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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

• 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)