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: [email protected]
Website: www.ago.gov.pgOFFICE OF THE AUDITOR-GENERAL
10 September 2020
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Page 2 of 475
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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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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);
• Accounting, administrative and procedural manuals not being
available;
• Employment contracts, salaries and contract gratuities not
available; and1 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 -
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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
-
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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 havegone into arrears due to non-submission of financial statements
since 2012 are given below inTable B and Schedule ‘B(iv)’.
Table B
Financial Statements Not Submitted
Para.
No. of
No. Section
No. Entity
Year Audits1 A 4 Border Development Authority
2018 12 A 4A Papua New Guinea Maritime Transport Limited
2013 to 2018 63 A 6 Climate Change and Development Authority
2018 14 A 8 Cocoa Coconut Institute Limited of Papua New
Guinea 2017 & 2018 25 A 15 Internal Revenue Commission
2018 16 A 19 Legal Training Institute
2017 & 2018 2 -
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7 A 20 Mineral Resources Authority
2017 & 2018 28 A 24 National Broadcasting Corporation
2018 19 A 25A National Capital District Botanical
Enterprises Limited 2013 to 2018 610 A 29 National Gaming Control Board
2018 111 A 29A National Gaming Control Board Community
Benefit Fund Trust 2018 112 A 30 National Housing Corporation
2018 113 A 30A National Housing Estate Limited
2015 to 2018 414 A 34 National Research Institute
2018 115 A 36 National Training Council
2018 116 A 37 National Volunteer Service
2017 & 2018 217 A 40 Oil Palm Industry Corporation
2015 to 2018 418 A 44 Papua New Guinea Forest Authority
2017 & 2018 219 A 45 Papua New Guinea Immigration and Citizenship
Service Authority 2018 120 A 47 Pacific Institute of Leadership and Governance
2018 1Papua New Guinea National Institute of
Standards and Industrial
21 A 49
2017 & 2018 2
Technology22 A 50 Papua New Guinea Sports Foundation
2016 to 2018 323 A 51A National Analytical and Testing Services
Limited 2013 to 2018 6 -
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24 A 51B Unitech Development and Consultancy Company
Limited 2014 to 2018 525 A 52 Parliamentary Members’ Retirement Benefits
Fund 2018 126 A 53 Public Curator of Papua New Guinea
2018 127 A 55 Security Industries Authority
2017 & 2018 228 A 58 University of Goroka
2018 129 A 58A Unigor Consultancy Limited
2016 to 2018 330 A 58B Unigor Humi Catering Limited
2016 to 2018 331 A 59 University of Natural Resources and
Environment 2016 to 2018 332 A 60 University of Papua New Guinea
2018 133 A 60A Unisave Limited
2012 to 2018 734 A 60B Univentures Limited
2012 to 2018 735 B 65C Kumul Gas Foreland 239 B.V
2017 & 2018 236 B 65D Kumul Gas Foreland 261 B.V
2017 & 2018 237 B 65E Kumul Gas Foreland 268 B.V
2017 & 2018 238 B 65F Kumul Gas Foreland 269 B.V
2017 & 2018 239 B 65G Kumul Gas Niugini B.V
2017 & 2018 240 B 67 Mineral Resources Development Company Limited
2018 141 B 70 NCD Water and Sewerage Limited (Eda Ranu)
2018 1 -
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42 B 72 PNG Air Services Limited
2016 to 2018 3101
-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. -
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-
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
SystemsAs 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-
-
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-
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-
-
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-
Executive Summary
ATTACHMENT ‘A’
STATUS OF CURRENT YEAR AUDITS 2019
No. Status of Current Year Audits Number
of Entities2019/2020
2018/20191 Audits completed and reports issued thereon (Schedule A)3
62 Audits substantially completed (Schedule A) 1
53 Audits in progress (Schedule A) 32
234 Audits to commence shortly (Schedule A) 9
175 Financial Statements not submitted (Schedule A) 78
72123
123Status 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.
-
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-
-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 Audits2019/2020 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 86238 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 Audits2019/2020 2018/2019
1 Audits completed and reports issued thereon (Schedules A & E)
81 1232 Audits substantially completed (Schedules A & B)
49 493 Audits in progress (Schedules A & B)
91 554 Audits to commence shortly (Schedules A & B)
39 525 Financial Statements not submitted (Schedules A & B)
179 158439 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 351respectively.
-
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-
-xx-
Executive Summary
ATTACHMENT ‘D’
TYPES OF AUDIT OPINIONS ISSUED
(i) UNQUALIFIED OPINION
No. Section Para. Entity
Year No. of
No.
Audits1 A 3 Bank of Papua New Guinea
2019 12 A 12 Independence Fellowship Trust
2018 & 2019 23 A 13 Independent Consumer and Competition
Commission 2018 14 A 16 Investment Promotion Authority
2018 15 A 17 Kokonas Indastri Koporesen
2018 16 A 17A Papua New Guinea Coconut Extension Fund
2018 17 A 17B Papua New Guinea Coconut Research Fund
-
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-
2018 1
8 A 18 Kumul Consolidated Holdings
2017 19 A 18C PNG Dams Limited
2017 110 A 22 National Agricultural Research Institute
2018 111 A 25B Port Moresby Nature Park Limited
2016 112 A 27 National Economic and Fiscal Commission
2018 113 A 32 National Maritime Safety Authority
2018 114 A 35 National Roads Authority
2018 115 A 51 Papua New Guinea University of Technology
2017 116 A 54 Road Traffic Authority
2017 & 2018 217 A 57 Tourism Promotion Authority
2018 118 B 65 Kumul Petroleum Holdings Limited
2018 119 B 65A Eda Oil Limited
2017 & 2018 220 B 65B Kumul Exploration (Asia) Limited
2018 121 B 65H Kumul Lending Co Pte Limited
2018 122 B 65I Kumul LNG Limited
2017 & 2018 223 B 65L Kumul Petroleum (Kroton) Limited
2018 124 B 65M Kumul Petroleum (Pipeline) Limited
2017 & 2018 225 B 65N Kumul Petroleum (Tech and Advisory) Limited
-
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-
2016 to 2018 3
26 B 65O Kumul Petroleum Marketing Pte Limited
2018 127 B 65P Kumul Security Agent Limited
2018 128 B 75 Post (PNG) Limited
2018 129 B 76A DATEC (PNG) Limited
2017 130 B 76B Kalang Advertising Limited
2016 131 B 76C Media Niugini Limited (EMTV)
2017 132 B 76D PNG Directories Limited
2017 139
-xxi-
Executive Summary
(ii) QUALIFIED OPINION
-
Page 38 of 475
-
Para.
No. of
No. Section Entity
Year
No.
Audits1 A 5 Civil Aviation Safety Authority of Papua New
Guinea 2018 12 A 10 Conservation and Environment Protection
Authority 2017 13 A 14 Industrial Centres Development Corporation
2017 14 A 18A General Business Trust
2017 15 A 18B Kumul Technology Development Corporation
Limited 2017 16 A 19 Legal Training Institute
2014 to 2016 37 A 21 National Agriculture Quarantine and
Inspection Authority 2017 18 A 23 National AIDS Council Secretariat
2018 19 A 25 National Capital District Commission
2017 & 2018 210 A 41 Ombudsman Commission of Papua New Guinea
2017 & 2018 211 A 42 Papua New Guinea Accident Investigation
Commission 2018 112 A 47 Pacific Institute of Leadership and
Governance 2014 113 A 48 Papua New Guinea Maritime College
2018 114 A 55 Security Industries Authority
2016 115 A 56 Small and Medium Enterprises Corporation
2016 & 2017 216 B 67 Mineral Resources Development Company Limited
2016 1 -
Page 39 of 475
-
17 B 68 Motor Vehicles Insurance Limited
2019 118 B 70 NCD Water and Sewerage Limited (Eda Ranu)
2015 & 2016 219 B 71 Papua New Guinea Ports Corporation Limited
2018 120 B 73 PNG DataCo Limited
2016 126
(iii) DISCLAIMER OPINION
No. Section Para. Entity
Year No. of
No.
Audits1 A 6 Climate Change and Development Authority
2014 12 A 9 Coffee Industry Corporation Limited
2016 13 A 9A Coffee Industry Fund
2016 14 A 9B Patana No.61 Limited
2016 15 A 24 National Broadcasting Corporation
2015 16 A 25 National Capital District Commission
2016 17 A 26 National Cultural Commission
2015 to 2017 38 A 38 National Youth Development Authority
2017 19 A 44 Papua New Guinea Forest Authority
2013 & 2014 2 -
Page 40 of 475
-
10 A 58A Unigor Consultancy Limited
2014 & 2015 211 B 77 Water PNG Limited
2017 115
(iv) ADVERSE OPINION
Para.
No. of
No. Section Entity
Year
No.
Audits1 B 64 Kumul Agriculture Limited
2018 11
-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
2013APEC Papua New Guinea 2018 Co-
1 A 2
New Inclusion
ordination Authority2 A 3 Bank of Papua New Guinea
Unqualified UnqualifiedUnqualified Unqualified Unqualified
Unqualified Unqualified3 A 4 Border Development Authority
DisclaimerPapua New Guinea Maritime Transport
4 A 4A
LimitedCivil Aviation Safety Authority of Papua New
5 A 5
Qualified Qualified Qualified Qualified Qualified
Qualified
Guinea6 A 6 Climate Change and Development Authority
Disclaimer Disclaimer7 A 7 Cocoa Board of Papua New Guinea
Qualified Qualified Qualified Qualified Qualified8 A 7A Cocoa Pod Borer Project Fund
Qualified Qualified Unqualified Unqualified Unqualified9 A 7B Cocoa Stabilisation Fund
Unqualified Unqualified Unqualified Unqualified UnqualifiedCocoa Coconut Institute Limited of Papua
10 A 8
Disclaimer
New Guinea11 A 9 Coffee Industry Corporation Limited
-
Page 42 of 475
-
Disclaimer Disclaimer Disclaimer Disclaimer
12 A 9A Coffee Industry Fund
Disclaimer Disclaimer Disclaimer Disclaimer13 A 9B Patana No.61 Limited
Disclaimer Disclaimer Disclaimer DisclaimerConservation and Environment Protection
14 A 10
Qualified
Authority15 A 11 Government Printing Office
Disclaimer Disclaimer Disclaimer16 A 12 Independence Fellowship Trust
Unqualified UnqualifiedUnqualified Unqualified Qualified
Qualified UnqualifiedIndependent Consumer and Competition
17 A 13
UnqualifiedUnqualified Unqualified Qualified Qualified
Unqualified
Commission18 A 14 Industrial Centres Development Corporation
Qualified Qualified Qualified Qualified Qualified19 A 15 Internal Revenue Commission
Unqualified Unqualified20 A 16 Investment Promotion Authority
UnqualifiedUnqualified Unqualified Unqualified Unqualified
Unqualified21 A 17 Kokonas Indastri Koporesen
UnqualifiedUnqualified Unqualified Unqualified Unqualified
Unqualified22 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
Unqualified24 A 18 Kumul Consolidated Holdings
Unqualified Unqualified Unqualified Unqualified Unqualified25 A 18A General Business Trust
Qualified Qualified Qualified Qualified DisclaimerKumul Technology Development
26 A 18B
Qualified Qualified Disclaimer Disclaimer Disclaimer
Corporation Limited27 A 18C PNG Dams Limited
Unqualified Unqualified Qualified Disclaimer Disclaimer28 A 19 Legal Training Institute
Qualified Qualified Qualified Qualified29 A 20 Mineral Resources Authority
Qualified QualifiedNational Agriculture Quarantine and
30 A 21
Qualified Qualified Qualified Qualified Qualified
Inspection Authority31 A 22 National Agricultural Research Institute
UnqualifiedUnqualified Unqualified Unqualified Unqualified
Unqualified32 A 23 National AIDS Council Secretariat
Qualified Unqualified Unqualified Qualified Disclaimer
Disclaimer33 A 24 National Broadcasting Corporation
Disclaimer Disclaimer Disclaimer34 A 25 National Capital District Commission
Qualified Qualified Disclaimer Disclaimer Disclaimer
Disclaimer -
Page 44 of 475
-
National Capital District Botanical
35 A 25A
Enterprises Limited36 A 25B Port Moresby Nature Park Limited
Unqualified Unqualified Unqualified Qualified37 A 26 National Cultural Commission
Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer38 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 201339 A 28 National Fisheries Authority
Disclaimer Qualified Qualified Qualified40 A 29 National Gaming Control Board
Qualified Qualified QualifiedNational Gaming Control Board Community
41 A 29A
Qualified Qualified Qualified
Benefit Fund Trust42 A 30 National Housing Corporation
-
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-
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 Qualified46 A 33 National Museum and Art Gallery
Qualified Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer47 A 34 National Research Institute
Qualified UnqualifiedUnqualified Unqualified48 A 35 National Roads Authority
UnqualifiedUnqualified UnqualifiedUnqualified Qualified Qualified49 A 36 National Training Council
Qualified Qualified Qualified Qualified50 A 37 National Volunteer Service
Qualified Qualified Qualified Qualified51 A 38 National Youth Development Authority
Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer52 A 39 Office of the Insurance Commissioner
New Inclusion53 A 40 Oil Palm Industry Corporation
Ombudsman Commission of Papua New
54 A 41
Qualified Qualified Qualified Unqualified Qualified Unqualified
GuineaPapua 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 Qualified57 A 44 Papua New Guinea Forest Authority
Disclaimer DisclaimerPapua New Guinea Immigration and
58 A 45
Unqualified Qualified Disclaimer Disclaimer Qualified
Citizenship Service AuthorityPapua New Guinea Institute of Medical
59 A 46
Qualified Qualified Disclaimer Disclaimer Disclaimer
ResearchPacific Institute of Leadership and
60 A 47
Qualified Qualified
Governance61 A 48 Papua New Guinea Maritime College
Qualified Qualified Qualified Qualified Disclaimer DisclaimerPapua New Guinea National Institute of
62 A 49
Qualified Qualified Qualified Qualified
Standards and Industrial Technology63 A 50 Papua New Guinea Sports Foundation
Disclaimer Disclaimer Disclaimer64 A 51 Papua New Guinea University of Technology
Unqualified UnqualifiedUnqualified Qualified QualifiedNational Analytical and Testing Services
65 A 51A
LimitedUnitech Development and Consultancy
66 A 51B
Adverse
Company LimitedParliamentary Members’ Retirement Benefits
-
Page 47 of 475
-
67 A 52
UnqualifiedUnqualifiedUnqualified Unqualified
Fund68 A 53 Public Curator of Papua New Guinea
Disclaimer69 A 54 Road Traffic Authority
UnqualifiedUnqualified UnqualifiedUnqualifiedUnqualified Unqualified70 A 55 Security Industries Authority
Qualified Qualified Qualified Qualified71 A 56 Small and Medium Enterprises Corporation
Qualified Qualified Qualified Qualified Qualified72 A 57 Tourism Promotion Authority
UnqualifiedUnqualified UnqualifiedUnqualifiedUnqualified Unqualified73 A 58 University of Goroka
Disclaimer Disclaimer Disclaimer Disclaimer74 A 58A Unigor Consultancy Limited
Disclaimer Disclaimer Disclaimer75 A 58B Unigor Humi Catering Limited
University of Natural Resources and
76 A 59
Disclaimer Qualified
Environment77 A 60 University of Papua New Guinea
Qualified Qualified78 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 201381 B 62A Air Niugini Cargo Limited
New Inclusion82 B 62B Air Niugini Properties Limited
New Inclusion83 B 62C Business Travel Centre Limited
New Inclusion84 B 62D Link-PNG Limited
Unqualified85 B 63 Bemobile Limited
New Inclusion86 B 63A Bemobile (Solomon Islands) Limited
New Inclusion87 B 64 Kumul Agriculture Limited
Adverse88 B 65 Kumul Petroleum Holdings Limited
UnqualifiedUnqualifiedUnqualifiedUnqualified Unqualified89 B 65A Eda Oil Limited
UnqualifiedUnqualifiedUnqualified90 B 65B Kumul Exploration (Asia) Limited
UnqualifiedUnqualified -
Page 49 of 475
-
91 B 65C Kumul Gas Foreland 239 B.V
New Inclusion92 B 65D Kumul Gas Foreland 261 B.V
New Inclusion93 B 65E Kumul Gas Foreland 268 B.V
New Inclusion94 B 65F Kumul Gas Foreland 269 B.V
New Inclusion95 B 65G Kumul Gas Niugini B.V
New Inclusion96 B 65H Kumul Lending Co Pte Limited
UnqualifiedUnqualified97 B 65I Kumul LNG Limited
UnqualifiedUnqualifiedUnqualifiedUnqualified Unqualified98 B 65J Kumul Petroleum (Development) Limited
UnqualifiedUnqualified Unqualified99 B 65K Kumul Petroleum (Investments) Limited
UnqualifiedUnqualified Unqualified100 B 65L Kumul Petroleum (Kroton) Limited
UnqualifiedUnqualifiedUnqualified101 B 65M Kumul Petroleum (Pipeline) Limited
UnqualifiedUnqualifiedUnqualified102 B 65N Kumul Petroleum (Tech and Advisory)
UnqualifiedUnqualifiedUnqualifiedUnqualified
Limited103 B 65O Kumul Petroleum Marketing Pte Limited
UnqualifiedUnqualified104 B 65P Kumul Security Agent Limited
UnqualifiedUnqualified -
Page 50 of 475
-
105 B 65Q NPCP Oil Company Pty Limited
New Inclusion106 B 66 Livestock Development Corporation Limited
107 B 67 Mineral Resources Development Company
Qualified Disclaimer Disclaimer Disclaimer
Limited108 B 68 Motor Vehicles Insurance Limited
Qualified Qualified UnqualifiedUnqualified Qualified Qualified
Qualified109 B 69 National Airports Corporation Limited
Disclaimer Disclaimer Qualified Qualified Qualified Qualified110 B 69A Airport City Development Limited
Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer
Disclaimer111 B 69B Airports Investments Limited
UnqualifiedUnqualifiedUnqualifiedNCD 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
Limited114 B 72 PNG Air Services Limited
Qualified Qualified Qualified115 B 73 PNG DataCo Limited
Qualified Qualified Unqualified116 B 74 PNG Power Limited
Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer117 B 75 Post (PNG) Limited
UnqualifiedUnqualifiedUnqualifiedUnqualified Unqualified
Unqualified -
Page 51 of 475
-
118 B 76 Telikom (PNG) Limited
Qualified Qualified119 B 76A DATEC (PNG) Limited
UnqualifiedUnqualifiedUnqualified Unqualified120 B 76B Kalang Advertising Limited
UnqualifiedUnqualified Unqualified Unqualified121 B 76C Media Niugini Limited (EMTV)
UnqualifiedUnqualified122 B 76D PNG Directories Limited
UnqualifiedUnqualifiedUnqualified Unqualified Unqualified123 B 77 Water PNG Limited
Disclaimer Disclaimer Disclaimer Disclaimer Disclaimer-xxv-
Executive Summary
ATTACHMENT ‘F’
AUDITS IN ARREARS (2018 AND PRIOR YEARS) COMPLETED
DURING2019/2020
AUDIT CYCLE -
Page 52 of 475
-
Audits Completed
Para.
Total Audits Substantially Total
No. Section Entity
and Reports
No.
Units Completed UnitsIssued
1 A 3 Bank of Papua New Guinea
2019 12 A 4 Border Development Authority
2014 13 A 5 Civil Aviation Safety Authority of
Papua New Guinea 2018 14 A 6 Climate Change and Development
Authority 2014 15 A 8 Cocoa Coconut Institute Limited of
Papua New Guinea 2014
to 2016 36 A 9 Coffee Industry Corporation Limited
2016 17 A 9A Coffee Industry Fund
2016 18 A 9B Patana No.61 Limited
2016 19 A 10 Conservation and Environment Protection
Authority 2017 110 A 11 Government Printing Office
2016 to 2018 311 A 12 Independence Fellowship Trust
2018 & 2019 212 A 13 Independent Consumer and Competition
Commission 2018 113 A 14 Industrial Centres Development
Corporation 2017 1
2018 1 -
Page 53 of 475
-
14 A 15 Internal Revenue Commission
2017 & 2018 215 A 16 Investment Promotion Authority
2018 116 A 17 Kokonas Indastri Koporesen
2018 117 A 17A Papua New Guinea Coconut Extension Fund
2018 118 A 17B Papua New Guinea Coconut Research Fund
2018 119 A 18 Kumul Consolidated Holdings
2017 1 2018 120 A 18A General Business Trust
2017 1 2018 121 A 18B Kumul Technology Development
Corporation Limited 2017 1
2018 122 A 18C PNG Dams Limited
2017 1 2018 123 A 19 Legal Training Institute
2014 to 2016 324 A 20 Mineral Resources Authority
2015 125 A 21 National Agriculture Quarantine and
Inspection Authority 2017 126 A 22 National Agricultural Research
Institute 2018 127 A 23 National AIDS Council Secretariat
2018 128 A 24 National Broadcasting Corporation
2015 1 2016 129 A 25 National Capital District Commission
2016 to 2018 330 A 25B Port Moresby Nature Park Limited
2016 131 A 26 National Cultural Commission
-
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-
2015 to 2017 3 2018 1
32 A 27 National Economic and Fiscal Commission
2018 133 A 28 National Fisheries Authority
2017 1National Information and Communications
Technology
34
A 31 Authority (NICTA)
2016 135 A 32 National Maritime Safety Authority
2018 136 A 34 National Research Institute
2017 137 A 35 National Roads Authority
2018 138 A 36 National Training Council
2017 139 A 38 National Youth Development Authority
2017 140 A 39 Office of the Insurance Commissioner
2018 141 A 40 Oil Palm Industry Corporation
2012 142 A 41 Ombudsman Commission of Papua New
Guinea 2017 & 2018 243 A 42 Papua New Guinea Accident Investigation
Commission 2018 144 A 44 Papua New Guinea Forest Authority
2013 & 2014 245 A 46 Papua New Guinea Institute of Medical
Research
2018 146 A 47 Pacific Institute of Leadership and
Governance 2014 1 2015 to
2017 347 A 48 Papua New Guinea Maritime College
2018 1 -
Page 55 of 475
-
48 A 51 Papua New Guinea University of
Technology 2017 149 A 51A National Analytical and Testing
Services Limited
2012 150 A 52 Parliamentary Members’ Retirement
Benefits Fund
2017 151 A 53 Public Curator of Papua New Guinea
2014 152 A 54 Road Traffic Authority
2017 & 2018 253 A 55 Security Industries Authority
2016 154 A 56 Small and Medium Enterprises
Corporation 2016 & 2017 255 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 Units56 A 58 University of Goroka
2017 157 A 58A Unigor Consultancy Limited
2014 & 2015 2 -
Page 56 of 475
-
58 A 59 University of Natural Resources and
Environment 2015
159 B 64 Kumul Agriculture Limited
2018 160 B 65 Kumul Petroleum Holdings Limited
2018 161 B 65A Eda Oil Limited
2017 & 2018 262 B 65B Kumul Exploration (Asia) Limited
2018 163 B 65H Kumul Lending Co Pte Limited
2018 164 B 65I Kumul LNG Limited
2017 & 2018 265 B 65J Kumul Petroleum (Development) Limited
2017 & 2018 266 B 65K Kumul Petroleum (Investments) Limited
2017 & 2018 267 B 65L Kumul Petroleum (Kroton) Limited
2018 168 B 65M Kumul Petroleum (Pipeline) Limited
2017 & 2018 269 B 65N Kumul Petroleum (Tech and Advisory)
Limited 2016 to 2018 370 B 65O Kumul Petroleum Marketing Pte Limited
2018 171 B 65P Kumul Security Agent Limited
2018 172 B 66 Livestock Development Corporation Limited
2010 to 2017 873 B 67 Mineral Resources Development Company
Limited 2016 174 B 68 Motor Vehicles Insurance Limited
2019 175 B 70 NCD Water and Sewerage Limited (Eda Ranu)
2015 & 2016 2 -
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-
76 B 71 Papua New Guinea Ports Corporation Limited
2018 177 B 73 PNG DataCo Limited
2016 1 2017 178 B 75 Post (PNG) Limited
2018 179 B 76 Telikom (PNG) Limited
2015 to 2017 380 B 76A DATEC (PNG) Limited
2017 181 B 76B Kalang Advertising Limited
2016 182 B 76C Media Niugini Limited (EMTV)
2017 183 B 76D PNG Directories Limited
2017 184 B 77 Water PNG Limited
2017 181 48
-
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-
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-
-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
AUTHORITY2.1 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 -
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-
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; -
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-
• 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
-
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-
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 -
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-
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”
” -
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-
-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 -
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-
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 -
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-
– 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
-
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-
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
-
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-
GUINEA
5.1 INTRODUCTION5.1.1 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-
-
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-
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 -
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-
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 Guinea5.3 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. -
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-
-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. -
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-
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 consistent and
reliable data and finances to improve and sustain forest
governance and
livelihoods of the forest communities.6.2 AUDIT OBSERVATIONS
6.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the Authority’s
financial statements for the year ended 31 December 2014 was
issued on 19 March
2020. The report contained a Disclaimer of Opinion. -
Page 76 of 475
-
-15-
Climate Change and Development
Authority“DISCLAIMER OF OPINION
Because of the significance of the matters described in the Basis
for Disclaimer of
Opinion paragraph below, I was not able to obtain sufficient
appropriate audit evidence
and accordingly, I am unable to and do not express an opinion on the
financial
statements of the Office of Climate Change and Development for the
year ended 31
December 2014.BASIS FOR DISCLAIMER OF OPINION
Limitation on the Scope of my Audit
I was unable to confirm and verify all the figures reported in the
statement of financial
position, statement of income and expenditure, statement of changes
in equity, and
statement of cash flows for the year ended 31 December 2014 due to
lack of supporting
documentation and information and anomalies noted as follows:• My report on the Office for the year ended 31 December 2013 was a
disclaimer
of opinion. As a result, I was unable to ensure accuracy and
completeness of the
opening balances entered into the determination of the results of
operations and
cash flows of the Office for the year ended 31 December 2014;• I was not provided with the general ledgers, trial balances,
profit & loss statement
and balance sheet generated from the MYOB system which the
management used
to prepare the financial statements. The management stated that
the MYOB
accounting system crashed therefore, they were unable to retrieve
the 2014
financial transaction records and data; -
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-
• There were no complete records of payment vouchers available. The
management
advised that most of the important records including payment
vouchers were
misplaced in the process of the Office moving continuously from
one location to
another;• There was no audit trail. The amounts allocated to the respective
income and
expenditure line items were not supported with all relevant
documents. I could
not confirm their accuracy and completeness;• There was no evidence of bank reconciliations performed on a
monthly basis and
for the whole year. Hence, I could not ensure the accuracy of the
cash balance at
year end; and• As per the policy disclosed, the accounts of the Office are
maintained on cash
basis. However, I noted that the financial statements have been
prepared and
presented on accrual basis.”-16-
Climate Change and Development
Authority6.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Authority for the years ended 31 December 2015, 2016 and 2017
were in progress.The financial statements for the years ended 31 December 2018 and
2019 had not been
submitted for my inspection and audit. -
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-
-17-
7. COCOA BOARD OF PAPUA NEW GUINEA
7.1 INTRODUCTION
7.1.1 Legislation
The Cocoa Board of Papua New Guinea was established under the
provisions of the
Cocoa Act 1981.7.1.2 Functions of the Board
The principal functions of the Board are to:
• control and regulate the growing, processing, marketing and
export of cocoa and
cocoa beans and the equalisation and stockholding
arrangements within the cocoa
industry;
• promote research and development programmes for the benefit
of the cocoa
industry; and
• promote the consumption of PNG cocoa beans and cocoa -
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-
products.
7.1.3 Subsidiary of the Board
The Cocoa Coconut Institute Limited of PNG (formerly PNG Cocoa
and Coconut
Research Institute) was amalgamated with PNG Cocoa and Coconut
Extension Agency
Limited in 2003. The Institute is owned equally by the Cocoa
Board and the Kokonas
Indastri Koporesen (KIK) of PNG. Comments in relation to the
Cocoa Coconut Institute
Limited of PNG are contained in paragraph 8 of this Report.7.1.4 Project and Stabilisation Funds
The Board as a Trustee administers the Cocoa Stabilisation Fund
as required under Part
IV and VI of the Cocoa Act 1981. Further, the Board manages the
Cocoa Pod Borer
Project Fund as well. Comments in relation to the Funds are
contained in paragraphs
7A and 7B of this Report.7.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Board for the Twelve months period ended 30 September 2018 and
Three months
period ended 31 December 2018 were in progress. The Board had
submitted its
financial statements for the additional three months period to
31 December 2018 to
align its accounting period to match with Papua New Guinea’s
financial year end.The Board had not submitted its financial statements for the
year ended 31 December
2019 for my inspection and audit.
-18-7A. COCOA POD BORER PROJECT FUND
7A.1 INTRODUCTION
7A.1.1 Framework
The National Government has funded the Cocoa Pod Borer Project
based on the Project
Proposal for Cocoa Pod Borer Management Project submitted by the -
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-
Cocoa Board of
Papua New Guinea. The Project is administered by the Cocoa Board
of Papua New
Guinea and was implemented in 2010.7A.1.2 Objectives of the Project Fund
The Principal objectives of the Project Fund are to:
• facilitate the impartation of skills and knowledge on better
management practices
that will result in the reduction of Cocoa Pod Borer (CPB)
infestation to less than
10% of production, and increase cocoa yields;
• introduce and/or enhance farmer’s skills and knowledge in the
combined use of
basic CPB management via the five Golden rules and the
Integrated Pest Disease
Management Technology; and
• provide farmer support by way of making high yielding cocoa
planting materials,
tools, equipment and chemicals readily available or
accessible to cocoa farmers
which would enable effective adaption of good management
practices.7A.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Fund for the twelve month period ended 30 September 2018 and
three month period
ended 31 December 2018 were in progress. The Board had submitted
its financial
statements for the additional three months period to 31 December
2018 to align its
accounting period to match with Papua New Guinea’s financial
year end.The Fund had not submitted its financial statements for the year
ended 31 December
2019 for my inspection and audit. -
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-
-19-
7B. COCOA STABILISATION FUND
(Subsidiary of Cocoa Board of PNG)7B.1 INTRODUCTION
7B.1.1 Legislation
The Cocoa Stabilisation Fund was established under Section 19 of
the Cocoa Act 1981.
The Fund is administered by the Cocoa Board of PNG with the
objective of establishing
price stabilisation, price equalisation and stockholding
arrangements within the cocoa
industry.7B.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Fund for the twelve month period ended 30 September 2018 and
three month period
ended 31 December 2018 were in progress. The Board had submitted
its financial
statements for the additional three months period to 31 December
2018 to align its
accounting period to match with Papua New Guinea’s financial year
end.The Fund had not submitted its financial statements for the year
ended 31 December
2019 for my inspection and audit. -
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-
-20-
8. COCOA COCONUT INSTITUTE LIMITED OF PAPUA NEW
GUINEA8.1 INTRODUCTION
8.1.1 Legislation
The Cocoa Coconut Institute Limited of Papua New Guinea
(formerly PNG Cocoa and
Coconut Research Company Limited) was amalgamated with PNG Cocoa
and Coconut
Extension Agency Limited in 2003. The Company is owned equally
by the Cocoa
Board of PNG and the Kokonas Indastri Koporesen (KIK) of PNG.8.1.2 Functions of the Company
The principal functions of the Company are to:
• conduct research into all aspects of Cocoa and Coconut
growing and production
and all aspects of the Cocoa and Coconut industries;
• promote research and beneficial programs for these
industries;
• provide assistance to all persons and bodies engaged in any
aspect of the Cocoa
and Coconut industries;
• produce planting materials for the Cocoa and Coconut
industries; and
• provide consultancy services.8.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the audit of the
accounts and records and the examination of the financial
statements of the Company
for the years ended 31 December 2014, 2015 and 2016 had been
completed on 18
October 2018. Despite numerous reminders, the Company’s signed
financial statements
were awaited to enable me to issue these reports.The Company had not submitted its financial statements for the
years ended 31
December 2017, 2018 and 2019 for my inspection and audit. -
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-
-21-
9. COFFEE INDUSTRY CORPORATION LIMITED
9.1 INTRODUCTION
9.1.1 Legislation
The Coffee Industry Corporation Limited was incorporated under
the Companies Act
as a company limited by guarantee and was conferred with
statutory powers relating to
the control and regulation of the production, processing,
marketing and export of coffee
by the Coffee Industry Corporation (Statutory Functions and
Powers) Act 1991. Under
this Act, the undertakings of the Coffee Industry Board, the
Coffee Development
Agency and the Coffee Research Institute were, on 1 October
1991, transferred to and
vested in the Coffee Industry Corporation Limited.The members of the Corporation according to the Articles of
Association are from the
Growers Associations, the Coffee Exporters Association, the
Plantation Processors
Association, the Block Development Association, the Secretary –
Department of
Agriculture and Livestock, the Secretary – Department of Finance
and the Secretary –
Department of Trade and Industry. The liability of each member
is limited to an amount
not exceeding one hundred kina.9.1.2 Functions of the Corporation
The principal functions of the Corporation are to:
• engage in research, extension, promotion, marketing,
administration,
management and control of the coffee industry in PNG; -
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-
• act in the best interests of coffee producers; and
• promote development of the coffee industry in PNG.9.1.3 Fund and Subsidiary of the Corporation
The Corporation has a Fund and a Subsidiary Company, Coffee
Industry Fund and
Patana No.61 Limited. Comments in relation to the Fund and the
Subsidiary are
contained in paragraphs 9A and 9B respectively of this Report.9.2 AUDIT OBSERVATIONS
9.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Corporation for the year ended 31 December
2016 was issued on 29
November 2019. The report contained a Disclaimer of Opinion.-22-
Coffee Industry Corporation Limited
“DISCLAIMER OF OPINIONBecause of the significance of the matters described in the Basis
for Disclaimer of
Opinion paragraphs below, I have not been able to obtain sufficient
appropriate audit
evidence and accordingly, I am unable to express an opinion on the
consolidated
financial statements of Coffee Industry Corporation Limited as at 31
December 2016,
its financial performance and its cash flows for the year then
ended.BASIS FOR DISCLAIMER OF OPINION
Opening Balances
My report on the Corporation’s financial statements for the year
ended 31 December
2015 was a disclaimer of opinion. I was not able to satisfy myself
as to the accuracy
and completeness of the opening balances of cash and cash
equivalents, trade
receivables, inventories, property, plant and equipment, trade
creditors, bank
overdrafts, inventories, group tax, other payables, employee
entitlements, and -
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-
accumulated fund. Since these opening balances entered into the
determination of the
results of operations and cash flows of the Company and the Group in
2016, I was
unable to determine whether adjustments to the financial position,
results of operations,
cash flows and changes in equity might have been necessary for the
year ended 31
December 2016.Non Consolidation of Kofi Management Services Limited
Kofi Management Services Limited (KMSL) was incorporated as a
subsidiary company
of Coffee Industry Corporation Limited under the Companies Act on 21
February 2014.
The Company has an operating bank account with Bank South Pacific
Limited (BSP)
since 2015. However, I noted that no separate set of accounting
records was maintained
to capture transactions made through the BSP account for the 2016
financial year,
instead in the books of the parent company. A practice that is not
in compliance with
the Companies Act 1997.Since there was no separate set of accounts for KMSL, I could not
review the accounts
of the Company and issue an opinion on the financial statements for
the year ended nor
determine whether the account of the KMSL was appropriately
consolidated with the
parent company as required by IAS 27, Consolidated and Separate
Financial
Statements.Internal Control over Financial Reporting
My review of the internal controls over financial reporting revealed
that adequate
accounting records including important registers such as investments
registers, Fixed
Assets Register, registration fees schedule, general journal
documentations and other
important reconciliations were not maintained. In addition, I noted
that the general
ledgers were not properly reconciled.
-23-Coffee Industry Corporation Limited
These shortcomings had placed limitations on my efforts to obtain
sufficient
appropriate audit evidence for my opinion. As a result, I could not -
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-
comment on the
completeness, accuracy and validity of the balances reported in the
consolidated
statement of financial position and the income and expenditure
statement for the year
ended 31 December 2016.Cash and Cash Equivalents – K7,037,895 (2015: K9,674,949)
During my review of the Cash and Cash Equivalents balance of
K7,037,895 disclosed
in Note 7 to the consolidated financial statements, I was not
provided with any bank
reconciliations to perform the necessary audit procedures on the
following accounts:Account / Description Amount (K)
Cash on Hand 67,121
Coffee Industry Fund (Cash at Bank) (979,054)
Coffee Industry Fund (IDB) 5,479,806Consequently, I could not verify the completeness, existence, rights
and validity of the
cash and cash equivalents balance reported in the financial
statements.Trade and Other Debtors – K11,624,573 (2015: K11,452,510)
Included in the Trade and Other Debtors balance of K11,624,573 as
disclosed in Note
10(a) to the consolidated financial statements are the following
accounts:Account / Description Amount (K)
Rental Debtors – Rent Receivable 1,008,948
Interest Receivables 105,717
Amount due from Project Partners (EU)885,467
Sundry Debtors & Prepayments 4,482,965
GST Receivable 2,544,321
Staff Debtors 93,912
Other Debtors-Impasses 2,861,781
Provision for Doubtful Debts (479,922)During my review, I was not provided with the required audit
information or other
appropriate records to enable me to conduct audit tests on these
balances and their
subsequent receipts. Therefore, I could not satisfy myself as to the
completeness and
accuracy of the trade and other debtors balance reported in the
consolidated statement
of financial position for the year ended. -
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-
-24-
Coffee Industry Corporation Limited
Inventories – K598,991 (2015: K519,779)As at 31 December 2016, the inventories of the Company was valued at
K598,991 and
disclosed in the consolidated financial statements. I did not
observe and witness the
physical inventory count conducted by the Company and further
observed that adequate
inventory records were not maintained during the period. Owing to
the nature of the
Company’s records, I could not satisfy myself as to the inventory
quantities by other
alternative audit procedures.Consequently, it has not been practicable to extend my audit
procedures to satisfy
myself on the completeness, existence, ownership and valuation of
the inventories.Property, Plant and Equipment – K12,918,635 (2015: K12,592,313)
The Company has not maintained sufficient records, including a Fixed
Assets Register
and title deeds of the lands and buildings to enable me to complete
my audit procedure
on its properties, plants and equipment valued at K12,918,635. No
physical verification
was carried out to verify the existence of the same. Further, I was
unable to determine
whether a valuation was done to the Company’s lands and buildings
disclosed at
K6,822,740 in Note 9 to the consolidated financial statements.
Consequently, it has not
been practicable to extend my audit procedures to satisfy myself on
the completeness,
existence, rights and valuation of the Company’s properties, plants
and equipment and
related depreciations valued at K1,105,387 and charged to the
consolidated statement
of income and expenditure for the year ended.Trade Creditors and Accruals – K9,079,756 (2015: K9,008,606)
As at 31 December 2016, trade creditors and accruals have been
reported at K9,079,756
in the consolidated statement of financial position. Included in the
balance are the -
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-
following accounts:
Account / Description Amount (K)
Trade Creditors (Control A/c) 826,703
Sundry Creditors & Accruals 5,115,551
Business Withholding Tax 222,580
Group Tax Clearing 744,887
GST Payable 1,981,600During my review, I noted that adequate records were not maintained
to substantiate
these balances. Due to poor record keeping, inadequate accounting
procedures, and
significant non-compliance issues identified in these areas, I could
not determine the
completeness, accuracy and validity of the trade creditors and
accruals balance of
K9,079,756 reported at year ended.-25-
Coffee Industry Corporation Limited
Employee Provision – K145,697 (2015: K145,697)Total employee provisions amounted to K145,697 was disclosed in Note
12 to the
consolidated financial statements. However, the ledgers of these
accounts and detailed
employee provision calculation schedules were not provided for my
review. I further
noted that the respective balances were being carried forward from
previous year and
current year accruals were not captured in the accounts.
Consequently, I was unable to
verify the completeness, accuracy and the validity of the employee
provisions taken up
in the financial statements for the year ended.Accumulated Funds – K22,954,643 (2015: K25,085,250)
The total accumulated fund balance of K22,954,643 disclosed in the
consolidated
statement of changes in accumulated funds was derived after
processing an adjustment
of K3,478,727 in the revenue reserve account. The adjustment was
processed as a
balancing adjustment to tie prior year revenue reserve balance to
that of the current
year. During my examination, the Company was unable to explain the
variance in the
revenue reserve account to which the above adjustment was processed. -
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-
As a result, I
could not verify the validity of the balancing adjustment processed
nor comment on the
completeness and accuracy of the accumulated funds of K22,954,643.Revenue – K21,289,224 (2015: K12,423,017)
The Company’s total revenue for the year was K21,289,224. Included
in this balance
as disclosed in the detailed Statement of Income and Expenditure are
the following:Account / Description Amount (K)
National Govt’ Funding 3,598,560
Coffee Export Levy 7,035,180
Coffee Sales 1,086,154
Rental Income 1,236,509
Funding / Grants-Projects 7,000,000During my review, I was not provided with sufficient appropriate
audit evidence to
verify the balances. I was therefore unable to test these balances
by other alternative
means nor comment on the completeness, accuracy and the validity of
the Company’s
total revenue of K21,289,224 as reported.Expenditure – K19,941,105 (2015: K25,048,944)
The Company’s total expenditure for the year was K19,941,105 as
disclosed in the
detailed Statement of Income and Expenditure. Due to the weaknesses
in internal
controls over financial reporting, the Company was unable to provide
me the details of
these expenditures that were requested during my review.-26-
Coffee Industry Corporation Limited
I was therefore unable to complete my audit procedures designed
to verify the
expenditure balance. Consequently, I could not comment on the
completeness,
accuracy and validity of the balance and of the results and cash
flows for the year then
ended. I am also unable to place any reliance on the
effectiveness of the internal controls
operated during the year.EMPHASIS OF MATTER
-
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I was provided with the copy of the Coffee Industry Corporation
(Statutory Functions
and Powers) Act, 1991 and according to this Act Coffee Industry
Corporation is a
Corporation and not a “Limited Company” Unless Parliament by an
Act amends the
existing Act to corporatize the Coffee Industry Corporation the
word “Limited” used
by the Corporation is not appropriate. I was not provided with
the amended Act for me
to determine the appropriateness of incorporating this
Corporation under the
Companies Act 1997.”9.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the year ended 31 December 2017 was in progress.The Company had submitted the financial statements for the year
ended 31 December
2018 for my inspection and audit and arrangements were being
made to commence the
audit shortly.The Company had not submitted the financial statements for the
year ended 31
December 2019 for my inspection and audit.-27-
9A. COFFEE INDUSTRY FUND
-
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9A.1 INTRODUCTION
9A.1.1 Legislation
The Coffee Industry Corporation (Statutory Functions and Powers)
Act 1991 provided
for the establishment of the Coffee Industry Fund (CIF). The main
purpose of the
Coffee Industry Fund is to stabilise the coffee industry by
giving the Coffee Industry
Corporation the financial ability to implement schemes relating
to stabilisation and
equalisation of coffee prices and stock holdings of coffee.9A.2 AUDIT OBSERVATIONS
9A.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act on
the financial
statements of the Fund for the year ended 31 December 2016 was
issued on 29
November 2019. The report contained a Disclaimer of Opinion.“DISCLAIMER OF OPINION
Because of the significance of the matters described in the Basis
for Disclaimer of
Opinion paragraphs below, I have not been able to obtain
sufficient appropriate audit
evidence and accordingly, I am unable to express an opinion on
the financial statements
of the Coffee Industry Fund as at 31 December 2016, and of its
financial performance
and financial position for the year then ended.BASIS FOR DISCLAIMER OF OPINION
Opening Balances
My report on the Fund for the year ended 31 December 2015 was a
disclaimer of
opinion. I was not able to satisfy myself as to the accuracy and
completeness of the
opening balances of trade receivables, trade creditors, tax
balances and investments.
Since these opening balances entered into the determination of
the results of operations
and cash flows of the Fund in 2016, I was unable to determine
whether adjustments to
the balance sheet and profit and loss account might have been
necessary for the year
ended 31 December 2016. -
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-
Internal Control over Financial Reporting
My review of the internal controls over financial reporting of
the Fund revealed that
adequate accounting records including important registers such as
investments register,
trade and other receivables, trade creditors listing and loan
schedules were not properly
maintained. The general ledger was also not properly reconciled.
-28-Coffee Industry Fund
These shortcomings placed limitations on my efforts to obtain
sufficient appropriate
audit evidence for my opinion. As a result, I could not comment on
the completeness,
accuracy and validity of the balances reported in the balance sheet
and the profit and
loss statement for the year ended 31 December 2016.Trade and Other Debtors – K2,479,146 (2015: K3,211,705)
The financial statements reported K2,479,146 as trade debtors as at
31 December 2016.
The management did not provide the listings or other relevant
documentation for my
review. Consequently, I was unable to satisfy myself as to the
completeness and
accuracy of the trade and other debtors balance reported in the
financial statements as
K2,479,146 for the year ended.Investments (IBD) – K5,479,806 (2015: K5,458,418)
Note 2(uu) to the financial statements disclosed K5,479,806 as
Interest Bearing Deposit
(IBD). However, I was not provided with IBD reconciliation
statements or certificates
for my verification. As such, I was unable to determine the
ownership, completeness
and accuracy of the Investment (IBD) balance taken up in the
financial statements as
K5,479,806 as at 31 December 2016.Tax – K166,931 (2015: K170,006)
As at 31 December 2016 an amount of K166,931 was recorded as tax
receivable from
Internal Revenue Commission (IRC). This amount comprised of K32,138
and
K134,793 as dividend withholding tax receivable and GST receivables
respectively. -
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-
There was a decrease of K3,075 from the prior year balance but no
relevant
documentation was made available for my review and verification.
Further, these
balances had been carried forward for a number of years. As a
result, I was unable to
comment on the completeness, accuracy and appropriateness of the tax
receivable
balance disclosed at year end.Trade Creditors – K32,138 (2015: K32,138)
Trade Creditors was disclosed at K32,138 as at 31 December 2016.
However, no
appropriate documentation or listing was made available for my
review to determine
the validity of this balance which has been carried forward without
any movement for
number of years. Consequently, I was unable to ascertain the
completeness and
accuracy of the trade payable balance reported at year end.Interest Income – K45,839 (2015: K22,919)
The Fund disclosed in its Profit and Loss statement K45,839 as
interest income for the
year. However, no records were made available for my review.
Therefore, I was unable
to comment on the accuracy and completeness of the interest income
for the year
ended.”
-29-Coffee Industry Fund
9A.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the audit of the
accounts and records and the examination of its financial
statements of the Fund for the
year ended 31 December 2017 was in progress.The Fund had submitted its financial statements for the year
ended 31 December 2018
for my inspection and audit and arrangements were being made to
commence the audit
shortly.The Fund had not submitted its financial statements for the year
ended 31 December
2019 for my inspection and audit. -
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-
-30-
9B. PATANA NO. 61 LIMITED
(Subsidiary of Coffee Industry Corporation Limited)9B.1 INTRODUCTION
9B.1.1 Legislation
Patana No. 61 Limited was incorporated under the Companies Act.
The Company was
acquired by the Coffee Industry Corporation Limited on 10
February 1994 and has a
total issued capital of two ordinary shares of K1.00 each. The
Company is wholly
owned by the Coffee Industry Corporation Limited. The principal
activity of the
Company is to invest in property. -
Page 95 of 475
-
9B.2 AUDIT OBSERVATIONS
9B.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the financial
statements of the Company for the year ended 31 December 2016 was
issued on 29
November 2019. The report contained a Disclaimer of Opinion.“DISCLAIMER OF OPINION
Because of the significance of the matters described in the Basis
for Disclaimer of
Opinion paragraphs, I have not been able to obtain sufficient
appropriate audit evidence
and accordingly, I am unable to express an opinion on the
financial position of Patana
No. 61 Limited as at 31 December 2016 and of its financial
performance for the year
then ended.BASIS FOR DISCLAIMER OF OPINION
Opening Balance
My report for the year ended 31 December 2015 was a disclaimer of
opinion. I was not
able to satisfy myself as to the accuracy and completeness of the
opening balances of
fixed assets and intercompany loan which impacted the share
capital and reserves. Since
these opening balances entered into the determination of the
results of operations and
cash flows of the Company in 2016, I was unable to determine
whether adjustments to
the balance sheet, profit and loss statement, and notes to the
financial statements might
have been necessary for the year ended 31 December 2016.Internal Control over Financial Statements
My review of the internal controls over financial reporting
revealed that adequate
accounting records including important registers such as the
fixed assets and loan
registers were not maintained.
-31-Patana No. 61 Limited
I also noted that the general ledger accounts were not properly
reconciled. These -
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-
shortcomings placed limitations on my efforts to obtain
sufficient appropriate audit
evidence for my opinion. As a result, I could not comment on the
accuracy,
completeness and validity of the balances reported in the
balance sheet and the profit
and loss statement for the year ended 31 December 2016.Inter-Company Loan Payable – (K806,393)
I was not provided with the loan agreement entered into between
the Company and its
parent entity (Coffee Industry Corporation Limited) to verify
the terms and conditions
of the loan and the repayment schedule. There was no movement in
the loan amount
since the loan was obtained from the parent entity. I was
therefore, unable to ascertain
the validity and accuracy of the loan amount of K806,393
reported as payable to the
parent company as at 31 December 2016.Fixed Assets – K559,705
The Company has not maintained sufficient records including a
Fixed Assets Register
to enable me to complete my audit tests on its fixed assets
reported at K559,705 in the
balance sheet. Physical verification was not carried out to
verify the existence of the
same.Further, I was unable to determine whether a valuation was done
to the Company’s land
and buildings reported at cost of K786,744 in Note 5 to the
financial statements.
