

  Included in land and building amount of K39,783,921 is an amount
  of K2,924,899
  relating to costs incurred for the construction of the
  prefabricated houses. As reported
  in the 2014, 2015 and 2016 audits, the Authority has paid
  additional amount of
  K1,048,998 above the approved contract value of K2,475,000 as
  approved by the
  Central Supplies and Tender Committee. Further, there were no
  specific clause in the
  contract in respect of the above payments of K1,048,998.
  Accordingly, I am unable to
  ascertain the basis on which the payment was made to Lands
  Investment Limited.

  Late Submission of Financial Statements

  The National Agriculture Quarantine and Inspection Authority had
  not prepared and
  submitted its financial statements to the Minister and the
  Auditor-General prior to 30
  April for the year ending 31 December preceding, resulting in
  breaches of Section 63(1)
  and Section 63(3) of the Public Finance (Management) (Amendment)
  Act 2016.

  21.3 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 153 of 475

• The Authority had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  -76-

  22. NATIONAL AGRICULTURAL RESEARCH INSTITUTE

  22.1 INTRODUCTION

  22.1.1 Legislation

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

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

  22.1.2 Objectives of the Institute

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

  ‒ any branch of biological, physical and natural sciences
  related to agriculture;
  ‒ cultural and socioeconomic aspects of the agricultural
  sector, especially of the
  smallholder agriculturalists; and
  ‒ matters relating to rural development, relevant to PNG.

  22.1.3 Functions of the Institute

  The primary functions of the Institute are to:

  • generate and adapt agricultural technologies and resource
  management practices
  appropriate to the needs, circumstances and goals of
  smallholder agriculturalists;
  • promote and facilitate applied and adaptive research in food
  crops, livestock,
  alternative cash crops, and resource management;
  • promote the use of appropriate agricultural technologies and
  provide essential

• Page 154 of 475

• technical services to improve the productivity, income,
  nutritional status and food
  security, resource base and quality of life of rural
  households and communities;
  • develop and promote ways of improving the output, quality,
  harvesting, post-
  harvesting, handling and processing, and marketing of food
  crops, livestock
  produce and alternative crops;
  • maintain and conserve the diversity of genetic resources for
  food and agriculture,
  act as custodian for these resources and promote the
  effective utilisation of these
  resources in the country;
  • update and maintain the national inventory on soil resources
  and to develop,
  promote and maintain sustainable practices in agriculture;

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  National Agricultural Research
  Institute

  • provide agricultural information services, extension service
  support and other
  such assistance packages to the agricultural sector and to
  provide liaison and
  access to international agencies that promote agricultural
  development;
  • perform such other functions as are given to it under this
  Act or any other law;
  • formulate national agricultural research policies, define
  sectoral research
  priorities and allocate funds and advise the Minister and the
  NEC on these
  matters; and
  • generally, do all such things as may be incidental or
  consequential upon the
  exercise of its powers and the performance of its functions.

  22.2 AUDIT OBSERVATONS AND RECOMMENDATIONS

  22.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Institute for the year ended 31 December 2018
  was issued on 14
  February 2020. The report did not contain any qualification.

  22.2.2 Audit Observations Reported to the Ministers

• Page 155 of 475

• My report to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Institute for the year
  ended 31 December 2018
  was issued on 14 February 2020. The report contained the
  following observations:

  Accounting System/Software

  My review of the Institute’s accounts and records for the year
  ended 31 December 2018
  revealed that the Institute had been using the Quicken
  Accounting Package for past
  several years. I noted that the transactions from the Quicken
  cash ledgers were
  transferred manually to spreadsheets for reporting purposes as
  the Quicken was
  programmed to adopt cash basis of accounting. I further noted
  that the Accpac
  Accounting System that was purchased some years back was not
  fully utilized by the
  Institute. In my view, possibility of errors and mistakes would
  be minimized, a lot of
  time can be saved and a better audit trail would be available
  when this new Accpac
  Accounting System was fully utilized. This matter was reported
  to Management in my
  previous reports as well and the Institute had to implement my
  recommendations.

  Management concurred with my comments and responded that the new
  Sage Accpac
  Accounting System is being trialed but put on hold pending
  implementation of the
  Integrated Financial Management System (IFMS) by Department of
  Treasury and
  Finance. The IFMS was further delayed due to internet
  connectivity and accessibility
  at all NARI Centers.

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  National Agricultural Research
  Institute

  Land Titles and Valuation

  My review of the Fixed Assets Register of the Institute and
  related records revealed that
  the Institute had carried out a valuation exercise of all of its

• Page 156 of 475

• titled land portions located
  at various research centers throughout the country and disclosed
  the revalued amounts
  in its financial statements. However, I noted the land at Portion
  121 at Tring Wewak,
  East Sepik Province was not included in this revaluation
  exercise, I recommended the
  management to do a valuation and to take up the revalued amount
  in its Fixed Assets
  Register.

  Management noted my recommendation and agreed to carry out
  revaluation exercise
  of Portion 121 in early 2020.

  22.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Institute had not
  submitted its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

  -79-

• Page 157 of 475

• 23. NATIONAL AIDS COUNCIL SECRETARIAT

  23.1 INTRODUCTION

  23.1.1 Legislation

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

  23.1.2 Objectives of the Council

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

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

  23.1.3 Functions of the Council

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

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

• Page 158 of 475

• -80-

  National AIDS Council Secretariat

  23.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  23.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Secretariat for the year ended 31 December
  2018 was issued on 10
  February 2020. The report contained a Qualified Opinion.

  “QUALIFIED OPINION

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

  a) the financial statements of the Secretariat 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 Secretariat as at 31
  December 2018 and the
  results of its financial operations for the year then ended.

  BASIS FOR QUALIFIED OPINION

  Operating and Capital Expenditure – Insufficient Supporting
  Documents

  During my review of expenditures, I noted that operating
  expenditure amounting to
  K1,020,376 and capital expenditure of K939,832 were not verified
  during the audit due
  to lack of proper supporting documents. As such, I was not able
  to ascertain the
  occurrence and authenticity of payments due to scope
  limitation.”

  23.2.2 Audit Observations Reported to the Ministers

• Page 159 of 475

• 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 Secretariat for the
  year ended 31 December
  2018 was issued on 10 February 2020. The report contained the
  following significant
  matters:

  Internal Control Environment

  I have reviewed the overall internal control environment of the
  Secretariat and noted
  the following issues in respect of the control environment:

  • Internal control mechanisms such as approved accounting
  manuals, operational
  guidelines and policies were not sighted at the time of audit;
  • Effective implementation and monitoring of the established
  internal controls
  especially in procurement were weak and are open to
  manipulation and override;

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  National AIDS Council Secretariat

  • Internal Audit function was not fully utilized to review various
  processes
  including assessment and implementation of effective internal
  controls and anti-
  fraud measures to provide necessary recommendations for the
  management; and
  • There was no proper accounting system in place to keep proper
  record of
  transactions.

  The accounts were maintained using both PGAS accounting system and
  MS excel
  spreadsheets. In the absence of a proper accounting system,
  financial information is
  prone to manipulation.

  I highlighted the implications of not having in place a properly
  defined control
  environment and recommended that Management take appropriate actions
  to ensure
  that the control environment need to be tightened up and adequate
  systems were in place
  to ensure sound operations of the Secretariat. The Management
  responded to my
  observation as follows:
  “The National AIDS Council Secretariat adopts the Public Finances

• Page 160 of 475

• Management Act
  (PFMA) when dealing with procurements of goods and services, PFMA
  clearly I
  specifies as how yo u go about in expending public funds. Hence, it
  cannot in anyway

  We admit that the Internal Audit function was not fully utilized as
  the internal auditor
  was very sick and could not perform his duties more often. The
  internal auditor resigned
  and the internal audit position is currently vacant. The position
  will be advertised in
  the near future; and
  We have also identified the issue with the accounting system and
  budgeted funds to
  purchase an accounting software that is suitable for our
  organization.”

  Fixed Assets

  Despite my prior years’ recommendations, I still noted weaknesses
  over the control of
  assets owned and in the custody of the Secretariat. The following
  issues were noted:

  • The Secretariat did not have an approved fixed assets policy in
  place for assets
  owned and controlled by the Secretariat;
  • The Fixed Assets Register (FAR) was not properly maintained in
  2018. Assets
  dating back over a decade still remained in the FAR although they
  had reached
  their useful lives and were due for disposal. I further noted
  instances where assets
  maintained in the Register did not have either purchase date or
  purchase price
  while all assets were not tagged with customized NACS codes and
  captured in the
  FAR to enable me to locate and verify the existence of the assets;
  • The Secretariat had not conducted a regular stock-take on its
  fixed assets for a
  number of years including 2018;
  • Physical inspections conducted on vehicles owned by the
  Secretariat revealed that
  the vehicles were not registered with “Z” plates, breaching the
  Motor Traffic I
  Regulation 1967 Chapter 243 section 19A(e)(i); and
  -82-

  National AIDS Council Secretariat

  • The Secretariat did not have in place an approved mobile phone
  policy to

• Page 161 of 475

• administer the purchase and usage of mobile phones.

  I was not able to place reliance on the controls surrounding the
  management and use of
  the fixed assets by the Secretariat and whether the fixed assets
  were properly
  safeguarded.

  Payment of Vehicle allowances to Officers Provided with Official
  Vehicles

  My review of the personnel and motor vehicle benefits of the
  Secretariat revealed
  breakdowns and malpractices. We noted that five (5) senior officers
  of the Secretariat
  were each provided vehicles for twenty-four (24) hours use with
  fuel. In addition, these
  officers were also paid vehicle allowances. This practice is a form
  of double dipping of
  benefits by the employees and should be discontinued.

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

  “We take note of the audit observation and inform you that going
  forward we will give
  an option to concerned officers whether to forgo their vehicle
  allowance and be given
  a vehicle or vice versa.”

  Long Over Due Staff Advances

  My review of the staff advance balance of K33,622 in Note 7 of the
  financial statements
  revealed that this balance remained outstanding with no movements
  for over two (2)
  years. As such, I could not confirm the collectability of these
  advances within the
  stipulated period.

  I recommended the Secretariat to come up with options to collect
  those debts; otherwise
  consider writing the balance off after the Secretariat’s approval.

  The Secretariat responded that the long outstanding staff advances
  of K33,622 were
  related to terminated officers; hence NACS will make a submission to
  the Board for
  their consideration for write-off.

  Maintenance of Staff Personnel Files

  My review of the personnel emoluments revealed that personnel files
  were not properly

• Page 162 of 475

• maintained. I noted that records such as salary and allowances tax
  declaration forms,
  birth certificates, salary history cards, leave records and other
  correspondences relating
  to salary variations were not properly maintained. In addition,
  important documents
  like the CV, offer and acceptance letters, supporting documents such
  as advertised
  positions, an applications register for all the applicants,
  selection criteria, and interview
  and evaluation forms for candidates and screening for criminal
  records such as police
  clearance forms were not on file for my verification.

  -83-

  National AIDS Council Secretariat

  Further, most of the contract officers’ contracts were not
  current or were not located in
  their personnel files during my review.

  Due to the above, I was not able to gain comfort and conclude on
  the effectiveness and
  adequacy of controls surrounding the Human Resources Management
  of the NACS.
  I recommended the Secretariat to ensure that its employees’
  personal files are properly
  maintained and important documents related to each officer should
  be filed in their
  personnel files and be readily available for management and audit
  purposes.

  Other Internal Control Weaknesses

  Other internal control weaknesses noted during my audit were:

  • the Secretariat did not maintain a complete Travel Acquittal
  Register for travel
  related expenses totaling K1,620,661. I was unable to
  ascertain whether all travel
  expenses incurred and paid during the year were accurately
  recorded and timely
  acquitted in accordance with Part 20, paragraphs 11.2 and
  12.10 of the Financial
  Management Manual;

  • encashable cheques were issued without cash collection
  registers and/or per diem
  sheets being signed off and dated by respective recipients. I
  further noted, on
  numerous occasions, that cash disbursements for awareness
  programs had no

• Page 163 of 475

• proper acquittals. I brought this to the attention of the
  Secretariat by emphasizing
  that encashable cheques are not an acceptable business
  practice and promotes
  fraudulent activity, abuse of resources and corruption; and

  • I was not able to ascertain the validity of K48,100 paid to
  consultants engaged by
  the Secretariat as there were no progressive/periodic reports
  attached with the
  payment vouchers as a basis for payments made. In addition, I
  noted on numerous
  occasions that Grants totaling K131,659 allocated to
  individual recipients as well
  as organizations for awareness programs were not substantiated
  and acquitted to
  justify that the funds used were for the intended purpose and
  had tangible
  outcomes.

  I drew management’s attention to these weaknesses and was advised
  that the Secretariat
  has taken note and appropriate actions will be taken to address
  these issues.

  23.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of
  the Secretariat for the
  year ended 31 December 2019 was submitted and arrangements were
  being made to
  commence the audit shortly.

  -84-

  24. NATIONAL BROADCASTING CORPORATION

  24.1 INTRODUCTION
  24.1.1 Legislation
  The National Broadcasting Commission (NBC) was established under
  the
  Broadcasting Commission Act (Chapter 149). This Act was amended
  in 1995 by the
  National Broadcasting Commission (Change of Name and Corporate
  Structure) Act
  1995.
  In terms of Section 4 of the Broadcasting Commission (Change of
  Name and Corporate
  Structure) Act No. 49 of 1995 the name of the Commission was
  changed to Corporation.

• Page 164 of 475

• The Amendment Act No.49 of 1995 came into operation on 23 April
  1996 as per
  Gazettal Notification No.G.32.
  24.1.2 Functions of the Corporation
  The principal functions of the Corporation are to provide
  balanced, objective and
  impartial broadcasting services and in so doing, to take in the
  interests of the
  community, all such measures as in its opinion are conducive to
  the full development
  of suitable broadcasting programs.

  The Corporation’s other functions are to:

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

  24.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the Corporation’s
  financial statements for the year ended 31 December 2015 was
  issued on 28 August
  2019. The report contained a Disclaimer of Opinion.

  -85-

  National Broadcasting Corporation

  “DISCLAIMER OF OPINION

  In my opinion, because of the limitations of scope of my work and
  other matters referred
  to in the Basis for Disclaimer of Opinion paragraphs, and the effect
  of such adjustments,
  if any, as might have been determined to be necessary had the
  limitations and other

• Page 165 of 475

• matters not existed, I am unable to and do not express an opinion on
  the financial
  statements of the National Broadcasting Corporation for the year
  ended 31 December
  2015.

  BASIS FOR DISCLAIMER OF OPINION

  Limitation of Scope due to Disclaimer of Opinion on the Previous
  Years’
  Financial Statements

  The previous year’s audit report (2014) was issued with a full
  disclaimer of opinion.
  The reason for the disclaimer of opinion was the limitation of scope
  arising from an
  inability to obtain accounting records and proper explanations for
  the differences that
  were recorded between the 2014 general ledger balances and the 2014
  financial
  statements. Similar qualifications had been made for the previous
  years’ financial
  statements including 2013. Consequently, I was unable to quantify
  the effects of any
  material misstatements in the opening balances that might have a
  consequential effect
  on the financial statements of the Corporation for the year ended 31
  December 2015.

  Fixed Assets – K204,464,822

  During my review of the fixed assets of the Corporation, I noted the
  following
  inefficiencies:

  • The Corporation did not maintain an updated Fixed Assets Register
  (FAR) to
  properly record, account and capture fixed assets additions,
  disposals and
  transfers of assets between Provincial Radio Stations;
  • The assets purchased during the year were expensed off instead of
  being
  capitalized and depreciated over useful life, thus overstating
  and understating the
  expense and fixed asset accounts respectively;
  • The Corporation did not calculate depreciation of its assets
  during the year which
  resulted in significant misstatement in the Profit and Loss
  Statement;
  • A significant variance of K452,122,853 was noted between FAR
  (K565,562,384)
  and general ledger (K113,439,531) relating to fixed assets;
  • A material variance of K3,607,390 was noted between FAR
  (K6,535,959) and

• Page 166 of 475

• general ledger (K10,143,348) relating to depreciation expense;
  • There were no accumulated depreciation accounts for each type of
  assets in the
  general ledger; and
  • I was not able to confirm physical existence of the Corporation’s
  assets that are
  located throughout the 20 provinces to verify the balances to the
  general ledger.

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  National Broadcasting Corporation

  Due to the above issues, I was unable to place any reliance on the
  effectiveness of the
  internal controls surrounding the management of the fixed assets of
  the Corporation.
  Consequently, I am unable to conclude on the valuation, correctness
  and existence of
  the fixed assets at year end.

  Trade and Other Debtors

  In Note 8 to the financial statements, the Corporation reported
  balances of K1,923,306
  and K1,245,202 for trade and other debtors respectively. However,
  these balances did
  not agree to the balances on various supporting schedules provided
  to me. In the
  absence of sufficient evidence of trade and other debtors’ balances,
  I am unable to
  verify the accuracy, completeness and validity of the trade and
  other debtors’ balances
  reported at the year end.

  Related Party-Government Debtors & Creditors

  As at 31 December 2015, the Government debtors and creditors
  balances were
  K1,246,005 and K1,929,944 respectively which nets off to the value
  of K683,939 as
  noted in Note 9 to the financial statements. However, the following
  discrepancies were
  noted:

  • No aged debtors listing was maintained for the government’s
  debtors account to
  identify clearly the balances, their ages and control balances;
  • No reconciliation was done to ensure each individual government’s
  debtors were
  paid and which were outstanding during the year;
  • The government’s creditors balance of K915,762 relates to 2012

• Page 167 of 475

• and prior years’
  unpresented cheques, which were yet to be identified and cleared;
  and
  • The government’s creditors balance was maintained manually on an
  excel spread-
  sheet and carried over from year to year without any review or
  monthly
  reconciliations performed to clear this significant balance.

  As a result, I was unable to conclude on the validity, accuracy and
  completeness of
  related party-government debtors and creditors balances stated in
  the financial
  statements as at 31 December 2015.

  Trade Creditor, Other Creditors and Accruals – K2,762,238

  Note 10 to the financial statements shows the following:

  • Trade payables – K3,533,809;
  • Other payables and accruals – K1,871,450; and
  • GST payables – K1,099,879.

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  National Broadcasting Corporation

  During my review, the Corporation did not provide any
  reconciliations or appropriate
  documentary evidence to support the amounts. In addition, I was
  unable to perform the
  cut-off procedures test of trade creditors and accrual balances
  to ascertain whether all
  credits and accruals transactions were recorded in the correct
  accounting period or that
  accruals were fairly recorded and that the method of accounting
  for accruals was
  consistently applied. As a result, I was not able to confirm the
  completeness, existence
  and accuracy of the creditors’ and accruals’ balances at the
  balance date.

  Employee Provisions – K4,051,263

  The Corporation reported balances of K1,460,513 and K2,589,749
  for provisions for
  recreational leave and furlough leave respectively. The two
  balances were brought
  forward from prior year without accounting for any movement
  during the year. The

• Page 168 of 475

• current year’s employee provisions were manually calculated by
  the Human Resource
  division and passed to Finance for posting into the general
  ledger only at the year-end
  but contained numerous mistakes and errors resulting in incorrect
  balances. Hence,
  these were not posted into the general ledger for current year’s
  accounting purpose. In
  the absence of accounting for employee provisions for the year, I
  was unable to
  ascertain the completeness, accuracy and validity of the employee
  provision balances
  at the year end.

  Issued Capital – K25,503,697

  As at 31 December 2015, the Issued Share Capital balance was
  K25,503,697. I was not
  provided with any records and reconciliations to verify the
  details and accuracy of the
  share capital balance. In the absence of sufficient evidence, I
  was unable to verify the
  accuracy, completeness and validity of the Issued Capital balance
  at the year end.

  Asset Revaluation Reserve – K187,317,339

  The asset revaluation reserve balance in the financial statements
  shows a significant
  balance of K187,317,339 while the general ledger balance only
  reflected K22,910,269.
  A fair value balance of K164,407,070 was put through and an
  unexplained adjusting
  balance of K944,641 was taken up in the financial statements to
  balance the Statement
  of Changes in Equity to the assets and liabilities balances. I
  was not provided with any
  records and reconciliations to verify the details and accuracy of
  the adjustments
  including the movements in the Asset Revaluation Reserve balance.
  In the absence of
  sufficient evidence, I was unable to verify the accuracy,
  completeness and validity of
  the Revaluation Reserve balance at the year end.”

  24.2.2 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
  2015 was issued on 28 August 2019. The report contained the
  following observations:

• Page 169 of 475

• -88-

  National Broadcasting Corporation

  Missing Payment Vouchers (Source Documents)

  During my review, I was not provided with payment vouchers totaling
  K1,056,627 for
  my verification. Source documents are the main information in which
  the financial data
  is being derived from. In the absence of this vital information, I
  was unable to satisfy
  myself as to the accuracy and completeness of the financial
  information presented in
  the financial statements. In addition, the Corporation has not fully
  complied with
  Section 62(1) of the Public Finances (Management) Act 1995 that
  requires public
  bodies to keep proper accounts and records of its affairs.

  Centralized Monitoring System – IT Call Centre

  My review on the Information Technology (IT) environment revealed
  that the
  Corporation does not have a call center for default reporting and a
  network monitoring
  system to allow for centralized monitoring of systems. As a result,
  the following issues
  were noted:

  • Key delays in achieving troubleshooting and/or resolving issues
  which can lead
  to down time effectively affecting delivery of service to
  customers which comes
  with a monetary cost and can also affect customer relationship;
  and
  • Current system does not provide extended resource monitoring and
  management
  capabilities in the form of dashboards, views, reports, capacity
  planning, alerts
  and recommendations.

  I recommended management to consider investing in running a
  feasibility study and if
  the benefits are exceptional, consideration may need to be given on
  how best to move
  this forward and management has responded as follows:

  “The recommendation is duly noted. The IT areas are a developing
  area that needs
  more funding and efforts to improve. The management had realised
  that and acquired
  new server and appliances in 2018.”

• Page 170 of 475

• Information Technology (IT) Policy

  I noted that the Corporation does not have in place a fully
  documented and working IT
  Policy and as a result, the following issues were noted:

  • The Corporation does not have policies to address the requirement
  to protect
  information from disclosure, unauthorised access, loss,
  corruption and
  interference;
  • Key information may be disclosed or made available to
  unauthorised individuals,
  entities or processes;
  • The information may be destroyed in an unauthorised manner and
  accuracy and
  consistency may not be preserved regardless of changes; and
  • The Corporation is not protected against any liability if any of
  the above is being
  violated.
  -89-

  National Broadcasting Corporation

  I recommended management to put a policy in place which will protect
  the Corporation
  from any loss and/or liability that may arise and management have
  responded as
  follows:

  “The IT manager and his team must develop policies and procedures to
  lift the standard
  of IT environment. The recommendations are fully noted.”

  Cash at Bank and Bank Reconciliations

  I was not provided with the bank reconciliations for the
  Corporation’s main bank
  account including most of the minor cash balances. In addition, I
  noted that two bank
  accounts namely National Project TV and National Karai Commercial
  accounts cash
  balances per the audited trail balance differs from the general
  ledger. The trial balance
  amount of K67,840 for the National Project TV account differs from
  the general ledger
  balance of K65,540 which gives a variance of K2,300 whilst the trial
  balance amount
  of K209,948 for National Karai Commercial account differs from
  general ledger
  balance of K191,773, resulting in a variance of K18,175. Though the
  balances were

• Page 171 of 475

• immaterial, the existence of such differences raises issues in
  regards to the general
  ledger system and the trial balance. Consequently, I was unable to
  place any reliance
  on the effectiveness of the internal controls surrounding the cash
  management and
  concluded that serious weaknesses existed.

  Transport and Fuel Management

  My review of the Corporation’s transport and fuel management system
  revealed gross
  misuse and abuse of the fuel management system where the fuel costs
  have been
  increasing rapidly until picked up by management and attended to. I
  noted that an
  internal investigation has already been carried out which confirmed
  misuse and abuse
  of the fuel vouchers in collaboration with respective fuel service
  stations being
  associated with. I recommended management to:

  • continue with existing arrangement in place which has allowed for
  the misuse to be
  stopped;
  • consider reviewing other key areas or business functions within
  the organization
  that carry the same risk and consider taking the same action; and
  • critically have a look at the “Financial Procedures Manual”
  recently established and
  seriously consider uplifting any current functions in line with
  all policies established
  by this manual.

  And management have responded as follows:

  “The management agrees with the recommendation and proper steps were
  taken in
  2017 and beyond. A transparent process is now followed.”

  -90-

  National Broadcasting Corporation

  Internal Controls

  I was unable to confirm whether internal controls are appropriately
  designed, correctly
  implemented and operating effectively as all the documents to verify
  and confirm the
  controls regarding revenue and debtor management cycle, operating

• Page 172 of 475

• expenses cycle and
  financial accounting cycle were not provided to me. As such, I was
  unable to verify and
  confirm on whether all established internal controls are
  appropriately designed,
  correctly implemented and whether they are operating effectively.

  General Ledger Integrity – General Ledger Reconciliations

  The Corporation has not performed any monthly reconciliation of its
  entire general
  ledger accounts for better internal control purposes. These general
  ledger accounts were
  not reconciled and independently reviewed at month end resulting in
  unresolved
  balances carried forward from year to year. In addition, specific
  contributing issues
  noted include changes to some key finance positions, no independent
  review of
  accounting entries or journals prior to posting into the accounting
  system (Attaché),
  lack of understanding of accounting issues, creation of new general
  ledger without
  obtaining proper approval and an unclear financial reporting
  structure. Consequently, I
  was unable to place any reliance on the effectiveness of the
  controls surrounding the
  general ledger accounts.

  I recommended that the Executive Director Finance and the Accountant
  to conduct a
  review of the current accounting processes and procedures in Finance
  and implement
  changes to improve the internal control environment and the
  management responded as
  follows:

  “The management have noted this and appropriate actions were taken
  in mid-2016 and
  beyond. The training of staff with the Attaché software and the CPA
  training with CPA
  PNG also started in 2017 and beyond.”

  Missing Records and Files

  During my review, certain vital information was not provided as
  these were either not
  available or missing. I was informed that certain experienced staff
  members including
  the executive Director Finance and Accountant, who were there in
  2014 had left or were
  terminated between 2015 and early 2016. When these staffs left, the
  information was
  misplaced or left somewhere where current finance staffs were unable

• Page 173 of 475

• to locate. The
  missing vital information resulted in the limitation of my scope.

  I recommended that the departing finance staff must go through a
  proper hand-over
  take-over in order to update new staffs with status of their
  accounting work, records
  and other information within their section before leaving. In
  addition, the Corporation
  to implement a strict and effective policy and system of filing and
  records management
  since it is important when there is high staff turnover.

  -91-

  National Broadcasting Corporation

  Management responded as follows:

  “The management noted this and proper handover takeover must be
  perform to have
  proper flow of info and data.”

  Evidence of Poor Accounting Function

  I noted certain general ledger balances relating to assets and
  provisions were not
  updated or adjusted to reflect the correct positions of the balances
  in 2015. The accounts
  were provision for furlough and annul leaves, trade and other
  debtors and prepayments.
  The balances in the general ledger and financial statement are
  carried forward balances
  for 2014 without any movements. In addition, some adjustments
  identified to be posted
  into the general ledger in order to amend the balances to reflect
  correct positions were
  not posted into the general ledger, rendering these balances at year
  end to be incorrect.
  Consequently, the final trial balance lacked integrity and shows
  evidence of weaknesses
  in the accounting environment. The trial balance contained incorrect
  balances and did
  not reflect the true position of the Corporation at year end.

  I recommended management to conduct an assessment of the accounting
  functions and
  implement improvements to basic accounting functions such as monthly
  general ledger
  reconciliations, review of journal entries and posting of entries,
  etc.

  Management had responded to my findings as follows:

• Page 174 of 475

• “The new management agree with the recommendation and did identify
  these issues
  and were addressed in 2017and beyond.”

  Journals and Creation of General Ledger Accounts

  I noted significant weaknesses in relation to journal entries and
  creation of new general
  ledger accounts as follows:

  • Some manual journal entries posted into the general ledger system
  were not
  independently reviewed by the senior accounts officers;
  • Some manual journal entries posted were not stamped as posted;
  • A complete listing of all manual journal entries processed into
  the attaché system
  in the 2015 financial year was not provided for my review;
  • There were many new general ledger accounts created in 2015 but
  were not
  supported by approval from the management team including the
  Managing
  Director; and
  • Some new general ledgers created have similar functions to those
  that already
  existed.

  -92-

  National Broadcasting Corporation

  The key controls to detect fraud and errors in financial reporting
  system are the
  segregation of duties, and the independent review of manual journals
  posted in the
  ledger system including appropriate approvals for creation of new
  general ledger
  accounts in the attaché system. Without such controls, the general
  ledger and the
  resulting financial reports produced may contain incorrect and
  materially misstated
  balances.

  I recommended the following to the management:

  • The manual journal entries prepared by any division including
  payroll be
  reviewed independently and approved for postings by senior
  accounts officers;
  • The senior accounts officers should collate all journals and

• Page 175 of 475

• maintain a central
  filing in order of their batch numbers and posting dates;
  • All journal entries posted should be clearly marked as posted;
  and
  • Any new general ledger accounts created in the general ledger
  system should be
  properly approved by the designated senior management member
  appointed by
  the Managing Director and copies of such approval issued must be
  properly kept.

  Management had responded as follows:

  “The new mana ement a ree with the recommendation and did identif
  these issues
  and were addressed in 2017and beyond.”

  Trade Debtors

  The trade debtor’s account captures the Corporation’s internal
  revenue generated from
  on-air and Kundu 2 advertising including other operating income from
  co-sitting and
  rentals from leasing of its properties. At year end, trade debtors
  balance was K1,923,306
  and a provision of K543,283 (43%) was provided against this debt.
  However, I noted
  following weaknesses:

  • I was unable to identify the ages of the trade debtor balance;
  • No monthly reconciliations have been done to trade debtors
  balances to identify
  those that paid up and those that did not;
  • There is a likelihood of some debtors may be paid but are not
  cleared in their
  accounts and may overstate the debtors account;
  • No proper procedures in place, particularly in respect of debt
  recovery; and
  • Failure to follow up on debts which have been overdue beyond the
  normal credit
  terms may result in debts becoming bad unnecessarily and being
  written off
  subsequently.

  Hence, I was unable to determine completeness, existence and
  accuracy of trade debtor
  balances at year end.

  -93-

  National Broadcasting Corporation

  Trade Creditors and Other Liabilities

• Page 176 of 475

• During my review of the Corporation’s trade creditors and other
  liabilities, I noted the
  following:

  • The trade creditors sub ledger in the Attaché System was not
  properly used and
  hence, the existing balance was not agreeing to the general
  ledger balance. A
  manual list containing the unpresented cheques was also
  maintained but this also
  did not tie to the general ledger balance;

  • There was no monthly reconciliation performed throughout the
  year;

  • Significant liabilities have not been accrued and due to
  errors noted in my prior
  review, I was unable to accurately quantify the balances at
  year end;

  • Payments for goods and services were done on cash basis; and

  • Total balance of K248,635 is made up of unpresented cheques
  which were carried
  forward from 2012. To date the balance has not changed. No
  proper information
  on the nature and explanation detailing the unpresented
  cheques was provided to
  me.

  Hence, I am unable to obtain any comfort on the completeness,
  existence and accuracy
  of trade and other creditors balance at year end.

  24.3 STATUS OF FINANCIAL STATEMENTS

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

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

  The Corporation had not submitted its financial statements for
  the years ended 31
  December 2018 and 2019 for my inspection and audit.

• Page 177 of 475

• -94-

  25. NATIONAL CAPITAL DISTRICT COMMISSION
  25.1 INTRODUCTION

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

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

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

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

  25.1.2 Functions of the Commission

• Page 178 of 475

• The function of the NCD Commission is to:

  • control, manage and administer the NCD to ensure its welfare
  and that of the
  persons in its jurisdiction.

  25.1.3 Subsidiaries of the Commission

  The subsidiaries of National Capital District Commission are
  National Capital District
  Botanical Enterprises Limited and Port Moresby Nature Park
  Limited. Comments in
  relation to these subsidiaries are contained in paragraphs 25A
  and 25B of this Report.

  -95-

  National Capital District
  Commission

  25.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  25.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act
  on the Commission’s
  financial statements for the years ended 31 December 2016, 2017
  and 2018 were issued
  on 14 August 2019, 29 June 2020 and 30 June 2020 respectively.
  The 2016 report was
  a Disclaimer of Opinion while 2017 and 2018 reports contained
  similar Qualified
  Opinions, hence, only the 2018 report is reproduced.

  “QUALIFIED OPINION

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

  (a) the financial statements of the Commission for the year
  ended 31 December
  2018:

  (i) give a true and fair view of the financial position and
  the results of its
  financial performance and cash flows for the year ended

• Page 179 of 475

• on that date; and

  (ii) the financial statements have been presented in
  accordance with the Public
  Finance (Management) (Amendment) Act 2016 and generally
  accepted
  accounting practice and statutory requirements in Papua
  New Guinea;

  (b) proper accounting records have been kept by the Commission,
  as far as appears
  from my examination of those records; and

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

  BASIS FOR QUALIFIED OPINION

  Revaluation of Lands and Buildings – K121,266,545

  I noted that the Commission’s lands and buildings reported at
  K121,266,545 in the
  financial statements had not been revalued over a number of
  years. The Commission
  carried on the book values since the last revaluation performed
  in 1992. Consequently,
  the Commission has not complied with LAS 16 paragraph 34
  (Measurement and
  Recognition) which requires valuation of property, plant and
  buildings are done every
  three or five years. Accordingly, I was unable to determine
  whether the Commission’s
  properties value as reported in the financial statements as at
  31 December 2018 were
  fairly stated.

  -96-

  National Capital District Commission

  Land and Garbage Rates Debtors – K84,802,351

  I noted that the data recorded in the TARMIS contains both
  ratable and non-ratable
  properties. Although the system oversight was corrected by
  applying 40% and 60%
  default rate for land tax and garbage rates respectively, the
  rates also apply to default
  customers. In addition, the basis used in deriving 40% and 60%
  to apply on provision

• Page 180 of 475

• of doubtful debt estimates could not be substantiated. As a
  result, I was unable to
  determine the accuracy of land tax and garbage rates debtors
  balance of K84,802,351
  (net of provision) as reported in the financial statements as at
  31 December 2018.

  Fixed Assets Register (FAR)

  My review of the Commission’s fixed assets account revealed that
  details of all other
  assets except for the lands and buildings were properly
  maintained in the FAR.
  However, the Commission did not conduct physical checks on these
  other assets to
  ascertain their existence and condition, and to confirm the
  completeness and accuracy
  of their total value of K33,653,588 as disclosed in the
  financial statements. In the
  absence of physical checks, assets that might be damaged, stolen
  or obsolete could not
  be identified by the Commission. Consequently, I could not
  comment on the condition,
  existence and ownership of the assets nor was I able to
  determine the completeness,
  valuation and accuracy of the amount stated in the financial
  statements as at 31
  December 2018.”

  25.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Commission for the
  years ended 31 December
  2016, 2017 and 2018 were issued on 14 August 2019, 29 June 2020
  and 30 June 2020
  respectively. These reports contained similar observations,
  hence, only the 2018
  observations are reproduced:

  Board Approval Limit & Variation Deeds

  I noted a number of contracts valued over K500,000 had been
  approved by the Board.
  I also noticed variations being done to such contracts. The
  management perceived that
  the Commission should be recognized as a Provincial Government
  and therefore, the
  Board of the Commission can approve contracts up to K5 million
  in accordance with
  Section 39B of the Public Finance (Management) (Amendment) Act
  2016.

• Page 181 of 475

• However, the Commission has been established by an Act of
  Parliament hence, does
  not apply provisions of the Organic Law. As a result, the
  Commission did not comply
  with the requirements of Section 47E(3) of the Public Finance
  (Management)
  (Amendment) Act 2016.

  -97-

  National Capital District Commission

  Budget Versus Actual Spending

  Expenditure incurred during the financial year 2018 was not within
  the budgetary
  allocation resulted in overspending. Payroll expenses (salaries and
  allowances,
  overtime, gratuity and casual wages) alone exceeded the budget by
  K3,599,865. As a
  result, I was not able to conclude on the effectiveness of the
  budget and whether strict
  observance on budget policies and monitoring of expenditure were
  undertaken during
  the year. I raised this issue and management responded as follows:

  “As noted in 2017 management letter, this is a case of under
  budgeting. Board wanted
  staff and overall admin cost to be less than 20% of the total budget
  outlay. We have an
  organization structure approved by the board and SCMC that require
  appropriate
  funding. This was reported back to board which since appointed an
  independent firm El
  to restructure NCDC management vis-à-vis to the NCDC’s functions.
  When this
  restructure is completed, all unwanted staffs in position of
  functions outsourced will be
  trimmed down and eventually cut costs.”

  Disaster Recovery Plan

  I noted that the general controls on information technology (IT)
  emphasized in my prior
  years’ audits (2008-2017) have not been addressed by the management.
  The IT
  Manager claimed that Information Technology Department had a
  disaster recovery plan
  that guarantees the continuity of activities and operations in the
  event that the

• Page 182 of 475

• Commission encounters catastrophic disasters such as fire,
  earthquake and cyclones,
  etc. I was not given the opportunity to view the documented plan
  however, informed
  that data back-ups are done on daily, weekly and monthly basis. As
  advised, the disaster
  recovery plan had not been tested to ensure its feasibility. Without
  a proper disaster
  recovery plan, the risk of discontinuity of operations increases in
  the case of unforeseen
  circumstances. This can endanger continuity of the Commission’s
  operations. I brought
  this to the attention of the management and they responded as
  follows:

  “This is a prior year issue re addressed in 2015, 2016 and 2017.
  Management agreed
  and formed a new committee to address this issue. The committee has
  resolved to adapt

  and complete recovery of data and resumption of norm
  occur.”

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

  Section 63(1) of the Public Finance (Management) (Amendment) Act
  2016 requires that
  financial statements of a public body must be furnished to the
  Minister before 30 April
  of the subsequent year. However, the audit of the financial
  statements of the
  Commission for the year under review was delayed resulting in
  reports not being issued
  within time frame stipulated. Consequently, the Commission had
  breached Section I
  63(1) and 63(3) of the Act.

  -98-

  National Capital District Commission

  Internal Controls – Payroll System Controls
  Reconciliation of allowances, gratuity and details of staff with
  fringe benefits for the
  period under review were not provided by the Human Resource
  division for my
  verification. Reconciliation is an important control mechanism.
  Failure to reconcile
  staff allowances may provide opportunities for fraudulent
  activities go undetected. In
  addition, a report from internal audit confirmed that the
  Commission does not have in

• Page 183 of 475

• place a payroll policy to manage its overtime and shift
  allowances. I brought this issue
  up to the management and management responded as follows:

  “Noted, we will review and address this recommendation now”
  25.3 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
  Commission for the year ended 31 December 2019 was in progress.

  -99-

  25A. NATIONAL CAPITAL DISTRICT BOTANICAL ENTERPRISES
  LIMITED (Subsidiary of NCDC)

  25A.1 INTRODUCTION

  25A.1.1 Legislation

  The NCD Botanical Enterprises Limited was incorporated under the
  Companies Act
  on 17 January 2000. Port Moresby City Development Enterprises

• Page 184 of 475

• Limited (a 100%
  owned subsidiary of the NCD Commission) holds 94% of the shares
  and the NCD
  Commission holds the remaining 6% shares directly or indirectly
  through trust.

  25A.1.2 Objective of the Company

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

  25A.1.3 Functions of the Company

  The Company’s activities include the sale of flowers and
  conducting research relating
  to orchids and horticulture.

  25A.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, 2018 and
  2019 for my inspection and audit, despite numerous reminders.

  -100-

  25B. PORT MORESBY NATURE PARK LIMITED
  (A Subsidiary of NCDC)

  25B.1 INTRODUCTION
  25B.1.1 Legislation

  Port Moresby Nature Park Limited was incorporated on 1 December

• Page 185 of 475

• 2011 under the
  Companies Act. The Company is a subsidiary of the National
  Capital District
  Commission (NCDC).

  In early 2012, a Deed of Trust was signed between Port Moresby
  Nature Park Limited
  (being the Trustee) and the National Capital District Commission
  (being the Settlor).
  The Trust Deed provided the intention of the Settlor (NCDC) to
  make Port Moresby
  Nature Park Limited a charitable body to be known as 3“Port
  Moresby Nature Park
  Trust.”

  On 11 June 2012, the Port Moresby Nature Park Limited was
  granted status of a
  charitable body based on the nature of its business operations.

  25B.1.2 Objective of the Company

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

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

• Page 186 of 475

• -101-

  Port Moresby Nature Park Limited

  25B.1.3 Functions of the Company

  The functions of the Company include:

  • encouraging, promoting and supporting the use of new and
  established
  technologies to make the unique natural environment of PNG
  more accessible
  to the public of PNG;
  • promoting, assisting and initiating research in PNG into the
  study of PNG flora,
  fauna and the environment including the provision of such
  financial assistance
  as may be necessary to enable or assist such research;
  • promoting, supporting and initiating research in PNG on the
  flora, fauna and
  environment of PNG and educating and informing different
  communities about
  the results of such research;
  • providing a forum for information from international
  contributors from the
  global community for the purpose of educating the PNG public
  in relation to
  the flora, fauna and environment of PNG;
  • doing such other lawful acts and things as are incidental to
  or conducive to the
  attainment of any of the foregoing activities; and
  • generally:
  ‒ carrying out fund raising schemes and charitable projects
  for the purpose
  of the Company, including exhibition and competitions;
  and
  ‒ establishing, promoting and fostering workshops and other
  educational
  activities for the purpose of the Company.

  25B.2 AUDIT OBSERVATIONS

  25B.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies
  Act on the inspection
  and audit of the accounts and records of the Company for the
  year ended 31 December
  2016 was issued on 27 August 2019. The report did not contain
  any qualification.

• Page 187 of 475

• 25B.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2017 and 2018 were
  in progress.

  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  -102-

  26. NATIONAL CULTURAL COMMISSION
  26.1 INTRODUCTION
  26.1.1 Legislation

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

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

  26.1.2 Functions of the Commission

  The main functions of the Commission are to:

  • perform the cultural functions of the former National
  Cultural Committee and in
  this connection, to assist and facilitate, preserve, protect,
  develop and promote the
  traditional cultures of the indigenous people of PNG;
  • encourage the development, promotion and protection of the
  contemporary
  cultures of PNG;
  • facilitate the marketing of selected and approved aspects of
  the cultures of PNG;
  • co-ordinate with related Government and Non-Government

• Page 188 of 475

• agencies on cultural
  matters;
  • co-ordinate cultural activities with provincial cultural
  bodies;
  • liaise with Non-Government organisations on cultural matters;
  and
  • liaise with international cultural organisations.
  26.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  26.2.1 Comments on Financial Statements
  My reports to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Commission for the years ended 31 December
  2015, 2016 and 2017
  were issued on 10 October 2019. The reports contained similar
  Disclaimer of Opinions,
  hence, only the 2017 report is reproduced.

  “DISCLAIMER OF OPINION

  Because of the significance of the matters referred to in the
  Basis for the Disclaimer of
  Opinion paragraphs below, I have not been able to obtain
  sufficient audit evidence to
  provide a basis for an audit opinion. Accordingly, I do not
  express an opinion on the
  financial statements of the Commission for the year ended 31
  December 2017.

  -103-

  National Cultural Commission

  BASIS FOR DISCLAIMER OF OPINION

  Internal Control Environment

  During my review, I noted that the Commission’s overall internal
  control environment
  was very weak. The internal control processes and procedures were
  not implemented
  by the Commission. I also noted a lack of segregation of duties
  within the Management
  Services Division of the Commission. The staff employed by the
  Commission both
  permanent and casual lacked necessary skills and qualifications to
  perform the
  accounting and finance and other tasks allocated to them. I further
  noted that they were
  not familiar with the Public Finance (Management) (Amendment) Act
  2016, General
  Orders and other Financial Procedures and Instructions to strengthen
  the internal

• Page 189 of 475

• control system of the Commission. As such, I was unable to rely on
  the overall internal
  control system of the Commission during the year under review.
  Consequently, I was
  unable to place reliance on the Commission’s financial statements
  for the year ended
  31 December 2017.

  Limitation of Scope – Cash at Bank – K875

  My review on the bank reconciliations of the Commission revealed
  that the bank
  reconciliation statements for the Main Operating Account, National
  Film Institute,
  National Performing Arts Troupe and Institute of PNG Studies were
  not provided for
  my review. Furthermore, I was not provided with the bank
  confirmation for NCC
  Operating Account, National Film Institute, National Performing Arts
  Troupe and
  Institute of PNG Studies accounts for the year ended 31 December
  2017. As a result, I
  was not provided with all the necessary information for me to carry
  out my audit
  procedures. Consequently, I was unable to identify whether proper
  controls were
  implemented by the Commission in the bank reconciliation function. I
  was also unable
  to verify and confirm the accuracy and completeness of the balance
  disclosed at the
  year end.

