Report of the Auditor-General Part IV 2019 on the Accounts of Public Authorities and Statutory Bodies
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Part IV Report of the
Auditor GeneralThis Report contains:
– Public Bodies and their Subsidiaries
– National Government Owned Companies
– National Government Shareholdings in Other CompaniesPart 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 CompaniesAuditor-General’s Office of Papua New Guinea
Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: agopng@ago.gov.pg
Website: www.ago.gov.pgOFFICE OF THE AUDITOR-GENERAL
10 September 2020
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Honourable Job Pomat, MP
Speaker of the National Parliament
Parliament House
WAIGANI
National Capital DistrictDear 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-GeneralLevel 6 PO Box 423
TISA Investment Haus WAIGANI, NCD -
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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-
xxviiSECTION 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 -
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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 -
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-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 303SECTION 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 -
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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 -
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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; -
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-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 -
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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
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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 -
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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-
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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 -
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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 tothe Finance Departmental Head before end of fourth calendar
month from close of a fiscalyear, a performance and management report of its operations
for the year ended 31December preceding, together with financial statements to
enable the Finance Minister topresent such report and statements to the Parliament
Before submitting the financial statements to the Minister,
Section 63(3)(c) requires astatutory body to submit the financial statements to the
-
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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 financialstatements to be audited and overall some 101 financial
statements for 2018 and prioryears had not been submitted for audit (Refer Table A).
Moreover, the situation hasdeteriorated during this cycle.
Due to Covid-19 pandemic outbreak, Government response has
resulted in virus lock-downsand reduced economic activities which has resulted in
reduction of current year audits to 3during 2019/2020 cycle. Further, 42 audits were either
substantially completed, in progressor to commence shortly and 78 audits were unable to commence
due to the non-submissionof the financial statements during the cycle.
The details of the audits in arrears and those entities
whose financial statements have beenoutstanding 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)
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Audits Audits to Financial
Audits Audits in
Total Total
Year Substantially Commence Statements
Completed Progress
2019/20202018/2019
Completed Shortly not Submitted2019 3 1 32 9 78
123 –2018 31 11 27 6 42
117 1232017 22 13 17 6 25
83 1192016 14 8 8 5 13
48 812015 5 6 5 4 8
28 552014 5 4 1 2 6
18 332013 1 1 1 2 5
10 142012 0 3 0 2 2
7 82011 0 1 0 2 0
3 22010 0 1 0 1 0
2 2Total 81 49 91 39 179
439 437 -
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-x-
Executive
SummaryTable 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. -
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• 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)