Consequently, it has not been practicable to extend my audit
procedures to satisfy
myself on the completeness, existence, ownership and valuation
of the Company’s
property, plant and equipment and related depreciations of
K7,713 charged to the profit
and loss statement.”9B.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the audit of the
accounts and records and the examination of the financial
statements of the Company
for the year ended 31 December 2017 was in progress.The Company had submitted its financial statements for the year
ended 31 December -
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-
2018 for my inspection and audit and arrangements were being
made to commence the
audit shortly.The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.-32-
10. CONSERVATION AND ENVIRONMENT PROTECTION
AUTHORITY10.1 INTRODUCTION
10.1.1 Legislation
The Conservation and Environment Protection Authority Act 2014
was drafted and
Certified on 30 May 2014, establishing the Conservation and
Environment Protection
Authority (CEPA).Prior to May 2014, the Conservation and Environment Protection
Authority was
operating as a Department of National Public Service.10.1.2 Functions of the Authority
The functions of the Authority are to:
• do all things necessary for the conservation and protection of
the environment in
accordance with the environmental conservation laws and any
policy directions of
the Minister and the National Executive Council;
• co-ordinate with provincial and local-level governments and
sub-national
authorities to foster, manage and monitor environmental
conservation strategies
and programmes in the country;
• relation to land under the care, control and management of the
Authority:–
–
–
drains and other structures for or in connection with the -
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-
purposes of the
Authority;• impose and receive rents, fees, charges and bonds in respect
of its functions under
any environmental conservation law, including but not limited
to providing
services related to the approval and issue of environment
permits and the
investigation and audit of activities under the Environment
Act 2000;
• promote Papua New Guinea’s laws, regulations and policies
relating to
conservation and environment matters within the country and
overseas;
• give advice to the Minister and maintain dialogue with other
government agencies
on environmental conservation laws and policies;
• encourage, accept, administer and allocate aid monies, whether
from within the
country or elsewhere, for purposes consistent with its
objects;-33-
Conservation and Environment
Protection Authority• accept donations, gifts, devises and bequests made to the
Authority and control,
manage and develop those donations, gifts, devises and
bequests in accordance
with any conditions attached to them;
• where it considers it necessary or convenient to do so, to
establish committees and
similar bodies in relation to its functions, in accordance
with regulations and to that
effect; and
• perform such other functions and duties as may be conferred
on it by the
Authority’s Act or any other law.10.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
10.2.1 Comments on Financial Statements
My report to the Minsters under Section 8(4) of the Audit Act
on the Authority’s
financial statements for the year ended 31 December 2017 was
issued on 22 June 2020.
The report contained a Qualified Opinion. -
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-
“QUALIFIED OPINION
In my opinion, except for the effects of the matters described
in the Basis for Qualified
Opinion paragraph below:(a) the financial statements of Conservation and Environment
Protection Authority
for the year ended 31 December 2017:(i) give a true and fair view of the financial position
and the results of its
financial performance for the year ended on that
date; and(ii) the financial statements have been presented in
accordance with the
Public Finance (Management) (Amendment) Act 2016 and
other
generally accepted accounting practice in Papua New
Guinea.(b) proper accounting records have been kept by the Authority,
as far as appears
from my examination of those records; and(c) I have obtained all the information and explanations
required.BASIS FOR QUALIFIED OPINION
Fixed Assets – K1,108,876
My review of the Authority’s fixed assets and Fixed Assets
Register (FAR) revealed
the following:• Assets were not tagged with serial numbers to identify and
confirm their existence
and their custodian;
-34-Conservation and Environment Protection
Authority• A vehicle and several computers were donated or given away to
staff without
proper approval and documentation;
• The assets donated/given away were not removed and updated in
the FAR;
• No stock take was carried out during the year under review;
and -
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-
• No fixed assets policy to properly record and manage the fixed
assets.As a result, I was unable to verify and confirm the
completeness, accuracy and existence
of the fixed assets balance presented in the financial
statements.”10.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Authority for the year
ended 31 December 2017
was issued on 22 June 2020. The report contained the following
observations:Expenditure – Cost Management
My review of the expenditure of the Authority revealed that
several expenditure items
including transport and fuel, travel and subsistence, vehicle
hire and administrative
consultancy fees exceeded their budget limits under the GO PNG
Drawing Account.
Section 37 of the Conservation and Environment Protection
Authority Act 2014
requires the Authority to prepare annual plan and budget
estimates for receipts and
expenditures. However, there was no detailed budget of the money
received from the
CEPA fees to guide the expenditure. Consequently, the Authority
expended excessively
on the hire cars and administrative consultancy fees. As such, I
was unable to confirm
whether proper systems and procedures were in place to control
the expenditure.Trade Debtors
I noted existence of weakness in the collection of debts from
the permit holders on
timely basis to comply with Section 33 (7) of the Conservation
and Environment
Protection Authority Act 2014. Consequently, about K27 million
worth of debts were
more than 90 days due. Poor management of debt collection
procedures may result in
cash flow pressures and permit holders may continue to exercise
the licenses without
paying the fees; hence, not complying with the Conservation and
Environment
Protection Authority Act 2014 and Environment Act 2000. -
Page 101 of 475
-
I brought this issue to the management and recommended that a
strong debt recovery
policy has to be in place and legal action taken against the
permit holders with long due
debts as per the Authority’s Act and the management responded as
follows:“Agree with audit recommendations”
-35-
Conservation and Environment Protection
AuthorityCash at Bank
My review of the cash at bank and bank reconciliation process
revealed that the
Authority’s monthly bank reconciliations were done systematically by
the MYOB
Accounting System. However, the reconciliations lacked manual
reviewing and
authorization by senior officers of the Authority. In addition,
K23,732 cash collected
from various fees in 2016 were never deposited or had no details of
deposit between
2016 and 2017 and remain as undeposited cash in the general ledger.
As a result, I was
not able to comment on the effectiveness of the controls surrounding
the management
of cash and bank reconciliation process. I raised this issue and
management responded
as follows:“CEPA to improve internal controls including regular bank
reconciliations of
accounts.”Lack of Proper Supporting Documentation
I was unable to ascertain the validity and accuracy of payments
totaling K1,550,949
and whether goods and services were received and value for money
achieved due to
lack of supporting documentations including proper receipts,
invoices or delivery
dockets. Further, several payments made to unknown suppliers which
carried
significant amount had no records on file. I brought this issue to
the management and -
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-
they responded as follows:
“CEPA to improve internal controls and set up a procurement unit to
ensure proper
documentation, payment processes and acquittals processes are in
place.”Operational Policy Manuals
My review revealed that the operational and procedural manuals such
as finance and
accounting procedural manual, fixed assets policy, travel advance
register and policy
and debt collection policy were not in place. In the absence of
clearly designed and
approved policy manuals and guidelines, there is a high risk of
abuse and malpractice
to take place within the Authority. As a result, I was unable to
measure and comment
on the standards of operations in relation to the systems and
controls and whether
uniform procedures were followed in the respective divisions/
sections.I brought this issue up and management responded that the Authority
had engaged a
consultant to draft the policies and Fixed Assets Register. In
addition, a procurement
unit was established in 2019 to monitor all advances (including
acquittals).-36-
Conservation and Environment Protection
AuthorityInternal Audit Function
I noted that the Authority did not have in place an internal
audit function. As such, there
was no proper control mechanism in place to ensure policies and
procedures put in place
by the board of governance are properly followed and applied in
the Authority’s daily
operations. I brought this issue up and management responded as
follows:“An internal audit unit be established once the CEPA’s
-
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-
organization restructure is
completed and approved. Note that in 2013, the Department of
Personnel Management
(DPM) gave an instruction by way of circular to all departments
to halt recruitment ofinternal audit vacancy.”
Management Information System (MIS)
The Authority did not have a MIS and kept manual records in
conjunction with PGAS.
I also noted that MYOB Accounting System was used to create
general ledger for the
purpose of audit. However, MYOB system was only installed in
external consultant’s
computer. There was no centralized server or data base installed
and connected. I raised
this issue with the management and management responded as
follows:“CEPA to work with the engaged consultant to ensure the MIS and
server are installed
and connected immediately.”10.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Authority for the year ended 31 December 2018 was in progress.The Authority had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.-37-
11. GOVERNMENT PRINTING OFFICE
-
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-
11.1 INTRODUCTION
11.1.1 Legislation
The Government Printing Office was established by the British
Colonial
Administration in 1888.The functions of the Printing Office are empowered by Section 252
of the Constitution,
the Interpretation Act (Chapter 2) and Printing of the Laws Act
(Chapter 333).11.1.2 Objective of the Office
The main objective of the Government Printing Office is to
provide efficient and quality
printing services to the executive arm of the government,
judicial arm of the
government, government departments and various statutory bodies
at an affordable
cost.11.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Office for the years ended 31 December 2016 and 2017 had been
completed and the
audit reports were expected to be issued shortly.The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements of the Office for the
year ended 31
December 2018 had been completed and the results were being
evaluated.The Office had not submitted its financial statements for the
year ended 31 December
2019 for my inspection and audit. -
Page 105 of 475
-
-38-
12. INDEPENDENCE FELLOWSHIP TRUST
12.1 INTRODUCTION
12.1.1 Legislation
The Independence Fellowship Trust was established under the
Independence Fellowship
Trust Act (Chapter 1040).
12.1.2 Objective of the Trust
The objective of the Trust is to benefit village development by
making annual awards to
selected citizens for the purposes of broadening their knowledge
and experience, as well
as implementing and encouraging that development.
12.1.3 Functions of the Trust
The functions of the Trust are to:• make selections of candidates to receive the awards of
fellowships;
• determine the number and value of awards; and
• invest the funds of the Trust.12.2 AUDIT OBSERVATIONS
12.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Trust for the years ended 31 December 2018 and
2019 were issued on
29 August 2019 and 29 June 2020 respectively. The reports did not
contain any
qualification. -
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-
-39-
13. INDEPENDENT CONSUMER AND COMPETITION
COMMISSION13.1 INTRODUCTION
13.1.1 LegislationThe Independent Consumer and Competition Commission was
established by the
Independent Consumer and Competition Commission Act 2002. The
Act came into
operation in January 2003.13.1.2 Functions of the Commission
The main functions of the Commission are to:
• formulate and submit to the Minister policies in the interest
of consumers;
• consider and examine and where necessary, advise the Minister
on the
consolidation or updating of legislation providing protection
to the consumers;
• liaise with Departments and other agencies of Government on
matters relating to
consumer protection legislation;
• receive and consider complaints from consumers on matters
relating to the supply
of goods and services;
• investigate any complaint received;
• make available to consumers general information affecting the
interests of
consumers;
• liaise with business, commercial and professional bodies and
associations in order
to establish codes of practice to regulate the activities of
their members in their
dealings with consumers;
• advise consumers of their rights and responsibilities under
laws relating to
consumers protection;
• promote and participate in consumer education activities;
• establish appropriate systems whereby consumer claims can be
considered and
redressed;
• liaise with consumer organisations, consumer affairs
authorities and consumer
protection groups overseas and to exchange information on
consumer issues with
those bodies;
• arrange for the representation of consumers in court
proceedings relating to -
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consumer matters; and
• do all other things relating to consumer affairs.-40-
Independent Consumer and Competition
Commission13.2 AUDIT OBSERVATIONS
13.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act on
the financial
statements of the Commission for the year ended 31 December 2018
was issued on 30
September 2019. The report did not contain any qualification.13.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Commission’s financial
statements for the year
ended 31 December 2019 had been submitted and arrangements were
being made to
commence the audit shortly. -
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-41-
14. INDUSTRIAL CENTRES DEVELOPMENT CORPORATION
14.1 INTRODUCTION14.1.1 Legislation
The Industrial Centres Development Corporation was established
under the Industrial
Centres Development Corporation Act 1990 which came into
operation on 23 August
1990. The Corporation commenced trading on 5 January 1994.14.1.2 Functions of the Corporation
The main functions of the Corporation are:
• overall planning and implementation of the Government’s
industrial centre
development programme;
• preparation of feasibility studies in order to identify
appropriate forms of
industrial development;
• to identify therewith or otherwise, regions and sites in the
country for industrial
centres; and
• to do such supplementary, incidental or consequential acts, as
are necessary for
the development and promotion of industrial centres in PNG.14.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
14.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act on
the financial
statements of the Corporation for the year ended 31 December 2017
was issued on 2
September 2019. The report contained a Qualified Opinion.“QUALIFIED OPINION
-
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In my opinion, except for the effect of the matters referred to
in the Basis for Qualified
Opinion paragraphs below:a) the financial statements are based on proper accounts and
records; andb) the financial statements are in agreement with those accounts
and records, and
show fairly the state of affairs of the Corporation for the
year ended 31
December 2017 and the results of its financial operations and
cash flows for the
year then ended.-42-
Industrial Centres Development
CorporationBASIS FOR QUALIFIED OPINION
Trade Debtors – Malahang & Ulaveo Industrial Centres (MIC & UIC)
The Corporation has disclosed its trade debtors balance as
K3,520,441 (included as part
of total debtors of K3,810,007) in the financial statements at 31
December 2017. I noted
that of the K3,520,441 receivable, K3,026,878 has been outstanding
for a considerable
period of time. Therefore, the collectability of this amount is in
doubt. Further, I was
unable to establish whether the Corporation has made adequate
provision against these
debts. As a result, I was unable to satisfy myself as to the
accuracy and collectability of
the trade debtors as reported at the year end.Fixed Assets – K63,527,082
My review of the fixed assets for the Corporation revealed that the
Fixed Assets
Register (FAR) was incomplete as it was not properly updated and has
not fully
captured all the assets owned by the Corporation. There were
additional purchases of
fixed assets not recorded and disclosed in the financial statements
including the
depreciation calculation as at 31 December 2017. I further noted
that the disposals of
Land and Building and Computer Equipment during the year were not -
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approved by the
Corporation’s Board. Further, the Corporation has not conducted any
stock take of its
fixed assets for a number of years. As a result, I was unable to
place reliance on the
effectiveness of the controls surrounding the management of the
fixed assets.
Consequently, I was not able to comment on the condition, valuation
and existence of
the fixed assets as disclosed in the financial statements at the
year end.Land Sales Debtors – K289,566
Included in the total debtors of K3,810,007 were land sales debtors
totaling K289,566.
I observed that land sales debtors have been outstanding since 2008.
The Corporation
has not provided adequate provision for doubtful debts in its
accounts. Consequently, I
was unable to ascertain the accuracy, correctness and collectability
of the trade debtors
as reported in the financial statements at 31 December 2017.Provision for Doubtful Debt – K1,492,333
I noted that the Corporation has made a provision for doubtful debts
totaling K70,178
during the year under review, thus brought the total provision of
doubtful debts to
K1,492,333. However, there was no policy on provisions and basis of
calculations of
provision for doubtful debts. Further, I was not provided with
either the schedule and
general ledger transactions listing of the doubtful debts of K70,178
as disclosed in the
financial statements. As a result, I was unable to ascertain the
accuracy, completeness
and valuation of the provision for doubtful debts as disclosed in
the financial statements
at 31 December 2017.-43-
Industrial Centres Development
CorporationCash at Bank – K2,399,412
The independent bank confirmation certificate for the Bond
account with Malahang
Industry Centre for the year ended 31 December 2017 was not -
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provided for my review.
As a result, I was unable to confirm the closing bank balance as
reported in the financial
statements.”14.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Corporation for the
year ended 31 December
2017 was issued on 2 September 2019. The report contained the
following observations:Non-Compliance with the Public Finance (Management) (Amendment)
Act, 2016The Corporation had not prepared and submitted its financial
statements to my Office
before 31 March 2017 to enable me to conduct the audit and issue
the audit report within
the time frame stipulated in the Public Finance (Management)
(Amendment) Act 2016.
Consequently, the Corporation had breached Section 63(1) and
63(3) of the above Act.Board Minutes
I noted that there were eleven (11) Board meetings held during
the year under review.
Out of the eleven meetings, seven (7) were special meetings and
four (4) were quarterly
meetings that were held in February, August, October and
December respectively.
However, I noted that all the meeting minutes were not signed by
the Chairman to
confirm the minutes were correct and true recording of the
proceedings at the meetings.
As a result, I was unable to comment and conclude on whether
there were proper
proceedings held and whether all major transactions and
decisions made and transpired
were in the best interest of the Corporation. I queried the
management of the
Corporation and they responded to my observation as follows:“The management has agreed and gave direction to the Board
Secretary to ensure all
board meeting minutes are signed chronologically to confirm that
minutes are true and
correct resolutions of the Board.”Staff Advance
-
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My review of the Corporation’s staff debtors revealed that there
was no proper control,
monitoring and recovery of the staff advances. As a result,
recouping staff advances
was slow and ineffective. I also noted that the Corporation had
no policy on staff
advances to control, monitor, recover and deal with those who
don’t comply with it.As such, staff advances amounting to K111,553 had been
outstanding (without
movement) for a considerable period of time. The management
responded to my query
as follows;
-44-Industrial
Centres Development Corporation“Management also agreed and directed during its meeting that this
list be checked,
reviewed and the outstanding balances be confirmed and letters be
written to the people
conc erned to pay the outstanding or legal action will be taken
against them Andmanagement to seek Board approval to write them off.”
Business Growth Centre
My review of the fixed assets revealed that the Fixed Assets
Register and other
information in relation to the fixed assets under the Business
Growth Centre were
destroyed/lost at the time when the officer in charge of these
records left employment
with the Corporation. Consequently, I was unable to establish the
value of assets under
the Business Growth Centre at year end. As a result, the accuracy
and completeness of
the fixed assets disclosed in the financial statements cannot be
ascertained as there were
no records to support the movements of assets under the Business
Growth Centre. I
drew my observation to the Management of the Corporation and they
responded as
follows:“Management will ensure the relevant information is collected from
the previous
existing records to be verified and sanctioned by the Head of the
Division so that a
proper and authentic record is maintained reflective of the current -
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-
asset.”
GST Payable – K1,183,455
During my review of GST, I observed that the Corporation had not
submitted the GST
Returns for the year under review as per the GST Act, 2003 (Section
63-66) which
stipulates that GST must be remitted within 21 days for the
subsequent taxable period
or (accounting period). This practice would attract penalty by IRC
in additional tax
payable at the rate of 10% on the amount owing and 20% calculated on
annual basis. I
sought explanation from the ICDC Management and they responded to my
concern as
follows:“GST payables relates mainly to unpaid invoices from MIC tenants who
have accounts
in arrears with rentals. This is directly related to Trade Debtors.
We have had several
meetings with IRC POM and Lae with regards to outstanding GST
returns and we both
agreed to settle the outstanding liability and moving forward and
reaching an
agreement for them (IRC) to waiver the charges/penalties imposed.
After complying I
and remitting payments on a timely basis, we are now current with
GST and SWT IRC
and ICDC are working together on this.”-45-
Industrial Centres Development Corporation
Travel Advance / Acquittal Register
The Corporation had not maintained Travel Advance/Acquittal
Registers for Head
Office and Malahang Industrial Centre despite my recommendation in
my previous
audits. Due to non-existence of the Advance/Acquittal Register
during the year under
review, I was unable to trace the authenticity of advances against
the acquittals. The
management responded to my query as follows; -
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“Management has taken note and agrees that this is an ongoing
problem. The matter
is now being addressed with management taking steps to appoint a
qualified accounts
Officer to handle this issue.”Lease Agreement
During my review, I noted that the Lease Agreement between Telikom
PNG Ltd and
the Corporation for the office rental had expired in 2016. As a
result, I was unable to
ascertain the monthly payment of K32,500 for office rental with a
total rental of
K390,000 incurred during the year under review. I recommended the
management to
renew the office lease agreement with Telikom (PNG) Ltd so that
monthly rental
payment complies with the rates agreed in the lease agreement and
the Corporation
responded as follows:“There have been a series of constant dialogue with the Landlord
(Telikom) through
telephone, letters and email for new lease Agreement to ensure
payments of rentals
were done but to no avail. Hence, ICDC has refused to pay its rental
fees until a proper
Lease Agreement is in place.”Goods and Service Procurement Process Weaknesses
My review of the Corporation’s procurement processes revealed the
following control
weaknesses:• The total cheque payments of K126,869 lacked three (3) quotations
for goods and
services worth K5,000 and over as required by the Public Finance
(Management)
(Amendment) Act 2016;• The total expenses of K413,292 had no proper supporting
documentations such
as invoices, receipts and cheques copies to substantiate the
validity and
completeness of the expenses incurred for the year ended 31
December 2017; and• The total cheque payments of K99,130 and K93,262 were not
approved by the
Managing Director and Corporate Service Director apart from
signing the -
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-
cheques for payments
-46-
Industrial Centres Development
CorporationAs a result, I was unable to place reliance on the effectiveness
on the controls
surrounding the procurements process of the Corporation. Also the
Corporation is in
breach of Public Finance (Management) (Amendment) Act 2016. I
brought this to the
attention of the Management and they responded that:“Appropriate measures and steps have been taken to comply with
the Public Finance
Management Amendment Act 2016 to address some of the issues
highlighted such as
obtaining three (3) quotes for payments over K5,000 and to ensure
all proper
documentation are attached with payments vouchers duly signed and
approved by the
accountable Officers.”Other Internal Control Weaknesses
Other weaknesses noted during my review were:
• Certain cost on preliminary activities were over spent by the
Corporation on the
projects and they are still incomplete;
• Salary Sacrifice Approval from IRC was not sought for two
officers;
• Inadequate control over cash encashment and payment to
suppliers;
• Reconciliations of general ledger accounts were not prepared
on a periodic basis
and the expenditure general ledgers for Business Growth Centre
were not made
available for my audit inspection;
• There were no assets identification numbers or tags allocated
to each assets listed
in the Fixed Assets Register;
• The salary history cards for the staff were not updated by the
HR in terms of base
salary, higher duty allowance, other allowances and leave
records such as
recreational, sick, compassionate and long service leaves;
• Recreational leave fares were paid to the employees and
dependents without valid
supporting documents such as birth and marriage certificates; -
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and
• There was no Internal Audit Unit established as per Section 9
Subsection 6 of the
Public Finances (Management) (Amendment) Act 2016.I drew management’s attention to these weaknesses and I was
advised that steps have
been taken to address these issues.14.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection of
accounts and records and the examination of the financial
statements of the Corporation
for the year ended 31 December 2018 had been completed and the
management letter
was issued on 12 May 2020. The management letter responses were
being awaited to
finalise and issue the audit reports.The Corporation had not submitted its financial statements for
the year ended 31
December 2019 for my inspection and audit.
-47-15. INTERNAL REVENUE COMMISSION
15.1 INTRODUCTION
15.1.1 LegislationThe National Executive Council (NEC) in its meeting on 5
December 2013, Decision
No: 419/2013 approved that the Internal Revenue Commission (IRC)
be transformed
into an Independent Statutory Authority through a separate Act
of Parliament.In accordance with the NEC Decision, the Internal Revenue
Commission Act 2014 was
certified on 5 August 2014. In September 2014, the Internal
Revenue Commission
started carrying out its operations as a Statutory Authority.Prior to September 2014, the Internal Revenue Commission was
operating as a
Department of the National Public Service under the Department
of Finance.15.1.2 The Objective of the Commission
The objective of the Internal Revenue Commission is to raise
revenue for the -
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-
government from taxes imposed on income that is liable to be
taxed under the taxation
laws it administers. The Commission assesses and collects taxes.
It conducts tax
education and awareness campaigns, and proposes tax
administration reform measures
to ensure that a conducive business environment is established
for collecting right
amount of taxes.15.1.3 The Powers and Functions of the Commission
The powers and functions of the Internal Revenue Commission are
to enable the
Commissioner General to:• administer and enforce the revenue laws;
• promote compliance with the revenue laws;
• take such measures as may be required to improve service
provided to taxpayers
with a view to improving efficiency and maximising revenue
collection;
• take such measures as may be required to counteract tax fraud
and other forms of
tax evasion;
• advise the State on matters relating to taxation and to
liaise with relevant
stakeholders on such matters;
• represent the State internationally in respect of matters
relating to taxation; and
• carry out such functions as are given to the Internal Revenue
Commission under
this Act or any other law.-48-
Internal Revenue Commission
15.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records, and the examination of the
financial statements of the
Commission for the years ended 31 December 2016 and 2017 had been
completed on
23 April 2019 and 20 June 2019 respectively. Despite repeated
reminders, the
management responses along with the signed financial statements
were being awaited
to finalise the audit reports. -
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The Commission had not submitted its financial statements for the
years ended 31
December 2018 and 2019 for my inspection and audit.-49-
16. INVESTMENT PROMOTION AUTHORITY
16.1 INTRODUCTION
16.1.1 Legislation and Objective of the Authority
The Investment Promotion Authority was established under the
Investment Promotion
Act 1992. The objective of the Act was to provide for the
promotion of investment in
the interests of national, social and economic development. This
Act repealed the
National Investment and Development Act (Chapter 120) and the -
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-
Investment Promotion
Act 1991.16.1.2 Functions of the Authority
The principal functions of the Authority are to:
• provide information to investors in the country and overseas;
• facilitate the introduction of citizens and foreign investors
to each other and to
activities and investments of mutual benefits;
• provide a system of certification of foreign enterprises;
• advise the Minister on policy issues which relate to the Act;
and
• maintain a register of foreign investment opportunities.16.2 AUDIT OBSERVATIONS
16.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Authority for the year ended 31 December 2018
was issued on 27
January 2020. The report did not contain any qualification.16.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Authority for the year
ended 31 December 2018
was issued on 27 January 2020. The report contained the
following observations:Fixed Assets
My review of the fixed assets for the year ended 31 December
2018 revealed that the
Authority had not fully complied with Part 32 of the Financial
Management Manual
by not maintaining an updated Fixed Assets Register. Physical
assets recorded in the
Fixed Assets Register were not tagged and labelled with serial
numbers and no proper
stock take was carried out during the year to update the Fixed
Assets Register.-50-
Investment Promotion Authority
-
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I brought this issue to the attention of the management and the
management noted my
concerns and responded as follows:“We have commenced on this project by way of recruiting an
accounting graduate; and
purchased a label printer; we have adopted a naming convention; and
we have
commenced labeling existing assets here at the head office; the
final step yet to be
implemented is to purchase fixed assets register software. We note
the audit
recommendation and will address the issue accordingly.”Personnel Files
My examination of the Authority’s personnel files revealed lack of
proper maintenance
of staff salary ledgers/cards, gratuity records, and leave history
for employees. I stressed
the importance of proper filing and regular update of records for
ease of access to
employee’s information and to facilitate correct calculation of
their entitlements. As a
result, I was unable to confirm on what basis salaries and
allowances were paid.I brought this issue to the attention of the management and the
management responded
to my observation as follows:“We agree with the audit findings on not maintaining salary history
cards for all
officers. Our Human Resource team have been made aware of this
recommendation,
hence, will commence preparing salary history cards for all officers
for 2020 and
onwards.I We note the recommendation and will adhere.”Leave Fares
I noted that a total of K280,548 was paid by the Authority to its
employees and their
dependents as leave fares during the year. However, I was unable to
verify the validity
and authenticity of the staff dependents (children) ages for leave
fares as no birth
certificates were attached to the payment vouchers or in their
personnel files.I drew management’s attention to the requirements of the General
Orders 14.41 for
compliance. The management responded to my observation as follows: -
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-
“We are not sure why HR team didn’t request birth certificates;
however, notice will
be issued to staff to provide legal documentation of their natural
born children and
adopted children who are 18 years and below.”-51-
Investment Promotion Authority
Travel Acquittal and Travel Advance Register
The Financial Management Manual, Part 20, paragraph 14.1
stipulates that an
advance register be maintained to keep record of all advances
authorized. Also, the
paragraph 11.2 requires travel advances to be acquitted within 14
days of return from
overseas travels whilst paragraph 12.10 requires that travel
advances from domestic
travels be acquitted within 7 days from the day of return.However, my review revealed that a travel advance register had
not been maintained
by the Authority. Hence, the travel and subsistence expenses were
not acquitted with
proper acquittal documents such as the receipts/invoices,
boarding passes and other
relevant supporting documents. Consequently, I could not verify a
total of K228,419
paid for travel and subsistence expenses during the year under
review.This issue was brought to the attention of the management and the
management noted
my concerns and responded as follows:“We concurred that the travel advance register had not been
frequently updated during
the year to ensure acquittals are done after an officer returns
from duty travel. We note
the recommendation and will adhere.”16.3 STATUS OF FINANCIAL STATEMENTS
-
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-
At the time of preparing this Report, the Authority had submitted
the financial
statements for the year ended 31 December 2019 for my inspection
and audit and
arrangements were being made to commence the audit shortly.-52-
17. KOKONAS INDASTRI KOPORESEN
(Formerly Copra Marketing Board of PNG)
17.1 INTRODUCTION17.1.1 Legislation
The (NEC) through its Gazettal Notice No. G19 abolished the Copra
Marketing Board
Act 1992 on 4 June 2002 and replaced it with Kokonas Indastri
Koporesen Act 2002
which established the Kokonas Indastri Koporesen (KIK). The new
Act decentralised
copra buying and selling in PNG and required KIK to only regulate
the copra price in
PNG.17.1.2 Functions of the Koporesen
The principal functions of the Koporesen are to regulate and
assist in the export and
marketing of copra in the best interest of the copra producers of
PNG and to administer
the PNG Coconut Extension Fund and the PNG Coconut Research Fund.17.1.3 Funds of the Koporesen
-
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-
The Kokonas Indastri Koporesen Act subsequently established PNG
Coconut
Extension Fund and PNG Coconut Research Fund. Comments in
relation to these Funds
are contained in paragraphs 17A and 17B respectively, of this
Report.17.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
17.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act on
the financial
statements of the Koporesen for the year ended 31 December 2018
was issued on 29
May 2020. The report did not contain any qualification.17.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act on
the inspection and
audit of the accounts and records of the Koporesen for the year
ended 31 December
2018 was issued on 29 May 2020. The report contained the
following observations:Land & Building – No Land Title Deeds
I noted that the Koporesen disclosed K20,529,450 as its closing
balance for Land and
Buildings at year end. However, my review of its records revealed
that the Koporesen
had disclosed two (2) land portions (Section 16 Allotment 13, in
Kimbe and Section 31
Allotment 11 Mangola Street, in Lae) as part of its assets
without obtaining their land
titles/ownerships.
-53-Kokonas Indastri Koporesen
The total value of land and improvements disclosed was K2,113,000
and K1,349,000
respectively on these portions.Further, there were unresolved issues related to those portions
of land between other
State entities (NAQIA and PNG Ports) and the Koporesen. In
relation, I noted that the
land titles are held by other State entities whilst the sheds
(buildings) were erected by
the Koporesen. As such, the Koporesen’s disclosure of both land
and improvement -
Page 124 of 475
-
values would be a departure from IAS 16 as ownership of land was
in dispute.Investments
Note 7 of the financial statements disclosed that in 2017, the
PNG Cocoa Coconut
Institute (PNGCCI) was abolished and its functions and staff
subsumed by the
Koporesen commencing this year. As such, the Koporesen’s
investment of K266,003
would be reassessed once PNGCCI is finally liquidated and
deregistered.17.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Koporesen had not
submitted its financial
statements for the year ended 31 December 2019 for my inspection
and audit.-54-
17A. PAPUA NEW GUINEA COCONUT EXTENSION FUND
17A.1 INTRODUCTION17A.1.1 Legislation
-
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-
The Copra Marketing Board (Amendment) Act 1997 provides for the
establishment
of the Papua New Guinea Coconut Extension Fund for the purpose
of receiving levies
and engaging in extension services and related programmes in
accordance with the
terms of the Act.17A.1.2 Objective of the Fund
The objective of the Fund is to engage in extension services and
related programs by
itself or in co-operation with other persons or bodies for the
benefit of the Copra
Industry.
The Fund was administered by the Copra Marketing Board up to 3
June 2002 and has
since been administered by Kokonas Indastri Koporesen.17A.2 AUDIT OBSERVATIONS
17A.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Extension Fund for the year ended 31 December
2018 was issued
on 29 May 2020. The report did not contain any qualification,
however, a going
concern issue is reproduced as follows:“Going Concern
I refer to Note 1 of the Extension Fund’s financial statements
which disclose that the
Fund was abolished in 2017 and its extension functions and staff
subsumed by the
Kokonas Indastri Koporesen. A registered liquidator would be
appointed to formally
liquidate PNG Cocoa Coconut Institute (PNGCCI) and deregistered
from the register
of companies. I will continue to report until PNGCCI is fully
liquidated and
deregistered and its related functions are formally transferred
to KIK and Cocoa
Board. My opinion is not modified in respect of this matter.”17A.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Fund had not submitted
its financial
statements for the year ended 31 December 2019 for my inspection
and audit. -
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-
-55-
17B. PAPUA NEW GUINEA COCONUT RESEARCH FUND
17B.1 INTRODUCTION
17B.1.1 Legislation and Objective of the Research Fund
The Papua New Guinea Coconut Research Fund was established by
the Kokonas
Indastri Koporesen Act following the repeal of the Copra
Marketing Board
(Amendment) Act and the cessation of the PNG Copra Research
Fund. The Kokonas
Indastri Koporesen deducts a copra research fee of K4 per tonne
of copra purchased
from producers and pays it to the Research Fund. The Research
Fund in turn, pays
this cess to the Cocoa Coconut Institute Limited of PNG.17B.2 AUDIT OBSERVATIONS
17B.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Research Fund for the year ended 31 December
2018 was issued on
29 May 2020. The report did not contain any qualification,
however, a going concern
issue is reproduced as follows:“Going Concern
I refer to Note 1 of the Research Fund’s financial statements
which disclosed that the
Fund was abolished in 2017 and its research functions and staff
subsumed by the
Kokonas Indastri Koporesen. A registered liquidator would be
appointed to formally
liquidate PNG Cocoa Coconut Institute (PNGCCI) and deregistered
from the register
of companies. I will continue to report until PNGCCI is fully
liquidated and
deregistered and its related functions are formally transferred
to KIK and Cocoa
Board. My opinion is not modified in respect of this matter.”17B.3 STATUS OF FINANCIAL STATEMENTS
-
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-
At the time of preparing this Report, the Research Fund had not
submitted its financial
statements for the year ended 31 December 2019 for my inspection
and audit.-56-
18. KUMUL CONSOLIDATED HOLDINGS (Formerly Independent Public
Business Corporation)18.1 INTRODUCTION
18.1.1 Legislation
The Independent Public Business Corporation (IPBC) was
established under the
Independent Public Business Corporation of Papua New Guinea Act
2002 (as
amended) which came into operation on 27 March 2002.The above Act was amended through the Independent Public
Business Corporation of
Papua New Guinea (Amendment) Act 2007 at which time the
objectives and functions
of the Corporation were changed.A major impact of the amendments made was that the Corporation,
the Trusts, the State
Owned Enterprises or any other enterprises in which the
Corporation, the Trusts or the
State Owned Enterprise holds any interest shall not be subject
to the Public Finances
(Management) Act. The amended Act also excludes the Corporation
from the
application of the Public Services (Management) Act 1995 and the
Salaries and
Conditions Monitoring Committee Act 1988. These amendments came
into operation
on 8 June 2007.The Principal Independent Public Business Corporation Act was
amended on 12
August 2015. The name of the Independent Public Business
Corporation was repealed -
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-
and replaced with Kumul Consolidated Holdings. The objectives
and functions of the
principal Act were not amended and all dividends declared by
Kumul Consolidated
Holdings shall be paid into the Sovereign Wealth Fund.
18.1.2 Objectives of the Corporation
The objectives of the Corporation are to:• act as trustee of the Trust and hold assets and liabilities
that have been vested in
or acquired by it, on behalf of the State;
• act as a financial institution for the benefit of and the
provision of financial
resources and services to State Owned Enterprises and the
State, where approved
by the National Executive Council (NEC);
• enhance the financial position of the State or State Owned
Enterprises; and
• enter into and perform financial and other arrangements that
in the opinion of the
Corporation have as their objective either:
– the advancement of the financial interests of the State or
State Owned
Enterprises; or
– the development of the State or any part thereof.-57-
Kumul Consolidated Holdings
18.1.3 Functions of the Corporation
The main functions of the Corporation are to:
• administer the Trusts and monitor the performance of the
assets of the Trusts in
such manner as provided under this Act and shall perform such
other functions as
are required under this Act.
• without limiting the generality of Section (1) but subject to
the provisions of this
Act, the Corporation may:
– undertake the function of holding and monitoring
corporation for State
owned assets and Majority State Owned Enterprises;
– undertake the function of planning, coordinating and
managing State
assets, infrastructure and projects;
– determine policies regarding:
– the conduct of its affairs and the affairs of any of
the Trusts; and
– the administration, management and control of the -
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-
Corporation
and any of the Trusts;
– borrow, raise or otherwise obtain financial accommodation
in PNG;
– advance money or otherwise make financial accommodation
available to
the State or State Owned Enterprises;
– act as a central borrowing and capital raising authority
for State Owned
Enterprises;
– act as agent for State Owned Enterprises in negotiating,
entering into and
performing financial arrangements;
– provide a medium for the investment of funds of State
Owned Enterprises;
– manage or cause to be managed the Corporation’s financial
rights and
obligations; and
– such other functions and duties as are prescribed by the
Act or any other
Act.18.1.4 Trust of the Corporation
The Trust of the Corporation is the General Business Trust.
Comments in relation to
the Trust are contained in paragraph 18A of this Report.18.1.5 Subsidiaries of the Corporation
The subsidiaries of the Corporation are Kumul Technology
Development Corporation
Limited (formerly Port Moresby Private Hospital Limited) and PNG
Dams Limited.
Comments in relation to these subsidiaries are contained in
paragraphs 18B and 18C of
this Report.-58-
Kumul Consolidated Holdings
18.2 AUDIT OBSERVATIONS
18.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Corporation for the year ended 31 December -
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-
2017 was issued on 28
February 2020. The report did not contain any qualification.18.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Corporation for the year ended 31 December 2018 had been
completed and results were
being evaluated.The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements of the Corporation
for the year ended 31
December 2019 was in progress.-59-
18A. GENERAL BUSINESS TRUST (Trust under Kumul Consolidated
Holdings)
18A.1 INTRODUCTION -
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18A.1.1 Legislation
The General Business Trust was established under Section 31 of
the Independent
Public Business Corporation of PNG Act 2002 (as amended) which
came into
operation on 20 June 2002.The Kumul Consolidated Holdings (KCH) (formerly Independent
Public Business
Corporation of PNG) was appointed as Trustee of the Trust and
all moneys belonging
to the Trust shall be invested or dealt with by KCH in
accordance with the Act;At any time before or after the commencement date of the Act,
the Minister
responsible for privatisation matters may vest certain assets
and liabilities in the
Kumul Consolidated Holdings as Trustee of the Trust; andAll the State Owned Enterprises and other investments owned by
the State of PNG
are vested in the Trust by the Minister responsible for
privatisation as approved by
the NEC from time to time.18A.2 AUDIT OBSERVATIONS
18A.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the Trust’s financial
statements for the year ended 31 December 2017 was issued on
28 February 2020.
The report contained a Qualified Opinion.“QUALIFIED OPINION
In my Opinion, except for the effects of the matters described
in the Basis for
Qualified Opinion paragraphs below:
(a) the financial statements of General Business Trust for the
year ended 31
December 2017:(i) give a true and fair view of the financial position
and the results of its
financial performance and cash flows for the year
ended on that date;
and(ii) the financial statements have been presented in
accordance with the -
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-
International Financial Reporting Standards and other
generally
accepted accounting practice in Papua New Guinea.
-60-General Business Trust
(b) proper accounting records have been kept by the Trust, as far as
appears from
my examination of those records; and(c) I have obtained all the information and explanations required.
BASIS FOR QUALIFIED OPINION
Value and Ownership of Lancron Naval Base Property
My report of the Trust for the year ended 31 December 2016 was
qualified in respect
of the inability of the Trust to provide the State Lease of the
Lancron Naval Base of
the Defence Department valued at K46,628,175 recorded under
investment
properties.I was unable to perform sufficient audit procedures to satisfy
myself as to the accuracy
or existence of the opening balance or comparatives as reported in
the financial
statements due to non-provision of requisite documents. Any
adjustments that are
found to be necessary on the opening balance of the investment
property would have
a consequential effect on the profit and loss for the year ended 31
December 2017
and the comparative profit and loss account presented and the
respective statement of
financial position and statement of cash flows.As at the date of this audit report, I was not provided with the
State Lease for this
property. Therefore, I was unable to obtain sufficient appropriate
audit evidence to
determine the fair value of this asset reported at K46,628,175 in
Note 11 and included
in the statement of financial position as at 31 December 2017.Transfer of Lae Port Project (LPP)
The Lae Port Project (LPP) was completed at a total cost of
K714,419,665 and
transferred to PNG Ports Corporation Limited (PPCL) in 2015.
Included in the total -
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-
project costs was the GoPNG component recorded in the books of the
Trust at
K223,527,155 as disclosed in Note 14(b), Projects Under Construction
of the
financial statements as at 31 December 2017.I further noted that the General Business Trust under Note 14(a),
Unquoted Equity
Securities included investment value in PNG Ports Corporation
Limited at
K585,000,000 which was carried at valuation. In the valuation of the
investment in
PNG Ports Corporation Limited, the future cash flows of LPP was
factored. In my
view, the amount of investment projects valuing K223,527,155 was
duplicated
without any explanation.As a result, total Investments value of K5,160,523,296 reported in
the Statement of
Financial Position of the Trust had been overstated by K223,527,155
as at 31
December 2017.-61-
General Business Trust
Valuation of Investment (Shareholding) in Pacific International
HospitalOn 26 July 2016, the Board of Kumul Consolidated Holdings approved
the transfer
of the Company’s investment property at a book value of K81 million
in exchange
for shares in Pacific International Hospital (PIH) without any
proper due diligence.
The share investment in PIH was then recorded at K9.5 million in the
Company’s
books and statement of financial position as at 31 December 2016. As
a result, a loss
of K71.6 million was recorded for the financial year ended 31
December 2016.In 2017, the Company engaged an independent valuer to perform
valuation of the
investment in PIH. The independent valuer asserted that the
investment in PIH valued
K41.8 million as at 31 December 2017. This had resulted in a fair
value gain of K32.3
million (K41.8 million less K9.5 million) recorded for the financial
year ended 31
December 2017. -
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-
I have engaged an expert valuer for review of the valuation and
raised a number of
queries to the management regarding appropriateness of the approach
undertaken and
sufficiency of the data and estimates utilized in the valuation.
However, these queries
have never been addressed by the Company at the time of this report.
As a result, I
concluded that the indicative value of the investment in PIH shown
in the valuation
report and recorded in the books of the Company were not reasonable
and may not
represent fair value in accordance with International Financial
Reporting Standards
(IFRS) guidelines. Any adjustment found necessary would have a
material impact on
the statement of financial position and statement of comprehensive
income for the
year ended.EMPHASIS OF MATTER
Going Concern
The K800 million loan of the Trust from Bank of South Pacific (BSP)
required the
submission of an asset sale plan related to the Fairfax property on
or before 31
December 2015. The Trust failed to submit the said requirement until
the loan
matured on 30 June 2018. On 6 July 2018, BSP had approved the
extension of
maturity of the loan to 30 June 2019 provided that the asset sale
plan was submitted
on or before 31 December 2018. However, the Trust is yet to submit
the required
asset sale plan as at the date of this report.This is in breach of the loan covenant and BSP has the right to
demand payment of
the loan at any time. Because of the importance of this non-
compliance of loan
agreement by the Trust, I consider necessary to bring this to your
attention.”-62-
General Business Trust
-
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18A.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Trust for the year ended 31 December 2018 had been completed
and the results
were being evaluated.The fieldwork associated with the inspection and audit of the
accounts and records
and the examination of the financial statements of the Trust for
the year ended 31
December 2019 was in progress.-63-
-
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-
18B. KUMUL TECHNOLOGY DEVELOPMENT CORPORATION
LIMITED (Subsidiary of Kumul Consolidated Holdings)18B.1 INTRODUCTION
18B.1.1 Legislation
This Company was initially registered under the Companies Act on
1 August 1994
with a name Negliw No. 81 Limited. On 30 September 1994, Negliw
No. 81 Limited
was acquired by the Motor Vehicles Insurance (PNG) Trust, now
the Motor Vehicles
Insurance Limited and on 20 March 1996 changed its name to Port
Moresby Private
Hospital Limited.Port Moresby Private Hospital Limited was later transferred to
the General Business
Trust on 2 August 2002. Subsequently on 20 April 2016, the
Company changed its
name from Port Moresby Private Hospital Limited to Kumul
Technology
Development Corporation Limited.18B.1.2 Objective of the Company
The objective of Kumul Technology Development Corporation
Limited is to
construct, furnish and equip a building to operate as a
hospital.18B.2 AUDIT OBSERVATIONS
18B.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the financial
statements of the Company for the year ended 31 December 2017
was issued on 28
February 2020. The report contained a Qualified Opinion.“QUALIFIED OPINION
In my Opinion, except for the effects of the matter described in
the Basis for Qualified
Opinion paragraph below:(a) the financial statements of Kumul Technology Development
Corporation
Limited for the year ended 31 December 2017: -
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-
(i) give a true and fair view of the financial position and
the results of its
financial performance and cash flows for the year ended on
that date; and(ii) the financial statements have been presented in
accordance with the
Companies Act, International Financial Reporting Standards
and other
generally accepted accounting practice in Papua New Guinea.-64-
Kumul Technology Development Corporation
Limited(b) proper accounting records have been kept by the Company, as far
as it appears
from my examination of those records; and
(c) I have obtained all the information and explanations required.BASIS FOR QUALIFIED OPINION
Valuation of Investment (Shareholding) in Pacific International
HospitalOn 25 July 2016, the Board of Kumul Consolidated Holdings approved
the transfer
of the Company’s investment property at a book value of K81 million
in exchange
for shares in Pacific International Hospital (PIH) without any
proper due diligence.
The share investment in PIH was then recorded at K9.5 million in the
Company’s
books and statement of financial position as at 31 December 2016. As
a result, a loss
of K71.6 million was recorded for the financial year ended 31
December 2016.In 2017, the Company engaged an independent valuer to perform
valuation of the
investment in PIH. The independent valuer asserted that the
investment in PIH valued
K41.8 million as at 31 December 2017. This had resulted in a fair
value gain of K32.3
million (K41.8 million less K9.5 million) recorded for the financial
year ended 31
December 2017.I have engaged an expert valuer for review of the valuation and
raised a number of
queries to the management regarding appropriateness of the approach
undertaken and -
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-
sufficiency of the data and estimates utilized in the valuation.
However, these queries
have never been addressed by the Company at the time of this report.
As a result, I
conclude that the indicative value of the investment in PIH shown in
the valuation
report and recorded in the books of the Company does not appear to
be reasonable
and may not represent fair value in accordance with International
Financial
Reporting Standards (IFRS) guidelines. Any adjustment found
necessary would have
a material impact on the statement of financial position and
statement of
comprehensive income for the year ended.EMPHASIS OF MATTER
Going Concern
As of 31 December 2017, the Company’s total current liabilities
exceed current assets
by K4.9 million. The management of the Company assessed that the
Company’s
ability to continue as a going concern is dependent on the ongoing
financial support
of its parent entity, the General Business Trust.”-65-
Kumul Technology Development Corporation
Limited18B.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the year ended 31 December 2018 had been
completed and the
results were being evaluated.The fieldwork associated with the inspection and audit of the
accounts and records
and the examination of the financial statements of the Company
for the year ended
31 December 2019 was in progress. -
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-
-66-
18C. PNG DAMS LIMITED
(Subsidiary of Kumul Consolidated Holdings)18C.1 INTRODUCTION
18C.1.1 Legislation
PNG Dams Limited was incorporated under the Companies Act on
5 June 2002. This
Company was established under Section 3(1) of the
Electricity Commission
(Privatisation) Act 2002 (the ‘Act’) by transferring to it -
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-
the Sirinumu Dam and YonkiDam from PNG Electricity Commission
(ELCOM). This was gazetted throughGazettal Notification No. G114 dated 16 July 2002. The
Company was vested with
the IPBC through the Gazettal Notification No. G125 dated 2
August 2002.18C.1.2 Objective of the Company
The objective of the Company is to store water in the two
dams for the controlled
release of water from the storage for electricity
generation.18C.2 AUDIT OBSERVATIONS
18C.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies
Act on the financial
statements of the Company for the year ended 31 December
2017 was issued on 28
February 2020. The report did not contain any qualification.18C.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the year ended 31 December 2018 had been
completed and the
results were being evaluated.The fieldwork associated with the inspection and audit of
the accounts and records
and the examination of the financial statements of the
Company for the year ended
31 December 2019 was in progress. -
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-
-67-
19. LEGAL TRAINING INSTITUTE
19.1 INTRODUCTION
19.1.1 Legislation
The Legal Training Institute was established in 1972 under the
Post Graduate Legal
Training Act (Chapter 168).19.1.2 Functions of the Institute
The functions of the Institute are to provide practical training
in law, the conduct and
management of legal offices, trust accounts and related subjects
for candidates for
admission, to a standard sufficient to qualify them for
admission to practice as lawyers
under the Admission Rules as contained in the Lawyers Act of
1986.19.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
19.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the Institute’s
financial statements for the years ended 31 December 2014, 2015
and 2016 were issued
on 22 June 2020. The reports contained similar Qualified
Opinions, hence, only the
2016 report is reproduced.“QUALIFIED OPINION
In my opinion, except for the effects of the matters referred to
in the Basis for Qualified
Opinion paragraphs below:(a) the financial statements of the Institute are based on
proper accounts and records; -
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-
and
(b) the financial statements are in agreement with those
accounts and records, and
show fairly the state of affairs of the Institute as at 31
December 2016 and the
results of its operations for the year then ended.BASIS FOR QUALIFIED OPINION
Fixed Assets – K2,645,876
I noted that the Institute had not maintained a Fixed Assets
Register during the year
under review. The assets owned by the Institute had not been
tagged for easy
identification and recording purposes. I also noted that the
Institute had not carried out
physical count of fixed assets over the years to ensure that
assets have properly been
recorded and in existence.
-68-Legal Training Institute
As a result, I was unable to confirm the valuation, existence
and accuracy of the fixed
assets disclosed in Note 6 of the financial statements.Limitation of Scope – K164,683
The Institute did not maintain proper records of payments
totalling K164,683 during
the period under review. My review of the expenditures during
the year revealed that
payments totalling K164,683 were missing or not provided for my
verification.
Consequently, I was unable to perform my audit procedures to
determine the validity,
completeness and accuracy of the payments totaling K164,683 as
reported in the
financial statements.”19.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Institute for the years
ended 31 December 2014,
2015 and 2016 were issued on 22 June 2020. The reports contained
similar
observations, hence, only the 2016 report is reproduced: -
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-
Budget Against Actual
A comparison of the budget figures against the actual
expenditure revealed that the
Institute had exceeded the budget in its spending. There was a
significant increase in
spending by K1,894,933 for the year under review for which the
audit did not receive
any satisfactory explanation from the Institute.Accounting and Administration Procedural Manual
I noted that the Institute did not maintain a procedural manual
for the staff to follow
and adopt standardized procedures within the Institute for
effective control purposes.