  Limitation of Scope – Cost Centre Accounting Information

  During my review, I noted that the accounting information and the
  bank reconciliations
  statements for the National Film Institute, National Performing Arts
  Troupe and
  Institute of PNG Studies were not provided by the Commission for my
  examination and
  inspection. I was unable to verify the expenditures (acquittals of
  payments), internal
  revenue collection reports, fixed assets and other documentary
  evidences during my
  review. Consequently, I was not provided with all the necessary
  information to enable
  me to carry out my audit procedures to confirm whether proper
  accounting records have
  been maintained by the National Film Institute, the National
  Performing Arts Troupe
  and Institute of PNG Studies.

• Page 190 of 475

• -104-

  National Cultural Commission

  Accounting Control System

  The Commission did not maintain a cashbook for recording its income
  and expenditure
  transactions during the year under review. I further noted that the
  bank reconciliations
  were prepared without a proper cashbook. The cashbook should form
  the basis of
  account balances presented in the financial statements. Without the
  cashbook, the
  balances in the financial statements may not be fairly stated at the
  year end. Further,
  due to inadequate manual controls, the financial statements produced
  from ledgers and
  without a cashbook cannot be relied upon. As a result, I was unable
  to obtain comfort
  over the internal control environment and the accuracy and
  completeness of the account
  balances stated in the financial statements.

  Limitation of Scope – Fixed Assets – K5,832,834

  My review of the fixed assets and capital expenditures of the
  Commission for the year
  ended 31 December 2017 revealed that the Commission has not
  maintained a Fixed
  Asset Register for all non-current assets acquired over the years-
  to-date. I also noted
  that the Commission’s acquisitions and disposals of assets were not
  properly accounted
  for.
  Further, there was no physical stock take undertaken by the
  Commission to confirm the
  existence of assets. Since fixed assets of the Commission are
  susceptible to theft and
  misuse, the Commission must have appropriate control mechanism in
  place to
  safeguard these assets. As a result, I was unable to ascertain the
  completeness, existence
  and valuation of the fixed assets totaling K5,832,834 as reported in
  Note 2 of the
  financial statements at the year end.
  Limitation of Scope – Salary and Wages – K2,468,180

  My review of the Commission’s salary and wages expenses revealed
  that the salary and
  wages files or reports from the Department of Finance were not
  maintained and

• Page 191 of 475

• provided for my review. Consequently, I was unable to perform my
  audit procedures to
  determine the validity, completeness and accuracy of the salary and
  wages totaled
  K2,468,180 as reported in the financial statements.

  Limitation of Scope – Other Income – K66,390

  During my review of the Commission’s Other Income, I noted that the
  supporting
  documents such as invoices, receipts and other necessary documents
  for Other Income
  were not properly maintained and provided for my review.
  Consequently, I was unable
  to perform my audit procedures to determine the validity,
  completeness and accuracy
  of the Other Income totaled K66,390 as reported in the financial
  statements.”

  -105-

  National Cultural Commission

  26.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Commission for the
  years ended 31 December
  2015, 2016 and 2017 were issued on 10 October 2019. The reports
  contained similar
  observations, hence, only the 2017 report is reproduced.

  Accounting and Administration Procedural Manual

  During my review, I noted that the Commission had a draft
  Procedural Manual which
  was yet to be approved by the Board. I observed that the
  Commission’s staff were not
  adhering to the processes and procedures of the Public Finance
  (Management)
  (Amendment) Act 2016, General Orders and other Financial Manuals
  and Instructions.
  As a result, I noted significant internal control weaknesses
  within the Commission
  during the year under review. I drew this to the attention of
  the management and they
  responded as follows:

• Page 192 of 475

• “Since this is addressed, we will attempt to draw up one for
  internal office use”

  Non Maintenance of Travel Advances Acquittal Register

  The Commission had not maintained a Travel Advances Register for
  all duty travels
  and related expenses. As a result, I was unable to trace and
  authenticate travel advances
  and related expenses amounting to K43,517 for the year under
  review. Consequently,
  the Commission had breached the Public Finance (Management) Act
  and the Financial
  Management Manual Part 20, paragraphs 11.2 & 12.10 which states
  that cash
  advanced to officers on official duty travels must acquit travel
  advances within 14 and
  7 days for international and domestic travels respectively on
  return from duty travels.
  In the absence of a Travel Advance Register, the Commission was
  unable to monitor
  the acquittals promptly.

  Staff Personnel Files

  During my review of staff personnel files for both permanent and
  casual employees, I
  noted that staff personnel files were not properly maintained
  and updated. There were
  instances in which salary and wages tax declaration forms and
  birth certificates for
  dependents were not sighted in the staff personnel files.

  Internal Control Weaknesses

  Other internal control breakdowns and weaknesses noted during my
  audit are
  summarized as follows:

  i. I noted that the Commission’s Board Meeting Minutes were not
  signed by the
  chairman to confirm the minutes as correct recording of the
  meetings;

  -106-

  National Cultural Commission

  ii. I noted that payments totaled K45,000 had no proper
  supporting documents such as
  cheque copies and invoice copies attached to confirm and verify
  the payments. As
  a result, I was unable to verify and substantiate the accuracy,

• Page 193 of 475

• completeness and
  occurrences of the expenditures incurred;

  iii. My review of the expenditures during the year revealed that
  payments totalling
  K72,362 were missing or not placed on the payment voucher files
  for my
  verification; and

  iv. I was not provided with the Acting Director’s contract of
  Employment for my
  review.

  26.3 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
  Commission for the year ended 31 December 2018 had been
  completed and results
  were being evaluated.

  The financial statements of the Commission for the year ended 31
  December 2019 had
  been submitted and arrangements were being made to commence the
  audit shortly.

  -107-

• Page 194 of 475

• 27. NATIONAL ECONOMIC AND FISCAL COMMISSION
  27.1 INTRODUCTION

  27.1.1 Legislation

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

  27.1.2 Functions of the Commission

  The main functions of the Commission are to:

  • provide assessment and views on national macro and micro
  economic issues and
  their relevance on the overall development of rural and urban
  communities;
  • consider and co-ordinate requests by Provincial Governments
  and Local-level
  Governments for foreign grants, loans and other financial
  assistance for
  development purposes;
  • ensure that Provincial Governments and Local-level
  Governments obtain a fair
  share of the national wealth and make recommendations to the
  NEC on the
  allocation of grants to Provincial Governments and Local-
  level Governments;
  • recommend suitable economic development strategies and sound
  fiscal
  management policies to the Minister responsible for financial
  matters;
  • carry out cost and benefit analysis on the development of all
  natural resources and
  the impact of such development on national development and
  make such analysis
  available to the NEC;
  • review public accounting and related practices;
  • make yearly reports and recommendations to the NEC through
  the Minister
  responsible for financial matters;
  • assist the Provincial and Local-level Service Monitoring
  Authority with
  assessments and views on the planning and implementation
  systems of the
  Provincial Governments and Local-level Governments;
  • establish and maintain a gradation system for the purpose of
  classifying provinces
  and districts according to the stages of development of each;
  • assist the Provincial and Local-level Service Monitoring

• Page 195 of 475

• Authority in carrying out
  its other functions; and
  • provide advice to the Minister responsible for Provincial
  Government and Local-
  level Government (now Inter Government Relations) matters as
  and when
  required.

  -108-

  National Economic and Fiscal Commission

  27.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  27.2.1 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 2018
  was issued on 10
  October 2019. The report did not contain any qualification.

  27.2.2 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 Commission for the year
  ended 31 December
  2018 was issued on 10 October 2019. The report contained the
  following significant
  matters:

  Fixed Asset Register

  During my review of the Fixed Assets Register, I noted that
  majority of the assets
  particularly the Furniture & Fittings and Office & Computer
  Equipment were not
  allocated with asset identification numbers or codes which are
  essential for identifying
  and monitoring movement of individual asset maintained and
  disposed by the
  Commission. There were also very old or obsolete assets that the
  Commission need to
  identify and dispose upon Board’s approval. As a result, I was
  unable to identify and
  confirm the existence of the individual assets in the Fixed
  Assets Register. I drew my
  observation to the management of the Commission and they

• Page 196 of 475

• responded to my concern
  as follows:

  “We acknowledged the issue and corrective measures are taken by
  tagging and coding
  the assets as well as identifying old and obsolete assets to go
  before the Commissioners
  to be disposed and taken off the asset register to give a true
  value of all assets.”

  Staff Personnel Files

  My review of the personnel emoluments revealed that staff
  personnel files were not
  properly maintained. I noted that records such as salaries and
  allowances variation
  advices, tax declaration forms and appointment letters were not
  on file for audit
  verification. The Commission also did not maintain control
  records such as salary
  history cards/leave history records (annual leave, long service
  leaves and sick leave) to
  assist in the verification of annual leave and long service leave
  entitlements.

  I recommended the management to update all staff personnel files
  on a regular basis
  and the management responded as follows:

  -109-

  National Economic and Fiscal Commission

  “The NEFC salaries and personnel files are administered by
  National Planning
  Salaries section however the process of updating records is slow
  We acknowledge this
  3 weakness and will engage competent personnel to update and
  maintain the personal
  files”

  Group Tax Liability

  My review of the salaries revealed that casual wages were paid
  out from the
  Commission’s Operational bank account. Based on the Commission’s
  fortnightly
  calculations, a total of K59,249 had been deducted for tax in
  2018. This tax liability
  withheld by the Commission had not been remitted to the Internal

• Page 197 of 475

• Revenue
  Commission.

  I recommended the management to comply with respective tax
  provisions and the
  management responded as follows:

  “We have been complying but there were no mechanism/tax coding in
  place with the
  IRC to capture tax payment from NEFC We have now obtained (TIN)
  Tax File Number
  from IRC incomplying tocorrectoraddress thisweakness”

  Travel Advances and Acquittal Register
  My review of the travel and subsistence expenses amounting to
  K886,474 revealed that
  the Commission did not maintain a Travel Advances/Acquittals
  Register with acquittal
  files for all duty travels and related expenses. My test also
  revealed that K286,597
  (32%) of total sample tested were not acquitted. As a result, I
  was unable to determine
  the propriety and reasonableness of the non-acquitted portion of
  travel and subsistence
  expenses as to whether the monies were spent for the intended
  purpose. The
  management responded to my observation as follows:

  “These are receipts /charges for airfares, hire car receipts for
  the regional workshops
  are adding to the issue raised Also officers have not properly
  acquitted advances
  despite ongoing follow ups by the Accounts/Records Management
  Officer We3
  acknowlede and aree with the issue raised and will com l in
  takincorrective
  measures to rectify this weakness.”

  27.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Commission had not
  submitted its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

  -110-

  28. NATIONAL FISHERIES AUTHORITY

• Page 198 of 475

• 28.1 INTRODUCTION

  28.1.1 Legislation

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

  28.1.2 Functions and Powers of the Authority

  • The primary functions and powers of the Authority are
  described as follows:

  – manage the fisheries within the fisheries waters in
  accordance with this Act,
  taking into account the international obligations of PNG in
  relation to tuna
  and other highly migratory fish stocks;
  – make recommendations to the Board on the granting of
  licences and
  implement any licensing scheme in accordance with this Act;
  – liaise with other agencies and persons, including regional
  and international
  organisations and consultants, whether local or foreign, on
  matters concerning
  fisheries;
  – operate research facilities aimed at the assessment of fish
  stocks and their
  commercial potential for marketing;
  – subject to the Pure Foods Act, the Commerce (Trade
  Descriptions) Act, the
  Customs Act, the Customs Tariff Act and the Exports (Control
  and Valuation)
  Act control and regulate the storing, processing and export
  of fish and fish
  products;
  – appraise, develop, implement and manage projects, including
  trial fishing
  projects;
  – prepare and implement appropriate public investment
  programmes;
  – collect data relevant to aquatic resources;
  – act on behalf of the Government in relation to any domestic
  or international
  agreement relating to fishing or related activities or other
  related matters to
  which the Independent State of PNG is or may become a party;
  – make recommendations on policy regarding fishing and related

• Page 199 of 475

• activities;
  – establish any procedures necessary for the implementation of
  this Act,
  including tender procedures;
  – implement any monitoring, control, and surveillance scheme,
  including co-
  operation, agreements or arrangements with other States or
  relevant
  international, regional or sub-regional organisations, in
  accordance with this
  Act; and

  -111-

  National Fisheries Authority

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

  28.2 STATUS OF FINANCIAL STATEMENTS

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

  The fieldwork associated with the inspection and audit of the
  accounts and records and
  the examination of the financial statements for the year ended
  31 December 2018 was
  in progress.

  The Authority had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

• Page 200 of 475

• -112-

  29. NATIONAL GAMING CONTROL BOARD

  29.1 INTRODUCTION

  29.1.1 Legislation

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

  29.1.2 Functions of the Board

  The principal functions of the Board are to:

  • promote probity and integrity in gaming;
  • maintain the probity and integrity of persons engaged in
  gaming in the country;
  • promote fairness, integrity and efficiency in the operations
  of persons engaged in
  gaming in the country;
  • reduce any adverse social impact of gaming;
  • promote a balanced contribution by the gaming industry to
  general community
  benefit and amenity; and
  • consider applications for and where appropriate grant permits
  and licenses under

• Page 201 of 475

• this Act and to control the operations of gaming machines as
  specified in this Act.

  29.1.3 Fund of the Board

  National Gaming Control Board Community Benefit Fund Trust is
  the Fund of the
  Board. Comments in relation to the Fund are contained in
  paragraph 29A of this Report.

  29.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Board for the year ended 31 December 2016 was in progress.

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

  The Board had not submitted its financial statements for the
  years ended 31 December
  2018 and 2019 for my inspection and audit.

  -113-

  29A. NATIONAL GAMING CONTROL BOARD COMMUNITY
  BENEFIT FUND TRUST (Subsidiary of National Gaming Control
  Board)

  29A.1 INTRODUCTION

  29A.1.1 Legislation

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

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

• Page 202 of 475

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

  The CBF started its operations in 2008.

  29A.1.2 Objectives of the Fund Trust

  The objectives of the Fund Trust are to:

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

  29A.1.3 Function of the Fund Trust

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

  -114-

  National Gaming Control Board Community
  Benefit Fund Trust

  • provision and improvement of social welfare;
  • development of sports and improvement of recreational
  facilities;
  • improvement of education and learning tools (not including
  school fees);
  • assistance to churches and religious groups;

• Page 203 of 475

• • provision of medical assistance;
  • assistance to education, health and law and order projects;
  and
  • undertake research into problems on gambling and promote
  community
  awareness and education on negative aspects of gambling.
  29A.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 Fund Trust for the year ended 31 December 2016 was in
  progress.

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

  The Fund Trust had not submitted its financial statements for
  the years ended 31
  December 2018 and 2019 for my inspection and audit.

  -115-

  30. NATIONAL HOUSING CORPORATION

• Page 204 of 475

• 30.1 INTRODUCTION

  30.1.1 Legislation

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

  30.1.2 Functions of the Corporation

  The principal functions of the Corporation are to:

  • improve housing conditions;
  • provide adequate and suitable housing or letting to eligible
  persons;
  • sell houses to eligible persons;
  • make advances to eligible persons and approved applicants to
  enable them to
  become the owners of houses occupied by them;
  • develop residential land by way of providing adequate services
  for human
  settlements;
  • carry out and promote research or investigations into matters
  connected with urban
  development and human settlements; and
  • maintain dwellings and associated buildings vested in the
  Corporation.

  30.1.3 Subsidiary of the Corporation

  The National Housing Corporation has a subsidiary company,
  National Housing Estate
  Limited. Comments in relation to National Housing Estate Limited
  are contained in
  paragraph 30A of this Report.

  30.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements
  of the Corporation for the
  years ended 31 December 2015, 2016 and 2017 had been submitted.
  However, audits
  were being delayed due to certain outstanding issues.

  The Corporation had not submitted its financial statements for
  the years ended 31
  December 2018 and 2019 for my inspection and audit.

• Page 205 of 475

• -116-

  30A. NATIONAL HOUSING ESTATE LIMITED
  (A Subsidiary of National Housing Corporation)
  30A.1 INTRODUCTION

  30A.1.1 Legislation

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

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

  The Company commenced its normal operations from 1 January 2010.

  30A.1.2 Objective of the Company

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

  30A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had submitted
  its financial
  statements for the years ended 31 December 2010, 2011, 2012,
  2013 and 2014.
  However, the audits were being delayed due to certain
  outstanding issues.

  The Company had not submitted its financial statements for the
  years ended 31
  December 2015, 2016, 2017, 2018 and 2019 for my inspection and
  audit.

• Page 206 of 475

• -117-

  31. NATIONAL INFORMATION AND COMMUNICATIONS
  TECHNOLOGY AUTHORITY (NICTA)

  31.1 INTRODUCTION

  31.1.1 Legislation and Objective of the Authority

  The National Information and Communications Technology Authority
  (NICTA) was
  established on 1 November 2009 by the National Information and
  Communications
  Technology Act 2009. The Authority succeeds the PNG Radio
  Communications and
  Telecommunication Technical Authority (PANGTEL) which was
  established on 1
  January 1997 as part of the Government’s policy to corporatise
  the Post and
  Telecommunication Corporation (PTC) and to have it divided into
  three different
  organisations namely: Telikom PNG Limited, Post PNG Limited and
  PANGTEL.

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

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

  31.1.2 Functions of the Authority

• Page 207 of 475

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

  31.2 STATUS OF FINANCIAL STATEMENTS

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

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

  -118-

  National Information and Communications Technology
  Authority
  The Authority had submitted its financial statements for the year
  ended 31 December
  2018 and arrangements were being made to commence the audit shortly,
  while the
  financial statements for the year ended 31 December 2019 had not
  been submitted for
  my inspection and audit.

• Page 208 of 475

• -119-

  32. NATIONAL MARITIME SAFETY AUTHORITY

  32.1 INTRODUCTION

  32.1.1 Legislation

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

  32.1.2 Functions of the Authority

  The functions of the Authority are to:

  • perform the functions and exercise the powers as are
  conferred upon it by this Act
  or under any other law;
  • co-ordinate search and rescue operations for vessels in
  distress or lost at sea
  pursuant to the terms and conditions of a search and rescue
  plan prepared by the

• Page 209 of 475

• Minister, from time to time, and approved by the Authority;
  • co-ordinate with other agencies and persons, including
  regional and international
  organisations and consultants, whether local or foreign, on
  matters concerning
  maritime safety, marine pollution prevention or search and
  rescue operations at
  sea;
  • collect data relevant to maritime safety, marine pollution
  prevention and search
  and rescue operations at sea;
  • act on behalf of the State in relation to any domestic or
  international agreement
  relating to maritime safety, marine pollution prevention or
  search and rescue
  operations at sea to which the State is or may become a
  party;
  • make recommendations on policy to the Minister regarding
  maritime safety,
  marine pollution prevention and search and rescue operations
  at sea;
  • provide consulting services, training and management services
  relating to any of
  its functions whether in PNG or overseas;
  • where appropriate to consult with:
  ‒ other agencies of National Government;
  ‒ Provincial Governments;
  ‒ Local-level Governments; or
  ‒ commercial, industrial and other relevant bodies and
  organisations, in
  relation to matters affecting them in the performance of
  its functions.
  • generally to do such supplementary, incidental or
  consequential acts and things
  as are necessary or convenient for carrying out its
  functions.

  -120-

  National Maritime Safety Authority
  32.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  32.2.1 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 2018 was

• Page 210 of 475

• issued on 29 January
  2020. The report did not contain any qualification.

  32.2.2 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 2018
  was issued on 29 January 2020. The report contained the
  following matters:

  Trade Debtors – K21,450,406

  My review of the Authority’s trade debtors of K21,450,406 at 31
  December 2018
  revealed that a large number of debtors amounting to K4,317,517
  were outstanding for
  more than 90 days. I further noted that most of these long
  outstanding debtors may not
  be collectable. I brought this matter to the attention of the
  management and the
  management responded as follows:

  “The Management has developed a debt management policy to
  address the debts that
  are falling behind the due dates for collection and allow
  provision for doubtful debts.
  One of the outcomes of the policy is to enforce the relevant
  legislation on detaining
  vessel for non-payment of levies. The Management is in the
  process of creating an
  enforcement unit within the legal department to enforce the law.
  Once the unit is in
  place and fully functional, it will force many agents/owners/
  masters to pay the levies
  on time. A warning letter to major clients informing them of the
  Authority’s intention
  will be disseminated to the industry. Also provisions for
  doubtful debts have been
  increased in line with the debt management policy.”

  Fixed Assets

  During my review of the Fixed Assets Register, I noted that the
  Authority’s Fixed
  Assets Register contained many old assets which existence cannot
  be verified. I further
  noted that the Authority did not conduct a complete stock take
  of all its fixed assets. As
  a result, those assets with nil written down values from
  previous years were still
  reported in the Assets Register. I brought this matter to the
  attention of the management

• Page 211 of 475

• and the management responded as follows:

  “The Management acknowledges this and confirmed NMSA conducted
  stock take and
  verification exercise on all its fixed assets in 2018. The
  Management has submitted the
  listing of the Board’s approved disposals of old or obsolete
  assets. However,
  systemising the Fixed Assets Register and allocation of tags and
  codes for each asset
  was hampered by the implementation of the PMMRA 2017 and Forex
  issues.

  -121-

  National Maritime Safety Authority
  The Management has resubmitted payments for the payment of Fixed
  Assets
  Management Module and we anticipate to systemise the registry before
  the end of
  2020.”

  Purchase of Ministerial APEC Vehicles

  During my review, I noted that the Authority purchased two executive
  support vehicles
  for the Ministry of Transport and Infrastructure totaling K410,585.
  The vehicles had
  been disclosed in the Fixed Assets Register of the Authority,
  however, I was unable to
  verify the existence and legal ownership of the vehicles as I was
  not provided vehicle
  registration details and had no access for physical inspection. As a
  result, I was unable
  to verify the existence and legal ownership of the two (2) vehicles.
  I queried the
  management and they responded to my query as follows:

  “The Management has acknowledged this and confirmed that two
  vehicles purchased
  were part of NMSA’s contribution to the APEC Summit approved by
  Board. We have
  enquired with Department of Transport and were advised vehicles are
  with APEC
  Committee. The Management has written to APEC committee for the
  vehicles to be
  returned to NMSA for Board’s deliberation.”

  Staff Salary History Cards

  During my review of the personnel files for certain selected
  officers of the Authority, I
  observed that the Authority had not maintained salary and history

• Page 212 of 475

• cards for employees
  in their respective personnel files. A salary history card should
  show an updated base
  salary, allowances, gratuities and the updated leave records for
  each employee. Proper
  filing of employee’s history and salary cards would enable the
  payroll staff to easily
  access the information and calculate the staff entitlements
  correctly including
  provisions for leave entitlements. As a result, I was unable to
  confirm the approved rate
  of salaries and allowances and the leave records for the officers
  from their personnel
  files.

  I recommended the Authority to maintain staff salary history cards
  for each employee
  in their personnel files as a control mechanism to enable the
  payroll staff to easily access
  the information and correctly calculate the staff entitlements.
  Further, for these files to
  be regularly updated upon changes/variations on each individual
  staff.

  Management responded to my concern as follows:

  “The Management acknowledged that and will address this issue in
  2019. Delays were
  attributed to the termination of the HR Manager which affected the
  HR Department’s
  functions”

  -122-

  National Maritime Safety Authority
  32.3 STATUS OF FINANCIAL STATEMENTS
  At the time of preparing this Report, the Authority had submitted
  its financial
  statements for the year ended 31 December 2019 and arrangements
  were being made
  to commence the audit shortly.

• Page 213 of 475

• -123-

  33. NATIONAL MUSEUM AND ART GALLERY
  33.1 INTRODUCTION

  33.1.1 Legislation

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

  33.1.2 Functions of the Museum

  The main functions of the Museum are to:

  • protect and conserve the cultural and natural heritage of
  PNG;

• Page 214 of 475

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

  33.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Museum had submitted
  its financial statements
  for the year ended 31 December 2019 and arrangements were being
  made to commence
  the audit shortly.

  -124-

  34. NATIONAL RESEARCH INSTITUTE

  34.1 INTRODUCTION

  34.1.1 Legislation

  The National Research Institute (NRI) was established under the
  Institute of Applied
  Social and Economic Research Act (Chapter 165). The name of the
  Institute was
  changed from 3 1 * çt 4BXWtR?tL$SSGIdt6RFiLltand
  (FRnRPIFt3H4L(FIc’ to 1 LtiRnLlt
  Research InJ4MXW’ following the approval of the NEC through its

• Page 215 of 475

• Decision No. 42/90
  of 7 March 1990.

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

  34.1.2 Functions of the Institute

  The functions of the Institute include:

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

  34.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the audit of the
  accounts and records and the examination of the financial
  statements of the Institute for
  the year ended 31 December 2017 was completed on 12 September
  2018. The
  management provided responses to the management letter on 6
  December 2019,
  however the amended financial statements had not been provided
  by the Institute to
  enable me to issue the report.

  The Institute had not submitted its financial statements for the
  years ended 31 December
  2018 and 2019 for my inspection and audit.

  -125-

• Page 216 of 475

• 35. NATIONAL ROADS AUTHORITY

  35.1 INTRODUCTION

  35.1.1 Legislation

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

  35.1.2 Objectives of the Authority

  The objectives of the Authority are to:

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

  35.1.3 Functions of the Authority

  The functions of the Authority are to:

  • establish and operate a Road Fund from road user charges,
  budget and other
  sources;
  • establish resources to enable the Authority to perform its
  functions;
  • maintain and manage updated data on asset conditions using the
  Road Asset
  Management System, Bridge Inventory and Bridge Maintenance and
  other
  approved systems;
  • formulate and determine prioritised annual road maintenance
  plans and
  programmes using the Road Asset Maintenance System, Bridge
  Inventory and
  Bridge Maintenance and other approved systems to be supported
  by the road sector
  cost recovery revenues;
  • establish annual road maintenance funding requirements in
  accordance with the
  future annual road maintenance plans;
  • determine and implement road user charges in accordance with
  the financial

• Page 217 of 475

• resource requirements of the annual road maintenance plans;
  • deliver the required routine, specific and emergency road
  maintenance in
  accordance with the maintenance service levels established for
  each class or type or
  road, through the contracting of independent contractors, to
  monitor and supervise
  the contracts as they are executed;

  -126-

  National Roads Authority

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

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

  • establish and sustain contract management capacity to ensure
  the validity of
  contracts and the effective management of contracts awarded
  for the execution of
  agreed road maintenance works and rehabilitation and
  reconstruction projects;
  • ensure that all contracts are tendered through a transparent
  and competitive
  procedure to ascertain economic efficiency and sustainability
  in delivery of road
  maintenance and rehabilitation works;
  • keep adequate records and to maintain a management information
  system which
  provides the Board and staff with accurate and timely
  information on commitments,
  expenditures and revenue for the purchase of consultancy and
  contracting services
  and other purchases and outlays;
  • report publicly and transparently on collection of user
  charges, revenues, and in

• Page 218 of 475

• detail on the use of the revenues on the road maintenance
  programmes in
  accordance with internationally accepted accounting
  principles;
  • establish environmental management capacity;
  • provide a continuing programme of professional staff
  development and required
  skills training for non-professional staff; and
  • construct, erect or affix signs or marks on road transport
  infrastructure in
  accordance with the Motor Traffic Act (Chapter 243).

  35.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  35.2.1 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 2018 was
  issued on 19 March
  2020. The report did not contain any qualification.

  35.2.2 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 2018
  was issued on 19 March 2020. The report contained the following
  observations:

  -127-

  National Roads Authority

  Accounting and Operational Procedures Manuals

  I observed that the accounting and operational procedures manual was
  not finalized and
  approved for use by the management of the Authority. Such internal
  control
  mechanisms and policies should be formally established, well
  documented and
  communicated to all levels and functions of the Authority to be used
  by all personnel
  in their routine operational activities.

  I was unable to measure and comment on the standards of operations
  in relation to the
  systems and controls and whether uniform procedures were followed in
  respective
  divisions or sections. This was a recurring issue that the

• Page 219 of 475

• management had to address.

  Management responded as follows:

  “Most functions of the Authority have well documented policies and
  procedures for
  routine operational activities. Update to the draft financial &
  accounting policies and
  procedures manual is subject to institutional reforms that are
  currently in progress. We
  are also aware that complete reliance on a financial manual in the
  changing world is
  old fashioned or outdated. With advances in technology, many
  resources for learning I
  are available on the internet that staffs are able to source online
  to help complete the I
  routine tasks.”

  Bank Reconciliations

  Part 4, Division I, paragraph 47 of the Financial Management Manual
  requires that
  all heads of government departments and statutory authorities are to
  ensure that their
  bank accounts are reconciled on a monthly basis. However, I noted
  that the bank
  reconciliations for both the Operating and Road Fund accounts were
  not prepared and
  reviewed on a timely basis. Consequently, I was unable to place
  reliance on the
  effectiveness of the internal controls surrounding the management of
  cash and the bank
  reconciliation process.

  Staff Rental Bond Fees – K537,594

  Rental Bond fees paid to landlords for staff accommodation was
  disclosed as K537,594
  at 31 December 2018. My review revealed that on several instances,
  the Authority did
  not recoup amounts paid as bond fees after officers relocated to new
  premises. I was
  unable to confirm whether the Authority had maintained proper
  controls and monitoring
  systems to track bond fees paid and refundable. This issue was also
  raised in my 2017
  audit report.

  I recommended the Authority to recoup bond fees after the officers
  vacate or relocate
  to new premises and the management responded as follows:

  -128-

• Page 220 of 475

• National Roads Authority

  “Comprehensive review of all rental bond fees was carried out in
  2019. We identified
  many records of expired or recovered bond fees that were still
  carried forward in the I
  GL since 2011 without updates or adjustments. We cross checked the
  records and
  resolved the differences between expired or refunded bond fees
  against genuine bond
  fees for current tenancy agreements in place. Total rental bond fee
  balance in the GL
  account was adjusted to reflect current bond fees only and cleared
  the amounts relating
  to expired & recovered amounts to expense. Preventive measures had
  been put in place
  to track bond fees activity, which includes expiring all bonds
  totally by offsetting I
  against final month’s rental when the leases are terminated. When
  notices to terminate

  those bonds therefore stop the need to recover bondfees.”

  Staff Debtors – K58,935

  My review of the staff debtors revealed that the balance disclosed
  was carried forward
  from prior year. I further observed that the Authority did not
  maintain a proper
  Advances Register in 2018 and that there was no approved staff and
  salary Advance
  Policy in place to govern matters relating to the approval,
  payments, recovery and
  general administration of advances made to staff. Consequently, I
  was unable to
  confirm the accuracy and correctness of the balance disclosed as
  K58,935 at year end
  and further comment on the effectiveness of controls surrounding
  staff advances.

  Management responded as follows:

  “The account represents residual balances for staff advances carried
  forward from
  2013, some of which were deducted from payroll but records were not
  updated
  including the GL. Some amounts cannot be recouped from staff that
  left the Authority.
  The account balance of K58,935 was cleared out to expense in 2019 as
  amounts have
  been outstanding (aging) for too long and full recovery was very

• Page 221 of 475

• remote. Staff advances
  ceased in 2013 and matter closed.”

  Fuel Levies Receivable – K12,943,909

  My review of the fuel levies receivable account revealed that an
  amount of K5,859,509
  relating to expected fuel levy for December 2017 remained
  outstanding for more than
  a year. Further, I was not able to comment on the collectability as
  levy receivables are
  categorized as current assets and are expected to be converted to
  cash within one year
  (12 months). According to the Generally Accepted Accounting
  Principles (GAAP), the
  treatment of fuel levies receivable account as K5,859,509 at balance
  date did not satisfy
  the definition of current assets.

  -129-

  National Roads Authority

  Management responded as follows:

  “The account balance of K5,859,509 was for estimated fuel levies
  recorded for some
  months in 2017 and carried forward in the GL as receivables for 3
  years. Adjustments
  were not made after taking up the actual receipts to bank account
  and the GL. Because

  it without source records & workings or formulae was not prudent.

  We have verified the fuel levy receipts for 2018 2019 period and
  accounted for it
  accurately to isolate the aging receivables and confirmed as
  worthless. We have
  cleared the aging account balance in 2019 to correct the treatment &
  keep proper
  accounts receivable record. We have stopped estimating fuel levy in
  2019 to minimise
  similar issues arising in the future.”

  Outstanding Payroll Liability – K11,318,414

• Page 222 of 475

• The Department of Finance pays for the salaries and allowances
  through Alesco
  (Government) Payroll for employees of the Authority based on the
  condition that the
  amounts paid would be refunded. My review revealed that the
  Authority had been
  accruing salaries and allowances paid by Department of Finance since
  2011 without
  any settlements to date. Comments and recommendations made in the
  2011-2017 audits
  for the settlement of the liability were not implemented by
  management. As a result,
  amount totalling Kl1,318,414 outstanding as at 31 December 2018
  reflected a liability
  which I was unable to establish whether settlement would be made in
  the foreseeable
  future.

  I was not able to conclude whether the amount would have any impact
  on the overall
  liquidity position of the Authority.

  Management responded to my concern as follows:

  “NRA responses to 2017 audit stands. We clarify that the Department
  of Finance (DoF)
  pays salaries and allowances for only 13 employees of the Authority
  through the Alesco
  Payroll. NRA extracts the amounts from the Alesco Payroll report and
  captures in the I
  GLLEE for record purposes only.

  There were no written/ documented agreements in place for the
  amounts paid to the
  NRA staff to be refunded to DoF. The DoF pays salaries for most
  Departments and
  Central Agenc ies through its annual budget. Obviously, it will be
  the responsibility of
  DoF to keep proper records and account for such expenditures, and
  report to
  Parliament regularly.

  -130-

  National Roads Authority

  NRA may treat these amounts as non-value transactions because it
  does not budget for

• Page 223 of 475

• (due to lack of funding) and pay for this expenditure. In the
  absence of a written
  agreement for refund, there is no true obligation that by paying all
  at once or failing to
  pay when due may cause a liquidity problem. NRA may opt to cease
  recording of the
  amounts in its books and clear the amounts currently held to expense
  as a way forward
  to correct the misunderstanding.”

  Fixed Assets Register

  My review of the fixed assets of the Authority revealed that the
  Fixed Assets Register
  (FAR) was not properly maintained and updated. I also noted that the
  assets were not
  labelled/tagged with unique identification numbers/codes to enable
  me to physically
  verify during the audit. Consequently, I was unable to establish the
  existence and
  location of assets listed in the Fixed Assets Register and place
  reliance on the
  effectiveness of internal controls surrounding the fixed assets of
  the Authority.

  Management responded that adjustments were made to the FAR which
  would be
  reflected in the subsequent year.

  Incorrect Tax Administration

  My review of the personnel emoluments revealed that certain senior
  officers were
  provided with accommodation and vehicles for 24 hours use with fuel.
  However, the
  correct prescribed rates for tax purposes were not included in the
  calculation of
  fortnightly salary and wages tax. The Authority had failed to
  administer tax correctly
  for concerned officers and thus breach the provisions in the Income
  Tax Act 1959.

  Management noted my concern and advised that a review will be done
  to address this
  issue.

  Staff Rental Accommodation – K1,070,414

  My review of the Staff Rental Accommodation revealed certain
  instances where rentals
  paid to personal companies or companies owned by spouses and related
  parties of the
  Authority’s Staff. Contract officers are deemed to be evading tax
  despite my

• Page 224 of 475

• recommendations to abstain from this practice in my prior year
  audits. I further noted
  that the landlords were the spouses of the contract officers who
  registered their
  companies with IPA in the pretext of leasing their properties to NRA
  contract staffs.
  The above practice is deemed improper where proper procedures were
  circumvented to
  obtain personal gain by officers of the Authority. As per the Income
  Tax Act 1959, this
  practice may be considered as tax evasion.

  I recommended the management to immediately cease this practice and
  they responded
  as follows:

  -131-

  National Roads Authority

  “All leases with relevant landlords are usually prepared by the
  legal team, who
  conducts company searches for proper checks before informing the
  management on the
  outcome. Part of the check is to ensure that a company is
  properly registered and
  complies with the Companies Act 1997. This includes ensuring that
  section 16 of the I
  Act is duly noted.
  LEE
  We are fully aware that if the rental payments are made directly
  to a person,
  salary/wages tax will definitely apply, but all accommodation
  rentals were paid in
  accordance with lease agreements held with relevant landlords or
  property managing
  companies. We will review the matter and discuss with each
  officer concerned to look
  at other avenues to secure their accommodation either through
  real estate agents or
  other parties.”

  35.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Authority had submitted
  its financial
  statements for the year ended 31 December 2019 and arrangements
  were being made
  to commence the audit shortly.

• Page 225 of 475

• -132-

  36. NATIONAL TRAINING COUNCIL

  36.1 INTRODUCTION

  36.1.1 Legislation

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

  36.1.2 Objectives of the Council
  The objectives of the Council are to:

  • foster the comprehensive development of training with regard
  to the needs and the
  resources of the country;
  • foster the co-ordination of training institutions so that the
  most effective use can be
  made of resources available for training which ensures
  increased productivity and
  capacity building in the workforce;
  • make the benefits of training as widely as possible;

• Page 226 of 475

• • plan and encourage the development of a system of training
  fitted to the
  requirements of the country and its people;
  • establish, preserve and improve standards of training
  throughout the country;
  • make the most effective use of the resources available for
  training related purposes
  in so far as this can be done by legislative and
  administrative measures; and
  • generally augment and support the role and functions of the
  Commission for Higher
  Education as specified in the Higher Education Act (Chapter
  397).
  36.1.3 Functions of the Council
  The principal functions of the Council are to be responsible for
  supervising and
  managing the implementation of the National Training Policy and
  for monitoring,
  reviewing and revising the National Training Policy when
  necessary; to provide
  guidelines to the NEC, Provincial Government, and the in-service
  Training Institution’s
  Governing Councils on any issues related to training; and to
  formulate and publish
  guidelines on human resource requirements, localisation and
  indigenisation issues and
  related matters.
  36.2 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 for
  the year ended 31 December 2017 had been completed and audit
  report was under
  preparation.

  The Council had not submitted its financial statements for the
  years ended 31 December
  2018 and 2019 for my inspection and audit.
  -133-

  37. NATIONAL VOLUNTEER SERVICE

  37.1 INTRODUCTION

  37.1.1 Legislation

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

  37.1.2 Functions of the Service

• Page 227 of 475

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

  37.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Service had not
  submitted its financial
  statements for the years ended 31 December 2017, 2018 and 2019
  for my inspection
  and audit despite reminders.

  -134-

  38. NATIONAL YOUTH DEVELOPMENT AUTHORITY
  (Formerly National Youth Commission)

  38.1 INTRODUCTION

  38.1.1 Legislation

  The National Youth Development Authority was established under

• Page 228 of 475

• the National Youth
  Development Authority Act 2014. This Act came into operation on
  21 October 2014,
  thereby repealing the National Youth Commission Act 1999. The
  Authority commenced
  its operational activities under the new name on 1 January 2015.

  Under the National Youth Development Authority Act, all the
  assets, properties, rights,
  obligations and liabilities which immediately before the coming
  into operation of this
  Act were vested in or imposed on the Commission, are, on that
  coming into operation,
  transferred to and became the assets, properties, obligations
  and liabilities of the
  Authority.

  38.1.2 Functions of the Authority

  The functions of the Authority are to:

  • advise the Ministry and the National Government on policy
  formulation and
  legislative changes pertaining to youth affairs;
  • authorise, coordinate, implement and monitor youth
  development activities at the
  National, Provincial and Local-Levels;
  • develop and provide policy and technical advice to the
  Provincial Governments
  and Local-Level Governments on matters pertaining to youth;
  • establish standards, regulate and monitor the level of
  services and training offered
  to youth by Government and non-profit organisations;
  • monitor the execution of National Youth Development Plans at
  the Provincial and
  District levels;
  • empower and provide opportunities to enable youth to
  participate meaningfully
  in activities at the International, National and Local-Level;
  • generate revenue and fund youth programs and activities;
  • report to the Minister on any matters referred to it by the
  Minister from time to
  time;
  • establish and maintain a strong youth network at the
  National, Provincial, District
  and Local-Level areas; and
  • promote awareness and disseminate information on youth
  matters through its
  network.

• Page 229 of 475

• -135-

  National Youth Development Authority

  38.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  38.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Authority for the year ended 31 December 2017
  was issued on 14
  October 2019. The report contained a Disclaimer of Opinion.

  “DISCLAIMER OF OPINION

  Because of the significance of the matters referred to in the
  Basis for the Disclaimer of
  Opinion paragraphs below, I have not been able to obtain
  sufficient audit evidence to
  provide a basis for an audit opinion. Accordingly, I do not
  express an opinion on the
  financial statements of the Authority for the year ended 31
  December 2017.

  BASIS FOR DISCLAIMER OF OPINION

  Internal Control Environment
  During my review of the internal control system of the Authority
  for the year ended
  31 December 2017, I noted that the Authority’s overall internal
  control environment
  was very weak. The Authority was operating without a council to
  provide corporate
  governance. The internal control processes and procedures were
  not implemented in
  the Corporate Services Division. I also noted lack of
  segregation of duties within the
  Payroll and Human Resource function of the Authority and no
  procedures were
  followed in handling Director General’s petty cash. The staff
  employed by the
  Authority both permanent and casual lacked necessary skills and
  qualifications to
  undertake the accounting, finance and other related tasks
  allocated to them.

  I further noted that they were not familiar with the Public
  Finance (Management)
  (Amendment) Act 2016, General Orders and other Financial Manuals
  and Instructions
  to strengthen the internal control system of the Authority. As
  such, I was unable to rely

• Page 230 of 475

• on the overall internal control system of the Authority during
  the year under review.
  Consequently, I was unable to place reliance on the Authority’s
  financial statements
  for the year ended 31 December 2017.
  Cash at Bank – K101,791
  During my review of the Authority’s bank reconciliations, I
  noted that bank
  reconciliations were not prepared, checked and approved by
  senior finance officers of
  the Authority during the year under review. I further noted that
  these bank
  reconciliations were not correctly prepared. Furthermore, I
  noted significant errors
  between cash book and bank reconciliations for the year under
  review and unpresented
  cheques totaled K51,711 which remained outstanding since 2012
  were never
  investigated and adjusted in the account.

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  National Youth Development Authority

  Consequently, I was unable to rely on the controls implemented
  by the Authority in the
  bank reconciliations function as well as verify and confirm the
  accuracy and
  completeness of the bank balance disclosed at the year end.

  Fixed Assets – K2,092,116

  My review of the Fixed Assets Register (FAR) of the Authority
  for the year ended 31
  December 2017 revealed that the Authority did not maintain a
  complete Fixed Assets
  Register to record details of all fixed assets amounting to
  K2,092,116. I noted that the
  assets lacked proper labelling or tagging for identification
  purposes. There was also no
  physical stock take undertaken by the Authority to confirm the
  existence of assets. The
  Assets Register provided for my verification was incomplete and
  did not capture all
  assets purchased over the years. As such, I was unable to
  conclude on the accuracy,
  valuation, existence and ownership of the fixed assets disclosed
  by the Authority as at
  31 December 2017.”

  38.2.2 Audit Observations Reported to the Ministers

• Page 231 of 475

• 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 October 2019. The report contained the
  following matters:

  Accounting and Administration Procedural Manual

  During my review, I noted that the Authority did not have an
  accounting and
  administration procedural manual in place for its staff to carry
  out tasks in accordance
  with the required procedures and guidelines applicable to the
  Authority. I observed that
  the Authority’s staff were not adhering to the processes and
  procedures of the Public
  Finance (Management) (Amendment) Act 2016, General Orders and
  other Financial
  Manuals and Instructions. As a result, I noted significant
  internal control weaknesses
  within the Authority during the year under review.

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

  “The Finance and Administration Branch has a draft copy of the
  Governance and
  Finance Policy and Accounting Procedures in place, this document
  is now before the
  Senior Management Team for their comments before a final draft
  is compiled and ready
  for use in 2019.”

  Non Maintenance of Travel Advances Acquittal Register

  The Authority had not maintained a Travel Advances Register for
  all duty travels and
  related expenses. As a result, I was unable to trace and
  authenticate travel advances and
  related expenses amounting to K166,303 during the year under
  review.

