Report of the Auditor-General Part IV 2019 on the Accounts of Public Authorities and Statutory Bodies

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    Auditor-General's annual report for 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.

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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: agopng@ago.gov.pg
    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

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  • 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

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  • 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

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  • – 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 c