In the absence of this manual, I was unable to establish whether
the uniform procedures
were followed in the accounting, administration and other
operational areas. Further, I
was unable to establish whether the staff members carry out
tasks in accordance with
the prescribed procedures and guidelines applicable to the
Institute.Council Meeting Minutes
I was not provided with the Council meeting minutes for the year
2016. As such, I was
not able to state whether the important financial, operational
and administrative
decisions were collectively discussed, agreed to and resolutions
passed accordingly.-69-
Legal Training Institute
Bank Reconciliations
My review on the Institute’s bank reconciliations revealed that
the bank reconciliations
were prepared without being reviewed on a timely basis by a
responsible officer. I
further noted that these bank reconciliations were not signed by
the preparer and the
reviewer. Due to lack of timely bank reconciliations, cheques
totalling K179,791 -
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-
remained outstanding for more than twelve (12) months and had
become stale.
Consequently, I was not able to place reliance on the
effectiveness of the internal
controls maintained by the Institute over the bank reconciliation
process.Expenditure – K175,463
I observed that the Institute made payments totalling K175,463
without obtaining three
(3) written quotations from reputable suppliers when making
payments for expenditures
exceeding K5,000. I further noted that in the absence of three
(3) written quotations,
the Institute resorted to using statutory declarations to bypass
the requirements specified
under the Public Finances (Management) Act 1995 (as amended). As
a result, I was
unable to place reliance on the effectiveness of the internal
controls surrounding the
procurement of goods and services of the Institute.19.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Institute had not
submitted its financial
statements for the years ended 31 December 2017, 2018 and 2019
for my inspection
and audit.-70-
-
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-
20. MINERAL RESOURCES AUTHORITY
20.1 INTRODUCTION
20.1.1 Legislation
The Mineral Resources Authority was established by the National
Parliament under the
Mineral Resources Act 2005 on 9 November 2005. This Act came
into force on January
2006 but the Authority commenced operations in June 2007.20.1.2 Objectives of the Authority
The objectives of the Authority are to achieve stability,
industry growth and a degree
of assurance of future revenues from the mineral industry. More
effective management
of issues concerning landowners and their participation in the
development process and
allow for the development of a more settled investment climate
and industry
development.20.1.3 Functions of the Authority
The functions of the Authority are to:
• advise the Minister on matters relating to mining and the
management,
exploitation and development of Papua New Guinea’s mineral
resources;
• promote the orderly exploration for the development of the
country’s mineral
resources;
• oversee the administration and enforcement of the Mining Act
1992, the Mining
(Safety) Act (Chapter 195A), the Mining Development Act
(Chapter 197), the Ok
Tedi Acts and the Ok Tedi Agreement, the Mining (Bougainville
Copper
Agreement) Act (Chapter 196) and the agreements that are
scheduled to that Act,
and any other legislation relating to mining or to the
management, exploitation or
development of PNG’s mineral resources;
• negotiate mining development contracts under the Mining Act
as agent for the
State;
• act as agent for the State, as required, in relation to any
international agreement
relating to mining or to the management, exploitation or
development of PNG’s
mineral resources; -
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-
• receive and collect, on its own account and on behalf of the
State, any fee, levy,
rent, security, deposit, compensation, royalty, costs,
penalty, or other money, or
other account payable under the Mining Act, the Mining
(Safety) Act, the Mining
Development Act, the Ok Tedi Acts and the Ok Tedi Agreement,
the Mining
(Bougainville Copper Agreement) Act and the agreements that
are scheduled to
that Act, or any other Act the administration of which is the
responsibility of the
Authority from time to time;-71-
Mineral Resources Authority
• on behalf of the State, to receive and collect from persons
to whom a tenement
has been granted under the Mining Act the security for
compliance with the
person’s obligations under the Act required to be lodged with
the Registrar, and
to hold and such security received or collected;
• on behalf of the State, to administer and be responsible for
the administration of
any public investment program relating to mining;
• conduct systematic geoscientific investigations into the
distribution and
characteristics of PNG’s mineral and geological resources,
located on, within or
beneath the country’s land mass, soil, subsoil and the sea-
bed;
• provide small scale mining and hydrogeological survey data
services, and
occupational health and safety community awareness programs;
• collect, analyse, store, archive, disseminate and publish (in
appropriate maps and
publications) on behalf of the State geoscientific
information about PNG’s
mineral and geological resources;
• carry out such other functions as are given to the Authority
by this Act or by any
other law; and
• generally to do such supplementary, incidental, or
consequential acts and things
as are necessary or convenient for the Authority to carry out
its functions.20.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
-
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-
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Authority for the year ended 31 December 2015 was completed and
the results were
being evaluated.The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements for the year ended
31 December 2016 was
in progress.The Authority had not submitted its financial statements for the
years ended 31
December 2017, 2018 and 2019 for my inspection and audit.-72-
21. NATIONAL AGRICULTURE QUARANTINE AND INSPECTION
AUTHORITY21.1 INTRODUCTION
21.1.1 Legislation
The National Agriculture Quarantine and Inspection Authority
(NAQIA) was
established by the National Agriculture Quarantine and Inspection
Authority Act 1997.
This Act came into operation on 29 May 1997.Under this Act, all assets used for Quarantine and Inspection
Services (other than land
held by the State) and previously held by the Department of
Agriculture and Livestock
which were necessary to be transferred to the Authority for the
purposes of the
Authority, were transferred to and became the assets of the
Authority at
commencement. -
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-
21.1.2 Objectives of the Authority
The main objectives of the Authority as mentioned in the Act are
the conduct of
quarantine and inspection of: any animal and species; any fish
species; any plant
species; any products derived from animals, fish and plants; and
to prevent pests or
diseases from entering in or going out of PNG.21.1.3 Functions of the Authority
The functions of the Authority are to:
• advise the Ministry and the National Government on policy
formulations and
legislative changes pertaining to agriculture quarantine and
inspection matters;
• monitor and inspect all imports of animals, fish and plants
and their parts and
products, including fresh, frozen and processed food to ensure
that the imports are
free from pests, diseases, weeds and any other symptoms;
• regulate and control all imports of animals, fish and plants
and their parts and
products, including fresh, frozen and processed food to ensure
the imports are free
from pests, diseases, weeds and any other symptoms;
• undertake all necessary actions to prevent arrival and spread
of pests, diseases,
contamination, weeds, and any undesirable changes pertaining
to animals, fish
and plants and their parts and products, including fresh,
frozen and processed
foods;
• monitor, inspect and control the export of animals, fish and
plants and their parts
and products to ensure that they are free from pests,
diseases, weeds and any other
symptoms;-73-
National Agriculture Quarantine and
Inspection Authority• undertake all necessary actions to ensure that the export of
animals, plants, fish
and their parts and products are free from pests, diseases,
weeds and any other -
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-
symptoms so as to provide quality assurance to meet the
import requirements of
importing countries;
• issue permits, certificates and endorsements pertaining to
imports and exports of
animals, fish and plants and their parts and products to
provide quality assurance
and to ensure that they are free from pests, diseases, weeds
and any other
symptoms;
• inspect and treat vessels, aircraft, vehicles, equipment and
machinery that are used
in importing and exporting animals, fish and plants to ensure
that they are free
from pests, diseases, weeds and any other symptoms;
• regulate the movement of animals and plants from one part of
the country to
another to control and prevent the spread of pests, diseases,
weeds and any other
symptoms;
• undertake and maintain inspection and quarantine surveillance
pertaining to pests,
diseases, weeds and any other symptoms on animals, fish and
plants within and
on the borders of the country;
• monitor, assess and carry out tests on animals, fish and
plants and their parts and
products that are introduced into the Country, to ensure that
they are free of pests,
diseases, weeds and any other symptoms;
• liaise with other countries, international agencies and other
organisations in
developing policies, strategies and agreements relating to
quarantine, quality and
inspection matters in respect of animals and plants;
• provide quarantine and inspection information and services to
individuals,
agencies and other organisations within the Country and
overseas in respect of
animals and plants;
• levy fees and charges for any of the purposes of this Act and
any regulations made
there under;
• exercise all functions and powers and perform all duties
which, under any other
written law, are or may be or become vested in the Authority
or are delegated to
the Authority; and
• do such matters and things as may be incidental to or
consequential upon the
exercise of its power or the discharge of its functions under
this Act.21.2 AUDIT OBSERVATIONS AND RECOMMENDATONS
-
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21.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the Authority’s
financial statements for the year ended 31 December 2017 was
issued on 28 August
2019. The report contained a Qualified Opinion.-74-
National Agriculture Quarantine and
Inspection Authority“QUALIFIED OPINION
In my opinion, except for the effects of the matter described in
the Basis for Qualified
Opinion paragraphs:(a) the financial statements are based on proper accounts and
records; and(b) the financial statements are in agreement with those
accounts and records, and
show fairly the affairs of the Authority as at 31 December
2017, and the results
of its financial operations and cash flows for the year then
ended.BASIS FOR QUALIFIED OPINION
Asset Revaluation Reserve
As at 31 December 2017, asset revaluation reserve was disclosed
as K18,979,236. The
asset revaluation reserve was recorded as a result of a
revaluation exercise conducted
in 2011. However, since 2011, the Authority has not maintained a
detailed register to
reconcile the increment or decrement by individual assets at
each financial year. As a
result, the Authority would not comply with the requirements of
International
Financial Reporting Standards IAS 16 Property, Plant and
Equipment in regards to any
future revaluation or disposals especially in relation to the
following:• If a revaluation results in increase in value, it should be
-
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credited to other
comprehensive income and accumulated in equity under the
heading “revaluation
surplus” unless it represents the reversal of a revaluation
decrease of the same
asset previously recognized as an expense, in which case it
should be recognized
in profit or loss;• A decrease arising as a result of a revaluation should be
recognized as an expense
to the extent that it exceeds any amount previously credited
to the revaluation
surplus relating to the same asset; and/or• When a revalued asset is disposed of, any revaluation surplus
may be transferred
directly to retained earnings, or it may be left in equity
under the heading
revaluation surplus. The transfer to retained earnings should
not be made through
profit or loss.Accordingly, I was unable to ascertain the validity and accuracy
of this balance at year
end.”21.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Authority for the year
ended 31 December 2017
was issued on the 28 August 2019. The report contained the
following observations:
-75-National Agriculture Quarantine and
Inspection AuthorityLack of Proper Updates and Maintenance of Employment Contracts
During my examination of the Authority’s payroll, I noted that
staff employment
records were not properly maintained and updated on a timely
basis. I also noted that
total personnel cost for the year was K17,136,771. However, my
request for the
employment contracts and other supporting employment letters
were not made
available to me to perform the necessary audit procedures. As a
result, I was unable to
verify and confirm whether correct rates of basic salary and -
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allowances were applied,
calculated and paid in 2017.I recommend that a 100% review and update of all staff records
to be performed and
the management responded as follows:“We have engaged external consultants in 2018. All staff files
have been reviewed andAll contract officers’ contracts have been renewed in 2018/2019
and that includes
taking up appropriate accounting entries for Long Service Leave,
Gratuity and Leave
Accruals in 2018.”Payment of Labour and Land Mobilisation Costs to Lands
Investment LimitedIncluded in land and building amount of K39,783,921 is an amount
of K2,924,899
relating to costs incurred for the construction of the
prefabricated houses. As reported
in the 2014, 2015 and 2016 audits, the Authority has paid
additional amount of
K1,048,998 above the approved contract value of K2,475,000 as
approved by the
Central Supplies and Tender Committee. Further, there were no
specific clause in the
contract in respect of the above payments of K1,048,998.
Accordingly, I am unable to
ascertain the basis on which the payment was made to Lands
Investment Limited.Late Submission of Financial Statements
The National Agriculture Quarantine and Inspection Authority had
not prepared and
submitted its financial statements to the Minister and the
Auditor-General prior to 30
April for the year ending 31 December preceding, resulting in
breaches of Section 63(1)
and Section 63(3) of the Public Finance (Management) (Amendment)
Act 2016.21.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Authority for the year ended 31 December 2018 was in progress. -
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The Authority had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.-76-
22. NATIONAL AGRICULTURAL RESEARCH INSTITUTE
22.1 INTRODUCTION
22.1.1 Legislation
The National Agricultural Research Institute (NARI) was
established by the National
Agricultural Research Institute Act 1996. This Act came into
operation on 10 October
1996.Under this Act, all monies allocated to or standing to the
credit of the research division
of the Department of Agriculture and Livestock and all assets
used for research and
research related functions previously held by the Department of
Agriculture and
Livestock prior to the operationalisation of the Act were
transferred to the Institute to
become the assets at commencement.22.1.2 Objectives of the Institute
The main objectives of the Institute are to conduct and foster
research into:‒ any branch of biological, physical and natural sciences
related to agriculture;
‒ cultural and socioeconomic aspects of the agricultural
sector, especially of the
smallholder agriculturalists; and
‒ matters relating to rural development, relevant to PNG.22.1.3 Functions of the Institute
The primary functions of the Institute are to:
• generate and adapt agricultural technologies and resource
management practices
appropriate to the needs, circumstances and goals of
smallholder agriculturalists;
• promote and facilitate applied and adaptive research in food
crops, livestock,
alternative cash crops, and resource management;
• promote the use of appropriate agricultural technologies and
provide essential -
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technical services to improve the productivity, income,
nutritional status and food
security, resource base and quality of life of rural
households and communities;
• develop and promote ways of improving the output, quality,
harvesting, post-
harvesting, handling and processing, and marketing of food
crops, livestock
produce and alternative crops;
• maintain and conserve the diversity of genetic resources for
food and agriculture,
act as custodian for these resources and promote the
effective utilisation of these
resources in the country;
• update and maintain the national inventory on soil resources
and to develop,
promote and maintain sustainable practices in agriculture;-77-
National Agricultural Research
Institute• provide agricultural information services, extension service
support and other
such assistance packages to the agricultural sector and to
provide liaison and
access to international agencies that promote agricultural
development;
• perform such other functions as are given to it under this
Act or any other law;
• formulate national agricultural research policies, define
sectoral research
priorities and allocate funds and advise the Minister and the
NEC on these
matters; and
• generally, do all such things as may be incidental or
consequential upon the
exercise of its powers and the performance of its functions.22.2 AUDIT OBSERVATONS AND RECOMMENDATIONS
22.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Institute for the year ended 31 December 2018
was issued on 14
February 2020. The report did not contain any qualification.22.2.2 Audit Observations Reported to the Ministers
-
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My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Institute for the year
ended 31 December 2018
was issued on 14 February 2020. The report contained the
following observations:Accounting System/Software
My review of the Institute’s accounts and records for the year
ended 31 December 2018
revealed that the Institute had been using the Quicken
Accounting Package for past
several years. I noted that the transactions from the Quicken
cash ledgers were
transferred manually to spreadsheets for reporting purposes as
the Quicken was
programmed to adopt cash basis of accounting. I further noted
that the Accpac
Accounting System that was purchased some years back was not
fully utilized by the
Institute. In my view, possibility of errors and mistakes would
be minimized, a lot of
time can be saved and a better audit trail would be available
when this new Accpac
Accounting System was fully utilized. This matter was reported
to Management in my
previous reports as well and the Institute had to implement my
recommendations.Management concurred with my comments and responded that the new
Sage Accpac
Accounting System is being trialed but put on hold pending
implementation of the
Integrated Financial Management System (IFMS) by Department of
Treasury and
Finance. The IFMS was further delayed due to internet
connectivity and accessibility
at all NARI Centers.-78-
National Agricultural Research
InstituteLand Titles and Valuation
My review of the Fixed Assets Register of the Institute and
related records revealed that
the Institute had carried out a valuation exercise of all of its -
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titled land portions located
at various research centers throughout the country and disclosed
the revalued amounts
in its financial statements. However, I noted the land at Portion
121 at Tring Wewak,
East Sepik Province was not included in this revaluation
exercise, I recommended the
management to do a valuation and to take up the revalued amount
in its Fixed Assets
Register.Management noted my recommendation and agreed to carry out
revaluation exercise
of Portion 121 in early 2020.22.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Institute had not
submitted its financial
statements for the year ended 31 December 2019 for my inspection
and audit.-79-
-
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23. NATIONAL AIDS COUNCIL SECRETARIAT
23.1 INTRODUCTION
23.1.1 Legislation
The National AIDS Council Secretariat was established under the
National AIDS
Council Act 1997. This Act was certified and became operational
on 19 January 1998.23.1.2 Objectives of the Council
The objectives of the Council are to take multi sectoral
approaches with a view to:• prevent, control and to eliminate HIV/AIDS transmission in
PNG;
• organise measures to minimise the personal, social and
economic impact of
HIV/AIDS; and
• safeguard personal privacy, dignity and integrity in the face
of the HIV/AIDS
epidemic in PNG.23.1.3 Functions of the Council
The functions of the Council include formulation,
implementation, review and revision
of national policy in accordance with its objects for the
prevention, control and
management of HIV/AIDS and to:• make recommendations and provide guidelines on the related
issues to the
National Executive Council (NEC), Provincial Governments
(PGs) and Local
Level Governments (LLGs);
• foster, co-ordinate and monitor HIV/AIDS prevention, control
and management
strategies and programmes;
• accept, administer and account for the funds and other
resources allocated to it;
• consult and co-ordinate with the appropriate state agencies
and other persons and
organisations on matters related to its activities;
• initiate, encourage, facilitate and monitor preparation and
dissemination of
information, counselling, care and legal services, research
on or in relation to
HIV/AIDS; and
• perform such other functions given to it under Section 5 of
this Act or any other
law. -
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-80-
National AIDS Council Secretariat
23.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
23.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Secretariat for the year ended 31 December
2018 was issued on 10
February 2020. The report contained a Qualified Opinion.“QUALIFIED OPINION
In my opinion, except for the effects of the matter referred to
in the Basis for Qualified
Opinion paragraph below:a) the financial statements of the Secretariat are based on
proper accounts and
records; andb) the financial statements are in agreement with those accounts
and records, and
show fairly the state of affairs of the Secretariat as at 31
December 2018 and the
results of its financial operations for the year then ended.BASIS FOR QUALIFIED OPINION
Operating and Capital Expenditure – Insufficient Supporting
DocumentsDuring my review of expenditures, I noted that operating
expenditure amounting to
K1,020,376 and capital expenditure of K939,832 were not verified
during the audit due
to lack of proper supporting documents. As such, I was not able
to ascertain the
occurrence and authenticity of payments due to scope
limitation.”23.2.2 Audit Observations Reported to the Ministers
-
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My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Secretariat for the
year ended 31 December
2018 was issued on 10 February 2020. The report contained the
following significant
matters:Internal Control Environment
I have reviewed the overall internal control environment of the
Secretariat and noted
the following issues in respect of the control environment:• Internal control mechanisms such as approved accounting
manuals, operational
guidelines and policies were not sighted at the time of audit;
• Effective implementation and monitoring of the established
internal controls
especially in procurement were weak and are open to
manipulation and override;-81-
National AIDS Council Secretariat
• Internal Audit function was not fully utilized to review various
processes
including assessment and implementation of effective internal
controls and anti-
fraud measures to provide necessary recommendations for the
management; and
• There was no proper accounting system in place to keep proper
record of
transactions.The accounts were maintained using both PGAS accounting system and
MS excel
spreadsheets. In the absence of a proper accounting system,
financial information is
prone to manipulation.I highlighted the implications of not having in place a properly
defined control
environment and recommended that Management take appropriate actions
to ensure
that the control environment need to be tightened up and adequate
systems were in place
to ensure sound operations of the Secretariat. The Management
responded to my
observation as follows:
“The National AIDS Council Secretariat adopts the Public Finances -
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Management Act
(PFMA) when dealing with procurements of goods and services, PFMA
clearly I
specifies as how yo u go about in expending public funds. Hence, it
cannot in anywayWe admit that the Internal Audit function was not fully utilized as
the internal auditor
was very sick and could not perform his duties more often. The
internal auditor resigned
and the internal audit position is currently vacant. The position
will be advertised in
the near future; and
We have also identified the issue with the accounting system and
budgeted funds to
purchase an accounting software that is suitable for our
organization.”Fixed Assets
Despite my prior years’ recommendations, I still noted weaknesses
over the control of
assets owned and in the custody of the Secretariat. The following
issues were noted:• The Secretariat did not have an approved fixed assets policy in
place for assets
owned and controlled by the Secretariat;
• The Fixed Assets Register (FAR) was not properly maintained in
2018. Assets
dating back over a decade still remained in the FAR although they
had reached
their useful lives and were due for disposal. I further noted
instances where assets
maintained in the Register did not have either purchase date or
purchase price
while all assets were not tagged with customized NACS codes and
captured in the
FAR to enable me to locate and verify the existence of the assets;
• The Secretariat had not conducted a regular stock-take on its
fixed assets for a
number of years including 2018;
• Physical inspections conducted on vehicles owned by the
Secretariat revealed that
the vehicles were not registered with “Z” plates, breaching the
Motor Traffic I
Regulation 1967 Chapter 243 section 19A(e)(i); and
-82-National AIDS Council Secretariat
• The Secretariat did not have in place an approved mobile phone
policy to -
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administer the purchase and usage of mobile phones.
I was not able to place reliance on the controls surrounding the
management and use of
the fixed assets by the Secretariat and whether the fixed assets
were properly
safeguarded.Payment of Vehicle allowances to Officers Provided with Official
VehiclesMy review of the personnel and motor vehicle benefits of the
Secretariat revealed
breakdowns and malpractices. We noted that five (5) senior officers
of the Secretariat
were each provided vehicles for twenty-four (24) hours use with
fuel. In addition, these
officers were also paid vehicle allowances. This practice is a form
of double dipping of
benefits by the employees and should be discontinued.I brought this to the attention of the Management and they responded
as follows:“We take note of the audit observation and inform you that going
forward we will give
an option to concerned officers whether to forgo their vehicle
allowance and be given
a vehicle or vice versa.”Long Over Due Staff Advances
My review of the staff advance balance of K33,622 in Note 7 of the
financial statements
revealed that this balance remained outstanding with no movements
for over two (2)
years. As such, I could not confirm the collectability of these
advances within the
stipulated period.I recommended the Secretariat to come up with options to collect
those debts; otherwise
consider writing the balance off after the Secretariat’s approval.The Secretariat responded that the long outstanding staff advances
of K33,622 were
related to terminated officers; hence NACS will make a submission to
the Board for
their consideration for write-off.Maintenance of Staff Personnel Files
My review of the personnel emoluments revealed that personnel files
were not properly -
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maintained. I noted that records such as salary and allowances tax
declaration forms,
birth certificates, salary history cards, leave records and other
correspondences relating
to salary variations were not properly maintained. In addition,
important documents
like the CV, offer and acceptance letters, supporting documents such
as advertised
positions, an applications register for all the applicants,
selection criteria, and interview
and evaluation forms for candidates and screening for criminal
records such as police
clearance forms were not on file for my verification.-83-
National AIDS Council Secretariat
Further, most of the contract officers’ contracts were not
current or were not located in
their personnel files during my review.Due to the above, I was not able to gain comfort and conclude on
the effectiveness and
adequacy of controls surrounding the Human Resources Management
of the NACS.
I recommended the Secretariat to ensure that its employees’
personal files are properly
maintained and important documents related to each officer should
be filed in their
personnel files and be readily available for management and audit
purposes.Other Internal Control Weaknesses
Other internal control weaknesses noted during my audit were:
• the Secretariat did not maintain a complete Travel Acquittal
Register for travel
related expenses totaling K1,620,661. I was unable to
ascertain whether all travel
expenses incurred and paid during the year were accurately
recorded and timely
acquitted in accordance with Part 20, paragraphs 11.2 and
12.10 of the Financial
Management Manual;• encashable cheques were issued without cash collection
registers and/or per diem
sheets being signed off and dated by respective recipients. I
further noted, on
numerous occasions, that cash disbursements for awareness
programs had no -
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proper acquittals. I brought this to the attention of the
Secretariat by emphasizing
that encashable cheques are not an acceptable business
practice and promotes
fraudulent activity, abuse of resources and corruption; and• I was not able to ascertain the validity of K48,100 paid to
consultants engaged by
the Secretariat as there were no progressive/periodic reports
attached with the
payment vouchers as a basis for payments made. In addition, I
noted on numerous
occasions that Grants totaling K131,659 allocated to
individual recipients as well
as organizations for awareness programs were not substantiated
and acquitted to
justify that the funds used were for the intended purpose and
had tangible
outcomes.I drew management’s attention to these weaknesses and was advised
that the Secretariat
has taken note and appropriate actions will be taken to address
these issues.23.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the financial statements of
the Secretariat for the
year ended 31 December 2019 was submitted and arrangements were
being made to
commence the audit shortly.-84-
24. NATIONAL BROADCASTING CORPORATION
24.1 INTRODUCTION
24.1.1 Legislation
The National Broadcasting Commission (NBC) was established under
the
Broadcasting Commission Act (Chapter 149). This Act was amended
in 1995 by the
National Broadcasting Commission (Change of Name and Corporate
Structure) Act
1995.
In terms of Section 4 of the Broadcasting Commission (Change of
Name and Corporate
Structure) Act No. 49 of 1995 the name of the Commission was
changed to Corporation. -
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-
The Amendment Act No.49 of 1995 came into operation on 23 April
1996 as per
Gazettal Notification No.G.32.
24.1.2 Functions of the Corporation
The principal functions of the Corporation are to provide
balanced, objective and
impartial broadcasting services and in so doing, to take in the
interests of the
community, all such measures as in its opinion are conducive to
the full development
of suitable broadcasting programs.The Corporation’s other functions are to:
• ensure that the services that it provides, when considered as
a whole, reflect the
drive for national unity and at the same time give adequate
expression to the
culture, characteristics, affairs, opinions and needs of the
people of the various
parts of the Country and in particular of rural areas;
• do all in its power to preserve and stimulate pride in the
indigenous and traditional
cultural heritage of PNG;
• take extreme care in broadcasting material that could inflame
racial or sectional
feelings; and
• co-operate with the Government in broadcasting social,
political, economic and
educational programs.
24.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS24.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the Corporation’s
financial statements for the year ended 31 December 2015 was
issued on 28 August
2019. The report contained a Disclaimer of Opinion.-85-
National Broadcasting Corporation
“DISCLAIMER OF OPINION
In my opinion, because of the limitations of scope of my work and
other matters referred
to in the Basis for Disclaimer of Opinion paragraphs, and the effect
of such adjustments,
if any, as might have been determined to be necessary had the
limitations and other -
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matters not existed, I am unable to and do not express an opinion on
the financial
statements of the National Broadcasting Corporation for the year
ended 31 December
2015.BASIS FOR DISCLAIMER OF OPINION
Limitation of Scope due to Disclaimer of Opinion on the Previous
Years’
Financial StatementsThe previous year’s audit report (2014) was issued with a full
disclaimer of opinion.
The reason for the disclaimer of opinion was the limitation of scope
arising from an
inability to obtain accounting records and proper explanations for
the differences that
were recorded between the 2014 general ledger balances and the 2014
financial
statements. Similar qualifications had been made for the previous
years’ financial
statements including 2013. Consequently, I was unable to quantify
the effects of any
material misstatements in the opening balances that might have a
consequential effect
on the financial statements of the Corporation for the year ended 31
December 2015.Fixed Assets – K204,464,822
During my review of the fixed assets of the Corporation, I noted the
following
inefficiencies:• The Corporation did not maintain an updated Fixed Assets Register
(FAR) to
properly record, account and capture fixed assets additions,
disposals and
transfers of assets between Provincial Radio Stations;
• The assets purchased during the year were expensed off instead of
being
capitalized and depreciated over useful life, thus overstating
and understating the
expense and fixed asset accounts respectively;
• The Corporation did not calculate depreciation of its assets
during the year which
resulted in significant misstatement in the Profit and Loss
Statement;
• A significant variance of K452,122,853 was noted between FAR
(K565,562,384)
and general ledger (K113,439,531) relating to fixed assets;
• A material variance of K3,607,390 was noted between FAR
(K6,535,959) and -
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-
general ledger (K10,143,348) relating to depreciation expense;
• There were no accumulated depreciation accounts for each type of
assets in the
general ledger; and
• I was not able to confirm physical existence of the Corporation’s
assets that are
located throughout the 20 provinces to verify the balances to the
general ledger.-86-
National Broadcasting Corporation
Due to the above issues, I was unable to place any reliance on the
effectiveness of the
internal controls surrounding the management of the fixed assets of
the Corporation.
Consequently, I am unable to conclude on the valuation, correctness
and existence of
the fixed assets at year end.Trade and Other Debtors
In Note 8 to the financial statements, the Corporation reported
balances of K1,923,306
and K1,245,202 for trade and other debtors respectively. However,
these balances did
not agree to the balances on various supporting schedules provided
to me. In the
absence of sufficient evidence of trade and other debtors’ balances,
I am unable to
verify the accuracy, completeness and validity of the trade and
other debtors’ balances
reported at the year end.Related Party-Government Debtors & Creditors
As at 31 December 2015, the Government debtors and creditors
balances were
K1,246,005 and K1,929,944 respectively which nets off to the value
of K683,939 as
noted in Note 9 to the financial statements. However, the following
discrepancies were
noted:• No aged debtors listing was maintained for the government’s
debtors account to
identify clearly the balances, their ages and control balances;
• No reconciliation was done to ensure each individual government’s
debtors were
paid and which were outstanding during the year;
• The government’s creditors balance of K915,762 relates to 2012 -
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and prior years’
unpresented cheques, which were yet to be identified and cleared;
and
• The government’s creditors balance was maintained manually on an
excel spread-
sheet and carried over from year to year without any review or
monthly
reconciliations performed to clear this significant balance.As a result, I was unable to conclude on the validity, accuracy and
completeness of
related party-government debtors and creditors balances stated in
the financial
statements as at 31 December 2015.Trade Creditor, Other Creditors and Accruals – K2,762,238
Note 10 to the financial statements shows the following:
• Trade payables – K3,533,809;
• Other payables and accruals – K1,871,450; and
• GST payables – K1,099,879.-87-
National Broadcasting Corporation
During my review, the Corporation did not provide any
reconciliations or appropriate
documentary evidence to support the amounts. In addition, I was
unable to perform the
cut-off procedures test of trade creditors and accrual balances
to ascertain whether all
credits and accruals transactions were recorded in the correct
accounting period or that
accruals were fairly recorded and that the method of accounting
for accruals was
consistently applied. As a result, I was not able to confirm the
completeness, existence
and accuracy of the creditors’ and accruals’ balances at the
balance date.Employee Provisions – K4,051,263
The Corporation reported balances of K1,460,513 and K2,589,749
for provisions for
recreational leave and furlough leave respectively. The two
balances were brought
forward from prior year without accounting for any movement
during the year. The -
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current year’s employee provisions were manually calculated by
the Human Resource
division and passed to Finance for posting into the general
ledger only at the year-end
but contained numerous mistakes and errors resulting in incorrect
balances. Hence,
these were not posted into the general ledger for current year’s
accounting purpose. In
the absence of accounting for employee provisions for the year, I
was unable to
ascertain the completeness, accuracy and validity of the employee
provision balances
at the year end.Issued Capital – K25,503,697
As at 31 December 2015, the Issued Share Capital balance was
K25,503,697. I was not
provided with any records and reconciliations to verify the
details and accuracy of the
share capital balance. In the absence of sufficient evidence, I
was unable to verify the
accuracy, completeness and validity of the Issued Capital balance
at the year end.Asset Revaluation Reserve – K187,317,339
The asset revaluation reserve balance in the financial statements
shows a significant
balance of K187,317,339 while the general ledger balance only
reflected K22,910,269.
A fair value balance of K164,407,070 was put through and an
unexplained adjusting
balance of K944,641 was taken up in the financial statements to
balance the Statement
of Changes in Equity to the assets and liabilities balances. I
was not provided with any
records and reconciliations to verify the details and accuracy of
the adjustments
including the movements in the Asset Revaluation Reserve balance.
In the absence of
sufficient evidence, I was unable to verify the accuracy,
completeness and validity of
the Revaluation Reserve balance at the year end.”24.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act on
the inspection and
audit of the accounts and records of the Corporation for the year
ended 31 December
2015 was issued on 28 August 2019. The report contained the
following observations: -
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-88-
National Broadcasting Corporation
Missing Payment Vouchers (Source Documents)
During my review, I was not provided with payment vouchers totaling
K1,056,627 for
my verification. Source documents are the main information in which
the financial data
is being derived from. In the absence of this vital information, I
was unable to satisfy
myself as to the accuracy and completeness of the financial
information presented in
the financial statements. In addition, the Corporation has not fully
complied with
Section 62(1) of the Public Finances (Management) Act 1995 that
requires public
bodies to keep proper accounts and records of its affairs.Centralized Monitoring System – IT Call Centre
My review on the Information Technology (IT) environment revealed
that the
Corporation does not have a call center for default reporting and a
network monitoring
system to allow for centralized monitoring of systems. As a result,
the following issues
were noted:• Key delays in achieving troubleshooting and/or resolving issues
which can lead
to down time effectively affecting delivery of service to
customers which comes
with a monetary cost and can also affect customer relationship;
and
• Current system does not provide extended resource monitoring and
management
capabilities in the form of dashboards, views, reports, capacity
planning, alerts
and recommendations.I recommended management to consider investing in running a
feasibility study and if
the benefits are exceptional, consideration may need to be given on
how best to move
this forward and management has responded as follows:“The recommendation is duly noted. The IT areas are a developing
area that needs
more funding and efforts to improve. The management had realised
that and acquired
new server and appliances in 2018.” -
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Information Technology (IT) Policy
I noted that the Corporation does not have in place a fully
documented and working IT
Policy and as a result, the following issues were noted:• The Corporation does not have policies to address the requirement
to protect
information from disclosure, unauthorised access, loss,
corruption and
interference;
• Key information may be disclosed or made available to
unauthorised individuals,
entities or processes;
• The information may be destroyed in an unauthorised manner and
accuracy and
consistency may not be preserved regardless of changes; and
• The Corporation is not protected against any liability if any of
the above is being
violated.
-89-National Broadcasting Corporation
I recommended management to put a policy in place which will protect
the Corporation
from any loss and/or liability that may arise and management have
responded as
follows:“The IT manager and his team must develop policies and procedures to
lift the standard
of IT environment. The recommendations are fully noted.”Cash at Bank and Bank Reconciliations
I was not provided with the bank reconciliations for the
Corporation’s main bank
account including most of the minor cash balances. In addition, I
noted that two bank
accounts namely National Project TV and National Karai Commercial
accounts cash
balances per the audited trail balance differs from the general
ledger. The trial balance
amount of K67,840 for the National Project TV account differs from
the general ledger
balance of K65,540 which gives a variance of K2,300 whilst the trial
balance amount
of K209,948 for National Karai Commercial account differs from
general ledger
balance of K191,773, resulting in a variance of K18,175. Though the
balances were -
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-
immaterial, the existence of such differences raises issues in
regards to the general
ledger system and the trial balance. Consequently, I was unable to
place any reliance
on the effectiveness of the internal controls surrounding the cash
management and
concluded that serious weaknesses existed.Transport and Fuel Management
My review of the Corporation’s transport and fuel management system
revealed gross
misuse and abuse of the fuel management system where the fuel costs
have been
increasing rapidly until picked up by management and attended to. I
noted that an
internal investigation has already been carried out which confirmed
misuse and abuse
of the fuel vouchers in collaboration with respective fuel service
stations being
associated with. I recommended management to:• continue with existing arrangement in place which has allowed for
the misuse to be
stopped;
• consider reviewing other key areas or business functions within
the organization
that carry the same risk and consider taking the same action; and
• critically have a look at the “Financial Procedures Manual”
recently established and
seriously consider uplifting any current functions in line with
all policies established
by this manual.And management have responded as follows:
“The management agrees with the recommendation and proper steps were
taken in
2017 and beyond. A transparent process is now followed.”-90-
National Broadcasting Corporation
Internal Controls
I was unable to confirm whether internal controls are appropriately
designed, correctly
implemented and operating effectively as all the documents to verify
and confirm the
controls regarding revenue and debtor management cycle, operating -
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expenses cycle and
financial accounting cycle were not provided to me. As such, I was
unable to verify and
confirm on whether all established internal controls are
appropriately designed,
correctly implemented and whether they are operating effectively.General Ledger Integrity – General Ledger Reconciliations
The Corporation has not performed any monthly reconciliation of its
entire general
ledger accounts for better internal control purposes. These general
ledger accounts were
not reconciled and independently reviewed at month end resulting in
unresolved
balances carried forward from year to year. In addition, specific
contributing issues
noted include changes to some key finance positions, no independent
review of
accounting entries or journals prior to posting into the accounting
system (Attaché),
lack of understanding of accounting issues, creation of new general
ledger without
obtaining proper approval and an unclear financial reporting
structure. Consequently, I
was unable to place any reliance on the effectiveness of the
controls surrounding the
general ledger accounts.I recommended that the Executive Director Finance and the Accountant
to conduct a
review of the current accounting processes and procedures in Finance
and implement
changes to improve the internal control environment and the
management responded as
follows:“The management have noted this and appropriate actions were taken
in mid-2016 and
beyond. The training of staff with the Attaché software and the CPA
training with CPA
PNG also started in 2017 and beyond.”Missing Records and Files
During my review, certain vital information was not provided as
these were either not
available or missing. I was informed that certain experienced staff
members including
the executive Director Finance and Accountant, who were there in
2014 had left or were
terminated between 2015 and early 2016. When these staffs left, the
information was
misplaced or left somewhere where current finance staffs were unable -
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to locate. The
missing vital information resulted in the limitation of my scope.I recommended that the departing finance staff must go through a
proper hand-over
take-over in order to update new staffs with status of their
accounting work, records
and other information within their section before leaving. In
addition, the Corporation
to implement a strict and effective policy and system of filing and
records management
since it is important when there is high staff turnover.-91-
National Broadcasting Corporation
Management responded as follows:
“The management noted this and proper handover takeover must be
perform to have
proper flow of info and data.”Evidence of Poor Accounting Function
I noted certain general ledger balances relating to assets and
provisions were not
updated or adjusted to reflect the correct positions of the balances
in 2015. The accounts
were provision for furlough and annul leaves, trade and other
debtors and prepayments.
The balances in the general ledger and financial statement are
carried forward balances
for 2014 without any movements. In addition, some adjustments
identified to be posted
into the general ledger in order to amend the balances to reflect
correct positions were
not posted into the general ledger, rendering these balances at year
end to be incorrect.
Consequently, the final trial balance lacked integrity and shows
evidence of weaknesses
in the accounting environment. The trial balance contained incorrect
balances and did
not reflect the true position of the Corporation at year end.I recommended management to conduct an assessment of the accounting
functions and
implement improvements to basic accounting functions such as monthly
general ledger
reconciliations, review of journal entries and posting of entries,
etc.Management had responded to my findings as follows:
-
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“The new management agree with the recommendation and did identify
these issues
and were addressed in 2017and beyond.”Journals and Creation of General Ledger Accounts
I noted significant weaknesses in relation to journal entries and
creation of new general
ledger accounts as follows:• Some manual journal entries posted into the general ledger system
were not
independently reviewed by the senior accounts officers;
• Some manual journal entries posted were not stamped as posted;
• A complete listing of all manual journal entries processed into
the attaché system
in the 2015 financial year was not provided for my review;
• There were many new general ledger accounts created in 2015 but
were not
supported by approval from the management team including the
Managing
Director; and
• Some new general ledgers created have similar functions to those
that already
existed.-92-
National Broadcasting Corporation
The key controls to detect fraud and errors in financial reporting
system are the
segregation of duties, and the independent review of manual journals
posted in the
ledger system including appropriate approvals for creation of new
general ledger
accounts in the attaché system. Without such controls, the general
ledger and the
resulting financial reports produced may contain incorrect and
materially misstated
balances.I recommended the following to the management:
• The manual journal entries prepared by any division including
payroll be
reviewed independently and approved for postings by senior
accounts officers;
• The senior accounts officers should collate all journals and -
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-
maintain a central
filing in order of their batch numbers and posting dates;
• All journal entries posted should be clearly marked as posted;
and
• Any new general ledger accounts created in the general ledger
system should be
properly approved by the designated senior management member
appointed by
the Managing Director and copies of such approval issued must be
properly kept.Management had responded as follows:
“The new mana ement a ree with the recommendation and did identif
these issues
and were addressed in 2017and beyond.”Trade Debtors
The trade debtor’s account captures the Corporation’s internal
revenue generated from
on-air and Kundu 2 advertising including other operating income from
co-sitting and
rentals from leasing of its properties. At year end, trade debtors
balance was K1,923,306
and a provision of K543,283 (43%) was provided against this debt.
However, I noted
following weaknesses:• I was unable to identify the ages of the trade debtor balance;
• No monthly reconciliations have been done to trade debtors
balances to identify
those that paid up and those that did not;
• There is a likelihood of some debtors may be paid but are not
cleared in their
accounts and may overstate the debtors account;
• No proper procedures in place, particularly in respect of debt
recovery; and
• Failure to follow up on debts which have been overdue beyond the
normal credit
terms may result in debts becoming bad unnecessarily and being
written off
subsequently.Hence, I was unable to determine completeness, existence and
accuracy of trade debtor
balances at year end.-93-
National Broadcasting Corporation
Trade Creditors and Other Liabilities
-
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During my review of the Corporation’s trade creditors and other
liabilities, I noted the
following:• The trade creditors sub ledger in the Attaché System was not
properly used and
hence, the existing balance was not agreeing to the general
ledger balance. A
manual list containing the unpresented cheques was also
maintained but this also
did not tie to the general ledger balance;• There was no monthly reconciliation performed throughout the
year;• Significant liabilities have not been accrued and due to
errors noted in my prior
review, I was unable to accurately quantify the balances at
year end;• Payments for goods and services were done on cash basis; and
• Total balance of K248,635 is made up of unpresented cheques
which were carried
forward from 2012. To date the balance has not changed. No
proper information
on the nature and explanation detailing the unpresented
cheques was provided to
me.Hence, I am unable to obtain any comfort on the completeness,
existence and accuracy
of trade and other creditors balance at year end.24.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Corporation for the year ended 31 December 2016 was completed and
results were
being evaluated.The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements of the Corporation
for the year ended 31
December 2017 was in progress.The Corporation had not submitted its financial statements for
the years ended 31
December 2018 and 2019 for my inspection and audit. -
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-
-94-
25. NATIONAL CAPITAL DISTRICT COMMISSION
25.1 INTRODUCTION25.1.1 Legislation
The National Capital District Government (Preparatory
Arrangements) Act 1982
established the National Capital District Interim Commission. The
purpose of this Act
was to establish an interim government for the NCD and make
preparatory
arrangements for the establishment of a government for the NCD as
required by Section
4(4) of the National Constitution. The National Capital District
Government
(Preparatory Arrangements) (Amendment) Act 1986 came into
operation in 1987.The National Capital District Commission Act 1990, which became
operational on 5
November 1990, established the NCD Commission. The introduction
of this Act
resulted in the amalgamation of Motu Koitabu Interim Assembly
with the NCD
Commission. Consequently, the assets, liabilities and the
obligations of the Interim
Assembly were absorbed by the Commission on the commencement
date.Amendments through the National Capital District Commission
(Amendment) Act 1992
which came into effect on 30 November 1992 resulted in the
establishment of the Motu
Koitabu Council.That was followed by the establishment of the system of
government for the NCD
through the National Capital District Commission (Amendment) Act
1995 which came
into operation on 19 July 1995. The NCD comprises the NCD
Commission, the Motu
Koitabu Council and Local-Level Governments in the NCD.25.1.2 Functions of the Commission
-
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-
The function of the NCD Commission is to:
• control, manage and administer the NCD to ensure its welfare
and that of the
persons in its jurisdiction.25.1.3 Subsidiaries of the Commission
The subsidiaries of National Capital District Commission are
National Capital District
Botanical Enterprises Limited and Port Moresby Nature Park
Limited. Comments in
relation to these subsidiaries are contained in paragraphs 25A
and 25B of this Report.-95-
National Capital District
Commission25.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
25.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the Commission’s
financial statements for the years ended 31 December 2016, 2017
and 2018 were issued
on 14 August 2019, 29 June 2020 and 30 June 2020 respectively.
The 2016 report was
a Disclaimer of Opinion while 2017 and 2018 reports contained
similar Qualified
Opinions, hence, only the 2018 report is reproduced.“QUALIFIED OPINION
In my opinion, except for the effects of the matters referred to
in the Basis for Qualified
Opinion paragraphs:(a) the financial statements of the Commission for the year
ended 31 December
2018:(i) give a true and fair view of the financial position and
the results of its
financial performance and cash flows for the year ended -
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-
on that date; and
(ii) the financial statements have been presented in
accordance with the Public
Finance (Management) (Amendment) Act 2016 and generally
accepted
accounting practice and statutory requirements in Papua
New Guinea;(b) proper accounting records have been kept by the Commission,
as far as appears
from my examination of those records; and(c) I have obtained all the information and explanations
required.BASIS FOR QUALIFIED OPINION
Revaluation of Lands and Buildings – K121,266,545
I noted that the Commission’s lands and buildings reported at
K121,266,545 in the
financial statements had not been revalued over a number of
years. The Commission
carried on the book values since the last revaluation performed
in 1992. Consequently,
the Commission has not complied with LAS 16 paragraph 34
(Measurement and
Recognition) which requires valuation of property, plant and
buildings are done every
three or five years. Accordingly, I was unable to determine
whether the Commission’s
properties value as reported in the financial statements as at
31 December 2018 were
fairly stated.-96-
National Capital District Commission
Land and Garbage Rates Debtors – K84,802,351
I noted that the data recorded in the TARMIS contains both
ratable and non-ratable
properties. Although the system oversight was corrected by
applying 40% and 60%
default rate for land tax and garbage rates respectively, the
rates also apply to default
customers. In addition, the basis used in deriving 40% and 60%
to apply on provision -
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-
of doubtful debt estimates could not be substantiated. As a
result, I was unable to
determine the accuracy of land tax and garbage rates debtors
balance of K84,802,351
(net of provision) as reported in the financial statements as at
31 December 2018.Fixed Assets Register (FAR)
My review of the Commission’s fixed assets account revealed that
details of all other
assets except for the lands and buildings were properly
maintained in the FAR.
However, the Commission did not conduct physical checks on these
other assets to
ascertain their existence and condition, and to confirm the
completeness and accuracy
of their total value of K33,653,588 as disclosed in the
financial statements. In the
absence of physical checks, assets that might be damaged, stolen
or obsolete could not
be identified by the Commission. Consequently, I could not
comment on the condition,
existence and ownership of the assets nor was I able to
determine the completeness,
valuation and accuracy of the amount stated in the financial
statements as at 31
December 2018.”25.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Commission for the
years ended 31 December
2016, 2017 and 2018 were issued on 14 August 2019, 29 June 2020
and 30 June 2020
respectively. These reports contained similar observations,
hence, only the 2018
observations are reproduced:Board Approval Limit & Variation Deeds
I noted a number of contracts valued over K500,000 had been
approved by the Board.
I also noticed variations being done to such contracts. The
management perceived that
the Commission should be recognized as a Provincial Government
and therefore, the
Board of the Commission can approve contracts up to K5 million
in accordance with
Section 39B of the Public Finance (Management) (Amendment) Act
2016. -
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-
However, the Commission has been established by an Act of
Parliament hence, does
not apply provisions of the Organic Law. As a result, the
Commission did not comply
with the requirements of Section 47E(3) of the Public Finance
(Management)
(Amendment) Act 2016.-97-
National Capital District Commission
Budget Versus Actual Spending
Expenditure incurred during the financial year 2018 was not within
the budgetary
allocation resulted in overspending. Payroll expenses (salaries and
allowances,
overtime, gratuity and casual wages) alone exceeded the budget by
K3,599,865. As a
result, I was not able to conclude on the effectiveness of the
budget and whether strict
observance on budget policies and monitoring of expenditure were
undertaken during
the year. I raised this issue and management responded as follows:“As noted in 2017 management letter, this is a case of under
budgeting. Board wanted
staff and overall admin cost to be less than 20% of the total budget
outlay. We have an
organization structure approved by the board and SCMC that require
appropriate
funding. This was reported back to board which since appointed an
independent firm El
to restructure NCDC management vis-à-vis to the NCDC’s functions.
When this
restructure is completed, all unwanted staffs in position of
functions outsourced will be
trimmed down and eventually cut costs.”Disaster Recovery Plan
I noted that the general controls on information technology (IT)
emphasized in my prior
years’ audits (2008-2017) have not been addressed by the management.
The IT
Manager claimed that Information Technology Department had a
disaster recovery plan
that guarantees the continuity of activities and operations in the
event that the -
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Commission encounters catastrophic disasters such as fire,
earthquake and cyclones,
etc. I was not given the opportunity to view the documented plan
however, informed
that data back-ups are done on daily, weekly and monthly basis. As
advised, the disaster
recovery plan had not been tested to ensure its feasibility. Without
a proper disaster
recovery plan, the risk of discontinuity of operations increases in
the case of unforeseen
circumstances. This can endanger continuity of the Commission’s
operations. I brought
this to the attention of the management and they responded as
follows:“This is a prior year issue re addressed in 2015, 2016 and 2017.
Management agreed
and formed a new committee to address this issue. The committee has
resolved to adaptand complete recovery of data and resumption of norm
occur.”Non-Compliance with the Public Finances (Management) (Amendment) Act
2016Section 63(1) of the Public Finance (Management) (Amendment) Act
2016 requires that
financial statements of a public body must be furnished to the
Minister before 30 April
of the subsequent year. However, the audit of the financial
statements of the
Commission for the year under review was delayed resulting in
reports not being issued
within time frame stipulated. Consequently, the Commission had
breached Section I
63(1) and 63(3) of the Act.-98-
National Capital District Commission
Internal Controls – Payroll System Controls
Reconciliation of allowances, gratuity and details of staff with
fringe benefits for the
period under review were not provided by the Human Resource
division for my
verification. Reconciliation is an important control mechanism.