  -137-

  National Youth Development
  Authority

  Consequently, the Authority breached the Public Finance
  (Management) (Amendment)
  Act 2016 and the Financial Management Manual Part 20 paragraphs
  11.2 & 12.10

• Page 232 of 475

• which states that cash advanced to officers on official duty
  travels must acquit travel
  advances within 14 and 7 days for international and domestic
  travels respectively on
  return from duty travels. In the absence of a Travel Advance
  Register, the Authority
  was unable to monitor the acquittals promptly.
  Internal Control Weaknesses

  Other internal control weaknesses noted during the audit are
  summarized as follows:

  i. I noted that petty cash payments totaled K71,004 for various
  expenses had no
  proper acquittals attached to determine or confirm if the
  funds had been fully
  utilized for the intended purposes;

  ii. I observed on a number of instances that the Authority made
  payments without
  obtaining three (3) written quotations from reputable
  suppliers when making
  payments for expenditures exceeding K5,000 which totaled
  K385,541. I further
  noted that some payments were executed on quotations and not
  on the basis of
  official supplier’s invoice;

  iii. I noted on a number of instances that some payments made by
  the Authority had
  no delivery dockets/consignment and other supporting documents
  attached to
  confirm if the actual goods purchased had been delivered to
  the Authority for their
  intended purposes;

  iv. My review on pay cash payments made to paymaster totaled
  K43,897 for various
  expenses had no proper acquittals attached to determine or
  confirm if the funds
  have been utilized for the intended purposes;

  v. I noted that some contingency payments were made by the
  Authority to the
  officers in addition to travelling allowances they received
  when on official duty
  travels. This practice amounts to double dipping as the
  General Orders had no
  provision for contingency allowances;

  vi. My review on casual staff salaries and wages revealed that the
  Authority did not
  remit the salaries and wages taxes to Internal Revenue
  Commission and

• Page 233 of 475

• consequently breached the Income Tax Act, 1959 (as amended);

  vii. The Authority’s staff personal files were not updated with
  birth certificates or
  statutory declarations to verify the legitimacy of their
  dependents. Further, there
  were segregation of duties noted in payroll section;

  viii. During my review, I noted that consultancy payments totaling
  K117,750 had no
  valid or proper service or consultancy agreements drawn up to
  engage them
  during the year under review; and

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  National Youth Development
  Authority

  ix. My review of the expenditures during the year revealed that
  payments totaling
  K25,173 were missing or not placed in the payment voucher
  files for my
  verification.
  I drew management’s attention to these weaknesses and I was
  advised that steps have
  been taken to address the issues.

  38.3 STATUS OF FINANCIAL STATEMENTS
  At the time of preparing this Report, the financial statements
  of the Authority for the
  year ended 31 December 2018 had been submitted and arrangements
  were being made
  to commence the audit shortly.
  The Authority had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

• Page 234 of 475

• -139-

  39. OFFICE OF THE INSURANCE COMMISSIONER

  39.1 INTRODUCTION

  39.1.1 Legislation

  The Office of the Insurance Commissioner was established under
  the Insurance Act
  1995. The Trust Fund of the Insurance Commissioner was
  established in accordance
  with Section 15 of the Public Finances (Management) Act 1995.

  The Office of the Insurance Commissioner was funded by Treasury
  Department prior
  to 1998. In accordance with Section 64C subsection 4 (a) and (b)
  of the Insurance Act
  1995, the Office of the Insurance Commissioner became a self-
  funded organisation
  through 1% levy collected from the Insurers and Brokers’ annual
  revenue from 1998.

  39.1.2 Function of the Insurance Commissioner

  The main function of the Insurance Commissioner is; the
  regulator for general
  insurance businesses in Papua New Guinea who administers the
  Insurance Act 1995
  and issues licences to:

  • Insurers;
  • Brokers; and
  • Loss adjusters.

  39.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated

• Page 235 of 475

• with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Commissioner for the year ended 31 December 2018 had been
  completed and
  management responses were being awaited to finalise the audit
  reports.

  The Commissioner had not submitted its financial statements for
  the year ended 31
  December 2019 for my inspection and audit.

  -140-

  40. OIL PALM INDUSTRY CORPORATION

  40.1 INTRODUCTION

  40.1.1 Legislation

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

  40.1.2 Functions of the Corporation

  The main functions of the Corporation are to:

  • promote the development of the oil palm industry;
  • encourage the increase in productivity by efficient provision
  of extension services
  to smallholders;
  • provide advice and disseminate information and educate

• Page 236 of 475

• smallholders regarding oil
  palm production methods; and
  • consult, liaise and collaborate with the State and other
  agencies involved in the oil
  palm industry.

  40.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Corporation for the year ended 31 December 2012 was completed
  and the results were
  being evaluated.

  The fieldwork associated with the inspection and audit of the
  accounts and records and
  the examination of the financial statements of the Corporation
  for the years ended 31
  December 2013 and 2014 were in progress.

  The Corporation had not submitted its financial statements for
  the years ended 31
  December 2015, 2016, 2017, 2018 and 2019 for my inspection and
  audit.

  -141-

  41. OMBUDSMAN COMMISSION OF PAPUA NEW GUINEA

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

• Page 237 of 475

• governmental bodies; and to supervise the enforcement of the
  Leadership Code.
  41.1.2 Functions of the Commission
  The functions of the Commission are to:

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

  41.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  41.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Commission for the years ended 31 December 2017
  and 2018 were
  issued on 27 August 2019 and 18 February 2020 respectively. The
  reports contained
  similar Qualified Opinions, hence, only the 2018 report is
  reproduced:

  “QUALIFIED OPINION

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

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  Ombudsman Commission of Papua New
  Guinea

  (a) the financial statements of the Commission are based on
  proper accounts and

• Page 238 of 475

• records; and

  (b) are in agreement with those accounts and records, and show
  fairly the state of
  affairs of the Commission for the year ended 31 December 2018
  and the results
  of its financial operations and cash flows for the year then
  ended.

  BASIS FOR QUALIFIED OPINION

  Cash at Bank Balance – K6,914,255

  My examination of the Commission’s Bank accounts and their
  related records revealed
  the following:

  • A material variance of K2,421,526 was noted between the Main
  Operating
  Account Cash at Bank General Ledger balance of K2,556,922 in
  the accounting
  system (IFMS) and the balance of K135,396 disclosed in Note
  5. In addition, I
  was not able to determine how and from where the balance of
  K135,396
  disclosed at the year-end was derived;
  • Manual payments (payments outside of IFMS) made out of the
  Main Operating
  Account totalling K1,475,381 incurred in January were not
  posted into IFMS.
  As a result, the Cash at Bank General Ledger balance in IFMS
  was overstated
  by K1,475,381; and
  • An unreconciled difference of K129,300 was noted between the
  Statement of
  Receipts and Payments year-end cash balance of K6,784,955 and
  the cash at
  bank amount disclosed in Note 5 at K6,914,255.

  As a result of the above, I was unable to conclude on the
  accuracy and correctness of
  the cash balance reported in the Statement of Cash Receipts and
  Payments as at 31
  December 2018.”

  41.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Commission for the years
  ended 31 December
  2017 and 2018 were issued on 27 August 2019 and 18 February 2020
  respectively. The
  reports contained similar significant matters, hence, only the

• Page 239 of 475

• 2018 report is reproduced:

  Bank Reconciliations

  Despite my prior years’ recommendations, I still noted that the
  Commission did not
  perform any bank reconciliations for the Main Operating Account
  during the year under
  review. In the absence of monthly bank reconciliations, I could
  not rely on the
  effectiveness of the internal controls surrounding the cash
  management process of the
  Commission.

  -143-

  Ombudsman Commission of Papua New Guinea

  I brought this to the attention of the management and recommended
  the Commission to
  employ qualified and competent personnel or provide in-house
  training to existing staff
  to fill the competency gap and address this vital issue.

  The Commission acknowledged and accepted my recommendation and
  responded that
  attempts were already made to employ competent personnel. In the
  meantime, the
  Commission will identify training to address the skills gap for its
  existing staff.

  Fixed Assets

  My review of the Fixed Assets of the Commission revealed the
  following weaknesses:

  • Lack of Proper Maintenance and Update of Fixed Assets Register
  (FAR)

  The Fixed Assets Register was not properly updated and maintained
  in 2018.
  Assets that were due for disposal dating back to 2002 were still
  captured in the
  FAR. Moreover, assets purchased between 2014 and 2018 did not
  contain details
  of identification or serial numbers to enable me to verify their
  existence. I further
  noted that assets that were purchased in bulk had their aggregate
  balances in the
  FAR instead of recording the individual items against their
  corresponding values.
  Similarly, the Commission has failed to disclose construction
  costs separately for

• Page 240 of 475

• each institutional house it owns, instead, the balances captured
  in the FAR
  disclosed the cumulative construction costs of the institutional
  houses.

  I brought this recurring issue to the attention of the management
  with reference
  to the implications of not having in place a complete and updated
  FAR and further
  recommended for improvement in this area.

  The management responded that it had commenced its consultations
  with IFMS
  in 2019 to rollout the Assets Management System Module and
  existing personnel
  had been identified to carry out the FAR process pending training
  from IFMS.
  The Commission was also looking at other available Assets
  Management
  Software if IFMS does not provide the solution.

  • Fixed Assets Policy

  There was no approved fixed assets policy in place for assets
  owned and
  controlled by the Commission. I was unable to comment on the
  procedures and
  guidelines required for asset capitalization; general information
  on classification
  and recording fixed assets; the allocation of assets; asset
  acquisition and disposal
  procedures; and the processes involved in replacement of assets
  when damaged
  or stolen. In the absence of an approved fixed assets policy, I
  was unable to
  conclude whether management has in place an effective internal
  control system
  over fixed assets under its custody.

  -144-

  Ombudsman Commission of Papua New Guinea

  The Commission concurred with my observation and responded as
  follows:

  “The Division responsible will draft the Asset Policy taking into
  consideration the
  procedures and guidelines recommended by audit to tighten the
  controls on Fixed
  Assets.”

• Page 241 of 475

• Staff Personnel Files

  My examination of the Commission’s staff personnel files revealed
  that staff salary
  history ledgers/cards were not properly maintained in their
  respective personnel files. I
  reminded the management that inadequate record keeping of staff
  salary records
  exposes the Commission to the risk of paying incorrect employee
  benefits. I also noted
  that the Commission’s employees did not have updated salary and
  wages tax
  declaration (S3) forms and birth certificates of employees’
  dependents in their personal
  files. As a result, I was not able to verify the legitimacy of
  dependents claimed as
  required under Section 5.2.41 of the OC HR Manual for leave fares
  paid including
  salary and wages tax rebates claimed in 2018.

  I recommended the Commission to ensure that personnel files are
  properly maintained
  with all required information for management and audit purposes. The
  Commission
  responded to my observation as follows:

  “Since the upgrade of the Complete Human Resource Information System
  (CHRIS21)
  in November 2018, the HR unit commenced updating staff’s records
  electronically.
  Today all information on ledger/card is now captured electronically
  on CHRIS21. HR
  will also ensure all officers complete the tax form (S3) in the
  first quarter of each
  financial year with HR and Logistic Units to liaise with National
  Identity Office to have
  officers’ dependents registered and issued with NID Cards and Birth
  Certificates.”

  Leave Fares

  My review of leave fares paid out in 2018 revealed that the
  Commission did not comply
  with the requirements of the Ombudsman Commission Human Resource
  Manual I
  (OCHRM). Section 5.2.46(c) of the OCHRM requires that “An officer
  shall pay to the
  State at the time of applying for payment of recreation leave fares,
  a contribution I
  towards the cost of the fares which shall be calculated at ten per
  cent of his/her gross
  substantive fortnightly salary at the date immediately prior to
  proceeding on recreation
  leave.” This has been a recurring issue which the management is yet

• Page 242 of 475

• to address. LI

  I recommended the Commission to comply with the requirements of
  OCHRM 5.2.46(c)
  in the administration and application of leave fares.

  -145-

  Ombudsman Commission of Papua New Guinea

  The Commission responded that its officers have not been made
  aware of this
  requirement and its implications; therefore, the Commission would
  review its HR
  Manual to reassess the clause, its implications and reasons
  whether the 10% should be
  applied to officers. In the meantime, the Commission will
  consider the
  recommendation.

  Procurement Process Review

  My review of expenditures incurred in 2018 revealed that payment
  vouchers totalling
  K117,312 for Capital Expenditures and K297,480 for Operating
  Expenditures were not
  supported by proper documents such as:

  • Minutes/Memos justifying the basis of payments;
  • Invoices to confirm the validity of the payments;
  • Three Quotes and/or documented justifications for choosing a
  particular supplier
  of goods/services in compliance with the Financial Management
  Manual, Part
  12, Div. 3, Para 9; and
  • Delivery dockets as evidence that goods have been received.

  I was, therefore, unable to determine whether the procurements
  were transparent and
  were made in an economically prudent manner. I recommended the
  Commission to
  ensure that in the future payment vouchers should be properly
  filed with necessary
  supporting documents in accordance with the requirements of
  Section 62 (1) of the
  Public Finance (Management) (Amendment) Act 2016.

  41.3 STATUS OF FINANCIAL STATEMENTS

• Page 243 of 475

• At the time of preparing this Report, the Commission had not
  submitted its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

  -146-

  42. PAPUA NEW GUINEA ACCIDENT INVESTIGATION
  COMMISSION

  42.1 INTRODUCTION

  42.1.1 Legislation

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

  42.1.2 Objective of the Commission

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

  42.1.3 Functions of the Commission

  • The principal function of the Commission is the investigation
  of aviation
  accidents and incidents;
  • The Minister may, by notice in the National Gazette, direct
  the Commission to
  investigate any serious land or marine transport accident or
  incident;

• Page 244 of 475

• • Where a direction is given under Subsection (2), all
  references to an “aircraft”
  shall be read as a reference to the vehicle or vessel or other
  form of transport
  involved in the accident or incident to be investigated;
  • Without limiting the principal function under Subsection (1),
  the Commission
  shall also have the following functions:

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

  -147-

  Papua New Guinea Accident
  Investigation Commission

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

• Page 245 of 475

• whether in PNG or
  overseas.

  42.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  42.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the Commission’s
  financial statements for the year ended 31 December 2018 was
  issued on 27 April 2020.
  The report contained a Qualified Opinion.

  “QUALIFIED OPINION

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

  (a) the financial statements of PNG Accident Investigation
  Commission for the
  year ended 31 December 2018:

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

  (ii) the financial statements have been presented in
  accordance with the
  Public Finance (Management) (Amendment) Act 2016 and
  other generally
  accepted accounting practice in Papua New Guinea.

  (b) proper accounting records have been kept by the Commission,
  as far as appears
  from my examination of those records; and

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

  BASIS FOR QUALIFIED OPINION

  Inadequate Documentation for Expenditure

  I was not provided with adequate documentation to obtain
  sufficient and appropriate
  audit evidence on the Commission’s reported expenditure
  totalling K6,166,531 for the
  year ended 31 December 2018.

  -148-

• Page 246 of 475

• Papua New Guinea Accident Investigation
  Commission

  Accordingly, I could not perform the necessary audit testing
  procedures. Therefore, I
  was unable to validate the accuracy of the expenses of the
  Commission for the year
  ended 31 December 2018.

  Payroll Expenses and Salary & Wages Tax

  My review of the payroll transactions revealed significant
  errors in the calculation of
  the salary and wages tax. The payroll taxes of some employees
  have been calculated
  based on the initial salary package of the employee and not
  based on the current
  remuneration. Salary increases, allowances and other benefits
  were not subjected to
  salary and wages tax.

  In addition, I was not provided with reconciliation for the
  variances noted in the payroll
  calculations and satisfactory explanation on the basis used for
  calculating the salary and
  wages tax. As such, I was unable to ascertain the accuracy,
  completeness and
  reasonableness of the payroll transactions and salary and wages
  tax for the year ended
  31 December 2018.

  Documentation for the Purchase of Assets

  Included in the property, plant and equipment were Memory Access
  Retrieval System
  (MARS) V2.0 and VAS-INV Accident Investigation softwares
  purchased from Plane
  Science Inc. amounting to US$488,000 (K1,267,207). I was not
  provided with
  sufficient appropriate and relevant documentation in relation to
  the purchase including
  appropriate approval from relevant authorities. As a result, I
  was unable to ascertain the
  value and the corresponding depreciation expense taken up in the
  financial statement
  for the year ended 31 December 2018.

  Fixed Assets Register

  The Fixed Assets Register maintained by the Commission was not
  updated during the
  year. The value of the property, plant and equipment reported at
  K2,209,362 in Note 4
  to the special purpose financial statements did not agree with

• Page 247 of 475

• the amount in the Fixed
  Assets Register. No reconciliation of the variance was provided
  for my verification. As
  a result, I was unable to ascertain the accuracy and
  completeness of the reported value
  of the property, plant and equipment as at 31 December 2018.”

  42.2.2 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 Commission for the year
  ended 31 December
  2018 was issued on 27 April 2020. The report contained the
  following observations:

  -149-

  Papua New Guinea Accident Investigation
  Commission

  Journal Entries Preparation and Approval

  Several journal entries were processed during the year without
  sufficient relevant
  supporting documentation. In addition, I noted that almost all of
  the journal entries were
  not reviewed and approved prior to posting to the general ledger.

  Financial Delegation Authority

  The Chief Executive Officer (CEO) of the Commission was given the
  ultimate (highest)
  financial authority to approve all expenditures irrespective of
  their values. I advised
  that such a practice of giving overwhelming financial powers for
  approval to a single
  person can lead to abuse of powers in controlling finances which may
  result in misuse
  of public funds. The management responded as follows:

  “7XITfl3 1* $, & fl4ITwl fldITvITlRSITd fl) i4a4cIT fl0 a4aJITmIT4t
  fl3 Rlic flL41fl3 (RcITLX(ITsfl
  Manual has that CoverITG”

  Employment of Expatriate under TSSP/AHC Co-funding Arrangement

  I noted that an expatriate had been employed by the PNG Accident
  Investigation
  Commission as Aircraft Operations Investigation Manager since 31

• Page 248 of 475

• October 2016. The
  employment of the expatriate was arranged between the Australian
  High Commission
  (AHC) and PNGAIC under the PNG-Australia Transport Sector Support
  Program
  (TSSP). The contract of employment had been for three years
  commencing 31 October
  2016 to 30 October 2019.

  Per the standing agreement between AHC and PNGAIC, salary of the
  expatriate
  employee was to be shared in the ratio 4:1 (80% by AHC and 20% by
  PNGAIC) for
  the first year, 7:3 (70% by AHC and 30% by PNGAIC) for the second
  year and 3:2
  (60% by AHC and 40% by PNGAIC) for the third year.

  My review for compliance with the standing agreement between AHC and
  PNGAIC
  revealed that for the first year of contract (2017), 100% of the
  expatriate’s salary was
  paid for by the PNGAIC which was beyond its budget and commitment.
  Subsequently,
  K1,040,863 was invoiced to AHC being 80% share of the expatriate’s
  total salary costs
  met by the PNGAIC in 2017. However, AHC refunded only K751,828 which
  resulted
  in underpayment of K289,035. I further identified inconsistencies by
  parties to the
  agreement in applying exchange rates ruling at the transaction date
  (date of contract)
  which contributed to the variation.

  Further, the expatriate was entitled to a rent-free accommodation
  during his
  engagement per the contract. However, in addition to the rent free
  accommodation he
  was also paid K1,500 every fortnight totaling K78,000 in 2017 and
  2018 as rental
  allowance resulting in non-compliance with Public Service Management
  Act and the
  employment contract.

  -150-

  Papua New Guinea Accident Investigation
  Commission

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

  “Many attempts were made since AHC decided to terminate the
  agreement. So far no

• Page 249 of 475

• progress made in 2019, and may be previous years as well. The PNGAIC
  Board and
  management are in contact with the Australian Transport Safety
  Bureau (ATSB) for a
  initial Hmeeting in first quarter of 2020 in an attempt to revive
  the Agency Support
  Arrangement (ASA). One of the priorities for the re establishment of
  the ASA through
  ATSB will be to seek the refund for the manager cost of employment
  for the period 2017
  to 2019.”

  Internal Auditor

  During my review, I noted that the Commission still has no internal
  audit function since
  its establishment. I advised management that having an internal
  auditor provides and
  promotes sound internal controls and adds value. The management
  stated that:

  “Currently the Board has approved for the PNGAIC to utilize external
  resources for
  the purposes of carrying out the function of internal audit. This
  arrangement
  commenced in 2019 and will be reviewed in 2020 for a decision
  whether to continue or 1~
  to fund a full time internal auditor position.”

  Board Sitting Allowances & Stipends

  Board sitting allowances and stipends were paid at rates above the
  category nominated
  by the Board Fees & Sitting Allowances Determination, 2000
  (Schedule) effective from
  January 2000. The Board members used the rates for Category A
  “Commercial
  Statutory Authorities / Government Financial Institutions” rather
  than the Category B
  “Non-Commercial / Funded Organizations”. I brought this to the
  management and they
  advised that:

  “Since 2019, the correct rates were applied.”

  Budget vs Actual

  The expenditure of the Commission was not regularly monitored
  against the budget for
  2018. I noted several instances where actual expense was over the
  approved budget. I
  brought this to the management and they advised that:

  “The finance team will task to take the necessary corrective

• Page 250 of 475

• action.”

  Non-Payroll Expenses under Payroll Transaction

  My review of payments revealed that several non-payroll related
  transactions were
  coursed through Kundupei banking facility and recorded into Attaché
  payroll system.
  These transactions were journalized in the MYOB on a monthly basis.
  I brought this to
  the attention of the management and they advised that:
  -151-

  Papua New Guinea Accident Investigation
  Commission

  “This practice which has been in existence in prior years has now
  been stopped and
  only payroll is paid through Kundupei. Commencing 2019, no other
  payments are
  passed through the Attaché Payroll system except for payroll.”

  Payroll Weaknesses

  My review of the payroll revealed the following weaknesses:

  i) The Commission’s payroll transactions were processed through
  Attaché payroll
  software. However, I noted that the functionalities of the
  payroll were not fully
  utilized. The calculation of salary and wages tax were performed
  manually
  through excel and entered in the payroll system. This practice
  had resulted in
  significant errors in the calculation of salary and wages tax;

  ii) Lack of sufficient and relevant documentation in relation to the
  increments of
  salary packages of some employees; and

  iii) Taxable benefits and allowances paid to the employees were not
  subjected to
  salary and wages tax as per the Income Tax Act 1959;

  I brought this to the attention of management and they advised that:

  “Now we have a correct and compliant payroll practice paid out of
  Attaché payroll
  system going forward.” LI

  Fixed Assets Discrepancies

  During my review, the following were noted:

• Page 251 of 475

• i) Capital expenditure (fixed assets) purchased during the year were
  not capitalized
  and recorded in the Fixed Assets Register. These were recorded
  under expense
  accounts in the MYOB general ledger;

  ii) The accumulated depreciation and written down values in the
  Fixed Assets
  Register (FAR) were incorrect or did not agree with the audited
  figures of prior
  years; and

  iii) Number of calculation errors were noted in the FAR.

  I brought this to the attention of management and they advised that:

  “Management has agreed to install and use the Fixed Assets module in
  the Attaché
  software; however, we are still waiting for budget approval to
  implement the above.”

  -152-

  Papua New Guinea Accident Investigation
  Commission

  Purchase of Fixed Assets not minuted in the Board Minutes

  The Commission had purchased three (3) motor vehicles at a cost
  of K397,177 and
  Memory Access Retrieval System (MARS) at a cost of US$488,000
  (K1,257,207).
  However, the purchase of capital items were not minuted in the
  Board meeting minutes
  nor budgeted for in 2018.

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

  “The MARS system was purchased before allocated budget in 2019
  due to urgency of
  the system to use Air Niugini B737 accident at Chuuk
  International Airport, Federated I
  States of Micronesia (FSM) in September 2018.”

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

  The financial statements for the year ended 31 December 2018 was
  approved and issued

• Page 252 of 475

• on 12 March 2020. The Directors did not meet the deadline set by
  Section 63 of the
  Public Finance (Management) (Amendment) Act for audited financial
  statements of
  public bodies/companies owned by the State to be furnished to the
  Minister before 30
  April of the subsequent year.

  42.3 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
  Commission for the year ended 31 December 2019 was in progress.

  -153-

  43. PAPUA NEW GUINEA CUSTOMS SERVICE

  43.1 INTRODUCTION

  43.1.1 Legislation

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

  In accordance with the NEC Decision, the Papua New Guinea
  Customs Service Act

• Page 253 of 475

• 2014 was drafted and certified on 21 October 2014, establishing
  the Papua New Guinea
  Customs Service as a Statutory Authority.

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

  43.1.2 The Functions of the Service

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

  43.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Service for the years ended 31 December 2017 and 2018 were in
  progress.

  The Service had not submitted its financial statements for the
  year ended 31 December
  2019 for my inspection and audit.

  -154-

  44. PAPUA NEW GUINEA FOREST AUTHORITY

  44.1 INTRODUCTION

  44.1.1 Legislation

• Page 254 of 475

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

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

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

  44.1.2 Objectives of the Authority

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

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

• Page 255 of 475

• -155-

  Papua New Guinea Forest
  Authority

  44.1.3 Functions of the Authority

  The principal functions of the Authority are to:

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

  44.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  44.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act
  on the Authority’s

• Page 256 of 475

• financial statements for the years ended 31 December 2013 and
  2014 were issued on
  11 June 2020. The reports contained similar Disclaimer of
  Opinions, hence, only the
  2014 report is reproduced:

  “DISCLAIMER OF OPINION

  Because of the significance of the matters described in the
  Basis for Disclaimer of
  Opinion paragraphs, I have not been able to obtain sufficient
  appropriate audit evidence
  to provide a basis for an audit opinion. Accordingly, I was
  unable to and do not express
  an opinion on the financial statements of the Papua New Guinea
  Forest Authority for
  the year ended 31 December 2014.

  -156-

  Papua New Guinea Forest Authority

  BASIS FOR DISCLAIMER OF OPINION

  General Ledger

  Proper accounting records were not maintained by the Authority for
  the year ended 31
  December 2014. As a result, an external accounting firm was engaged
  to perform
  various reconciliations and prepare the 2014 financial statements.
  As a result of this,
  numerous journal entries were made including entries passed by the
  accounts team of
  the Authority. However, appropriate records in relation to journal
  entries were not
  maintained. Accordingly, I was unable to obtain a complete list of
  the journals
  processed during the year, or supporting documents for journal
  entries made. As such,
  I was unable to obtain sufficient appropriate audit evidence over a
  number of
  transactions recorded in the general ledger. Due to the limitations,
  I was unable to
  obtain sufficient appropriate audit evidence over the existence and
  accuracy of a
  significant number of amounts recorded in the financial statements,
  or determine
  whether adjustments might be necessary to the Authority’s financial
  position as at 31
  December 2014, and financial performance and cash flows for the year
  then ended.

• Page 257 of 475

• Opening Balances

  My report on the financial statements of the Authority for the year
  ended 31 December
  2013 was a disclaimer of opinion, identifying issues in respect to
  royalty trust fund,
  reforestation levy, project development levies, cash balances,
  personnel emoluments,
  cash grants for projects, property, plant and equipment, biological
  assets, suspense
  accounts, deferred expenses, plantation income, litigation and
  claims, and other
  liabilities. I was unable to satisfy myself as to the accuracy or
  completeness of the
  opening account balances taken up for the financial year 2014. Since
  the opening
  balances enter into the determination of the results of operations
  and cash flows of the
  Authority for the year ended 31 December 2014, any adjustment
  necessary on such
  opening balances would have a consequential effect on the financial
  performance and
  cash flows for the year ended 31 December 2014. I was unable to
  determine whether
  any such adjustment to the financial performance and cash flows of
  the Authority might
  be necessary for the year ended 31 December 2014.

  Royalty Trust Fund, Plantation Royalty, Reforestation Levy Trust
  Fund and
  Production Development Levies

  The accounting records over timber royalties, plantation royalties,
  reforestation levies
  and project development levies for the year ended 31 December 2014
  were not properly
  maintained. As at 31 December 2014, the royalty trust fund had a
  balance of
  K30,491,479 as disclosed in Note 9, the Authority’s plantation
  royalty had a balance of
  K23,361,438 as disclosed in Note 10 and the project development
  levies had a net
  balance of K10,165,173 as disclosed in Note 12 of the financial
  statements. I was unable
  to obtain sufficient appropriate audit evidence over the
  completeness and accuracy of
  royalties and levies due and received.

  -157-

  Papua New Guinea Forest Authority

• Page 258 of 475

• Due to the inability to reconcile royalties and levies to the
  production of the respective
  timber permits or logging operations, it was not possible to obtain
  persuasive evidence
  regarding the computation and recording of royalties and levies
  including records of
  payments made to and evidence of receipts by legitimate
  beneficiaries.

  As such, I could not determine whether any such adjustment might be
  necessary to the
  Authority’s financial position at 31 December 2014, and financial
  performance and
  cash flows for the year then ended.

  Fixed Assets

  No physical verification was performed by the Authority as at 31
  December 2014 to
  confirm the existence of the fixed assets included in the total
  balance of K44,408,293
  as disclosed in Note 5 of the financial statements. As such, I could
  not obtain sufficient
  appropriate audit evidence over the existence of the Authority’s
  fixed assets as at 31
  December 2014 and accuracy of the depreciations charged for the year
  ended 31
  December 2014.

  In addition, the Authority owned five (5) plantations within Papua
  New Guinea as at
  the year end. I noted that all of the plantation lands have been
  stated at cost and
  additional costs incurred on land improvements were not capitalised
  in accordance with
  IAS 16 Property, Plant and Equipment. Management had not estimated
  value of the un-
  capitalised land improvements to determine the impact to the
  carrying amounts of lands
  as at 31 December 2014, or the related impact on income and
  expenditure items
  recorded in the statement of comprehensive income.

  As such, I was unable to determine whether any such adjustment might
  be necessary to
  the Authority’s financial position as at 31 December 2014, and
  financial performance
  and cash flows for the year then ended.

  Biological Assets

  Plantation trees being biological assets have not been accounted for
  in the books of the
  Authority as assets up to the financial year ended 31 December 2014

• Page 259 of 475

• that I reviewed.
  Instead, costs incurred on the tree seedlings and planting
  activities have been expensed
  in the profit and loss account, which is not in compliance with IAS
  41 Biological Assets
  which requires these biological assets to be recorded at fair value
  less cost to sell.
  Management had not estimated the fair value of these biological
  assets to determine the
  impact to the carrying amounts as at 31 December 2014.

  As such, I was unable to determine whether any such adjustment might
  be necessary to
  the Authority’s financial position as at 31 December 2014, and
  financial performance
  and cash flows for the year ended 31 December 2014.

  -158-

  Papua New Guinea Forest Authority

  Suspense Account (Difference in Suspense)

  As disclosed in Note 14 of the financial statements, the Authority
  had changed its
  accounting software from Accpac to Attaché in 2001. My review noted
  that there had
  been a lack of proper migration of accounts from the old system to
  the new system
  which had resulted in an unknown difference of K7,458,716. This
  unexplained amount
  had been taken up in an account called “Difference in Suspense” as
  disclosed in Note
  14, and was sitting idle without any movement since the data
  migration from the old
  system to the new system. I was unable to obtain sufficient
  appropriate audit evidence
  over the nature or basis of this Difference in Suspense account
  balance which was
  inflating overall assets in the statement of financial position by
  K7,458,716.

  As such, I was unable to comment as to what adjustment might be
  necessary to the
  Authority’s financial position as at 31 December 2014, and financial
  performance and
  cash flows for year then ended.

  Other Liabilities

  Included in Trade and Other Payables as disclosed in Note 12 of the

• Page 260 of 475

• financial statements
  are a number of accounts totalling K7,460,144 as at 31 December
  2014. I was not
  provided with sufficient appropriate audit evidence regarding the
  accuracy,
  completeness and existence of the amount, nor was I able to perform
  alternative
  procedures to evaluate the accuracy and completeness of the
  individual other liabilities
  account balances that added up to K7,460,144.

  Accordingly, I was unable to comment on the accuracy, completeness
  and existence of
  other liabilities as at 31 December 2014, and the related operating
  expenses for the 2014
  financial year, or determine whether adjustments might be necessary
  to the Authority’s
  financial position as at 31 December 2014, and financial performance
  and cash flows
  for the year ended 31 December 2014.

  Personnel Emoluments and Employee Provisions

  The personnel emoluments of K27,378,795 as disclosed in Note 4(A) of
  the financial
  statements had a bearing on the employee provisions balance of
  K13,111,203 as
  disclosed in Note 13 of the financial statements. However, I was not
  able to obtain
  sufficient appropriate audit evidence related to the personnel
  emoluments incurred and
  expensed or the employee provisions made. As such, I could not
  comment on the
  completeness, existence and accuracy of the personnel emoluments
  expensed during
  the year and employee benefits provided for at the year end.
  Alternatively, I could not
  determine whether adjustment might be necessary to the Authority’s
  financial position
  as at 31 December 2014, and financial performance and cash flows for
  the year ended
  31 December 2014.

  -159-

  Papua New Guinea Forest Authority

  Litigation and Claim Liabilities

  I was not provided with the records of legal cases or claims
  afoot as at 31 December

• Page 261 of 475

• 2014. Neither have I received any independent confirmation of
  current legal cases from
  the solicitors of the Authority. Therefore, I was not able to
  obtain sufficient appropriate
  audit evidence over the completeness of legal liabilities that
  may exist as at balance
  date or whether adjustments might be necessary to the Authority’s
  financial position at
  31 December 2014, and financial performance and cash flows for
  the year ended 31
  December 2014.

  Going Concern

  I was unable to assess the financial position of the Authority as
  at 31 December 2014
  due to significant matters described in the paragraphs above.
  Consequently, I was
  unable to determine whether the Authority will continue as a
  going concern. Should the
  Authority be unable to continue as a going concern, it is
  unlikely they will be able to
  realise their assets and extinguish their liabilities in the
  normal course of business and
  at amounts stated in the financial statements.”

  44.2.2 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 the records of the Authority for the
  years ended 31 December
  2013 and 2014 were issued on the 11 June 2020. These reports
  contained similar
  observations, hence, only the 2014 observations are reproduced:

  Ineffective Finance Functions

  I noted during the course of the audit that the finance function
  of the Authority had not
  been effective and needs strengthening through employment of
  skilled finance
  professionals and design and implementation of appropriate
  financial control
  procedures. The key issues identified were:

  • Material unidentified variances existed in a number of general
  ledger
  reconciliations provided;
  • Significant number of “manual journals” posted were neither
  reviewed by senior
  officers nor supported by appropriate documentations;
  • Financial control over key processes including cash at bank,
  term deposits,

• Page 262 of 475

• payroll, royalties, plantation royalties and reforestation
  levies have not been
  effectively designed and are not operating effectively; and
  • Poor maintenance of accounting records and documents in
  finance functions had
  prevented me from completing my audit procedures on a number
  of general ledger
  accounts.

  -160-

  Papua New Guinea Forest Authority

  I recommended the management to consider taking the following
  remedial actions:

  • Re-assess the finance function resourcing level and skill sets;
  • Implement finance team training, specifically with respect to the
  month end
  reconciliation process and how to perform an effective review;
  and
  • Implement formal review process for all general ledger accounts,
  manual journals,
  etc, and ensure variances and errors identified are followed up
  on a timely basis.

  Trade Creditors

  I noted that the Authority adopts a cash basis of accounting.
  Therefore, there was no
  creditor listing maintained throughout the year.

  The creditors recorded in the accounts as at 31 December 2014 were
  based on invoices
  paid subsequent to year end and relating to creditors incurred
  during the 2014 financial
  year. Also, there has been no reconciliation of trade creditors at
  year end to supplier’s
  statements to ensure that all unpaid invoices are correctly recorded
  in the general ledger.

  I advised the management that for control purposes there should be a
  monthly process
  implemented to ensure that all creditors are properly accrued
  throughout the year even-
  though the Authority is a statutory body which requires its books
  maintained on a cash
  basis of accounting.

  Bank Reconciliations

• Page 263 of 475

• Bank reconciliations were not prepared on a monthly basis during the
  2014 financial
  year. I also noted that significant general ledger adjusting entries
  were passed at the
  year end to adjust for reconciling differences.

  I advised the management that periodic review of bank reconciliation
  is a fundamental
  control to detect and prevent fraud and error associated with
  recording and reporting of
  all bank transactions. Therefore, all bank accounts must be
  reconciled on a monthly
  basis. The Finance Manager should review all reconciliations to
  ensure reconciling
  items are corrected in a timely manner.

  Fees Paid to Board of Directors

  I noted that fees and allowances were paid to Board of Directors of
  the Authority in
  2014. However, all appropriate supporting documentations were not
  made available for
  my review to ensure approval of the payment of those fees and
  allowance by the
  Minister responsible for the Authority.

  I recommended the management to maintain proper records and
  supporting documents
  related to payment of fees and allowances to Directors. I also
  recommended that a
  proper register must be maintained to record payment of fees and
  allowances to
  respective Directors of the Authority.
  -161-

  Papua New Guinea Forest
  Authority

  Project Development Benefit (PDB) Receipts and Payments

  From my review of the Project Development Benefits general ledger
  accounts, I noted
  the following related general ledger accounts as at 31 December
  2014:

  GL Accounts 2014 (IC)
  PNGFA 984009124 Premium Receipts 511,706
  PNGFA 984009125 Premium Payments (500,649)
  PNGFA 984009148 Domestic Processing Benefit 103,992
  PNGFA 984009127 40% PDL For New FMA Projects4,110,690
  PNGFA 984009128 60% PDL For New FMA Projects3,123,596
  PNGFA 984009129 PDL Receipts 7,626,114
  PNGFA 984009310 PDB Payments (4,799,219)

• Page 264 of 475

• Total 10,176,230

  • I noted that the actual funds held in the Project Development
  Benefit bank account
  was K5.3 million and cash held in IBD was nil. This indicates
  that there was K4.9
  million (K5.3m + K10.2m – K4.9m) deficit funds for the project
  development
  benefit then what was recorded in the ledger account;
  • I have not verified the projects being implemented in 2014 using
  those funds due
  to lack of project reports;
  • I have not obtained the details of the supporting documents of
  the receipts from
  2001 to 2014; and
  • In addition, I have not received documentation of the payments,
  including
  evaluation and awarding of contracts for the PDL/PDB projects.

  I recommended to the management that:

  • Accounting policies must be drafted and implemented to guide the
  process of
  initiation, authorization, recording and reporting of PDB/PDL
  receipts and
  payments;

  • The balance of the bank and IBD accounts must be reconciled to
  the balance of
  the PDL/PDB liability general ledger accounts on a monthly basis;
  and

  • The Authority should fast tract implementation of projects in
  logging areas so that
  people can have excess to the basic and relevant services.

  Reporting Requirements under Forestry Act 1991

  The Forestry Act 1991 requires the Board of PNGFA to furnish to the
  Minister an
  annual report on the progress and performance of the finances before
  the end of March
  of succeeding year. I note that this had not been complied with for
  the financial year
  ended 31 December 2014.

  -162-

  Papua New Guinea Forest Authority

  I stressed the repercussions of non-compliance with the required law

• Page 265 of 475

• and recommended
  the management to strictly comply with Section 20 of the Forestry
  Act 1991, by
  producing the annual report on time to enable the Board to report to
  the Minister in a
  timely manner.

  Journal Entries

  From my review of the journal entries, I noted the following:

  a) Some journals posted into the general ledger system were not
  independently
  reviewed by the Finance Manager and some journals were not stamped
  as posted;

  b) The journals were not maintained in order of the batch number and
  date of
  posting;

  c) No evidence was available to prove that year end journal entries
  prepared by the
  Accounting Consultant were reviewed by the Finance Manager and
  approved for
  posting; and

  d) I could not obtain the complete listing of all the journal
  entries processed during
  the year.

  I stressed that the key controls to detect fraud and errors in
  financial reporting are
  segregation of duties and independent review of journals posted into
  the ledger systems.
  Without such controls, the general ledger system and the resulting
  financial reports it
  produces may be materially misstated. Hence, I recommended to the
  management that:

  a) All journals prepare by any department, including payroll officer
  and Accounting
  Consultants must be reviewed independently and approved for
  postings by the
  Finance Manager;

  b) The Finance Manager should collate all journals and maintain a
  central filing in
  order of their batch number and posting date; and

  c) All journals posted should be clearly indicated as posted.

  Interest from Royalties and Levies Trust Funds

  I noted that interest earned from royalties and levies trust funds

• Page 266 of 475

• held in the interest
  bearing deposits were transferred to PNGFA’s bank account. These
  funds were then
  utilized by PNGFA for its operations. The trust deed was not made
  available for my
  review to confirm whether the practice has been allowable. As such,
  I am also not aware
  of any specific restrictions on how the trust funds are to be
  managed. I recommended
  that PNGFA must consider revisiting the trust deed to ensure
  interest earned from trust
  funds are treated in compliance with the terms of the trust deed.

  -163-

  Papua New Guinea Forest Authority

  GST Suspense

  I noted that Bulolo Plantation, a branch of the Authority claimed
  K4,244,199 as GST
  receivables from its sole customer, PNG Forest Products Limited
  (PNGFP) as at 31
  December 2014. The GST was computed at 10% on all log sales to the
  customers and
  taken up as receivable in the books of the Bulolo Plantation. A
  corresponding liability
  of K3,955,091 was also booked to indicate the GST amount remittable
  to the Internal
  Revenue Commission.

  The PNGFA claims that no GST is payable to IRC on the basis that
  PNGFA is exempted
  from GST (Income Tax) which is contrary to its own understanding
  that GST applies
  to the Bulolo operations. I was told that PNGFA had written to IRC
  seeking their
  intervention in confirming the GST status of the Bulolo Plantation.
  However, IRC has
  not responded to date.

  I advised the management to follow up on this matter with IRC and
  obtain a
  confirmation on the GST status of Bulolo Plantation. Based on IRC’s
  response,
  accounting of GST in the general ledger must be rectified.

  Accounting for PIP Funds

  As at 31 December 2014, there was no PIP account balance, however,
  there was a cash
  grant of K1,500,000 recorded in the general ledger. The funds
  receipted related to

• Page 267 of 475

• capital projects which required them to be treated as deferred
  income in the balance
  sheet and amortized over the useful life of the project. In
  addition, I was not able to
  verify the warrants received to the bank statements as there were
  lack of audit trail to
  verify these balances.

  I advised the management that capital grants should be treated,
  accounted and disclosed
  in accordance with requirements under the International Financial
  Reporting Standard,
  and record and track the utilization of funds and produce regular
  project reports to assist
  in effective monitoring of the projects.

  Access Controls over Payroll System not Effective

  I obtained the Attaché system access authority level for the year
  ended 31 December
  2014 and noted that all team leaders and the managers have ‘level 1’
  access. This means
  they can perform all functions in all modules including payrolls.
  The payroll reports I
  requested to perform my control testing were not provided which
  indicates that the
  control environment had been ineffective.

  I brought to the attention of the management that the Authority
  should immediately
  review the level and type of system accesses granted to the staff
  members and rectify
  any unauthorized accesses to the system. I also advised that the
  “level 1” access to the
  attaché payroll system should be restricted to the HR and IT
  Managers only.

  -164-

  Papua New Guinea Forest Authority

  Claims by PNG Timbers Limited

  I noted from review of the Board meeting minutes that the NEC in
  2012 resolved
  PNGFA to settle K450 million which was in court battle to PNG
  Timbers Limited. The
  Forest Management Act states that NEC has the powers to act for
  the Authority, thus
  this amount would be settled unless further referral is made.

  As at 31 December 2014, this matter had still not been settled
  and yet I could not obtain

• Page 268 of 475

• further documents on the assessment of this claim over the
  completeness, accuracy and
  existence of this liability to the Authority.

  I advised the management that proper assessment of the above
  claim and all related
  liabilities and costs related to the claim should be recorded.
  Management should have
  a register to record all claims and the probabilities of each
  claims assessed timely.

  44.3 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 2015 was in progress.

  The Authority had submitted its financial statements for the
  year ended 31 December
  2016 and arrangements are being made to commence the audit
  shortly.

  The Authority had not submitted its financial statements for the
  years ended 31
  December 2017, 2018 and 2019 for my inspection and audit.

  -165-

  45. PAPUA NEW GUINEA IMMIGRATION AND CITIZENSHIP
  SERVICE AUTHORITY

  45.1 INTRODUCTION

• Page 269 of 475

• 45.1.1 Legislation

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

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

  45.1.2 Objectives of the Authority

  The objectives of the Authority are the following:

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

• Page 270 of 475

• -166-

  Papua New Guinea Immigration and
  Citizenship Service Authority

  45.1.3 Functions of the Authority

  The functions of the Authority are to:

  • perform the functions and exercise the powers conferred on an
  authorised person
  or an officer under the Migration Act (Chapter 16) or the
  Passports Act (Chapter
  17);
  • assist the Minister responsible for the administration of the
  Migration Act
  (Chapter 16) and Passport Act (Chapter 17) in the performance
  of their functions
  under those Acts respectively;
  • assist the Minister responsible for citizenship in the
  performance of his/her
  functions under Part IV of the Constitution and the
  Citizenship Act (Chapter 12);
  • collect fees, penalties and other revenue authorised under
  the Migration Act
  (Chapter 16), Passport Act (Chapter 17) and Citizenship Act
  (Chapter 12);
  • administer the APEC Business Travel Card Scheme under the
  Migration Act
  (Chapter 16);
  • collect, monitor, secure and maintain information and
  technological systems to
  enable fully integrated and supported immigration,
  citizenship and passport
  operations;
  • undertake development of legislation and policy to support
  the operations of the
  Authority and the effective administration of the Migration
  Act (Chapter 16),
  Passport Act (Chapter 17) and the Citizenship Act (Chapter
  12);
  • advise the Minister on policy issues which relate to this Act
  and the effective
  administration of the Migration Act (Chapter 16), Passport
  Act (Chapter 17) and
  the Citizenship Act (Chapter 12);
  • exercise and carry out such functions and powers and perform
  all duties which
  under any other written law are or may be or become vested in
  the Authority or

• Page 271 of 475

• delegated to the Authority by this Act or any other law; and
  • carry out such other duties as are necessary, supplementary,
  incidental to or
  consequential to achieve the objectives or the discharge of
  its functions under this
  Act.

  45.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Authority had not
  submitted its financial
  statements for the years ended 31 December 2018 and 2019 for my
  inspection and audit,
  despite numerous reminders.

  -167-

  46. PAPUA NEW GUINEA INSTITUTE OF MEDICAL RESEARCH

  46.1 INTRODUCTION

  46.1.1 Legislation

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

  46.1.2 Functions of the Institute

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

  46.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Institute for the year ended 31 December 2018 had been completed
  and results were
  being evaluated.

• Page 272 of 475

• The Institute had not submitted its financial statements for the
  year ended 31 December
  2019 for my inspection and audit.

  -168-

  47. PACIFIC INSTITUTE OF LEADERSHIP AND GOVERNANCE
  (Formerly Papua New Guinea Institute of Public Administration)

  47.1 INTRODUCTION

  47.1.1 Legislation

  The Pacific Institute of Leadership and Governance (formerly
  Papua New Guinea
  Institute of Public Administration) was established under the
  Pacific Institute of
  Leadership and Governance Act 2017. This Act came into operation
  on 1 May 2018 as
  per Gazettal Notification No. G262 of 2018 dated 24 April 2018,
  thereby repealing the
  Papua New Guinea Institute of Public Administration Act 1993.

  Under this Act, all assets held by and obligations and
  liabilities imposed on the former
  Papua New Guinea Institute of Public Administration immediately
  before the
  operationalisation of the Act were on that date transferred to
  the Pacific Institute of
  Leadership and Governance.

• Page 273 of 475

• 47.1.2 Objectives of the Institute

  The objectives of the Institute are to:

  • achieve excellence in providing organisational needs based
  training focused on
  ethical leadership, strategic planning, corporate services
  and related management
  processes to enhance public sector performance;
  • establish the Institute as the premiere provider of ethical
  needs based training
  products and programs of choice for the Pacific Island
  Nations through training
  based partnerships;
  • develop, maintain and promote the recognised training
  standards and
  qualifications regime for public sector organisations in
  collaboration with the
  department responsible for personnel management and the
  National Training
  Council; and
  • operate as a business concern and raise revenue for the
  Institute to minimise
  budgetary support from National Government through
  partnerships established
  with public and private training research and delivery
  organisations within Papua
  New Guinea and in the Pacific region.

  47.1.3 Functions of the Institute

  The functions of the Institute are to:

  • promote excellence in training standards and service delivery
  to meet the
  aspirations of integrated human development and inclusiveness
  as required by the
  Constitution;

  -169-

  Pacific Institute of Leadership and
  Governance

  • conduct applied research, engage consultancies and
  collaborate with public and
  private sector training organisations and professional
  bodies, including the Papua
  New Guinea National Research Institute and the National
  Training Council, in
  order to design an up to date training standards and
  qualifications framework;

• Page 274 of 475

• • collaborate with the Department of Higher Education,
  Research, Science and
  Technology in order to establish bringing arrangements for
  suitably qualified
  diploma students to upgrade their qualifications to
  recognised degree level at
  selected higher education institutions;
  • assist the provincial and district administrations to conduct
  training needs analysis
  and develop training programs to address the need for
  financial, human resource,
  planning and project management skills;
  • explore, promote and deliver training opportunities for
  students from Pacific
  Island nations; and
  • any other functions conferred upon it by Section 7 of the
  Public Institute of
  Leadership and Governance Act 2017.

  47.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  47.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Institute for the year ended 31 December 2014
  was issued on 20
  March 2020. The report contained a Qualified Opinion.

  “QUALIFIED OPINION

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

  (a) the financial statements of the Institute 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 Institute as at 31
  December 2014 and the
  results of its operations for the year then ended.

  BASIS FOR QUALIFIED OPINION

  Internal Control Environment

  My review on the accounts and records of the Institute for the
  year ended 31 December
  2014 revealed that weak internal controls operated during the
  year under review. There
  were no approved procedural guidelines or manuals to guide the

• Page 275 of 475

• daily operations of the
  Institute in respect of approval limits, authorization of
  expenditures and other recurring
  activities. Further, I noted that the accounts were maintained
  using spreadsheets
  (Microsoft Excel) without having a proper accounting system/
  software.

  -170-

  Pacific Institute of Leadership and
  Governance

  In the absence of proper internal control mechanisms, I was
  unable to place any reliance
  on the effectiveness of the internal control system and whether
  this will have a bearing
  on the financial information recorded and disclosed in the
  financial statements.

  Fixed Assets

  I noted that the Institute did not maintain a Fixed Assets
  Register for all non-current
  assets acquired by the Institute over the years-to-date. In the
  absence of a Fixed Assets
  Register, I was unable to ascertain the correctness,
  appropriateness and valuation of the
  fixed assets totaling K448,466 as reported in the financial
  statements. Further, the
  amount disclosed in the financial statements reflects only the
  additions for the year
  under review. Further, the carried forward prior years’
  acquisition of properties and
  other assets worth millions of kina located in the Head Office
  and the four (4) Regional
  Offices were not disclosed by way of note to the financial
  statements. I also noted that
  the Institute has not carried out any physical count of fixed
  assets over the years to
  ensure that assets have properly been recorded and are in
  existence. As a result, I was
  unable to confirm the valuation, existence and accuracy of the
  fixed assets acquired by
  the Institute over the years-to-date.

  PGAS Salaries and Allowances – K3,308,200

  During my review of the Institute’s salaries and allowances, I
  noted that the personnel
  files of employees selected were not updated and properly
  maintained. There were no
  salary and wages declaration forms (Form S3) from IRC present in

• Page 276 of 475

• the personal files. I
  also could not validate the allowances and other benefits paid
  during the year for the
  three (3) pay periods selected due to discrepancies between the
  employment contract
  rates, personnel documents and the Alesco payroll documents.
  Further, I noted that the
  employees were not taxed using the prescribed tax rate based on
  the amount of salaries
  and allowances received; most were under taxed. Consequently, I
  was unable to
  perform the necessary examination on salary and allowances paid
  during the year and
  conclude on the accuracy and completeness of the account balance
  of K3,308,200 as
  disclosed in the financial statements.

  Limitation of Scope – K68,452

  The Institute did not maintain proper records of payments
  totaling K68,452 during the
  year under review. My review of the expenditures during the year
  revealed that records
  of payments totaling K68,452 were missing or not provided for my
  verification.
  Consequently, I was unable to perform my audit procedures to
  determine the validity,
  completeness and accuracy of the payments totaling K68,452 as
  reported in the
  financial statements.”

  47.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Institute for the year
  ended 31 December 2014
  was issued on 20 March 2020. The report contained the following
  observations:
  -171-

  Pacific Institute of Leadership and
  Governance

  Non–Compliance with the Public Finances (Management) Act 1995

  The Institute had not prepared and submitted its financial
  statements to my Office
  before 31 March 2015 to enable me to conduct the audit and issue the
  audit report within
  the time frame stipulated in the Public Finances (Management) Act
  1995 (as amended).
  Consequently, the Institute had breached Sections 63 (2) and 63 (4)

• Page 277 of 475

• of the above Act.

  Accounting Policy and Procedural Manual

  During my review of the internal controls, I noted that the
  Institute did not have any
  policy and procedural manual in place to guide its financial and
  operational activities.
  The policy and procedural manuals serve as control tools to assist
  staff at all levels to
  execute their duties and responsibilities in accordance with
  legislative requirements and
  best practice. I brought the matter to the attention of the
  management and I was advised
  that it had identified this requirement as a priority and commenced
  work on the manual
  for Accounting and Finance process.

  Accounting System (Software)

  The Institute did not have a proper Accounting System (accounting
  software) in place
  to produce financial reports. The Statement of Receipts and Payments
  (Financial
  Statements) were being manually prepared and produced using
  Microsoft Excel
  spreadsheets. The basic accounting records were being maintained on
  spreadsheets to
  draw monthly Income and Expenditure Reports from which the Statement
  of Receipts
  and Payments was compiled. I noted this issue during my previous
  audits and
  recommended the management to consider sourcing an Accounting
  Software
  appropriate for the entity. The Institute is yet to implement my
  recommendation.

  Bank Reconciliations

  My review of the bank reconciliations of the bank accounts operated
  by the Institute
  revealed that monthly reconciliations were performed. However, I
  noted that the Trust
  Account bank reconciliation was signed and dated in December 2016.
  The bank
  reconciliations for the General Fund and Government Operational
  Accounts were not
  signed and dated by the preparer and the reviewer. Thus, I was
  unable to substantiate
  whether there was segregation of duties and whether the bank
  reconciliations were done
  on a timely basis.

  General Fund Account (GFA) Wages

• Page 278 of 475

• During my review of the wages, I noted that staff personnel files
  did not have salary
  history cards as well as approved time sheets for actual hours
  worked. As a result, I was
  unable to determine whether the staff wages were calculated
  correctly and accurately
  according to the actual hours worked by each employee.

  -172-

  Pacific Institute of Leadership and
  Governance

  Travel Advances and Acquittal Register

  The Institute had not maintained a Travel Advances Register for
  all duty travels and
  related expenses. As a result, I was unable to trace and
  authenticate travel advances and
  related expenses amounting to K348,218 during the year under
  review. Consequently,
  the Institute had breached the Public Finances (Management) Act
  1995 (as amended)
  and the Financial Management Manual Part 20 paragraphs 11.2 &
  12.10 which states
  that cash advanced to officers on official duty travels must be
  acquitted advances within
  14 and 7 days for international and domestic travels
  respectively upon return from duty
  travels. In the absence of a Travel Advance Register, the
  Institute was unable to monitor
  the acquittals promptly.

  Service Providers Contract

  During my review on the Institute’s expenditures, I noted that
  contractual agreements
  or terms of references were not attached to payment vouchers or
  maintained separately
  and provided for my verification. In the absence of the contract
  agreements, I was
  unable to verify the basis on which the consultancy payments
  were made to the
  consultants or service providers.

  I brought the above issue to the attention of the management and
  I was advised that the
  management would take heed of the recommendation made.

  Lack of Three (3) Quotations – K75,458

• Page 279 of 475

• I observed that the Institute made payments totaling K75,458
  without obtaining three
  (3) written quotations from reputable suppliers when making
  payments for expenditure
  exceeding K5,000. Consequently, the Institute had breached the
  requirements specified
  under the Public Finances (Management) Act 1995 (as amended). As
  a result, I was
  unable to place reliance on the effectiveness of the internal
  controls surrounding the
  procurement of goods and services of the Institute.

  47.3 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
  Institute for the years ended 31 December 2015, 2016 and 2017
  had been completed
  and the results were being evaluated.

  The Institute had not submitted its financial statements for the
  years ended 31 December
  2018 and 2019 for my inspection and audit.

  -173-

  48. PAPUA NEW GUINEA MARITIME COLLEGE
  48.1 INTRODUCTION

  48.1.1 Legislation

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

  48.1.2 Functions of the College

• Page 280 of 475

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

  48.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  48.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the College for the year ended 31 December 2018
  was issued on 15
  October 2019. The report contained a Qualified Opinion.

  “QUALIFIED OPINION

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

  (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 College for the year
  ended 31 December
  2018 and the results of its financial operations and cash
  flows for the year then
  ended.

  BASIS FOR QUALIFIED OPINION

  Valuation of Non-Current Assets – K10,394,866

  I noted that since the establishment of the College, there was
  no valuation exercise
  carried out on its properties and other assets totalling
  K10,394,866 by an independent
  valuer to determine the fair values of the College assets.
  -174-

  Papua New Guinea Maritime College

  Further, I noted that the College’s Assets recorded in the Fixed
  Assets Register did not
  have identification numbers or labels assigned to them. Without
  proper labelling of
  assets, the identification of fixed assets under the College’s
  custody was difficult for
  my verification.

• Page 281 of 475

• Further, the College had not carried out any stocktake on all
  its fixed assets over the
  years and thus I was unable to carry out physical inspection to
  confirm certain fixed
  assets against the records to verify their existence. As a
  result, I was unable to comment
  on the existence and valuation of fixed assets disclosed in the
  financial statements.”

  48.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act
  on the accounts and
  records of the College for the year ended 31 December 2018 was
  issued on 15 October
  2019. The report contained the following significant matters:

  Title Deeds of College Properties

  During my review of the Land & Buildings, I noted that for
  eleven (11) properties the
  College had no valid title deeds in place or was unable to
  locate the deeds for my
  verification. As a result, I was unable to verify the College’s
  ownership of the eleven
  properties.

  I brought the above issue to the attention of the College
  Management and I was advised
  that communication had commenced with various stakeholders and
  would continue
  until the matter is being resolved.

  Withholding Taxes (Salary Taxes) – K876,131

  During my examination of the Salary Account, I noted that
  monthly group taxes for
  prior years (2012 & 2013) were not remitted to Internal Revenue
  Commission (IRC)
  on time as required by Section 299 G of the Income Tax Act,
  (1959). The employer is
  required to remit salary and wages taxes to IRC within 7 days
  after month-end. Failure
  to remit salary and wages taxes on time would result in penalty
  of 20% for outstanding
  tax payable and an additional interest of 20% per annum on the
  amount outstanding. I
  noted that the College had been carrying forward these balances
  without remitting them
  on a timely basis as required under the Act. I brought the above
  issue to the attention
  of the management and I was advised that:

• Page 282 of 475

• “Group tax liabilities carried forward is an ongoing concern.
  The current management
  has been addressing the issue since 2014 accumulated by failure
  to remit to IRC as a
  PAYE. Discussions with IRC at the moment is to offset assessed
  GST refunds against
  group tax liability. The management continues to strive to make
  savings from internally
  generated income to gradually settle the outstanding
  liabilities. A genuine effort has
  been put into this matter and will continue into the future.”

  -175-

  Papua New Guinea Maritime College

  Personnel Emoluments

  During my review of staff personnel files, I noted that the
  employment contract for the
  Principal of the College was not signed. As a result, I was
  unable to substantiate and
  validate the salary and allowances paid to the Principal. I
  brought this to the attention
  of management in my previous audits and followed up during the
  current audit as well.

  I was advised by the College as follows:

  “The Principal’s contract is the responsibility of the Board to
  ensure that he has a valid
  contract in place in concurrence of his duties. The matter has
  been followed up by the I
  Management with no success. However, the management is still
  doing its best to ensure
  DPM provides the Principal a valid contract soon.”

  48.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the College had submitted
  its financial statements
  for the year ended 31 December 2019 and arrangements were being
  made to commence
  the audit shortly.

• Page 283 of 475

• -176-

  49. PAPUA NEW GUINEA NATIONAL INSTITUTE OF
  STANDARDS AND INDUSTRIAL TECHNOLOGY

  49.1 INTRODUCTION

  49.1.1 Legislation

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

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

  49.1.2 Objectives of the Institute

  The objectives of the Institute are: to carry out scientific
  and technological research
  and to develop a National Standards system; to co-operate with
  international
  organisations of measurement and technical standards; to
  promote and undertake

• Page 284 of 475

• industrial integrated standardisation and quality assurance;
  and to enter into any
  agreement both within and outside PNG to further the objectives
  and functions of the
  Institute.

  49.1.3 Functions of the Institute

  The main functions of the Institute are to:

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

  -177-

  Papua New Guinea National Institute of
  Standards and Industrial Technology
  y
  49.2 STATUS OF FINANCIAL STATEMENTS
  At the time of preparing this Report, the Institute had
  not submitted its financial
  statements for the years ended 31 December 2017, 2018 and
  2019 for my inspection
  and audit, despite several reminders.

• Page 285 of 475

• -178-

  50. PAPUA NEW GUINEA SPORTS FOUNDATION

  50.1 INTRODUCTION

  50.1.1 Legislation

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

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

  50.1.2 Objectives of the Foundation

• Page 286 of 475

• The principal objectives of the Foundation are: to encourage the
  private sector to
  contribute to the funding of sports to supplement assistance by
  the government of Papua
  New Guinea; to provide leadership in the development of Papua
  New Guinea’s
  performance in sports; and to encourage increased participation
  and 6SRrt 1Rr $ll’ by
  Papua New Guineans in sports.

  50.1.3 Functions of the Foundation

  The principal functions of the Foundation are to:

  • advise the Minister in relation to the development of
  sports;
  • co-ordinate activities in Papua New Guinea for the
  development of sports and
  to develop and implement programs to promote equality of
  access to and
  participation in sports by all Papua New Guineans;
  • develop and implement programs for the recognition and
  development of
  persons who excel, or who have the potential to excel in
  sports and persons who
  have the potential to achieve standards of excellence as
  sports coaches, umpires,
  referees or officials essential to the conduct of sports;
  • initiate, encourage and facilitate research and development
  in relation to sports;
  • undertake research and development related to sports science
  and sports
  medicine and to provide sports medicine services and sports
  science services to
  persons participating in programs of the Foundation;
  • establish, manage, develop and maintain facilities for the
  purposes of the
  Foundation;
  • collect and distribute information and provide advice on
  matters related to the
  activities of the Foundation;

  -179-

  Papua New Guinea Sports Foundation

  • fostering co-operation in sports between Papua New Guinea and
  other countries
  and to provide access to persons from other countries to the
  resources, services
  and facilities of the Foundation;
  • raise money through the National Sports Trust or by other
  means for the

• Page 287 of 475

• purposes of the Foundation and to administer and expend money
  appropriated
  by the Parliament or raised in accordance with and for the
  purpose of the
  Foundation;
  • consult and co-operate with appropriate authorities of the
  National Government
  or the Provinces and Local-level Governments and with other
  persons,
  associations and organisations on matters related to the
  activities of the
  Foundation;
  • provide advice on matters related to sports to the Papua New
  Guinea National
  Olympic Committee or other persons, bodies or associations;
  and
  • co-operate with districts, provincial, national and
  international sporting
  organisations in aiming to foster a sporting environment that
  is free from the
  unsanctioned use of performance enhancing drugs and doping
  methods.

  50.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements of
  the Foundation for the
  years ended 31 December 2016, 2017, 2018 and 2019 had not been
  submitted for my
  inspection and audit.

• Page 288 of 475

• -180-

  51. PAPUA NEW GUINEA UNIVERSITY OF TECHNOLOGY

  51.1 INTRODUCTION
  51.1.1 Legislation and Objectives of the University
  The Papua New Guinea University of Technology was established
  under the University
  of Technology Act (Chapter 170). The University’s aims are to
  provide tertiary
  educational facilities and to produce qualified men and women to
  contribute to the
  development of Papua New Guinea.
  51.1.2 Functions of the University
  The University’s principal functions are to encourage and
  provide facilities for study,
  education and training of technological subjects and branches of
  learning at tertiary
  level, and to assist in research and the practical application
  of technological branches
  of learning.
  51.1.3 Subsidiaries of the University
  The University has two subsidiary companies; National Analytical
  and Testing Services
  Limited and Unitech Development and Consultancy Company Limited
  which were
  incorporated under the Companies Act.
  Comments in relation to the subsidiary companies are contained
  in paragraphs 51A and
  51B of this Report respectively.

  51.2 AUDIT OBSERVATIONS

  51.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  of the University’s
  financial statements for the year ended 31 December 2017 was
  issued on 11 March
  2020. The report did not contain any qualification.

  51.3 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
  University for the year ended 31 December 2018 was in progress.

  The University had not submitted its financial statements for
  the year ended 31
  December 2019 for my inspection and audit.

• Page 289 of 475

• -181-

  51A. NATIONAL ANALYTICAL AND TESTING SERVICES
  LIMITED (Subsidiary of University of Technology)

  51A.1 INTRODUCTION
  The National Analytical and Testing Services Limited was
  initially incorporated as
  Champion No. 67 Limited on 10 March 2011. However, on 24 March
  2011 the former
  Company name (Champion No. 67 Limited) was changed to what is
  now the National
  Analytical and Testing Services Limited.

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

  51A.1.1 Functions of the Company

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

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

  51A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the year ended 31 December 2012 was completed
  and results were
  being evaluated.

  The Company had not submitted its financial statements for the
  years ended 31
  December 2013, 2014, 2015, 2016, 2017, 2018 and 2019 for my
  inspection and audit.

• Page 290 of 475

• -182-

  51B. UNITECH DEVELOPMENT AND CONSULTANCY COMPANY
  LIMITED (Subsidiary of PNG University of Technology)

  51B.1 INTRODUCTION

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

  51B.1.1 Functions of the Company

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

  51B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements
  of the Company for the
  years ended 31 December 2014, 2015, 2016, 2017, 2018 and 2019
  had not been
  submitted for my inspection and audit.

• Page 291 of 475

• -183-

  52. PARLIAMENTARY MEMBERS’ RETIREMENT BENEFITS
  FUND

  52.1 INTRODUCTION

  52.1.1 Legislation

  The Parliamentary Members’ Retirement Benefits Fund was
  established under the
  Parliamentary Members’ Retirement Benefits Fund ALl I I I 7
  which came into
  operation on 16 July 1997.

  52.1.2 Objectives of the Fund

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

  52.2 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
  Fund for the year ended 31 December 2017 had been completed and
  the results were
  being evaluated.

  The Fund had not submitted its financial statements for the
  years ended 31 December
  2018 and 2019 for my inspection and audit.

• Page 292 of 475

• -184-

  53. PUBLIC CURATOR OF PAPUA NEW GUINEA

  53.1 INTRODUCTION

  53.1.1 Legislation

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

  53.1.2 Functions of the Public Curator

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

  53.2 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
  Public Curator’s Office for the year ended 31 December 2014 had
  been completed and
  the audit reports were being finalised.

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

  The financial statements for the years ended 31 December 2018

• Page 293 of 475

• and 2019 had not been
  submitted by the Public Curator’s Office for my inspection and
  audit.

  -185-

  54. ROAD TRAFFIC AUTHORITY (formerly National Road Safety
  Council)

  54.1 INTRODUCTION

  54.1.1 Legislation

  The Road Traffic Authority (formerly National Road Safety
  Council) was established
  under the Road Traffic Authority Act 2014. This Act was
  certified on 5 August 2014
  thereby repealing the National Road Safety Act 1997. The
  Authority only commenced
  its operational activities in 2017.

  Under the Road Traffic Authority Act 2014 all assets,
  liabilities, rights, entitlements and
  choice-in action of the National Road Safety Council and the
  Land Transport Board
  which related to the functions of the Council were transferred
  to the Authority upon the
  commencement of this Act.

  54.1.2 Objective of the Authority

  The objective of the Authority is to manage and administer the
  regulation, safety and
  efficient use of land transport throughout Papua New Guinea.
  54.1.3 Functions of the Authority

• Page 294 of 475

• The functions of the Authority are to:
  • establish, administer and enforce regulatory requirements for
  land transport in
  Papua New Guinea, including setting fees and charges for
  services provided by
  the Authority;
  • within the resources available to the Authority, provide for
  the safe and efficient
  use of land transport in Papua New Guinea;
  • assist, advise and work cooperatively with the Police Force,
  Provinces and other
  organisations in relation to land transport regulatory
  matters, road safety and the
  efficient use of land transport;
  • monitor the road safety performance of the public road
  network and to develop
  and implement action plans for improvements;
  • manage data for activities within the land transport system
  including maintaining
  and preserving records, registers and documents in relation
  to the activities;
  • undertake investigation into land transport accidents,
  incidents and report to the
  Minister and public on the findings of such investigations;
  • promote and conduct research into land transport regulatory
  matters and road
  safety;

  -186-

  Road Traffic Authority

  • monitor and evaluate the effectiveness of programs and
  activities concerning land
  transports regulatory matters and road safety;
  • promote and conduct educational and awareness programs to
  stimulate
  compliance with land transport regulatory requirements and
  road safety;
  • advise the Minister on all functions specified in this
  section;
  • perform other functions as are given to the Authority under
  this Act, the
  regulations, the rules or any other law; and
  • do all things incidental, consequential or convenient in the
  exercise of the
  Authority’s functions and powers.

  54.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

• Page 295 of 475

• 54.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act
  on the Authority’s
  financial statements for the years ended 31 December 2017 and
  2018 were issued on
  27 May 2020. The reports did not contain any qualification.

  54.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Authority for the years
  ended 31 December
  2017 and 2018 were issued on 27 May 2020. The reports contained
  similar
  observations, hence, only the 2018 report is reproduced:

  CASH AT BANK – Bank Reconciliation

  My review and examination of the 2018 bank reconciliations for
  the Authority’s three
  bank accounts revealed that the reconciliations were not
  prepared, reviewed and
  certified by the designated officers on a timely basis for all
  three bank accounts. This
  practice leads to a breach of provisions of the Public Finance
  (Management)
  (Amendment) Act 2016 and the Financial Management Manual. I
  recommended that
  the Authority must comply with the Public Finance (Management)
  (Amendment) Act
  2016 and the Finance Management Manual. The management responded
  to my concern
  as follows:

  “Management has taken note of the audit findings and has taken
  corrective measures
  to ensure bank reconciliations are prepared in a timely manner
  and in accordance to
  Financial Management Manual Part 3, Section 4.7 (Bank
  Reconciliation). Due to the
  transition period from NRSC to RTA, management have performed
  bank
  reconciliations; however, that was on a cash basis. The
  reconciliations are now being
  prepared from the Accounting system against the bank statements
  and verified, checked
  and signed by preparers and reviewers.”

  -187-

• Page 296 of 475

• Road
  Traffic Authority

  PROPERTY PLANT & EQUIPMENT – Fixed Assets Management

  The Authority had not maintained a proper Fixed Assets Register in
  2018. The absence
  of a proper and updated Fixed Assets Register exposed the Authority
  to high risk of
  losing its properties through theft and other means. I drew this
  observation to the
  attention of the management of the Authority and they responded to
  my observation as
  follows:

  “Management agrees to the findings and has updated its Fixed Assets
  Register for 2017.
  To maintain proper control, RTA will conduct half yearly stocktake
  to verify the

  fixed assets at year-end.”

  INCOME – Traffic Infringement Notices

  My review of the income of the Authority revealed that there were
  weaknesses in the
  controls surrounding record keeping functions and issue of receipt
  books. There were
  also instances where TIN receipt books given to police officers were
  not returned to the
  Authority and some Inspectors had lost the TIN books. Further, fines
  and fees schedules
  and summaries of deposits were not properly arranged and filed. I
  brought this issue to
  the attention of the management of the Authority and they responded
  as follows:

  “Management concurs to the audit findings and necessary measures
  have been taken
  to address the control issues. RTA now has an approved Finance and
  Accounting
  Manual which specifically outlines the processes of receipting and
  collection and also
  to maintain, records of transaction, filing of payment vouchers for
  audit purposes and
  future references.

  Besides, only Gazetted RTA Traffic Enforcement Officers (TEO) are
  now authorized
  Officers to use the Traffic Infringement Notice (TIN) book and not
  police officers. The
  procedures of Collection of revenue will be monitored by the

• Page 297 of 475

• Managers concerned in
  this process.”

  PAYROLL – Maintenance of Staff Personnel Files

  During my review of staff personnel files, I noted that the staff
  personnel files were not
  properly and timely updated with salary history cards, employment
  letters, birth and
  marriage certificates, leave records and salary and wages
  declaration forms. In the
  absence of these valid documents, I was unable to verify each of the
  officers’
  salaries/wages and allowances provided for at the year end. I drew
  this observation to
  the management of the Authority and the management responded as
  follows:

  “Management agrees that some employee’s files were not properly and
  timely
  maintained during the transition from National Road Safety Council
  to Road Traffic
  Authority.

  -188-

  Road Traffic Authority

  Management have taken corrective actions and has developed the Admin
  and HR
  manual approved by Board in 2016. This is used now as a guideline
  for update of
  staff records and files on a regular basis. Management have started
  to maintain proper
  records of staff and also improved its efforts in compliance to IRC
  requirements by
  filling in the salary wages forms and others for yearly lodgement
  with IRC.” F1
  EXPENDITURES – Procurement Process Review

  My review of the procurement process of the expenditure accounts and
  records of the
  Authority for the year ended 31 December 2018 revealed the following
  discrepancies:

  • Several payments could not be verified as I was not able to locate
  their respective
  payment vouchers in the files provided for my review;

  • There were instances in which expenses incurred for operational
  expenses had no
  proper or complete supporting documentations to substantiate the
  validity of the

• Page 298 of 475

• payments; and

  • There were instances where payments were made without obtaining
  three
  quotations from three different suppliers as required under the
  provisions of the
  Financial Management Manual.

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

  “Management agrees with audit findings and has addressed the issues
  by ensuring all
  supporting and relevant documents are duly attached for payment
  processing,
  maintaining proper record of its transaction and to ensure proper
  filing of payment
  vouchers for future reference.

  Furthermore, the compliance relating to minor procurement for goods
  and services as
  per the Public Finance (Management) (Amendment) Act 2016 is noted
  and will be
  adhered to.”

  Travel Acquittal Register

  My review of the travel and subsistence expenses revealed that the
  Authority had not
  maintained a Travel Advances Register with acquittal files for all
  duty travels and
  related expenses. This resulted in an amount of K31,347 of travel
  and subsistence
  expenses not being acquitted from a total of K134,747 at year end. I
  advised the
  management of the Authority that this was a breach of the provisions
  of the Public
  Finance (Management) (Amendment) Act 2016 and the Financial
  Management Manual
  and to comply with the above legislations. I brought this
  observation
  to the attention of the management and they responded as follows:

  -189-

  Road Traffic Authority
  “Management has addressed this issue by having a t

  e Section.”

  54.3 STATUS OF FINANCIAL STATEMENTS

• Page 299 of 475

• At the time of preparing this Report, the Authority had not
  submitted its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

  -190-

  55. SECURITY INDUSTRIES AUTHORITY

  55.1 INTRODUCTION

  55.1.1 Legislation

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

• Page 300 of 475

• The Authority
  commenced its operations in April 2005.

  55.1.2 Functions of the Authority

  The principal functions of the Authority are to:

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

  55.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  55.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Authority for the year ended 31 December 2016
  was issued on 21
  April 2020. The report contained a Qualified Opinion.

  “QUALIFIED OPINION

  In my opinion, except for the effects of the matters described
  in the Basis for Qualified
  Opinion paragraphs, the accompanying financial statements are:

  a) based on proper accounts and records; and

  -191-

• Page 301 of 475

• Security Industries Authority

  b) are in agreement with those accounts and records, and show
  fairly the state of
  affairs of the Authority for the year ended 31 December 2016
  and the results of
  its financial operations and cash flows for the year then
  ended.

  BASIS FOR QUALIFIED OPINION

  Fixed Assets – K477,960

  My review of the Fixed Assets Register (FAR) revealed that the
  Register was not
  properly maintained and updated on a timely basis by the
  Authority. No proper stock-
  take was done to confirm the existence and to determine the fair
  value of each asset
  held at year end. I also noted that assets were not numbered/
  tagged and no acquisition
  dates were provided for me to verify the depreciation calculated
  on assets listed in the
  Register. Based on the findings, I was unable to place reliance
  on controls surrounding
  the management of fixed assets. As such, I was unable to conclude
  on the accuracy,
  valuation and existence of the fixed assets balance of K477,960
  disclosed in the
  financial statements.

  Accounts Receivable – K63,445

  My examination of accounts receivable revealed that receivable
  balance was
  understated as it did not capture licence and permit fees
  receivable from licence and
  permit holders who have not paid their fees on due dates. The
  Authority has not
  maintained proper debtors’ records detailing the debtors,
  invoices and other supporting
  documents to validate the actual existence of debtors.

  As a result, I was unable to confirm the completeness and
  accuracy of the debtors and
  the fair presentation of the accounts receivable amount stated in
  the financial
  statements.”

  55.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on
  the inspection and

• Page 302 of 475

• audit of the accounts and records of the Authority for the year
  ended 31 December 2016
  was issued on 21 April 2020. The report contained the following
  observations:

  Register of Disciplinary Points

  I noted that the Authority has not maintained a Register of
  Disciplinary Points. It is a
  statutory requirement pursuant to provisions of the Security
  (Protection) Industry Act
  2004, Section 25 which stipulates that the Authority should
  maintain a Register of
  Disciplinary Points. The Register of Disciplinary Points is to be
  used by the Authority
  to record findings through Board of Complaints in relation to
  disciplinary points that
  needs to be recorded against a holder of licence or permit.

  -192-

  Security Industries Authority

  My review revealed that the Authority did not have in place a proper
  mechanism to
  account for disciplinary issues and actions taken against the
  licence and permit holders,
  when any breach occurs.

  I drew this matter to the attention of the Authority and the
  Authority advised me that
  they have now put in place a Register of Disciplinary Points managed
  by the Manager
  Licensing and Compliance whilst awaiting the gazettal of the Board
  of Complaints.

  Board of Complaints

  I noted during the audit that the Authority did not have a Board of
  Complaints to deal
  with complaints raised by or against licence and permit holders as
  required under
  Section 57 of the Security (Protection) Industry Act 2004.

  I recommended the Authority to ensure that a Board of Complaints is
  established as per
  the requirement of Section 57 of the Security (Protection) Industry
  Act 2004 to perform
  its required function as a quasi-judicial Board to hear into
  complaints/allegations made
  by or against permit and licence holders.

• Page 303 of 475

• The Authority responded to my concern as follows:

  “I have noted your concerns and I will take it up to the Council in
  the next meeting to
  ensure the full Council endorses the 3 men before their gazettal by
  the Chairman
  (Police Commissioner) before the Board of Complaints comes into
  existence in
  compliance with the law by this year 2020.”

  Annual Returns

  It is a requirement under Section 76 of the Security (Protection)
  Industry Act 2004 that
  all licence holders are required to submit an Annual Return on or
  before 31 March for
  the year ending 31 December preceding. During my review, I noted
  that no annual
  returns were received from licence holders. The Authority had not
  pursued the
  enforcement of this statutory requirement through mechanism such as
  cancelation or
  refusal to grant licences. I drew this matter to the attention of
  the management and they
  responded as follows:

  “We agree with you on the requirement for the submission of annual
  return by Security
  Companies as required by Section 76 of the Security (Protection)
  Industries Act We’ve
  advertised in media reminding security companies to submit their
  annual returns but
  only few or none have been submitting their annual returns.

  And further there is no penalty listed in the Security (Protection)
  Industries Act for
  failing to submit the Annual Returns, therefore we cannot cancel the
  security providers’
  license and guards’ permit or penalize security companies in one way
  or another.”

  -193-

  Security Industries Authority

  Council Stipend and Sitting Allowances – Ex officio members

  My review of the Council members and related expenses revealed that
  two ex-officio
  members were paid sitting allowances and stipends. As senior public
  servants serving
  as a member of the Council by virtue of operations of Section 9,

• Page 304 of 475

• sub-sections 1(a) and
  1(h) of the Security (Protection) Industry Act 2004; the two ex-
  officio members were
  not eligible to receive the sitting allowances and stipends.

  This practice is in breach of Section 3 of the Boards (Fees and
  Allowance) Act 1955
  and Section 25(3) of the Pubic Finance Manual and Circular
  Instructions 21/2000 and
  1/2005 from the Department of Personal Management.

  I recommended the Authority to cease the practice of paying ex-
  officio members
  stipend and sitting allowances. However, I recommended the Authority
  to pay travel
  cost, accommodation and travel allowances for meetings held in other
  centers /locations
  where they are required to travel. I drew this matter to the
  attention of the management
  and they responded as follows:

  ,“I confirmed your audit findings on this issue and I will bring it
  to the full council
  members’ attention to deliberate on this issue. Because right now I
  cannot stop paying
  them as recommended by you until the full council passes a meeting
  resolution to stop
  payment of the stipends and sitting allowances to ex-officio council
  members then, I
  will legally effect your recommendation. I will advise the full
  council members in the
  council meeting of your audit finding and advise them of the audit
  recommendation to
  stop this payment”

  Increase in Council Stipend and Sitting Allowances

  My review of the 2015 meeting minutes of meeting number 2 of 2015
  held on 8
  September 2015 noted that the council members approved for
  themselves an increase
  in stipend and sitting allowances. I further noted that the
  increased rates were over the
  threshold set by the Department of Personal Management in circular
  number
  21/2000.The Authority as per the circular is classified under
  Category “A” as
  Commercial Statutory Authorities. The Authority is in breach of
  Section 3 of the Boards
  (Fees and Allowance) Act 1955 and Circular Instructions 21/2000 from
  the Department
  of Personal Management.

  I recommended the Authority to ensure compliance with Section 3 of

• Page 305 of 475

• the Boards (Fees
  and Allowance) Act 1955 and Circular Instructions 21/2000 from the
  Department of
  Personal Management as the Authority is a Commercial Statutory
  Authority created by
  an Act of Parliament. The Authority responded to my observation as
  follows:

  3,“I confirm that the Council members through the full legally
  constituted quorum in
  Council Meeting 2 held on 8 September 2015, voted to increase their
  Stipend and Sitting
  Allowances based on the following reasons:

  -194-

  Security Industries Authority

  a) The Security Industries Council members raised concern that they
  were not paid
  at a rate similar to other SQE Board members as their current
  fees were much
  lower. Therefore, one of the council members at that time was
  tasked by the full
  council to compare their remunerations with other SOEs and
  private Boards’
  terms and conditions. Which he did and presented the written
  findings to the full
  council thereafter resulting in the vote to increase their
  sitting and quarterly
  stipend allowances.

  b) This Council stipend and sitting allowances increase is
  consistent with section 8
  (2) (D) of the Security (Protection) Industries Act, 2004 to
  increase its stipends
  and sitting Allowances.

  However, I also noted your references to Section 3 of the Board Fees
  and Allowances
  Act, 1955, Part 25 (3) of the Finance Management Manual as well as
  Circular
  Instruction 21/2000 and 1/2005 issued by Department of Personnel
  Management as
  your source of supporting authority to say that the increase is
  wrong. I therefore, will
  bring your concerns on this matter to the Council in the next
  meeting to deliberate on
  this issue.”

  Improper Payments of Stipend and Sitting Allowance

  I noted that the Authority’s Council members were paid full four (4)

• Page 306 of 475

• quarterly stipends
  and sitting allowances balance of K317,500 during the year under
  review. However,
  only one (1) Council meeting was conducted for the year and second
  meeting was
  through board resolution paper without any meetings conducted for
  the second, third
  and fourth quarter of 2016. The payments were improper and deviate
  from the original
  intended practice whereby a council member can only be paid sitting
  allowance and
  stipend upon attendance of council meetings as per Circular
  Instructions 1/2005 issued
  by the Department of Personnel Management. I brought this issue to
  the attention of
  the management of the Authority and they responded to my observation
  as follows:

  “I agree that the Council members were paid their quarterly stipends
  in 2016 despite
  sitting for only one council meeting in which sitting allowances
  were paid for this one
  meeting only. The quarterly stipends were paid to council members on
  quarterly basis
  even when the meetings were held or not. This is because we have
  been following Public
  Finances Management Manual Part # 25 subsection 4.
  However, we now take note of the recommendation given to follow
  Circular Instruction
  No.2/2005 and we will inform council members for their appropriate
  actions going
  forward in the next meeting to deliberate on this issue for the
  Authority to implement”

  -195-

  Security Industries Authority

  Bank Reconciliations

  My review of the bank reconciliations for the two (2) accounts
  maintained by the
  Authority revealed that the reconciliations were not done on a
  timely basis. Bank
  reconciliations for 2016 were only prepared in 2019 prior to the
  commencement of the

• Page 307 of 475

• field audit. As a result, I was not able to place reliance on the
  effectiveness of the
  internal controls surrounding the bank reconciliation function. I
  drew this matter to the
  management and they responded to my observation as follows:

  “We agree and confirmed the weaknesses highlighted by the audit for
  the year 2016.
  The Manageme nt has already action this and it will be reflected in
  2019 financial
  statements.”

  SALARIES AND ALLOWANCES – (K871,638)

  Personnel Files

  During my review of the personnel files for certain selected
  officers of the Authority,
  it revealed that the Authority now maintains salary history cards in
  their respective
  personnel files. However, the salary history cards were not updated
  by the Human
  Resources in terms of base salary, higher duty allowance and other
  allowances. Also,
  leave records for each employee such as recreational, sick,
  compassionate and long
  service leaves were not updated. Poor maintenance of staff personnel
  files can increase
  the risk of fraud and error such as dubious dependency claims and
  payment of contract
  officers on invalid unsigned contracts. The Authority might use
  wrong rates for
  calculation of entitlements for the staff. I drew this issue to the
  attention of the
  management and they responded to my observation as follows:

  “Upon my appointment as Registrar, I have taken on board the audit
  recommendations
  and recruited a new Human Resources Officer which gradually
  addressed all those
  issues. However, we appreciate those few weaknesses highlighted and
  we will take on
  board recommendations given.”

  Recreational Leave Fares

  My review of the leave fares expenses revealed that the Authority
  paid leave fares to
  its employees and their dependents totaled K23,756 during the year
  under review.
  However, I was unable to verify the validity and authenticity of the
  staff dependents
  (children) ages for leave fares as no birth certificates were
  attached to the payment

• Page 308 of 475

• vouchers in the personnel files. As a result, I was not able to
  confirm whether the
  Authority was complying with General Orders 1441. I drew my
  observation to the
  management and they responded as follows:

  -196-

  Security Industries Authority

  “We take note of the observation highlighted for annual leave
  fares paid of K23,756
  and the validity issue of dependency claim This is the total
  amount paid for the year
  which includes four officers. Dependencies paid are
  legitimate as these dependents
  were declared through staff IRC Tax forms and Superannuation
  forms. These I
  documentsLEE are attached to the staff respective files.

  We are being mindful of that as each time staff lodge for
  leave fares, we ensure
  legitimate dependents are paid for and within the age limit
  specified in the GSOfor
  children. However, for further compliances, we take note and
  it will be address.”

  Non maintenance of Acquittal File and Travel Advances
  Register

  My review of the travel and subsistence expenses totalling
  K127,377 incurred by staff
  on duty travel (domestic and overseas) revealed that the
  Authority did not maintain a
  Travel Advances Register to ensure that the advances were
  properly recorded and
  timely acquitted. As a result, the above total amount
  remained outstanding or
  unacquitted at year end. I drew this issue to the attention
  of the management and they
  responded as follows:

  “We take note of the weaknesses highlighted and
  recommendation given and will be I
  taken on board.”

  55.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Authority had not

• Page 309 of 475

• submitted its financial
  statements for the years ended 31 December 2017, 2018 and
  2019 for my inspection
  and audit.

  -197-

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

  56.1 INTRODUCTION

  56.1.1 Legislation

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

  56.1.2 Functions of the Corporation

  The functions of the Corporation are to:

  • co-ordinate, monitor and evaluate the implementation of the
  policies, strategies
  and programs for small and medium enterprises in accordance
  with the Small and
  Medium Enterprises Policy, the Master Plan of the Government
  as directed by the
  Small and Medium Enterprises Development Council and the
  Ministry
  responsible for trade, commerce and industry matters;

• Page 310 of 475

• • undertake studies concerning the development of small and
  medium enterprises;
  • liaise with the National Executive Council or relevant
  Ministry in the
  implementation of the policies, strategies and programmes for
  small and medium
  enterprises;
  • being responsible for collecting, sourcing, keeping and
  disseminating information
  on small and medium enterprises;
  • act as the Secretariat to the Council;
  • in the manufacturing and services sectors:
  ‒ to undertake promotional activities to promote growth of
  small and medium
  enterprises;
  ‒ to promote co-operation amongst small and medium
  enterprises;
  ‒ to encourage industrial linkages with the large
  industries;
  ‒ to develop human resource in the small and medium
  enterprises; and
  • undertake any work and investments necessary to promote and
  grow the small
  and medium enterprises sector in the economy.

  56.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  56.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Corporation for the years ended 31 December
  2016 and 2017 were
  issued on 30 September 2019. The reports contained similar
  Qualified Opinions, hence,
  only the 2017 report is reproduced:

  -198-

  Small and Medium Enterprises Corporation

  “QUALIFIED OPINION

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

  (a) are based on proper accounts and records; and

  (b) are in agreement with those accounts and records and present
  fairly, in all material
  respects, the Corporation’s financial performance, financial
  position and its cash

• Page 311 of 475

• flow for the year then ended.

  BASIS FOR QUALIFIED OPINION

  Financial Incentive Schemes – K558,635

  The Corporation maintains security deposits (Gurantee) with the
  Australia and New
  Zealand Bank (ANZ), National Development Bank (NDB) and Nationwide
  Microbank
  (NMB). My review on these deposits revealed the following:

  • The Corporation did not maintain detailed records/schedules and
  supporting
  documentations of loans granted to businesses by the Corporation
  to date;
  • The total security placed with various commercial banks of
  K3,250,000 in 2005
  decreased to K558,635 as at 31 December 2017. There were no
  proper records
  maintained by the Corporation to substantiate this reduction.
  Further, the
  Corporation lacked proper and detailed information in relation to
  loans granted,
  loan defaulted, written off loans and current active loans;
  • A variance of K133,917 was noted between bank statements and the
  financial
  statements relating to Nationwide Microbank; and
  • A balance of K952,715 was transferred back to the Corporation
  from ANZ
  Banking Group on 27 January 2017 without details of written-off
  or default loans.