Failure to reconcile
staff allowances may provide opportunities for fraudulent
activities go undetected. In
addition, a report from internal audit confirmed that the
Commission does not have in -
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-
place a payroll policy to manage its overtime and shift
allowances. I brought this issue
up to the management and management responded as follows:“Noted, we will review and address this recommendation now”
25.3 STATUS OF FINANCIAL STATEMENTSAt the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Commission for the year ended 31 December 2019 was in progress.-99-
25A. NATIONAL CAPITAL DISTRICT BOTANICAL ENTERPRISES
LIMITED (Subsidiary of NCDC)25A.1 INTRODUCTION
25A.1.1 Legislation
The NCD Botanical Enterprises Limited was incorporated under the
Companies Act
on 17 January 2000. Port Moresby City Development Enterprises -
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-
Limited (a 100%
owned subsidiary of the NCD Commission) holds 94% of the shares
and the NCD
Commission holds the remaining 6% shares directly or indirectly
through trust.25A.1.2 Objective of the Company
The main objective of the Company is to take control over the
operations of the
Botanical Gardens.25A.1.3 Functions of the Company
The Company’s activities include the sale of flowers and
conducting research relating
to orchids and horticulture.25A.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company had not
submitted its financial
statements for the years ended 31 December 2013, 2014, 2015,
2016, 2017, 2018 and
2019 for my inspection and audit, despite numerous reminders.-100-
25B. PORT MORESBY NATURE PARK LIMITED
(A Subsidiary of NCDC)25B.1 INTRODUCTION
25B.1.1 LegislationPort Moresby Nature Park Limited was incorporated on 1 December
-
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2011 under the
Companies Act. The Company is a subsidiary of the National
Capital District
Commission (NCDC).In early 2012, a Deed of Trust was signed between Port Moresby
Nature Park Limited
(being the Trustee) and the National Capital District Commission
(being the Settlor).
The Trust Deed provided the intention of the Settlor (NCDC) to
make Port Moresby
Nature Park Limited a charitable body to be known as 3“Port
Moresby Nature Park
Trust.”On 11 June 2012, the Port Moresby Nature Park Limited was
granted status of a
charitable body based on the nature of its business operations.25B.1.2 Objective of the Company
The objective of the Company is to allow the residents and
visitors to Papua New
Guinea (PNG) enjoy a botanical and zoological experience
consisting of the flora and
fauna of PNG in a safe, secure setting in Port Moresby, for the
purposes of education
and for the purposes beneficial to the community, including:• allowing persons, including residents of, and visitors to
PNG, to enjoy the
benefits of flora and fauna of PNG in a peaceful, well-
ordered and secure
recreational settings in the grounds of the Port Moresby
Nature Park;
• encouraging a greater understanding of the cultural
significance of the flora,
fauna and environment of PNG;
• furthering the appreciation and learning of PNG in relation
to the flora, fauna
and environment of PNG;
• promoting the use of the Port Moresby Nature Park to
stimulate interest and
research into PNG flora, fauna and environment and assisting
the conservation
efforts of the Government of PNG and the National Capital
District Commission
(NCDC) in relation to the environment; and
• allowing students from any educational institute to gain
practical training,
education and research opportunities on specific terms. -
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-
-101-
Port Moresby Nature Park Limited
25B.1.3 Functions of the Company
The functions of the Company include:
• encouraging, promoting and supporting the use of new and
established
technologies to make the unique natural environment of PNG
more accessible
to the public of PNG;
• promoting, assisting and initiating research in PNG into the
study of PNG flora,
fauna and the environment including the provision of such
financial assistance
as may be necessary to enable or assist such research;
• promoting, supporting and initiating research in PNG on the
flora, fauna and
environment of PNG and educating and informing different
communities about
the results of such research;
• providing a forum for information from international
contributors from the
global community for the purpose of educating the PNG public
in relation to
the flora, fauna and environment of PNG;
• doing such other lawful acts and things as are incidental to
or conducive to the
attainment of any of the foregoing activities; and
• generally:
‒ carrying out fund raising schemes and charitable projects
for the purpose
of the Company, including exhibition and competitions;
and
‒ establishing, promoting and fostering workshops and other
educational
activities for the purpose of the Company.25B.2 AUDIT OBSERVATIONS
25B.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies
Act on the inspection
and audit of the accounts and records of the Company for the
year ended 31 December
2016 was issued on 27 August 2019. The report did not contain
any qualification. -
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-
25B.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2017 and 2018 were
in progress.The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.-102-
26. NATIONAL CULTURAL COMMISSION
26.1 INTRODUCTION
26.1.1 LegislationThe National Cultural Commission was established under the
National Cultural
Commission Act 1994. This Act came into operation on 15 November
1994, there by
repealing the National Cultural Committee (Interim Arrangements)
Act 1993.Under the Act, all assets held by and obligations and
liabilities imposed on the former
National Cultural Committee immediately before the
operationalisation of the Act were
on that date transferred to the Commission.26.1.2 Functions of the Commission
The main functions of the Commission are to:
• perform the cultural functions of the former National
Cultural Committee and in
this connection, to assist and facilitate, preserve, protect,
develop and promote the
traditional cultures of the indigenous people of PNG;
• encourage the development, promotion and protection of the
contemporary
cultures of PNG;
• facilitate the marketing of selected and approved aspects of
the cultures of PNG;
• co-ordinate with related Government and Non-Government -
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-
agencies on cultural
matters;
• co-ordinate cultural activities with provincial cultural
bodies;
• liaise with Non-Government organisations on cultural matters;
and
• liaise with international cultural organisations.
26.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS26.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Commission for the years ended 31 December
2015, 2016 and 2017
were issued on 10 October 2019. The reports contained similar
Disclaimer of Opinions,
hence, only the 2017 report is reproduced.“DISCLAIMER OF OPINION
Because of the significance of the matters referred to in the
Basis for the Disclaimer of
Opinion paragraphs below, I have not been able to obtain
sufficient audit evidence to
provide a basis for an audit opinion. Accordingly, I do not
express an opinion on the
financial statements of the Commission for the year ended 31
December 2017.-103-
National Cultural Commission
BASIS FOR DISCLAIMER OF OPINION
Internal Control Environment
During my review, I noted that the Commission’s overall internal
control environment
was very weak. The internal control processes and procedures were
not implemented
by the Commission. I also noted a lack of segregation of duties
within the Management
Services Division of the Commission. The staff employed by the
Commission both
permanent and casual lacked necessary skills and qualifications to
perform the
accounting and finance and other tasks allocated to them. I further
noted that they were
not familiar with the Public Finance (Management) (Amendment) Act
2016, General
Orders and other Financial Procedures and Instructions to strengthen
the internal -
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-
control system of the Commission. As such, I was unable to rely on
the overall internal
control system of the Commission during the year under review.
Consequently, I was
unable to place reliance on the Commission’s financial statements
for the year ended
31 December 2017.Limitation of Scope – Cash at Bank – K875
My review on the bank reconciliations of the Commission revealed
that the bank
reconciliation statements for the Main Operating Account, National
Film Institute,
National Performing Arts Troupe and Institute of PNG Studies were
not provided for
my review. Furthermore, I was not provided with the bank
confirmation for NCC
Operating Account, National Film Institute, National Performing Arts
Troupe and
Institute of PNG Studies accounts for the year ended 31 December
2017. As a result, I
was not provided with all the necessary information for me to carry
out my audit
procedures. Consequently, I was unable to identify whether proper
controls were
implemented by the Commission in the bank reconciliation function. I
was also unable
to verify and confirm the accuracy and completeness of the balance
disclosed at the
year end.Limitation of Scope – Cost Centre Accounting Information
During my review, I noted that the accounting information and the
bank reconciliations
statements for the National Film Institute, National Performing Arts
Troupe and
Institute of PNG Studies were not provided by the Commission for my
examination and
inspection. I was unable to verify the expenditures (acquittals of
payments), internal
revenue collection reports, fixed assets and other documentary
evidences during my
review. Consequently, I was not provided with all the necessary
information to enable
me to carry out my audit procedures to confirm whether proper
accounting records have
been maintained by the National Film Institute, the National
Performing Arts Troupe
and Institute of PNG Studies. -
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-104-
National Cultural Commission
Accounting Control System
The Commission did not maintain a cashbook for recording its income
and expenditure
transactions during the year under review. I further noted that the
bank reconciliations
were prepared without a proper cashbook. The cashbook should form
the basis of
account balances presented in the financial statements. Without the
cashbook, the
balances in the financial statements may not be fairly stated at the
year end. Further,
due to inadequate manual controls, the financial statements produced
from ledgers and
without a cashbook cannot be relied upon. As a result, I was unable
to obtain comfort
over the internal control environment and the accuracy and
completeness of the account
balances stated in the financial statements.Limitation of Scope – Fixed Assets – K5,832,834
My review of the fixed assets and capital expenditures of the
Commission for the year
ended 31 December 2017 revealed that the Commission has not
maintained a Fixed
Asset Register for all non-current assets acquired over the years-
to-date. I also noted
that the Commission’s acquisitions and disposals of assets were not
properly accounted
for.
Further, there was no physical stock take undertaken by the
Commission to confirm the
existence of assets. Since fixed assets of the Commission are
susceptible to theft and
misuse, the Commission must have appropriate control mechanism in
place to
safeguard these assets. As a result, I was unable to ascertain the
completeness, existence
and valuation of the fixed assets totaling K5,832,834 as reported in
Note 2 of the
financial statements at the year end.
Limitation of Scope – Salary and Wages – K2,468,180My review of the Commission’s salary and wages expenses revealed
that the salary and
wages files or reports from the Department of Finance were not
maintained and -
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provided for my review. Consequently, I was unable to perform my
audit procedures to
determine the validity, completeness and accuracy of the salary and
wages totaled
K2,468,180 as reported in the financial statements.Limitation of Scope – Other Income – K66,390
During my review of the Commission’s Other Income, I noted that the
supporting
documents such as invoices, receipts and other necessary documents
for Other Income
were not properly maintained and provided for my review.
Consequently, I was unable
to perform my audit procedures to determine the validity,
completeness and accuracy
of the Other Income totaled K66,390 as reported in the financial
statements.”-105-
National Cultural Commission
26.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Commission for the
years ended 31 December
2015, 2016 and 2017 were issued on 10 October 2019. The reports
contained similar
observations, hence, only the 2017 report is reproduced.Accounting and Administration Procedural Manual
During my review, I noted that the Commission had a draft
Procedural Manual which
was yet to be approved by the Board. I observed that the
Commission’s staff were not
adhering to the processes and procedures of the Public Finance
(Management)
(Amendment) Act 2016, General Orders and other Financial Manuals
and Instructions.
As a result, I noted significant internal control weaknesses
within the Commission
during the year under review. I drew this to the attention of
the management and they
responded as follows: -
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“Since this is addressed, we will attempt to draw up one for
internal office use”Non Maintenance of Travel Advances Acquittal Register
The Commission had not maintained a Travel Advances Register for
all duty travels
and related expenses. As a result, I was unable to trace and
authenticate travel advances
and related expenses amounting to K43,517 for the year under
review. Consequently,
the Commission had breached the Public Finance (Management) Act
and the Financial
Management Manual Part 20, paragraphs 11.2 & 12.10 which states
that cash
advanced to officers on official duty travels must acquit travel
advances within 14 and
7 days for international and domestic travels respectively on
return from duty travels.
In the absence of a Travel Advance Register, the Commission was
unable to monitor
the acquittals promptly.Staff Personnel Files
During my review of staff personnel files for both permanent and
casual employees, I
noted that staff personnel files were not properly maintained
and updated. There were
instances in which salary and wages tax declaration forms and
birth certificates for
dependents were not sighted in the staff personnel files.Internal Control Weaknesses
Other internal control breakdowns and weaknesses noted during my
audit are
summarized as follows:i. I noted that the Commission’s Board Meeting Minutes were not
signed by the
chairman to confirm the minutes as correct recording of the
meetings;-106-
National Cultural Commission
ii. I noted that payments totaled K45,000 had no proper
supporting documents such as
cheque copies and invoice copies attached to confirm and verify
the payments. As
a result, I was unable to verify and substantiate the accuracy, -
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completeness and
occurrences of the expenditures incurred;iii. My review of the expenditures during the year revealed that
payments totalling
K72,362 were missing or not placed on the payment voucher files
for my
verification; andiv. I was not provided with the Acting Director’s contract of
Employment for my
review.26.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Commission for the year ended 31 December 2018 had been
completed and results
were being evaluated.The financial statements of the Commission for the year ended 31
December 2019 had
been submitted and arrangements were being made to commence the
audit shortly.-107-
-
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27. NATIONAL ECONOMIC AND FISCAL COMMISSION
27.1 INTRODUCTION27.1.1 Legislation
The National Economic and Fiscal Commission was established in
April 1996 under
the National Economic and Fiscal Commission Act 1996 and Section
117 of the
Organic Law on Provincial and Local-level Governments.27.1.2 Functions of the Commission
The main functions of the Commission are to:
• provide assessment and views on national macro and micro
economic issues and
their relevance on the overall development of rural and urban
communities;
• consider and co-ordinate requests by Provincial Governments
and Local-level
Governments for foreign grants, loans and other financial
assistance for
development purposes;
• ensure that Provincial Governments and Local-level
Governments obtain a fair
share of the national wealth and make recommendations to the
NEC on the
allocation of grants to Provincial Governments and Local-
level Governments;
• recommend suitable economic development strategies and sound
fiscal
management policies to the Minister responsible for financial
matters;
• carry out cost and benefit analysis on the development of all
natural resources and
the impact of such development on national development and
make such analysis
available to the NEC;
• review public accounting and related practices;
• make yearly reports and recommendations to the NEC through
the Minister
responsible for financial matters;
• assist the Provincial and Local-level Service Monitoring
Authority with
assessments and views on the planning and implementation
systems of the
Provincial Governments and Local-level Governments;
• establish and maintain a gradation system for the purpose of
classifying provinces
and districts according to the stages of development of each;
• assist the Provincial and Local-level Service Monitoring -
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Authority in carrying out
its other functions; and
• provide advice to the Minister responsible for Provincial
Government and Local-
level Government (now Inter Government Relations) matters as
and when
required.-108-
National Economic and Fiscal Commission
27.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
27.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act on
the financial
statements of the Commission for the year ended 31 December 2018
was issued on 10
October 2019. The report did not contain any qualification.27.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act on
the inspection and
audit of the accounts and records of the Commission for the year
ended 31 December
2018 was issued on 10 October 2019. The report contained the
following significant
matters:Fixed Asset Register
During my review of the Fixed Assets Register, I noted that
majority of the assets
particularly the Furniture & Fittings and Office & Computer
Equipment were not
allocated with asset identification numbers or codes which are
essential for identifying
and monitoring movement of individual asset maintained and
disposed by the
Commission. There were also very old or obsolete assets that the
Commission need to
identify and dispose upon Board’s approval. As a result, I was
unable to identify and
confirm the existence of the individual assets in the Fixed
Assets Register. I drew my
observation to the management of the Commission and they -
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responded to my concern
as follows:“We acknowledged the issue and corrective measures are taken by
tagging and coding
the assets as well as identifying old and obsolete assets to go
before the Commissioners
to be disposed and taken off the asset register to give a true
value of all assets.”Staff Personnel Files
My review of the personnel emoluments revealed that staff
personnel files were not
properly maintained. I noted that records such as salaries and
allowances variation
advices, tax declaration forms and appointment letters were not
on file for audit
verification. The Commission also did not maintain control
records such as salary
history cards/leave history records (annual leave, long service
leaves and sick leave) to
assist in the verification of annual leave and long service leave
entitlements.I recommended the management to update all staff personnel files
on a regular basis
and the management responded as follows:-109-
National Economic and Fiscal Commission
“The NEFC salaries and personnel files are administered by
National Planning
Salaries section however the process of updating records is slow
We acknowledge this
3 weakness and will engage competent personnel to update and
maintain the personal
files”Group Tax Liability
My review of the salaries revealed that casual wages were paid
out from the
Commission’s Operational bank account. Based on the Commission’s
fortnightly
calculations, a total of K59,249 had been deducted for tax in
2018. This tax liability
withheld by the Commission had not been remitted to the Internal -
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-
Revenue
Commission.I recommended the management to comply with respective tax
provisions and the
management responded as follows:“We have been complying but there were no mechanism/tax coding in
place with the
IRC to capture tax payment from NEFC We have now obtained (TIN)
Tax File Number
from IRC incomplying tocorrectoraddress thisweakness”Travel Advances and Acquittal Register
My review of the travel and subsistence expenses amounting to
K886,474 revealed that
the Commission did not maintain a Travel Advances/Acquittals
Register with acquittal
files for all duty travels and related expenses. My test also
revealed that K286,597
(32%) of total sample tested were not acquitted. As a result, I
was unable to determine
the propriety and reasonableness of the non-acquitted portion of
travel and subsistence
expenses as to whether the monies were spent for the intended
purpose. The
management responded to my observation as follows:“These are receipts /charges for airfares, hire car receipts for
the regional workshops
are adding to the issue raised Also officers have not properly
acquitted advances
despite ongoing follow ups by the Accounts/Records Management
Officer We3
acknowlede and aree with the issue raised and will com l in
takincorrective
measures to rectify this weakness.”27.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Commission had not
submitted its financial
statements for the year ended 31 December 2019 for my inspection
and audit.-110-
28. NATIONAL FISHERIES AUTHORITY
-
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28.1 INTRODUCTION
28.1.1 Legislation
The National Fisheries Authority was established under the
Fisheries Management Act
1998. This Act came into operation on 11 February 1999 and
replaced the Fisheries Act
1994. Under this Act, all assets including monies held in trust
accounts which were held
or occupied by the National Fisheries Authority established
under the Fisheries Act
were transferred to and became assets of the Authority.28.1.2 Functions and Powers of the Authority
• The primary functions and powers of the Authority are
described as follows:– manage the fisheries within the fisheries waters in
accordance with this Act,
taking into account the international obligations of PNG in
relation to tuna
and other highly migratory fish stocks;
– make recommendations to the Board on the granting of
licences and
implement any licensing scheme in accordance with this Act;
– liaise with other agencies and persons, including regional
and international
organisations and consultants, whether local or foreign, on
matters concerning
fisheries;
– operate research facilities aimed at the assessment of fish
stocks and their
commercial potential for marketing;
– subject to the Pure Foods Act, the Commerce (Trade
Descriptions) Act, the
Customs Act, the Customs Tariff Act and the Exports (Control
and Valuation)
Act control and regulate the storing, processing and export
of fish and fish
products;
– appraise, develop, implement and manage projects, including
trial fishing
projects;
– prepare and implement appropriate public investment
programmes;
– collect data relevant to aquatic resources;
– act on behalf of the Government in relation to any domestic
or international
agreement relating to fishing or related activities or other
related matters to
which the Independent State of PNG is or may become a party;
– make recommendations on policy regarding fishing and related -
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activities;
– establish any procedures necessary for the implementation of
this Act,
including tender procedures;
– implement any monitoring, control, and surveillance scheme,
including co-
operation, agreements or arrangements with other States or
relevant
international, regional or sub-regional organisations, in
accordance with this
Act; and-111-
National Fisheries Authority
• the Authority has, in addition to the powers otherwise
conferred on it by this Act
and any other law, full powers to do all things that are
necessary or convenient to
be done for or in connection with the performance of its
functions and the
achievement of its objectives.28.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the audit of the
accounts and records and the examination of the financial
statements of the Authority
for the year ended 31 December 2017 was completed and the
results were being
evaluated.The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements for the year ended
31 December 2018 was
in progress.The Authority had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit. -
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-
-112-
29. NATIONAL GAMING CONTROL BOARD
29.1 INTRODUCTION
29.1.1 Legislation
The National Gaming Control Board was established under the
Gaming Control Act
2007. The Act came into operation on 1 May 2007. The objective
of the Act is to
provide for the control of all forms of gaming; including
lotteries, games and wagers,
gaming machines and casinos and for their operations, and for
related purposes. This
Act has repealed the Gaming Machine Act 1993.29.1.2 Functions of the Board
The principal functions of the Board are to:
• promote probity and integrity in gaming;
• maintain the probity and integrity of persons engaged in
gaming in the country;
• promote fairness, integrity and efficiency in the operations
of persons engaged in
gaming in the country;
• reduce any adverse social impact of gaming;
• promote a balanced contribution by the gaming industry to
general community
benefit and amenity; and
• consider applications for and where appropriate grant permits
and licenses under -
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this Act and to control the operations of gaming machines as
specified in this Act.29.1.3 Fund of the Board
National Gaming Control Board Community Benefit Fund Trust is
the Fund of the
Board. Comments in relation to the Fund are contained in
paragraph 29A of this Report.29.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Board for the year ended 31 December 2016 was in progress.The Board had submitted its financial statements for the year
ended 31 December 2017
and arrangements were being made to commence the audit shortly.The Board had not submitted its financial statements for the
years ended 31 December
2018 and 2019 for my inspection and audit.-113-
29A. NATIONAL GAMING CONTROL BOARD COMMUNITY
BENEFIT FUND TRUST (Subsidiary of National Gaming Control
Board)29A.1 INTRODUCTION
29A.1.1 Legislation
The Community Benefit Fund (CBF) was established under the
provision of Section
163(6)(a) of the Gaming Control Act 2007 on 1 May 2007 when the
Act was passed
and certified by the Parliament.The Gaming Control Act authorises the Board of National Gaming
Control Board
(NGCB) to establish a “Community Benefit Fund” and shall open a
trust account to
be called the “Community Benefit Fund Account” in which
payments of 14% of
monthly gaming revenues are made. -
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The Trust is managed and operated by a Board of Trustees
comprised of the Chairman
of the NGCB Board and four additional Trustees as members
appointed by the
Minister in the National Gazette, and in accordance with the
terms of a trust deed that
is settled by the Board.The CBF started its operations in 2008.
29A.1.2 Objectives of the Fund Trust
The objectives of the Fund Trust are to:
• provide for and apply the income and capital of the Trust
towards generally
charitable purposes, including without limitation, the
alleviation of poverty, the
advancement of education, sports development and other
purposes generally
beneficial to the people of Papua New Guinea;
• undertake research into the problems associated with gambling
activities
including the social and economic impact of gambling on
individuals, families
and the communities at large; and
• promote community awareness and education in respect of
problem gambling and
the provision of counselling, rehabilitation and support
services for problem
gamblers and their families.29A.1.3 Function of the Fund Trust
The principal function of the Fund Trust is to provide for and
apply the income and
capital of the fund towards generally charitable purposes,
including but not exclusive
of the following areas:-114-
National Gaming Control Board Community
Benefit Fund Trust• provision and improvement of social welfare;
• development of sports and improvement of recreational
facilities;
• improvement of education and learning tools (not including
school fees);
• assistance to churches and religious groups; -
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• provision of medical assistance;
• assistance to education, health and law and order projects;
and
• undertake research into problems on gambling and promote
community
awareness and education on negative aspects of gambling.
29A.2 STATUS OF FINANCIAL STATEMENTSAt the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Fund Trust for the year ended 31 December 2016 was in
progress.The Fund Trust had submitted its financial statements for the
year ended 31 December
2017 and arrangements were being made to commence the audit
shortly.The Fund Trust had not submitted its financial statements for
the years ended 31
December 2018 and 2019 for my inspection and audit.-115-
30. NATIONAL HOUSING CORPORATION
-
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30.1 INTRODUCTION
30.1.1 Legislation
The National Housing Commission Act (Chapter 79) was repealed by
the National
Housing Corporation Act 1990. The assets and liabilities of the
former National
Housing Commission were transferred to the National Housing
Corporation in March
1990.30.1.2 Functions of the Corporation
The principal functions of the Corporation are to:
• improve housing conditions;
• provide adequate and suitable housing or letting to eligible
persons;
• sell houses to eligible persons;
• make advances to eligible persons and approved applicants to
enable them to
become the owners of houses occupied by them;
• develop residential land by way of providing adequate services
for human
settlements;
• carry out and promote research or investigations into matters
connected with urban
development and human settlements; and
• maintain dwellings and associated buildings vested in the
Corporation.30.1.3 Subsidiary of the Corporation
The National Housing Corporation has a subsidiary company,
National Housing Estate
Limited. Comments in relation to National Housing Estate Limited
are contained in
paragraph 30A of this Report.30.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the financial statements
of the Corporation for the
years ended 31 December 2015, 2016 and 2017 had been submitted.
However, audits
were being delayed due to certain outstanding issues.The Corporation had not submitted its financial statements for
the years ended 31
December 2018 and 2019 for my inspection and audit. -
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-116-
30A. NATIONAL HOUSING ESTATE LIMITED
(A Subsidiary of National Housing Corporation)
30A.1 INTRODUCTION30A.1.1 Legislation
National Housing Estate Limited (NHEL) was incorporated on 28
September 2007
under the Companies Act. The incorporation of the company was
based on the
National Executive Council (NEC) Decision No. 304/2006 in
accordance with Section
27 of the National Housing Corporation Act 1990.Subsequently, the NEC Decision No. 70/2007 endorsed its
establishment as a Special
Purpose Company of the National Housing Corporation.The Company commenced its normal operations from 1 January 2010.
30A.1.2 Objective of the Company
The principal purpose of the Company is to manage certain
National Housing
Corporation owned properties for commercial development in Port
Moresby, to
generate income for the National Housing Corporation and to
deliver its mandate.30A.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company had submitted
its financial
statements for the years ended 31 December 2010, 2011, 2012,
2013 and 2014.
However, the audits were being delayed due to certain
outstanding issues.The Company had not submitted its financial statements for the
years ended 31
December 2015, 2016, 2017, 2018 and 2019 for my inspection and
audit. -
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-
-117-
31. NATIONAL INFORMATION AND COMMUNICATIONS
TECHNOLOGY AUTHORITY (NICTA)31.1 INTRODUCTION
31.1.1 Legislation and Objective of the Authority
The National Information and Communications Technology Authority
(NICTA) was
established on 1 November 2009 by the National Information and
Communications
Technology Act 2009. The Authority succeeds the PNG Radio
Communications and
Telecommunication Technical Authority (PANGTEL) which was
established on 1
January 1997 as part of the Government’s policy to corporatise
the Post and
Telecommunication Corporation (PTC) and to have it divided into
three different
organisations namely: Telikom PNG Limited, Post PNG Limited and
PANGTEL.NICTA is a 100% Government-owned statutory authority,
established to regulate the
telecommunication industry in PNG.Under the Post and Telecommunication Corporation
(Corporatisation) Act 1996 assets,
rights and liabilities as well as employees of the Corporation
were transferred to
PANGTEL as per the allocation statement approved by the then
Minister for
Communications at the net book value recorded in the books of
the Corporation as at
31 December 1996. In the same manner, the assets, rights and
liabilities as well as
employees of PANGTEL were transferred to NICTA by virtue of
Section 305 of the
National Information and Communications Technology Act.31.1.2 Functions of the Authority
-
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The main functions or principal activities of the Authority are
to exercise all licensing
and regulatory functions in relation to the Information and
Communications
Technology Industry and perform all other functions as stated
under Section 9 of the
National Information and Communications Technology Authority Act
2009.31.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Authority for the year ended 31 December 2016 was completed and
results were being
evaluated.The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements for the year ended
31 December 2017 was
in progress.-118-
National Information and Communications Technology
Authority
The Authority had submitted its financial statements for the year
ended 31 December
2018 and arrangements were being made to commence the audit shortly,
while the
financial statements for the year ended 31 December 2019 had not
been submitted for
my inspection and audit. -
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-
-119-
32. NATIONAL MARITIME SAFETY AUTHORITY
32.1 INTRODUCTION
32.1.1 Legislation
The National Maritime Safety Authority was established by the
National Maritime
Safety Authority Act 2003.32.1.2 Functions of the Authority
The functions of the Authority are to:
• perform the functions and exercise the powers as are
conferred upon it by this Act
or under any other law;
• co-ordinate search and rescue operations for vessels in
distress or lost at sea
pursuant to the terms and conditions of a search and rescue
plan prepared by the -
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-
Minister, from time to time, and approved by the Authority;
• co-ordinate with other agencies and persons, including
regional and international
organisations and consultants, whether local or foreign, on
matters concerning
maritime safety, marine pollution prevention or search and
rescue operations at
sea;
• collect data relevant to maritime safety, marine pollution
prevention and search
and rescue operations at sea;
• act on behalf of the State in relation to any domestic or
international agreement
relating to maritime safety, marine pollution prevention or
search and rescue
operations at sea to which the State is or may become a
party;
• make recommendations on policy to the Minister regarding
maritime safety,
marine pollution prevention and search and rescue operations
at sea;
• provide consulting services, training and management services
relating to any of
its functions whether in PNG or overseas;
• where appropriate to consult with:
‒ other agencies of National Government;
‒ Provincial Governments;
‒ Local-level Governments; or
‒ commercial, industrial and other relevant bodies and
organisations, in
relation to matters affecting them in the performance of
its functions.
• generally to do such supplementary, incidental or
consequential acts and things
as are necessary or convenient for carrying out its
functions.-120-
National Maritime Safety Authority
32.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS32.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the Authority’s
financial statements for the year ended 31 December 2018 was -
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-
issued on 29 January
2020. The report did not contain any qualification.32.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Authority for the year
ended 31 December 2018
was issued on 29 January 2020. The report contained the
following matters:Trade Debtors – K21,450,406
My review of the Authority’s trade debtors of K21,450,406 at 31
December 2018
revealed that a large number of debtors amounting to K4,317,517
were outstanding for
more than 90 days. I further noted that most of these long
outstanding debtors may not
be collectable. I brought this matter to the attention of the
management and the
management responded as follows:“The Management has developed a debt management policy to
address the debts that
are falling behind the due dates for collection and allow
provision for doubtful debts.
One of the outcomes of the policy is to enforce the relevant
legislation on detaining
vessel for non-payment of levies. The Management is in the
process of creating an
enforcement unit within the legal department to enforce the law.
Once the unit is in
place and fully functional, it will force many agents/owners/
masters to pay the levies
on time. A warning letter to major clients informing them of the
Authority’s intention
will be disseminated to the industry. Also provisions for
doubtful debts have been
increased in line with the debt management policy.”Fixed Assets
During my review of the Fixed Assets Register, I noted that the
Authority’s Fixed
Assets Register contained many old assets which existence cannot
be verified. I further
noted that the Authority did not conduct a complete stock take
of all its fixed assets. As
a result, those assets with nil written down values from
previous years were still
reported in the Assets Register. I brought this matter to the
attention of the management -
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-
and the management responded as follows:
“The Management acknowledges this and confirmed NMSA conducted
stock take and
verification exercise on all its fixed assets in 2018. The
Management has submitted the
listing of the Board’s approved disposals of old or obsolete
assets. However,
systemising the Fixed Assets Register and allocation of tags and
codes for each asset
was hampered by the implementation of the PMMRA 2017 and Forex
issues.-121-
National Maritime Safety Authority
The Management has resubmitted payments for the payment of Fixed
Assets
Management Module and we anticipate to systemise the registry before
the end of
2020.”Purchase of Ministerial APEC Vehicles
During my review, I noted that the Authority purchased two executive
support vehicles
for the Ministry of Transport and Infrastructure totaling K410,585.
The vehicles had
been disclosed in the Fixed Assets Register of the Authority,
however, I was unable to
verify the existence and legal ownership of the vehicles as I was
not provided vehicle
registration details and had no access for physical inspection. As a
result, I was unable
to verify the existence and legal ownership of the two (2) vehicles.
I queried the
management and they responded to my query as follows:“The Management has acknowledged this and confirmed that two
vehicles purchased
were part of NMSA’s contribution to the APEC Summit approved by
Board. We have
enquired with Department of Transport and were advised vehicles are
with APEC
Committee. The Management has written to APEC committee for the
vehicles to be
returned to NMSA for Board’s deliberation.”Staff Salary History Cards
During my review of the personnel files for certain selected
officers of the Authority, I
observed that the Authority had not maintained salary and history -
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-
cards for employees
in their respective personnel files. A salary history card should
show an updated base
salary, allowances, gratuities and the updated leave records for
each employee. Proper
filing of employee’s history and salary cards would enable the
payroll staff to easily
access the information and calculate the staff entitlements
correctly including
provisions for leave entitlements. As a result, I was unable to
confirm the approved rate
of salaries and allowances and the leave records for the officers
from their personnel
files.I recommended the Authority to maintain staff salary history cards
for each employee
in their personnel files as a control mechanism to enable the
payroll staff to easily access
the information and correctly calculate the staff entitlements.
Further, for these files to
be regularly updated upon changes/variations on each individual
staff.Management responded to my concern as follows:
“The Management acknowledged that and will address this issue in
2019. Delays were
attributed to the termination of the HR Manager which affected the
HR Department’s
functions”-122-
National Maritime Safety Authority
32.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Authority had submitted
its financial
statements for the year ended 31 December 2019 and arrangements
were being made
to commence the audit shortly. -
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-123-
33. NATIONAL MUSEUM AND ART GALLERY
33.1 INTRODUCTION33.1.1 Legislation
The National Museum and Art Gallery of Papua New Guinea was
established under the
provisions of the National Museum and Art Gallery Act 1992. This
Act came into
operation on 15 April 1992.33.1.2 Functions of the Museum
The main functions of the Museum are to:
• protect and conserve the cultural and natural heritage of
PNG; -
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• research and document the prehistory of PNG and manage the
national
archaeological collections, and monitor archaeological
research in PNG;
• maintain the national register of traditional and
archaeological sites;
• identify and maintain a register of national cultural
property and monitor the
collection and export of artefacts; and
• issue permits and perform other duties as required by the
National Cultural
Property (Preservation) Act (Chapter 156).33.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Museum had submitted
its financial statements
for the year ended 31 December 2019 and arrangements were being
made to commence
the audit shortly.-124-
34. NATIONAL RESEARCH INSTITUTE
34.1 INTRODUCTION
34.1.1 Legislation
The National Research Institute (NRI) was established under the
Institute of Applied
Social and Economic Research Act (Chapter 165). The name of the
Institute was
changed from 3 1 * çt 4BXWtR?tL$SSGIdt6RFiLltand
(FRnRPIFt3H4L(FIc’ to 1 LtiRnLlt
Research InJ4MXW’ following the approval of the NEC through its -
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Decision No. 42/90
of 7 March 1990.The Institute of Applied Social and Economic Research
(Amendment) Act 1987 came
into operation on 1 January 1988, and on this date, the
promotion and cultural functions
of the former Institute of PNG Studies; and functions to do with
Educational Research
for National and Provincial Departments of Education carried out
by the former
Educational Research Unit (UPNG), formed part of the National
Research Institute.34.1.2 Functions of the Institute
The functions of the Institute include:
• the promotion of research into PNG society and economy;
• the undertaking of research into social, political and
economic problems of PNG in
order to formulate practical solutions to such problems;
• where practicable, the provision, by agreement with the body
concerned, of
consultancy services to the Government and to Government
institutions;
• the promotion of the functions and objects of the Institute of
PNG Studies; and
• research into all aspects of education for National and
Provincial Departments of
Education.34.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the audit of the
accounts and records and the examination of the financial
statements of the Institute for
the year ended 31 December 2017 was completed on 12 September
2018. The
management provided responses to the management letter on 6
December 2019,
however the amended financial statements had not been provided
by the Institute to
enable me to issue the report.The Institute had not submitted its financial statements for the
years ended 31 December
2018 and 2019 for my inspection and audit.-125-
-
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35. NATIONAL ROADS AUTHORITY
35.1 INTRODUCTION
35.1.1 Legislation
The National Roads Authority was established by the National
Roads Authority Act
2003 and came into operation in 2004.35.1.2 Objectives of the Authority
The objectives of the Authority are to:
• raise funds for the maintenance of public roads;
• ensure the efficient preparation of effective annual road
maintenance
programmes; and
• ensure that all routine, specific and emergency maintenance
of roads and road
rehabilitation and reconstruction funded by the Authority are
executed in a
transparent, effective and efficient manner, in order to
optimise the contribution
of road assets to the economic and social development of
Papua New Guinea.35.1.3 Functions of the Authority
The functions of the Authority are to:
• establish and operate a Road Fund from road user charges,
budget and other
sources;
• establish resources to enable the Authority to perform its
functions;
• maintain and manage updated data on asset conditions using the
Road Asset
Management System, Bridge Inventory and Bridge Maintenance and
other
approved systems;
• formulate and determine prioritised annual road maintenance
plans and
programmes using the Road Asset Maintenance System, Bridge
Inventory and
Bridge Maintenance and other approved systems to be supported
by the road sector
cost recovery revenues;
• establish annual road maintenance funding requirements in
accordance with the
future annual road maintenance plans;
• determine and implement road user charges in accordance with
the financial -
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resource requirements of the annual road maintenance plans;
• deliver the required routine, specific and emergency road
maintenance in
accordance with the maintenance service levels established for
each class or type or
road, through the contracting of independent contractors, to
monitor and supervise
the contracts as they are executed;-126-
National Roads Authority
• deliver road improvement, and road restoration when required,
by undertaking the
design studies necessary for the programmed road improvement
or rehabilitation
projects by:‒ prepairing corresponding construction plans, specifications,
cost estimates,
and the other documents required for the proper tendering of
the programmed
works;
‒ monitoring and supervising the works as are executed, by
such qualified
consultants and/or contractors as are engaged; and
‒ ensuring safety audits on design, construction, maintenance
and safety aspects
of road;• establish and sustain contract management capacity to ensure
the validity of
contracts and the effective management of contracts awarded
for the execution of
agreed road maintenance works and rehabilitation and
reconstruction projects;
• ensure that all contracts are tendered through a transparent
and competitive
procedure to ascertain economic efficiency and sustainability
in delivery of road
maintenance and rehabilitation works;
• keep adequate records and to maintain a management information
system which
provides the Board and staff with accurate and timely
information on commitments,
expenditures and revenue for the purchase of consultancy and
contracting services
and other purchases and outlays;
• report publicly and transparently on collection of user
charges, revenues, and in -
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detail on the use of the revenues on the road maintenance
programmes in
accordance with internationally accepted accounting
principles;
• establish environmental management capacity;
• provide a continuing programme of professional staff
development and required
skills training for non-professional staff; and
• construct, erect or affix signs or marks on road transport
infrastructure in
accordance with the Motor Traffic Act (Chapter 243).35.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
35.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the Authority’s
financial statements for the year ended 31 December 2018 was
issued on 19 March
2020. The report did not contain any qualification.35.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Authority for the year
ended 31 December 2018
was issued on 19 March 2020. The report contained the following
observations:-127-
National Roads Authority
Accounting and Operational Procedures Manuals
I observed that the accounting and operational procedures manual was
not finalized and
approved for use by the management of the Authority. Such internal
control
mechanisms and policies should be formally established, well
documented and
communicated to all levels and functions of the Authority to be used
by all personnel
in their routine operational activities.I was unable to measure and comment on the standards of operations
in relation to the
systems and controls and whether uniform procedures were followed in
respective
divisions or sections. This was a recurring issue that the -
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-
management had to address.
Management responded as follows:
“Most functions of the Authority have well documented policies and
procedures for
routine operational activities. Update to the draft financial &
accounting policies and
procedures manual is subject to institutional reforms that are
currently in progress. We
are also aware that complete reliance on a financial manual in the
changing world is
old fashioned or outdated. With advances in technology, many
resources for learning I
are available on the internet that staffs are able to source online
to help complete the I
routine tasks.”Bank Reconciliations
Part 4, Division I, paragraph 47 of the Financial Management Manual
requires that
all heads of government departments and statutory authorities are to
ensure that their
bank accounts are reconciled on a monthly basis. However, I noted
that the bank
reconciliations for both the Operating and Road Fund accounts were
not prepared and
reviewed on a timely basis. Consequently, I was unable to place
reliance on the
effectiveness of the internal controls surrounding the management of
cash and the bank
reconciliation process.Staff Rental Bond Fees – K537,594
Rental Bond fees paid to landlords for staff accommodation was
disclosed as K537,594
at 31 December 2018. My review revealed that on several instances,
the Authority did
not recoup amounts paid as bond fees after officers relocated to new
premises. I was
unable to confirm whether the Authority had maintained proper
controls and monitoring
systems to track bond fees paid and refundable. This issue was also
raised in my 2017
audit report.I recommended the Authority to recoup bond fees after the officers
vacate or relocate
to new premises and the management responded as follows:-128-
-
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National Roads Authority
“Comprehensive review of all rental bond fees was carried out in
2019. We identified
many records of expired or recovered bond fees that were still
carried forward in the I
GL since 2011 without updates or adjustments. We cross checked the
records and
resolved the differences between expired or refunded bond fees
against genuine bond
fees for current tenancy agreements in place. Total rental bond fee
balance in the GL
account was adjusted to reflect current bond fees only and cleared
the amounts relating
to expired & recovered amounts to expense. Preventive measures had
been put in place
to track bond fees activity, which includes expiring all bonds
totally by offsetting I
against final month’s rental when the leases are terminated. When
notices to terminatethose bonds therefore stop the need to recover bondfees.”
Staff Debtors – K58,935
My review of the staff debtors revealed that the balance disclosed
was carried forward
from prior year. I further observed that the Authority did not
maintain a proper
Advances Register in 2018 and that there was no approved staff and
salary Advance
Policy in place to govern matters relating to the approval,
payments, recovery and
general administration of advances made to staff. Consequently, I
was unable to
confirm the accuracy and correctness of the balance disclosed as
K58,935 at year end
and further comment on the effectiveness of controls surrounding
staff advances.Management responded as follows:
“The account represents residual balances for staff advances carried
forward from
2013, some of which were deducted from payroll but records were not
updated
including the GL. Some amounts cannot be recouped from staff that
left the Authority.
The account balance of K58,935 was cleared out to expense in 2019 as
amounts have
been outstanding (aging) for too long and full recovery was very -
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remote. Staff advances
ceased in 2013 and matter closed.”Fuel Levies Receivable – K12,943,909
My review of the fuel levies receivable account revealed that an
amount of K5,859,509
relating to expected fuel levy for December 2017 remained
outstanding for more than
a year. Further, I was not able to comment on the collectability as
levy receivables are
categorized as current assets and are expected to be converted to
cash within one year
(12 months). According to the Generally Accepted Accounting
Principles (GAAP), the
treatment of fuel levies receivable account as K5,859,509 at balance
date did not satisfy
the definition of current assets.-129-
National Roads Authority
Management responded as follows:
“The account balance of K5,859,509 was for estimated fuel levies
recorded for some
months in 2017 and carried forward in the GL as receivables for 3
years. Adjustments
were not made after taking up the actual receipts to bank account
and the GL. Becauseit without source records & workings or formulae was not prudent.
We have verified the fuel levy receipts for 2018 2019 period and
accounted for it
accurately to isolate the aging receivables and confirmed as
worthless. We have
cleared the aging account balance in 2019 to correct the treatment &
keep proper
accounts receivable record. We have stopped estimating fuel levy in
2019 to minimise
similar issues arising in the future.”Outstanding Payroll Liability – K11,318,414
-
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The Department of Finance pays for the salaries and allowances
through Alesco
(Government) Payroll for employees of the Authority based on the
condition that the
amounts paid would be refunded. My review revealed that the
Authority had been
accruing salaries and allowances paid by Department of Finance since
2011 without
any settlements to date. Comments and recommendations made in the
2011-2017 audits
for the settlement of the liability were not implemented by
management. As a result,
amount totalling Kl1,318,414 outstanding as at 31 December 2018
reflected a liability
which I was unable to establish whether settlement would be made in
the foreseeable
future.I was not able to conclude whether the amount would have any impact
on the overall
liquidity position of the Authority.Management responded to my concern as follows:
“NRA responses to 2017 audit stands. We clarify that the Department
of Finance (DoF)
pays salaries and allowances for only 13 employees of the Authority
through the Alesco
Payroll. NRA extracts the amounts from the Alesco Payroll report and
captures in the I
GLLEE for record purposes only.There were no written/ documented agreements in place for the
amounts paid to the
NRA staff to be refunded to DoF. The DoF pays salaries for most
Departments and
Central Agenc ies through its annual budget. Obviously, it will be
the responsibility of
DoF to keep proper records and account for such expenditures, and
report to
Parliament regularly.-130-
National Roads Authority
NRA may treat these amounts as non-value transactions because it
does not budget for -
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(due to lack of funding) and pay for this expenditure. In the
absence of a written
agreement for refund, there is no true obligation that by paying all
at once or failing to
pay when due may cause a liquidity problem. NRA may opt to cease
recording of the
amounts in its books and clear the amounts currently held to expense
as a way forward
to correct the misunderstanding.”Fixed Assets Register
My review of the fixed assets of the Authority revealed that the
Fixed Assets Register
(FAR) was not properly maintained and updated. I also noted that the
assets were not
labelled/tagged with unique identification numbers/codes to enable
me to physically
verify during the audit. Consequently, I was unable to establish the
existence and
location of assets listed in the Fixed Assets Register and place
reliance on the
effectiveness of internal controls surrounding the fixed assets of
the Authority.Management responded that adjustments were made to the FAR which
would be
reflected in the subsequent year.Incorrect Tax Administration
My review of the personnel emoluments revealed that certain senior
officers were
provided with accommodation and vehicles for 24 hours use with fuel.
However, the
correct prescribed rates for tax purposes were not included in the
calculation of
fortnightly salary and wages tax. The Authority had failed to
administer tax correctly
for concerned officers and thus breach the provisions in the Income
Tax Act 1959.Management noted my concern and advised that a review will be done
to address this
issue.Staff Rental Accommodation – K1,070,414
My review of the Staff Rental Accommodation revealed certain
instances where rentals
paid to personal companies or companies owned by spouses and related
parties of the
Authority’s Staff. Contract officers are deemed to be evading tax
despite my -
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-
recommendations to abstain from this practice in my prior year
audits. I further noted
that the landlords were the spouses of the contract officers who
registered their
companies with IPA in the pretext of leasing their properties to NRA
contract staffs.
The above practice is deemed improper where proper procedures were
circumvented to
obtain personal gain by officers of the Authority. As per the Income
Tax Act 1959, this
practice may be considered as tax evasion.I recommended the management to immediately cease this practice and
they responded
as follows:-131-
National Roads Authority
“All leases with relevant landlords are usually prepared by the
legal team, who
conducts company searches for proper checks before informing the
management on the
outcome. Part of the check is to ensure that a company is
properly registered and
complies with the Companies Act 1997. This includes ensuring that
section 16 of the I
Act is duly noted.
LEE
We are fully aware that if the rental payments are made directly
to a person,
salary/wages tax will definitely apply, but all accommodation
rentals were paid in
accordance with lease agreements held with relevant landlords or
property managing
companies. We will review the matter and discuss with each
officer concerned to look
at other avenues to secure their accommodation either through
real estate agents or
other parties.”35.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Authority had submitted
its financial
statements for the year ended 31 December 2019 and arrangements
were being made
to commence the audit shortly. -
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-
-132-
36. NATIONAL TRAINING COUNCIL
36.1 INTRODUCTION
36.1.1 Legislation
The National Training Council was established under the National
Training Council
Act 1991. Although the Act came into operation on 5 December
1991, the Council
formally began operating in April 1992 following its
inauguration.36.1.2 Objectives of the Council
The objectives of the Council are to:• foster the comprehensive development of training with regard
to the needs and the
resources of the country;
• foster the co-ordination of training institutions so that the
most effective use can be
made of resources available for training which ensures
increased productivity and
capacity building in the workforce;
• make the benefits of training as widely as possible; -
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• plan and encourage the development of a system of training
fitted to the
requirements of the country and its people;
• establish, preserve and improve standards of training
throughout the country;
• make the most effective use of the resources available for
training related purposes
in so far as this can be done by legislative and
administrative measures; and
• generally augment and support the role and functions of the
Commission for Higher
Education as specified in the Higher Education Act (Chapter
397).
36.1.3 Functions of the Council
The principal functions of the Council are to be responsible for
supervising and
managing the implementation of the National Training Policy and
for monitoring,
reviewing and revising the National Training Policy when
necessary; to provide
guidelines to the NEC, Provincial Government, and the in-service
Training Institution’s
Governing Councils on any issues related to training; and to
formulate and publish
guidelines on human resource requirements, localisation and
indigenisation issues and
related matters.
36.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements for
the year ended 31 December 2017 had been completed and audit
report was under
preparation.The Council had not submitted its financial statements for the
years ended 31 December
2018 and 2019 for my inspection and audit.
-133-37. NATIONAL VOLUNTEER SERVICE
37.1 INTRODUCTION
37.1.1 Legislation
The National Volunteer Service was established on 12 April 1990
under the National
Volunteer Service Act 1990.37.1.2 Functions of the Service
-
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The principal functions of the National Volunteer Service are to
promote a spirit of
sacrifice and service to the people of PNG; to provide labour,
skills, education and
training to the community for development projects; to cooperate
and assist National
and Provincial Government agencies as well as other organisations
whose goals include
the development of the people of PNG, in achieving their plans
and purposes; and to
encourage and participate generally in the advancement of the
development of PNG.37.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Service had not
submitted its financial
statements for the years ended 31 December 2017, 2018 and 2019
for my inspection
and audit despite reminders.-134-
38. NATIONAL YOUTH DEVELOPMENT AUTHORITY
(Formerly National Youth Commission)38.1 INTRODUCTION
38.1.1 Legislation
The National Youth Development Authority was established under
-
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-
the National Youth
Development Authority Act 2014. This Act came into operation on
21 October 2014,
thereby repealing the National Youth Commission Act 1999. The
Authority commenced
its operational activities under the new name on 1 January 2015.Under the National Youth Development Authority Act, all the
assets, properties, rights,
obligations and liabilities which immediately before the coming
into operation of this
Act were vested in or imposed on the Commission, are, on that
coming into operation,
transferred to and became the assets, properties, obligations
and liabilities of the
Authority.38.1.2 Functions of the Authority
The functions of the Authority are to:
• advise the Ministry and the National Government on policy
formulation and
legislative changes pertaining to youth affairs;
• authorise, coordinate, implement and monitor youth
development activities at the
National, Provincial and Local-Levels;
• develop and provide policy and technical advice to the
Provincial Governments
and Local-Level Governments on matters pertaining to youth;
• establish standards, regulate and monitor the level of
services and training offered
to youth by Government and non-profit organisations;
• monitor the execution of National Youth Development Plans at
the Provincial and
District levels;
• empower and provide opportunities to enable youth to
participate meaningfully
in activities at the International, National and Local-Level;
• generate revenue and fund youth programs and activities;
• report to the Minister on any matters referred to it by the
Minister from time to
time;
• establish and maintain a strong youth network at the
National, Provincial, District
and Local-Level areas; and
• promote awareness and disseminate information on youth
matters through its
network. -
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-135-
National Youth Development Authority
38.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
38.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Authority for the year ended 31 December 2017
was issued on 14
October 2019. The report contained a Disclaimer of Opinion.“DISCLAIMER OF OPINION
Because of the significance of the matters referred to in the
Basis for the Disclaimer of
Opinion paragraphs below, I have not been able to obtain
sufficient audit evidence to
provide a basis for an audit opinion. Accordingly, I do not
express an opinion on the
financial statements of the Authority for the year ended 31
December 2017.BASIS FOR DISCLAIMER OF OPINION
Internal Control Environment
During my review of the internal control system of the Authority
for the year ended
31 December 2017, I noted that the Authority’s overall internal
control environment
was very weak. The Authority was operating without a council to
provide corporate
governance. The internal control processes and procedures were
not implemented in
the Corporate Services Division. I also noted lack of
segregation of duties within the
Payroll and Human Resource function of the Authority and no
procedures were
followed in handling Director General’s petty cash. The staff
employed by the
Authority both permanent and casual lacked necessary skills and
qualifications to
undertake the accounting, finance and other related tasks
allocated to them.I further noted that they were not familiar with the Public
Finance (Management)
(Amendment) Act 2016, General Orders and other Financial Manuals
and Instructions
to strengthen the internal control system of the Authority. As
such, I was unable to rely -
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on the overall internal control system of the Authority during
the year under review.