  As a result, I was unable to obtain comfort over the completeness
  and accuracy of the
  balance disclosed at year end and further place reliance on the
  monitoring processes of
  the loans granted to the borrowers.

  Fixed Assets – K4,816,361

  My review of the fixed assets of the Corporation revealed the
  following issues:

  • The Corporation did not maintain a proper and complete Fixed
  Assets Register in
  2017 to capture all asset particulars such as asset numbers or
  coding, location and
  custodian;
  • There was no clear policy formulated by the Corporation in
  relation to acquisition,
  capitalization and disposal of assets;

• Page 312 of 475

• -199-

  Small and Medium Enterprises
  Corporation

  • No stock-take was conducted on its fixed assets for a number
  of years up to 31
  December 2017. Assets were not counted and tagged with asset
  identification
  codes for verification and control; and
  • The semi-mechanized leather factory that was built and
  completed in 2012
  including the machinery and equipment installed were yet to be
  used due to non-
  commissioning and absence of technical expert. However, both
  the building and
  the machinery were depreciated to the net value of K1,793,140
  and K166,686
  respectively.

  Due to the above recurring issues, I was unable to rely on the
  effectiveness of the
  internal controls surrounding the management of fixed asset of
  the Corporation.
  Further, I was unable to conclude on the valuation, accuracy and
  existence of the fixed
  assets amounting to K4,816,361 as at 31 December 2017.”

  56.2.2 Audit Observations Reported to the Ministers

  My reports to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Corporation for the
  years ended 31 December
  2016 and 2017 were issued on 30 September 2019. The reports
  contained similar
  significant matters, hence, only the 2017 report is reproduced:

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

  The Public Finance (Management) (Amendment) Act 2016 Section
  63(1) and 63(3)
  requires the Corporation to furnish to the Minister before 30
  April each year, a
  performance and management report of its operations for the year
  ending 31 December
  preceding, together with financial statements. However, the
  Corporation has not
  prepared and submitted its financial statements for the year
  ended 31 December 2017
  to my Office on a timely basis to enable me to complete the audit
  on time for tabling

• Page 313 of 475

• the report in the Parliament before 30 April 2018. Accordingly,
  the Corporation
  breached Section 63(1) and 63(3) of the Public Finances
  (Management) (Amendment)
  Act 2016.

  Account Balances without Proper Supporting Documentation

  Disclosures relating to Other Debtors, Creditors and Accruals and
  Other Income of
  K16,231, K57,840 and K64,016 respectively, were not properly
  supported by
  appropriate source documents. I was unable to confirm the
  accuracy and completeness
  of this disclosures and the balance presented in the financial
  statements.

  Preparation of Bank Reconciliations

  The Corporation maintained six (6) bank accounts during the year
  under review. I noted
  that the bank reconciliations for the accounts were not prepared,
  reviewed and verified
  by concerned officers on a timely basis.

  -200-

  Small and Medium Enterprises Corporation

  As such, I was not able to place any reliance on the effectiveness
  of the controls
  surrounding the bank reconciliation process. In addition, existence
  of such weaknesses
  in the internal control system may result in Corporation’s inability
  to properly monitor,
  control and safeguard cash at bank against the risks associated with
  it. Consequently, I
  was unable to satisfy myself as to the correctness, completeness and
  existence
  pertaining to the cash balance of K832,602 disclosed at year end.

  Operational Policy Manuals

  Internal control mechanisms such as accounting manuals, operational
  guidelines and
  policies of an entity ensures uniform application of processes
  across all levels of
  management and must be formally established, well documented and
  communicated to
  all levels and functions of organization to be used by all personnel
  in the routine
  operational activities. My review revealed that there were no such
  operational

• Page 314 of 475

• procedural manuals drafted and used. In the absence of clearly
  designed and approved
  policy manuals and guidelines, there is a high risk of abuses and
  malpractices to take
  place within the Corporation. As a result, I was unable to measure
  and comment on the
  standards of operations in relation to the systems and controls and
  whether uniform
  procedures were followed in respective divisions and sections.

  I brought this issue to the attention of the management and
  recommended the
  Corporation to have in place operational policy manuals and to be
  used by all levels of
  operations. Management responded to my comments as follows:

  “At the time of this response, the Human Resource Policies and
  Procedures Manual is
  currently being worked on whilst an accounting firm had been
  selected by the board
  after the due bidding process to undertake the review, design and
  development of a new
  accounting policies and procedural manuals for the organization.”

  Board Meeting Minutes

  The Corporation did not maintain proper records of its meeting
  minutes in 2017.
  Minutes for the third and fourth meetings were not approved by the
  Chairman of the
  Board. As such, I was unable to confirm whether proceedings recorded
  were correct
  and whether issues deliberated were in the best interest of the
  Corporation. I raised this
  issue with the management and the response was as follows:

  “The third and fourth quarters 2017 Board Meeting Minutes were
  edited after members
  noted and corrected few typing errors in the subsequent schedule
  board meetings and
  the amended versions were hand delivered to Chairman of the SMEC
  Board for
  signature after verification and confirmation that minutes were true
  records of the
  proceeding of the meeting. After numerous reminders and due to busy
  business
  schedule, Chairman is yet to return the signed copies. Copies will
  be made available to
  AGO once they are received from the Chairman.”

  -201-

• Page 315 of 475

• Small and Medium Enterprises Corporation

  Internal Audit Function

  During my review of the internal audit function, I noted that the
  Corporation did not
  fully utilize the internal audit to review various processes and
  systems and to provide
  necessary recommendation for the management to improve on the
  internal control
  weaknesses noted in the prior year audits. This issue on the role of
  the internal audit
  function and its lack of performance was brought to the attention of
  the management
  previously and yet to be addressed by the Corporation. I brought
  this issue to the
  attention of the management again for their necessary action.

  Office Rental (Government Grant) – K1,323,414

  I noted that the Corporation received rental grants from the
  government totaling
  K1,323,414. However, the source documents such as warrants,
  remittance advices and
  invoices were not provided to me for my verification. As a result, I
  was unable to verify
  and confirm the balance disclosed in the financial statement.

  Travel Acquittal Register

  My review of the travel and accommodation revealed that the
  Corporation did not
  maintain a Travel Acquittal Register to keep proper records of all
  the duty travel
  advances taken. I also noted that travel and accommodation expenses
  amounting to
  K825,230 were never acquitted. It is a requirement under Financial
  Management
  Manual, Part 20, Paragraph 12.2 that a Financial Delegate/
  Authorizing officer shall
  maintain a Register of Advances to officers on duty travel. It must
  also be noted that it
  is a requirement under the Financial Management Manual, Part 20,
  Paragraphs 11.2
  and 12.10 that cash advanced to officers on overseas official duty
  must acquit travel
  advances within fourteen (14) days of return from duty travel, and
  advances to officers
  for domestic duty travels to be acquitted within seven (7) days of
  return from duty travel
  by submitting the acquittal form. In the absence of Travel Acquittal
  Register and the
  corresponding travel advance and expense acquittal documents, I was
  unable to confirm

• Page 316 of 475

• whether the travel and subsistence payments made were for the
  intended purposes.

  Staff Advances – K489,031

  Staff Advance Register will enable the Corporation to show how much
  money was
  advanced and recouped and an advance policy will specify who is
  eligible for advance,
  penalties on default, interest on advance, and when the advance
  should be fully
  recouped. In my review of the staff advances, I noted that the
  Corporation had not
  properly maintained an Advance Register to capture and record all
  advances paid and
  recouped during the period. I further noted that the Corporation did
  not have a staff
  advance policy in place. This issue was reported in my prior year
  reports but
  management is yet to implement my recommendations.

  -202-

  Small and Medium Enterprises
  Corporation

  In the absence of these such mechanisms, I was unable to verify
  the staff advance
  balance disclosed in the financial statements and further place
  reliance on the controls
  surrounding staff advances.

  Weaknesses in the procurement process

  My review of the Corporation’s procurement process revealed the
  following
  weaknesses and inefficiencies:

  • Cash payments totaling K356,957 were not supported by proper
  acquittals to
  confirm whether funds were utilized for their intended
  purposes; and
  • Payments totaling K50,669 were executed without obtaining
  three (3) written
  quotations from three (3) different suppliers nor minor
  contract agreements
  drawn.

  As a result, I was unable to place reliance on the effectiveness
  of the internal controls
  surrounding the procurement of goods and services of the

• Page 317 of 475

• Corporation for the year then
  ended.

  56.3 STATUS OF FINANCIAL STATEMENTS

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

  The Corporation had not submitted its financial statements for
  the year ended 31
  December 2019 for my inspection and audit.

  -203-

  57. TOURISM PROMOTION AUTHORITY

  57.1 INTRODUCTION

  57.1.1 Legislation

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

  Under the Tourism Promotion Authority Act all assets held by and
  obligations and
  liabilities imposed on the Tourism Development Corporation which

• Page 318 of 475

• related to the
  functions of the Authority were transferred to it (the
  Authority), and the rest of the
  assets and liabilities were transferred to the National Cultural
  Committee on 3 June
  1993.

  57.1.2 Functions of the Authority

  The principal functions of the Authority are to:

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

  57.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  57.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act
  on the financial
  statements of the Authority for the year ended 31 December 2018
  was issued on 2
  March 2020. The report did not contain any qualification.

  57.2.2 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 2018
  was issued on 2 March 2020. The report contained the following
  matters:

  -204-

  Tourism Promotion Authority

  Other Taxes – K129,696

  During my review of the Other Taxes Account, I noted that the
  Authority did not remit

• Page 319 of 475

• the Other Taxes on time to Internal Revenue Commission. I further
  noted that the
  Authority also attracted penalty fees for late payment of Group Tax.
  I drew this matter
  to the attention of the management and the management responded to
  my observation
  as follows:

  “It is to be noted that the 10 % business withholding of K31,500
  taxes was settled in
  2014 but was returned as the Internal Revenue Commission claimed it
  could not
  correspond files with the payment. These taxes remain unpaid up to
  date of audit. We
  will settle these taxes in 2020 and provide copies of the same
  during the 2019 on site
  audit.”

  Travel Acquittal Register

  My review of the travel and subsistence expenses revealed that the
  Authority has not
  fully maintained the Travel Advance/Acquittal Register as required
  under Financial
  Management Manual (Part 20) I noted that the travelling officers
  have not fully
  acquitted their travel advances by attaching all source documents
  such as the hotel and
  hire car receipts, boarding passes and ticket butts.

  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
  travel must acquit
  travel advances within 14 days of return from duty travel. At the
  same time Part 20,
  paragraph 12.10 of the 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 and documents. I drew this matter to the attention of
  the management
  and the management responded as follows:

  “We will ensure that all staff on duty travels acquit within
  fourteen (14) days for any
  overseas duty travels and seven (7) days for any domestic duty
  travels. We will continue
  to maintain the acquittals register but a more up to date register
  including a separate
  acquittal file for ease of access during audit.”

  Consultancy Payments

• Page 320 of 475

• During my review on consultancy payments, I noted that consultancy
  agreements or
  terms of references were not attached to payment vouchers. In the
  absence of the
  contract agreements, I was unable to verify the basis on which the
  consultancy
  payments were made to the consultants. I brought this issue to the
  attention of the
  management and management responded as follows:

  “We will ensure we comply with this requirement going forward.”

  -205-

  Tourism Promotion Authority

  57.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Authority had submitted
  its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit and
  arrangements were being made to commence the audit shortly.

• Page 321 of 475

• -206-

  58. UNIVERSITY OF GOROKA

  58.1 INTRODUCTION

  58.1.1 Legislation

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

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

  58.1.2 Objectives of the University

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

  58.1.3 Powers of the University

  The University shall have the power to:

  • grant such degrees as are authorised by the Statutes and such
  diplomas,
  certificates or other academic awards as it determines;
  • provide instruction and facilities for study, education and
  research to persons

• Page 322 of 475

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

  -207-

  University of Goroka

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

  58.1.4 Subsidiaries of the University

  The University has two Subsidiary Companies, Unigor Consultancy
  Limited and
  Unigor Humi Catering Limited which were incorporated under the
  Companies Act.
  Comments in relation to these Companies are contained in
  paragraphs 58A and 58B of
  this Report respectively.

  58.2 STATUS OF FINANCIAL STATEMENTS

• Page 323 of 475

• At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  University for the year ended 31 December 2017 had been completed
  and the
  management letter issued on 11 December 2018. The management
  responses were
  being awaited to finalise the audit report.

  The University had not submitted its financial statements for the
  years ended 31
  December 2018 and 2019 for my audit and inspection.

  -208-

  58A. UNIGOR CONSULTANCY LIMITED
  (Subsidiary of the University of Goroka)

  58A.1 INTRODUCTION

  Unigor Consultancy Limited is 100% owned by the University of
  Goroka. It was
  incorporated on 29 March 2000 as a consultancy company under
  the Companies Act.

  58A.1.1 Objectives of the Company

  The Company’s objectives are to:

  • advance, promote, assist and encourage the educational

• Page 324 of 475

• purposes of the
  University through;

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

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

  58A.1.2 Function of the Company

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

  • professional consultancy services, teaching and dissemination
  of knowledge;
  • merchandising of textbooks, educational supplies and
  stationery;
  • printing and publication of educational materials, textbooks,
  business documents
  and all other forms of print material; and
  • catering and cafeteria services.

  58A.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  58A.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act
  on the Company’s
  financial statements for the years ended 31 December 2014 and
  2015 were issued on
  27 April 2020. The reports contained similar Disclaimer of
  Opinions, hence, only the
  2015 report is reproduced:

  -209-

  Unigor Consultancy Limited

  “DISCLAIMER OF OPINION

  I do not express an opinion on the accompanying financial statements
  of Unigor
  Consultancy Limited for the year ended 31 December 2015. Because of

• Page 325 of 475

• the
  significance of matters described in the Basis for Disclaimer of
  Opinion section of
  my report, I have not been able to obtain sufficient appropriate
  audit evidence to
  provide a basis for an audit opinion on these financial statements.

  BASIS FOR DISCLAIMER OF OPINION

  Opening Balances

  My report on the financial statements of the Company for the year
  ended 31
  December 2014 was a Disclaimer of Opinion due to limitation of
  scope. My inability
  to obtain sufficient accounting records, source documents and
  reconciliation in
  respect of Investments, Trade Debtors, Cash and Cash Equivalents,
  Inventory,
  Provision of Annual Leave, Provision of Income Tax, Trade and Other
  Creditors had
  placed a limitation of audit scope in 2014.

  As a result, I was unable to perform the necessary procedures to
  obtain assurance on
  the accuracy and completeness of the balances and further quantify
  the effects of such
  material misstatements in the opening balances of the aforementioned
  accounts that
  might have a bearing on the balances reported in the 2015 financial
  statements.

  Cash at Bank – K120,631

  My review of the bank reconciliation as at 31 December 2015 revealed
  stale cheques
  totaling K35,540 dating back to 2012 have been recorded in the
  reconciliation
  statements. The stale cheques have not been reconciled and adjusted
  in the Cashbook
  balance. As a result, I was not able to comment on the completeness
  and accuracy of
  the bank balance reported at year end.

  Accounts Receivables – K646,644

  My review of the accounts receivables revealed that the Company did
  not maintain
  and update the aged accounts receivable listing and similarly the
  individual customer
  sub-ledgers. Further, I noted a variance of K403,551 between the
  accounts receivable
  listing balance of K243,092 and the general ledger balance of
  K646,644. As a result,

• Page 326 of 475

• I was not able to gain assurance on the completeness, existence,
  accuracy and
  valuation of the receivable balance disclosed at year end.

  -210-

  Unigor Consultancy Limited

  Stock – K309,040

  My review of the stock disclosed in the accounts revealed that the
  Company had not
  maintained an inventory management system to enable the proper
  disclosure of the
  cost of sales account in accordance with the International
  Accounting Standards 2 –
  Inventories. Apart from actual stock records, the disclosure of
  K309,040 in the
  financial statements, was only an estimate of the purchases done
  during the year.
  Consequently, I was not able to comment on the effectiveness of
  controls surrounding
  inventory management and further extend my audit procedures to
  confirm the
  completeness, accuracy and valuation of the inventory balance
  disclosed at the year
  end.

  Property, Plant & Equipment – K251,938

  The Company disclosed its fixed assets as K251,938 at 31 December
  2015. However,
  this disclosure was not supported with a Fixed Assets Register and
  appropriate
  accounting records and supporting documents. Furthermore, there were
  no periodic
  stock-takes carried out on fixed assets during the year for assets
  owned by the
  Company. I was unable to perform the required procedures to verify
  the
  completeness, existence, accuracy and valuation of the fixed assets
  and further
  comment on the effectiveness of controls surrounding the management
  of fixed assets
  for the year then ended.

  Investments in Associates & Joint Ventures – K551,000

• Page 327 of 475

• My review of the Investment accounts revealed that the Company had
  investments in
  Unigor PNGTIS and Unigor Catering Ltd of K245,000 and K306,000
  respectively.
  However, during my review, I was not provided with sufficient
  documents to
  establish whether the investments were properly accounted for using
  the equity
  method under the IAS 28 Investments in Associates and Joint
  Ventures. Consequently,
  I was unable to confirm the accuracy and valuation of these
  Investments and to further
  conclude whether the investment accounts were correctly recorded in
  accordance with
  the International Financial Reporting Standards.

  Provisions for Income Tax – K194,292

  The Company disclosed provisions for income tax in Note 4 to the
  financial
  statements without any basis and appropriate supporting documents.
  As the balance
  was carried over from prior year, I was not able to establish if the
  provision was
  computed in accordance with Section 275M (1) of the Income Tax Act
  1959 (as
  amended). Further, I was unable to confirm whether income tax
  provisions were
  properly accounted for and presented in accordance with the
  International Accounting
  Standards 12 – Income Taxes. As a result, I was unable to gain
  reasonable assurance
  over the completeness, existence and accuracy of the provision for
  income tax
  disclosed in the financial statements as at 31 December 2015.
  -211-

  Unigor Consultancy Limited

  Missing Payment Vouchers – K150,272

  My review of the operating expenditures revealed that the
  Company did not maintain
  proper records and accounts. Payments totaling K150,272 were
  missing from the
  payment voucher files. As a result, I was unable to extend my
  audit procedures to
  gain assurance over the completeness, accuracy and authenticity
  of these payments.
  The Company had breached Section 188 of the Companies Act 1997
  which requires
  the Company to keep proper accounts and records of its
  transactions and affairs.”

• Page 328 of 475

• 58A.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 Company for the years
  ended 31 December
  2014 and 2015 were issued on 27 April 2020. The reports
  contained similar
  significant matters, hence, only the 2015 report is reproduced:

  Board Meeting Minutes

  The Company did not maintain and provide minutes of the Board
  meetings for my
  audit and inspection. As a result, I was not able to comment and
  conclude on whether
  there were proper proceedings held and whether all major
  transactions and decisions
  reached were adequately deliberated and in the best interest of
  the Company.

  I brought this issue to the attention of management and was
  advised that corrective
  action has been implemented under the current Board and
  Management.

  Staff Capacity and Competency

  My review revealed that the Company lacked qualified staff with
  skills in accounting
  and information technology. I further observed that there were
  no proper segregation
  of duties in the bank reconciliation, asset management and
  payroll/expenditure
  functions. I reiterated that present weak internal control
  environment and limited
  segregation of duties in key control areas may increase the risk
  of material
  misstatements in financial reporting.

  I recommended the management to ensure that competent personnel
  are employed to
  cover key processes and/or appropriate training and development
  programs are
  facilitated to fill the competency gap. The management responded
  as follows:

  “The new Management realised the lack of segregation of
  accounting staff by
  functions by outgoing Accountant who was also acting Managing
  Director – a one-
  man- operator. The Company has engaged Finance Officers since
  2017 who are

• Page 329 of 475

• considered capable to carry out the operations and delegated
  tasks into the future.
  The staff currently on hand are committed to the Company and
  willing to learn which
  supports Management plan to further invest to upskill them.”
  -212-

  Unigor Consultancy Limited

  Preparation of Financial Statements

  The Company’s financial statements were not prepared in a timely
  manner in
  accordance with Section 179 of the Companies Act 1997. I noted that
  the Unigor
  Consultancy Limited’s management prepared the Company’s financial
  statements for
  the year ended 31 December 2015 in August 2019.

  Consequently, the Company had failed with the Companies Act 1997
  which requires
  the financial statements to be prepared within five months after the
  financial year of
  the balance date.

  Tax Remittance to the Internal Revenue Commission

  My review of the Company’s tax obligations revealed the following:

  • The Company did not remit the 2015 group tax to the IRC on a
  timely basis as
  required under Section 299G of the Income Tax Act 1959;
  • The Company did not remit its Company income tax returns of the
  prior years
  as well as the income tax returns for the 2015 financial year
  within the time-
  frame required by the Income Tax Act 1959 which remained
  outstanding as at
  31 December 2015; and
  • The Company did not remit GST returns for the 2015 financial year
  on time
  including GST returns from prior years as required by Section
  63-66 of the
  Goods and Services Tax Act 2003.

  The Company had failed to comply with requirements of the Companies
  Act 1997,
  the Income Tax Act 1959 and the Goods and Services Tax Act 2003. I
  reminded the
  management on the consequences of non-compliance and recommended for
  them to
  ensure that the Company complies with relevant statutory provisions.

• Page 330 of 475

• Lack of Proper Accounting Records

  The Unigor Consultancy Limited did not maintain proper accounting
  records of its
  transactions during the 2015 financial year. Due to lack of proper
  record keeping, I
  was unable to perform the necessary audit procedures to determine
  the authenticity
  of the amounts disclosed in the financial statements. The Company
  had breached
  Section 188 of the Companies Act 1997 which requires the Company to
  keep proper
  accounts and records of its transactions and affairs.

  This issue had been raised in my prior year reports and management
  assured me that
  corrective action would be taken to clear all issues that had not
  been resolved since
  2013.

  -213-

  Unigor Consultancy Limited

  Staff Advances

  The other debtors included advance payments for staff rental and
  accommodation as
  well as general staff advances. My review revealed that the
  Company did not maintain
  a proper Advances Register and an approved advance policy to
  guide the Company
  in the approval, disbursements, recovery and general
  administration of the advances
  made to staff. I was therefore, unable to place reliance on the
  controls surrounding
  staff advances and further confirm the accuracy and correctness
  of the balance
  disclosed as K191,871 at year end.

  I recommended the management to have an advance policy in place
  and an Advance
  Register to keep track of advances disbursed.

  Management took note of my recommendations and advised that
  corrective actions
  would be taken to rectify this issue.

  Staff Personnel Files

  My examination of personnel records revealed that the Company

• Page 331 of 475

• did not maintain
  staff personnel files. Details of salary and leave history, and
  promotion and
  increments along with other personnel data were not available
  for audit inspection
  and verification. Consequently, I was unable to validate whether
  salaries and
  allowances paid to employees were based on proper employment
  contracts and
  appointment letters and further compute employee provisions
  disclosed in the
  financial statements. Similarly, I was unable to confirm whether
  the dependents
  claimed for tax rebates and leave fares were legitimate.

  Consultancy Payments

  The Company engaged several consultants during the year for
  physical planning and
  asset management for the year under review. However, the signed
  contract
  agreements of four (4) contractors and details of work they
  performed were not made
  available for my verification. I was unable to establish whether
  consultancy expenses
  were incurred in accordance with valid agreements.

  58A.3 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 2016, 2017, 2018 and
  2019 for my audit
  and inspection.

  -214-

  58B. UNIGOR HUMI CATERING LIMITED

  58B.1 INTRODUCTION

  58B.1.1 Legislation

  Unigor Catering Limited was incorporated under the Companies
  Act 1997 on the
  14 December 2010. A total of 600,000 shares (100 ordinary
  shares and 599,900
  preference shares) had been issued at K1 each. The Unigor

• Page 332 of 475

• Consultancy Limited
  acquired 306,000 shares (51%) and the remaining 294,000
  shares (49%) acquired
  by Humilaveka Food Company Limited.

  On 16 February 2013, the Company changed its name from
  Unigor Catering to
  Unigor Humi Catering Limited.

  58B.1.2 Objectives of the Company

  The primary objective of the Company is to give effect to
  the Joint Venture
  Agreement between the shareholders for the purpose of
  providing catering services
  to students of the UOG at its main campus at Goroka as a
  commercial venture. The
  Company may conduct or undertake any other business
  activities in the country
  from time to time.

  58B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial
  statements of the Company for
  the years ended 31 December 2011, 2012, 2013, 2014, and 2015
  had been
  submitted and arrangements were being made to commence the
  audit shortly.

  The financial statements for the years ended 31 December
  2016, 2017, 2018 and
  2019 had not been submitted for my inspection and audit.

  -215-

  59. UNIVERSITY OF NATURAL RESOURCES AND
  ENVIRONMENT
  59.1 INTRODUCTION

• Page 333 of 475

• 59.1.1 Legislation

  The University of Vudal was established under the University of
  Vudal Act 1997. This
  Act came into operation on 1 January 1997 and became operative
  in the same year. The
  University changed its name to University of Natural Resources
  and Environment in
  2008 after the enactment of the University of Vudal (Amendment)
  Act 2009.

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

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

  59.1.2 Objectives of the University

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

  59.1.3 Powers of the University

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

  • grant such degrees as are authorised by the Statutes and such
  diplomas,
  certificates or other academic awards as it determines;
  • provide instruction and facilities for study, education and
  research to persons
  registered as preparing for degrees, diplomas, certificates
  or other awards of the
  University;
  • provide facilities for extramural study and continuing
  education to persons,
  whether members of the University or not, in such fields and
  in such manner as

• Page 334 of 475

• the University may from time to time determine;
  • co-operate in pursuance of any of the objectives of the
  University with any other
  bodies or persons to enter into agreements authorised by
  Statute with institutions
  for their affiliation with or incorporation into the
  University;

  -216-

  University of Natural Resources and
  Environment

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

  59.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  University for the year ended 31 December 2015 had been
  completed and the
  management letter was issued on 27 November 2019, and awaiting
  the management
  letter responses to finalise and issue the audit reports.

  The University had not submitted its financial statements for
  the years ended 31
  December 2016, 2017, 2018 and 2019 for my inspection and audit.

• Page 335 of 475

• -217-

  60. UNIVERSITY OF PAPUA NEW GUINEA

  60.1 INTRODUCTION

  60.1.1 Legislation

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

  60.1.2 Objectives of the University

  The objectives of the University include the:

  • provision of facilities for study and education;
  • giving of instruction and training in all such branches of
  learning as are provided
  for by the Statutes;
  • aiding by research and other means the advancement of
  knowledge and its
  practical application;
  • conferring, after examination, of the degrees of Bachelor,
  Master and Doctorate
  and such other degrees, diplomas, certificates and other
  academic honours as are
  authorised by the Statutes;
  • provision of facilities for university education throughout
  the country by the
  affiliation of educational institutions, and by the
  establishment of tutorial classes,

• Page 336 of 475

• correspondence classes, university extension classes, and
  vacation classes, and by
  such other means as the Council thinks appropriate; and
  • liaison, collaboration and reciprocation with other
  universities and institutions of
  learning, within or outside the country, in the provision of
  facilities, the
  recognition of degrees and other status, and the interchange
  of staff, students and
  information, and in any other way not inconsistent with its
  status as the
  University.

  60.1.3 Subsidiaries of the University

  The University has two subsidiaries; Unisave Limited and
  Univentures Limited which
  were incorporated under the Companies Act. Comments in relation
  to the subsidiaries
  are contained in paragraphs 60A and 60B of this Report.

  60.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and examination of the
  University’s financial
  statements for the year ended 31 December 2015 was in progress
  for more than two
  years. The audit has been delayed due to lack of co-operation
  from management.

  -218-

  University of Papua New Guinea

  The University had submitted its financial statements for the years
  ended 31 December
  2016 and 2017 for my inspection and audit. However, due to lack of
  co-operation from
  the management, the commencement of these audits were being delayed.

  The University had not submitted its financial statements for the
  years ended 31
  December 2018 and 2019 for my inspection and audit.

• Page 337 of 475

• -219-

  60A. UNISAVE LIMITED
  (Subsidiary of University of Papua New Guinea)

  60A.1 INTRODUCTION

  60A.1.1 Legislation
  Unisave Limited was incorporated under the Companies Act on 18
  October 2011.
  The incorporation of Unisave Limited was as a result of a
  Memorandum of
  Agreement (MOA) signed between Univentures Limited, (a company
  100% owned
  by University of PNG) and S.I.T Co. Limited of the Republic of
  South Korea.
  60A.1.2 Objective of the Company
  The parties to this MOA shall endeavor to create mutual

• Page 338 of 475

• commercial benefits through
  assembly and sale of Information Communication Technology (ICT)
  products and
  various projects which have price and quality competitiveness
  compared with other
  organisations in PNG. This will be achieved by combining of
  infrastructures and
  marketing power in PNG provided by Univentures and the technical
  know-how and
  successful long-term various experience in Korean ICT market
  provided by S.I.T.
  The main business of the Company is to assemble TVs, PCs,
  laptops, monitors and
  other items which can be included under mutual consent, such as
  systems integration,
  systems administration and maintenance in information
  technology.

  60A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the financial statements
  of the Company for the
  years ended 31 December 2012, 2013, 2014, 2015, 2016, 2017, 2018
  and 2019 had
  not been submitted for my inspection and audit, despite numerous
  reminders.

  -220-

  60B. UNIVENTURES LIMITED
  (Subsidiary of University of Papua New Guinea)
  60B.1 INTRODUCTION

  60B.1.1 Legislation

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

• Page 339 of 475

• owned by the University of Papua New Guinea.

  60B.1.2 Functions of the Company

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

  60B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not
  submitted its financial
  statements for the years ended 31 December 2012, 2013, 2014,
  2015, 2016, 2017,
  2018 and 2019 for my inspection and audit despite numerous
  reminders from my
  Office.

  -221-

  SECTION B

  NATIONAL GOVERNMENT
  OWNED COMPANIES

• Page 340 of 475

• -223-

  61. FOREWORD

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

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

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

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

  Comments in relation to the companies are detailed in paragraphs
  62 to 77.

• Page 341 of 475

• -225-

  62. AIR NIUGINI LIMITED

  62.1 INTRODUCTION

  62.1.1 Legislation

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

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

  62.1.2 Objectives of the Company

  The principal objectives of the Company are to:

  • carry on the business of airline operators, general carriers,
  freight forwarders and
  forwarding agents, warehouse operators, shippers and general
  agents, ship owners
  charterers, hospitality and general traders, stevedores, cool
  store operators, flight
  contractors, carriers by land, air and water, insurers and
  insurance brokers and

• Page 342 of 475

• other business which may be usefully carried on in connection
  with such business;
  • provide transport service, carrier freight transport,
  courier, taxi truck, light or
  heavy haulage and delivery services which involves the use of
  aircraft, railways,
  ship, road vehicle or any other means of conveyance by land,
  road, railway, sea,
  river, canal, water or air to carry and convey passengers,
  mails, containers,
  packages, parcels, bulk commodities, goods, merchandise,
  livestock and produce
  and property of every description;
  • carry, collect, receive, load, unload, store, consign,
  distribute, transfer and deliver
  property of every description by any mode of transportation;
  and
  • carry passengers by air, road, rail, land, sea or water and
  to operate any taxi service
  and to obtain any necessary licences for such purposes.

  62.1.3 Subsidiaries of the Company

  The Company has four (4) subsidiary companies. Comments in
  relation to the
  subsidiary companies are contained in paragraphs 62A, 62B, 62C
  and 62D of this
  Report.

  -227-

  Air Niugini Limited

  62.2 STATUS OF FINANCIAL STATEMENTS
  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the years ended 31 December 2016, 2017 and 2018 were
  in progress.

  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

• Page 343 of 475

• -228-

  62A. AIR NIUGINI CARGO LIMITED
  (Subsidiary of Air Niugini Limited)

  62A.1 INTRODUCTION

  62A.1.1 Legislation

  Air Niugini Cargo Limited was formerly known as Kitoro No. 94
  Limited, which was
  incorporated on 23 March 2012 under the Companies Act. On 12
  December 2016, the
  former name was changed to its current business name.

  The Company formally commenced its operations in January 2017.

  62A.1.2 Objective of the Company

  The primary objective of the Company is to be a leader in cargo

• Page 344 of 475

• services and products
  of Air Niugini Limited and Link PNG Limited (subsidiary company
  of Air Niugini)
  within PNG and over the extensive international routes with
  other leading global
  service providers.
  .
  62A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2017 and 2018 were
  in progress.

  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  -229-

  62B. AIR NIUGINI PROPERTIES LIMITED
  (Subsidiary of Air Niugini Limited)

  62B.1 INTRODUCTION

  62B.1.1 Legislation

  Air Niugini Properties Limited, formerly known as Kitoro No. 95
  Limited was
  incorporated on 23 March 2012 under the Companies Act. The
  Company’s name
  change formally came into effect on 24 January 2019 and
  commenced operations in
  December 2018.

• Page 345 of 475

• 62B.1.2 Objective of the Company

  Primary objective of the Company is to grow Air Niugini’s
  property portfolio in terms
  of property investment, development and improvement of current
  residential and
  commercial properties and acquisition of new Land and Buildings.

  62B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection of
  the accounts and records and the examination of the financial
  statements of the
  Company for the year ended 31 December 2018 was in progress.

  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  -230-

  62C. BUSINESS TRAVEL CENTRE LIMITED
  (Subsidiary of Air Niugini Limited)

  62C.1 INTRODUCTION

  62C.1.1 Legislation

  Business Travel Centre Limited was established on 27 October
  2016. The Company
  was formerly known as Kitoro No. 98 Limited incorporated on 14
  July 2014 under the

• Page 346 of 475

• Companies Act. It is a wholly owned subsidiary of Air Niugini
  Limited and
  commenced its operations effective from 16 December 2016.

  62C.1.2 Objective of the Company

  The primary objective of the Company is to expand the airlines’
  revenue base from
  that of selling purely Air Niugini and Link PNG, to selling full
  suite of PX products
  in addition to other airlines where traditionally PX was unable
  to sell/ticket, hence be
  the complete travel solution provider for all airlines,
  ancillary services, and “All
  Things Travel.”

  62C.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2017 and 2018 were
  in progress.
  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  -231-

  62D. LINK-PNG LIMITED
  (Subsidiary of Air Niugini Limited)

  62D.1 INTRODUCTION

• Page 347 of 475

• 62D.1.1 Legislation

  Link-PNG Limited came into existence on 26 June 2014 after the
  name changed from
  PNG Link Limited. The Company was incorporated under the
  Companies Act on 4
  May 2010 and was acquired by Air Niugini Limited from Steamships
  Limited on 5
  August 2014 for a consideration of K100.

  Link-PNG Limited is a 100% subsidiary of Air Niugini Limited.
  The Company
  commenced the business of air travel for the PNG Domestic
  markets since November
  2014.

  62D.1.2 The Objective of the Company

  The key objective of the Company is to be the leading domestic
  airline in Papua New
  Guinea, delivering safest and cost effective air travel to the
  communities.

  62D.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2016, 2017 and 2018
  were in progress.

  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  — 232 —

• Page 348 of 475

• 63. BEMOBILE LIMITED

  63.1 INTRODUCTION

  63.1.1 Legislation

  The Company was incorporated under the Companies Act on 4 March
  2008. As a result
  of PNG Government deregulating mobile telephony, Telikom PNG
  through its mobile
  arm/service invested in Bemobile Limited partnering with a group
  of investors who
  owned 51% equity in the business. In 2014, Bemobile entered into
  a partnership with
  Vodafone which gave Bemobile the right to use of “Vodafone”
  branding thereby
  creating the Bemobile-Vodafone brand in PNG.

  In October 2016, Kumul Consolidated Holdings (KCH) bought off
  the minority
  shareholding from Capital Way and Asian Development Bank (ADB)
  making
  Bemobile a fully State Owned Enterprise.

  63.1.2 Objectives of the Company

  The objectives of the Company are to provide excellent mobile
  voice and data services
  to the citizens of PNG.

  63.1.3 Subsidiary of the Company

  The Company has a subsidiary, Bemobile (Solomon Islands)
  Limited. Comments in
  relation to this subsidiary are contained in paragraph 63A of
  this Report.

  63.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the years ended 31 December 2018 and 2019 were in
  progress.

• Page 349 of 475

• -233-

  63A. BEMOBILE (SOLOMON ISLANDS) LIMITED
  (Subsidiary of Bemobile Limited)

  63A.1 INTRODUCTION

  63A.1.1 Legislation

  The Company was registered under the Solomon Islands Companies
  Act on 26
  January 2010 as Bemobile (Solomon Islands) Limited.

  The Company is a wholly owned subsidiary of Bemobile Limited.

  63A.1.2 Objective of the Company

  The objective of the Company is to be a leader in
  Telecommunication offering high-
  speed data, reliable voice and SMS across the Solomon Islands.

  63A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2018 and 2019 were
  in progress.

• Page 350 of 475

• -234-

  64. KUMUL AGRICULTURE LIMITED

  64.1 INTRODUCTION

  64.1.1 Legislation

  This Company was incorporated under the Companies Act on 13
  November 2017 as a
  wholly owned subsidiary of Kumul Consolidated Holdings Limited
  (KCHL).

  On 15 August 2018, in accordance with NEC Decision No. 221/2018
  dated 2 August
  2018, the Company was established as a fully State Owned
  Enterprise through which
  Kumul Consolidated Holdings Limited holds the State’s interest
  in all current and
  future agricultural assets, projects and investments.

  The Company also took over the shares and ownership interest in
  Livestock
  Development Corporation Limited from Kumul Consolidated Holdings
  Limited and the
  Department of Agriculture and Livestock including the functions,
  management and
  assets.

  64.1.2 Objectives of the Company

  The Company’s principle activities are to:

  • provide assistance to persons for purposes of primary
  production, for the
  establishment, development or acquisition of industrial or
  commercial
  undertakings;
  • provide advice and assistance with a view to promoting the
  efficient organisation
  and conduct of primary production;
  • act as an agent for the Government in relation to any matter
  within the functions
  of the Company in the case of industrial or commercial
  undertakings;
  • serve the rural population via the management and
  rehabilitation of plantations;

• Page 351 of 475

• and
  • exporting of all cash crops in order to improve foreign
  exchange of the country.

  64.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  64.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the Company’s
  financial statements for the year ended 31 December 2018 was
  issued on 24 June 2020.
  The report contained an Adverse Opinion.

  -235-

  Kumul Agriculture Limited

  “ADVERSE OPINION

  Because of the significance of the matters described in the Basis
  for Adverse Opinion
  paragraphs, I have obtained sufficient appropriate audit evidence,
  and conclude that
  misstatements, individually or in the aggregate, are both material
  and pervasive to
  provide a basis for an adverse opinion on the financial statements
  of the Kumul
  Agriculture Limited (KAL) for the year ended 31 December 2018.

  BASIS FOR ADVERSE OPINION

  Cash and Cash Equivalent – K1,677,826

  My request for independent confirmation of the bank balances as at
  31 December 2018
  from the respective banks were not provided for my verification.
  Accordingly, I could
  not satisfy myself as to whether all the bank accounts and interest
  bearing deposits
  (IBDs) balances were completely and accurately taken up and
  disclosed in the financial
  statements as at the year end.

  GST Receivables – K416,470

  Note 12 to the financial statements included GST receivables of
  K416,470 as at the
  year end. No statement from the Internal Revenue Commission (IRC)

• Page 352 of 475

• was provided
  for my review. Also, reconciliation between the general ledger
  balance and IRC
  statement was not prepared. As a result, I was unable to satisfy
  myself as to the
  completeness, accuracy and recoverability of the GST receivables
  amount reported as
  at 31 December 2018.

  Investment in Joint Arrangements – K24,100,000

  The Company’s total Investment in Joint Arrangements reported at
  K24,100,000 in the
  Statement of Financial Position was based on values provided by
  Kumul Consolidated
  Holdings (KCH). Note 14 to the financial statements disclosed
  Central Dairy Ltd and
  Sepik Agro Industries Ltd being the Joint Venture companies in which
  KAL holds
  joint interest.

  However, audited financial statements of the Joint Ventures
  companies were not
  available for my review. Accordingly, I was not able to determine
  the appropriateness
  of the measurement and valuation recorded in the financial
  statements as at 31
  December 2018, and related impacts this might have on the operating
  results and cash
  flows of the Company for the year ended 31 December 2018.

  Investment in and Consolidation of Subsidiaries – K16,011,430

  The Company’s total Investment in Subsidiaries reported at
  K16,011,430 in the
  Statement of Financial Position was based on values provided by
  Kumul Consolidated

  -236-

  Kumul Agriculture Limited

  Holdings (KCH). Note 15 to the financial statements disclosed Dylup
  Estates and Cape
  Rodney Rubber Ltd being the subsidiary companies of KAL.
  However, the audited financial statements of the subsidiaries were
  not available for
  my review. As such, the Group accounts had not been consolidated as
  required by the
  International Financial Reporting Standard (IFRS) 10. Consequently,
  I was unable to
  determine the impacts the consolidation of the Group accounts might
  have on the

• Page 353 of 475

• Statement of Financial Position and operating result and cash flows
  of the Company
  for the year ended 31 December 2018.

  Accounting for Biological Assets

  I noted that KAL made no consideration of its biological assets
  including bearer plants
  and livestock. KAL as an agriculture focussed entity dealing with
  livestock and crops
  and their valuations requires compliance with International
  Accounting Standards
  (IAS) 41, Biological Assets for their accounting treatments. The
  biological assets were
  neither reported nor disclosed which is a departure from the
  requirements under the
  IAS 41 and promotes the financial statements as incomplete.

  Work In Progress – K1,251,631

  Note 16 to the financial statement included Work in Progress (WIP)
  at a value of
  K1,251,631. I could not obtain all the relevant supporting
  documentations including
  project work plans, report on conduct of project feasibility
  studies, project budget, and
  monitoring and evaluation reports on the respective agriculture
  projects in progress. In
  addition, I noted the following:

  • K369,487 was paid to Arokara Coffee Limited being payment for
  coffee
  rehabilitation project. However, there was no agreement available
  for my review
  to ensure legitimacy of the payment or to examine the economic
  benefits KAL
  expects to realise in future;

  • A land identified as Nadzab Portion #2 in Lae was recorded at
  K420,000 while
  the settlement statement provided indicated its valuation at
  K900,000 with
  K475,000 paid to date. I also noted that there was no existence of
  legal sale and
  purchase agreement. Further, a valid title was not available for
  my verification;
  and

  • Solomon Tropical Products Oil Ltd was paid K107,824 as
  consideration for
  Coconut Oil Crushing Mill sets. Documentary trail of the
  transactions indicated
  that this payment was made based on pro-forma invoice of US
  $31,000. An

• Page 354 of 475

• amount of K30,000 was paid to Commodity Management Partners
  Limited
  (CMPL), a Company owned by the Chief Executive Officer (CEO).
  Subsequently, CMPL reimbursed K19,623 to KAL and the balance of
  K10,377
  was transferred to the personal bank account of the owner of the
  company
  (CMPL).

  -237-

  Kumul Agriculture Limited

  Due to the shortcomings and discrepancies noted above, I was
  unable to comment on
  the completeness, accuracy and soundness of the work in progress
  and whether the
  agriculture project related expenditures were properly procured
  in the best interest of
  the Company.

  Group Tax (Salary and Wages Tax) – K445,991

  Note 17 to the financial statements included Group Tax payables
  at a value of
  K445,991 as at the year end. No statement from the Internal
  Revenue Commission
  (IRC) was provided for my review. Also, reconciliation between
  the general ledger
  balance and IRC statement was not prepared. As such, I was
  unable to comment on
  the completeness, accuracy, and validity of the Group Tax
  payables balance reported
  in the financial statements as at 31 December 2018.

  Operating Expenditures – K8,004,796

  I was unable to obtain sufficient and appropriate audit evidence
  to ensure validity and
  appropriateness of the payments made under the following
  expenditure items:

  • Personnel Expenses – Note 5 to the financial statements
  disclosed personnel
  expenses at K4,302,764. The amount comprised of costs of
  executives valued
  K2,657,571 or 62% of the total payroll costs. I was not
  provided the necessary
  documents including employment contract of the executive
  managements for
  verifying the validity and appropriateness of the payments;

  • Consultancy Fees – Note 6 to the financial statements

• Page 355 of 475

• disclosed consultancy fees
  at K1,931,743. I was not provided the necessary documents
  including consultancy
  agreements for verifying the validity and appropriateness of
  the payments; and

  • Board Expenses – Note 10 to the financial statements disclosed
  Board meeting
  expenses at K469,373. I was not provided the necessary
  documents including
  Gazettal Notice approving appointment of the Board members or
  letters of
  appointment of the Directors setting out terms and conditions
  for payment of their
  stipends and sitting allowances.

  Due to the lack of documentary evidences and discrepancies noted
  above, I was unable
  to comment on the completeness and accuracy of the total
  operational expenditure
  amount of K8,004,796 as reported in the financial statements for
  the year ended 31
  December 2018.”

  64.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Company for the year
  ended 31 December 2018
  was issued on 24 June 2020. The report contained the following
  observations:

  -238-

  Kumul Agriculture Limited

  Annual Budget and Business Plans

  The Company had no budget for the year under review to manage its
  income and
  expenditures. The State provided K10 million to finance the
  commencement of KAL’s
  operations during the year. In addition, KCH paid a management fee
  of K771,402 and
  a further K159,083 was generated internally through sale of crops.
  Hence, total funds
  available to KAL was K10.93 million. Out of the total available
  funds, K9,270,549 was
  spent during the year without a budget.

  I advised the management to formulate business plan and annual
  budget for approval

• Page 356 of 475

• by the Board. The management responded as follows:

  “We agree NPMA as a start

  business goals.”

  Board Papers

  The Board of KAL held two (2) meetings during the year. Although
  minutes of the
  meetings were kept, supporting board papers including financial
  reports, CEO’s
  reports, risk assessment reports and business strategy papers were
  not provided for my
  review.

  I advised the management that the Board members should receive well-
  documented
  board papers to allow them opportunities to read through and be
  informed of the state
  of affairs of the business in order for them to discharge their
  responsibilities with due
  care, skill and diligence. The management’s respond was as quoted:

  “The Company’s corporate governance structure has been reviewed, and
  the roles and
  functions of the Board and of management are now clearly
  established. The Board is
  now approving all organisational structures, policies and procedures
  and management

  advisers etc. with suitable cost/benefit analysis, opti
  the boards’ independent review and consideration.”

  Delegation of Authority

  KAL had no documented Delegation of Financial Authorities during the
  year under
  review. As there was no clearly defined financial authority limit,
  the CEO alone had
  the overwhelming financial authority to pre-commit. As a result,
  transactions worth
  K10,027,251 were approved by the CEO with insufficient source
  documents being
  retained to support those payments.

  -239-

  Kumul
  Agriculture Limited

• Page 357 of 475

• I recommended KAL to document and implement a Delegation of
  Authority as a matter
  of urgency to ensure the CEO, Executives and Staff perform their
  responsibilities within
  the limit of authority delegated to them.
  The management responded as follows:

  “In 2019 KAL received a documented Delegation of Authorities from
  Kumul
  Consolidated Holdings whereby our Board and the Chief Executives and
  Staff to
  comply with.”

  Segregation of Duties

  I noted that there was a lack of segregation of duties during the
  year under review. The
  CEO had been instructing staff in his comfort to take actions on
  various transactions
  which needed participation of different officers. Some of the
  activities performed which
  required segregation of duties included, recruitment of staff and
  executives, execution
  of consultancy contracts, conduct of project investigations and
  approval of payments.

  I recommended the management to institute segregation of duties
  within all of its
  operations to strengthen the internal control function and assist
  management to ensure
  the management of the business with a framework and sound controls.
  The management
  responded as quoted below:

  “Current management has instituted segregation of duties within all
  of its operations
  to strengthen the internal control function and avoid failures of
  the past.”

  Procurement Processes

  I noted that KAL had not implemented the standard “value for money”
  procurement
  process. Accordingly, a significant number of payments were made
  under the CEO’s
  instructions and directives. I recommended the management to
  implement procurement
  policies and procedures to ensure purchase of goods and services are
  of value for money
  and to avoid wasteful uneconomical expenditure. The management
  responded as
  follows:

• Page 358 of 475

• “The internal control environment over procurement process including
  obtaining
  quote, raising purchase requisition form, raising of payment
  requisition form,
  approvals for payments, signing of cheque, cashing and dispatching
  cash and
  recording processes has been reviewed and improved.
  Management has drafted (WIP stage) a procurement policy and
  procedures to ensure
  procurement process results in value for money purchase of goods and
  services to avoid
  the risks.”

  -240-

  Kumul Agriculture Limited

  Principal Activities of KAL

  My review of the NEC decision to establish KAL revealed that the
  objectives of the
  company are to pursue large scale agriculture projects. However, the
  expenditure
  incurred by the company during the year indicated the entity pursued
  a wide range of
  small-scale projects which did not satisfy the definition of large-
  scale project. I advised
  the Company to develop a practical strategic plan that aligns with
  its corporate
  objectives and enforce focused operations towards achievement of the
  corporate
  objectives. Expenditures incurred on small-scale projects included:

  Project Description Amount (K)
  Arakara Plantation – Rehabilitation 396,487
  Mount Hagen Agriculture College-Coffee Nursery107,824
  MJ & RM Martin @ Cape Rodney Buying Rubber 48,980
  Aroma Coconut Processing Facility 45,000
  Coffee Nursery in Lae 20,000
  Mt Hagen Coffee Fertilizer 15,000
  Aran Moringa Plantation 10,000
  Baiyer River Project 2,000
  Coldbran Plantation 2,426
  Total Projects 620,717

  Other Anomalies on Purchase, Usage and Register of Motor Vehicles

  I noted a motor vehicle with a cost value of K100,000 was recorded
  in the asset register

• Page 359 of 475

• of KAL. However, the vehicle was registered in the name of Commodity
  Management
  Partners Limited (CMPL), a company owned by the CEO.

  In another instance, on 12 November 2018 KAL purchased a motor
  vehicle at a cost of
  K75,000 from CMPL. Initially, the vehicle had been hired from CMPL
  for the CEO’s
  use for a period of 10 months with a monthly rental payment totalled
  K86,013. In fact,
  KAL paid a total of K151,013 (K75,000 + K86,013) to CMPL.

  Payroll Procedures and Processing

  I noted that the payroll of KAL was prepared by the National
  Development Bank
  (NDB) who then provided journal entries to KAL for recording in its
  books. The details
  of the staff, hours they worked and approval for payroll processing
  were not supervised
  by KAL. I noted staff costs in 2018 was K4,345,857 which was 43% of
  the K10 million
  funding provided by the State. Further, management were not able to
  provide the
  summary of pay run and or pay details for the 26 pay periods to
  support the amounts
  recorded in the books of KAL.

  -241-

  Kumul Agriculture Limited

  I advised the management that initial timesheets should be
  reviewed and approved by
  KAL managers prior to submission for processing. The 26 pay run
  summaries must be
  supported with timesheets that can validate the amount taken up
  in the books of KAL.
  The management responded as quoted below:

  “The payroll timesheets were approved by MD prior to submission
  for processing to
  NDB payroll. In 2019, KAL has set up its own payroll system and
  we are able to I
  monitor, control and ensure that staff are contributing fairly
  and honestly to the
  business and operations of the Company.”

  Costs of Duty Travels

• Page 360 of 475

• My review of the duty travels associated with investigation of
  various potential
  agricultural projects revealed that a total of K770,062 or 8% of
  the K10 million State
  grant given to the Company was spent on travel itineraries,
  allowances, hire cars and
  accommodations as details:

  Travel Cost Description Amount (KQ
  Domestic travel 278,109
  Hire cars 197,204
  Overseas travel 139,276
  Hotel accommodation and meals 99,990
  Travel allowances 31,631
  Board travel 23,852
  Total travel costs 770,062

  I noted that KAL had no approved business plan or budget for
  2018, and no project
  documentation and reports including feasibility studies or
  situational analysis for the
  projects investigated.

  I recommended the management to have a policy on duty travel that
  requires a business
  justification and approval. Such travel costs should be included
  in the organizational
  budget and monitored on a monthly basis. The management responded
  as follows:

  “Current management has instituted (WIP stage) a policy for
  travel and
  accommodation to address the risks and manage the process.”

  64.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the year ended 31 December 2019 was in progress.

  -242-

  65. KUMUL PETROLEUM HOLDINGS LIMITED

  65.1 INTRODUCTION

• Page 361 of 475

• 65.1.1 Legislation

  In accordance with NEC Decision No. 108/2011 dated 7
  July 2011, the Company was
  established and incorporated under the Companies Act
  on 4 March 2014 as NPCP
  Holdings Limited. As a result of the enactment of
  the Kumul Petroleum Holdings
  Limited Authorisation Act 2015 the issued shares of
  the previously owned by
  Independent Public Business Corporation (IPBC) now
  Kumul Consolidated Holdings
  was transferred to the Kumul Petroleum Trustee. On
  25 September 2015, the Company
  changed its name from NPCP Holdings Limited to Kumul
  Petroleum Holdings Limited.

  65.1.2 Objective of the Company

  Kumul Petroleum Holdings Limited and its wholly
  owned subsidiaries are the only
  group of State Owned Companies from which the State
  would nominate one or more
  of them to participate in all future Petroleum
  Projects as State nominee for the purposes
  of Section 165 of the Oil and Gas Act 1998.

  65.1.3 Subsidiaries of the Company

  The Subsidiaries of Kumul Petroleum Holdings Limited
  are; Eda Oil Limited, Kumul
  Exploration (Asia) Limited, Kumul Gas Foreland 239
  B.V, Kumul Gas Foreland 261
  B.V, Kumul Gas Foreland 268 B.V, Kumul Gas Foreland
  269 B.V, Kumul Gas NiuginiB.V, Kumul Lending Co Pte Limited, Kumul
  LNG Limited, Kumul Petroleum
  m

  (Development) Limited, Kumul Petroleum (Investments)
  Limited, Kumul Petroleum
  (Kroton) Limited, Kumul Petroleum (Pipeline)
  Limited, Kumul Petroleum (Tech &
  Advisory) Limited, Kumul Petroleum Marketing Pte
  Limited, Kumul Security Agent
  Limited and NPCP Oil Company Pty Limited. Comments
  in relation to these
  Subsidiaries are contained in paragraphs 65A to 65Q
  of this Report.

• Page 362 of 475

• 65.2 AUDIT OBSERVATIONS

  65.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the
  Companies Act on the Company’s
  financial statements for the year ended 31 December
  2018 was issued on 25 November
  2019. The report did not contain any qualification.

  65.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of the
  Company for the year ended 31 December 2019 was in
  progress.

  -243-

  65A. EDA OIL LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65A.1 INTRODUCTION

  65A.1.1 Legislation

  Eda Oil Limited was incorporated under the
  Companies Act. At the time, the
  Company has two (2) shares owned by Petromin PNG
  Holdings Limited. As a result
  of the enactment of the Kumul Petroleum Holdings
  Limited Authorisation Bill 2015,
  Eda Oil Limited together with Kumul LNG Limited
  were transferred to Kumul
  Petroleum (Development) Limited, a subsidiary of
  Kumul Petroleum Holdings
  Limited on 30 June 2016 by Petromin PNG Holdings
  Limited.

  The Company has a direct participation in the Moran
  Petroleum Project, through
  20.5% License Interest it directly holds in PDL 5
  and an initial 11.275% Unit Interest
  in Unit Operation under the Multi Unit Operator
  Alliance (MUOA) and an indirect

• Page 363 of 475

• participation in the PNG LNG Project through its
  holding of the only issued share in
  the share capital of Kumul LNG Limited.

  65A.1.2 Objective of the Company

  The main objective of the Company is to invest in
  the development and production
  of hydrocarbons in the Moran Joint Venture in Papua
  New Guinea.

  65A.2 AUDIT OBSERVATIONS

  65A.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 2017 and 2018 were
  issued on 25 November 2019. The reports did not
  contain any qualification.

  65A.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of
  the Company for the year ended 31 December 2019 was
  in progress.

  – 244 –

  65B. KUMUL EXPLORATION (ASIA) LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65B.1 INTRODUCTION

  65B.1.1 Legislation

  The Kumul Exploration (Asia) Limited was
  incorporated in Singapore under the
  Companies Act of Singapore on 2 March 2017. Kumul
  Petroleum Holdings Limited
  is the sole shareholder of Kumul Exploration (Asia)

• Page 364 of 475

• Limited.

  65B.1.2 Objective of the Company

  The Company’s main objective is service activities
  incidental to oil and gas extraction
  (excluding surveying and engineering design and
  consultancy services, supporting
  mining, oil and gas extraction and offshore
  exploration activities).

  65B.2 AUDIT OBSERVATIONS

  65B.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the
  Companies Act on the Company’s
  financial statements for the year ended 31 December
  2018 was issued on 17 January
  2020. The report did not contain any qualification.

  65B.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of
  the Company for the year ended 31 December 2019 was
  in progress.

  – 245 –

  65C. KUMUL GAS FORELAND 239 B.V
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65C.1 INTRODUCTION

• Page 365 of 475

• 65C.1.1 Legislation

  The Kumul Gas Foreland 239 B.V was incorporated in
  Amsterdam, Netherlands
  under the Netherlands Civil Code on 12 October 2011
  (amended on 30 June 2017).
  Kumul Petroleum Holdings Limited is the sole
  shareholder of Kumul Gas Foreland
  239 B.V.

  65C.1.2 Objectives of the Company

  The Company’s objectives are; to incorporate, to
  finance, to participate in, to manage
  and to supervise companies and other enterprises;
  to raise funds, to acquire, to dispose
  of, to manage, to exploit, to develop and to
  commercialise in any other way real estate,
  securities and other assets, including patents,
  permits, copyrights, trademarks,
  licenses, secret processes or formula’s, designs
  and other industrial and intellectual
  property rights, to render administrative,
  technical, financial, economic, commercial
  or managerial services to companies, partnerships
  and other enterprises, engage in all
  activities, whether or not in collaboration with
  others, which directly or indirectly
  relate to those objects and all this in the
  broadest sense.

  65C.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 2017,
  2018 and 2019 for my inspection
  and audit.

• Page 366 of 475

• – 246 –

  65D. KUMUL GAS FORELAND 261 B.V
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65D.1 INTRODUCTION

  65D.1.1 Legislation

  The Kumul Gas Foreland 261 B.V was incorporated in
  Amsterdam, Netherlands
  under the Netherlands Civil Code on 12 October
  2011. Kumul Petroleum Holdings
  Limited is the sole shareholder of Kumul Gas
  Foreland 261 B.V.

  65D.1.2 Objectives of the Company

  The Company’s objectives are: to incorporate, to
  finance, to participate in, to manage
  and to supervise companies and other enterprises;
  to raise funds, to acquire, to dispose
  of, to manage, to exploit, to develop and to
  commercialise in any other way real estate,
  securities and other assets, including patents,
  permits, copyrights, trademarks,
  licenses, secret processes or formulas, designs and
  other industrial and intellectual
  property rights, to render administrative,
  technical, financial, economic, commercial
  or managerial services to companies, partnerships
  and other enterprises; and engage
  in all activities, whether or not in collaboration
  with others, which directly or
  indirectly relate to those objects and all these in
  the broadest sense.

  65D.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 2017,
  2018 and 2019 for my inspection
  and audit.

• Page 367 of 475

• – 247 –

  65E. KUMUL GAS FORELAND 268 B.V
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65E.1 INTRODUCTION

  65E.1.1 Legislation

  The Kumul Gas Foreland 268 B.V was incorporated in
  Amsterdam, Netherlands
  under the Netherlands Civil Code on 12 October 2011
  (amended to 30-06-2017).
  Kumul Petroleum Holdings Limited is the sole
  shareholder of Kumul Gas Foreland
  268 B.V.

  65E.1.2 Objectives of the Company

  The Company’s objectives are; to incorporate, to
  finance, to participate in, to manage
  and to supervise companies and other enterprises;
  to raise funds, to acquire, to dispose
  of, to manage, to exploit, to develop and to
  commercialise in any other way real estate,
  securities and other assets, including patents,
  permits, copyrights, trademarks,
  licenses, secret processes or formulas, designs and
  other industrial and intellectual
  property rights, to render administrative,
  technical, financial, economic, commercial
  or managerial services to companies, partnerships
  and other enterprises; engage in all
  activities, whether or not in collaboration with
  others, which directly or indirectly
  relate to those objects and all this in the
  broadest sense.

  65E.2 STATUS OF FINANCIAL STATEMENTS

• Page 368 of 475

• At the time of preparing this Report, the Company
  had not submitted its financial
  statements for the years ended 31 December 2017,
  2018 and 2019 for my inspection
  and audit.

  – 248 –

  65F. KUMUL GAS FORELAND 269 B.V
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65F.1 INTRODUCTION

  65F.1.1 Legislation

  This Company was incorporated in Amsterdam,
  Netherlands under the Netherlands
  Civil Code on 12 October 2011 under the name of
  Kumul Gas Foreland 269 B.V.
  Kumul Petroleum Holdings Limited is the sole
  shareholder of Kumul Gas Foreland
  269 B.V.

  65F.1.2 Objectives of the Company

  The objectives of the Company are to finance, to
  participate in, to manage and to
  supervise companies and other enterprises; to raise
  funds, to acquire, to dispose of, to
  manage, to exploit, to develop and to commercialise
  in any other way real estate,
  securities and other assets, including patents,
  permits, copyrights, trademarks,
  licenses, secret processes or formulas, designs and

• Page 369 of 475

• other industrial and intellectual
  property rights, to render administrative,
  technical, financial, economic, commercial
  or managerial services to companies, partnerships
  and other enterprises; engage in all
  activities, whether or not in collaboration with
  others, which directly or indirectly
  relate to those objects and all this in the
  broadest sense.

  65F.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 2017,
  2018 and 2019 for my inspection
  and audit.

  – 249 –

  65G. KUMUL GAS NIUGINI B.V
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65G.1 INTRODUCTION

  65G.1.1 Legislation

  The Kumul Gas Niugini B.V was incorporated in
  Amsterdam, Netherlands under the
  Netherlands Civil Code on 12 October 2011 (amended
  on 11 May 2017). Kumul
  Petroleum Holdings Limited is the sole shareholder
  of Kumul Gas Niugini B.V.

  65G.1.2 Objectives of the Company

• Page 370 of 475

• The Company’s objectives are; to incorporate, to
  finance, to participate in, to manage
  and to supervise companies and other enterprises;
  to raise funds, to acquire, to dispose
  of, to manage, to exploit, to develop and to
  commercialise in any other way real estate,
  securities and other assets, including patents,
  permits, copyrights, trademarks,
  licenses, secret processes or formula’s, designs
  and other industrial and intellectual
  property rights, to render administrative,
  technical, financial, economic, commercial
  or managerial services to companies, partnerships
  and other enterprises, engage in all
  activities, whether or not in collaboration with
  others, which directly or indirectly
  relate to those objects and all this in the
  broadest sense.

  65G.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 2017,
  2018 and 2019 for my inspection
  and audit.

  – 250 –

  65H. KUMUL LENDING CO PTE LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65H.1 INTRODUCTION

• Page 371 of 475

• 65H.1.1 Legislation

  The Kumul Lending Co Pte Limited was incorporated
  in Singapore under the
  Companies Act of Singapore on 8 August 2016. Kumul
  Petroleum Holdings Limited
  is the sole shareholder of Kumul Lending Co Pte
  Limited.

  65H.1.2 Objective of the Company

  The key objective of the Company is to undertake
  fund management activities.

  65H.2 AUDIT OBSERVATIONS

  65H.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the
  Companies Act on the Company’s
  financial statements for the year ended 31 December
  2018 was issued on 17 January
  2020. The report did not contain any qualification.

  65H.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of
  the Company for the year ended 31 December 2019 was
  in progress.

  – 251 –

• Page 372 of 475

• 65I. KUMUL LNG LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65I.1 INTRODUCTION

  65I.1.1 Legislation

  This Company was incorporated under the Companies
  Act on 19 May 2009 under the
  name of Kumul LNG Limited. The Company has one (1)
  share and Eda Oil Limited
  is the sole shareholder of the Company. Eda Oil
  Limited is 100% subsidiary of
  Petromin PNG Holdings Limited that was established
  as a special purpose entity to
  hold Petromin’s interests in the LNG Projects. As a
  result of the enactment of the
  Kumul Petroleum Holdings Limited Authorisation Bill
  2015, both Eda Oil Limited
  and Kumul LNG Limited were transferred to Kumul
  Petroleum Holdings Limited on
  30 June 2016 by Petromin PNG Holdings Limited.

  65I.1.2 Objective of the Company

  The Company has 0.20% interest in the PNG LNG
  Project. The Project interest is
  connected to Eda Oil Limited’s license interest in
  PDL 5 (20.5% License Interest in
  PDL 5) and the Moran Petroleum Project Interest.

  65I.2 AUDIT OBSERVATIONS

  65I.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 2017 and 2018 were
  issued on 25 November 2019. The reports did not
  contain any qualification.

  65I.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of
  the Company for the year ended 31 December 2019 was
  in progress.

• Page 373 of 475

• – 252 –

  65J. KUMUL PETROLEUM (DEVELOPMENT) LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)
  65J.1 INTRODUCTION

  65J.1.1 Legislation

  This Company was incorporated under the Companies
  Act on 19 September 2014 in
  accordance with the NEC Decision No. 108/2011 dated
  7 July 2011. Kumul
  Petroleum Holdings Limited is the sole shareholder
  of Kumul Petroleum
  (Development) Limited. On 25 September 2015, the
  Company changed its name from
  NPCP Pipeline and Gas Supply Limited to Kumul
  Petroleum Development Limited.
  The Company again had its name changed from Kumul
  Petroleum Development
  Limited to Kumul Petroleum (Development) Limited on
  28 January 2016.

  65J.1.2 Objective of the Company

  The objective of the Company is to provide pipeline
  facilities to the upcoming various
  Liquefied Natural Gas (LNG) projects. In 2014, the
  Company purchased 100%
  shareholding in Cue PNG Limited at a cost of US$7
  million and changed the name to
  NPCP Oil Company Limited registered in Port
  Moresby, PNG.

  65J.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of
  the Company for the years ended 31 December 2017
  and 2018 had been completed
  and results were being evaluated.

  The fieldwork associated with the inspection and

• Page 374 of 475

• audit of the accounts and records
  and the examination of the financial statements of
  the Company for the year ended
  31 December 2019 was in progress.

  – 253 –

  65K. KUMUL PETROLEUM (INVESTMENTS) LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65K.1 INTRODUCTION

  65K.1.1 Legislation

  This Company was incorporated under the Companies
  Act on 15 October 2014 in
  accordance with the NEC Decision No. 108/2011 dated
  7 July 2011. Kumul
  Petroleum Holdings Limited is the sole shareholder
  of Kumul Petroleum
  (Investments) Limited. On 25 September 2015, the
  Company changed its name from
  NPCP Investments Limited to Kumul Petroleum
  (Investments) Limited.

  65K.1.2 Objective of the Company

  The Principal objective of the Company is to hold
  the Independent State of Papua
  New Guinea’s shareholding interest in Oil Search
  Limited and other Investments by
  the State in oil and gas in Papua New Guinea. In
  this respect, on 4 March 2014, the
  State acquired 10.01% shareholding (149,390,244
  shares) in Oil Search Limited
  (OSL) at a price of AUD8.20 per share for a total
  consideration of AUD1.225 million.
  The funding for purchase of the State’s interest in
  OSL was provided by UBS

• Page 375 of 475

• Australia. On 23 December 2014, the State
  transferred its 10.01% shareholding
  interest in OSL and the obligations arising from
  the loan facilities provided by UBS
  to Kumul Petroleum (Investments) Limited and Kumul
  Petroleum Holdings Limited.

  65K.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of
  the Company for the years ended 31 December 2017
  and 2018 had been completed
  and results were being evaluated awaiting signed
  financial statements and a number
  of documents in relation to UBS loan and disposal
  of Oil Search Limited (OSL) shares
  in 2018.

  The fieldwork associated with the inspection and
  audit of the accounts and records
  and the examination of the financial statements of
  the Company for the year ended
  31 December 2019 was in progress.

  – 254 –

  65L. KUMUL PETROLEUM (KROTON) LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65L.1 INTRODUCTION

  65L1.1 Legislation

  This Company was incorporated under the Companies
  Act and was acquired by the
  Independent Public Business Corporation (IPBC) (now
  Kumul Consolidated
  Holdings) on 24 November 2008.

  IPBC was approved as the State’s nominee in the PNG
  Liquefied Natural Gas (PNG

• Page 376 of 475

• LNG) Project as resolved by NEC in its Meeting No.
  36/2008 through Decision No.
  223/2008. NPCP Holdings Limited (Now Kumul
  Petroleum Holdings Limited) is the
  100% Shareholder of National Petroleum Company of
  PNG (Kroton) Limited as per
  NEC Decision No. 108/2011 dated 7 July 2011, which
  came into effect in 2013. All
  the Company’s shares held by IPBC were transferred
  to NPCP Holdings Limited in
  2013. On 25 September 2015, the Company changed its
  name from National
  Petroleum Company of PNG (Kroton) Limited to Kumul
  Petroleum (PNG LNG)
  Limited. On 28 January 2016 the Company changed its
  name from Kumul Petroleum
  (PNG LNG) Limited to Kumul Petroleum (Kroton)
  Limited.
  65L.1.2 Objective of the Company

  The objective of Kumul Petroleum (Kroton) Limited
  is to invest in the PNG LNG
  Project as PNG State’s nominee holding 16.57%
  equity in the Project.

  65L.2 AUDIT OBSERVATIONS

  65L.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the
  Companies Act on the Company’s
  financial statements for the year ended 31 December
  2018 was issued on 11
  September 2019. The report did not contain any
  qualification.

  65L.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of
  the Company for the year ended 31 December 2019 was
  in progress.

  – 255 –

• Page 377 of 475

• 65M. KUMUL PETROLEUM (PIPELINE) LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65M.1 INTRODUCTION

  65M.1.1 Legislation

  This Company was incorporated under the Companies
  Act on 30 October 2015 under
  the name Kumul Petroleum Pipeline Limited. On 28
  January 2016, the Company
  changed its name to Kumul Petroleum (Pipeline)
  Limited. Kumul Petroleum
  Holdings Limited is the sole shareholder of Kumul
  Petroleum (Pipeline) Limited.

  65M.1.2 Objective of the Company

  The Company holds the interest of Kumul Petroleum
  Holdings Limited in the
  Western Pipeline (Strategic Pipeline) Project.

  65M.2 AUDIT OBSERVATIONS

  65M.2.1 Comments on Financial Statements

  My reports in accordance with the provisions of the
  Companies Act on the Company’s
  financial statements for the years ended 31
  December 2017 and 2018 were issued on
  15 June 2020. The reports did not contain any
  qualification.

  65M.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork
  associated with the inspection and
  audit of the accounts and records and the
  examination of the financial statements of
  the Company for the year ended 31 December 2019 was
  in progress.

• Page 378 of 475

• – 256 –

  65N. KUMUL PETROLEUM (TECH & ADVISORY) LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65N.1 INTRODUCTION

  65N.1.1 Legislation

  The Company was incorporated under the Companies Act on 8
  September 2014 in
  accordance with the NEC Decision No. 108/2011 dated 7 July 2011.
  Kumul
  Petroleum Holdings Limited is the sole shareholder of Kumul
  Petroleum Technical
  Institute and Consulting Limited. On 25 September 2015, the
  Company changed its
  name from NPCP Technical Institute and Consulting Limited to
  Kumul Petroleum
  Technical Institute and Consulting Limited. Subsequently, the
  Company changed its
  name from Kumul Petroleum Technical Institute and Consulting
  Limited to Kumul
  Petroleum (Tech & Advisory) Limited on 28 January 2016.

  In 2015, the Company bought 12.5% shares in Orion Enga
  Children’s Fund JV
  Limited. Orion Enga Children’s Fund JV owns the South Pacific
  Employment
  Institute registered as a business name and runs the Port
  Moresby Technical College
  (now known as Kumul Petroleum Academy).

  65N.1.2 Objective of the Company

  The principal objective of the Company is to provide
  professional and other business
  services.

  65N.2 AUDIT OBSERVATION

  65N.2.1 Comments on Financial Statements

  My reports in accordance with the provisions of the Companies
  Act on the Company’s
  financial statements for the years ended 31 December 2016, 2017
  and 2018 were
  issued on 15 June 2020. The reports did not contain any
  qualification. However, the

• Page 379 of 475

• reports contained similar Emphasis of Matter, hence, only the
  2018 matter is
  reproduced as follows:

  “EMPHASIS OF MATTER

  Investment in Orion Enga Children’s Fund JV Limited

  Kumul Petroleum (Tech & Advisory) Limited invested US$3,803,190
  to hold 12.5%
  of the ordinary shares (25 Ordinary Shares of the total 200
  Shares) in Orion Enga
  Children’s Fund JV Limited. However, the other shareholders of
  the investee
  company did not contribute appropriate capital amount towards
  the shareholding they
  have in the company.

  -257-

  Kumul Petroleum (Tech & Advisory)
  Limited

  Further, at the date of this report no audited financial
  statements of the investee
  company was available for my determination to evaluate the
  financial aspects of the
  company for the years 2015 to 2018. When I raised my concern
  with the management,
  they impaired the whole investment for the year ended 31
  December 2016. I noted
  that the Board approval granted for investment in the Orion Enga
  Children’s Fund
  Limited was done without any due diligence report.”

  65N.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the year ended 31 December 2019 was in progress.

• Page 380 of 475

• -258-

  65O. KUMUL PETROLEUM MARKETING PTE LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65O.1 INTRODUCTION

  65O.1.1 Legislation

  The Kumul Petroleum Marketing Pte Limited was incorporated in
  Singapore under
  the Companies Act of Singapore on 28 April 2017. Kumul Petroleum
  Holdings
  Limited is the sole shareholder of Kumul Petroleum Marketing Pte
  Limited.

  65O.1.2 Objective of the Company

  The Company is to be engaged in the Marketing of Liquefied
  Natural Gas,
  Condensate and other related products.

  65O.2 AUDIT OBSERVATIONS

  65O.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the Company’s
  financial statements for the year ended 31 December 2018 was
  issued on 17 January

• Page 381 of 475

• 2020. The report did not contain any qualification.

  65O.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the year ended 31 December 2019 was in progress.

  -259-

  65P. KUMUL SECURITY AGENT LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65P.1 INTRODUCTION

  65P.1.1 Legislation

  The Kumul Security Agent Limited was incorporated in Singapore
  under the
  Companies Act of Singapore on 31 August 2016. Kumul Petroleum
  Holdings Limited
  is the sole shareholder of Kumul Security Agent Limited.

  65P.1.2 Objective of the Company

  The key objective of the Company is to undertake fund management
  activities.

  65P.2 AUDIT OBSERVATIONS

  65P.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the Company’s

• Page 382 of 475

• financial statements for the year ended 31 December 2018 was
  issued on 17 January
  2020. The report did not contain any qualification.

  65P.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the year ended 31 December 2019 was in progress.

  -260-

  65Q. NPCP OIL COMPANY PTY LIMITED
  (Subsidiary of Kumul Petroleum Holdings Limited)

  65Q.1 INTRODUCTION

  65Q.1.1 Legislation

  Cue PNG Oil Company Pty Limited, a subsidiary of Cue Energy
  Limited of Australia
  was incorporated in Australia under the Companies Act of
  Australia on 8 February
  1996. This Company was bought by Kumul Petroleum (Development)
  Limited on 20
  November 2014 at a cost of US$7,109,144. The Company changed its
  name to NPCP
  Oil Company Pty Limited on 20 January 2015. Kumul Petroleum
  (Development)
  Limited (A subsidiary of Kumul Petroleum Holdings Limited) is
  the sole shareholder
  of NPCP Oil Company Pty Limited. The Company is now incorporated
  in PNG under

• Page 383 of 475

• Companies Act of PNG.

  65Q.1.2 Objective of the Company

  The principal objectives of the Company are exploration and
  production of
  hydrocarbons. The Company holds certain exploration and
  development licenses in
  PNG, namely PDL 3, PRL 14, PRL 19 and PL2.

  65Q.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2015, 2016, 2017,
  2018 and 2019
  were in progress.

  -261-

  66. LIVESTOCK DEVELOPMENT CORPORATION LIMITED
  66.1 INTRODUCTION

  66.1.1 Legislation
  The Livestock Development Corporation Limited was incorporated
  under the
  Companies Act. The share capital is wholly owned by the National
  Government.

  66.1.2 Functions of the Corporation

  The main activities of the Corporation are breeding and
  slaughtering cattle and pigs,

• Page 384 of 475

• purchasing and exporting insects, growing vegetables and fruits,
  and raising poultry.

  66.2 STATUS OF FINANCIAL STATEMENTS
  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Corporation for the years ended 31 December 2010, 2011, 2012,
  2013, 2014, 2015,
  2016, 2017 had been completed and the results were being
  evaluated and 2018 audit
  was in progress.

  The Corporation had not submitted its financial statements for
  the year ended 31
  December 2019 for my inspection and audit.

  -262-

  67. MINERAL RESOURCES DEVELOPMENT COMPANY LIMITED

  67.1 INTRODUCTION

  67.1.1 Legislation

  The Mineral Resources Development Company Limited (MRDC) was
  incorporated
  under the Companies Act. The Company is wholly owned by the
  National Government.
  The authorised capital of the Company was increased from 10,000
  Ordinary Shares to

• Page 385 of 475

• 10,000,000 Ordinary Shares of K1 each in June 1992. An additional
  4,906,015 shares
  were issued to the Independent State of PNG in June 1992,
  converting the Government
  grant and the shareholders loan to equity. The Company also
  acquired the
  Government’s 20% interest in Misima Mines Limited.

  67.1.2 Objective of the Company

  The principal objective of the Company is to hold the
  Government’s equity in mineral
  and petroleum development ventures within PNG.

  67.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  67.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the inspection
  and audit of the accounts and records of the Company for the year
  ended 31 December
  2016 was issued on 27 April 2020. The report contained a
  Qualified Opinion.

  “QUALIFIED OPINION

  In my Opinion, except for the effects of the matters described in
  the Basis for Qualified
  Opinion paragraphs below:
  (a) the financial statements of the Company for the year ended 31
  December 2016:

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

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

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

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

  -263-

• Page 386 of 475

• Mineral Resources Development Company Limited

  BASIS FOR QUALIFIED OPINION

  Opening Balances

  My report on the Company’s consolidated financial statements for the
  year ended 31
  December 2015 was a disclaimer of opinion. I was not able to perform
  audit procedures
  to satisfy myself to obtain reasonable assurance as to the accuracy
  and completeness of
  the opening balances for both the Company and the Group.

  Since these opening balances entered into the determination of the
  financial
  performance and cash flows of the Company and the Group in 2016, I
  was unable to
  determine whether adjustments to the results of operations, cash
  flows and changes in
  equity might have been necessary for the year ended 31 December
  2016.

  Investments

  Note 12 to the financial statements disclosed total investments at
  K228.23 million
  (Group) and K44.12 million (Company) as at 31 December 2016. My
  review of the
  Company’s investments revealed the following:

  (a) Investment in Ramu Nickel JV

  Included in the Investments balance is K184.102 million (Group)
  relating to the
  Group’s interest in the Ramu Nickel Joint Venture. This balance
  was
  determined based on an impairment assessment performed by
  management on
  31 December 2015 closing balance of K406.165 million. The Group’s
  liabilities
  include a carry liability of K305.33 million in relation to the
  financing of the
  Groups interest in the Ramu Nickel Joint Venture. Further, the
  Group’s
  statement of changes in equity for the year ended 31 December
  2016 includes
  an amount of K108.566 million recorded directly to retained
  earnings as prior
  year adjustment which incorporates adjustments to the prior year
  balance for
  both the investment in Ramu Nickel Joint Venture and the carrying
  liability. I

• Page 387 of 475

• was not provided with sufficient and appropriate evidence to
  support the
  opening balance of the investment at 1 January 2016 and as a
  result, I have been
  unable to conclude on the accuracy of the amounts recorded in the
  statement of
  comprehensive income and statement of changes in equity during
  the year in
  respect of these balances. I also noted that the amount
  determined by
  management to be a prior year adjustment has been recorded
  directly to retained
  earnings in the current year, however, it should have been
  treated as a
  restatement of the prior year financial statements.

  -264-

  Mineral Resources Development Company
  Limited

  (b) Investment in Pacific International Hospital (PIH)

  K7.42 million (Group and Company) relates to investment in
  Pacific
  International Hospital. The investment has been classified
  under assets available
  for sale and in accordance with the Company’s accounting
  policy, this should
  be carried at fair value, however, a valuation of the
  investment at 31 December
  2016 was not performed and the investment has been recorded
  at cost in the
  financial statements. As a result, I was unable to determine
  whether adjustments
  to the financial statements might be necessary in respect of
  fair value gain or
  loss on investment in PIH for the year reported in the
  statements of
  comprehensive income and the investment balance reported in
  the financial
  position.

  Income Tax

  The matters mentioned in the above qualifications could have
  impacted the financial
  performance of the Company and the Group and accordingly the

• Page 388 of 475

• basis for the
  calculation of the income tax position and deferred tax balance
  may not be accurate as
  disclosed in the financial statements. As a result, I was unable
  to determine the
  appropriateness of the income tax balances disclosed in Note 8
  to the financial
  statements.”

  67.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Company for the year
  ended 31 December 2016
  was issued on 27 April 2020. The report contained the following
  observations:

  Non-Disclosure of Directors Remuneration and Staff Salary for
  the year

  During my review, I noted that the directors’ fees has increased
  by K1,056,334 (136%)
  to K1,833,840 from K777,505 in 2015. I further noted that the
  Company discontinue to
  disclose the total stipends paid to its Directors and the
  remuneration and allowances
  paid to the management staff whose total salary exceeds K100,000
  per annum as
  required under Section 212 (f) and (g) of the Companies Act.
  However, I was not
  provided with the details of stipends paid to the seven (7) Non-
  Executive directors of
  which two (2) were Government Departmental Heads or the
  shareholders resolution
  made available for my determination at the time of this report.
  As a result, I was unable
  to verify and conclude on the appropriateness and validity of
  the stipends paid and
  whether the Company has complied with the Companies Act.

  -265-

  Mineral Resources Development Company
  Limited

  Overseas Travel Expenses

• Page 389 of 475

• In 2016, the Company’s business travel expense amounted to
  K2,217,210 compared to
  K303,652 in 2015, a substantial increase of K1,913,557. During my
  review, I was not
  provided with the listing of all the overseas travels to
  determine the validity and
  purpose. As a result, I am not able to comment whether the trips
  were intended for and
  beneficial to the Company.

  Insurance Premium

  In 2016, K1,965,000 was paid as insurance premium by the Company.
  That was
  K1,700,000 more than the insurance premium paid for 2015 at a
  value of K265,000.
  However, I was not provided with appropriate explanation and
  basis for the six (6) fold
  increase in the insurance premium.

  Overseas Investments

  Note 12(c)(ii) to the financial statements disclosed investments
  made by the Mineral
  Resources Development Company in Taumeasina Resort (Samoa) for
  25% share worth
  K19.347 million in 2016. The current value of this investment was
  nil after loss on
  acquisition of K1.460 million, impairment loss of K15.488 million
  and loss for the
  current year amounting to K2.399 million were considered.

  In summary, the Company has made two overseas investments in the
  past few years
  and most of these investments so far has not produced any benefit
  to the Company or
  State but incurring losses due to impairments of assets caused by
  the reduction in the
  value of the investment. This is a concern the management and
  Board of Directors has
  to review and act in the best interest of the stakeholders.

  Loan to PNG Air Limited

  The financial statements include K14 million as receivables from
  PNG Air Limited.
  During my review, I was advised by the management that the amount
  relates to an
  advance made to APNG towards working capital requirements and
  that PNG Air
  Limited would issue additional equity to MRDC. However, at the
  date of this report,
  no shares were issued to the Company.

• Page 390 of 475

• 67.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the year ended 31 December 2017 was in progress.

  The Company had not submitted its financial statements for the
  years ended 31
  December 2018 and 2019 for my inspection and audit.

  -266-

  68. MOTOR VEHICLES INSURANCE LIMITED

  68.1 INTRODUCTION

  68.1.1 Legislation

  The Motor Vehicles Insurance (PNG) Trust Limited was incorporated
  under the
  Companies Act following the NEC Decision No. 4/98 of January
  1998. It was formed
  to change the status of the then existing Motor Vehicles
  Insurance (PNG) Trust to
  conform to the intentions of the NEC for the then PNG Banking
  Corporation Holding
  Company No. 1 Limited to acquire the business of the Trust as
  part of the reform of the
  financial services sector.

  The Trust was incorporated under the Companies Act as Motor
  Vehicles Insurance
  (PNG) Trust Limited (MVITL). The shares of this entity which were
  held by the
  Independent State of PNG were subsequently sold to the then PNG
  Banking
  Corporation, an entity also owned and controlled by the State.

  On 31 December 1998, as part of the corporatisation and
  restructuring programme of
  the then PNG Banking Corporation Group, PNGBC Limited, PNGBC
  Holding Co. No.
  1 Limited and Motor Vehicles Insurance (PNG) Trust Limited were
  amalgamated under
  the provisions of the Companies Act to form an amalgamated
  Company, PNGBC
  Limited. The ultimate parent Company of PNGBC Limited was Finance
  Pacific
  Limited, a Company wholly owned and controlled by the Independent
  State of PNG.

• Page 391 of 475

• With effect from 1 January 1999, Motor Vehicles Insurance Limited
  (MVIL) was
  incorporated under the Companies Act to underwrite the third
  party insurance under the
  Act in succession to the Trust and MVITL.

  The assets of MVITL immediately before the amalgamation with the
  then PNGBC
  Limited were transferred to MVIL when it took over the
  responsibility for providing
  third party insurance.

  68.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  68.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the inspection
  and audit of the accounts and records of the Company for the year
  ended 31 December
  2019 was issued on 30 June 2020. The report contained a Qualified
  Opinion.

  “QUALIFIED OPINION

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

  -267-

  Motor Vehicles Insurance Limited

  (a) the financial statements of Motor Vehicles Insurance Limited for
  the year ended
  31 December, 2019:

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

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

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

• Page 392 of 475

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

  BASIS FOR QUALIFIED OPINION

  Non-Consolidation of Subsidiaries

  Note 15(iii) to the financial statements disclosed Investment in
  Subsidiaries as
  K84,717,507 (2018: K73,956,993). The investment relates to 100% and
  52%
  shareholding in Pacific MMI Limited and Pacific Re Limited
  respectively. I noted that
  the shareholdings in these subsidiaries as at 31 December 2019
  exceeded 50%
  therefore, consolidation of the financial statements for the group
  is necessary as
  required by IFRS 10, Consolidated Financial Statements. However, no
  consolidated
  financial statements had been prepared and submitted for my review.
  As a result, the
  Company had not complied with the requirements of IFRS 10.

  Impairment of Investment in Subsidiary

  In accordance with IAS-36 Impairment of Assets, an entity shall
  assess at the end of
  each reporting period whether there is any indication that an asset
  may be impaired. If
  such indication exists, the Company shall estimate the recoverable
  amount of the asset
  and appropriately provide through the profit and loss account.
  However, Motor Vehicle
  Insurance Limited (MVIL) has reported K67 million (2018:
  K56,239,487) as
  investment in its subsidiary Pacific MMI Limited as at 31 December
  2019. This
  carrying amount is higher than the unaudited investee’s net assets
  by K14,000,000
  (2018: K45,000,000). There was no valuation of the investments done
  by the
  management during the year to determine whether any impairment would
  have
  occurred on its investments. Therefore, I was unable to determine
  whether the
  investment taken up under subsidiaries was appropriate.
  Consequently, the Company
  did not make necessary provision for the impairment by which it has
  not complied with
  IAS 36, Impairment of Assets.”

  -268-

• Page 393 of 475

• Motor
  Vehicles Insurance Limited

  68.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Company for the year
  ended 31 December 2019
  was issued on 30 June 2020. The report contained the following
  observations:

  Non-Compliance with the Notification issued on Investment
  Criteria

  Motor Vehicles Insurance Limited (MVIL) is a successor Company
  under the Motor
  Vehicles (Third Parties Insurance) Act. The Finance Minister,
  in accordance with
  powers granted by Motor Vehicles (Third Parties Insurance) Act
  had laid down the
  following criteria with regard to the composition of
  investments made by MVIL:

  Per Notification Policy At
  31-12-2019
  Government securities 15-25%
  8.95%
  Term Deposits 20-30%
  0.05%
  Commercial Equities 25-35%
  74.0%
  Property 20-30% –
  Long Term Development 10-20%
  2.0%
  Loans/Debentures – –
  Subsidiaries Nil
  15.0%

  From the information obtained above, it is evident that MVIL
  has not complied with
  the criteria laid down in the notification.

  Further, per investment policy the company should not invest
  in any one company more
  than 50% of the paid-up capital of that company. However, MVIL
  has owned 100%
  equity in Pacific MMI Limited and 52% in Pacific Re Limited as
  at 31 December 2019,
  hence, MVIL has not complied with the investment policy.

  I brought this matter to the attention of management in 2014
  and management since

• Page 394 of 475

• responded that, “the 50% of the shares in Pacific MMI going to
  be disinvest to
  prospective buyer.” However, to date the investment has not
  been disinvested as
  responded earlier.

  Salary Sacrifice

  During my review, I kept noting that staff salary sacrifices
  were paid to tertiary
  institutions and continue to remind management of the
  requirements under Taxation
  Circular TC2016/1 containing salary sacrifice arrangement. The
  payment of school
  fees by salary sacrifice covers up to Grade 12. Hence, school
  fee payment to tertiary
  institutions through salary sacrifice is outside of the
  Taxation Circular TC2016/1 and
  Section 29(1)(i) of the Income Tax Act 1959. I brought this
  matter to the attention of
  management and recommended that salary sacrifices paid to
  tertiary institutions and
  colleges should be taxed and processed through payroll.
  Management since responded
  as follows: -269-

  Motor Vehicles
  Insurance Limited

  “noted and agreed. We have implemented in 2020.”