Consequently, I was unable to place reliance on the Authority’s
financial statements
for the year ended 31 December 2017.
Cash at Bank – K101,791
During my review of the Authority’s bank reconciliations, I
noted that bank
reconciliations were not prepared, checked and approved by
senior finance officers of
the Authority during the year under review. I further noted that
these bank
reconciliations were not correctly prepared. Furthermore, I
noted significant errors
between cash book and bank reconciliations for the year under
review and unpresented
cheques totaled K51,711 which remained outstanding since 2012
were never
investigated and adjusted in the account.-136-
National Youth Development Authority
Consequently, I was unable to rely on the controls implemented
by the Authority in the
bank reconciliations function as well as verify and confirm the
accuracy and
completeness of the bank balance disclosed at the year end.Fixed Assets – K2,092,116
My review of the Fixed Assets Register (FAR) of the Authority
for the year ended 31
December 2017 revealed that the Authority did not maintain a
complete Fixed Assets
Register to record details of all fixed assets amounting to
K2,092,116. I noted that the
assets lacked proper labelling or tagging for identification
purposes. There was also no
physical stock take undertaken by the Authority to confirm the
existence of assets. The
Assets Register provided for my verification was incomplete and
did not capture all
assets purchased over the years. As such, I was unable to
conclude on the accuracy,
valuation, existence and ownership of the fixed assets disclosed
by the Authority as at
31 December 2017.”38.2.2 Audit Observations Reported to the Ministers
-
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-
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Authority for the year
ended 31 December 2017
was issued on 14 October 2019. The report contained the
following matters:Accounting and Administration Procedural Manual
During my review, I noted that the Authority did not have an
accounting and
administration procedural manual in place for its staff to carry
out tasks in accordance
with the required procedures and guidelines applicable to the
Authority. I observed that
the Authority’s staff were not adhering to the processes and
procedures of the Public
Finance (Management) (Amendment) Act 2016, General Orders and
other Financial
Manuals and Instructions. As a result, I noted significant
internal control weaknesses
within the Authority during the year under review.I drew this to the attention of the management and they
responded as follows:“The Finance and Administration Branch has a draft copy of the
Governance and
Finance Policy and Accounting Procedures in place, this document
is now before the
Senior Management Team for their comments before a final draft
is compiled and ready
for use in 2019.”Non Maintenance of Travel Advances Acquittal Register
The Authority had not maintained a Travel Advances Register for
all duty travels and
related expenses. As a result, I was unable to trace and
authenticate travel advances and
related expenses amounting to K166,303 during the year under
review.-137-
National Youth Development
AuthorityConsequently, the Authority breached the Public Finance
(Management) (Amendment)
Act 2016 and the Financial Management Manual Part 20 paragraphs
11.2 & 12.10 -
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which states that cash advanced to officers on official duty
travels must acquit travel
advances within 14 and 7 days for international and domestic
travels respectively on
return from duty travels. In the absence of a Travel Advance
Register, the Authority
was unable to monitor the acquittals promptly.
Internal Control WeaknessesOther internal control weaknesses noted during the audit are
summarized as follows:i. I noted that petty cash payments totaled K71,004 for various
expenses had no
proper acquittals attached to determine or confirm if the
funds had been fully
utilized for the intended purposes;ii. I observed on a number of instances that the Authority made
payments without
obtaining three (3) written quotations from reputable
suppliers when making
payments for expenditures exceeding K5,000 which totaled
K385,541. I further
noted that some payments were executed on quotations and not
on the basis of
official supplier’s invoice;iii. I noted on a number of instances that some payments made by
the Authority had
no delivery dockets/consignment and other supporting documents
attached to
confirm if the actual goods purchased had been delivered to
the Authority for their
intended purposes;iv. My review on pay cash payments made to paymaster totaled
K43,897 for various
expenses had no proper acquittals attached to determine or
confirm if the funds
have been utilized for the intended purposes;v. I noted that some contingency payments were made by the
Authority to the
officers in addition to travelling allowances they received
when on official duty
travels. This practice amounts to double dipping as the
General Orders had no
provision for contingency allowances;vi. My review on casual staff salaries and wages revealed that the
Authority did not
remit the salaries and wages taxes to Internal Revenue
Commission and -
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consequently breached the Income Tax Act, 1959 (as amended);
vii. The Authority’s staff personal files were not updated with
birth certificates or
statutory declarations to verify the legitimacy of their
dependents. Further, there
were segregation of duties noted in payroll section;viii. During my review, I noted that consultancy payments totaling
K117,750 had no
valid or proper service or consultancy agreements drawn up to
engage them
during the year under review; and-138-
National Youth Development
Authorityix. My review of the expenditures during the year revealed that
payments totaling
K25,173 were missing or not placed in the payment voucher
files for my
verification.
I drew management’s attention to these weaknesses and I was
advised that steps have
been taken to address the issues.38.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the financial statements
of the Authority for the
year ended 31 December 2018 had been submitted and arrangements
were being made
to commence the audit shortly.
The Authority had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit. -
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-139-
39. OFFICE OF THE INSURANCE COMMISSIONER
39.1 INTRODUCTION
39.1.1 Legislation
The Office of the Insurance Commissioner was established under
the Insurance Act
1995. The Trust Fund of the Insurance Commissioner was
established in accordance
with Section 15 of the Public Finances (Management) Act 1995.The Office of the Insurance Commissioner was funded by Treasury
Department prior
to 1998. In accordance with Section 64C subsection 4 (a) and (b)
of the Insurance Act
1995, the Office of the Insurance Commissioner became a self-
funded organisation
through 1% levy collected from the Insurers and Brokers’ annual
revenue from 1998.39.1.2 Function of the Insurance Commissioner
The main function of the Insurance Commissioner is; the
regulator for general
insurance businesses in Papua New Guinea who administers the
Insurance Act 1995
and issues licences to:• Insurers;
• Brokers; and
• Loss adjusters.39.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
-
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-
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Commissioner for the year ended 31 December 2018 had been
completed and
management responses were being awaited to finalise the audit
reports.The Commissioner had not submitted its financial statements for
the year ended 31
December 2019 for my inspection and audit.-140-
40. OIL PALM INDUSTRY CORPORATION
40.1 INTRODUCTION
40.1.1 Legislation
The Oil Palm Industry Corporation was established by the Oil
Palm Industry
Corporation Act 1992 which came into operation on 1 June 1992.
Under the Act, all
assets (other than land held by the State) and liabilities
previously held or occupied by
the Division of the Department of Agriculture and Livestock
responsible for the
provision of extension services to oil palm industry, were
transferred to the Corporation
at commencement date.40.1.2 Functions of the Corporation
The main functions of the Corporation are to:
• promote the development of the oil palm industry;
• encourage the increase in productivity by efficient provision
of extension services
to smallholders;
• provide advice and disseminate information and educate -
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-
smallholders regarding oil
palm production methods; and
• consult, liaise and collaborate with the State and other
agencies involved in the oil
palm industry.40.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Corporation for the year ended 31 December 2012 was completed
and the results were
being evaluated.The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements of the Corporation
for the years ended 31
December 2013 and 2014 were in progress.The Corporation had not submitted its financial statements for
the years ended 31
December 2015, 2016, 2017, 2018 and 2019 for my inspection and
audit.-141-
41. OMBUDSMAN COMMISSION OF PAPUA NEW GUINEA
41.1 INTRODUCTION
41.1.1 Legislation
The Ombudsman Commission was established under Section 217 of the
Constitution
of the Independent State of PNG. The principal objectives of the
Commission are: to
ensure that all governmental bodies are responsive to the needs
and aspirations of the
people; to help in the improvement of the work of governmental
bodies and the
elimination of unfairness and discrimination by them; to help in
the elimination of
unfair or otherwise defective legislation and practices affecting
or administered by -
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governmental bodies; and to supervise the enforcement of the
Leadership Code.
41.1.2 Functions of the Commission
The functions of the Commission are to:• investigate on its own initiative or on complaint by a person
affected, any conduct
on the part of any State or provincial or local governmental,
or other governmental
body or a member or officer or employee of any such body, any
member of the
personal staff of the Governor-General, Minister or the Leader
or Deputy Leader of
the Opposition, or any other body or person as may be declared
by an Organic Law
or an Act of Parliament, to which the Leadership Code applies;
• investigate any defects in any law or administrative practice
appearing from any
such investigation;
• investigate any case of an alleged or suspected discriminatory
practice within the
meaning of a law prohibiting such practices; and
• any functions conferred upon it by Part III Division 2
(Leadership Code) of the
National Constitution.41.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
41.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Commission for the years ended 31 December 2017
and 2018 were
issued on 27 August 2019 and 18 February 2020 respectively. The
reports contained
similar Qualified Opinions, hence, only the 2018 report is
reproduced:“QUALIFIED OPINION
In my opinion, except for the effects of the matters referred to
in the Basis for Qualified
Opinion paragraph below;-142-
Ombudsman Commission of Papua New
Guinea(a) the financial statements of the Commission are based on
proper accounts and -
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-
records; and
(b) are in agreement with those accounts and records, and show
fairly the state of
affairs of the Commission for the year ended 31 December 2018
and the results
of its financial operations and cash flows for the year then
ended.BASIS FOR QUALIFIED OPINION
Cash at Bank Balance – K6,914,255
My examination of the Commission’s Bank accounts and their
related records revealed
the following:• A material variance of K2,421,526 was noted between the Main
Operating
Account Cash at Bank General Ledger balance of K2,556,922 in
the accounting
system (IFMS) and the balance of K135,396 disclosed in Note
5. In addition, I
was not able to determine how and from where the balance of
K135,396
disclosed at the year-end was derived;
• Manual payments (payments outside of IFMS) made out of the
Main Operating
Account totalling K1,475,381 incurred in January were not
posted into IFMS.
As a result, the Cash at Bank General Ledger balance in IFMS
was overstated
by K1,475,381; and
• An unreconciled difference of K129,300 was noted between the
Statement of
Receipts and Payments year-end cash balance of K6,784,955 and
the cash at
bank amount disclosed in Note 5 at K6,914,255.As a result of the above, I was unable to conclude on the
accuracy and correctness of
the cash balance reported in the Statement of Cash Receipts and
Payments as at 31
December 2018.”41.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Commission for the years
ended 31 December
2017 and 2018 were issued on 27 August 2019 and 18 February 2020
respectively. The
reports contained similar significant matters, hence, only the -
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-
2018 report is reproduced:
Bank Reconciliations
Despite my prior years’ recommendations, I still noted that the
Commission did not
perform any bank reconciliations for the Main Operating Account
during the year under
review. In the absence of monthly bank reconciliations, I could
not rely on the
effectiveness of the internal controls surrounding the cash
management process of the
Commission.-143-
Ombudsman Commission of Papua New Guinea
I brought this to the attention of the management and recommended
the Commission to
employ qualified and competent personnel or provide in-house
training to existing staff
to fill the competency gap and address this vital issue.The Commission acknowledged and accepted my recommendation and
responded that
attempts were already made to employ competent personnel. In the
meantime, the
Commission will identify training to address the skills gap for its
existing staff.Fixed Assets
My review of the Fixed Assets of the Commission revealed the
following weaknesses:• Lack of Proper Maintenance and Update of Fixed Assets Register
(FAR)The Fixed Assets Register was not properly updated and maintained
in 2018.
Assets that were due for disposal dating back to 2002 were still
captured in the
FAR. Moreover, assets purchased between 2014 and 2018 did not
contain details
of identification or serial numbers to enable me to verify their
existence. I further
noted that assets that were purchased in bulk had their aggregate
balances in the
FAR instead of recording the individual items against their
corresponding values.
Similarly, the Commission has failed to disclose construction
costs separately for -
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-
each institutional house it owns, instead, the balances captured
in the FAR
disclosed the cumulative construction costs of the institutional
houses.I brought this recurring issue to the attention of the management
with reference
to the implications of not having in place a complete and updated
FAR and further
recommended for improvement in this area.The management responded that it had commenced its consultations
with IFMS
in 2019 to rollout the Assets Management System Module and
existing personnel
had been identified to carry out the FAR process pending training
from IFMS.
The Commission was also looking at other available Assets
Management
Software if IFMS does not provide the solution.• Fixed Assets Policy
There was no approved fixed assets policy in place for assets
owned and
controlled by the Commission. I was unable to comment on the
procedures and
guidelines required for asset capitalization; general information
on classification
and recording fixed assets; the allocation of assets; asset
acquisition and disposal
procedures; and the processes involved in replacement of assets
when damaged
or stolen. In the absence of an approved fixed assets policy, I
was unable to
conclude whether management has in place an effective internal
control system
over fixed assets under its custody.-144-
Ombudsman Commission of Papua New Guinea
The Commission concurred with my observation and responded as
follows:“The Division responsible will draft the Asset Policy taking into
consideration the
procedures and guidelines recommended by audit to tighten the
controls on Fixed
Assets.” -
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-
Staff Personnel Files
My examination of the Commission’s staff personnel files revealed
that staff salary
history ledgers/cards were not properly maintained in their
respective personnel files. I
reminded the management that inadequate record keeping of staff
salary records
exposes the Commission to the risk of paying incorrect employee
benefits. I also noted
that the Commission’s employees did not have updated salary and
wages tax
declaration (S3) forms and birth certificates of employees’
dependents in their personal
files. As a result, I was not able to verify the legitimacy of
dependents claimed as
required under Section 5.2.41 of the OC HR Manual for leave fares
paid including
salary and wages tax rebates claimed in 2018.I recommended the Commission to ensure that personnel files are
properly maintained
with all required information for management and audit purposes. The
Commission
responded to my observation as follows:“Since the upgrade of the Complete Human Resource Information System
(CHRIS21)
in November 2018, the HR unit commenced updating staff’s records
electronically.
Today all information on ledger/card is now captured electronically
on CHRIS21. HR
will also ensure all officers complete the tax form (S3) in the
first quarter of each
financial year with HR and Logistic Units to liaise with National
Identity Office to have
officers’ dependents registered and issued with NID Cards and Birth
Certificates.”Leave Fares
My review of leave fares paid out in 2018 revealed that the
Commission did not comply
with the requirements of the Ombudsman Commission Human Resource
Manual I
(OCHRM). Section 5.2.46(c) of the OCHRM requires that “An officer
shall pay to the
State at the time of applying for payment of recreation leave fares,
a contribution I
towards the cost of the fares which shall be calculated at ten per
cent of his/her gross
substantive fortnightly salary at the date immediately prior to
proceeding on recreation
leave.” This has been a recurring issue which the management is yet -
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-
to address. LI
I recommended the Commission to comply with the requirements of
OCHRM 5.2.46(c)
in the administration and application of leave fares.-145-
Ombudsman Commission of Papua New Guinea
The Commission responded that its officers have not been made
aware of this
requirement and its implications; therefore, the Commission would
review its HR
Manual to reassess the clause, its implications and reasons
whether the 10% should be
applied to officers. In the meantime, the Commission will
consider the
recommendation.Procurement Process Review
My review of expenditures incurred in 2018 revealed that payment
vouchers totalling
K117,312 for Capital Expenditures and K297,480 for Operating
Expenditures were not
supported by proper documents such as:• Minutes/Memos justifying the basis of payments;
• Invoices to confirm the validity of the payments;
• Three Quotes and/or documented justifications for choosing a
particular supplier
of goods/services in compliance with the Financial Management
Manual, Part
12, Div. 3, Para 9; and
• Delivery dockets as evidence that goods have been received.I was, therefore, unable to determine whether the procurements
were transparent and
were made in an economically prudent manner. I recommended the
Commission to
ensure that in the future payment vouchers should be properly
filed with necessary
supporting documents in accordance with the requirements of
Section 62 (1) of the
Public Finance (Management) (Amendment) Act 2016.41.3 STATUS OF FINANCIAL STATEMENTS
-
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-
At the time of preparing this Report, the Commission had not
submitted its financial
statements for the year ended 31 December 2019 for my inspection
and audit.-146-
42. PAPUA NEW GUINEA ACCIDENT INVESTIGATION
COMMISSION42.1 INTRODUCTION
42.1.1 Legislation
The Papua New Guinea Accident Investigation Commission was
established under
Section 218 of the Civil Aviation Act 2000 (as amended) and came
into operation in
January 2011.42.1.2 Objective of the Commission
The principal purpose of the Commission is to determine the
circumstances and causes
of accidents and incidents with a view to avoiding similar
occurrences in the future,
rather than to ascribe blame to any person.42.1.3 Functions of the Commission
• The principal function of the Commission is the investigation
of aviation
accidents and incidents;
• The Minister may, by notice in the National Gazette, direct
the Commission to
investigate any serious land or marine transport accident or
incident; -
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-
• Where a direction is given under Subsection (2), all
references to an “aircraft”
shall be read as a reference to the vehicle or vessel or other
form of transport
involved in the accident or incident to be investigated;
• Without limiting the principal function under Subsection (1),
the Commission
shall also have the following functions:‒ make such inquiries and investigations as it considers
appropriate in order
to ascertain the cause or causes of accidents or incidents;
‒ co-ordinate and direct all such inquiries and investigations
and to determine
which other parties, if any, should be involved in the
investigation;
‒ prepare and publish findings and recommendations, if any, in
respect of any
such inquiries and investigation;
‒ where requested by the Minister, to deliver a written report
on each
investigation to the Minister, including any recommendations
for changes
or improvements that it considers will ensure avoidance of
accidents and
incidents in the future;
‒ co-ordinate and co-operate with other accident investigation
organisations
of Contracting States, including taking or collecting
evidence on their
behalf;-147-
Papua New Guinea Accident
Investigation Commission‒ request from the Authority or PNG Air Traffic Services
(PNGATS) or any
other person such information as it considers appropriate
regarding any
accident or incident that the Commission believes that it
is required to
investigate under this Act;
‒ perform any other function or duty conferred on the
Commission under any
Act or prescribed by regulations; and
‒ with the consent of the Minister, to provide consulting
services, training and
management services relating to any of its functions, -
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-
whether in PNG or
overseas.42.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
42.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the Commission’s
financial statements for the year ended 31 December 2018 was
issued on 27 April 2020.
The report contained a Qualified Opinion.“QUALIFIED OPINION
In my Opinion, except for the effects of the matters described
in the Basis for Qualified
Opinion paragraphs below:(a) the financial statements of PNG Accident Investigation
Commission for the
year ended 31 December 2018:(i) give a true and fair view of the financial position and
the results of its
financial performance for the year ended on that date;
and(ii) the financial statements have been presented in
accordance with the
Public Finance (Management) (Amendment) Act 2016 and
other generally
accepted accounting practice in Papua New Guinea.(b) proper accounting records have been kept by the Commission,
as far as appears
from my examination of those records; and(c) I have obtained all the information and explanations
required.BASIS FOR QUALIFIED OPINION
Inadequate Documentation for Expenditure
I was not provided with adequate documentation to obtain
sufficient and appropriate
audit evidence on the Commission’s reported expenditure
totalling K6,166,531 for the
year ended 31 December 2018.-148-
-
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-
Papua New Guinea Accident Investigation
CommissionAccordingly, I could not perform the necessary audit testing
procedures. Therefore, I
was unable to validate the accuracy of the expenses of the
Commission for the year
ended 31 December 2018.Payroll Expenses and Salary & Wages Tax
My review of the payroll transactions revealed significant
errors in the calculation of
the salary and wages tax. The payroll taxes of some employees
have been calculated
based on the initial salary package of the employee and not
based on the current
remuneration. Salary increases, allowances and other benefits
were not subjected to
salary and wages tax.In addition, I was not provided with reconciliation for the
variances noted in the payroll
calculations and satisfactory explanation on the basis used for
calculating the salary and
wages tax. As such, I was unable to ascertain the accuracy,
completeness and
reasonableness of the payroll transactions and salary and wages
tax for the year ended
31 December 2018.Documentation for the Purchase of Assets
Included in the property, plant and equipment were Memory Access
Retrieval System
(MARS) V2.0 and VAS-INV Accident Investigation softwares
purchased from Plane
Science Inc. amounting to US$488,000 (K1,267,207). I was not
provided with
sufficient appropriate and relevant documentation in relation to
the purchase including
appropriate approval from relevant authorities. As a result, I
was unable to ascertain the
value and the corresponding depreciation expense taken up in the
financial statement
for the year ended 31 December 2018.Fixed Assets Register
The Fixed Assets Register maintained by the Commission was not
updated during the
year. The value of the property, plant and equipment reported at
K2,209,362 in Note 4
to the special purpose financial statements did not agree with -
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-
the amount in the Fixed
Assets Register. No reconciliation of the variance was provided
for my verification. As
a result, I was unable to ascertain the accuracy and
completeness of the reported value
of the property, plant and equipment as at 31 December 2018.”42.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Commission for the year
ended 31 December
2018 was issued on 27 April 2020. The report contained the
following observations:-149-
Papua New Guinea Accident Investigation
CommissionJournal Entries Preparation and Approval
Several journal entries were processed during the year without
sufficient relevant
supporting documentation. In addition, I noted that almost all of
the journal entries were
not reviewed and approved prior to posting to the general ledger.Financial Delegation Authority
The Chief Executive Officer (CEO) of the Commission was given the
ultimate (highest)
financial authority to approve all expenditures irrespective of
their values. I advised
that such a practice of giving overwhelming financial powers for
approval to a single
person can lead to abuse of powers in controlling finances which may
result in misuse
of public funds. The management responded as follows:“7XITfl3 1* $, & fl4ITwl fldITvITlRSITd fl) i4a4cIT fl0 a4aJITmIT4t
fl3 Rlic flL41fl3 (RcITLX(ITsfl
Manual has that CoverITG”Employment of Expatriate under TSSP/AHC Co-funding Arrangement
I noted that an expatriate had been employed by the PNG Accident
Investigation
Commission as Aircraft Operations Investigation Manager since 31 -
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-
October 2016. The
employment of the expatriate was arranged between the Australian
High Commission
(AHC) and PNGAIC under the PNG-Australia Transport Sector Support
Program
(TSSP). The contract of employment had been for three years
commencing 31 October
2016 to 30 October 2019.Per the standing agreement between AHC and PNGAIC, salary of the
expatriate
employee was to be shared in the ratio 4:1 (80% by AHC and 20% by
PNGAIC) for
the first year, 7:3 (70% by AHC and 30% by PNGAIC) for the second
year and 3:2
(60% by AHC and 40% by PNGAIC) for the third year.My review for compliance with the standing agreement between AHC and
PNGAIC
revealed that for the first year of contract (2017), 100% of the
expatriate’s salary was
paid for by the PNGAIC which was beyond its budget and commitment.
Subsequently,
K1,040,863 was invoiced to AHC being 80% share of the expatriate’s
total salary costs
met by the PNGAIC in 2017. However, AHC refunded only K751,828 which
resulted
in underpayment of K289,035. I further identified inconsistencies by
parties to the
agreement in applying exchange rates ruling at the transaction date
(date of contract)
which contributed to the variation.Further, the expatriate was entitled to a rent-free accommodation
during his
engagement per the contract. However, in addition to the rent free
accommodation he
was also paid K1,500 every fortnight totaling K78,000 in 2017 and
2018 as rental
allowance resulting in non-compliance with Public Service Management
Act and the
employment contract.-150-
Papua New Guinea Accident Investigation
CommissionI brought these issues to the attention of the management and they
responded as follows:“Many attempts were made since AHC decided to terminate the
agreement. So far no -
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-
progress made in 2019, and may be previous years as well. The PNGAIC
Board and
management are in contact with the Australian Transport Safety
Bureau (ATSB) for a
initial Hmeeting in first quarter of 2020 in an attempt to revive
the Agency Support
Arrangement (ASA). One of the priorities for the re establishment of
the ASA through
ATSB will be to seek the refund for the manager cost of employment
for the period 2017
to 2019.”Internal Auditor
During my review, I noted that the Commission still has no internal
audit function since
its establishment. I advised management that having an internal
auditor provides and
promotes sound internal controls and adds value. The management
stated that:“Currently the Board has approved for the PNGAIC to utilize external
resources for
the purposes of carrying out the function of internal audit. This
arrangement
commenced in 2019 and will be reviewed in 2020 for a decision
whether to continue or 1~
to fund a full time internal auditor position.”Board Sitting Allowances & Stipends
Board sitting allowances and stipends were paid at rates above the
category nominated
by the Board Fees & Sitting Allowances Determination, 2000
(Schedule) effective from
January 2000. The Board members used the rates for Category A
“Commercial
Statutory Authorities / Government Financial Institutions” rather
than the Category B
“Non-Commercial / Funded Organizations”. I brought this to the
management and they
advised that:“Since 2019, the correct rates were applied.”
Budget vs Actual
The expenditure of the Commission was not regularly monitored
against the budget for
2018. I noted several instances where actual expense was over the
approved budget. I
brought this to the management and they advised that:“The finance team will task to take the necessary corrective
-
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-
action.”
Non-Payroll Expenses under Payroll Transaction
My review of payments revealed that several non-payroll related
transactions were
coursed through Kundupei banking facility and recorded into Attaché
payroll system.
These transactions were journalized in the MYOB on a monthly basis.
I brought this to
the attention of the management and they advised that:
-151-Papua New Guinea Accident Investigation
Commission“This practice which has been in existence in prior years has now
been stopped and
only payroll is paid through Kundupei. Commencing 2019, no other
payments are
passed through the Attaché Payroll system except for payroll.”Payroll Weaknesses
My review of the payroll revealed the following weaknesses:
i) The Commission’s payroll transactions were processed through
Attaché payroll
software. However, I noted that the functionalities of the
payroll were not fully
utilized. The calculation of salary and wages tax were performed
manually
through excel and entered in the payroll system. This practice
had resulted in
significant errors in the calculation of salary and wages tax;ii) Lack of sufficient and relevant documentation in relation to the
increments of
salary packages of some employees; andiii) Taxable benefits and allowances paid to the employees were not
subjected to
salary and wages tax as per the Income Tax Act 1959;I brought this to the attention of management and they advised that:
“Now we have a correct and compliant payroll practice paid out of
Attaché payroll
system going forward.” LIFixed Assets Discrepancies
During my review, the following were noted:
-
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-
i) Capital expenditure (fixed assets) purchased during the year were
not capitalized
and recorded in the Fixed Assets Register. These were recorded
under expense
accounts in the MYOB general ledger;ii) The accumulated depreciation and written down values in the
Fixed Assets
Register (FAR) were incorrect or did not agree with the audited
figures of prior
years; andiii) Number of calculation errors were noted in the FAR.
I brought this to the attention of management and they advised that:
“Management has agreed to install and use the Fixed Assets module in
the Attaché
software; however, we are still waiting for budget approval to
implement the above.”-152-
Papua New Guinea Accident Investigation
CommissionPurchase of Fixed Assets not minuted in the Board Minutes
The Commission had purchased three (3) motor vehicles at a cost
of K397,177 and
Memory Access Retrieval System (MARS) at a cost of US$488,000
(K1,257,207).
However, the purchase of capital items were not minuted in the
Board meeting minutes
nor budgeted for in 2018.I brought this to the attention of management and they responded
as follows:“The MARS system was purchased before allocated budget in 2019
due to urgency of
the system to use Air Niugini B737 accident at Chuuk
International Airport, Federated I
States of Micronesia (FSM) in September 2018.”Non-Compliance with Public Finance (Management) (Amendment) Act
2016The financial statements for the year ended 31 December 2018 was
approved and issued -
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-
on 12 March 2020. The Directors did not meet the deadline set by
Section 63 of the
Public Finance (Management) (Amendment) Act for audited financial
statements of
public bodies/companies owned by the State to be furnished to the
Minister before 30
April of the subsequent year.42.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Commission for the year ended 31 December 2019 was in progress.-153-
43. PAPUA NEW GUINEA CUSTOMS SERVICE
43.1 INTRODUCTION
43.1.1 Legislation
The National Executive Council (NEC) in its meeting on 24 July
2014, Decision No:
216/2014 approved that the Papua New Guinea Customs Service be
transformed from
the National Public Service into an Independent Statutory
Authority through a separate
Act of Parliament.In accordance with the NEC Decision, the Papua New Guinea
Customs Service Act -
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-
2014 was drafted and certified on 21 October 2014, establishing
the Papua New Guinea
Customs Service as a Statutory Authority.Prior to November 2014, the Papua New Guinea Customs Service was
operating as a
Department of the National Public Service.43.1.2 The Functions of the Service
The functions of the Papua New Guinea Customs Service are to:
• administer and enforce the customs laws;
• promote compliance with the customs laws;
• take such measures as may be required to improve service
provided to importers
and exporters with a view to improving efficiency and
maximising revenue
collection;
• take such measures as may be required to counteract customs
fraud and other
forms of duty evasion;
• advise the State on matters relating to customs and to liaise
with relevant
stakeholders on such matters;
• represent the State internationally in respect of matters
relating to customs; and
• carry out such functions as are given to the Papua New Guinea
Customs Service
under this Act or any other law.43.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Service for the years ended 31 December 2017 and 2018 were in
progress.The Service had not submitted its financial statements for the
year ended 31 December
2019 for my inspection and audit.-154-
44. PAPUA NEW GUINEA FOREST AUTHORITY
44.1 INTRODUCTION
44.1.1 Legislation
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The Papua New Guinea Forest Authority was established under the
Forestry Act 1991
which came into operation on 25 June 1992.The Authority was formed by the amalgamation of the Department
of Forests, the
Forest Industries Council, the Provincial Divisions of Forestry,
the Forestry College in
Bulolo, the Timber Industry Training College and the Research
Institute in Lae.With the establishment of the Authority the following Acts were
repealed: the Forest
Industries Council Act (Chapter 215); the Forestry Act (Chapter
216); and the Forestry
(Private Dealings) Act (Chapter 217).44.1.2 Objectives of the Authority
The prime objective of the Authority is to provide for and to
give effect to the National
goals and the directive principles regarding:• management, development and protection of the Nation’s forest
resources and
environment in such a way as to conserve and renew them as an
asset for
succeeding generations;
• maximisation of PNG’s participation in the wise use and
development of the
forest resources as a renewable asset;
• utilisation of the Nation’s forest resources to achieve
economic growth,
employment creation and increased “downstream” processing of
the forest
resources;
• encouragement of scientific study and research into forest
resources so as to
contribute towards a sound ecological balance, consistent
with the national
development objectives;
• increased acquisition and dissemination of skills, knowledge
and information in
forestry through education and training; and
• pursuit of effective strategies, including improved
administrative and legal
machinery, for managing forest resources and the management
of National,
Provincial and Local interests. -
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Papua New Guinea Forest
Authority44.1.3 Functions of the Authority
The principal functions of the Authority are to:
• provide advice to the Minister on forest policies and
legislation pertaining to
forestry matters;
• prepare and review the National Forest Plan and recommend it
to the NEC for
approval;
• through the Managing Director, to direct and supervise the
National Forest
Service;
• negotiate Forest Management Agreements;
• select operators and negotiate conditions on which timber
permits, timber
authorities and licences may be granted in accordance with
the provisions of the
Forestry Act;
• appoint and supervise the State Marketing Agency;
• subject to the Customs Act, Customs Tariff Act and Exports
(Control and
Valuation) Act to control and regulate the export of forest
produce;
• oversee the administration and enforcement of the Forestry
Act and any other
legislation pertaining to forestry matters, and of such
forestry policy as approved
by the NEC;
• undertake the evaluation and registration of persons desiring
to participate in any
aspect of the forestry industry;
• act as agent for the State, as required, in relation to any
international agreement
relating to forestry matters; and
• carry out such other functions necessary to achieve its
objectives or given to it
under the Act or other relevant law.44.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
44.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the Authority’s -
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financial statements for the years ended 31 December 2013 and
2014 were issued on
11 June 2020. The reports contained similar Disclaimer of
Opinions, hence, only the
2014 report is reproduced:“DISCLAIMER OF OPINION
Because of the significance of the matters described in the
Basis for Disclaimer of
Opinion paragraphs, I have not been able to obtain sufficient
appropriate audit evidence
to provide a basis for an audit opinion. Accordingly, I was
unable to and do not express
an opinion on the financial statements of the Papua New Guinea
Forest Authority for
the year ended 31 December 2014.-156-
Papua New Guinea Forest Authority
BASIS FOR DISCLAIMER OF OPINION
General Ledger
Proper accounting records were not maintained by the Authority for
the year ended 31
December 2014. As a result, an external accounting firm was engaged
to perform
various reconciliations and prepare the 2014 financial statements.
As a result of this,
numerous journal entries were made including entries passed by the
accounts team of
the Authority. However, appropriate records in relation to journal
entries were not
maintained. Accordingly, I was unable to obtain a complete list of
the journals
processed during the year, or supporting documents for journal
entries made. As such,
I was unable to obtain sufficient appropriate audit evidence over a
number of
transactions recorded in the general ledger. Due to the limitations,
I was unable to
obtain sufficient appropriate audit evidence over the existence and
accuracy of a
significant number of amounts recorded in the financial statements,
or determine
whether adjustments might be necessary to the Authority’s financial
position as at 31
December 2014, and financial performance and cash flows for the year
then ended. -
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Opening Balances
My report on the financial statements of the Authority for the year
ended 31 December
2013 was a disclaimer of opinion, identifying issues in respect to
royalty trust fund,
reforestation levy, project development levies, cash balances,
personnel emoluments,
cash grants for projects, property, plant and equipment, biological
assets, suspense
accounts, deferred expenses, plantation income, litigation and
claims, and other
liabilities. I was unable to satisfy myself as to the accuracy or
completeness of the
opening account balances taken up for the financial year 2014. Since
the opening
balances enter into the determination of the results of operations
and cash flows of the
Authority for the year ended 31 December 2014, any adjustment
necessary on such
opening balances would have a consequential effect on the financial
performance and
cash flows for the year ended 31 December 2014. I was unable to
determine whether
any such adjustment to the financial performance and cash flows of
the Authority might
be necessary for the year ended 31 December 2014.Royalty Trust Fund, Plantation Royalty, Reforestation Levy Trust
Fund and
Production Development LeviesThe accounting records over timber royalties, plantation royalties,
reforestation levies
and project development levies for the year ended 31 December 2014
were not properly
maintained. As at 31 December 2014, the royalty trust fund had a
balance of
K30,491,479 as disclosed in Note 9, the Authority’s plantation
royalty had a balance of
K23,361,438 as disclosed in Note 10 and the project development
levies had a net
balance of K10,165,173 as disclosed in Note 12 of the financial
statements. I was unable
to obtain sufficient appropriate audit evidence over the
completeness and accuracy of
royalties and levies due and received.-157-
Papua New Guinea Forest Authority
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Due to the inability to reconcile royalties and levies to the
production of the respective
timber permits or logging operations, it was not possible to obtain
persuasive evidence
regarding the computation and recording of royalties and levies
including records of
payments made to and evidence of receipts by legitimate
beneficiaries.As such, I could not determine whether any such adjustment might be
necessary to the
Authority’s financial position at 31 December 2014, and financial
performance and
cash flows for the year then ended.Fixed Assets
No physical verification was performed by the Authority as at 31
December 2014 to
confirm the existence of the fixed assets included in the total
balance of K44,408,293
as disclosed in Note 5 of the financial statements. As such, I could
not obtain sufficient
appropriate audit evidence over the existence of the Authority’s
fixed assets as at 31
December 2014 and accuracy of the depreciations charged for the year
ended 31
December 2014.In addition, the Authority owned five (5) plantations within Papua
New Guinea as at
the year end. I noted that all of the plantation lands have been
stated at cost and
additional costs incurred on land improvements were not capitalised
in accordance with
IAS 16 Property, Plant and Equipment. Management had not estimated
value of the un-
capitalised land improvements to determine the impact to the
carrying amounts of lands
as at 31 December 2014, or the related impact on income and
expenditure items
recorded in the statement of comprehensive income.As such, I was unable to determine whether any such adjustment might
be necessary to
the Authority’s financial position as at 31 December 2014, and
financial performance
and cash flows for the year then ended.Biological Assets
Plantation trees being biological assets have not been accounted for
in the books of the
Authority as assets up to the financial year ended 31 December 2014 -
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that I reviewed.
Instead, costs incurred on the tree seedlings and planting
activities have been expensed
in the profit and loss account, which is not in compliance with IAS
41 Biological Assets
which requires these biological assets to be recorded at fair value
less cost to sell.
Management had not estimated the fair value of these biological
assets to determine the
impact to the carrying amounts as at 31 December 2014.As such, I was unable to determine whether any such adjustment might
be necessary to
the Authority’s financial position as at 31 December 2014, and
financial performance
and cash flows for the year ended 31 December 2014.-158-
Papua New Guinea Forest Authority
Suspense Account (Difference in Suspense)
As disclosed in Note 14 of the financial statements, the Authority
had changed its
accounting software from Accpac to Attaché in 2001. My review noted
that there had
been a lack of proper migration of accounts from the old system to
the new system
which had resulted in an unknown difference of K7,458,716. This
unexplained amount
had been taken up in an account called “Difference in Suspense” as
disclosed in Note
14, and was sitting idle without any movement since the data
migration from the old
system to the new system. I was unable to obtain sufficient
appropriate audit evidence
over the nature or basis of this Difference in Suspense account
balance which was
inflating overall assets in the statement of financial position by
K7,458,716.As such, I was unable to comment as to what adjustment might be
necessary to the
Authority’s financial position as at 31 December 2014, and financial
performance and
cash flows for year then ended.Other Liabilities
Included in Trade and Other Payables as disclosed in Note 12 of the
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financial statements
are a number of accounts totalling K7,460,144 as at 31 December
2014. I was not
provided with sufficient appropriate audit evidence regarding the
accuracy,
completeness and existence of the amount, nor was I able to perform
alternative
procedures to evaluate the accuracy and completeness of the
individual other liabilities
account balances that added up to K7,460,144.Accordingly, I was unable to comment on the accuracy, completeness
and existence of
other liabilities as at 31 December 2014, and the related operating
expenses for the 2014
financial year, or determine whether adjustments might be necessary
to the Authority’s
financial position as at 31 December 2014, and financial performance
and cash flows
for the year ended 31 December 2014.Personnel Emoluments and Employee Provisions
The personnel emoluments of K27,378,795 as disclosed in Note 4(A) of
the financial
statements had a bearing on the employee provisions balance of
K13,111,203 as
disclosed in Note 13 of the financial statements. However, I was not
able to obtain
sufficient appropriate audit evidence related to the personnel
emoluments incurred and
expensed or the employee provisions made. As such, I could not
comment on the
completeness, existence and accuracy of the personnel emoluments
expensed during
the year and employee benefits provided for at the year end.
Alternatively, I could not
determine whether adjustment might be necessary to the Authority’s
financial position
as at 31 December 2014, and financial performance and cash flows for
the year ended
31 December 2014.-159-
Papua New Guinea Forest Authority
Litigation and Claim Liabilities
I was not provided with the records of legal cases or claims
afoot as at 31 December -
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2014. Neither have I received any independent confirmation of
current legal cases from
the solicitors of the Authority. Therefore, I was not able to
obtain sufficient appropriate
audit evidence over the completeness of legal liabilities that
may exist as at balance
date or whether adjustments might be necessary to the Authority’s
financial position at
31 December 2014, and financial performance and cash flows for
the year ended 31
December 2014.Going Concern
I was unable to assess the financial position of the Authority as
at 31 December 2014
due to significant matters described in the paragraphs above.
Consequently, I was
unable to determine whether the Authority will continue as a
going concern. Should the
Authority be unable to continue as a going concern, it is
unlikely they will be able to
realise their assets and extinguish their liabilities in the
normal course of business and
at amounts stated in the financial statements.”44.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and the records of the Authority for the
years ended 31 December
2013 and 2014 were issued on the 11 June 2020. These reports
contained similar
observations, hence, only the 2014 observations are reproduced:Ineffective Finance Functions
I noted during the course of the audit that the finance function
of the Authority had not
been effective and needs strengthening through employment of
skilled finance
professionals and design and implementation of appropriate
financial control
procedures. The key issues identified were:• Material unidentified variances existed in a number of general
ledger
reconciliations provided;
• Significant number of “manual journals” posted were neither
reviewed by senior
officers nor supported by appropriate documentations;
• Financial control over key processes including cash at bank,
term deposits, -
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payroll, royalties, plantation royalties and reforestation
levies have not been
effectively designed and are not operating effectively; and
• Poor maintenance of accounting records and documents in
finance functions had
prevented me from completing my audit procedures on a number
of general ledger
accounts.-160-
Papua New Guinea Forest Authority
I recommended the management to consider taking the following
remedial actions:• Re-assess the finance function resourcing level and skill sets;
• Implement finance team training, specifically with respect to the
month end
reconciliation process and how to perform an effective review;
and
• Implement formal review process for all general ledger accounts,
manual journals,
etc, and ensure variances and errors identified are followed up
on a timely basis.Trade Creditors
I noted that the Authority adopts a cash basis of accounting.
Therefore, there was no
creditor listing maintained throughout the year.The creditors recorded in the accounts as at 31 December 2014 were
based on invoices
paid subsequent to year end and relating to creditors incurred
during the 2014 financial
year. Also, there has been no reconciliation of trade creditors at
year end to supplier’s
statements to ensure that all unpaid invoices are correctly recorded
in the general ledger.I advised the management that for control purposes there should be a
monthly process
implemented to ensure that all creditors are properly accrued
throughout the year even-
though the Authority is a statutory body which requires its books
maintained on a cash
basis of accounting.Bank Reconciliations
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Bank reconciliations were not prepared on a monthly basis during the
2014 financial
year. I also noted that significant general ledger adjusting entries
were passed at the
year end to adjust for reconciling differences.I advised the management that periodic review of bank reconciliation
is a fundamental
control to detect and prevent fraud and error associated with
recording and reporting of
all bank transactions. Therefore, all bank accounts must be
reconciled on a monthly
basis. The Finance Manager should review all reconciliations to
ensure reconciling
items are corrected in a timely manner.Fees Paid to Board of Directors
I noted that fees and allowances were paid to Board of Directors of
the Authority in
2014. However, all appropriate supporting documentations were not
made available for
my review to ensure approval of the payment of those fees and
allowance by the
Minister responsible for the Authority.I recommended the management to maintain proper records and
supporting documents
related to payment of fees and allowances to Directors. I also
recommended that a
proper register must be maintained to record payment of fees and
allowances to
respective Directors of the Authority.
-161-Papua New Guinea Forest
AuthorityProject Development Benefit (PDB) Receipts and Payments
From my review of the Project Development Benefits general ledger
accounts, I noted
the following related general ledger accounts as at 31 December
2014:GL Accounts 2014 (IC)
PNGFA 984009124 Premium Receipts 511,706
PNGFA 984009125 Premium Payments (500,649)
PNGFA 984009148 Domestic Processing Benefit 103,992
PNGFA 984009127 40% PDL For New FMA Projects4,110,690
PNGFA 984009128 60% PDL For New FMA Projects3,123,596
PNGFA 984009129 PDL Receipts 7,626,114
PNGFA 984009310 PDB Payments (4,799,219) -
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Total 10,176,230
• I noted that the actual funds held in the Project Development
Benefit bank account
was K5.3 million and cash held in IBD was nil. This indicates
that there was K4.9
million (K5.3m + K10.2m – K4.9m) deficit funds for the project
development
benefit then what was recorded in the ledger account;
• I have not verified the projects being implemented in 2014 using
those funds due
to lack of project reports;
• I have not obtained the details of the supporting documents of
the receipts from
2001 to 2014; and
• In addition, I have not received documentation of the payments,
including
evaluation and awarding of contracts for the PDL/PDB projects.I recommended to the management that:
• Accounting policies must be drafted and implemented to guide the
process of
initiation, authorization, recording and reporting of PDB/PDL
receipts and
payments;• The balance of the bank and IBD accounts must be reconciled to
the balance of
the PDL/PDB liability general ledger accounts on a monthly basis;
and• The Authority should fast tract implementation of projects in
logging areas so that
people can have excess to the basic and relevant services.Reporting Requirements under Forestry Act 1991
The Forestry Act 1991 requires the Board of PNGFA to furnish to the
Minister an
annual report on the progress and performance of the finances before
the end of March
of succeeding year. I note that this had not been complied with for
the financial year
ended 31 December 2014.-162-
Papua New Guinea Forest Authority
I stressed the repercussions of non-compliance with the required law
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and recommended
the management to strictly comply with Section 20 of the Forestry
Act 1991, by
producing the annual report on time to enable the Board to report to
the Minister in a
timely manner.Journal Entries
From my review of the journal entries, I noted the following:
a) Some journals posted into the general ledger system were not
independently
reviewed by the Finance Manager and some journals were not stamped
as posted;b) The journals were not maintained in order of the batch number and
date of
posting;c) No evidence was available to prove that year end journal entries
prepared by the
Accounting Consultant were reviewed by the Finance Manager and
approved for
posting; andd) I could not obtain the complete listing of all the journal
entries processed during
the year.I stressed that the key controls to detect fraud and errors in
financial reporting are
segregation of duties and independent review of journals posted into
the ledger systems.
Without such controls, the general ledger system and the resulting
financial reports it
produces may be materially misstated. Hence, I recommended to the
management that:a) All journals prepare by any department, including payroll officer
and Accounting
Consultants must be reviewed independently and approved for
postings by the
Finance Manager;b) The Finance Manager should collate all journals and maintain a
central filing in
order of their batch number and posting date; andc) All journals posted should be clearly indicated as posted.
Interest from Royalties and Levies Trust Funds
I noted that interest earned from royalties and levies trust funds
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held in the interest
bearing deposits were transferred to PNGFA’s bank account. These
funds were then
utilized by PNGFA for its operations. The trust deed was not made
available for my
review to confirm whether the practice has been allowable. As such,
I am also not aware
of any specific restrictions on how the trust funds are to be
managed. I recommended
that PNGFA must consider revisiting the trust deed to ensure
interest earned from trust
funds are treated in compliance with the terms of the trust deed.-163-
Papua New Guinea Forest Authority
GST Suspense
I noted that Bulolo Plantation, a branch of the Authority claimed
K4,244,199 as GST
receivables from its sole customer, PNG Forest Products Limited
(PNGFP) as at 31
December 2014. The GST was computed at 10% on all log sales to the
customers and
taken up as receivable in the books of the Bulolo Plantation. A
corresponding liability
of K3,955,091 was also booked to indicate the GST amount remittable
to the Internal
Revenue Commission.The PNGFA claims that no GST is payable to IRC on the basis that
PNGFA is exempted
from GST (Income Tax) which is contrary to its own understanding
that GST applies
to the Bulolo operations. I was told that PNGFA had written to IRC
seeking their
intervention in confirming the GST status of the Bulolo Plantation.
However, IRC has
not responded to date.I advised the management to follow up on this matter with IRC and
obtain a
confirmation on the GST status of Bulolo Plantation. Based on IRC’s
response,
accounting of GST in the general ledger must be rectified.Accounting for PIP Funds
As at 31 December 2014, there was no PIP account balance, however,
there was a cash
grant of K1,500,000 recorded in the general ledger. The funds
receipted related to -
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capital projects which required them to be treated as deferred
income in the balance
sheet and amortized over the useful life of the project. In
addition, I was not able to
verify the warrants received to the bank statements as there were
lack of audit trail to
verify these balances.I advised the management that capital grants should be treated,
accounted and disclosed
in accordance with requirements under the International Financial
Reporting Standard,
and record and track the utilization of funds and produce regular
project reports to assist
in effective monitoring of the projects.Access Controls over Payroll System not Effective
I obtained the Attaché system access authority level for the year
ended 31 December
2014 and noted that all team leaders and the managers have ‘level 1’
access. This means
they can perform all functions in all modules including payrolls.
The payroll reports I
requested to perform my control testing were not provided which
indicates that the
control environment had been ineffective.I brought to the attention of the management that the Authority
should immediately
review the level and type of system accesses granted to the staff
members and rectify
any unauthorized accesses to the system. I also advised that the
“level 1” access to the
attaché payroll system should be restricted to the HR and IT
Managers only.-164-
Papua New Guinea Forest Authority
Claims by PNG Timbers Limited
I noted from review of the Board meeting minutes that the NEC in
2012 resolved
PNGFA to settle K450 million which was in court battle to PNG
Timbers Limited. The
Forest Management Act states that NEC has the powers to act for
the Authority, thus
this amount would be settled unless further referral is made.As at 31 December 2014, this matter had still not been settled
and yet I could not obtain -
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further documents on the assessment of this claim over the
completeness, accuracy and
existence of this liability to the Authority.I advised the management that proper assessment of the above
claim and all related
liabilities and costs related to the claim should be recorded.
Management should have
a register to record all claims and the probabilities of each
claims assessed timely.44.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Authority for the year ended 31 December 2015 was in progress.The Authority had submitted its financial statements for the
year ended 31 December
2016 and arrangements are being made to commence the audit
shortly.The Authority had not submitted its financial statements for the
years ended 31
December 2017, 2018 and 2019 for my inspection and audit.-165-
45. PAPUA NEW GUINEA IMMIGRATION AND CITIZENSHIP
SERVICE AUTHORITY45.1 INTRODUCTION
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45.1.1 Legislation
The Papua New Guinea Immigration and Citizenship Service
Authority was established
under the Immigration and Citizenship Service Act 2010. This Act
came into operation
on 9 July 2010.Under this Act, all assets used for the Authority services
(other than land held by the
State) which immediately before the coming into operation of
this Act, were held by
the Department of Foreign Affairs and Trade and which, by
agreement between the
Departmental Head of that Department and the Authority are
necessary to be transferred
to the Authority for the purposes of the Authority are on that
coming into operation,
transferred to and become assets of the Authority.45.1.2 Objectives of the Authority
The objectives of the Authority are the following:
• the management, development and protection of the nation’s
interest in so far as
the security of the nation is protected;
• elimination of corruption and increase in accountability;
• provision of a more flexible operational working environment;
• increased operational and management efficiency in financial
management,
accountability and performance management;
• provision of a mechanism for the achievement of best
practice;
• provision of financial and administrative autonomy;
• increased levels of client service delivery;
• encouragement of study and research in areas which will
contribute to the
protection and security of the nation;
• increased acquisition and dissemination of skill, knowledge
and information in
immigration and citizenship through education and training;
• pursuit of effective strategies including improved
administrative and legal
machinery for managing immigration, citizenship and passport
matters; and
• ensure the Authority retains its primacy and leadership role
with regard to the
provision of effective border control and security through
the effective
management of entry and stay of people in PNG. -
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Papua New Guinea Immigration and
Citizenship Service Authority45.1.3 Functions of the Authority
The functions of the Authority are to:
• perform the functions and exercise the powers conferred on an
authorised person
or an officer under the Migration Act (Chapter 16) or the
Passports Act (Chapter
17);
• assist the Minister responsible for the administration of the
Migration Act
(Chapter 16) and Passport Act (Chapter 17) in the performance
of their functions
under those Acts respectively;
• assist the Minister responsible for citizenship in the
performance of his/her
functions under Part IV of the Constitution and the
Citizenship Act (Chapter 12);
• collect fees, penalties and other revenue authorised under
the Migration Act
(Chapter 16), Passport Act (Chapter 17) and Citizenship Act
(Chapter 12);
• administer the APEC Business Travel Card Scheme under the
Migration Act
(Chapter 16);
• collect, monitor, secure and maintain information and
technological systems to
enable fully integrated and supported immigration,
citizenship and passport
operations;
• undertake development of legislation and policy to support
the operations of the
Authority and the effective administration of the Migration
Act (Chapter 16),
Passport Act (Chapter 17) and the Citizenship Act (Chapter
12);
• advise the Minister on policy issues which relate to this Act
and the effective
administration of the Migration Act (Chapter 16), Passport
Act (Chapter 17) and
the Citizenship Act (Chapter 12);
• exercise and carry out such functions and powers and perform
all duties which
under any other written law are or may be or become vested in
the Authority or -
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delegated to the Authority by this Act or any other law; and
• carry out such other duties as are necessary, supplementary,
incidental to or
consequential to achieve the objectives or the discharge of
its functions under this
Act.45.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Authority had not
submitted its financial
statements for the years ended 31 December 2018 and 2019 for my
inspection and audit,
despite numerous reminders.-167-
46. PAPUA NEW GUINEA INSTITUTE OF MEDICAL RESEARCH
46.1 INTRODUCTION
46.1.1 Legislation
The Papua New Guinea Institute of Medical Research was
established by the Institute
of Medical Research Act (Chapter 166) on 1 January 1980.46.1.2 Functions of the Institute
The primary functions of the Institute are to conduct and foster
research into any branch
of medical science or biology, anthropological and sociological
aspects of health, and
matters relating to public health generally, that are of
relevance to PNG.46.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Institute for the year ended 31 December 2018 had been completed
and results were
being evaluated. -
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The Institute had not submitted its financial statements for the
year ended 31 December
2019 for my inspection and audit.-168-
47. PACIFIC INSTITUTE OF LEADERSHIP AND GOVERNANCE
(Formerly Papua New Guinea Institute of Public Administration)47.1 INTRODUCTION
47.1.1 Legislation
The Pacific Institute of Leadership and Governance (formerly
Papua New Guinea
Institute of Public Administration) was established under the
Pacific Institute of
Leadership and Governance Act 2017. This Act came into operation
on 1 May 2018 as
per Gazettal Notification No. G262 of 2018 dated 24 April 2018,
thereby repealing the
Papua New Guinea Institute of Public Administration Act 1993.Under this Act, all assets held by and obligations and
liabilities imposed on the former
Papua New Guinea Institute of Public Administration immediately
before the
operationalisation of the Act were on that date transferred to
the Pacific Institute of
Leadership and Governance. -
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47.1.2 Objectives of the Institute
The objectives of the Institute are to:
• achieve excellence in providing organisational needs based
training focused on
ethical leadership, strategic planning, corporate services
and related management
processes to enhance public sector performance;
• establish the Institute as the premiere provider of ethical
needs based training
products and programs of choice for the Pacific Island
Nations through training
based partnerships;
• develop, maintain and promote the recognised training
standards and
qualifications regime for public sector organisations in
collaboration with the
department responsible for personnel management and the
National Training
Council; and
• operate as a business concern and raise revenue for the
Institute to minimise
budgetary support from National Government through
partnerships established
with public and private training research and delivery
organisations within Papua
New Guinea and in the Pacific region.47.1.3 Functions of the Institute
The functions of the Institute are to:
• promote excellence in training standards and service delivery
to meet the
aspirations of integrated human development and inclusiveness
as required by the
Constitution;-169-
Pacific Institute of Leadership and
Governance• conduct applied research, engage consultancies and
collaborate with public and
private sector training organisations and professional
bodies, including the Papua
New Guinea National Research Institute and the National
Training Council, in
order to design an up to date training standards and
qualifications framework; -
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• collaborate with the Department of Higher Education,
Research, Science and
Technology in order to establish bringing arrangements for
suitably qualified
diploma students to upgrade their qualifications to
recognised degree level at
selected higher education institutions;
• assist the provincial and district administrations to conduct
training needs analysis
and develop training programs to address the need for
financial, human resource,
planning and project management skills;
• explore, promote and deliver training opportunities for
students from Pacific
Island nations; and
• any other functions conferred upon it by Section 7 of the
Public Institute of
Leadership and Governance Act 2017.47.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
47.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Institute for the year ended 31 December 2014
was issued on 20
March 2020. The report contained a Qualified Opinion.“QUALIFIED OPINION
In my opinion, except for the effects of the matters referred to
in the Basis for Qualified
Opinion paragraphs below:(a) the financial statements of the Institute are based on
proper accounts and records;
and(b) the financial statements are in agreement with those
accounts and records, and
show fairly the state of affairs of the Institute as at 31
December 2014 and the
results of its operations for the year then ended.BASIS FOR QUALIFIED OPINION
Internal Control Environment
My review on the accounts and records of the Institute for the
year ended 31 December
2014 revealed that weak internal controls operated during the
year under review. There
were no approved procedural guidelines or manuals to guide the -
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-
daily operations of the
Institute in respect of approval limits, authorization of
expenditures and other recurring
activities. Further, I noted that the accounts were maintained
using spreadsheets
(Microsoft Excel) without having a proper accounting system/
software.-170-
Pacific Institute of Leadership and
GovernanceIn the absence of proper internal control mechanisms, I was
unable to place any reliance
on the effectiveness of the internal control system and whether
this will have a bearing
on the financial information recorded and disclosed in the
financial statements.Fixed Assets
I noted that the Institute did not maintain a Fixed Assets
Register for all non-current
assets acquired by the Institute over the years-to-date. In the
absence of a Fixed Assets
Register, I was unable to ascertain the correctness,
appropriateness and valuation of the
fixed assets totaling K448,466 as reported in the financial
statements. Further, the
amount disclosed in the financial statements reflects only the
additions for the year
under review. Further, the carried forward prior years’
acquisition of properties and
other assets worth millions of kina located in the Head Office
and the four (4) Regional
Offices were not disclosed by way of note to the financial
statements. I also noted that
the Institute has not carried out any physical count of fixed
assets over the years to
ensure that assets have properly been recorded and are in
existence. As a result, I was
unable to confirm the valuation, existence and accuracy of the
fixed assets acquired by
the Institute over the years-to-date.PGAS Salaries and Allowances – K3,308,200
During my review of the Institute’s salaries and allowances, I
noted that the personnel
files of employees selected were not updated and properly
maintained. There were no
salary and wages declaration forms (Form S3) from IRC present in -
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-
the personal files. I
also could not validate the allowances and other benefits paid
during the year for the
three (3) pay periods selected due to discrepancies between the
employment contract
rates, personnel documents and the Alesco payroll documents.
Further, I noted that the
employees were not taxed using the prescribed tax rate based on
the amount of salaries
and allowances received; most were under taxed. Consequently, I
was unable to
perform the necessary examination on salary and allowances paid
during the year and
conclude on the accuracy and completeness of the account balance
of K3,308,200 as
disclosed in the financial statements.Limitation of Scope – K68,452
The Institute did not maintain proper records of payments
totaling K68,452 during the
year under review. My review of the expenditures during the year
revealed that records
of payments totaling K68,452 were missing or not provided for my
verification.
Consequently, I was unable to perform my audit procedures to
determine the validity,
completeness and accuracy of the payments totaling K68,452 as
reported in the
financial statements.”47.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Institute for the year
ended 31 December 2014
was issued on 20 March 2020. The report contained the following
observations:
-171-Pacific Institute of Leadership and
GovernanceNon–Compliance with the Public Finances (Management) Act 1995
The Institute had not prepared and submitted its financial
statements to my Office
before 31 March 2015 to enable me to conduct the audit and issue the
audit report within
the time frame stipulated in the Public Finances (Management) Act
1995 (as amended).
Consequently, the Institute had breached Sections 63 (2) and 63 (4) -
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of the above Act.
Accounting Policy and Procedural Manual
During my review of the internal controls, I noted that the
Institute did not have any
policy and procedural manual in place to guide its financial and
operational activities.
The policy and procedural manuals serve as control tools to assist
staff at all levels to
execute their duties and responsibilities in accordance with
legislative requirements and
best practice. I brought the matter to the attention of the
management and I was advised
that it had identified this requirement as a priority and commenced
work on the manual
for Accounting and Finance process.Accounting System (Software)
The Institute did not have a proper Accounting System (accounting
software) in place
to produce financial reports. The Statement of Receipts and Payments
(Financial
Statements) were being manually prepared and produced using
Microsoft Excel
spreadsheets. The basic accounting records were being maintained on
spreadsheets to
draw monthly Income and Expenditure Reports from which the Statement
of Receipts
and Payments was compiled. I noted this issue during my previous
audits and
recommended the management to consider sourcing an Accounting
Software
appropriate for the entity. The Institute is yet to implement my
recommendation.Bank Reconciliations
My review of the bank reconciliations of the bank accounts operated
by the Institute
revealed that monthly reconciliations were performed. However, I
noted that the Trust
Account bank reconciliation was signed and dated in December 2016.
The bank
reconciliations for the General Fund and Government Operational
Accounts were not
signed and dated by the preparer and the reviewer. Thus, I was
unable to substantiate
whether there was segregation of duties and whether the bank
reconciliations were done
on a timely basis.General Fund Account (GFA) Wages
-
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-
During my review of the wages, I noted that staff personnel files
did not have salary
history cards as well as approved time sheets for actual hours
worked. As a result, I was
unable to determine whether the staff wages were calculated
correctly and accurately
according to the actual hours worked by each employee.-172-
Pacific Institute of Leadership and
GovernanceTravel Advances and Acquittal Register
The Institute had not maintained a Travel Advances Register for
all duty travels and
related expenses. As a result, I was unable to trace and
authenticate travel advances and
related expenses amounting to K348,218 during the year under
review. Consequently,
the Institute had breached the Public Finances (Management) Act
1995 (as amended)
and the Financial Management Manual Part 20 paragraphs 11.2 &
12.10 which states
that cash advanced to officers on official duty travels must be
acquitted advances within
14 and 7 days for international and domestic travels
respectively upon return from duty
travels. In the absence of a Travel Advance Register, the
Institute was unable to monitor
the acquittals promptly.Service Providers Contract
During my review on the Institute’s expenditures, I noted that
contractual agreements
or terms of references were not attached to payment vouchers or
maintained separately
and provided for my verification. In the absence of the contract
agreements, I was
unable to verify the basis on which the consultancy payments
were made to the
consultants or service providers.I brought the above issue to the attention of the management and
I was advised that the
management would take heed of the recommendation made.Lack of Three (3) Quotations – K75,458
-
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-
I observed that the Institute made payments totaling K75,458
without obtaining three
(3) written quotations from reputable suppliers when making
payments for expenditure
exceeding K5,000. Consequently, the Institute had breached the
requirements specified
under the Public Finances (Management) Act 1995 (as amended). As
a result, I was
unable to place reliance on the effectiveness of the internal
controls surrounding the
procurement of goods and services of the Institute.47.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Institute for the years ended 31 December 2015, 2016 and 2017
had been completed
and the results were being evaluated.The Institute had not submitted its financial statements for the
years ended 31 December
2018 and 2019 for my inspection and audit.-173-
48. PAPUA NEW GUINEA MARITIME COLLEGE
48.1 INTRODUCTION48.1.1 Legislation
The Papua New Guinea Maritime College was established under the
Papua New
Guinea Maritime College Act (Chapter 355). It was previously
known as the Nautical
Training Institute. However, by virtue of the Nautical Training
Institute (Change of
Name) Act 1985 which became effective on 25 July 1985, the names
of Nautical
Training Institute and Nautical Training Institute Act were
changed to PNG Maritime
College and PNG Maritime College Act respectively.48.1.2 Functions of the College
-
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-
The principal functions of the College are to provide training
and other instructional
facilities for the theoretical and practical training of persons
in maritime skills and any
other objects incidental or ancillary thereto.48.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
48.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the College for the year ended 31 December 2018
was issued on 15
October 2019. The report contained a Qualified Opinion.“QUALIFIED OPINION
In my opinion, except for the effects of the matter referred to
in the Basis for Qualified
Opinion paragraph below:(a) the financial statements are based on proper accounts and
records; and(b) the financial statements are in agreement with those
accounts and records, and
show fairly the state of affairs of the College for the year
ended 31 December
2018 and the results of its financial operations and cash
flows for the year then
ended.BASIS FOR QUALIFIED OPINION
Valuation of Non-Current Assets – K10,394,866
I noted that since the establishment of the College, there was
no valuation exercise
carried out on its properties and other assets totalling
K10,394,866 by an independent
valuer to determine the fair values of the College assets.
-174-Papua New Guinea Maritime College
Further, I noted that the College’s Assets recorded in the Fixed
Assets Register did not
have identification numbers or labels assigned to them. Without
proper labelling of
assets, the identification of fixed assets under the College’s
custody was difficult for
my verification. -
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-
Further, the College had not carried out any stocktake on all
its fixed assets over the
years and thus I was unable to carry out physical inspection to
confirm certain fixed
assets against the records to verify their existence. As a
result, I was unable to comment
on the existence and valuation of fixed assets disclosed in the
financial statements.”48.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the accounts and
records of the College for the year ended 31 December 2018 was
issued on 15 October
2019. The report contained the following significant matters:Title Deeds of College Properties
During my review of the Land & Buildings, I noted that for
eleven (11) properties the
College had no valid title deeds in place or was unable to
locate the deeds for my
verification. As a result, I was unable to verify the College’s
ownership of the eleven
properties.I brought the above issue to the attention of the College
Management and I was advised
that communication had commenced with various stakeholders and
would continue
until the matter is being resolved.Withholding Taxes (Salary Taxes) – K876,131
During my examination of the Salary Account, I noted that
monthly group taxes for
prior years (2012 & 2013) were not remitted to Internal Revenue
Commission (IRC)
on time as required by Section 299 G of the Income Tax Act,
(1959). The employer is
required to remit salary and wages taxes to IRC within 7 days
after month-end. Failure
to remit salary and wages taxes on time would result in penalty
of 20% for outstanding
tax payable and an additional interest of 20% per annum on the
amount outstanding. I
noted that the College had been carrying forward these balances
without remitting them
on a timely basis as required under the Act. I brought the above
issue to the attention
of the management and I was advised that: -
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-
“Group tax liabilities carried forward is an ongoing concern.
The current management
has been addressing the issue since 2014 accumulated by failure
to remit to IRC as a
PAYE. Discussions with IRC at the moment is to offset assessed
GST refunds against
group tax liability. The management continues to strive to make
savings from internally
generated income to gradually settle the outstanding
liabilities. A genuine effort has
been put into this matter and will continue into the future.”-175-
Papua New Guinea Maritime College
Personnel Emoluments
During my review of staff personnel files, I noted that the
employment contract for the
Principal of the College was not signed. As a result, I was
unable to substantiate and
validate the salary and allowances paid to the Principal. I
brought this to the attention
of management in my previous audits and followed up during the
current audit as well.I was advised by the College as follows:
“The Principal’s contract is the responsibility of the Board to
ensure that he has a valid
contract in place in concurrence of his duties. The matter has
been followed up by the I
Management with no success. However, the management is still
doing its best to ensure
DPM provides the Principal a valid contract soon.”48.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the College had submitted
its financial statements
for the year ended 31 December 2019 and arrangements were being
made to commence
the audit shortly. -
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-
-176-
49. PAPUA NEW GUINEA NATIONAL INSTITUTE OF
STANDARDS AND INDUSTRIAL TECHNOLOGY49.1 INTRODUCTION
49.1.1 Legislation
The Papua New Guinea National Institute of Standards and
Industrial Technology
was established by the National Institute of Standards and
Industrial Technology Act
1993 and came into operation on 3 January 1994.The National Standards Act (Chapter 378) and the National
Technical Standards Act
(Chapter 379) were repealed, and all funds standing to the
credit of and on accounts
operated under the authority of the repealed acts and all
assets and liabilities owned
or held by the bodies established under the repealed acts were
transferred to and
became the assets and liabilities of the Institute on the
commencement of the new
Act.49.1.2 Objectives of the Institute
The objectives of the Institute are: to carry out scientific
and technological research
and to develop a National Standards system; to co-operate with
international
organisations of measurement and technical standards; to
promote and undertake -
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-
industrial integrated standardisation and quality assurance;
and to enter into any
agreement both within and outside PNG to further the objectives
and functions of the
Institute.49.1.3 Functions of the Institute
The main functions of the Institute are to:
• safeguard PNG against the dumping and supply of unsafe,
unhealthy and
inferior or substandard products;
• establish and co-ordinate the National Standardisation
system;
• provide education, training and industrial extension and
consultative services to
assist industries;
• promote public and industrial welfare, health and safety;
• recognise as testing authorities, bodies and institutions;
• establish a National Certification System of conformity;
• assist industries overcome technical barriers on its
products and services to
international trade; and
• assist industries to produce quality products and services.-177-
Papua New Guinea National Institute of
Standards and Industrial Technology
y
49.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Institute had
not submitted its financial
statements for the years ended 31 December 2017, 2018 and
2019 for my inspection
and audit, despite several reminders. -
Page 285 of 475
-
-178-
50. PAPUA NEW GUINEA SPORTS FOUNDATION
50.1 INTRODUCTION
50.1.1 Legislation
The Papua New Guinea Sports Foundation was established by the
Papua New Guinea
Sports Foundation Act 2005. This Act was certified on 8 August
2006 and became
operational on the same date and replaced the Papua New Guinea
Sports Commission
Act 1992.Under this Act, all assets held or occupied by and all
liabilities and obligations of the
Papua New Guinea Sports Commission prior to the operation of
this Act were
transferred to and became assets and liabilities and obligations
of the Foundation at
commencement.50.1.2 Objectives of the Foundation
-
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-
The principal objectives of the Foundation are: to encourage the
private sector to
contribute to the funding of sports to supplement assistance by
the government of Papua
New Guinea; to provide leadership in the development of Papua
New Guinea’s
performance in sports; and to encourage increased participation
and 6SRrt 1Rr $ll’ by
Papua New Guineans in sports.50.1.3 Functions of the Foundation
The principal functions of the Foundation are to:
• advise the Minister in relation to the development of
sports;
• co-ordinate activities in Papua New Guinea for the
development of sports and
to develop and implement programs to promote equality of
access to and
participation in sports by all Papua New Guineans;
• develop and implement programs for the recognition and
development of
persons who excel, or who have the potential to excel in
sports and persons who
have the potential to achieve standards of excellence as
sports coaches, umpires,
referees or officials essential to the conduct of sports;
• initiate, encourage and facilitate research and development
in relation to sports;
• undertake research and development related to sports science
and sports
medicine and to provide sports medicine services and sports
science services to
persons participating in programs of the Foundation;
• establish, manage, develop and maintain facilities for the
purposes of the
Foundation;
• collect and distribute information and provide advice on
matters related to the
activities of the Foundation;-179-
Papua New Guinea Sports Foundation
• fostering co-operation in sports between Papua New Guinea and
other countries
and to provide access to persons from other countries to the
resources, services
and facilities of the Foundation;
• raise money through the National Sports Trust or by other
means for the -
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-
purposes of the Foundation and to administer and expend money
appropriated
by the Parliament or raised in accordance with and for the
purpose of the
Foundation;
• consult and co-operate with appropriate authorities of the
National Government
or the Provinces and Local-level Governments and with other
persons,
associations and organisations on matters related to the
activities of the
Foundation;
• provide advice on matters related to sports to the Papua New
Guinea National
Olympic Committee or other persons, bodies or associations;
and
• co-operate with districts, provincial, national and
international sporting
organisations in aiming to foster a sporting environment that
is free from the
unsanctioned use of performance enhancing drugs and doping
methods.50.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the financial statements of
the Foundation for the
years ended 31 December 2016, 2017, 2018 and 2019 had not been
submitted for my
inspection and audit. -
Page 288 of 475
-
-180-
51. PAPUA NEW GUINEA UNIVERSITY OF TECHNOLOGY
51.1 INTRODUCTION
51.1.1 Legislation and Objectives of the University
The Papua New Guinea University of Technology was established
under the University
of Technology Act (Chapter 170). The University’s aims are to
provide tertiary
educational facilities and to produce qualified men and women to
contribute to the
development of Papua New Guinea.
51.1.2 Functions of the University
The University’s principal functions are to encourage and
provide facilities for study,
education and training of technological subjects and branches of
learning at tertiary
level, and to assist in research and the practical application
of technological branches
of learning.
51.1.3 Subsidiaries of the University
The University has two subsidiary companies; National Analytical
and Testing Services
Limited and Unitech Development and Consultancy Company Limited
which were
incorporated under the Companies Act.
Comments in relation to the subsidiary companies are contained
in paragraphs 51A and
51B of this Report respectively.51.2 AUDIT OBSERVATIONS
51.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
of the University’s
financial statements for the year ended 31 December 2017 was
issued on 11 March
2020. The report did not contain any qualification.51.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
University for the year ended 31 December 2018 was in progress.The University had not submitted its financial statements for
the year ended 31
December 2019 for my inspection and audit. -
Page 289 of 475
-
-181-
51A. NATIONAL ANALYTICAL AND TESTING SERVICES
LIMITED (Subsidiary of University of Technology)51A.1 INTRODUCTION
The National Analytical and Testing Services Limited was
initially incorporated as
Champion No. 67 Limited on 10 March 2011. However, on 24 March
2011 the former
Company name (Champion No. 67 Limited) was changed to what is
now the National
Analytical and Testing Services Limited.The shareholders of the Company are Unitech Development and
Consultancy
Company Limited and Star Mountains Institute of Technology
Limited, each holding
61% and 39% of the total issued shares respectively.51A.1.1 Functions of the Company
The functions of the Company are to provide analytical,
pathological and mineral
testing services:• analytical testing including tests for food, water, soil,
mining or industrial waste;
• pathology testing relating to test for human diseases; and
• mineral (geo) testing involving testing for mineral
compositions.51A.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the year ended 31 December 2012 was completed
and results were
being evaluated.The Company had not submitted its financial statements for the
years ended 31
December 2013, 2014, 2015, 2016, 2017, 2018 and 2019 for my
inspection and audit. -
Page 290 of 475
-
-182-
51B. UNITECH DEVELOPMENT AND CONSULTANCY COMPANY
LIMITED (Subsidiary of PNG University of Technology)51B.1 INTRODUCTION
Unitech Development and Consultancy Company Limited was
incorporated under
the Companies Act.51B.1.1 Functions of the Company
The primary function of the Company is to carry on the business
and activities of
consultants, and to render management, industrial, commercial,
financial, secretarial,
public relations, industrial relations and other related
services to any person, firm or
corporation engaged in any business, trade or activity. The
Company also carries on
a business of insect farming.51B.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the financial statements
of the Company for the
years ended 31 December 2014, 2015, 2016, 2017, 2018 and 2019
had not been
submitted for my inspection and audit. -
Page 291 of 475
-
-183-
52. PARLIAMENTARY MEMBERS’ RETIREMENT BENEFITS
FUND52.1 INTRODUCTION
52.1.1 Legislation
The Parliamentary Members’ Retirement Benefits Fund was
established under the
Parliamentary Members’ Retirement Benefits Fund ALl I I I 7
which came into
operation on 16 July 1997.52.1.2 Objectives of the Fund
The objectives of the Fund are to provide pensions and
retirement benefits for Members
and former Members of Parliament and the former House of
Assembly and to provide
benefits to dependant spouses and juvenile dependants. This Act
repealed the
Parliamentary Members’ Retirement Benefits ALl which came into
operation in 1982.52.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Fund for the year ended 31 December 2017 had been completed and
the results were
being evaluated.The Fund had not submitted its financial statements for the
years ended 31 December
2018 and 2019 for my inspection and audit. -
Page 292 of 475
-
-184-
53. PUBLIC CURATOR OF PAPUA NEW GUINEA
53.1 INTRODUCTION
53.1.1 Legislation
The Office of the Public Curator of Papua New Guinea was
established under the Public
Curator Act (Chapter 81).53.1.2 Functions of the Public Curator
The main functions of the Public Curator are to act as an
administrator of estates; an
executor appointed under a will by a member of the public; and/
or an official trustee.53.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Public Curator’s Office for the year ended 31 December 2014 had
been completed and
the audit reports were being finalised.The financial statements for the years ended 31 December 2015,
2016 and 2017 had
been submitted for my inspection and audit and arrangements were
being made to
commence the audit shortly.The financial statements for the years ended 31 December 2018
-
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-
and 2019 had not been
submitted by the Public Curator’s Office for my inspection and
audit.-185-
54. ROAD TRAFFIC AUTHORITY (formerly National Road Safety
Council)54.1 INTRODUCTION
54.1.1 Legislation
The Road Traffic Authority (formerly National Road Safety
Council) was established
under the Road Traffic Authority Act 2014. This Act was
certified on 5 August 2014
thereby repealing the National Road Safety Act 1997. The
Authority only commenced
its operational activities in 2017.Under the Road Traffic Authority Act 2014 all assets,
liabilities, rights, entitlements and
choice-in action of the National Road Safety Council and the
Land Transport Board
which related to the functions of the Council were transferred
to the Authority upon the
commencement of this Act.54.1.2 Objective of the Authority
The objective of the Authority is to manage and administer the
regulation, safety and
efficient use of land transport throughout Papua New Guinea.
54.1.3 Functions of the Authority -
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-
The functions of the Authority are to:
• establish, administer and enforce regulatory requirements for
land transport in
Papua New Guinea, including setting fees and charges for
services provided by
the Authority;
• within the resources available to the Authority, provide for
the safe and efficient
use of land transport in Papua New Guinea;
• assist, advise and work cooperatively with the Police Force,
Provinces and other
organisations in relation to land transport regulatory
matters, road safety and the
efficient use of land transport;
• monitor the road safety performance of the public road
network and to develop
and implement action plans for improvements;
• manage data for activities within the land transport system
including maintaining
and preserving records, registers and documents in relation
to the activities;
• undertake investigation into land transport accidents,
incidents and report to the
Minister and public on the findings of such investigations;
• promote and conduct research into land transport regulatory
matters and road
safety;-186-
Road Traffic Authority
• monitor and evaluate the effectiveness of programs and
activities concerning land
transports regulatory matters and road safety;
• promote and conduct educational and awareness programs to
stimulate
compliance with land transport regulatory requirements and
road safety;
• advise the Minister on all functions specified in this
section;
• perform other functions as are given to the Authority under
this Act, the
regulations, the rules or any other law; and
• do all things incidental, consequential or convenient in the
exercise of the
Authority’s functions and powers.54.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
-
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-
54.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the Authority’s
financial statements for the years ended 31 December 2017 and
2018 were issued on
27 May 2020. The reports did not contain any qualification.54.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Authority for the years
ended 31 December
2017 and 2018 were issued on 27 May 2020. The reports contained
similar
observations, hence, only the 2018 report is reproduced:CASH AT BANK – Bank Reconciliation
My review and examination of the 2018 bank reconciliations for
the Authority’s three
bank accounts revealed that the reconciliations were not
prepared, reviewed and
certified by the designated officers on a timely basis for all
three bank accounts. This
practice leads to a breach of provisions of the Public Finance
(Management)
(Amendment) Act 2016 and the Financial Management Manual. I
recommended that
the Authority must comply with the Public Finance (Management)
(Amendment) Act
2016 and the Finance Management Manual. The management responded
to my concern
as follows:“Management has taken note of the audit findings and has taken
corrective measures
to ensure bank reconciliations are prepared in a timely manner
and in accordance to
Financial Management Manual Part 3, Section 4.7 (Bank
Reconciliation). Due to the
transition period from NRSC to RTA, management have performed
bank
reconciliations; however, that was on a cash basis. The
reconciliations are now being
prepared from the Accounting system against the bank statements
and verified, checked
and signed by preparers and reviewers.”-187-
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Road
Traffic AuthorityPROPERTY PLANT & EQUIPMENT – Fixed Assets Management
The Authority had not maintained a proper Fixed Assets Register in
2018. The absence
of a proper and updated Fixed Assets Register exposed the Authority
to high risk of
losing its properties through theft and other means. I drew this
observation to the
attention of the management of the Authority and they responded to
my observation as
follows:“Management agrees to the findings and has updated its Fixed Assets
Register for 2017.
To maintain proper control, RTA will conduct half yearly stocktake
to verify thefixed assets at year-end.”
INCOME – Traffic Infringement Notices
My review of the income of the Authority revealed that there were
weaknesses in the
controls surrounding record keeping functions and issue of receipt
books. There were
also instances where TIN receipt books given to police officers were
not returned to the
Authority and some Inspectors had lost the TIN books. Further, fines
and fees schedules
and summaries of deposits were not properly arranged and filed. I
brought this issue to
the attention of the management of the Authority and they responded
as follows:“Management concurs to the audit findings and necessary measures
have been taken
to address the control issues. RTA now has an approved Finance and
Accounting
Manual which specifically outlines the processes of receipting and
collection and also
to maintain, records of transaction, filing of payment vouchers for
audit purposes and
future references.Besides, only Gazetted RTA Traffic Enforcement Officers (TEO) are
now authorized
Officers to use the Traffic Infringement Notice (TIN) book and not
police officers. The
procedures of Collection of revenue will be monitored by the -
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Managers concerned in
this process.”PAYROLL – Maintenance of Staff Personnel Files
During my review of staff personnel files, I noted that the staff
personnel files were not
properly and timely updated with salary history cards, employment
letters, birth and
marriage certificates, leave records and salary and wages
declaration forms. In the
absence of these valid documents, I was unable to verify each of the
officers’
salaries/wages and allowances provided for at the year end. I drew
this observation to
the management of the Authority and the management responded as
follows:“Management agrees that some employee’s files were not properly and
timely
maintained during the transition from National Road Safety Council
to Road Traffic
Authority.-188-
Road Traffic Authority
Management have taken corrective actions and has developed the Admin
and HR
manual approved by Board in 2016. This is used now as a guideline
for update of
staff records and files on a regular basis. Management have started
to maintain proper
records of staff and also improved its efforts in compliance to IRC
requirements by
filling in the salary wages forms and others for yearly lodgement
with IRC.” F1
EXPENDITURES – Procurement Process ReviewMy review of the procurement process of the expenditure accounts and
records of the
Authority for the year ended 31 December 2018 revealed the following
discrepancies:• Several payments could not be verified as I was not able to locate
their respective
payment vouchers in the files provided for my review;• There were instances in which expenses incurred for operational
expenses had no
proper or complete supporting documentations to substantiate the
validity of the -
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payments; and
• There were instances where payments were made without obtaining
three
quotations from three different suppliers as required under the
provisions of the
Financial Management Manual.I brought this issue to the attention of the management of the
Authority and they
responded to my observation as follows:“Management agrees with audit findings and has addressed the issues
by ensuring all
supporting and relevant documents are duly attached for payment
processing,
maintaining proper record of its transaction and to ensure proper
filing of payment
vouchers for future reference.Furthermore, the compliance relating to minor procurement for goods
and services as
per the Public Finance (Management) (Amendment) Act 2016 is noted
and will be
adhered to.”Travel Acquittal Register
My review of the travel and subsistence expenses revealed that the
Authority had not
maintained a Travel Advances Register with acquittal files for all
duty travels and
related expenses. This resulted in an amount of K31,347 of travel
and subsistence
expenses not being acquitted from a total of K134,747 at year end. I
advised the
management of the Authority that this was a breach of the provisions
of the Public
Finance (Management) (Amendment) Act 2016 and the Financial
Management Manual
and to comply with the above legislations. I brought this
observation
to the attention of the management and they responded as follows:-189-
Road Traffic Authority
“Management has addressed this issue by having a te Section.”
54.3 STATUS OF FINANCIAL STATEMENTS
-
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At the time of preparing this Report, the Authority had not
submitted its financial
statements for the year ended 31 December 2019 for my inspection
and audit.-190-
55. SECURITY INDUSTRIES AUTHORITY
55.1 INTRODUCTION
55.1.1 Legislation
The Security Industries Authority was established under the
Security (Protection)
Industry Act 2004. This Act came into operation on 1 March 2005. -
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The Authority
commenced its operations in April 2005.55.1.2 Functions of the Authority
The principal functions of the Authority are to:
• grant licenses and permits under the Act;
• fix minimum standards of training applicable to holders of
licenses and permits
respectively;
• establish, provide or approve training institutions and
facilities or permit such
training institutions or facilities as it may approve, to
conduct training or to be
used for training for the purpose of training of persons who
intend to perform
security officers’ duties or security guard duties;
• approve any equipment other than firearms used by a holder of
a license or permit
or required by a customer to be installed on his premises or
property;
• ensure that the holder of a license or permit operates or
carries out his duties or
performs his functions in accordance with the terms and
conditions of the license
or permit and subject to the provisions of this Act;
• formulate a Code of Conduct governing the disciplinary
matters and work ethics
within the Industry; and
• undertake such other functions and exercise such powers as
may be conferred on
it by this Act or any other law.55.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
55.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Authority for the year ended 31 December 2016
was issued on 21
April 2020. The report contained a Qualified Opinion.“QUALIFIED OPINION
In my opinion, except for the effects of the matters described
in the Basis for Qualified
Opinion paragraphs, the accompanying financial statements are:a) based on proper accounts and records; and
-191-
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Security Industries Authority
b) are in agreement with those accounts and records, and show
fairly the state of
affairs of the Authority for the year ended 31 December 2016
and the results of
its financial operations and cash flows for the year then
ended.BASIS FOR QUALIFIED OPINION
Fixed Assets – K477,960
My review of the Fixed Assets Register (FAR) revealed that the
Register was not
properly maintained and updated on a timely basis by the
Authority. No proper stock-
take was done to confirm the existence and to determine the fair
value of each asset
held at year end. I also noted that assets were not numbered/
tagged and no acquisition
dates were provided for me to verify the depreciation calculated
on assets listed in the
Register. Based on the findings, I was unable to place reliance
on controls surrounding
the management of fixed assets. As such, I was unable to conclude
on the accuracy,
valuation and existence of the fixed assets balance of K477,960
disclosed in the
financial statements.Accounts Receivable – K63,445
My examination of accounts receivable revealed that receivable
balance was
understated as it did not capture licence and permit fees
receivable from licence and
permit holders who have not paid their fees on due dates. The
Authority has not
maintained proper debtors’ records detailing the debtors,
invoices and other supporting
documents to validate the actual existence of debtors.As a result, I was unable to confirm the completeness and
accuracy of the debtors and
the fair presentation of the accounts receivable amount stated in
the financial
statements.”55.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act on
the inspection and -
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-
audit of the accounts and records of the Authority for the year
ended 31 December 2016
was issued on 21 April 2020. The report contained the following
observations:Register of Disciplinary Points
I noted that the Authority has not maintained a Register of
Disciplinary Points. It is a
statutory requirement pursuant to provisions of the Security
(Protection) Industry Act
2004, Section 25 which stipulates that the Authority should
maintain a Register of
Disciplinary Points. The Register of Disciplinary Points is to be
used by the Authority
to record findings through Board of Complaints in relation to
disciplinary points that
needs to be recorded against a holder of licence or permit.-192-
Security Industries Authority
My review revealed that the Authority did not have in place a proper
mechanism to
account for disciplinary issues and actions taken against the
licence and permit holders,
when any breach occurs.I drew this matter to the attention of the Authority and the
Authority advised me that
they have now put in place a Register of Disciplinary Points managed
by the Manager
Licensing and Compliance whilst awaiting the gazettal of the Board
of Complaints.Board of Complaints
I noted during the audit that the Authority did not have a Board of
Complaints to deal
with complaints raised by or against licence and permit holders as
required under
Section 57 of the Security (Protection) Industry Act 2004.I recommended the Authority to ensure that a Board of Complaints is
established as per
the requirement of Section 57 of the Security (Protection) Industry
Act 2004 to perform
its required function as a quasi-judicial Board to hear into
complaints/allegations made
by or against permit and licence holders. -
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The Authority responded to my concern as follows:
“I have noted your concerns and I will take it up to the Council in
the next meeting to
ensure the full Council endorses the 3 men before their gazettal by
the Chairman
(Police Commissioner) before the Board of Complaints comes into
existence in
compliance with the law by this year 2020.”Annual Returns
It is a requirement under Section 76 of the Security (Protection)
Industry Act 2004 that
all licence holders are required to submit an Annual Return on or
before 31 March for
the year ending 31 December preceding. During my review, I noted
that no annual
returns were received from licence holders. The Authority had not
pursued the
enforcement of this statutory requirement through mechanism such as
cancelation or
refusal to grant licences. I drew this matter to the attention of
the management and they
responded as follows:“We agree with you on the requirement for the submission of annual
return by Security
Companies as required by Section 76 of the Security (Protection)
Industries Act We’ve
advertised in media reminding security companies to submit their
annual returns but
only few or none have been submitting their annual returns.And further there is no penalty listed in the Security (Protection)
Industries Act for
failing to submit the Annual Returns, therefore we cannot cancel the
security providers’
license and guards’ permit or penalize security companies in one way
or another.”-193-
Security Industries Authority
Council Stipend and Sitting Allowances – Ex officio members
My review of the Council members and related expenses revealed that
two ex-officio
members were paid sitting allowances and stipends. As senior public
servants serving
as a member of the Council by virtue of operations of Section 9, -
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sub-sections 1(a) and
1(h) of the Security (Protection) Industry Act 2004; the two ex-
officio members were
not eligible to receive the sitting allowances and stipends.This practice is in breach of Section 3 of the Boards (Fees and
Allowance) Act 1955
and Section 25(3) of the Pubic Finance Manual and Circular
Instructions 21/2000 and
1/2005 from the Department of Personal Management.I recommended the Authority to cease the practice of paying ex-
officio members
stipend and sitting allowances. However, I recommended the Authority
to pay travel
cost, accommodation and travel allowances for meetings held in other
centers /locations
where they are required to travel. I drew this matter to the
attention of the management
and they responded as follows:,“I confirmed your audit findings on this issue and I will bring it
to the full council
members’ attention to deliberate on this issue. Because right now I
cannot stop paying
them as recommended by you until the full council passes a meeting
resolution to stop
payment of the stipends and sitting allowances to ex-officio council
members then, I
will legally effect your recommendation. I will advise the full
council members in the
council meeting of your audit finding and advise them of the audit
recommendation to
stop this payment”Increase in Council Stipend and Sitting Allowances
My review of the 2015 meeting minutes of meeting number 2 of 2015
held on 8
September 2015 noted that the council members approved for
themselves an increase
in stipend and sitting allowances. I further noted that the
increased rates were over the
threshold set by the Department of Personal Management in circular
number
21/2000.The Authority as per the circular is classified under
Category “A” as
Commercial Statutory Authorities. The Authority is in breach of
Section 3 of the Boards
(Fees and Allowance) Act 1955 and Circular Instructions 21/2000 from
the Department
of Personal Management.I recommended the Authority to ensure compliance with Section 3 of
-
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the Boards (Fees
and Allowance) Act 1955 and Circular Instructions 21/2000 from the
Department of
Personal Management as the Authority is a Commercial Statutory
Authority created by
an Act of Parliament. The Authority responded to my observation as
follows:3,“I confirm that the Council members through the full legally
constituted quorum in
Council Meeting 2 held on 8 September 2015, voted to increase their
Stipend and Sitting
Allowances based on the following reasons:-194-
Security Industries Authority
a) The Security Industries Council members raised concern that they
were not paid
at a rate similar to other SQE Board members as their current
fees were much
lower. Therefore, one of the council members at that time was
tasked by the full
council to compare their remunerations with other SOEs and
private Boards’
terms and conditions. Which he did and presented the written
findings to the full
council thereafter resulting in the vote to increase their
sitting and quarterly
stipend allowances.b) This Council stipend and sitting allowances increase is
consistent with section 8
(2) (D) of the Security (Protection) Industries Act, 2004 to
increase its stipends
and sitting Allowances.However, I also noted your references to Section 3 of the Board Fees
and Allowances
Act, 1955, Part 25 (3) of the Finance Management Manual as well as
Circular
Instruction 21/2000 and 1/2005 issued by Department of Personnel
Management as
your source of supporting authority to say that the increase is
wrong. I therefore, will
bring your concerns on this matter to the Council in the next
meeting to deliberate on
this issue.”Improper Payments of Stipend and Sitting Allowance
I noted that the Authority’s Council members were paid full four (4)
-
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quarterly stipends
and sitting allowances balance of K317,500 during the year under
review. However,
only one (1) Council meeting was conducted for the year and second
meeting was
through board resolution paper without any meetings conducted for
the second, third
and fourth quarter of 2016. The payments were improper and deviate
from the original
intended practice whereby a council member can only be paid sitting
allowance and
stipend upon attendance of council meetings as per Circular
Instructions 1/2005 issued
by the Department of Personnel Management. I brought this issue to
the attention of
the management of the Authority and they responded to my observation
as follows:“I agree that the Council members were paid their quarterly stipends
in 2016 despite
sitting for only one council meeting in which sitting allowances
were paid for this one
meeting only. The quarterly stipends were paid to council members on
quarterly basis
even when the meetings were held or not. This is because we have
been following Public
Finances Management Manual Part # 25 subsection 4.
However, we now take note of the recommendation given to follow
Circular Instruction
No.2/2005 and we will inform council members for their appropriate
actions going
forward in the next meeting to deliberate on this issue for the
Authority to implement”-195-
Security Industries Authority
Bank Reconciliations
My review of the bank reconciliations for the two (2) accounts
maintained by the
Authority revealed that the reconciliations were not done on a
timely basis. Bank
reconciliations for 2016 were only prepared in 2019 prior to the
commencement of the -
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field audit. As a result, I was not able to place reliance on the
effectiveness of the
internal controls surrounding the bank reconciliation function. I
drew this matter to the
management and they responded to my observation as follows:“We agree and confirmed the weaknesses highlighted by the audit for
the year 2016.
The Manageme nt has already action this and it will be reflected in
2019 financial
statements.”SALARIES AND ALLOWANCES – (K871,638)
Personnel Files
During my review of the personnel files for certain selected
officers of the Authority,
it revealed that the Authority now maintains salary history cards in
their respective
personnel files. However, the salary history cards were not updated
by the Human
Resources in terms of base salary, higher duty allowance and other
allowances. Also,
leave records for each employee such as recreational, sick,
compassionate and long
service leaves were not updated. Poor maintenance of staff personnel
files can increase
the risk of fraud and error such as dubious dependency claims and
payment of contract
officers on invalid unsigned contracts. The Authority might use
wrong rates for
calculation of entitlements for the staff. I drew this issue to the
attention of the
management and they responded to my observation as follows:“Upon my appointment as Registrar, I have taken on board the audit
recommendations
and recruited a new Human Resources Officer which gradually
addressed all those
issues. However, we appreciate those few weaknesses highlighted and
we will take on
board recommendations given.”Recreational Leave Fares
My review of the leave fares expenses revealed that the Authority
paid leave fares to
its employees and their dependents totaled K23,756 during the year
under review.
However, I was unable to verify the validity and authenticity of the
staff dependents
(children) ages for leave fares as no birth certificates were
attached to the payment -
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vouchers in the personnel files. As a result, I was not able to
confirm whether the
Authority was complying with General Orders 1441. I drew my
observation to the
management and they responded as follows:-196-
Security Industries Authority
“We take note of the observation highlighted for annual leave
fares paid of K23,756
and the validity issue of dependency claim This is the total
amount paid for the year
which includes four officers. Dependencies paid are
legitimate as these dependents
were declared through staff IRC Tax forms and Superannuation
forms. These I
documentsLEE are attached to the staff respective files.We are being mindful of that as each time staff lodge for
leave fares, we ensure
legitimate dependents are paid for and within the age limit
specified in the GSOfor
children. However, for further compliances, we take note and
it will be address.”Non maintenance of Acquittal File and Travel Advances
RegisterMy review of the travel and subsistence expenses totalling
K127,377 incurred by staff
on duty travel (domestic and overseas) revealed that the
Authority did not maintain a
Travel Advances Register to ensure that the advances were
properly recorded and
timely acquitted. As a result, the above total amount
remained outstanding or
unacquitted at year end. I drew this issue to the attention
of the management and they
responded as follows:“We take note of the weaknesses highlighted and
recommendation given and will be I
taken on board.”55.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Authority had not
-
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-
submitted its financial
statements for the years ended 31 December 2017, 2018 and
2019 for my inspection
and audit.-197-
56. SMALL AND MEDIUM ENTERPRISES CORPORATION
(Formerly Small Business Development Corporation)56.1 INTRODUCTION
56.1.1 Legislation
The Small and Medium Enterprises Corporation (formerly Small
Business
Development Corporation) was established under the Small and
Medium Enterprises
Corporation Act 2014. This Act came into operation on 10
February 2015.56.1.2 Functions of the Corporation
The functions of the Corporation are to:
• co-ordinate, monitor and evaluate the implementation of the
policies, strategies
and programs for small and medium enterprises in accordance
with the Small and
Medium Enterprises Policy, the Master Plan of the Government
as directed by the
Small and Medium Enterprises Development Council and the
Ministry
responsible for trade, commerce and industry matters; -
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• undertake studies concerning the development of small and
medium enterprises;
• liaise with the National Executive Council or relevant
Ministry in the
implementation of the policies, strategies and programmes for
small and medium
enterprises;
• being responsible for collecting, sourcing, keeping and
disseminating information
on small and medium enterprises;
• act as the Secretariat to the Council;
• in the manufacturing and services sectors:
‒ to undertake promotional activities to promote growth of
small and medium
enterprises;
‒ to promote co-operation amongst small and medium
enterprises;
‒ to encourage industrial linkages with the large
industries;
‒ to develop human resource in the small and medium
enterprises; and
• undertake any work and investments necessary to promote and
grow the small
and medium enterprises sector in the economy.56.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
56.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Corporation for the years ended 31 December
2016 and 2017 were
issued on 30 September 2019. The reports contained similar
Qualified Opinions, hence,
only the 2017 report is reproduced:-198-
Small and Medium Enterprises Corporation
“QUALIFIED OPINION
In my opinion, except for the effects of the matters referred to in
the Basis for Qualified
Opinion paragraphs, the financial statements of the Corporation;(a) are based on proper accounts and records; and
(b) are in agreement with those accounts and records and present
fairly, in all material
respects, the Corporation’s financial performance, financial
position and its cash -
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-
flow for the year then ended.
BASIS FOR QUALIFIED OPINION
Financial Incentive Schemes – K558,635
The Corporation maintains security deposits (Gurantee) with the
Australia and New
Zealand Bank (ANZ), National Development Bank (NDB) and Nationwide
Microbank
(NMB). My review on these deposits revealed the following:• The Corporation did not maintain detailed records/schedules and
supporting
documentations of loans granted to businesses by the Corporation
to date;
• The total security placed with various commercial banks of
K3,250,000 in 2005
decreased to K558,635 as at 31 December 2017. There were no
proper records
maintained by the Corporation to substantiate this reduction.
Further, the
Corporation lacked proper and detailed information in relation to
loans granted,
loan defaulted, written off loans and current active loans;
• A variance of K133,917 was noted between bank statements and the
financial
statements relating to Nationwide Microbank; and
• A balance of K952,715 was transferred back to the Corporation
from ANZ
Banking Group on 27 January 2017 without details of written-off
or default loans.As a result, I was unable to obtain comfort over the completeness
and accuracy of the
balance disclosed at year end and further place reliance on the
monitoring processes of
the loans granted to the borrowers.Fixed Assets – K4,816,361
My review of the fixed assets of the Corporation revealed the
following issues:• The Corporation did not maintain a proper and complete Fixed
Assets Register in
2017 to capture all asset particulars such as asset numbers or
coding, location and
custodian;
• There was no clear policy formulated by the Corporation in
relation to acquisition,
capitalization and disposal of assets; -
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-
-199-
Small and Medium Enterprises
Corporation• No stock-take was conducted on its fixed assets for a number
of years up to 31
December 2017. Assets were not counted and tagged with asset
identification
codes for verification and control; and
• The semi-mechanized leather factory that was built and
completed in 2012
including the machinery and equipment installed were yet to be
used due to non-
commissioning and absence of technical expert. However, both
the building and
the machinery were depreciated to the net value of K1,793,140
and K166,686
respectively.Due to the above recurring issues, I was unable to rely on the
effectiveness of the
internal controls surrounding the management of fixed asset of
the Corporation.