  Fair Value of Unquoted Shares

  I noted that MVIL has unquoted share investments totalled K18
  million in Westpac and
  Pacific International Hospital. However, these investments were not
  valued during the
  year as requires by Ittil Fiil Rti Stdd to determine fair value
  of unquoted shares each year.

  I brought this recurring issue to the attention of management and
  recommended for
  valuation of these investments within the next 12 months. Management
  since responded
  that:

  “noted and agreed on recommendations. We have en ulti ivetm
  analyst to manage valuations.”

  Information Technology (IT) System

  My review revealed that the IT policy and procedure manual has not
  yet been

• Page 395 of 475

• formulated by the Company. As a result, there exists high risks in
  the IT control
  environment. I brought this issue to the attention of management and
  recommended for
  development of IT Policy Procedure Manual and enforce immediate
  implementation.
  Management concurred with my recommendation and advised that the
  policy and
  procedure manual is being implemented in 2020.

  -270-

  69. NATIONAL AIRPORTS CORPORATION LIMITED

  69.1 INTRODUCTION

  69.1.1 Legislation
  National Airports Corporation Limited was incorporated under the
  Companies Act. The
  Company had begun operations in October 2009 after its
  incorporation on 6 October
  2009. This Company was established in accordance with Section 132
  of the Civil
  Aviation Act 2000 (as amended).

  National Airports Corporation Limited is regulated by the Civil
  Aviation Authority Act
  2000 (as amended) as a Company having its own operating
  certificates. Except for the
  governance requirements specified in the Civil Aviation Act, it
  operates independently.
  The two shares issued by the Company are equally held by the

• Page 396 of 475

• Minister for Civil
  Aviation and the Minister for Finance on behalf of the
  Independent State of Papua New
  Guinea.

  69.1.2 Functions of the Corporation
  The functions of the National Airports Corporation Limited are
  derived from Section
  132 of the Civil Aviation Act.
  69.1.3 Subsidiaries of the Corporation
  The Corporation has two subsidiary companies; Airport City
  Development Limited and
  Airports Investments Limited. Comments in relation to these
  companies are contained
  in paragraphs 69A and 69B of this Report.
  69.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not
  submitted its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

  -271-

  69A. AIRPORT CITY DEVELOPMENT LIMITED
  (Subsidiary of National Airports Corporation Limited)

  69A.1 INTRODUCTION

  69A.1.1 Legislation

  The Airport City Development Limited was incorporated on 20
  August 2009 and was
  deregistered on 20 April 2010. However, the Company was
  reinstated on 19
  September 2011 as a subsidiary company of the National Airports
  Corporation
  Limited. The Company came into operation on 19 September 2012.

  69A.1.2 Charter of the Company

• Page 397 of 475

• The Company was incorporated to establish and manage the design,
  construction and
  operating stages of the Airport City Project to ensure economic,
  technically sound
  and expeditious completion of the Project.

  69A.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the Company had not
  submitted its financial
  statements for the year ended 31 December 2019 for my inspection
  and audit.

  -272-

  69B. AIRPORTS INVESTMENTS LIMITED
  (Subsidiary of National Airports Corporation Limited)

  69B.1 INTRODUCTION

  69B.1.1 Legislation

  The Airports Investments Limited is a wholly owned subsidiary
  of the National
  Airports Corporation Limited. The Company was initially
  registered as Helios No.
  129 Limited on 23 October 2014 under the Companies Act, and

• Page 398 of 475

• later changed its name
  to Airports Investments Limited on 27 April 2015. The
  operations of the Company
  commenced on 1 January 2016.

  69B.1.2 Objective of the Company

  Primary objective of the Airports Investments Limited is to
  maximize full utilization
  of airport assets to generate revenue to support core airport
  activities relating to safety
  and security.

  69B.1.3 Functions of the Company

  Functions of the Company include: utilization of large assets
  base of the airports to
  realize large revenue potential; generating revenue to fund the
  operations of the
  terminal facilities and runways; and utilizing return from
  commercialising the airport
  assets to assist rural airstrips.

  69B.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the year ended 31 December 2019 was in
  progress.

  -273-

  70. NCD WATER AND SEWERAGE LIMITED (Trading as Eda Ranu)

  70.1 INTRODUCTION

• Page 399 of 475

• 70.1.1 Legislation and Objectives of the Company

  The NCD Water and Sewerage Limited was incorporated on 23
  February 1996 under
  the Companies Act. The National Capital District Commission
  (Transfer of Assets) Act
  1996 provided for the vesting in the Company of the assets
  required for the supply of
  treated water and the treatment of sewerage from the NCDC.

  70.1.2 Functions of the Company

  The principal functions of the Company are to provide the supply
  of treated water, and
  the treatment and disposal of sewerage within the NCD.

  70.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  70.2.1 Comments on Financial Statements

  My reports in accordance with the provisions of the Companies Act
  on the inspection
  and audit of the accounts and records of the Company for the
  years ended 31 December
  2015 and 2016 were issued on 23 October 2019 and 18 May 2020
  respectively. The
  reports contained similar Qualified Opinions, hence only the 2016
  report is reproduced.

  “QUALIFIED OPINION

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

  (a) the financial statements of NCD Water and Sewerage Limited
  (Eda Ranu) for
  the year ended 31 December 2016:

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

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

  (b) proper accounting records have been kept by the Company, as
  far as appears
  from my examination of those records; and

• Page 400 of 475

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

  -274-

  NCD Water and Sewerage Limited

  BASIS FOR QUALIFIED OPINION

  Opening Balance

  My report on the financial statements of the Company for the year
  ended 31 December
  2015 was a qualified opinion in respect to capital grants,
  provision for doubtful debts,
  accrued expenses and inventory stock. I was unable to quantify
  the effects of such
  material misstatements of the opening balances of the above
  mentioned accounts that
  might have a bearing on the balances reported in the 2016
  financial statements. Within
  the scope of my engagement, I was unable to perform sufficient
  audit procedures to
  satisfy myself as to the accuracy or completeness of the opening
  balance or
  comparatives presented. Any adjustment that might be found
  necessary on such opening
  balances would have a consequential effect on the profit and loss
  for the year ended 31
  December 2016 and the comparative profit and loss account
  presented and the
  respective statement of financial position and statement of cash
  flows.

  Trade Receivables and Revenue – K54,249,743

  The Company reported Trade Receivables of K54,249,743 as at 31
  December 2016. I
  noted that a third party contractor on behalf of the Company
  performed billing of sales
  and collection of sales revenue with collection summary and
  associated payment
  provided to the Company at each month end. However, I was unable
  to perform any
  tests on the sales and revenue functions performed by the third
  party service provider
  that gave rise to the trade receivables balance. Consequently, I
  was unable to satisfy
  myself as to the assertions of completeness, existence, accuracy
  and valuation of these
  balances.

• Page 401 of 475

• Inventory Stock Taking – K5,825,486

  My review noted that the Inventories of the Company was disclosed
  at K5,825,486 in
  the statement of financial position. However, I was not present
  to witness the physical
  count conducted to ensure accuracy and validation of the
  inventories quantities. Further,
  my review on the stock count conducted by the Company revealed
  discrepancies
  existed between the stock quantities in the Company’s records and
  the quantities
  recorded from physical stock count. As a result, I was unable to
  confirm the accuracy
  and valuation of stock balance reported as at 31 December 2016.”

  70.2.2 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 Company for the years
  ended 31 December
  2015 and 2016 were issued on 23 October 2019 and 18 May 2020
  respectively. The
  reports contained similar observations, hence, only the 2016
  report is reproduced.

  -275-

  NCD Water and Sewerage Limited

  Annual Tax Returns

  My review of the Company’s various taxes as at 31 December 2016
  revealed the
  following issues:

  • Last income tax return lodged with the IRC has been for the year
  ended 31
  December 2012;
  • Corporate income tax filing since 2013 financial year has not been
  done;
  • Of the total Business withholding taxes liability of K2,304,642 as
  at 31 December
  2016, a total of K2,283,023 pertains to 2015 and prior years; and
  • Tax on Staff allowances payable includes a balance of K1,911,248
  relating to
  2015 and prior year.

  The late lodgment of tax returns and the accompanying payments in a
  timely manner

• Page 402 of 475

• with the IRC will result in the imposition of significant penalties.
  The penalties include
  a flat rate of 20% charge on the amounts outstanding and a further
  20% per annum on
  the amounts outstanding from the date when the taxes first become
  due. I raised these
  issues to the attention of the management and management responded
  as follows:

  • “The tax status of the Company is regularly reported in the
  Monthly Management
  Reports and to the Board during Board Meetings. Same is also
  reported to our

  • Corporate Income Tax (CIT) filed for 2013 on 20/2/2018, 2014 on
  16/3/2018
  2015 on 26/6/2018, 2016 on 20/12/2018 and 2017 on 6/3/2020. 2018
  is in WIP.

  • Due to significant tax liability, management negotiated an
  installment payment
  arrangement with IRC and based on this all o/s taxes for SWWT
  brought to
  current status. We will continue to adhere to the arrangement for
  GST
  outstanding (Budgeted K1.2 million per month based on government
  payment).” I

  Availability and Reliability of Relevant Data provided by JCKRTA

  The Company’s revenue billing and collection function was contracted
  to JCKRTA
  Consulting under a Consumer Service Agreement dated 23 June 1997.
  Accordingly,
  revenue, trade receivables and customer data are kept by JCKRTA and
  on a monthly
  basis it provides a statement to the Company which is used as a
  source document for
  recording the amount of revenue and trade receivables. Since revenue
  and receivables
  are key financial data of the Company, I was not provided with
  relevant documents and
  information by both the finance team of the Company and the JCKRTA
  for me to verify
  the balances. The Company must comply with the Companies Act to
  maintain records
  of key financial data, and where third parties are contracted to
  perform key functions
  as part of contractual obligations, the Company must secure right of
  audit, access to
  records and reliable and relevant reports. I brought this issue up
  and management
  responded as follows:

• Page 403 of 475

• -276-

  NCD Water and Sewerage Limited

  “The Build Operate and Transfer (BOT) agreement was signed in 1996
  which the
  current management had no role. We however, agree with the auditor’s
  points, and
  going forward we will ensure that any contractual obligations or
  conditions are
  properly captured in future agreements through our legal team or
  consultants.”

  Doubtful Debt Provisioning

  The Company has a current practice of making monthly provisions for
  doubtful debt of
  K83,333 to K1,000,000 annually. As at 31 December 2016, the total
  doubtful debt
  provision amounted to K6,840,605 of which 14% represented the total
  trade receivables
  of the Company.

  However, during my review I noted that there is neither a formal
  policy nor explanation
  for the basis of the current practice of doubtful debt provisioning.
  The quantum of bad
  debt provision is a direct result of credit policy and practices
  maintained by an entity.
  Effective credit management result in less general provisions as
  specific circumstances
  of an account is understood and bad debts are easily established.
  Thus, the general
  provisions as maintained by the Company, is likely to misstate the
  true circumstance of
  debtors and therefore affects the receivables and results reported.
  I recommended the
  management to adopt a policy on doubtful debt provision and write-
  off which should
  align to the IFRS 9 Financial Instrument (Iairment) and the
  management responded
  as follows:

  “For the year in audit our BOT partners – JCKRTA control the credit
  management.
  We agree that a proper policy document is required in the Comany to
  manage credit
  and accounts receivable (AR) functions. And such a policy will be
  aligned with IFRS 9
  in future. For starters management is developing Hian AR or CREDIT
  standard operating I
  rocedures (SOPs) which would create the basis for credit and write
  off policies.”

• Page 404 of 475

• Inventory Management System

  My review of the internal controls in the inventory management
  system and the internal
  audit report of the Company noted that there were issues on the
  inventory management
  system that needed immediate action by the management. The inventory
  of the
  Company is composed of materials needed for installation, repairs
  and maintenance of
  water and sewerage services. The issues noted are enumerated below:

  • Challenge on migrating inventory data in the new accounting system
  (TechOne);
  • Inadequate physical storage area which leads to spoilage for items
  stored in
  uncovered area;
  • Safeguard and security of inventory items, especially those high
  valued items;
  • Weak controls on the inventory process leading to unauthorised
  issuance; and
  • Unmonitored obsolete stocks.

  -277-

  NCD Water and Sewerage Limited

  In addition, the issues identified in the internal audit reports
  showed control weaknesses
  and therefore create an environment for abuse that may cause the
  Company losses.
  Consequently, I was unable to comment on the efficiency and
  effectiveness of the
  controls surrounding the management of the stock.

  Valuation of Land

  The Company accounts for the land assets at fair or market value.
  The last market
  valuation of these properties was carried out in 25 September 2013
  and no subsequent
  valuation exercise was performed thereon. The last market valuation
  may not be
  reflective of the current market value of the property as at 31
  December 2016. While
  there is no explicit mention of the regularity of valuation in the
  accounting standards,
  the timing of valuation should be sufficient and timely enough to
  reflect the fair value
  of the property at any given reporting date. I recommended the
  management to assess

• Page 405 of 475

• the necessity for every property to be updated with its market
  valuation through
  property appraisal.

  Annual and Long Service Leave

  The Company policy on the annual and long service leave states that
  furlough/long
  service leave is only applicable after fifteen (15) years of service
  whereby staff may
  apply for six months leave, and pro-rated accrual on furlough may
  commence after
  three (3) years of employment and furlough/long service leave is
  paid at a rate of nine
  (9) days per year. However, during my review, I noted the following
  deviation to the
  Company’s policy:

  • There are a number of employees who have exceeded the allowable
  leaves during
  the year resulting in a negative balance on the respective
  calculated leave balance;
  • The calculation for annual and long service leaves also included
  employees who
  have already resigned;
  • New employee salary rates were not used in the calculation of
  annual and long
  service leave;
  • One employee who worked for the Company less than fifteen (15)
  years took long
  service leave; and
  • Furlough/Long service leave has been accrued for a number of
  employees who
  had less than three (3) years of service.

  These had resulted in variances in my calculation against the
  balance of annual leave
  and long service leave as at 31 December 2016. I recommended the
  management to
  utilise Technology One System and integrate leave calculation. And I
  strongly
  encouraged the management to have regular review process of the
  Company’s annual
  and long service leave provision to ensure completeness, existence
  and accuracy and
  management responded as follows:

  -278-

  NCD Water and Sewerage Limited

  “Management notes auditor’s views and agree that we will review

• Page 406 of 475

• all long service and
  annual leave provisions quarterly to monthly. Management noted
  some issues when we
  migrated into Techone from Able Payroll, consultant was engaged
  to fix the issues.
  Management to stop approving advances against long service leave
  until staffs qualify
  (15 years) or upon termination of employment.”

  New Accounting Software (TechOne)

  The Company uses Enterprise Resource Planning (ERP) accounting
  software called
  Technology One. Technology One has series of modules which can
  cater for finance,
  budgeting, human resources & payroll, assets management,
  inventory management and
  project management to name a few.

  My general observations of the system are as follows:

  • Relevant modules required such as accounts receivable and
  sales, inventory
  management, project management are yet to be installed;
  • It appears that the baseline system has been installed without
  much tailoring to
  the business requirement of the Company. This is evident from
  the difficulty in
  producing basic and standard reports that one would ordinarily
  expect from an
  ERP system; and
  • No consideration has been given to key stakeholders in the
  implementation of the
  ERP system. A properly procured system considers all
  stakeholders who feed
  information into or receive information from and allows
  integration
  electronically. This improves efficiency and reduces errors
  associated with
  manual entries. One such consideration is the integration of
  the sales and debtors
  management which has been outsourced to a third party who use
  their own
  systems.

  Significant investment has occurred in both time and money and
  it will be difficult to
  justify limitations in value of the system to the Company. I
  recommended the
  management to carry out a Post Implementation Review (PIR) on
  the Information
  Technology (IT) system and management took note of my
  recommendation.

• Page 407 of 475

• 70.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the year ended 31 December 2017 was in progress.

  The Company had not submitted its financial statements for the
  years ended 31
  December 2018 and 2019 for my inspection and audit.

  -279-

  71. PAPUA NEW GUINEA PORTS CORPORATION LIMITED
  (Formerly PNG Harbours Limited)

  71.1 INTRODUCTION

  71.1.1 Legislation

  PNG Harbours Limited was incorporated under the Companies Act on
  19 June 2002 in
  accordance with the privatisation policy approved by the NEC in
  1999. The Company
  changed its name to Papua New Guinea Ports Corporation Limited on
  7 March 2006.

  71.1.2 Functions of the Company

  The general functions of PNG Ports Corporation Limited include
  the regulation,
  management, control and operation of declared ports; the movement
  of shipping
  therein; and the maintenance of light ships, buoys, beacons,
  moorings, wharves, docks,
  piers, jetties, landing stages, slips, landing ramps and
  platforms.

  71.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  71.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the Company’s
  financial statements for the year ended 31 December 2018 was
  issued on 30 June 2020.
  The report contained a Qualified Opinion.

  “QUALIFIED OPINION

• Page 408 of 475

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

  (a) the financial statements of PNG Ports Corporation Limited for
  the year ended
  31 December 2018;

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

  (ii) the financial statements have been presented in
  accordance with the
  Companies Act 1997, International Financial Reporting
  Standards and
  other generally accepted accounting practice in Papua New
  Guinea.

  (b) proper accounting records have been kept by the Company, as
  far as appears from
  my examination of those records; and

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

  -280-

  Papua New Guinea Ports Corporation Limited

  BASIS FOR QUALIFIED OPINION

  Port Assets, ADB Loan Liability and State Equity Funding which all
  related to the
  Lae Port (Tidal Basin) Development not taken up in the Books, and
  off the Balance
  Sheet of the Company

  Note 24 (b) to the financial statements disclosed contingent asset
  and liability at K734
  million and K434 million respectively. These balances related to the
  development of
  Lae Tidal Basin which were transferred by Kumul Consolidated
  Holdings (KCH) to the
  Company. I received written confirmation from KCH that the transfer
  was done to
  effect the National Executive Council (NEC) Decision No: 121/2017
  which resolved
  for transfer of all liabilities incurred on the construction of the
  Lae Tidal Basin and
  resulting assets to PNG Ports Corporation Limited.

• Page 409 of 475

• The Company has been generating income from the improved Lae Port
  (asset) since the
  transfer of the completed project facilities in April 2015. However,
  the Company had
  not recorded this important revenue generating asset to the value of
  K734 million, the
  ADB loan liability of K434 million and the State’s equity funding
  balance of K233
  million in its books and reflected in the balance sheet. Instead,
  the Company opted to
  disclose as contingent asset and liability. This promotes the
  financial statements of the
  Company to be incomplete and is a departure from IAS 1, Presentation
  of Financial
  Statements.

  Consequently, the asset and liability position of the Company could
  be materially
  misstated. Should necessary adjustments be initiated, I was unable
  to quantify the
  resultant impact that such adjustments might have on the financial
  position and
  financial performance of the Company for the year ended 31 December
  2018.

  Authenticity of Payments made to a Contractor and Valuation of Work
  in
  Progress related to Lae Industrial Park Development Project

  Note 15(c) to the financial statements disclosed a loan amount of
  K350 million obtained
  from Exim Bank of China for design, construction and
  commercialization of the
  Western Side of the Lae Tidal Basin into Industrial Real Estate. Out
  of the loan amount,
  a total of K133.3 million was drawn between 2017 and 2018 and paid
  to a contractor
  engaged for the project. However, I was not provided with sufficient
  audit evidence
  including project progressive status report by Project Manager
  specifying percentage
  of milestone achieved and instalment payment amount recommended. I
  applied
  professional judgement upon inspection of the project site that the
  level of work done
  at the site might not worth the K133.3 million paid to the
  contractor and recorded in the
  Company’s books as Work in Progress (WIP).

  Consequently, I was unable to comment on the validity of the
  payments made to the
  contractor, nor was I able to ensure accuracy and completeness of
  the Work in Progress

• Page 410 of 475

• and associated liabilities disclosed in the financial statements as
  at 31 December 2018.”

  -281-

  Papua New Guinea Ports Corporation
  Limited

  71.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Company for the year
  ended 31 December 2018
  was issued on 30 June 2020. The report contained the following
  observations:

  Lack of Supporting Documentations to Validate Payments and
  Valuation of Work
  Done

  My review of the Company’s payments during the year revealed an
  invoice valued at
  K58,157,498 and paid to a contractor without any support of
  proper documentary
  evidences of the work done. This amount was a second payment
  whilst first payment
  of K75 million had been made in 2017. As a result, cumulative
  payments made to that
  particular contractor up to 31 December 2018 totaled K133.3
  million. I applied
  professional judgement upon inspection of the project site that
  the level of work done
  at the site might not worth the K133.3 million paid to the
  contractor and recorded in the
  Company’s books as Work in Progress (WIP). I raised this issue
  to the management
  and management responded as follows:

  “A second payment of 15% or K58,157,498 of the sum of the
  contract was paid
  consistent with the contract payment schedule.”

  Payments not Supported with Contract Agreements

  The Company engaged various security companies during the year
  under review. My
  review of the payments made to the security companies revealed
  that amounts of
  K3,523,376 and K1,945,511 were paid to Ranger Protection Limited
  and Wasman
  Security Services Limited respectively. However, I was not
  provided with the contract

• Page 411 of 475

• agreements and all relevant supporting documentations to
  validate the payments made.
  As a result, I was not able to substantiate the basis for making
  the payments, and
  confirm whether due processes were followed in awarding the
  contract to the security
  firms. I raised this issue to the attention of the management
  and management responded
  as follows:

  “The previous board approved for the service to be continued on
  a month by month
  basis until a security firm is contracted through a tender
  process”

  Payments beyond the Approved Contract Value

  The Board of the Company approved full development cost of the
  CRCE Tower
  Limited – Office Complex at K43.5 million which included GST.
  However, the
  contractor considered the development cost of K43.5 million as
  GST exclusive and had
  been invoicing the Company with GST again added on. As a result,
  the Company
  overpaid a total of K2,667,750 to the contractor. I raised this
  issue to the attention of
  the management and management responded as follows:

  -282-

  Papua New Guinea Ports Corporation
  Limited

  “The management has sought professional tax and legal advice in
  which opinion has
  independently confirmed that no GST should have been charged by
  the contractor by
  terms and the legal structure of the agreement. Thus, management
  has already taken
  the position that it will deduct the GST overpayment from the
  final outstanding
  milestone claims.”

  71.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the year ended 31 December 2019 was in progress.

• Page 412 of 475

• -283-

  72. PNG AIR SERVICES LIMITED

  72.1 INTRODUCTION

  72.1.1 Legislation

  PNG Air Services Limited was incorporated under the Companies
  Act and
  commenced operation in January 2008 after its incorporation on
  30 April 2007. The
  Company was established in accordance with Section 143(6) of the
  Civil Aviation Act
  2000 (as amended) which envisaged the establishment of a Company
  to deliver “air
  traffic services, aeronautical navigation services and
  aeronautical communication
  services and all related services in Papua New Guinea and the
  airspace for which it

• Page 413 of 475

• is responsible.”

  PNG Air Services Limited as a State Aviation Enterprise (SAE) is
  an independent
  self-funding Company. The two shares issued by the Company are
  equally held by
  the Minister for Civil Aviation and the Minister for Finance on
  behalf of the
  Independent State of Papua New Guinea. The Company has its own
  operating
  certificates and operates independently from other Aviation
  Entities established under
  the Civil Aviation Act 2000 (as amended).

  72.1.2 Functions of the Company

  PNG Air Services Limited was established with a purpose of
  delivering safe and
  efficient air navigation services to the aviation industry and
  the travelling public. It
  ensures provision of quality Communication, Navigation,
  Surveillance (CNS) and Air
  Traffic Management (ATM) services to both domestic and
  international customers
  who operate within the PNG airspace, at a reasonable cost, hence
  to be a leader in
  providing world standard air navigation services. PNG Air
  Services Limited makes
  sure that the radio coverage in PNG both VHF and HF are improved
  and that efficient
  and effective air traffic services are maintained.

  72.2 STATUS OF FINANCIAL STATEMENTS

  The Company had advised me as per the letter dated 14 November
  2016 that it would
  appoint its own auditor for the 2016 and subsequent years’
  audits. However, I advised
  the Company of my responsibility under Section 214(3) of the
  Constitution of the
  Independent State of PNG, to inspect and audit and report to
  Parliament on all bodies
  set up by an Act of Parliament.

  At the time of preparing this Report, the Company had not
  submitted its financial
  statements for the years ended 31 December 2016, 2017, 2018 and
  2019 for my
  inspection and audit.

  -284-

• Page 414 of 475

• 73. PNG DATACO LIMITED

  73.1 INTRODUCTION

  73.1.1 Legislation

  The PNG DataCo Limited came into existence on 2 December 2010
  after the name was
  changed from Whittlesea Limited. Whittlesea Limited was
  incorporated under the
  Companies Act on 21 April 2010.

  On 6 February 2014, the National Executive Council (NEC) in its
  Decision No. 32/2014
  approved for immediate operations of the PNG DataCo Limited as a
  100% Majority
  State Owned Enterprise (SOE) to oversee and implement the
  National Transmission
  Network (NTN) Impact Project Strategy and Objectives as approved
  by the NEC
  Decision No. 268 of 2010, NEC Decision No. 107 of 2011 and NEC
  Decision No. 108
  of 2012.

  PNG DataCo Limited is governed by the Companies Act, the
  Independent Public
  Business Corporation of PNG Act, and the regulator – National
  Information and
  Communication Technology Authority Act. The Company came into
  operations in
  February 2014.

  73.1.2 Objectives of the Company

  The key objectives of the Company are to:

  • work towards the PNG Government’s Policy on ICT to refurbish
  the existing
  transmission network, extend its availability across the
  country, allow new
  transmission networks to develop, and to increase technical
  capabilities to support
  high-speed broadband;
  • develop the National Transmission Network (NTN) as the
  efficient domestic and
  international telecommunication transmission network and that
  the NTN is
  available on a wholesale and non-discriminatory basis to all
  licensed operators of
  the telecommunication industry to stimulate and foster social
  and economic
  developments in Papua New Guinea using State Owned assets and
  new network

• Page 415 of 475

• investments;
  • provide internet gateway services at the international
  gateway;
  • improve the availability of broadband transmission
  telecommunication services
  within PNG and internationally;
  • improve performance of telecommunication services in terms of
  responsiveness;
  • lower the cost of telecommunication services to end users;
  and
  • ensure the current network operations are scalable,
  standardise network and IT,
  invest in required capabilities to build low-cost position,
  develop deal making
  capabilities, and best-in-class execution capabilities.

  -285-

  PNG DataCo Limited

  73.1.3 Functions of the Company

  The main functions of the Company are to:

  • develop the National Transmission Network (NTN) as the
  efficient domestic and
  international transmission network; and

  • supply high value and market driven suite of data services on
  a wholesale and non-
  discriminatory basis to all licensed operators and ISPs (i.e.
  holders of a Network or
  applications licenses) leveraging its exclusive network asset
  base.

  73.2 AUDIT OBSERVATIONS

  73.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the financial
  statements of the Company for the year ended 31 December 2016
  was issued on 20
  May 2020. The report contained a Qualified Opinion.

  “QUALIFIED OPINION

  In my opinion, except for the effects of the matter referred to
  in the qualification
  paragraph below:

  (a) the financial statements of PNG DataCo Limited for the year
  ended 31

• Page 416 of 475

• December 2016:

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

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

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

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

  BASIS FOR QUALIFIED OPINION
  The financial statements disclosed that the carrying value of
  property, plant and
  equipment was K167.45 million as at 31 December 2016, of which
  K166.38 million
  was fibre optic lines and associated construction in progress.
  In accordance with IAS
  36, Impairment of Assets, an entity shall assess at the end of
  each reporting period
  whether there is any indication an asset may be impaired.

  -286-

  PNG DataCo Limited

  If such indication exists, the entity shall measure the
  recoverable amount of the asset
  and compare the recoverable amount of the asset to its carrying
  amount. If the carrying
  amount exceeds the recoverable amount of the asset an impairment
  charge is to be
  recorded.

  Based on my audit procedures, I identified evidence to support
  the existence of
  impairment indicators of the fibre optic lines asset at 31
  December 2016. However, the
  company has not performed an impairment assessment as required by
  IAS 36. Also, the
  Company has not prepared information to enable assessment of the
  recoverable amount
  of its fibre optic lines asset as at 31 December 2016. I was
  unable to obtain sufficient
  appropriate audit evidence to assess whether the carrying amount

• Page 417 of 475

• of the fibre optic lines
  asset exceeds the recoverable amount for the year end. As a
  result, I was unable to
  satisfy myself about the accuracy of the carrying value of the
  property, plant and
  equipment as at 31 December 2016 and any impairment loss that
  might have been
  recognised in the profit and loss account for the year ended.
  Consequently, I was unable
  to determine whether any adjustments to these amounts were
  necessary.

  OTHER MATTER

  Compliance with Public Finances (Management) Act 1995

  The financial statements for the year ended 31 December 2016 was
  approved and issued
  on 13 May 2020 and was submitted to my Office. The Directors did
  not meet the
  deadline set by Section 63 of the Public Finances (Management)
  Act 1995 for audited
  financial statements of public bodies/companies owned by the
  State to be furnished to
  the Minister before 30 June of the subsequent year.”

  73.3 STATUS OF FINANCIAL STATEMENTS

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

  The fieldwork associated with the inspection and audit of the
  accounts and records and
  the examination of the financial statements of the Company for
  the year ended 31
  December 2018 was in progress.

  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

  -287-

• Page 418 of 475

• 74. PNG POWER LIMITED

  74.1 INTRODUCTION

  74.1.1 Legislation

  PNG Power Limited (PPL) was incorporated by the Privatisation
  Commission under
  Section 3(1) of the Electricity Commission (Privatisation) Act
  2002 as the successor
  company to the PNG Electricity Commission (ELCOM), a statutory
  corporation
  established under the Electricity Industry Act (Chapter 78).

  • the Electricity Commission (Privatisation) Act transferred
  to PNG Power Limited:

  (i) all of ELCOM’s right, title and interest to any and all
  assets other than those
  transferred to PNG Dams pursuant to items 1(a) and (c),
  including, without
  limitation, the electricity generation assets located in
  the areas of Sirinumu
  Dam and Yonki Dam;
  (ii) all of ELCOM’s liabilities other than those transferred
  to PNG Dams
  pursuant to item 2(b); and
  (iii) all water use permits held by ELCOM and referred to in
  Section 7(1) of the
  Act.

  • transferred all of the employees of ELCOM to the employment
  of PNG Power
  Limited;
  • declared PNG Power Limited as a “651-cifi1-d (ntity” for the
  purposes of Section
  8 of the Act;
  • in accordance with the privatisation policy of the
  Privatisation Commission, all the
  issued shares of PNG Power Limited were transferred to the
  Privatisation
  Commission (and deemed transferred to the successor to the
  Privatisation
  Commission, the Independent Public Business Corporation of
  Papua New Guinea
  (IPBC of PNG), now Kumul Consolidated Holdings as the
  trustee of the General
  Business Trust under the Independent Public Business
  Corporation of Papua New
  Guinea Act; and
  • the consideration for the transfers referred to in items (i)
  and (ii) was nil.

  74.1.2 Functions of the Company

• Page 419 of 475

• The functions of the Company are to plan and co-ordinate the
  supply of electricity
  throughout the country; to generate, transmit, distribute,
  reticulate and sell electricity;
  and to provide to the public bodies and the State, services
  related to sale, consumption
  and use of electricity.

  -288-

  PNG Power Limited

  74.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the year ended 31 December 2018 was in progress.

  The Company had not submitted its financial statements for the
  year ended 31
  December 2019 for my inspection and audit.

• Page 420 of 475

• -289-

  75. POST (PNG) LIMITED

  75.1 INTRODUCTION

  75.1.1 Legislation

  Post (PNG) Limited was incorporated on 24 December 1996 under
  the Companies Act.
  This Company was formed following the NEC Decision No. 18/96 of
  17 April 1996 to
  corporatise the Post and Telecommunications Corporation (PTC)
  and separate it into
  three entities, namely: Telikom PNG, Post PNG and PNG
  Telecommunication
  Authority (PANGTEL) now known as National Information and
  Communications
  Technology Authority (NICTA) as established by Section 8 of the
  National Information
  and Communications Act.

  As a result of the NEC Decision, all assets, rights,
  liabilities, staff and regulatory powers
  and business of the PTC relating to Postal Services were, as per
  the allocation statement
  approved by the Minister for Communications, transferred on 31
  December 1996 at net
  book value to Post (PNG) Limited. Post (PNG) Limited is a 100%
  state-owned
  Company and it commenced trading on 1 January 1997.

  75.1.2 Objectives of the Company

  The primary objectives of the Company are to:

  • provide domestic and international postal services to meet the
  reasonable needs of
  the people, Government, non-governmental organisations and
  business enterprises
  of PNG;

• Page 421 of 475

• • manufacture and market postage stamps, philatelic products and
  other products for
  use in connection with services provided by Post PNG;
  • provide money transfer services within the Independent State
  of PNG and between
  PNG and other places;
  • engage in research relating to postal products and activities;
  • provide packet and parcel carrying services;
  • provide courier and freight services;
  • provide mail house, documents exchange and contract mail
  management services;
  • carry on any business or activity that is related, incidental,
  ancillary or
  complementary to the provision of domestic and international
  postal services;
  • provide fund transfer services, act as agent on behalf of
  other entities, bodies and
  organisations in relation to banking arrangements and in the
  collection of premium
  rates, licence fees, other like services and operate a savings
  bank; and
  • perform functions relating to the provision of postal services
  in a manner consistent
  with PNG’s obligations under any convention.

  -290-

  Post (PNG) Limited

  75.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  75.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the inspection
  and audit of the accounts and records of the Company for the year
  ended 31 December
  2018 was issued on 16 October 2019. The report did not contain
  any qualification.

  75.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on
  the inspection and
  audit of the accounts and records of the Company for the year
  ended 31 December 2018
  was issued on 16 October 2019. The report contained the following
  observations:

  Stock

• Page 422 of 475

• I noted that the Company’s stock increased over K2 million. My
  review of this stock
  revealed that a number of stock were very old but the Company
  still recognized them
  as stock. In addition, the Company does not have a standard
  policy to manage the
  obsolete and damaged stock. As a result, I was unable to comment
  on the effectiveness
  of the controls surrounding the management of the Company’s
  stock.

  Internal Audit Report-International Inbound Process

  An internal audit conducted into the International Inbound
  Process at mail cargo at the
  airport revealed that the International Inbound function was not
  in compliance with the
  relevant policies, systems and procedures that were set up to
  manage it. The report also
  identified that there are significant delays in the billing of
  international postal operators
  which are said to be in millions of kina. I recommended the
  management to implement
  the various recommendations specified in the report as a matter
  of priority and the
  management responded as follows:

  “O LnL1JIPInJIL1J(ees to continue the review of the process of
  the International Inbound
  Mail Cargo and will analyze the recommendations by its internal
  audit department for
  S(RFIIViPS(RYIPITJVLQIW-Ix(iJy RI PLiciJePT”

  Provision for Doubtful Debts

  As reported in my prior year audit reports, I noted that the
  Company’s debtors remained
  consistent in the current year by K9.65 million. However, the
  Company did not
  adequately provide for the doubtful debts to cover the trade
  debtors in the event that the
  debtors become bad. In addition, the process of debt recovery and
  the staff involved in
  it were slow. Further, the Company does not have a policy in
  place to appropriately
  provide for the doubtful debts and manage the debt recovery/
  collection process.
  Consequently, I was unable to comment on the controls surrounding
  the management
  of trade debtors and their provision for doubtful debts.
  -291-

• Page 423 of 475

• Post (PNG) Limited
  75.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the year ended 31 December 2019 was in progress.

  -292-

  76. TELIKOM (PNG) LIMITED

• Page 424 of 475

• 76.1 INTRODUCTION

  76.1.1 Legislation

  Telikom (PNG) Limited was incorporated under the Companies Act.
  This Company
  was formed following the NEC Decision No. 18/96 of 17 April 1996
  to corporatise the
  Post and Telecommunications Corporation (PTC) and to separate it
  into three entities
  namely: Telikom (PNG) Limited, Post PNG Limited and National
  Information and
  Communication Technology Authority (NICTA) formerly known as
  (PANGTEL).

  As a result of the NEC Decision, all assets, rights,
  liabilities, staff and regulatory powers
  and business of the PTC relating to Telecommunication Services
  were transferred on
  31 December 1996 at the net book value to Telikom (PNG) Limited
  as per the allocation
  statement approved by the Minister for Communications. Telikom
  (PNG) Limited is a
  100% State Owned Company and it commenced trading on 1 January
  1997.

  76.1.2 Objectives of the Company

  The primary objectives of the Company are to:

  • be the successor Company to the Telikom Divisions of PTC
  within the meaning
  of and for the purposes of the Telikom (PNG) Limited Act;
  • supply telecommunication services within PNG and between PNG
  and other
  places;
  • carry on any business or activity relating to
  telecommunications either inside or
  outside of PNG;
  • publish telecommunications directories, and to supply
  directory information
  service;
  • supply, install and maintain customer equipment and customer
  lines;
  • develop, manufacture, market and supply facilities and
  software;
  • supply value added services;
  • utilise its network, installations and facilities for
  purposes other than
  telecommunications, to the extent that such network
  installations and facilities are
  not fully utilised in the supply of telecommunications;
  • carry on any business incidental to telecommunication;
  • unless otherwise advised to the contrary by the Minister

• Page 425 of 475

• acting in accordance with
  a directive of the NEC to:

  -293-

  Telikom (PNG) Limited

  ‒ act as an adviser to the Government of PNG on matters
  relating to
  telecommunication activities in PNG;
  ‒ represent PNG as a member of, and actively participate, in
  international
  bodies concerned with the administration of
  telecommunication services;
  ‒ enter into international agreement relating to
  telecommunication activities;
  and
  ‒ perform functions relating to the provision of
  telecommunication services
  in a way consistent with PNG’s obligations under any
  convention; and

  • exercise such powers to negotiate, prepare, execute and perform
  any contracts or
  management arrangements of the State as may be delegated to it
  or conferred on it.

  76.1.3 Subsidiaries of the Company

  The subsidiaries of Telikom (PNG) Limited are DATEC (PNG)
  Limited, Kalang
  Advertising Limited, Media Niugini Limited (EMTV) and PNG
  Directories Limited.
  Comments in relation to these subsidiaries are contained in
  paragraphs 76A, 76B, 76C
  and 76D of this Report respectively.

  76.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the years ended 31 December 2015, 2016 and 2017 were
  completed and
  results were being evaluated.

• Page 426 of 475

• The fieldwork associated with the inspection and audit of the
  accounts and records and
  the examination of the financial statements for the years ended
  31 December 2018 and
  2019 were in progress.

  -294-

  76A. DATEC (PNG) LIMITED
  (A Subsidiary of Telikom (PNG) Limited)

  76A.1 INTRODUCTION

  76A.1.1 Legislation

  Datec (PNG) Limited was incorporated under the Companies Act.
  The Company was
  fully acquired by Telikom (PNG) Limited from Steamships Trading
  Company
  Limited on 1 August 2014. The Company is a wholly owned
  subsidiary of Telikom
  (PNG) Limited.

  76A.1.2 Function of the Company

  Datec (PNG) Limited’s principal activity is in the provision and
  support of technology
  applied solutions including business critical ICT consulting,
  solutions and services,
  IT outsourcing, business process outsourcing, internet services,
  electronics and
  computer retail, training and wide-ranging technical support.

  76A.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  76A.2.1 Comments on Financial Statements

• Page 427 of 475

• My report in accordance with the provisions of the Companies Act
  on the inspection
  and audit of the accounts and records of the Company for the
  year ended 31 December
  2017 was issued on 3 March 2020. The report did not contain any
  qualification.

  76A.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act
  on the inspection and
  audit of the accounts and records of the Company for the year
  ended 31 December
  2017 was issued on 3 March 2020. The report contained the
  following observations:

  Review and Approval of Manual Journal Entries – Segregation of
  Duties

  My review of the Company’s journal entries processed during the
  year revealed that
  there was no proper segregation of duties in place in the review
  and posting of manual
  journal entries. In order for an internal control to be
  effective, there should be
  adequate division of responsibilities among those who perform
  control activities and
  those who review such activities. Segregation of duties reduces
  the risk of error and
  serves as a deterrent to fraud which could have materially
  misstate the financial
  statements.

  -295-

  Datec (PNG) Limited
  Accounting for Projects Revenue

  The Company recognized the revenue earned from the projects when
  cash was
  received instead of when the services were performed. This reflected
  cash basis of
  accounting which is not in accordance with the accounting standards
  and the
  Company’s Accounting Policy of accrual basis.

  The Company should account for its project revenue when the services
  are performed

• Page 428 of 475

• to the customer regardless of when the services have been settled.

  Valuation of Foreign Currency Denominated Accounts Payable

  My review of the Company’s accounts payable balances showed that its
  foreign
  currency denominated outstanding invoices were not properly valued
  at end of year
  closing rate. Although I had recalculated the appropriate closing
  rate and concluded
  that the differences were immaterial, foreign currency denominated
  account balances
  in the books must be appropriately revalued to PGK at the end of
  each month using
  the prescribed closing rate (e.g BSP) and capture the correct
  foreign exchange gain
  or loss in the income statement.

  Manual Calculation for Inventory Provisioning

  The Company’s policy for provision for inventory obsolescence
  encompasses several
  criteria. During my review, I noted that one of the criteria was not
  considered in the
  calculation of the inventory provision. The lack of proper review of
  the manual
  calculation for inventory provision exposes the Company to
  misstatements and error
  which may go undetected. I recommended management to consider
  implementing
  guidelines for reviewer to ensure the review process is performed
  with sufficient
  granularity.

  Authorized Bank Signatories

  The signatories of the Company’s bank accounts were not updated to
  reflect the
  current management. Instead the signatories of the former chief
  executive officer,
  chief financial officer and finance controller remain listed as part
  of current officers.
  This may attract an opportunity of payment that may not be properly
  authorized by
  current authorized signatories. I recommended the management to
  update its roster of
  bank signatories to reflect the current management.

  Proper Use and Monitoring of Goods Received Not Invoiced Account
  (GRNI)

  My review of the GRNI account revealed certain costs in which
  invoices were already
  received at balance sheet date but were not properly removed from

• Page 429 of 475

• GRNI listing. In
  addition, the Company does not maintain a proper reconciliation of
  GRNI balance
  which should only show the breakdown of the balance at the end of
  the year.

  -296-

  Datec (PNG) Limited
  I recommended the management to revisit its reconciliation
  process for GRNI and
  ensure that is periodically monitored to effectively assist in
  detecting any unrecorded
  or overdue GRNI balances which may have materially misstate the
  financial
  statements.

  Control Findings from Information Technology (IT) Environment

  My review of the IT control environment revealed following
  issues:

  a) Periodic access rights review or recertification for all in-
  scope application
  system is yet to be established;
  b) Majority of EZY ISP application users are accorded super
  admin/power admin
  access profiles on the system. Review of transactions or
  activities of super-users
  for the all in-scope applications are yet to be established;
  c) Undocumented granted of access rights to user excess
  information within
  applications and untimely removal of user accounts of
  terminated employees;
  d) Absence of service level agreements with the software houses
  may mean that
  there is no mutually agreed and legally defined basis
  regarding service quality,
  deliverables, delivery timelines, priorities and
  responsibilities between the
  Company and the software houses;
  e) Periodic backup recovery testings were not performed and
  back-up tapes were
  not stored in a secure offsite location. I also noted
  consistent Pronto tape back-
  up failures;
  f) Lack of formal password policy and user authentication. No
  password policy
  exists to govern password settings. Password configurations
  are found to be
  below industry standard especially password length, age,
  history, complexity

• Page 430 of 475

• and lockout settings. User ID naming convention implemented
  for user accounts
  was inconsistent; and
  g) There was no change in management register/monitoring tool in
  place.

  76A.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2018 and 2019 were
  in progress.

  -297-

  76B. KALANG ADVERTISING LIMITED
  (Subsidiary of Telikom (PNG) Limited)

  76B.1 INTRODUCTION

  76B.1.1 Legislation

  Kalang Advertising Limited was incorporated under the Companies
  Act. The
  Company is wholly owned by Telikom (PNG) Limited.

  The ownership of the Company changed following the National
  Court Order of 9
  September 1997 which allowed Telikom (PNG) Limited to convert
  the debt due from
  Kalang Advertising Limited into shareholding. Subsequently,
  Kalang issued 535,424
  ordinary shares to Telikom (PNG) Limited on 31 October 1997.

  76B.1.2 Functions of the Company

  Kalang Advertising Limited was set up primarily to take over the
  activity of
  commercial radio broadcasting previously under the National

• Page 431 of 475

• Broadcasting
  Commission.

  The Company carries on the business of producers, consultants
  and promoters of
  Broadcast Television, Community Television, Video, Audio, Film,
  Visual, Cassettes
  Recordings, Productions and Recordings.

  76B.2 AUDIT OBSERVATIONS

  76B.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the inspection
  and audit of the accounts and records of the Company for the
  year ended 31 December
  2016 was issued on 26 August 2019. The report did not contain
  any qualification,
  however, with an emphasis of matter.
  “EMPHASIS OF MATTER

  Material Uncertainty Related to Going Concern

  I draw attention to Note 1.1 in the financial statements, which
  indicates that the
  Company incurred a net loss of K493,055 for the year ended 31
  December 2016 and
  as of that date, the Company’s current liabilities exceeded its
  current assets by
  K1,720,508.