Further, I was unable to conclude on the valuation, accuracy and
existence of the fixed
assets amounting to K4,816,361 as at 31 December 2017.”56.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Corporation for the
years ended 31 December
2016 and 2017 were issued on 30 September 2019. The reports
contained similar
significant matters, hence, only the 2017 report is reproduced:Non-Compliance with the Public Finance (Management) (Amendment)
Act 2016The Public Finance (Management) (Amendment) Act 2016 Section
63(1) and 63(3)
requires the Corporation to furnish to the Minister before 30
April each year, a
performance and management report of its operations for the year
ending 31 December
preceding, together with financial statements. However, the
Corporation has not
prepared and submitted its financial statements for the year
ended 31 December 2017
to my Office on a timely basis to enable me to complete the audit
on time for tabling -
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the report in the Parliament before 30 April 2018. Accordingly,
the Corporation
breached Section 63(1) and 63(3) of the Public Finances
(Management) (Amendment)
Act 2016.Account Balances without Proper Supporting Documentation
Disclosures relating to Other Debtors, Creditors and Accruals and
Other Income of
K16,231, K57,840 and K64,016 respectively, were not properly
supported by
appropriate source documents. I was unable to confirm the
accuracy and completeness
of this disclosures and the balance presented in the financial
statements.Preparation of Bank Reconciliations
The Corporation maintained six (6) bank accounts during the year
under review. I noted
that the bank reconciliations for the accounts were not prepared,
reviewed and verified
by concerned officers on a timely basis.-200-
Small and Medium Enterprises Corporation
As such, I was not able to place any reliance on the effectiveness
of the controls
surrounding the bank reconciliation process. In addition, existence
of such weaknesses
in the internal control system may result in Corporation’s inability
to properly monitor,
control and safeguard cash at bank against the risks associated with
it. Consequently, I
was unable to satisfy myself as to the correctness, completeness and
existence
pertaining to the cash balance of K832,602 disclosed at year end.Operational Policy Manuals
Internal control mechanisms such as accounting manuals, operational
guidelines and
policies of an entity ensures uniform application of processes
across all levels of
management and must be formally established, well documented and
communicated to
all levels and functions of organization to be used by all personnel
in the routine
operational activities. My review revealed that there were no such
operational -
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procedural manuals drafted and used. In the absence of clearly
designed and approved
policy manuals and guidelines, there is a high risk of abuses and
malpractices to take
place within the Corporation. As a result, I was unable to measure
and comment on the
standards of operations in relation to the systems and controls and
whether uniform
procedures were followed in respective divisions and sections.I brought this issue to the attention of the management and
recommended the
Corporation to have in place operational policy manuals and to be
used by all levels of
operations. Management responded to my comments as follows:“At the time of this response, the Human Resource Policies and
Procedures Manual is
currently being worked on whilst an accounting firm had been
selected by the board
after the due bidding process to undertake the review, design and
development of a new
accounting policies and procedural manuals for the organization.”Board Meeting Minutes
The Corporation did not maintain proper records of its meeting
minutes in 2017.
Minutes for the third and fourth meetings were not approved by the
Chairman of the
Board. As such, I was unable to confirm whether proceedings recorded
were correct
and whether issues deliberated were in the best interest of the
Corporation. I raised this
issue with the management and the response was as follows:“The third and fourth quarters 2017 Board Meeting Minutes were
edited after members
noted and corrected few typing errors in the subsequent schedule
board meetings and
the amended versions were hand delivered to Chairman of the SMEC
Board for
signature after verification and confirmation that minutes were true
records of the
proceeding of the meeting. After numerous reminders and due to busy
business
schedule, Chairman is yet to return the signed copies. Copies will
be made available to
AGO once they are received from the Chairman.”-201-
-
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Small and Medium Enterprises Corporation
Internal Audit Function
During my review of the internal audit function, I noted that the
Corporation did not
fully utilize the internal audit to review various processes and
systems and to provide
necessary recommendation for the management to improve on the
internal control
weaknesses noted in the prior year audits. This issue on the role of
the internal audit
function and its lack of performance was brought to the attention of
the management
previously and yet to be addressed by the Corporation. I brought
this issue to the
attention of the management again for their necessary action.Office Rental (Government Grant) – K1,323,414
I noted that the Corporation received rental grants from the
government totaling
K1,323,414. However, the source documents such as warrants,
remittance advices and
invoices were not provided to me for my verification. As a result, I
was unable to verify
and confirm the balance disclosed in the financial statement.Travel Acquittal Register
My review of the travel and accommodation revealed that the
Corporation did not
maintain a Travel Acquittal Register to keep proper records of all
the duty travel
advances taken. I also noted that travel and accommodation expenses
amounting to
K825,230 were never acquitted. It is a requirement under Financial
Management
Manual, Part 20, Paragraph 12.2 that a Financial Delegate/
Authorizing officer shall
maintain a Register of Advances to officers on duty travel. It must
also be noted that it
is a requirement under the Financial Management Manual, Part 20,
Paragraphs 11.2
and 12.10 that cash advanced to officers on overseas official duty
must acquit travel
advances within fourteen (14) days of return from duty travel, and
advances to officers
for domestic duty travels to be acquitted within seven (7) days of
return from duty travel
by submitting the acquittal form. In the absence of Travel Acquittal
Register and the
corresponding travel advance and expense acquittal documents, I was
unable to confirm -
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-
whether the travel and subsistence payments made were for the
intended purposes.Staff Advances – K489,031
Staff Advance Register will enable the Corporation to show how much
money was
advanced and recouped and an advance policy will specify who is
eligible for advance,
penalties on default, interest on advance, and when the advance
should be fully
recouped. In my review of the staff advances, I noted that the
Corporation had not
properly maintained an Advance Register to capture and record all
advances paid and
recouped during the period. I further noted that the Corporation did
not have a staff
advance policy in place. This issue was reported in my prior year
reports but
management is yet to implement my recommendations.-202-
Small and Medium Enterprises
CorporationIn the absence of these such mechanisms, I was unable to verify
the staff advance
balance disclosed in the financial statements and further place
reliance on the controls
surrounding staff advances.Weaknesses in the procurement process
My review of the Corporation’s procurement process revealed the
following
weaknesses and inefficiencies:• Cash payments totaling K356,957 were not supported by proper
acquittals to
confirm whether funds were utilized for their intended
purposes; and
• Payments totaling K50,669 were executed without obtaining
three (3) written
quotations from three (3) different suppliers nor minor
contract agreements
drawn.As a result, I was unable to place reliance on the effectiveness
of the internal controls
surrounding the procurement of goods and services of the -
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-
Corporation for the year then
ended.56.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the financial statements
of the Corporation for the
year ended 31 December 2018 had been submitted and arrangements
were being made
to commence the audit shortly.The Corporation had not submitted its financial statements for
the year ended 31
December 2019 for my inspection and audit.-203-
57. TOURISM PROMOTION AUTHORITY
57.1 INTRODUCTION
57.1.1 Legislation
The Tourism Promotion Authority was established under the
Tourism Promotion
Authority Act 1993. This Act came into operation on 3 June 1993
thereby repealing the
Tourism Development Corporation Act 1990. The Authority
commenced its operational
activities on 1 April 1993.Under the Tourism Promotion Authority Act all assets held by and
obligations and
liabilities imposed on the Tourism Development Corporation which -
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-
related to the
functions of the Authority were transferred to it (the
Authority), and the rest of the
assets and liabilities were transferred to the National Cultural
Committee on 3 June
1993.57.1.2 Functions of the Authority
The principal functions of the Authority are to:
• foster the development of tourism in PNG;
• formulate a tourism policy for consideration by the NEC and to
implement the
tourism policy approved by the NEC;
• promote PNG overseas as a tourist destination;
• co-ordinate the overseas promotional efforts of the PNG
tourism industry;
• encourage the provision, development and expansion of tourism
infrastructure,
facilities and products in PNG; and
• enhance awareness within PNG of the tourism industry and
tourism opportunities.57.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
57.2.1 Comments on Financial Statements
My report to the Ministers under Section 8(4) of the Audit Act
on the financial
statements of the Authority for the year ended 31 December 2018
was issued on 2
March 2020. The report did not contain any qualification.57.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Authority for the year
ended 31 December 2018
was issued on 2 March 2020. The report contained the following
matters:-204-
Tourism Promotion Authority
Other Taxes – K129,696
During my review of the Other Taxes Account, I noted that the
Authority did not remit -
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-
the Other Taxes on time to Internal Revenue Commission. I further
noted that the
Authority also attracted penalty fees for late payment of Group Tax.
I drew this matter
to the attention of the management and the management responded to
my observation
as follows:“It is to be noted that the 10 % business withholding of K31,500
taxes was settled in
2014 but was returned as the Internal Revenue Commission claimed it
could not
correspond files with the payment. These taxes remain unpaid up to
date of audit. We
will settle these taxes in 2020 and provide copies of the same
during the 2019 on site
audit.”Travel Acquittal Register
My review of the travel and subsistence expenses revealed that the
Authority has not
fully maintained the Travel Advance/Acquittal Register as required
under Financial
Management Manual (Part 20) I noted that the travelling officers
have not fully
acquitted their travel advances by attaching all source documents
such as the hotel and
hire car receipts, boarding passes and ticket butts.It is a requirement as per the Financial Management Manual Part 20,
paragraph 11.2
that cash advanced to officers travelling overseas on official duty
travel must acquit
travel advances within 14 days of return from duty travel. At the
same time Part 20,
paragraph 12.10 of the Manual stipulates that advances to officers
for domestic duty
travels to be acquitted within 7 days of return from duty travel by
submitting an
acquittal form and documents. I drew this matter to the attention of
the management
and the management responded as follows:“We will ensure that all staff on duty travels acquit within
fourteen (14) days for any
overseas duty travels and seven (7) days for any domestic duty
travels. We will continue
to maintain the acquittals register but a more up to date register
including a separate
acquittal file for ease of access during audit.”Consultancy Payments
-
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-
During my review on consultancy payments, I noted that consultancy
agreements or
terms of references were not attached to payment vouchers. In the
absence of the
contract agreements, I was unable to verify the basis on which the
consultancy
payments were made to the consultants. I brought this issue to the
attention of the
management and management responded as follows:“We will ensure we comply with this requirement going forward.”
-205-
Tourism Promotion Authority
57.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Authority had submitted
its financial
statements for the year ended 31 December 2019 for my inspection
and audit and
arrangements were being made to commence the audit shortly. -
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-
-206-
58. UNIVERSITY OF GOROKA
58.1 INTRODUCTION
58.1.1 Legislation
The University of Goroka was established under the University of
Goroka Act 1997.
This Act came into operation on 1 January 1997.Under this Act, the Goroka Campus of the University of Papua New
Guinea was
transferred to the University of Goroka together with all staff
and students, buildings
and grounds, equipment, teaching and research facilities, and
other assets and liabilities
both within and outside the Campus.58.1.2 Objectives of the University
The objectives of the University are dedicated to the pursuit,
advancement and
dissemination of knowledge, understanding and wisdom; the paying
of particular
attention to the human resource development and other
development needs of PNG;
and endeavouring to achieve academic and professional excellence
to meet those needs
through teaching, research and community service.58.1.3 Powers of the University
The University shall have the power to:
• grant such degrees as are authorised by the Statutes and such
diplomas,
certificates or other academic awards as it determines;
• provide instruction and facilities for study, education and
research to persons -
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-
registered as preparing for degrees, diplomas, certificates
or other awards of the
University;
• provide facilities for extramural study and continuing
education to persons,
whether members of the University or not, in such fields and
in such manner as
the University may from time to time determine;
• co-operate in pursuance of any of the objectives of the
University with any other
bodies or persons to enter into agreements authorised by
Statute with institutions
for their affiliation with or incorporation into the
University;
• subject to the Salaries and Conditions Monitoring Committee
Act, to appoint
academic, administrative and other staff on such terms and
conditions of service
as the University may determine;
• provide for promoting the health and general welfare of the
students of the
University, including the establishment and supervision of
residence;-207-
University of Goroka
• regulate and enforce discipline among the employees and
students of the
University by such measures as the University may determine;
• cancel, annul or revoke any act done in the exercise of these
powers; and
• do all such other acts or things as may be done under the
provisions of this Act or
these powers or as may be conducive to the exercise of the
attainment of any of
the objectives of the University.58.1.4 Subsidiaries of the University
The University has two Subsidiary Companies, Unigor Consultancy
Limited and
Unigor Humi Catering Limited which were incorporated under the
Companies Act.
Comments in relation to these Companies are contained in
paragraphs 58A and 58B of
this Report respectively.58.2 STATUS OF FINANCIAL STATEMENTS
-
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-
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
University for the year ended 31 December 2017 had been completed
and the
management letter issued on 11 December 2018. The management
responses were
being awaited to finalise the audit report.The University had not submitted its financial statements for the
years ended 31
December 2018 and 2019 for my audit and inspection.-208-
58A. UNIGOR CONSULTANCY LIMITED
(Subsidiary of the University of Goroka)58A.1 INTRODUCTION
Unigor Consultancy Limited is 100% owned by the University of
Goroka. It was
incorporated on 29 March 2000 as a consultancy company under
the Companies Act.58A.1.1 Objectives of the Company
The Company’s objectives are to:
• advance, promote, assist and encourage the educational
-
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-
purposes of the
University through;‒ short term programs for and on behalf of the University
tailored to the needs
of clients; and
‒ research, consultancy and publication of all educational
materials for
commercial purposes;• conduct or undertake any other business activity both within
and outside of
PNG; and
• expand and diversify business activities to maximise profits
and to promote the
interest of the Shareholder from time to time.58A.1.2 Function of the Company
The core function of the Company is to provide services in four
key areas:• professional consultancy services, teaching and dissemination
of knowledge;
• merchandising of textbooks, educational supplies and
stationery;
• printing and publication of educational materials, textbooks,
business documents
and all other forms of print material; and
• catering and cafeteria services.58A.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
58A.2.1 Comments on Financial Statements
My reports to the Ministers under Section 8(4) of the Audit Act
on the Company’s
financial statements for the years ended 31 December 2014 and
2015 were issued on
27 April 2020. The reports contained similar Disclaimer of
Opinions, hence, only the
2015 report is reproduced:-209-
Unigor Consultancy Limited
“DISCLAIMER OF OPINION
I do not express an opinion on the accompanying financial statements
of Unigor
Consultancy Limited for the year ended 31 December 2015. Because of -
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-
the
significance of matters described in the Basis for Disclaimer of
Opinion section of
my report, I have not been able to obtain sufficient appropriate
audit evidence to
provide a basis for an audit opinion on these financial statements.BASIS FOR DISCLAIMER OF OPINION
Opening Balances
My report on the financial statements of the Company for the year
ended 31
December 2014 was a Disclaimer of Opinion due to limitation of
scope. My inability
to obtain sufficient accounting records, source documents and
reconciliation in
respect of Investments, Trade Debtors, Cash and Cash Equivalents,
Inventory,
Provision of Annual Leave, Provision of Income Tax, Trade and Other
Creditors had
placed a limitation of audit scope in 2014.As a result, I was unable to perform the necessary procedures to
obtain assurance on
the accuracy and completeness of the balances and further quantify
the effects of such
material misstatements in the opening balances of the aforementioned
accounts that
might have a bearing on the balances reported in the 2015 financial
statements.Cash at Bank – K120,631
My review of the bank reconciliation as at 31 December 2015 revealed
stale cheques
totaling K35,540 dating back to 2012 have been recorded in the
reconciliation
statements. The stale cheques have not been reconciled and adjusted
in the Cashbook
balance. As a result, I was not able to comment on the completeness
and accuracy of
the bank balance reported at year end.Accounts Receivables – K646,644
My review of the accounts receivables revealed that the Company did
not maintain
and update the aged accounts receivable listing and similarly the
individual customer
sub-ledgers. Further, I noted a variance of K403,551 between the
accounts receivable
listing balance of K243,092 and the general ledger balance of
K646,644. As a result, -
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-
I was not able to gain assurance on the completeness, existence,
accuracy and
valuation of the receivable balance disclosed at year end.-210-
Unigor Consultancy Limited
Stock – K309,040
My review of the stock disclosed in the accounts revealed that the
Company had not
maintained an inventory management system to enable the proper
disclosure of the
cost of sales account in accordance with the International
Accounting Standards 2 –
Inventories. Apart from actual stock records, the disclosure of
K309,040 in the
financial statements, was only an estimate of the purchases done
during the year.
Consequently, I was not able to comment on the effectiveness of
controls surrounding
inventory management and further extend my audit procedures to
confirm the
completeness, accuracy and valuation of the inventory balance
disclosed at the year
end.Property, Plant & Equipment – K251,938
The Company disclosed its fixed assets as K251,938 at 31 December
2015. However,
this disclosure was not supported with a Fixed Assets Register and
appropriate
accounting records and supporting documents. Furthermore, there were
no periodic
stock-takes carried out on fixed assets during the year for assets
owned by the
Company. I was unable to perform the required procedures to verify
the
completeness, existence, accuracy and valuation of the fixed assets
and further
comment on the effectiveness of controls surrounding the management
of fixed assets
for the year then ended.Investments in Associates & Joint Ventures – K551,000
-
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-
My review of the Investment accounts revealed that the Company had
investments in
Unigor PNGTIS and Unigor Catering Ltd of K245,000 and K306,000
respectively.
However, during my review, I was not provided with sufficient
documents to
establish whether the investments were properly accounted for using
the equity
method under the IAS 28 Investments in Associates and Joint
Ventures. Consequently,
I was unable to confirm the accuracy and valuation of these
Investments and to further
conclude whether the investment accounts were correctly recorded in
accordance with
the International Financial Reporting Standards.Provisions for Income Tax – K194,292
The Company disclosed provisions for income tax in Note 4 to the
financial
statements without any basis and appropriate supporting documents.
As the balance
was carried over from prior year, I was not able to establish if the
provision was
computed in accordance with Section 275M (1) of the Income Tax Act
1959 (as
amended). Further, I was unable to confirm whether income tax
provisions were
properly accounted for and presented in accordance with the
International Accounting
Standards 12 – Income Taxes. As a result, I was unable to gain
reasonable assurance
over the completeness, existence and accuracy of the provision for
income tax
disclosed in the financial statements as at 31 December 2015.
-211-Unigor Consultancy Limited
Missing Payment Vouchers – K150,272
My review of the operating expenditures revealed that the
Company did not maintain
proper records and accounts. Payments totaling K150,272 were
missing from the
payment voucher files. As a result, I was unable to extend my
audit procedures to
gain assurance over the completeness, accuracy and authenticity
of these payments.
The Company had breached Section 188 of the Companies Act 1997
which requires
the Company to keep proper accounts and records of its
transactions and affairs.” -
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-
58A.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Company for the years
ended 31 December
2014 and 2015 were issued on 27 April 2020. The reports
contained similar
significant matters, hence, only the 2015 report is reproduced:Board Meeting Minutes
The Company did not maintain and provide minutes of the Board
meetings for my
audit and inspection. As a result, I was not able to comment and
conclude on whether
there were proper proceedings held and whether all major
transactions and decisions
reached were adequately deliberated and in the best interest of
the Company.I brought this issue to the attention of management and was
advised that corrective
action has been implemented under the current Board and
Management.Staff Capacity and Competency
My review revealed that the Company lacked qualified staff with
skills in accounting
and information technology. I further observed that there were
no proper segregation
of duties in the bank reconciliation, asset management and
payroll/expenditure
functions. I reiterated that present weak internal control
environment and limited
segregation of duties in key control areas may increase the risk
of material
misstatements in financial reporting.I recommended the management to ensure that competent personnel
are employed to
cover key processes and/or appropriate training and development
programs are
facilitated to fill the competency gap. The management responded
as follows:“The new Management realised the lack of segregation of
accounting staff by
functions by outgoing Accountant who was also acting Managing
Director – a one-
man- operator. The Company has engaged Finance Officers since
2017 who are -
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-
considered capable to carry out the operations and delegated
tasks into the future.
The staff currently on hand are committed to the Company and
willing to learn which
supports Management plan to further invest to upskill them.”
-212-Unigor Consultancy Limited
Preparation of Financial Statements
The Company’s financial statements were not prepared in a timely
manner in
accordance with Section 179 of the Companies Act 1997. I noted that
the Unigor
Consultancy Limited’s management prepared the Company’s financial
statements for
the year ended 31 December 2015 in August 2019.Consequently, the Company had failed with the Companies Act 1997
which requires
the financial statements to be prepared within five months after the
financial year of
the balance date.Tax Remittance to the Internal Revenue Commission
My review of the Company’s tax obligations revealed the following:
• The Company did not remit the 2015 group tax to the IRC on a
timely basis as
required under Section 299G of the Income Tax Act 1959;
• The Company did not remit its Company income tax returns of the
prior years
as well as the income tax returns for the 2015 financial year
within the time-
frame required by the Income Tax Act 1959 which remained
outstanding as at
31 December 2015; and
• The Company did not remit GST returns for the 2015 financial year
on time
including GST returns from prior years as required by Section
63-66 of the
Goods and Services Tax Act 2003.The Company had failed to comply with requirements of the Companies
Act 1997,
the Income Tax Act 1959 and the Goods and Services Tax Act 2003. I
reminded the
management on the consequences of non-compliance and recommended for
them to
ensure that the Company complies with relevant statutory provisions. -
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-
Lack of Proper Accounting Records
The Unigor Consultancy Limited did not maintain proper accounting
records of its
transactions during the 2015 financial year. Due to lack of proper
record keeping, I
was unable to perform the necessary audit procedures to determine
the authenticity
of the amounts disclosed in the financial statements. The Company
had breached
Section 188 of the Companies Act 1997 which requires the Company to
keep proper
accounts and records of its transactions and affairs.This issue had been raised in my prior year reports and management
assured me that
corrective action would be taken to clear all issues that had not
been resolved since
2013.-213-
Unigor Consultancy Limited
Staff Advances
The other debtors included advance payments for staff rental and
accommodation as
well as general staff advances. My review revealed that the
Company did not maintain
a proper Advances Register and an approved advance policy to
guide the Company
in the approval, disbursements, recovery and general
administration of the advances
made to staff. I was therefore, unable to place reliance on the
controls surrounding
staff advances and further confirm the accuracy and correctness
of the balance
disclosed as K191,871 at year end.I recommended the management to have an advance policy in place
and an Advance
Register to keep track of advances disbursed.Management took note of my recommendations and advised that
corrective actions
would be taken to rectify this issue.Staff Personnel Files
My examination of personnel records revealed that the Company
-
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-
did not maintain
staff personnel files. Details of salary and leave history, and
promotion and
increments along with other personnel data were not available
for audit inspection
and verification. Consequently, I was unable to validate whether
salaries and
allowances paid to employees were based on proper employment
contracts and
appointment letters and further compute employee provisions
disclosed in the
financial statements. Similarly, I was unable to confirm whether
the dependents
claimed for tax rebates and leave fares were legitimate.Consultancy Payments
The Company engaged several consultants during the year for
physical planning and
asset management for the year under review. However, the signed
contract
agreements of four (4) contractors and details of work they
performed were not made
available for my verification. I was unable to establish whether
consultancy expenses
were incurred in accordance with valid agreements.58A.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company had not
submitted its financial
statements for the years ended 31 December 2016, 2017, 2018 and
2019 for my audit
and inspection.-214-
58B. UNIGOR HUMI CATERING LIMITED
58B.1 INTRODUCTION
58B.1.1 Legislation
Unigor Catering Limited was incorporated under the Companies
Act 1997 on the
14 December 2010. A total of 600,000 shares (100 ordinary
shares and 599,900
preference shares) had been issued at K1 each. The Unigor -
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-
Consultancy Limited
acquired 306,000 shares (51%) and the remaining 294,000
shares (49%) acquired
by Humilaveka Food Company Limited.On 16 February 2013, the Company changed its name from
Unigor Catering to
Unigor Humi Catering Limited.58B.1.2 Objectives of the Company
The primary objective of the Company is to give effect to
the Joint Venture
Agreement between the shareholders for the purpose of
providing catering services
to students of the UOG at its main campus at Goroka as a
commercial venture. The
Company may conduct or undertake any other business
activities in the country
from time to time.58B.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the financial
statements of the Company for
the years ended 31 December 2011, 2012, 2013, 2014, and 2015
had been
submitted and arrangements were being made to commence the
audit shortly.The financial statements for the years ended 31 December
2016, 2017, 2018 and
2019 had not been submitted for my inspection and audit.-215-
59. UNIVERSITY OF NATURAL RESOURCES AND
ENVIRONMENT
59.1 INTRODUCTION -
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-
59.1.1 Legislation
The University of Vudal was established under the University of
Vudal Act 1997. This
Act came into operation on 1 January 1997 and became operative
in the same year. The
University changed its name to University of Natural Resources
and Environment in
2008 after the enactment of the University of Vudal (Amendment)
Act 2009.Under the Principal Act, the Vudal University College Campus of
the PNG University
of Technology was transferred to the University of Vudal with
all staff and students,
buildings and land, equipment, teaching and research facilities,
and other assets and
liabilities both within and outside the College Campus.Although the new entity was created by the Act in 1997, the
finance and accounting
function was transferred to the University of Vudal only on 1
January 1998.59.1.2 Objectives of the University
The Act states the objectives of the University as: dedication
to the pursuit,
advancement and dissemination of knowledge, understanding and
wisdom; paying
particular attention to the human resource development and other
development needs
of PNG; and endeavouring to achieve academic and professional
excellence to meet
those needs through teaching, research and community service.59.1.3 Powers of the University
Section 6 of the Act enshrines the University as having the
power to:• grant such degrees as are authorised by the Statutes and such
diplomas,
certificates or other academic awards as it determines;
• provide instruction and facilities for study, education and
research to persons
registered as preparing for degrees, diplomas, certificates
or other awards of the
University;
• provide facilities for extramural study and continuing
education to persons,
whether members of the University or not, in such fields and
in such manner as -
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-
the University may from time to time determine;
• co-operate in pursuance of any of the objectives of the
University with any other
bodies or persons to enter into agreements authorised by
Statute with institutions
for their affiliation with or incorporation into the
University;-216-
University of Natural Resources and
Environment• subject to the SCMC Act appoint academic, administrative and
other staff on such
terms and conditions of service as the University may
determine;
• provide for promoting the health and general welfare of the
students of the
University, including the establishment and supervision of
residences;
• regulate and enforce discipline among the employees and
students of the
University by such measures as the University may determine;
• cancel, annul or revoke any act done in the exercise of these
powers; and
• do all such other acts or things as may be done under the
provisions of this Act or
these powers or as may be conducive to the exercise of the
attainment of any of
the objectives of the University.59.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
University for the year ended 31 December 2015 had been
completed and the
management letter was issued on 27 November 2019, and awaiting
the management
letter responses to finalise and issue the audit reports.The University had not submitted its financial statements for
the years ended 31
December 2016, 2017, 2018 and 2019 for my inspection and audit. -
Page 335 of 475
-
-217-
60. UNIVERSITY OF PAPUA NEW GUINEA
60.1 INTRODUCTION
60.1.1 Legislation
The University of Papua New Guinea was established under the
University of Papua
New Guinea Act (Chapter 169).60.1.2 Objectives of the University
The objectives of the University include the:
• provision of facilities for study and education;
• giving of instruction and training in all such branches of
learning as are provided
for by the Statutes;
• aiding by research and other means the advancement of
knowledge and its
practical application;
• conferring, after examination, of the degrees of Bachelor,
Master and Doctorate
and such other degrees, diplomas, certificates and other
academic honours as are
authorised by the Statutes;
• provision of facilities for university education throughout
the country by the
affiliation of educational institutions, and by the
establishment of tutorial classes, -
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-
correspondence classes, university extension classes, and
vacation classes, and by
such other means as the Council thinks appropriate; and
• liaison, collaboration and reciprocation with other
universities and institutions of
learning, within or outside the country, in the provision of
facilities, the
recognition of degrees and other status, and the interchange
of staff, students and
information, and in any other way not inconsistent with its
status as the
University.60.1.3 Subsidiaries of the University
The University has two subsidiaries; Unisave Limited and
Univentures Limited which
were incorporated under the Companies Act. Comments in relation
to the subsidiaries
are contained in paragraphs 60A and 60B of this Report.60.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and examination of the
University’s financial
statements for the year ended 31 December 2015 was in progress
for more than two
years. The audit has been delayed due to lack of co-operation
from management.-218-
University of Papua New Guinea
The University had submitted its financial statements for the years
ended 31 December
2016 and 2017 for my inspection and audit. However, due to lack of
co-operation from
the management, the commencement of these audits were being delayed.The University had not submitted its financial statements for the
years ended 31
December 2018 and 2019 for my inspection and audit. -
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-
-219-
60A. UNISAVE LIMITED
(Subsidiary of University of Papua New Guinea)60A.1 INTRODUCTION
60A.1.1 Legislation
Unisave Limited was incorporated under the Companies Act on 18
October 2011.
The incorporation of Unisave Limited was as a result of a
Memorandum of
Agreement (MOA) signed between Univentures Limited, (a company
100% owned
by University of PNG) and S.I.T Co. Limited of the Republic of
South Korea.
60A.1.2 Objective of the Company
The parties to this MOA shall endeavor to create mutual -
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-
commercial benefits through
assembly and sale of Information Communication Technology (ICT)
products and
various projects which have price and quality competitiveness
compared with other
organisations in PNG. This will be achieved by combining of
infrastructures and
marketing power in PNG provided by Univentures and the technical
know-how and
successful long-term various experience in Korean ICT market
provided by S.I.T.
The main business of the Company is to assemble TVs, PCs,
laptops, monitors and
other items which can be included under mutual consent, such as
systems integration,
systems administration and maintenance in information
technology.60A.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the financial statements
of the Company for the
years ended 31 December 2012, 2013, 2014, 2015, 2016, 2017, 2018
and 2019 had
not been submitted for my inspection and audit, despite numerous
reminders.-220-
60B. UNIVENTURES LIMITED
(Subsidiary of University of Papua New Guinea)
60B.1 INTRODUCTION60B.1.1 Legislation
Univentures Limited was incorporated under the Companies Act on
2 August 2007.
The Company has a total issued capital of one ordinary share of
K1.00 and is wholly -
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owned by the University of Papua New Guinea.
60B.1.2 Functions of the Company
The activities of the Company are to sell and print books in the
Bookshop and the
Printery respectively, as a business arm of the University of
Papua New Guinea.60B.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company had not
submitted its financial
statements for the years ended 31 December 2012, 2013, 2014,
2015, 2016, 2017,
2018 and 2019 for my inspection and audit despite numerous
reminders from my
Office.-221-
SECTION B
NATIONAL GOVERNMENT
OWNED COMPANIES -
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-
-223-
61. FOREWORD
This Section of my Report deals with Companies in which the
Government of PNG
holds more than 50% of the Issued Share Capital. On 26 January
1983, the NEC’s
Decision No. 12/93 expanded my responsibilities to include the
audit of National
Government Owned Companies and subsidiaries thereof. The audit
of Government
Owned Companies is also conferred to me through Section 3 of the
Audit Act.The auditing and reporting requirements of these companies are
stipulated under
Section 200 of the Companies Act, which includes:(a) The work done by the auditor;
(b) The scope and limitations of the audit;
(c) The existence of any relationship the auditor has with the
Company;
(d) Whether all information and explanations required have been
obtained;
(e) Whether in the auditor’s opinion, proper accounting records
have been kept;
(f) Whether in the auditor’s opinion, the financial statements
comply with generally
accepted accounting practice and, where they do not, the
respects in which they
fail to comply; and
(g) Whether in the auditor’s opinion, the financial statements
give a true and fair view
of the matters to which they relate and, if not, the respects
in which they fail to
give such a view.My audit of Government owned Companies is conducted in
accordance with the
requirements of the Companies Act. Under Section 8 (2) of the
Audit Act, I am also
expected to report to the Minister for Finance, the matters of
significance to do with the
accounts and records, the financial transactions and the assets
and liabilities. The
management of the Company are also informed of the same.Comments in relation to the companies are detailed in paragraphs
62 to 77. -
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-
-225-
62. AIR NIUGINI LIMITED
62.1 INTRODUCTION
62.1.1 Legislation
Air Niugini Limited was incorporated under the Companies Act. It
was formed to be
the successor company of the National Airline Commission,
following the NEC
decision of 20 June 1996 to corporatise the National Airline
Commission in accordance
with Section 45 of the National Airline Commission Act.As a result of the NEC decision, all assets, liabilities, staff
and operations of the
National Airline Commission were transferred at the written down
book value (as at 31
August 1996) to Air Niugini Limited. Air Niugini Limited is a
100% State Owned
Company.62.1.2 Objectives of the Company
The principal objectives of the Company are to:
• carry on the business of airline operators, general carriers,
freight forwarders and
forwarding agents, warehouse operators, shippers and general
agents, ship owners
charterers, hospitality and general traders, stevedores, cool
store operators, flight
contractors, carriers by land, air and water, insurers and
insurance brokers and -
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other business which may be usefully carried on in connection
with such business;
• provide transport service, carrier freight transport,
courier, taxi truck, light or
heavy haulage and delivery services which involves the use of
aircraft, railways,
ship, road vehicle or any other means of conveyance by land,
road, railway, sea,
river, canal, water or air to carry and convey passengers,
mails, containers,
packages, parcels, bulk commodities, goods, merchandise,
livestock and produce
and property of every description;
• carry, collect, receive, load, unload, store, consign,
distribute, transfer and deliver
property of every description by any mode of transportation;
and
• carry passengers by air, road, rail, land, sea or water and
to operate any taxi service
and to obtain any necessary licences for such purposes.62.1.3 Subsidiaries of the Company
The Company has four (4) subsidiary companies. Comments in
relation to the
subsidiary companies are contained in paragraphs 62A, 62B, 62C
and 62D of this
Report.-227-
Air Niugini Limited
62.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the years ended 31 December 2016, 2017 and 2018 were
in progress.The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit. -
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-228-
62A. AIR NIUGINI CARGO LIMITED
(Subsidiary of Air Niugini Limited)62A.1 INTRODUCTION
62A.1.1 Legislation
Air Niugini Cargo Limited was formerly known as Kitoro No. 94
Limited, which was
incorporated on 23 March 2012 under the Companies Act. On 12
December 2016, the
former name was changed to its current business name.The Company formally commenced its operations in January 2017.
62A.1.2 Objective of the Company
The primary objective of the Company is to be a leader in cargo
-
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services and products
of Air Niugini Limited and Link PNG Limited (subsidiary company
of Air Niugini)
within PNG and over the extensive international routes with
other leading global
service providers.
.
62A.2 STATUS OF FINANCIAL STATEMENTSAt the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2017 and 2018 were
in progress.The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.-229-
62B. AIR NIUGINI PROPERTIES LIMITED
(Subsidiary of Air Niugini Limited)62B.1 INTRODUCTION
62B.1.1 Legislation
Air Niugini Properties Limited, formerly known as Kitoro No. 95
Limited was
incorporated on 23 March 2012 under the Companies Act. The
Company’s name
change formally came into effect on 24 January 2019 and
commenced operations in
December 2018. -
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62B.1.2 Objective of the Company
Primary objective of the Company is to grow Air Niugini’s
property portfolio in terms
of property investment, development and improvement of current
residential and
commercial properties and acquisition of new Land and Buildings.62B.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection of
the accounts and records and the examination of the financial
statements of the
Company for the year ended 31 December 2018 was in progress.The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.-230-
62C. BUSINESS TRAVEL CENTRE LIMITED
(Subsidiary of Air Niugini Limited)62C.1 INTRODUCTION
62C.1.1 Legislation
Business Travel Centre Limited was established on 27 October
2016. The Company
was formerly known as Kitoro No. 98 Limited incorporated on 14
July 2014 under the -
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Companies Act. It is a wholly owned subsidiary of Air Niugini
Limited and
commenced its operations effective from 16 December 2016.62C.1.2 Objective of the Company
The primary objective of the Company is to expand the airlines’
revenue base from
that of selling purely Air Niugini and Link PNG, to selling full
suite of PX products
in addition to other airlines where traditionally PX was unable
to sell/ticket, hence be
the complete travel solution provider for all airlines,
ancillary services, and “All
Things Travel.”62C.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2017 and 2018 were
in progress.
The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.-231-
62D. LINK-PNG LIMITED
(Subsidiary of Air Niugini Limited)62D.1 INTRODUCTION
-
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62D.1.1 Legislation
Link-PNG Limited came into existence on 26 June 2014 after the
name changed from
PNG Link Limited. The Company was incorporated under the
Companies Act on 4
May 2010 and was acquired by Air Niugini Limited from Steamships
Limited on 5
August 2014 for a consideration of K100.Link-PNG Limited is a 100% subsidiary of Air Niugini Limited.
The Company
commenced the business of air travel for the PNG Domestic
markets since November
2014.62D.1.2 The Objective of the Company
The key objective of the Company is to be the leading domestic
airline in Papua New
Guinea, delivering safest and cost effective air travel to the
communities.62D.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2016, 2017 and 2018
were in progress.The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.— 232 —
-
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63. BEMOBILE LIMITED
63.1 INTRODUCTION
63.1.1 Legislation
The Company was incorporated under the Companies Act on 4 March
2008. As a result
of PNG Government deregulating mobile telephony, Telikom PNG
through its mobile
arm/service invested in Bemobile Limited partnering with a group
of investors who
owned 51% equity in the business. In 2014, Bemobile entered into
a partnership with
Vodafone which gave Bemobile the right to use of “Vodafone”
branding thereby
creating the Bemobile-Vodafone brand in PNG.In October 2016, Kumul Consolidated Holdings (KCH) bought off
the minority
shareholding from Capital Way and Asian Development Bank (ADB)
making
Bemobile a fully State Owned Enterprise.63.1.2 Objectives of the Company
The objectives of the Company are to provide excellent mobile
voice and data services
to the citizens of PNG.63.1.3 Subsidiary of the Company
The Company has a subsidiary, Bemobile (Solomon Islands)
Limited. Comments in
relation to this subsidiary are contained in paragraph 63A of
this Report.63.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the years ended 31 December 2018 and 2019 were in
progress. -
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-233-
63A. BEMOBILE (SOLOMON ISLANDS) LIMITED
(Subsidiary of Bemobile Limited)63A.1 INTRODUCTION
63A.1.1 Legislation
The Company was registered under the Solomon Islands Companies
Act on 26
January 2010 as Bemobile (Solomon Islands) Limited.The Company is a wholly owned subsidiary of Bemobile Limited.
63A.1.2 Objective of the Company
The objective of the Company is to be a leader in
Telecommunication offering high-
speed data, reliable voice and SMS across the Solomon Islands.63A.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2018 and 2019 were
in progress. -
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-234-
64. KUMUL AGRICULTURE LIMITED
64.1 INTRODUCTION
64.1.1 Legislation
This Company was incorporated under the Companies Act on 13
November 2017 as a
wholly owned subsidiary of Kumul Consolidated Holdings Limited
(KCHL).On 15 August 2018, in accordance with NEC Decision No. 221/2018
dated 2 August
2018, the Company was established as a fully State Owned
Enterprise through which
Kumul Consolidated Holdings Limited holds the State’s interest
in all current and
future agricultural assets, projects and investments.The Company also took over the shares and ownership interest in
Livestock
Development Corporation Limited from Kumul Consolidated Holdings
Limited and the
Department of Agriculture and Livestock including the functions,
management and
assets.64.1.2 Objectives of the Company
The Company’s principle activities are to:
• provide assistance to persons for purposes of primary
production, for the
establishment, development or acquisition of industrial or
commercial
undertakings;
• provide advice and assistance with a view to promoting the
efficient organisation
and conduct of primary production;
• act as an agent for the Government in relation to any matter
within the functions
of the Company in the case of industrial or commercial
undertakings;
• serve the rural population via the management and
rehabilitation of plantations; -
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and
• exporting of all cash crops in order to improve foreign
exchange of the country.64.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
64.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the Company’s
financial statements for the year ended 31 December 2018 was
issued on 24 June 2020.
The report contained an Adverse Opinion.-235-
Kumul Agriculture Limited
“ADVERSE OPINION
Because of the significance of the matters described in the Basis
for Adverse Opinion
paragraphs, I have obtained sufficient appropriate audit evidence,
and conclude that
misstatements, individually or in the aggregate, are both material
and pervasive to
provide a basis for an adverse opinion on the financial statements
of the Kumul
Agriculture Limited (KAL) for the year ended 31 December 2018.BASIS FOR ADVERSE OPINION
Cash and Cash Equivalent – K1,677,826
My request for independent confirmation of the bank balances as at
31 December 2018
from the respective banks were not provided for my verification.
Accordingly, I could
not satisfy myself as to whether all the bank accounts and interest
bearing deposits
(IBDs) balances were completely and accurately taken up and
disclosed in the financial
statements as at the year end.GST Receivables – K416,470
Note 12 to the financial statements included GST receivables of
K416,470 as at the
year end. No statement from the Internal Revenue Commission (IRC) -
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-
was provided
for my review. Also, reconciliation between the general ledger
balance and IRC
statement was not prepared. As a result, I was unable to satisfy
myself as to the
completeness, accuracy and recoverability of the GST receivables
amount reported as
at 31 December 2018.Investment in Joint Arrangements – K24,100,000
The Company’s total Investment in Joint Arrangements reported at
K24,100,000 in the
Statement of Financial Position was based on values provided by
Kumul Consolidated
Holdings (KCH). Note 14 to the financial statements disclosed
Central Dairy Ltd and
Sepik Agro Industries Ltd being the Joint Venture companies in which
KAL holds
joint interest.However, audited financial statements of the Joint Ventures
companies were not
available for my review. Accordingly, I was not able to determine
the appropriateness
of the measurement and valuation recorded in the financial
statements as at 31
December 2018, and related impacts this might have on the operating
results and cash
flows of the Company for the year ended 31 December 2018.Investment in and Consolidation of Subsidiaries – K16,011,430
The Company’s total Investment in Subsidiaries reported at
K16,011,430 in the
Statement of Financial Position was based on values provided by
Kumul Consolidated-236-
Kumul Agriculture Limited
Holdings (KCH). Note 15 to the financial statements disclosed Dylup
Estates and Cape
Rodney Rubber Ltd being the subsidiary companies of KAL.
However, the audited financial statements of the subsidiaries were
not available for
my review. As such, the Group accounts had not been consolidated as
required by the
International Financial Reporting Standard (IFRS) 10. Consequently,
I was unable to
determine the impacts the consolidation of the Group accounts might
have on the -
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-
Statement of Financial Position and operating result and cash flows
of the Company
for the year ended 31 December 2018.Accounting for Biological Assets
I noted that KAL made no consideration of its biological assets
including bearer plants
and livestock. KAL as an agriculture focussed entity dealing with
livestock and crops
and their valuations requires compliance with International
Accounting Standards
(IAS) 41, Biological Assets for their accounting treatments. The
biological assets were
neither reported nor disclosed which is a departure from the
requirements under the
IAS 41 and promotes the financial statements as incomplete.Work In Progress – K1,251,631
Note 16 to the financial statement included Work in Progress (WIP)
at a value of
K1,251,631. I could not obtain all the relevant supporting
documentations including
project work plans, report on conduct of project feasibility
studies, project budget, and
monitoring and evaluation reports on the respective agriculture
projects in progress. In
addition, I noted the following:• K369,487 was paid to Arokara Coffee Limited being payment for
coffee
rehabilitation project. However, there was no agreement available
for my review
to ensure legitimacy of the payment or to examine the economic
benefits KAL
expects to realise in future;• A land identified as Nadzab Portion #2 in Lae was recorded at
K420,000 while
the settlement statement provided indicated its valuation at
K900,000 with
K475,000 paid to date. I also noted that there was no existence of
legal sale and
purchase agreement. Further, a valid title was not available for
my verification;
and• Solomon Tropical Products Oil Ltd was paid K107,824 as
consideration for
Coconut Oil Crushing Mill sets. Documentary trail of the
transactions indicated
that this payment was made based on pro-forma invoice of US
$31,000. An -
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-
amount of K30,000 was paid to Commodity Management Partners
Limited
(CMPL), a Company owned by the Chief Executive Officer (CEO).
Subsequently, CMPL reimbursed K19,623 to KAL and the balance of
K10,377
was transferred to the personal bank account of the owner of the
company
(CMPL).-237-
Kumul Agriculture Limited
Due to the shortcomings and discrepancies noted above, I was
unable to comment on
the completeness, accuracy and soundness of the work in progress
and whether the
agriculture project related expenditures were properly procured
in the best interest of
the Company.Group Tax (Salary and Wages Tax) – K445,991
Note 17 to the financial statements included Group Tax payables
at a value of
K445,991 as at the year end. No statement from the Internal
Revenue Commission
(IRC) was provided for my review. Also, reconciliation between
the general ledger
balance and IRC statement was not prepared. As such, I was
unable to comment on
the completeness, accuracy, and validity of the Group Tax
payables balance reported
in the financial statements as at 31 December 2018.Operating Expenditures – K8,004,796
I was unable to obtain sufficient and appropriate audit evidence
to ensure validity and
appropriateness of the payments made under the following
expenditure items:• Personnel Expenses – Note 5 to the financial statements
disclosed personnel
expenses at K4,302,764. The amount comprised of costs of
executives valued
K2,657,571 or 62% of the total payroll costs. I was not
provided the necessary
documents including employment contract of the executive
managements for
verifying the validity and appropriateness of the payments;• Consultancy Fees – Note 6 to the financial statements
-
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disclosed consultancy fees
at K1,931,743. I was not provided the necessary documents
including consultancy
agreements for verifying the validity and appropriateness of
the payments; and• Board Expenses – Note 10 to the financial statements disclosed
Board meeting
expenses at K469,373. I was not provided the necessary
documents including
Gazettal Notice approving appointment of the Board members or
letters of
appointment of the Directors setting out terms and conditions
for payment of their
stipends and sitting allowances.Due to the lack of documentary evidences and discrepancies noted
above, I was unable
to comment on the completeness and accuracy of the total
operational expenditure
amount of K8,004,796 as reported in the financial statements for
the year ended 31
December 2018.”64.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Company for the year
ended 31 December 2018
was issued on 24 June 2020. The report contained the following
observations:-238-
Kumul Agriculture Limited
Annual Budget and Business Plans
The Company had no budget for the year under review to manage its
income and
expenditures. The State provided K10 million to finance the
commencement of KAL’s
operations during the year. In addition, KCH paid a management fee
of K771,402 and
a further K159,083 was generated internally through sale of crops.
Hence, total funds
available to KAL was K10.93 million. Out of the total available
funds, K9,270,549 was
spent during the year without a budget.I advised the management to formulate business plan and annual
budget for approval -
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-
by the Board. The management responded as follows:
“We agree NPMA as a start
business goals.”
Board Papers
The Board of KAL held two (2) meetings during the year. Although
minutes of the
meetings were kept, supporting board papers including financial
reports, CEO’s
reports, risk assessment reports and business strategy papers were
not provided for my
review.I advised the management that the Board members should receive well-
documented
board papers to allow them opportunities to read through and be
informed of the state
of affairs of the business in order for them to discharge their
responsibilities with due
care, skill and diligence. The management’s respond was as quoted:“The Company’s corporate governance structure has been reviewed, and
the roles and
functions of the Board and of management are now clearly
established. The Board is
now approving all organisational structures, policies and procedures
and managementadvisers etc. with suitable cost/benefit analysis, opti
the boards’ independent review and consideration.”Delegation of Authority
KAL had no documented Delegation of Financial Authorities during the
year under
review. As there was no clearly defined financial authority limit,
the CEO alone had
the overwhelming financial authority to pre-commit. As a result,
transactions worth
K10,027,251 were approved by the CEO with insufficient source
documents being
retained to support those payments.-239-
Kumul
Agriculture Limited -
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-
I recommended KAL to document and implement a Delegation of
Authority as a matter
of urgency to ensure the CEO, Executives and Staff perform their
responsibilities within
the limit of authority delegated to them.
The management responded as follows:“In 2019 KAL received a documented Delegation of Authorities from
Kumul
Consolidated Holdings whereby our Board and the Chief Executives and
Staff to
comply with.”Segregation of Duties
I noted that there was a lack of segregation of duties during the
year under review. The
CEO had been instructing staff in his comfort to take actions on
various transactions
which needed participation of different officers. Some of the
activities performed which
required segregation of duties included, recruitment of staff and
executives, execution
of consultancy contracts, conduct of project investigations and
approval of payments.I recommended the management to institute segregation of duties
within all of its
operations to strengthen the internal control function and assist
management to ensure
the management of the business with a framework and sound controls.
The management
responded as quoted below:“Current management has instituted segregation of duties within all
of its operations
to strengthen the internal control function and avoid failures of
the past.”Procurement Processes
I noted that KAL had not implemented the standard “value for money”
procurement
process. Accordingly, a significant number of payments were made
under the CEO’s
instructions and directives. I recommended the management to
implement procurement
policies and procedures to ensure purchase of goods and services are
of value for money
and to avoid wasteful uneconomical expenditure. The management
responded as
follows: -
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-
“The internal control environment over procurement process including
obtaining
quote, raising purchase requisition form, raising of payment
requisition form,
approvals for payments, signing of cheque, cashing and dispatching
cash and
recording processes has been reviewed and improved.
Management has drafted (WIP stage) a procurement policy and
procedures to ensure
procurement process results in value for money purchase of goods and
services to avoid
the risks.”-240-
Kumul Agriculture Limited
Principal Activities of KAL
My review of the NEC decision to establish KAL revealed that the
objectives of the
company are to pursue large scale agriculture projects. However, the
expenditure
incurred by the company during the year indicated the entity pursued
a wide range of
small-scale projects which did not satisfy the definition of large-
scale project. I advised
the Company to develop a practical strategic plan that aligns with
its corporate
objectives and enforce focused operations towards achievement of the
corporate
objectives. Expenditures incurred on small-scale projects included:Project Description Amount (K)
Arakara Plantation – Rehabilitation 396,487
Mount Hagen Agriculture College-Coffee Nursery107,824
MJ & RM Martin @ Cape Rodney Buying Rubber 48,980
Aroma Coconut Processing Facility 45,000
Coffee Nursery in Lae 20,000
Mt Hagen Coffee Fertilizer 15,000
Aran Moringa Plantation 10,000
Baiyer River Project 2,000
Coldbran Plantation 2,426
Total Projects 620,717Other Anomalies on Purchase, Usage and Register of Motor Vehicles
I noted a motor vehicle with a cost value of K100,000 was recorded
in the asset register -
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-
of KAL. However, the vehicle was registered in the name of Commodity
Management
Partners Limited (CMPL), a company owned by the CEO.In another instance, on 12 November 2018 KAL purchased a motor
vehicle at a cost of
K75,000 from CMPL. Initially, the vehicle had been hired from CMPL
for the CEO’s
use for a period of 10 months with a monthly rental payment totalled
K86,013. In fact,
KAL paid a total of K151,013 (K75,000 + K86,013) to CMPL.Payroll Procedures and Processing
I noted that the payroll of KAL was prepared by the National
Development Bank
(NDB) who then provided journal entries to KAL for recording in its
books. The details
of the staff, hours they worked and approval for payroll processing
were not supervised
by KAL. I noted staff costs in 2018 was K4,345,857 which was 43% of
the K10 million
funding provided by the State. Further, management were not able to
provide the
summary of pay run and or pay details for the 26 pay periods to
support the amounts
recorded in the books of KAL.-241-
Kumul Agriculture Limited
I advised the management that initial timesheets should be
reviewed and approved by
KAL managers prior to submission for processing. The 26 pay run
summaries must be
supported with timesheets that can validate the amount taken up
in the books of KAL.