  -298-

  Kalang Advertising Limited
  These events or conditions, along with other matters set out in
  Note 1.1, indicate the
  existence of a material uncertainty that may cast significant
  doubt about the
  Company’s ability to continue as a going concern and therefore
  the entity may be
  unable to realize its assets and discharge its liabilities in
  the normal course of business
  and at the amounts stated in the financial statements.”

  76B.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

• Page 432 of 475

• financial statements of
  the Company for the years ended 31 December 2017, 2018 and 2019
  were in progress.

  -299-

  76C. MEDIA NIUGINI LIMITED (EMTV)
  (A Subsidiary of Telikom (PNG) Limited)

  76C.1 INTRODUCTION

  76C.1.1 Legislation

  Media Niugini Limited (EMTV) was incorporated under the
  Companies Act. The
  Company was acquired by Telikom (PNG) Limited from Fiji
  Television Limited
  (FijiTV) on 4 February 2016.

• Page 433 of 475

• The Company was founded in 1985 by two local businessmen in a
  joint venture with
  the Nine Network of Australia. In July 1987, the Company
  commenced broadcasting
  through its national television service. In 1990, Nine Network
  acquired 100%
  ownership of Media Niugini Limited and later sold its interest
  in the Company to Fiji
  Television Limited (FijiTV) in December 2004. The Company then
  operated as a
  subsidiary of FijiTV.

  The Company is now a wholly owned subsidiary of Telikom (PNG)
  Limited.

  76C.1.2 Functions of the Company

  Media Niugini Limited, trading as EMTV, provides television
  broadcasting services
  in Papua New Guinea.

  The Company offers:

  • current affairs, national news, weather reports and special
  documentaries; and
  • shows in the areas of sports, lifestyle, entertainment, drama,
  children, religion,
  music and others.

  76C.2 AUDIT OBSERVATIONS

  76C.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act
  on the inspection
  and audit of the accounts and records of the Company for the
  year ended 31 December
  2017 was issued on 23 October 2019. The report did not contain
  any qualification,
  however, an emphasis of matter.

  -300-

  Media Niugini Limited (EMTV)

  “EMPHASIS OF MATTER

• Page 434 of 475

• Material Uncertainty Related to Going Concern

  I draw attention to Note 2 in the financial statements, which
  indicates that the
  Company incurred a net loss of K5,690,441 for the year ended 31
  December 2017
  and as of that date, the Company’s current liabilities exceeded
  its current assets by
  K13,678,998. These events or conditions, along with other
  matters set out in Note 2,
  indicate the existence of a material uncertainty that may cast
  significant doubt about
  the Company’s ability to continue as a going concern and
  therefore, the Company
  may be unable to realize its assets and discharge its
  liabilities in the normal course of
  business and at the amounts stated in the financial
  statements.”

  76C.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2018 and 2019 were
  in progress.

• Page 435 of 475

• -301-

  76D. PNG DIRECTORIES LIMITED (Formerly E. H. O’Brien Limited)
  (Subsidiary of Telikom (PNG) Limited)
  76D.1 INTRODUCTION

  76D.1.1 Legislation

  Edward H.O’Brien Limited is a Company incorporated under the
  Companies Act. The
  Company is jointly owned by Telikom (PNG) Limited (54%) and
  Edward H.O’Brien
  Enterprise of Sydney, Australia (46%). The Company changed its
  name to PNG
  Directories Limited in 2002.

  76D.2 AUDIT OBSERVATIONS

  76D.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies
  Act on the inspection
  and audit of the accounts and records of the Company for the
  year ended 31 December
  2017 was issued on 30 September 2019. The report did not
  contain any qualification.

  76D.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of
  the Company for the years ended 31 December 2018 and 2019 were
  in progress.

• Page 436 of 475

• -302-

  77. WATER PNG LIMITED (Formerly PNG Water Board)

  77.1 INTRODUCTION

  77.1.1 Legislation

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

  On 21 January 2017, the National Water Supply and Sanitation Act
  2016 came into
  effect paving for this utility (Water Supply and Sanitation
  Services) provider to be
  corporatised as a Company. As a result, the former Water PNG was
  abolished and a
  new company, Water PNG Limited was incorporated on 30 March
  2017. Water PNG
  Limited operates as a company effective from the date of its
  incorporation.

  77.1.2 Functions of Water PNG Limited

  The functions of the Company are:

  (a) to provide, design, construct and maintain such water supply
  systems as may be
  required for collection, production, supply and use of water
  for private and
  public purposes in and for cities, towns and rural areas in
  accordance with this
  Act;
  (b) to provide, design, construct and maintain such sanitation
  systems as may be
  required in and for the disposal of sewage and wastewater in
  and for cities,
  towns and rural areas in accordance with this Act;
  (c) to secure and provide an adequate supply of water in
  accordance with this Act;
  (d) to manage, operate and maintain water supply systems and

• Page 437 of 475

• sanitation systems
  owned by the Company and such other installations as maybe
  erected or
  constructed by the Company;
  (e) to work with provincial governments and through them, with
  authorities
  involved in district administration, and where appropriate
  with other State-
  Owned enterprises, to further the objectives of this Act;
  (f) to comply with the Public Health Act (Chapter 226), the
  consumer protection
  provisions of the Independent Consumer and Competition
  Commission Act
  2002 and the Environment Act 2000, and to abide by such
  water quality and
  sewerage discharge standards as are from time to time in
  force; and
  (g) generally, to do such supplementary, incidental or
  consequential acts and things
  as are necessary or convenient for carrying out its
  functions.

  -303-

  Water PNG Limited

  77.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  77.2.1 Comments on Financial Statements

  My report in accordance with the Companies Act on the Company’s
  financial
  statements for the period 1 April 2017 to 31 December 2017 was
  issued on 2 June 2020.
  The report contained a Disclaimer of Opinion.

  “DISCLAIMER OF OPINION

  I am unable to express an opinion on the accompanying financial
  statements of the
  Company, because of the significance of the matters described in
  the basis for
  disclaimer of opinion paragraphs below, I have not been able to
  obtain sufficient
  appropriate audit evidence to provide a basis for an audit
  opinion on the financial
  statements.

  BASIS FOR DISCLAIMER OF OPINION

• Page 438 of 475

• Limitation of Scope due to Opening Balances

  My audit report for the 15 months period ended 31 March 2017 was
  a Disclaimer of
  Opinion due to the limitation of scope on the opening balances.
  A number of general
  ledger accounts had unknown material amounts which related to
  prior years’ opening
  balances. The unexplained opening balances had not been
  reconciled prior to migration
  from the former Magix accounting system to the current Pronto
  accounting system. I
  was unable to satisfy myself as to the accuracy and completeness
  of the opening
  balances of fixed assets, trade debtors, other current assets,
  asset revaluation reserve,
  trade payables, other payables and long-term borrowings. Since
  these opening balances
  entered into the determination of the results of operations and
  cash flows of Water PNG
  for the period under review, I was unable to determine whether
  any adjustments to the
  results of operations, financial position and cash flows might
  have been necessary for
  the period ended 31 December 2017.

  Current Assets

  Note 3 to the financial statements disclosed a total of
  K7,774,368 as Other Current
  Assets. Of the total, 88% or K6,851,067 could not be confirmed
  as to the accuracy as I
  was not provided with the necessary reconciliations, schedules
  and supporting
  documentation for my review of the following Other Current
  Assets account balances:

  -304-

  Water PNG Limited

  Kina
  Prepayments 2,516,121
  Home Ownership Scheme 247,914
  Suspense Account 253,699
  Bank Suspense Account 1,480,883
  Novated Lease Suspense 151,167

• Page 439 of 475

• Sundry Debtors 2,120,172
  Accrued Income 81,111
  TOTAL 6,851,067

  As a result, I was unable to obtain sufficient and appropriate audit
  evidence to ensure
  the completeness and accuracy of the above balances taken up under
  Other Current
  Assets as at 31 December 2017.

  Current Liabilities

  Note 5(b) to the financial statements disclosed total Other Payables
  and Accruals at
  K19,781,099. Out of the total, I was not provided with the relevant
  supporting
  documentations including listings and reconciliations of the
  following liabilities to a
  value of K15,592,757 (79%) for my review:

  Kina
  Outstanding Accrued Expenses 12,075,605
  Business Payment Tax 349,449
  Purchase Clearing Account 2,367,021
  Interest Withholding Tax 71,640
  Contract Retention (Clearing Account)729,042
  TOTAL 15,592,757

  Therefore, I was unable to perform my audit procedures to assess the
  completeness and
  accuracy of the transactions recorded in the general ledger and the
  balance presented as
  current liabilities in the financial statements. Consequently, I am
  unable to determine
  the accuracy and completeness of the Current Liabilities taken up in
  the financial
  statements for the period ended 31 December 2017.

  Deferred Grant – Current

  Note 8(a) to the financial statements disclosed Deferred Grant –
  Current at K6,264,697.
  I was not provided with the relevant supporting documentations
  including listing and
  reconciliation for performing my audit procedures to determine the
  movement and
  assess the completeness and accuracy of the balance as presented in
  the financial
  statements. Consequently, I was unable to determine the accuracy and
  completeness of
  the balance of the Deferred Grant – Current taken up in the
  financial statements for the
  period ended 31 December 2017.

• Page 440 of 475

• -305-

  Water PNG Limited

  Non- Current Liabilities

  Note 6 and 8(b) to the financial statements disclosed Non-Current
  Liabilities totaled
  K163,891,473 as shown below:

  Kina
  Bonds & Refundable Deposits 6,252,767
  ADB Loan 104,918,261
  Deferred Income 51,238,867
  Lease Liability 1,481,578
  TOTAL 163,891,473

  I was not provided with all the relevant reconciliations, schedules
  and supporting
  documentations for my review. Hence, I could not perform the
  necessary audit
  procedures to evaluate the balances. Consequently, I was unable to
  determine the
  completeness and accuracy of the Non-Current Liabilities taken up in
  the financial
  statements for the period ended.

  Capital Works-In-Progress

  Note 7 to the financial statements included Work-In-Progress (WIP)
  at K34,756,881. I
  was not provided with complete listing and status report of all
  projects that have been
  in progress at the time of this report. Therefore, I could not
  perform the necessary audit
  procedures to substantiate the completeness, existence and accuracy
  of the value of
  WIP. Further, I could not determine whether there has been timely
  transfer of completed
  projects to proper fixed asset categories to which they relate. As a
  result, I could not
  conclude on the completeness and accuracy of the depreciations
  charged for the period
  and possible impacts this might have on the profit and loss account.
  Consequently, I am
  unable to comment on the correctness of the value of WIP as at 31
  December 2017 and
  the depreciations charged to the profit and loss account.

  Land and Building

  Note 7 to financial statements disclosed value of the Land and
  Building totaling

• Page 441 of 475

• K28,847,391. Of the total, K8,633,734 was pertaining to land and
  K20,213,656 for the
  value of buildings. However, listing of the portion of lands and
  buildings were not
  provided for my review. In addition, Water PNG does not have the
  land titles for the
  portions of land it owns. I was unable to ensure the legal ownership
  over the land taken
  up in the books.”

  -306-

  Water PNG Limited

  77.2.2 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 Water PNG for the period 1
  April 2017 to 31
  December 2017 was issued on 3 June 2020. The report contained
  the following
  observations:

  General Ledger Account Reports

  The system generated general ledger transaction reports provided
  to me were not user-
  friendly. The format provided did not have details of suppliers,
  payment reference,
  transaction description and GL account totals for all business
  units combined. I
  requested for a better organized report but was not addressed
  due to system capacity
  issues. A lot of time was spent sorting the transactions in
  order to get the transactions
  organized in a meaningful format to conduct my review of the
  accounts. Furthermore,
  some of the account balances from the report did not agree with
  the trial balance. Also,
  no regular reconciliation was performed on General Ledger
  accounts. I brought this to
  the attention of management and they responded as follows:

  “We agree to the audit observation and advise that
  reconciliation are done for 2018 I
  and 2019.” ii

• Page 442 of 475

• Land Titles

  I noted that Water PNG does not have title deeds for all the
  properties (lands and
  buildings) it owns. Water PNG was unable to provide proper
  listing of the land and
  buildings it claimed to own. I brought this to the management’s
  attention and they
  responded as follows:

  “We engaged our permanent land officer and a Consultant to
  resolve that issue.”

  Provision for Income Tax

  Water PNG now operates under the Companies Act 1997 and it is
  liable to pay
  Company Tax in accordance with the PNG Income Tax Act 1959.
  However, I was
  unable to determine the method used in calculating the tax
  liability. Furthermore, I was
  not provided with the necessary calculations, reconciliations
  and schedules and
  supporting documentation to determine the completeness and
  accuracy of the tax
  balances. I brought this to the attention of management and they
  responded as follows:

  “The calculation of the income tax is 30% of the net operating
  profit which is the total
  revenue minus total expenses.”

  -307-

  Water PNG Limited

  Expenses recorded in Profit and Loss

  Total expenses recorded for the period was K71,974,062. However,
  the expenditure
  documentations selected for my in-depth test were not provided
  for review to determine
  the necessity and frequency of the payments and to confirm
  whether all expenditures
  actually incurred and due care observed. Details are as shown
  below:

  Kina
  Allowances 5,385,390
  Gratuity Expenses 320,090

• Page 443 of 475

• Consultancy Fee 5,066,556
  Travel &Accommodation – Local 1,023,900
  Travel &Accommodation – Overseas 196,911
  Entertainment 120,076
  TOTAL 12,112,923

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

  “The concerned staff have supplied the transaction listing to
  verify the expenses without
  fully understanding the requirements In addition the shortage of
  manpower 333333 due to
  recruitment freeze by 333333management became an issue Also
  there was an urgency to
  333 complete theaudit withspecific time frame Going forward for
  2018audit we 333 will
  provide all the schedules and necessary supporting
  documentation.”

  77.3 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the fieldwork associated
  with the inspection and
  audit of the accounts and records and the examination of the
  financial statements of the
  Company for the years ended 31 December 2018 and 2019 were in
  progress.

  -308-

  SECTION C
  NATIONAL GOVERNMENT
  SHAREHOLDINGS IN

• Page 444 of 475

• OTHER COMPANIES

  -309-

  78. FOREWORD

  This Section of my Report deals with Companies in which the
  Government owns 50%
  or less of the issued Share Capital of a Company.

  The auditing and reporting requirements of these Companies are
  stipulated under the
  Companies Act, and these have been elaborated in Paragraph 62 of
  this Report.

  As the Government of PNG does not hold majority interest in
  these Companies, the
  accounts of these Companies are audited by Private Auditors.

  However, because public monies are invested in these Companies,
  my responsibilities
  require the inclusion of the summaries of their accounts and the
  comments of the Private
  Auditors’ Reports in this Section of my Report. Details of these
  companies are
  contained in paragraphs 79 to 80.

• Page 445 of 475

• -311-

  79. BOUGAINVILLE COPPER LIMITED
  79.1 INTRODUCTION

  79.1.1 Legislation

  Bougainville Copper Limited, formerly Bougainville Copper Pty
  Limited, was
  incorporated under the Companies Act.

  From 1972 until 1989, the Company operated a large open pit mine
  and processing
  facility at Panguna on the island of Bougainville in the North
  Solomons Province of
  PNG. It produced concentrate containing copper, gold and silver
  which was sold
  primarily under long-term contracts to smelters in Asia and
  Europe. On 15 May 1989
  production was brought to a halt by militant activity and has
  not recommenced since.

  As at 31 December 2019 the issued capital of the Company were
  401,062,500 fully
  paid shares, each carrying one voting right. Of these, the
  Government of PNG held
  76,430,809 (19.06%) shares of the total shares. A further
  69,744,640 (17.39%) shares
  were held through Eda Minerals Limited totalling 36.4%.

  The Autonomous Bougainville Government (ABG) holds 146,175,449
  shares (36.4%)
  through Bougainville Minerals Limited. The remaining 108,711,602
  shares (27.11%)
  are owned by individual Papua New Guinean and Bougainvillean
  shareholders.

  79.1.2 Objectives of the Company

  The main objectives of the Company are to prospect, explore,
  quarry, develop,
  excavate, dredge for, open, work, purchase or otherwise obtain

• Page 446 of 475

• copper and other various
  metals and minerals.

  79.2 REPORT OF THE COMPANY’S AUDITORS

  A Private Firm of Auditors conducted the audit of the Company’s
  financial statements
  including the accounts and records for the year ended 31
  December 2019 and the audit
  report was issued on 30 April 2020. This report contained a
  Qualified Opinion.

  “QUALIFED OPINION

  In my opinion, except for the possible effects of the matter
  described in the Basis for
  Qualified Opinion of my report, the accompanying financial
  statements:

  • comply with International Financial Reporting Standards and
  other generally
  accepted accounting practice in Papua New Guinea; and

  -313-

  Bougainville Copper Limited

  • give a true and fair view of the financial position of the
  Company and the Group
  as at 31 December 2019 and their financial performance and cash
  flows for the
  year then ended.

  BASIS FOR QUALIFIED OPINION

  The Company’s subsidiary holds an investment in an unlisted
  investment fund with a
  carrying value of K1.1 million at 31 December 2019. Management have
  not been
  provided with audited financial statements of the investee at 31
  December 2019 and
  there is currently no active market for the sale of units in the
  investment fund. As a
  result, we have been unable to satisfy ourselves as to the valuation
  of K1.1 million of
  the investments recognised in the consolidated balance sheet at 31
  December 2019.”

• Page 447 of 475

• -314-

  80. GOGOL REFORESTATION COMPANY LIMITED

  80.1 INTRODUCTION

  80.1.1 Legislation

  Gogol Reforestation Company Limited was incorporated under the
  Companies Act.

  As at 31 December 2009, the issued and fully paid up capital of
  the Company comprised
  102,001 ‘A’ class ordinary shares of K1.00 each and 98,001 ‘B’
  class ordinary shares
  of K1.00 each. Of these, the Government of PNG held 98,001 ‘B’
  class ordinary shares
  of K1.00 each, representing 49% of the issued Capital at a cost
  of K98,001.

  80.1.2 Objectives of the Company

  The objective of the Company is to be involved in reforestation.

• Page 448 of 475

• 80.2 STATUS OF FINANCIAL STATEMENTS

  At the time of preparing this Report, the audited financial
  statements and the audit
  reports of the Company for the years ended 31 December 2010,
  2011, 2012, 2013, 2014,
  2015, 2016, 2017, 2018 and 2019 had not been submitted for my
  verification.

  Further, I was informed by management on 16th July 2013 that the
  Company was no
  longer in operation since 2011 due to the winding down of the
  Company.

  In 2014, I communicated with Independent Public Business
  Corporation (IPBC)
  requesting for the winding down documents and IPBC responded that
  they had not
  received any winding down application nor deregistration
  documents with regard to
  Gogol Reforestation Co. Limited. My efforts to clarify the status
  with Kumul
  Consolidated Holdings were unsuccessful. A Company search with
  the Investment
  Promotion Authority on 14 July 2020 revealed that the Company was
  not deregistered.

  -315-

  SECTION D

  PROBLEM AUDITS
  (AUDITS IN ARREARS)
  )

• Page 449 of 475

• -317-

  81. FOREWORD

  This Section of my Report deals with problem audits, especially
  audits in arrears.
  Problem audits denote audit of entities in respect of which I
  have not been able to carry
  out audits for circumstances detailed in the respective
  paragraphs.

  81.1 EXCLUSION OF ENTITIES FROM STATUTORY AUDIT

  Due to non-submission of financial statements by the following
  entities due to
  amendment to the enabling Act, I was not able to perform the
  audit of the following
  entities.

  • Fresh Produce Development Agency;
  • Kumul Minerals Holding Limited (formerly Petromin Limited);
  • National Development Bank Limited;
  • Ok Tedi Mining Limited;
  • PNG Air Services Limited; and
  • PNG Sustainable Development Program Limited.

• Page 450 of 475

• -319-

  82. AUDITS IN ARREARS

  82.1 GENERAL

  Audits in arrears are those in respect of which financial
  statements have not been
  submitted on time for audit to be undertaken, thus placing my
  Office in a position where
  audits are not able to be conducted on a current year basis
  consistent with the
  requirements of the Companies Act and the PFMA. Two serious
  consequences develop
  from this. Firstly, it results in a build-up of audits in
  arrears, and these are all audits
  other than the current year (2019) audits. The other serious
  consequence is that audit
  reports issued more than a year or two in arrears serve only to
  meet the administrative
  or legislative requirements, but their validity from a decision
  making stand-point may
  be lost due to the time lag.

  82.2 RESPONSIBILITY FOR PREPARATION OF FINANCIAL STATEMENTS

  The responsibility for the preparation and presentation of
  financial statements is that of
  the management of the auditee organisation. That being the case,
  the audit of the
  financial statements by the Auditor-General does not in any way
  relieve management
  of its responsibility to have financial statements prepared on
  time.

  This responsibility also requires management to ensure that an
  adequate and effective
  internal control system is maintained so as to ensure, inter-
  alia, that complete and
  accurate financial statements are produced on a timely basis. To
  assist management in
  producing financial statements that meet the qualitative
  characteristics, the
  management’s responsibility also extends to ensuring that
  professionally qualified and
  experienced accounting personnel are engaged.

• Page 451 of 475

• It is generally true that irrespective of their completeness,
  accuracy or reliability,
  financial statements that are unduly delayed, lose their
  relevance. Although there is no
  consensus regarding the length of time that ought to be allowed
  to elapse between the
  predetermined reporting date and the date when the financial
  statements lose their
  relevance, there is a need to weigh the relative merits of
  preparing them on a timely
  basis, let alone the legislative requirements.

  Relevant and reliable information therefore is useful for
  decision making when these
  are timely prepared and made available to concerned parties.
  Relevance here is relative
  to the value and usefulness of the audited financial information
  to management and the
  parties concerned for decision making. Current information is of
  more relevance in the
  fight against corrupt practices than information that is out of
  date.

  -321-

  82.3 LEGISLATIVE REQUIREMENTS

  To ensure the timely preparation of financial statements, Section
  63(3)(a) of the Public
  Finance (Management) (Amendment) Act 2016 makes it mandatory for
  statutory bodies to
  prepare and furnish audited financial statements to the Finance
  Departmental Head, before
  end of the fourth calendar month from close of a fiscal year. The
  fact that audit of 42
  entities as depicted in Schedule B(iv) had been in arrears due to
  non-submission of
  financial statements is a direct contravention of the
  requirements of Section 63(3)(a)
  referred to above.

  Strict adherence of this requirement, despite its mandatory
  nature, has not been enforced
  by the respective entities’ managements and the authorities
  concerned. My strong
  contention is that, enforcement of the above requirements by the
  authorities concerned and
  the Minister responsible may have been lacking in the past. There

• Page 452 of 475

• may therefore be a need,
  whilst ensuring timely accountability of public resources, to
  take certain statutory bodies
  to task for non-compliance with mandatory statutory requirements.

  By virtue of Section 63(4) of the Public Finance (Management)
  (Amendment) Act 2016,
  the Finance Minister is required to table the reports of the
  respective statutory bodies in
  Parliament after they are received. The following arrears
  situation implies that a lot of
  statutory bodies reports may not have been tabled in Parliament
  as required, and thus, the
  accountability to Parliament in these respects has been far short
  of the desired.

  82.4 CURRENT YEAR AUDITS (2019 AUDITS)

  Entities totalling 125 subject to audit by the Auditor-General
  comprise 79 Public Bodies
  and their subsidiaries, 44 National Government owned companies
  and 2 companies in
  which the National Government has shareholdings (referred to as
  Section ‘C’ Companies).

  -322-

  TYPES OF ENTITIES SUBJECT TO AUDIT

  Table 1

• Page 453 of 475

• Section Types of Audit
  Number of Entities

  2019/2020
  2018/2019

  (A) Public Bodies and their Subsidiaries 79
  80

  (B) National Government Owned Companies 44
  43

  (C) National Government Shareholdings in other Companies2
  2

  125
  125

  Table 1. Shows the total of Types of Entities subject to Audit.

  Chart 1

  National Government Types of Audits National
  Government
  Owned Companies Shareholdings
  in other
  Companies
  35%
  2%

• Page 454 of 475

• Public Bodies
  and their

  Subsidiaries

  63%

  Chart 1. Shows the percentages of Types of Entities subject to Audit
  during 2019/2020 Audit Cycle.

• Page 455 of 475

• -323-

  82.5 STATUS OF CURRENT YEAR AUDITS

  Each of the 123 entities, except Section ‘C’ Companies are
  subject to audit and required
  under Section 63(3)(c) of the Public Finance (Management)
  (Amendment) Act 2016 to
  submit annual financial statements for audit. Information
  available in my Office shows that
  only 45 entities have submitted their financial statements for
  2019 (Schedule A) for audit
  up to the time of preparing this Report. A total of 78 entities
  have not submitted their 2019
  financial statements (Schedule A) for audit in 2019. It could
  therefore be logically
  concluded that, about 63% of the public bodies might not have
  submitted their annual
  reports and financial statements for 2019 together with my
  reports on them, to the
  respective Ministers for tabling in the National Parliament on
  or before 30 April 2020.

  Table 2 and Chart 2 shown below, and Schedule A attached show
  the status of the current
  year audits.

• Page 456 of 475

• -324-

  STATUS OF CURRENT YEAR AUDITS 2019

  Table 2

  No. Status of Current Year Audits Number
  of Entities
  2019/2020
  2018/2019
  1 Audits completed and reports issued thereon (Schedule A)3
  6
  2 Audits substantially completed (Schedule A) 1
  5
  3 Audits in progress (Schedule A) 32
  23
  4 Audits to commence shortly (Schedule A) 9
  17
  5 Financial Statements not submitted (Schedule A) 78
  72
  123
  123

  Table 2. Shows the total of Status of Current Year (2019 Audits)
  (Schedule A).

  Chart 2

  Status of Current Year Audits 2019
  Audits completed and
  reports issued thereon Audits

• Page 457 of 475

• substantially
  (Schedule A) completed
  (Schedule A)
  3% 1%

  Audits in progress

  (Schedule A)

  26%

  Audits to commence

  shortly (Schedule A)
  Financial Statements
  7%
  not submitted
  (Schedule A)
  63%

  Chart 2. Shows the percentages of Audit Status for the Current Year
  (2019) during 2019/2020 Audit Cycle. (Schedule A).

  -325-

• Page 458 of 475

• 82.6 AUDITS IN ARREARS (2018 AND PRIOR YEARS)

  Records available in my Office show that a total of 128 entities
  (238 audits) were in the
  Audit in Arrears category due to non-submission of financial
  statements on time. Table 3
  and Chart 3 shown below, and Schedule B attached provide more
  details of these.

  -326-

• Page 459 of 475

• STATUS OF AUDITS IN ARREARS BY NUMBER OF ENTITIES

  (2018 AND PRIOR YEARS)

  Table 3A

  Status of Audits in Arrears by No. of Entities
  No. Number of
  Entities
  (2018 and Prior Years)

  2019/2020
  2018/2019

  1 Audits substantially completed (Schedule B) 30 30

  2 Audits in progress (Schedule B) 41 24

  3 Audits to commence shortly (Schedule B) 15 16

  4 Financial Statements not submitted (Schedule B) 42 36

  128
  106
  Table 3A. Shows the Status of Audits in Arrears by number of
  Entities for 2018 and Prior Years during 2019/2020 Audit
  Cycle. (Schedule B).

  Chart 3A

  Status of Audits in Arrears by number of Entities

  (2018 and prior years)

  Financial Statements Audits
  substantially
  not submitted completed
  (Schedule B)
  (Schedule B) 23%
  33%

• Page 460 of 475

• Audits
  in progress
  Audits to commence
  (Schedule B)
  shortly (Schedule B) 32%
  12%

  Chart 3A. Shows the percentages of Audit Status for Audits in
  Arrears by number of Entities for 2018 and Prior Years during

  2019/2020 Audit Cycle. (Schedule B).

• Page 461 of 475

• -327-

  STATUS OF AUDITS IN ARREARS BY NUMBER OF AUDITS
  (2018 AND PRIOR YEARS)

  Table 3B

  No. Status of Audits in Arrears by No. Of Audits (2018 &
  prior years)Number of Audits

  2019/2020 2018/2019
  1 Audits substantially completed (Schedule B)
  48 44
  2 Audits in progress (Schedule B)
  59 32
  3 Audits to commence shortly (Schedule B)
  30 35
  4 Financial Statements not submitted (Schedule B)
  101 86

  238 197

  Table 3B. Shows the Status of Audits in Arrears by number of Audits
  for 2018 and Prior Years during 2019/2020 Audit Cycle.
  (Schedule B).
  Chart 3B

  Status of Audits in Arrears by number of Audits

  (2018 and prior years)

  Audits substantially
  Financial Statements
  completed (Schedule B)
  not submitted
  20%
  (Schedule B)
  42%

• Page 462 of 475

• Audits in progress

  (Schedule B)
  Audits to commence
  25%
  shortly (Schedule B)
  13%

  Chart 3B. Shows the percentages of Audit Status for Audits in
  Arrears by number of Audits for 2018 and Prior Years during
  2019/2020 Audit Cycle. (Schedule B).

  -328-

  82.7 LONG OUTSTANDING FINANCIAL STATEMENTS
  During this Audit Cycle (2019/2020), 101 audit entities were in
  the arrears category,
  increased by two compared to prior year (2018). Of these 101
  entities, 237 financial
  statements for periods ranging from one year to seven years have
  still not been submitted.
  In other words, they still have financial statements outstanding
  for the years from 2012 to
  2018. Details of these are shown below in Table 4, Chart 4 and
  also in Schedule C
  attached.

• Page 463 of 475

• -329-

  LONG OUTSTANDING FINANCIAL STATEMENTS
  BY NUMBER OF ENTITIES
  (2018 AND PRIOR YEARS)

  Table 4A

  No. Years Outstanding by Entities
  Number of Entities

  2019 Report 2018 Report
  1 One Year (Schedule C)
  42 20
  2 Two Years (Schedule C)
  25 5
  3 Three Years (Schedule C)
  13 2
  4 Four Years (Schedule C)
  8 1
  5 Five Years (Schedule C)
  6 4
  6 Six Years (Schedule C)
  5 3
  7 Seven Years (Schedule C)

• Page 464 of 475

• 2 0
  8 Eight Years (Schedule C)
  0 1

  101 36

  Table 4A. Shows the total of Long Outstanding Financial Statements
  by number of Entities during 2019/2020 Audit Cycle.
  (Schedule C).
  Chart 4A

  Long Outstanding Financial Statements by number
  of Entities

  45

  40

  35

  30

  25

  20

  15

  10

  5

  0
  One Year Two Years Three Years Four Years Five
  Years Six Years Seven Years Eigth Years
  (Schedule C)(Schedule C) (Schedule C)(Schedule C)
  (Schedule C) (Schedule C)(Schedule C) (Schedule C)

  2019 Report 2018
  Report

  Chart 4A. Shows the percentages of Long Outstanding Financial
  Statements by number of Entities during 2019/2020 Audit Cycle
  (Schedule C).

  -330-

  LONG OUTSTANDING FINANCIAL STATEMENTS
  BY NUMBER OF AUDITS

• Page 465 of 475

• (2018 AND PRIOR YEARS)

  Table 4B

  No. Years Outstanding by Audits
  Number of Audits

  2019 Report 2018 Report
  1 One Year (Schedule C)
  42 20
  2 Two Years (Schedule C)
  50 10
  3 Three Years (Schedule C)
  39 6
  4 Four Years (Schedule C)
  32 4
  5 Five Years (Schedule C)
  30 20
  6 Six Years (Schedule C)
  30 18
  7 Seven Years (Schedule C)
  14 0
  8 Eight Years (Schedule C)
  0 8

  237 86

  Table 4B. Shows the total of Long Outstanding Financial Statements
  by number of Audits during 2019/2020 Audit Cycle.
  (Schedule C).

  Chart 4B

  Long Outstanding Financial Statements by

  Number of Audits (2018 and Prior Years)

  50
  45
  40
  35
  30
  25
  20
  15
  10
  5
  0
  One Year Two Years Three Years Four Years Five Years
  Six Years Seven Eight Years
  (Schedule (Schedule (Schedule (Schedule (Schedule

• Page 466 of 475

• (Schedule Years ( Schedule
  C) C) C) C) C)
  C) (Schedule C)

  C)

  2019 Report 2018
  Report

  Chart 4B. Shows the percentages of Long Outstanding Financial
  Statements by number of Audits during 2019/2020 Audit
  Cycle. (Schedule C).

  -331-

  82.8 STATUS OF AUDITS AS AT 30 JUNE 2020

  As illustrated in Executive Summary Table A, during July 2019 and
  June 2020 Audit
  Cycle, a total of 221 audits were undertaken by the Audit Office.
  Out of 221 audits
  carried out, 81 audit reports were issued. Table 5 and Chart 5
  shown below provide
  the details of the Status of Audits during the period July 2019
  to June 2020.

• Page 467 of 475

• -332-

  STATUS OF AUDITS AS AT 30
  JUNE 2020

  Table 5

  No. Status of
  Audits
  2019/2020Number of Audits 2018/2019
  1 Audits completed and reports issued thereon
  (Schedules A & E)
  81 123
  2 Audits substantially completed (Schedules A & B)
  49 49
  3 Audits in progress (Schedules A & B)
  91 55
  4 Audits to commence shortly (Schedules A & B)
  39 52
  5 Financial Statements not submitted (Schedules A & B)
  179 158

  439 437

  Table 5. Shows the Status of Audits as at 30 June 2020 for the
  2019/2020 Audit Cycle. (Schedules A&E and A&B).

  Chart 5

  Status of Audits as at
  30 June 2020

  Audits completed and

  reports issued thereon

• Page 468 of 475

• (Schedule A & E) Audits
  substantially

  18% completed (Schedule A & B)
  Financial Statements not
  11%
  submitted (Schedule A & B)
  41%

  Audits to commence shortly Audits in
  progress

  (Schedule A & B) (Schedule A & B)

  9% 21%

  Chart 5. Shows the percentages of Audit Status as at 30 June 2020
  for the 2019/2020 Audit Cycle (Schedules A&E and A&B).

  -333-

  ACKNOWLEDGEMENTS

• Page 469 of 475

• My audit staff worked conscientiously and successfully completed
  audits entrusted to them.
  Their devotion to duty, their integrity and loyalty are highly
  appreciated.

  I extend my appreciation and gratitude to the Government Printing
  Office staff, for their efforts
  in completing the printing of this Report within the limited time
  frame available. I also
  acknowledge the co-operation and the assistance of all Heads of
  Public Bodies and National
  Government Owned Companies, and Registered Company Auditors and
  their staff who assisted
  as my Authorised Auditors.

  I would also like to thank the Chairman and the members of the
  Permanent Parliamentary
  Committee on Public Accounts of PNG and the Secretary for the
  continuous interest shown in
  my work.

  SIGNED AT WAIGANI ON 10th SEPTEMBER
  TWO THOUSAND AND TWENTY

  GORDON KEGA MBA, CPA
  Acting Auditor-General of Papua New Guinea

• Page 470 of 475

• -335-

  SCHEDULES

  -337-

  Schedule ‘A’

  STATUS OF CURRENT YEAR (2019) AUDIT
  (i) AUDITS COMPLETED AND REPORTS ISSUED THEREON
  No. Section Para. No. Entity
  No. of Audits
  1 A 3 Bank of Papua New Guinea
  1
  2 A 12 Independence Fellowship Trust
  1
  3 B 68 Motor Vehicles Insurance Limited
  1

  3

  (ii) AUDITS SUBSTANTIALLY COMPLETED
  No. Section Para. No. Entity
  No. of Audits
  1 A 5 Civil Aviation Safety Authority of Papua
  New Guinea 1

  1

  (iii) AUDITS IN PROGRESS
  No. Section Para. No. Entity
  No. of Audits
  1 A 2 APEC Papua New Guinea 2018 Co-ordination
  Authority 1
  2 A 18 Kumul Consolidated Holdings
  1
  3 A 18A General Business Trust
  1
  4 A 18B Kumul Technology Development Corporation
  Limited 1
  5 A 18C PNG Dams Limited
  1
  6 A 25 National Capital District Commission
  1
  7 A 42 Papua New Guinea Accident Investigation
  Commission 1
  8 B 63 Bmobile Limited
  1
  9 B 63A Bmobile (Solomon Islands) Limited
  1
  10 B 64 Kumul Agriculture Limited

• Page 471 of 475

• 1
  11 B 65 Kumul Petroleum Holdings Limited
  1
  12 B 65A Eda Oil Limited
  1
  13 B 65B Kumul Exploration (Asia) Limited
  1
  14 B 65H Kumul Lending Co Pte Limited
  1
  15 B 65I Kumul LNG Limited
  1
  16 B 65J Kumul Petroleum (Development) Limited
  1
  17 B 65K Kumul Petroleum (Investments) Limited
  1
  18 B 65L Kumul Petroleum (Kroton) Limited
  1
  19 B 65M Kumul Petroleum (Pipeline) Limited
  1
  20 B 65N Kumul Petroleum (Tech and Advisory) Limited
  1
  21 B 65O Kumul Petroleum Marketing Pte Limited
  1
  22 B 65P Kumul Security Agent Limited
  1
  23 B 65Q NPCP Oil Company Pty Limited
  1
  24 B 69B Airports Investments Limited
  1
  25 B 71 Papua New Guinea Ports Corporation Limited
  1
  26 B 75 Post (PNG) Limited
  1
  27 B 76 Telikom (PNG) Limited
  1
  28 B 76A DATEC (PNG) Limited
  1
  29 B 76B Kalang Advertising Limited
  1
  30 B 76C Media Niugini Limited (EMTV)
  1
  31 B 76D PNG Directories Limited
  1
  32 B 77 Water PNG Limited
  1

  32

  -339-

  (iv) AUDITS TO COMMENCE SHORTLY

  No. Section Para. No. Entity

• Page 472 of 475

• No. of Audits
  1 A 13 Independent Consumer and Competition
  Commission 1
  2 A 16 Investment Promotion Authority
  1
  3 A 23 National AIDS Council Secretariat
  1
  4 A 26 National Cultural Commission
  1
  5 A 32 National Maritime Safety Authority
  1
  6 A 33 National Museum and Art Gallery
  1
  7 A 35 National Roads Authority
  1
  8 A 48 Papua New Guinea Maritime College
  1
  9 A 57 Tourism Promotion Authority
  1

  9

  (v) FINANCIAL STATEMENTS NOT SUBMITTED

  Para.
  No. of Last Report Date of
  No. Section No. Entity
  Audits Issued Report
  1 A 4 Border Development Authority
  1 2013 28-11-16
  2 A 4A Papua New Guinea Maritime Transport Limited
  1 2012 29-10-15
  3 A 6 Climate Change and Development Authority
  1 2014 19-03-20
  4 A 7 Cocoa Board of Papua New Guinea
  1 2017 18-03-19
  5 A 7A Cocoa Pod Borer Project Fund
  1 2017 18-03-19
  6 A 7B Cocoa Stabilisation Fund
  1 2017 18-03-19
  7 A 8 Cocoa Coconut Institute Limited of Papua New
  Guinea 1 2013 09-08-16
  8 A 9 Coffee Industry Corporation Limited
  1 2016 29-11-19
  9 A 9A Coffee Industry Fund
  1 2016 29-11-19
  10 A 9B Patana No.61 Limited
  1 2016 29-11-19
  11 A 10 Conservation and Environment Protection
  Authority 1 2017 22-06-20
  12 A 11 Government Printing Office
  1 2015 10-09-18
  13 A 14 Industrial Centres Development Corporation
  1 2017 02-09-19

• Page 473 of 475

• 14 A 15 Internal Revenue Commission
  1 2015 22-03-19
  15 A 17 Kokonas Indastri Koporesen
  1 2018 29-05-20
  16 A 17A Papua New Guinea Coconut Extension Fund
  1 2018 29-05-20
  17 A 17B Papua New Guinea Coconut Research Fund
  1 2018 29-05-20
  18 A 19 Legal Training Institute
  1 2016 22-06-20
  19 A 20 Mineral Resources Authority
  1 2014 15-06-17
  20 A 21 National Agriculture Quarantine and
  Inspection Authority1 2017 28-08-19
  21 A 22 National Agricultural Research Institute
  1 2018 14-02-20
  22 A 24 National Broadcasting Corporation
  1 2015 28-08-19
  23 A 25A National Capital District Botanical
  Enterprises Limited 1 2012 04-05-15
  24 A 25B Port Moresby Nature Park Limited
  1 2016 27-08-19
  25 A 27 National Economic and Fiscal Commission
  1 2018 10-10-19
  26 A 28 National Fisheries Authority
  1 2016 24-05-19
  27 A 29 National Gaming Control Board
  1 2015 15-05-19
  National Gaming Control Board Community
  Benefit
  28 A 29A Fund Trust
  1 2015 15-05-19
  29 A 30 National Housing Corporation
  1 2014 21-11-17
  30 A 30A National Housing Estate Limited
  1 New Inclusion
  National Information and Communications
  31 A 31 Technology Authority (NICTA)
  1 2015 15-05-19
  32 A 34 National Research Institute
  1 2016 28-06-17
  33 A 36 National Training Council
  1 2016 28-02-18
  34 A 37 National Volunteer Service
  1 2016 29-05-17
  35 A 38 National Youth Development Authority
  1 2017 14-10-19
  36 A 39 Office of the Insurance Commissioner
  1 2017 13-05-19
  -340-

  Para.
  No. of Last Report Date of

• Page 474 of 475

• No. Section No. Entity
  Audits Issued Report
  37 A 40 Oil Palm Industry Corporation
  1 2011 30-09-16
  38 A 41 Ombudsman Commission of Papua New Guinea
  1 2018 18-02-20
  39 A 43 Papua New Guinea Customs Service
  1 2016 31-05-19
  40 A 44 Papua New Guinea Forest Authority
  1 2014 11-06-20
  Papua New Guinea Immigration and
  Citizenship
  41 A 45 Service Authority
  1 2017 13-05-19
  42 A 46 Papua New Guinea Institute of Medical
  Research 1 2017 25-02-19
  43 A 47 Pacific Institute of Leadership and
  Governance 1 2014 20-03-20
  Papua New Guinea National Institute of
  Standards
  44 A 49 and Industrial Technology
  1 2016 10-12-18
  45 A 50 Papua New Guinea Sports Foundation
  1 2015 30-04-19
  46 A 51 Papua New Guinea University of
  Technology 1 2017
  11-03-20
  47 A 51A National Analytical and Testing Services
  Limited 1 2011 04-04-16
  48 A 51B Unitech Development and Consultancy
  Company Limited 1 2013 22-10-15
  49 A 52 Parliamentary Members’ Retirement
  Benefits Fund 1 2016 28-02-18
  50 A 53 Public Curator of Papua New Guinea
  1 2013 18-10-17
  51 A 54 Road Traffic Authority
  1 2018 27-05-20
  52 A 55 Security Industries Authority
  1 2016 21-04-20
  53 A 56 Small and Medium Enterprises Corporation
  1 2017 30-09-19
  54 A 58 University of Goroka
  1 2016 24-09-18
  55 A 58A Unigor Consultancy Limited
  1 2015 27-04-20
  56 A 58B Unigor Humi Catering Limited
  1 New Inclusion
  57 A 59 University of Natural Resources and
  Environment 1 2014 29-10-16
  58 A 60 University of Papua New Guinea
  1 2014 03-08-18
  59 A 60A Unisave Limited
  1 2011 25-08-14
  60 A 60B Univentures Limited

• Page 475 of 475

• 1 2011 24-06-14
  61 B 62 Air Niugini Limited
  1 2015 13-12-17
  62 B 62A Air Niugini Cargo Limited
  1 New Inclusion
  63 B 62B Air Niugini Properties Limited
  1 New Inclusion
  64 B 62C Business Travel Centre Limited
  1 New Inclusion
  65 B 62D Link-PNG Limited
  1 2015 13-12-17
  66 B 65C Kumul Gas Foreland 239 B.V
  1 New Inclusion
  67 B 65D Kumul Gas Foreland 261 B.V
  1 New Inclusion
  68 B 65E Kumul Gas Foreland 268 B.V
  1 New Inclusion
  69 B 65F Kumul Gas Foreland 269 B.V
  1 New Inclusion
  70 B 65G Kumul Gas Niugini B.V
  1 New Inclusion
  71 B 66 Livestock Development Corporation
  Limited 1 2009 31-10-12
  72 B 67 Mineral Resources Development Company
  Limited 1 2016 27-04-20
  73 B 69 National Airports Corporation Limited
  1 2018 24-06-19
  74 B 69A Airport City Development Limited
  1 2018 24-06-19
  75 B 70 NCD Water and Sewerage Limited (Eda
  Ranu) 1 2016 18-05-20
  76 B 72 PNG Air Services Limited
  1 2015 08-08-19
  77 B 73 PNG DataCo Limited
  1 2016 20-05-20
  78 B 74 PNG Power Limited
  1 2017 01-05-19

  78

  -341-

  Schedule ‘B’