The management responded as quoted below:“The payroll timesheets were approved by MD prior to submission
for processing to
NDB payroll. In 2019, KAL has set up its own payroll system and
we are able to I
monitor, control and ensure that staff are contributing fairly
and honestly to the
business and operations of the Company.”Costs of Duty Travels
-
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My review of the duty travels associated with investigation of
various potential
agricultural projects revealed that a total of K770,062 or 8% of
the K10 million State
grant given to the Company was spent on travel itineraries,
allowances, hire cars and
accommodations as details:Travel Cost Description Amount (KQ
Domestic travel 278,109
Hire cars 197,204
Overseas travel 139,276
Hotel accommodation and meals 99,990
Travel allowances 31,631
Board travel 23,852
Total travel costs 770,062I noted that KAL had no approved business plan or budget for
2018, and no project
documentation and reports including feasibility studies or
situational analysis for the
projects investigated.I recommended the management to have a policy on duty travel that
requires a business
justification and approval. Such travel costs should be included
in the organizational
budget and monitored on a monthly basis. The management responded
as follows:“Current management has instituted (WIP stage) a policy for
travel and
accommodation to address the risks and manage the process.”64.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the year ended 31 December 2019 was in progress.-242-
65. KUMUL PETROLEUM HOLDINGS LIMITED
65.1 INTRODUCTION
-
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65.1.1 Legislation
In accordance with NEC Decision No. 108/2011 dated 7
July 2011, the Company was
established and incorporated under the Companies Act
on 4 March 2014 as NPCP
Holdings Limited. As a result of the enactment of
the Kumul Petroleum Holdings
Limited Authorisation Act 2015 the issued shares of
the previously owned by
Independent Public Business Corporation (IPBC) now
Kumul Consolidated Holdings
was transferred to the Kumul Petroleum Trustee. On
25 September 2015, the Company
changed its name from NPCP Holdings Limited to Kumul
Petroleum Holdings Limited.65.1.2 Objective of the Company
Kumul Petroleum Holdings Limited and its wholly
owned subsidiaries are the only
group of State Owned Companies from which the State
would nominate one or more
of them to participate in all future Petroleum
Projects as State nominee for the purposes
of Section 165 of the Oil and Gas Act 1998.65.1.3 Subsidiaries of the Company
The Subsidiaries of Kumul Petroleum Holdings Limited
are; Eda Oil Limited, Kumul
Exploration (Asia) Limited, Kumul Gas Foreland 239
B.V, Kumul Gas Foreland 261
B.V, Kumul Gas Foreland 268 B.V, Kumul Gas Foreland
269 B.V, Kumul Gas NiuginiB.V, Kumul Lending Co Pte Limited, Kumul
LNG Limited, Kumul Petroleum
m(Development) Limited, Kumul Petroleum (Investments)
Limited, Kumul Petroleum
(Kroton) Limited, Kumul Petroleum (Pipeline)
Limited, Kumul Petroleum (Tech &
Advisory) Limited, Kumul Petroleum Marketing Pte
Limited, Kumul Security Agent
Limited and NPCP Oil Company Pty Limited. Comments
in relation to these
Subsidiaries are contained in paragraphs 65A to 65Q
of this Report. -
Page 362 of 475
-
65.2 AUDIT OBSERVATIONS
65.2.1 Comments on Financial Statements
My report in accordance with the provisions of the
Companies Act on the Company’s
financial statements for the year ended 31 December
2018 was issued on 25 November
2019. The report did not contain any qualification.65.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of the
Company for the year ended 31 December 2019 was in
progress.-243-
65A. EDA OIL LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65A.1 INTRODUCTION
65A.1.1 Legislation
Eda Oil Limited was incorporated under the
Companies Act. At the time, the
Company has two (2) shares owned by Petromin PNG
Holdings Limited. As a result
of the enactment of the Kumul Petroleum Holdings
Limited Authorisation Bill 2015,
Eda Oil Limited together with Kumul LNG Limited
were transferred to Kumul
Petroleum (Development) Limited, a subsidiary of
Kumul Petroleum Holdings
Limited on 30 June 2016 by Petromin PNG Holdings
Limited.The Company has a direct participation in the Moran
Petroleum Project, through
20.5% License Interest it directly holds in PDL 5
and an initial 11.275% Unit Interest
in Unit Operation under the Multi Unit Operator
Alliance (MUOA) and an indirect -
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-
participation in the PNG LNG Project through its
holding of the only issued share in
the share capital of Kumul LNG Limited.65A.1.2 Objective of the Company
The main objective of the Company is to invest in
the development and production
of hydrocarbons in the Moran Joint Venture in Papua
New Guinea.65A.2 AUDIT OBSERVATIONS
65A.2.1 Comments on Financial Statements
My reports in accordance with the provisions of the
Companies Act on the financial
statements of the Company for the years ended 31
December 2017 and 2018 were
issued on 25 November 2019. The reports did not
contain any qualification.65A.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of
the Company for the year ended 31 December 2019 was
in progress.– 244 –
65B. KUMUL EXPLORATION (ASIA) LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65B.1 INTRODUCTION
65B.1.1 Legislation
The Kumul Exploration (Asia) Limited was
incorporated in Singapore under the
Companies Act of Singapore on 2 March 2017. Kumul
Petroleum Holdings Limited
is the sole shareholder of Kumul Exploration (Asia) -
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-
Limited.
65B.1.2 Objective of the Company
The Company’s main objective is service activities
incidental to oil and gas extraction
(excluding surveying and engineering design and
consultancy services, supporting
mining, oil and gas extraction and offshore
exploration activities).65B.2 AUDIT OBSERVATIONS
65B.2.1 Comments on Financial Statements
My report in accordance with the provisions of the
Companies Act on the Company’s
financial statements for the year ended 31 December
2018 was issued on 17 January
2020. The report did not contain any qualification.65B.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of
the Company for the year ended 31 December 2019 was
in progress.– 245 –
65C. KUMUL GAS FORELAND 239 B.V
(Subsidiary of Kumul Petroleum Holdings Limited)65C.1 INTRODUCTION
-
Page 365 of 475
-
65C.1.1 Legislation
The Kumul Gas Foreland 239 B.V was incorporated in
Amsterdam, Netherlands
under the Netherlands Civil Code on 12 October 2011
(amended on 30 June 2017).
Kumul Petroleum Holdings Limited is the sole
shareholder of Kumul Gas Foreland
239 B.V.65C.1.2 Objectives of the Company
The Company’s objectives are; to incorporate, to
finance, to participate in, to manage
and to supervise companies and other enterprises;
to raise funds, to acquire, to dispose
of, to manage, to exploit, to develop and to
commercialise in any other way real estate,
securities and other assets, including patents,
permits, copyrights, trademarks,
licenses, secret processes or formula’s, designs
and other industrial and intellectual
property rights, to render administrative,
technical, financial, economic, commercial
or managerial services to companies, partnerships
and other enterprises, engage in all
activities, whether or not in collaboration with
others, which directly or indirectly
relate to those objects and all this in the
broadest sense.65C.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company
had not submitted its financial
statements for the years ended 31 December 2017,
2018 and 2019 for my inspection
and audit. -
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-
– 246 –
65D. KUMUL GAS FORELAND 261 B.V
(Subsidiary of Kumul Petroleum Holdings Limited)65D.1 INTRODUCTION
65D.1.1 Legislation
The Kumul Gas Foreland 261 B.V was incorporated in
Amsterdam, Netherlands
under the Netherlands Civil Code on 12 October
2011. Kumul Petroleum Holdings
Limited is the sole shareholder of Kumul Gas
Foreland 261 B.V.65D.1.2 Objectives of the Company
The Company’s objectives are: to incorporate, to
finance, to participate in, to manage
and to supervise companies and other enterprises;
to raise funds, to acquire, to dispose
of, to manage, to exploit, to develop and to
commercialise in any other way real estate,
securities and other assets, including patents,
permits, copyrights, trademarks,
licenses, secret processes or formulas, designs and
other industrial and intellectual
property rights, to render administrative,
technical, financial, economic, commercial
or managerial services to companies, partnerships
and other enterprises; and engage
in all activities, whether or not in collaboration
with others, which directly or
indirectly relate to those objects and all these in
the broadest sense.65D.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company
had not submitted its financial
statements for the years ended 31 December 2017,
2018 and 2019 for my inspection
and audit. -
Page 367 of 475
-
– 247 –
65E. KUMUL GAS FORELAND 268 B.V
(Subsidiary of Kumul Petroleum Holdings Limited)65E.1 INTRODUCTION
65E.1.1 Legislation
The Kumul Gas Foreland 268 B.V was incorporated in
Amsterdam, Netherlands
under the Netherlands Civil Code on 12 October 2011
(amended to 30-06-2017).
Kumul Petroleum Holdings Limited is the sole
shareholder of Kumul Gas Foreland
268 B.V.65E.1.2 Objectives of the Company
The Company’s objectives are; to incorporate, to
finance, to participate in, to manage
and to supervise companies and other enterprises;
to raise funds, to acquire, to dispose
of, to manage, to exploit, to develop and to
commercialise in any other way real estate,
securities and other assets, including patents,
permits, copyrights, trademarks,
licenses, secret processes or formulas, designs and
other industrial and intellectual
property rights, to render administrative,
technical, financial, economic, commercial
or managerial services to companies, partnerships
and other enterprises; engage in all
activities, whether or not in collaboration with
others, which directly or indirectly
relate to those objects and all this in the
broadest sense.65E.2 STATUS OF FINANCIAL STATEMENTS
-
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-
At the time of preparing this Report, the Company
had not submitted its financial
statements for the years ended 31 December 2017,
2018 and 2019 for my inspection
and audit.– 248 –
65F. KUMUL GAS FORELAND 269 B.V
(Subsidiary of Kumul Petroleum Holdings Limited)65F.1 INTRODUCTION
65F.1.1 Legislation
This Company was incorporated in Amsterdam,
Netherlands under the Netherlands
Civil Code on 12 October 2011 under the name of
Kumul Gas Foreland 269 B.V.
Kumul Petroleum Holdings Limited is the sole
shareholder of Kumul Gas Foreland
269 B.V.65F.1.2 Objectives of the Company
The objectives of the Company are to finance, to
participate in, to manage and to
supervise companies and other enterprises; to raise
funds, to acquire, to dispose of, to
manage, to exploit, to develop and to commercialise
in any other way real estate,
securities and other assets, including patents,
permits, copyrights, trademarks,
licenses, secret processes or formulas, designs and -
Page 369 of 475
-
other industrial and intellectual
property rights, to render administrative,
technical, financial, economic, commercial
or managerial services to companies, partnerships
and other enterprises; engage in all
activities, whether or not in collaboration with
others, which directly or indirectly
relate to those objects and all this in the
broadest sense.65F.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company
had not submitted its financial
statements for the years ended 31 December 2017,
2018 and 2019 for my inspection
and audit.– 249 –
65G. KUMUL GAS NIUGINI B.V
(Subsidiary of Kumul Petroleum Holdings Limited)65G.1 INTRODUCTION
65G.1.1 Legislation
The Kumul Gas Niugini B.V was incorporated in
Amsterdam, Netherlands under the
Netherlands Civil Code on 12 October 2011 (amended
on 11 May 2017). Kumul
Petroleum Holdings Limited is the sole shareholder
of Kumul Gas Niugini B.V.65G.1.2 Objectives of the Company
-
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-
The Company’s objectives are; to incorporate, to
finance, to participate in, to manage
and to supervise companies and other enterprises;
to raise funds, to acquire, to dispose
of, to manage, to exploit, to develop and to
commercialise in any other way real estate,
securities and other assets, including patents,
permits, copyrights, trademarks,
licenses, secret processes or formula’s, designs
and other industrial and intellectual
property rights, to render administrative,
technical, financial, economic, commercial
or managerial services to companies, partnerships
and other enterprises, engage in all
activities, whether or not in collaboration with
others, which directly or indirectly
relate to those objects and all this in the
broadest sense.65G.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company
had not submitted its financial
statements for the years ended 31 December 2017,
2018 and 2019 for my inspection
and audit.– 250 –
65H. KUMUL LENDING CO PTE LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65H.1 INTRODUCTION
-
Page 371 of 475
-
65H.1.1 Legislation
The Kumul Lending Co Pte Limited was incorporated
in Singapore under the
Companies Act of Singapore on 8 August 2016. Kumul
Petroleum Holdings Limited
is the sole shareholder of Kumul Lending Co Pte
Limited.65H.1.2 Objective of the Company
The key objective of the Company is to undertake
fund management activities.65H.2 AUDIT OBSERVATIONS
65H.2.1 Comments on Financial Statements
My report in accordance with the provisions of the
Companies Act on the Company’s
financial statements for the year ended 31 December
2018 was issued on 17 January
2020. The report did not contain any qualification.65H.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of
the Company for the year ended 31 December 2019 was
in progress.– 251 –
-
Page 372 of 475
-
65I. KUMUL LNG LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65I.1 INTRODUCTION
65I.1.1 Legislation
This Company was incorporated under the Companies
Act on 19 May 2009 under the
name of Kumul LNG Limited. The Company has one (1)
share and Eda Oil Limited
is the sole shareholder of the Company. Eda Oil
Limited is 100% subsidiary of
Petromin PNG Holdings Limited that was established
as a special purpose entity to
hold Petromin’s interests in the LNG Projects. As a
result of the enactment of the
Kumul Petroleum Holdings Limited Authorisation Bill
2015, both Eda Oil Limited
and Kumul LNG Limited were transferred to Kumul
Petroleum Holdings Limited on
30 June 2016 by Petromin PNG Holdings Limited.65I.1.2 Objective of the Company
The Company has 0.20% interest in the PNG LNG
Project. The Project interest is
connected to Eda Oil Limited’s license interest in
PDL 5 (20.5% License Interest in
PDL 5) and the Moran Petroleum Project Interest.65I.2 AUDIT OBSERVATIONS
65I.2.1 Comments on Financial Statements
My reports in accordance with the provisions of the
Companies Act on the financial
statements of the Company for the years ended 31
December 2017 and 2018 were
issued on 25 November 2019. The reports did not
contain any qualification.65I.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of
the Company for the year ended 31 December 2019 was
in progress. -
Page 373 of 475
-
– 252 –
65J. KUMUL PETROLEUM (DEVELOPMENT) LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)
65J.1 INTRODUCTION65J.1.1 Legislation
This Company was incorporated under the Companies
Act on 19 September 2014 in
accordance with the NEC Decision No. 108/2011 dated
7 July 2011. Kumul
Petroleum Holdings Limited is the sole shareholder
of Kumul Petroleum
(Development) Limited. On 25 September 2015, the
Company changed its name from
NPCP Pipeline and Gas Supply Limited to Kumul
Petroleum Development Limited.
The Company again had its name changed from Kumul
Petroleum Development
Limited to Kumul Petroleum (Development) Limited on
28 January 2016.65J.1.2 Objective of the Company
The objective of the Company is to provide pipeline
facilities to the upcoming various
Liquefied Natural Gas (LNG) projects. In 2014, the
Company purchased 100%
shareholding in Cue PNG Limited at a cost of US$7
million and changed the name to
NPCP Oil Company Limited registered in Port
Moresby, PNG.65J.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of
the Company for the years ended 31 December 2017
and 2018 had been completed
and results were being evaluated.The fieldwork associated with the inspection and
-
Page 374 of 475
-
audit of the accounts and records
and the examination of the financial statements of
the Company for the year ended
31 December 2019 was in progress.– 253 –
65K. KUMUL PETROLEUM (INVESTMENTS) LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65K.1 INTRODUCTION
65K.1.1 Legislation
This Company was incorporated under the Companies
Act on 15 October 2014 in
accordance with the NEC Decision No. 108/2011 dated
7 July 2011. Kumul
Petroleum Holdings Limited is the sole shareholder
of Kumul Petroleum
(Investments) Limited. On 25 September 2015, the
Company changed its name from
NPCP Investments Limited to Kumul Petroleum
(Investments) Limited.65K.1.2 Objective of the Company
The Principal objective of the Company is to hold
the Independent State of Papua
New Guinea’s shareholding interest in Oil Search
Limited and other Investments by
the State in oil and gas in Papua New Guinea. In
this respect, on 4 March 2014, the
State acquired 10.01% shareholding (149,390,244
shares) in Oil Search Limited
(OSL) at a price of AUD8.20 per share for a total
consideration of AUD1.225 million.
The funding for purchase of the State’s interest in
OSL was provided by UBS -
Page 375 of 475
-
Australia. On 23 December 2014, the State
transferred its 10.01% shareholding
interest in OSL and the obligations arising from
the loan facilities provided by UBS
to Kumul Petroleum (Investments) Limited and Kumul
Petroleum Holdings Limited.65K.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of
the Company for the years ended 31 December 2017
and 2018 had been completed
and results were being evaluated awaiting signed
financial statements and a number
of documents in relation to UBS loan and disposal
of Oil Search Limited (OSL) shares
in 2018.The fieldwork associated with the inspection and
audit of the accounts and records
and the examination of the financial statements of
the Company for the year ended
31 December 2019 was in progress.– 254 –
65L. KUMUL PETROLEUM (KROTON) LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65L.1 INTRODUCTION
65L1.1 Legislation
This Company was incorporated under the Companies
Act and was acquired by the
Independent Public Business Corporation (IPBC) (now
Kumul Consolidated
Holdings) on 24 November 2008.IPBC was approved as the State’s nominee in the PNG
Liquefied Natural Gas (PNG -
Page 376 of 475
-
LNG) Project as resolved by NEC in its Meeting No.
36/2008 through Decision No.
223/2008. NPCP Holdings Limited (Now Kumul
Petroleum Holdings Limited) is the
100% Shareholder of National Petroleum Company of
PNG (Kroton) Limited as per
NEC Decision No. 108/2011 dated 7 July 2011, which
came into effect in 2013. All
the Company’s shares held by IPBC were transferred
to NPCP Holdings Limited in
2013. On 25 September 2015, the Company changed its
name from National
Petroleum Company of PNG (Kroton) Limited to Kumul
Petroleum (PNG LNG)
Limited. On 28 January 2016 the Company changed its
name from Kumul Petroleum
(PNG LNG) Limited to Kumul Petroleum (Kroton)
Limited.
65L.1.2 Objective of the CompanyThe objective of Kumul Petroleum (Kroton) Limited
is to invest in the PNG LNG
Project as PNG State’s nominee holding 16.57%
equity in the Project.65L.2 AUDIT OBSERVATIONS
65L.2.1 Comments on Financial Statements
My report in accordance with the provisions of the
Companies Act on the Company’s
financial statements for the year ended 31 December
2018 was issued on 11
September 2019. The report did not contain any
qualification.65L.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of
the Company for the year ended 31 December 2019 was
in progress.– 255 –
-
Page 377 of 475
-
65M. KUMUL PETROLEUM (PIPELINE) LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65M.1 INTRODUCTION
65M.1.1 Legislation
This Company was incorporated under the Companies
Act on 30 October 2015 under
the name Kumul Petroleum Pipeline Limited. On 28
January 2016, the Company
changed its name to Kumul Petroleum (Pipeline)
Limited. Kumul Petroleum
Holdings Limited is the sole shareholder of Kumul
Petroleum (Pipeline) Limited.65M.1.2 Objective of the Company
The Company holds the interest of Kumul Petroleum
Holdings Limited in the
Western Pipeline (Strategic Pipeline) Project.65M.2 AUDIT OBSERVATIONS
65M.2.1 Comments on Financial Statements
My reports in accordance with the provisions of the
Companies Act on the Company’s
financial statements for the years ended 31
December 2017 and 2018 were issued on
15 June 2020. The reports did not contain any
qualification.65M.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork
associated with the inspection and
audit of the accounts and records and the
examination of the financial statements of
the Company for the year ended 31 December 2019 was
in progress. -
Page 378 of 475
-
– 256 –
65N. KUMUL PETROLEUM (TECH & ADVISORY) LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65N.1 INTRODUCTION
65N.1.1 Legislation
The Company was incorporated under the Companies Act on 8
September 2014 in
accordance with the NEC Decision No. 108/2011 dated 7 July 2011.
Kumul
Petroleum Holdings Limited is the sole shareholder of Kumul
Petroleum Technical
Institute and Consulting Limited. On 25 September 2015, the
Company changed its
name from NPCP Technical Institute and Consulting Limited to
Kumul Petroleum
Technical Institute and Consulting Limited. Subsequently, the
Company changed its
name from Kumul Petroleum Technical Institute and Consulting
Limited to Kumul
Petroleum (Tech & Advisory) Limited on 28 January 2016.In 2015, the Company bought 12.5% shares in Orion Enga
Children’s Fund JV
Limited. Orion Enga Children’s Fund JV owns the South Pacific
Employment
Institute registered as a business name and runs the Port
Moresby Technical College
(now known as Kumul Petroleum Academy).65N.1.2 Objective of the Company
The principal objective of the Company is to provide
professional and other business
services.65N.2 AUDIT OBSERVATION
65N.2.1 Comments on Financial Statements
My reports in accordance with the provisions of the Companies
Act on the Company’s
financial statements for the years ended 31 December 2016, 2017
and 2018 were
issued on 15 June 2020. The reports did not contain any
qualification. However, the -
Page 379 of 475
-
reports contained similar Emphasis of Matter, hence, only the
2018 matter is
reproduced as follows:“EMPHASIS OF MATTER
Investment in Orion Enga Children’s Fund JV Limited
Kumul Petroleum (Tech & Advisory) Limited invested US$3,803,190
to hold 12.5%
of the ordinary shares (25 Ordinary Shares of the total 200
Shares) in Orion Enga
Children’s Fund JV Limited. However, the other shareholders of
the investee
company did not contribute appropriate capital amount towards
the shareholding they
have in the company.-257-
Kumul Petroleum (Tech & Advisory)
LimitedFurther, at the date of this report no audited financial
statements of the investee
company was available for my determination to evaluate the
financial aspects of the
company for the years 2015 to 2018. When I raised my concern
with the management,
they impaired the whole investment for the year ended 31
December 2016. I noted
that the Board approval granted for investment in the Orion Enga
Children’s Fund
Limited was done without any due diligence report.”65N.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the year ended 31 December 2019 was in progress. -
Page 380 of 475
-
-258-
65O. KUMUL PETROLEUM MARKETING PTE LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65O.1 INTRODUCTION
65O.1.1 Legislation
The Kumul Petroleum Marketing Pte Limited was incorporated in
Singapore under
the Companies Act of Singapore on 28 April 2017. Kumul Petroleum
Holdings
Limited is the sole shareholder of Kumul Petroleum Marketing Pte
Limited.65O.1.2 Objective of the Company
The Company is to be engaged in the Marketing of Liquefied
Natural Gas,
Condensate and other related products.65O.2 AUDIT OBSERVATIONS
65O.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the Company’s
financial statements for the year ended 31 December 2018 was
issued on 17 January -
Page 381 of 475
-
2020. The report did not contain any qualification.
65O.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the year ended 31 December 2019 was in progress.-259-
65P. KUMUL SECURITY AGENT LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65P.1 INTRODUCTION
65P.1.1 Legislation
The Kumul Security Agent Limited was incorporated in Singapore
under the
Companies Act of Singapore on 31 August 2016. Kumul Petroleum
Holdings Limited
is the sole shareholder of Kumul Security Agent Limited.65P.1.2 Objective of the Company
The key objective of the Company is to undertake fund management
activities.65P.2 AUDIT OBSERVATIONS
65P.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the Company’s -
Page 382 of 475
-
financial statements for the year ended 31 December 2018 was
issued on 17 January
2020. The report did not contain any qualification.65P.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the year ended 31 December 2019 was in progress.-260-
65Q. NPCP OIL COMPANY PTY LIMITED
(Subsidiary of Kumul Petroleum Holdings Limited)65Q.1 INTRODUCTION
65Q.1.1 Legislation
Cue PNG Oil Company Pty Limited, a subsidiary of Cue Energy
Limited of Australia
was incorporated in Australia under the Companies Act of
Australia on 8 February
1996. This Company was bought by Kumul Petroleum (Development)
Limited on 20
November 2014 at a cost of US$7,109,144. The Company changed its
name to NPCP
Oil Company Pty Limited on 20 January 2015. Kumul Petroleum
(Development)
Limited (A subsidiary of Kumul Petroleum Holdings Limited) is
the sole shareholder
of NPCP Oil Company Pty Limited. The Company is now incorporated
in PNG under -
Page 383 of 475
-
Companies Act of PNG.
65Q.1.2 Objective of the Company
The principal objectives of the Company are exploration and
production of
hydrocarbons. The Company holds certain exploration and
development licenses in
PNG, namely PDL 3, PRL 14, PRL 19 and PL2.65Q.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2015, 2016, 2017,
2018 and 2019
were in progress.-261-
66. LIVESTOCK DEVELOPMENT CORPORATION LIMITED
66.1 INTRODUCTION66.1.1 Legislation
The Livestock Development Corporation Limited was incorporated
under the
Companies Act. The share capital is wholly owned by the National
Government.66.1.2 Functions of the Corporation
The main activities of the Corporation are breeding and
slaughtering cattle and pigs, -
Page 384 of 475
-
purchasing and exporting insects, growing vegetables and fruits,
and raising poultry.66.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Corporation for the years ended 31 December 2010, 2011, 2012,
2013, 2014, 2015,
2016, 2017 had been completed and the results were being
evaluated and 2018 audit
was in progress.The Corporation had not submitted its financial statements for
the year ended 31
December 2019 for my inspection and audit.-262-
67. MINERAL RESOURCES DEVELOPMENT COMPANY LIMITED
67.1 INTRODUCTION
67.1.1 Legislation
The Mineral Resources Development Company Limited (MRDC) was
incorporated
under the Companies Act. The Company is wholly owned by the
National Government.
The authorised capital of the Company was increased from 10,000
Ordinary Shares to -
Page 385 of 475
-
10,000,000 Ordinary Shares of K1 each in June 1992. An additional
4,906,015 shares
were issued to the Independent State of PNG in June 1992,
converting the Government
grant and the shareholders loan to equity. The Company also
acquired the
Government’s 20% interest in Misima Mines Limited.67.1.2 Objective of the Company
The principal objective of the Company is to hold the
Government’s equity in mineral
and petroleum development ventures within PNG.67.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
67.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the inspection
and audit of the accounts and records of the Company for the year
ended 31 December
2016 was issued on 27 April 2020. The report contained a
Qualified Opinion.“QUALIFIED OPINION
In my Opinion, except for the effects of the matters described in
the Basis for Qualified
Opinion paragraphs below:
(a) the financial statements of the Company for the year ended 31
December 2016:(i) give a true and fair view of the financial position and
the results of its
financial performance and cash flows for the year ended on
that date; and(ii) the financial statements have been presented in
accordance with the
Companies Act, International Financial Reporting Standards
and other
generally accepted accounting practice in Papua New Guinea.(b) proper accounting records have been kept by the Company, as
far as it appears
from my examination of those records; and(c) I have obtained all the information and explanations
required.-263-
-
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Mineral Resources Development Company Limited
BASIS FOR QUALIFIED OPINION
Opening Balances
My report on the Company’s consolidated financial statements for the
year ended 31
December 2015 was a disclaimer of opinion. I was not able to perform
audit procedures
to satisfy myself to obtain reasonable assurance as to the accuracy
and completeness of
the opening balances for both the Company and the Group.Since these opening balances entered into the determination of the
financial
performance and cash flows of the Company and the Group in 2016, I
was unable to
determine whether adjustments to the results of operations, cash
flows and changes in
equity might have been necessary for the year ended 31 December
2016.Investments
Note 12 to the financial statements disclosed total investments at
K228.23 million
(Group) and K44.12 million (Company) as at 31 December 2016. My
review of the
Company’s investments revealed the following:(a) Investment in Ramu Nickel JV
Included in the Investments balance is K184.102 million (Group)
relating to the
Group’s interest in the Ramu Nickel Joint Venture. This balance
was
determined based on an impairment assessment performed by
management on
31 December 2015 closing balance of K406.165 million. The Group’s
liabilities
include a carry liability of K305.33 million in relation to the
financing of the
Groups interest in the Ramu Nickel Joint Venture. Further, the
Group’s
statement of changes in equity for the year ended 31 December
2016 includes
an amount of K108.566 million recorded directly to retained
earnings as prior
year adjustment which incorporates adjustments to the prior year
balance for
both the investment in Ramu Nickel Joint Venture and the carrying
liability. I -
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was not provided with sufficient and appropriate evidence to
support the
opening balance of the investment at 1 January 2016 and as a
result, I have been
unable to conclude on the accuracy of the amounts recorded in the
statement of
comprehensive income and statement of changes in equity during
the year in
respect of these balances. I also noted that the amount
determined by
management to be a prior year adjustment has been recorded
directly to retained
earnings in the current year, however, it should have been
treated as a
restatement of the prior year financial statements.-264-
Mineral Resources Development Company
Limited(b) Investment in Pacific International Hospital (PIH)
K7.42 million (Group and Company) relates to investment in
Pacific
International Hospital. The investment has been classified
under assets available
for sale and in accordance with the Company’s accounting
policy, this should
be carried at fair value, however, a valuation of the
investment at 31 December
2016 was not performed and the investment has been recorded
at cost in the
financial statements. As a result, I was unable to determine
whether adjustments
to the financial statements might be necessary in respect of
fair value gain or
loss on investment in PIH for the year reported in the
statements of
comprehensive income and the investment balance reported in
the financial
position.Income Tax
The matters mentioned in the above qualifications could have
impacted the financial
performance of the Company and the Group and accordingly the -
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-
basis for the
calculation of the income tax position and deferred tax balance
may not be accurate as
disclosed in the financial statements. As a result, I was unable
to determine the
appropriateness of the income tax balances disclosed in Note 8
to the financial
statements.”67.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Company for the year
ended 31 December 2016
was issued on 27 April 2020. The report contained the following
observations:Non-Disclosure of Directors Remuneration and Staff Salary for
the yearDuring my review, I noted that the directors’ fees has increased
by K1,056,334 (136%)
to K1,833,840 from K777,505 in 2015. I further noted that the
Company discontinue to
disclose the total stipends paid to its Directors and the
remuneration and allowances
paid to the management staff whose total salary exceeds K100,000
per annum as
required under Section 212 (f) and (g) of the Companies Act.
However, I was not
provided with the details of stipends paid to the seven (7) Non-
Executive directors of
which two (2) were Government Departmental Heads or the
shareholders resolution
made available for my determination at the time of this report.
As a result, I was unable
to verify and conclude on the appropriateness and validity of
the stipends paid and
whether the Company has complied with the Companies Act.-265-
Mineral Resources Development Company
LimitedOverseas Travel Expenses
-
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In 2016, the Company’s business travel expense amounted to
K2,217,210 compared to
K303,652 in 2015, a substantial increase of K1,913,557. During my
review, I was not
provided with the listing of all the overseas travels to
determine the validity and
purpose. As a result, I am not able to comment whether the trips
were intended for and
beneficial to the Company.Insurance Premium
In 2016, K1,965,000 was paid as insurance premium by the Company.
That was
K1,700,000 more than the insurance premium paid for 2015 at a
value of K265,000.
However, I was not provided with appropriate explanation and
basis for the six (6) fold
increase in the insurance premium.Overseas Investments
Note 12(c)(ii) to the financial statements disclosed investments
made by the Mineral
Resources Development Company in Taumeasina Resort (Samoa) for
25% share worth
K19.347 million in 2016. The current value of this investment was
nil after loss on
acquisition of K1.460 million, impairment loss of K15.488 million
and loss for the
current year amounting to K2.399 million were considered.In summary, the Company has made two overseas investments in the
past few years
and most of these investments so far has not produced any benefit
to the Company or
State but incurring losses due to impairments of assets caused by
the reduction in the
value of the investment. This is a concern the management and
Board of Directors has
to review and act in the best interest of the stakeholders.Loan to PNG Air Limited
The financial statements include K14 million as receivables from
PNG Air Limited.
During my review, I was advised by the management that the amount
relates to an
advance made to APNG towards working capital requirements and
that PNG Air
Limited would issue additional equity to MRDC. However, at the
date of this report,
no shares were issued to the Company. -
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67.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the year ended 31 December 2017 was in progress.The Company had not submitted its financial statements for the
years ended 31
December 2018 and 2019 for my inspection and audit.-266-
68. MOTOR VEHICLES INSURANCE LIMITED
68.1 INTRODUCTION
68.1.1 Legislation
The Motor Vehicles Insurance (PNG) Trust Limited was incorporated
under the
Companies Act following the NEC Decision No. 4/98 of January
1998. It was formed
to change the status of the then existing Motor Vehicles
Insurance (PNG) Trust to
conform to the intentions of the NEC for the then PNG Banking
Corporation Holding
Company No. 1 Limited to acquire the business of the Trust as
part of the reform of the
financial services sector.The Trust was incorporated under the Companies Act as Motor
Vehicles Insurance
(PNG) Trust Limited (MVITL). The shares of this entity which were
held by the
Independent State of PNG were subsequently sold to the then PNG
Banking
Corporation, an entity also owned and controlled by the State.On 31 December 1998, as part of the corporatisation and
restructuring programme of
the then PNG Banking Corporation Group, PNGBC Limited, PNGBC
Holding Co. No.
1 Limited and Motor Vehicles Insurance (PNG) Trust Limited were
amalgamated under
the provisions of the Companies Act to form an amalgamated
Company, PNGBC
Limited. The ultimate parent Company of PNGBC Limited was Finance
Pacific
Limited, a Company wholly owned and controlled by the Independent
State of PNG. -
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-
With effect from 1 January 1999, Motor Vehicles Insurance Limited
(MVIL) was
incorporated under the Companies Act to underwrite the third
party insurance under the
Act in succession to the Trust and MVITL.The assets of MVITL immediately before the amalgamation with the
then PNGBC
Limited were transferred to MVIL when it took over the
responsibility for providing
third party insurance.68.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
68.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the inspection
and audit of the accounts and records of the Company for the year
ended 31 December
2019 was issued on 30 June 2020. The report contained a Qualified
Opinion.“QUALIFIED OPINION
In my Opinion, except for the effects of the matters described in
the Basis for Qualified
Opinion paragraphs below:-267-
Motor Vehicles Insurance Limited
(a) the financial statements of Motor Vehicles Insurance Limited for
the year ended
31 December, 2019:(i) give a true and fair view of the financial position and the
results of its
financial performance and cash flows for the year ended on
that date; and(ii) the financial statements have been presented in accordance
with the
Companies Act, International Financial Reporting Standards
(IFRS) and
other generally accepted accounting practice in Papua New
Guinea.(b) proper accounting records have been kept by the Company, as far
as it appears
from my examination of those records; and -
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-
(c) I have obtained all the information and explanations required.
BASIS FOR QUALIFIED OPINION
Non-Consolidation of Subsidiaries
Note 15(iii) to the financial statements disclosed Investment in
Subsidiaries as
K84,717,507 (2018: K73,956,993). The investment relates to 100% and
52%
shareholding in Pacific MMI Limited and Pacific Re Limited
respectively. I noted that
the shareholdings in these subsidiaries as at 31 December 2019
exceeded 50%
therefore, consolidation of the financial statements for the group
is necessary as
required by IFRS 10, Consolidated Financial Statements. However, no
consolidated
financial statements had been prepared and submitted for my review.
As a result, the
Company had not complied with the requirements of IFRS 10.Impairment of Investment in Subsidiary
In accordance with IAS-36 Impairment of Assets, an entity shall
assess at the end of
each reporting period whether there is any indication that an asset
may be impaired. If
such indication exists, the Company shall estimate the recoverable
amount of the asset
and appropriately provide through the profit and loss account.
However, Motor Vehicle
Insurance Limited (MVIL) has reported K67 million (2018:
K56,239,487) as
investment in its subsidiary Pacific MMI Limited as at 31 December
2019. This
carrying amount is higher than the unaudited investee’s net assets
by K14,000,000
(2018: K45,000,000). There was no valuation of the investments done
by the
management during the year to determine whether any impairment would
have
occurred on its investments. Therefore, I was unable to determine
whether the
investment taken up under subsidiaries was appropriate.
Consequently, the Company
did not make necessary provision for the impairment by which it has
not complied with
IAS 36, Impairment of Assets.”-268-
-
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Motor
Vehicles Insurance Limited68.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Company for the year
ended 31 December 2019
was issued on 30 June 2020. The report contained the following
observations:Non-Compliance with the Notification issued on Investment
CriteriaMotor Vehicles Insurance Limited (MVIL) is a successor Company
under the Motor
Vehicles (Third Parties Insurance) Act. The Finance Minister,
in accordance with
powers granted by Motor Vehicles (Third Parties Insurance) Act
had laid down the
following criteria with regard to the composition of
investments made by MVIL:Per Notification Policy At
31-12-2019
Government securities 15-25%
8.95%
Term Deposits 20-30%
0.05%
Commercial Equities 25-35%
74.0%
Property 20-30% –
Long Term Development 10-20%
2.0%
Loans/Debentures – –
Subsidiaries Nil
15.0%From the information obtained above, it is evident that MVIL
has not complied with
the criteria laid down in the notification.Further, per investment policy the company should not invest
in any one company more
than 50% of the paid-up capital of that company. However, MVIL
has owned 100%
equity in Pacific MMI Limited and 52% in Pacific Re Limited as
at 31 December 2019,
hence, MVIL has not complied with the investment policy.I brought this matter to the attention of management in 2014
and management since -
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-
responded that, “the 50% of the shares in Pacific MMI going to
be disinvest to
prospective buyer.” However, to date the investment has not
been disinvested as
responded earlier.Salary Sacrifice
During my review, I kept noting that staff salary sacrifices
were paid to tertiary
institutions and continue to remind management of the
requirements under Taxation
Circular TC2016/1 containing salary sacrifice arrangement. The
payment of school
fees by salary sacrifice covers up to Grade 12. Hence, school
fee payment to tertiary
institutions through salary sacrifice is outside of the
Taxation Circular TC2016/1 and
Section 29(1)(i) of the Income Tax Act 1959. I brought this
matter to the attention of
management and recommended that salary sacrifices paid to
tertiary institutions and
colleges should be taxed and processed through payroll.
Management since responded
as follows: -269-Motor Vehicles
Insurance Limited“noted and agreed. We have implemented in 2020.”
Fair Value of Unquoted Shares
I noted that MVIL has unquoted share investments totalled K18
million in Westpac and
Pacific International Hospital. However, these investments were not
valued during the
year as requires by Ittil Fiil Rti Stdd to determine fair value
of unquoted shares each year.I brought this recurring issue to the attention of management and
recommended for
valuation of these investments within the next 12 months. Management
since responded
that:“noted and agreed on recommendations. We have en ulti ivetm
analyst to manage valuations.”Information Technology (IT) System
My review revealed that the IT policy and procedure manual has not
yet been -
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formulated by the Company. As a result, there exists high risks in
the IT control
environment. I brought this issue to the attention of management and
recommended for
development of IT Policy Procedure Manual and enforce immediate
implementation.
Management concurred with my recommendation and advised that the
policy and
procedure manual is being implemented in 2020.-270-
69. NATIONAL AIRPORTS CORPORATION LIMITED
69.1 INTRODUCTION
69.1.1 Legislation
National Airports Corporation Limited was incorporated under the
Companies Act. The
Company had begun operations in October 2009 after its
incorporation on 6 October
2009. This Company was established in accordance with Section 132
of the Civil
Aviation Act 2000 (as amended).National Airports Corporation Limited is regulated by the Civil
Aviation Authority Act
2000 (as amended) as a Company having its own operating
certificates. Except for the
governance requirements specified in the Civil Aviation Act, it
operates independently.
The two shares issued by the Company are equally held by the -
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Minister for Civil
Aviation and the Minister for Finance on behalf of the
Independent State of Papua New
Guinea.69.1.2 Functions of the Corporation
The functions of the National Airports Corporation Limited are
derived from Section
132 of the Civil Aviation Act.
69.1.3 Subsidiaries of the Corporation
The Corporation has two subsidiary companies; Airport City
Development Limited and
Airports Investments Limited. Comments in relation to these
companies are contained
in paragraphs 69A and 69B of this Report.
69.2 STATUS OF FINANCIAL STATEMENTSAt the time of preparing this Report, the Company had not
submitted its financial
statements for the year ended 31 December 2019 for my inspection
and audit.-271-
69A. AIRPORT CITY DEVELOPMENT LIMITED
(Subsidiary of National Airports Corporation Limited)69A.1 INTRODUCTION
69A.1.1 Legislation
The Airport City Development Limited was incorporated on 20
August 2009 and was
deregistered on 20 April 2010. However, the Company was
reinstated on 19
September 2011 as a subsidiary company of the National Airports
Corporation
Limited. The Company came into operation on 19 September 2012.69A.1.2 Charter of the Company
-
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-
The Company was incorporated to establish and manage the design,
construction and
operating stages of the Airport City Project to ensure economic,
technically sound
and expeditious completion of the Project.69A.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the Company had not
submitted its financial
statements for the year ended 31 December 2019 for my inspection
and audit.-272-
69B. AIRPORTS INVESTMENTS LIMITED
(Subsidiary of National Airports Corporation Limited)69B.1 INTRODUCTION
69B.1.1 Legislation
The Airports Investments Limited is a wholly owned subsidiary
of the National
Airports Corporation Limited. The Company was initially
registered as Helios No.
129 Limited on 23 October 2014 under the Companies Act, and -
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-
later changed its name
to Airports Investments Limited on 27 April 2015. The
operations of the Company
commenced on 1 January 2016.69B.1.2 Objective of the Company
Primary objective of the Airports Investments Limited is to
maximize full utilization
of airport assets to generate revenue to support core airport
activities relating to safety
and security.69B.1.3 Functions of the Company
Functions of the Company include: utilization of large assets
base of the airports to
realize large revenue potential; generating revenue to fund the
operations of the
terminal facilities and runways; and utilizing return from
commercialising the airport
assets to assist rural airstrips.69B.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the year ended 31 December 2019 was in
progress.-273-
70. NCD WATER AND SEWERAGE LIMITED (Trading as Eda Ranu)
70.1 INTRODUCTION
-
Page 399 of 475
-
70.1.1 Legislation and Objectives of the Company
The NCD Water and Sewerage Limited was incorporated on 23
February 1996 under
the Companies Act. The National Capital District Commission
(Transfer of Assets) Act
1996 provided for the vesting in the Company of the assets
required for the supply of
treated water and the treatment of sewerage from the NCDC.70.1.2 Functions of the Company
The principal functions of the Company are to provide the supply
of treated water, and
the treatment and disposal of sewerage within the NCD.70.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
70.2.1 Comments on Financial Statements
My reports in accordance with the provisions of the Companies Act
on the inspection
and audit of the accounts and records of the Company for the
years ended 31 December
2015 and 2016 were issued on 23 October 2019 and 18 May 2020
respectively. The
reports contained similar Qualified Opinions, hence only the 2016
report is reproduced.“QUALIFIED OPINION
In my opinion, except for the effects of the matters referred to
in the Basis for Qualified
Opinion paragraphs:(a) the financial statements of NCD Water and Sewerage Limited
(Eda Ranu) for
the year ended 31 December 2016:(i) give a true and fair view of the financial position and
the results of its
financial performance and cash flows for the year ended on
that date; and(ii) the financial statements have been presented in
accordance with the
Companies Act, International Financial Reporting Standards
and other
generally accepted accounting practice in Papua New Guinea.(b) proper accounting records have been kept by the Company, as
far as appears
from my examination of those records; and -
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-
(c) I have obtained all the information and explanations
required.-274-
NCD Water and Sewerage Limited
BASIS FOR QUALIFIED OPINION
Opening Balance
My report on the financial statements of the Company for the year
ended 31 December
2015 was a qualified opinion in respect to capital grants,
provision for doubtful debts,
accrued expenses and inventory stock. I was unable to quantify
the effects of such
material misstatements of the opening balances of the above
mentioned accounts that
might have a bearing on the balances reported in the 2016
financial statements. Within
the scope of my engagement, I was unable to perform sufficient
audit procedures to
satisfy myself as to the accuracy or completeness of the opening
balance or
comparatives presented. Any adjustment that might be found
necessary on such opening
balances would have a consequential effect on the profit and loss
for the year ended 31
December 2016 and the comparative profit and loss account
presented and the
respective statement of financial position and statement of cash
flows.Trade Receivables and Revenue – K54,249,743
The Company reported Trade Receivables of K54,249,743 as at 31
December 2016. I
noted that a third party contractor on behalf of the Company
performed billing of sales
and collection of sales revenue with collection summary and
associated payment
provided to the Company at each month end. However, I was unable
to perform any
tests on the sales and revenue functions performed by the third
party service provider
that gave rise to the trade receivables balance. Consequently, I
was unable to satisfy
myself as to the assertions of completeness, existence, accuracy
and valuation of these
balances. -
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Inventory Stock Taking – K5,825,486
My review noted that the Inventories of the Company was disclosed
at K5,825,486 in
the statement of financial position. However, I was not present
to witness the physical
count conducted to ensure accuracy and validation of the
inventories quantities. Further,
my review on the stock count conducted by the Company revealed
discrepancies
existed between the stock quantities in the Company’s records and
the quantities
recorded from physical stock count. As a result, I was unable to
confirm the accuracy
and valuation of stock balance reported as at 31 December 2016.”70.2.2 Audit Observations Reported to the Ministers
My reports to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Company for the years
ended 31 December
2015 and 2016 were issued on 23 October 2019 and 18 May 2020
respectively. The
reports contained similar observations, hence, only the 2016
report is reproduced.-275-
NCD Water and Sewerage Limited
Annual Tax Returns
My review of the Company’s various taxes as at 31 December 2016
revealed the
following issues:• Last income tax return lodged with the IRC has been for the year
ended 31
December 2012;
• Corporate income tax filing since 2013 financial year has not been
done;
• Of the total Business withholding taxes liability of K2,304,642 as
at 31 December
2016, a total of K2,283,023 pertains to 2015 and prior years; and
• Tax on Staff allowances payable includes a balance of K1,911,248
relating to
2015 and prior year.The late lodgment of tax returns and the accompanying payments in a
timely manner -
Page 402 of 475
-
with the IRC will result in the imposition of significant penalties.
The penalties include
a flat rate of 20% charge on the amounts outstanding and a further
20% per annum on
the amounts outstanding from the date when the taxes first become
due. I raised these
issues to the attention of the management and management responded
as follows:• “The tax status of the Company is regularly reported in the
Monthly Management
Reports and to the Board during Board Meetings. Same is also
reported to our• Corporate Income Tax (CIT) filed for 2013 on 20/2/2018, 2014 on
16/3/2018
2015 on 26/6/2018, 2016 on 20/12/2018 and 2017 on 6/3/2020. 2018
is in WIP.• Due to significant tax liability, management negotiated an
installment payment
arrangement with IRC and based on this all o/s taxes for SWWT
brought to
current status. We will continue to adhere to the arrangement for
GST
outstanding (Budgeted K1.2 million per month based on government
payment).” IAvailability and Reliability of Relevant Data provided by JCKRTA
The Company’s revenue billing and collection function was contracted
to JCKRTA
Consulting under a Consumer Service Agreement dated 23 June 1997.
Accordingly,
revenue, trade receivables and customer data are kept by JCKRTA and
on a monthly
basis it provides a statement to the Company which is used as a
source document for
recording the amount of revenue and trade receivables. Since revenue
and receivables
are key financial data of the Company, I was not provided with
relevant documents and
information by both the finance team of the Company and the JCKRTA
for me to verify
the balances. The Company must comply with the Companies Act to
maintain records
of key financial data, and where third parties are contracted to
perform key functions
as part of contractual obligations, the Company must secure right of
audit, access to
records and reliable and relevant reports. I brought this issue up
and management
responded as follows: -
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-
-276-
NCD Water and Sewerage Limited
“The Build Operate and Transfer (BOT) agreement was signed in 1996
which the
current management had no role. We however, agree with the auditor’s
points, and
going forward we will ensure that any contractual obligations or
conditions are
properly captured in future agreements through our legal team or
consultants.”Doubtful Debt Provisioning
The Company has a current practice of making monthly provisions for
doubtful debt of
K83,333 to K1,000,000 annually. As at 31 December 2016, the total
doubtful debt
provision amounted to K6,840,605 of which 14% represented the total
trade receivables
of the Company.However, during my review I noted that there is neither a formal
policy nor explanation
for the basis of the current practice of doubtful debt provisioning.
The quantum of bad
debt provision is a direct result of credit policy and practices
maintained by an entity.
Effective credit management result in less general provisions as
specific circumstances
of an account is understood and bad debts are easily established.
Thus, the general
provisions as maintained by the Company, is likely to misstate the
true circumstance of
debtors and therefore affects the receivables and results reported.
I recommended the
management to adopt a policy on doubtful debt provision and write-
off which should
align to the IFRS 9 Financial Instrument (Iairment) and the
management responded
as follows:“For the year in audit our BOT partners – JCKRTA control the credit
management.
We agree that a proper policy document is required in the Comany to
manage credit
and accounts receivable (AR) functions. And such a policy will be
aligned with IFRS 9
in future. For starters management is developing Hian AR or CREDIT
standard operating I
rocedures (SOPs) which would create the basis for credit and write
off policies.” -
Page 404 of 475
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Inventory Management System
My review of the internal controls in the inventory management
system and the internal
audit report of the Company noted that there were issues on the
inventory management
system that needed immediate action by the management. The inventory
of the
Company is composed of materials needed for installation, repairs
and maintenance of
water and sewerage services. The issues noted are enumerated below:• Challenge on migrating inventory data in the new accounting system
(TechOne);
• Inadequate physical storage area which leads to spoilage for items
stored in
uncovered area;
• Safeguard and security of inventory items, especially those high
valued items;
• Weak controls on the inventory process leading to unauthorised
issuance; and
• Unmonitored obsolete stocks.-277-
NCD Water and Sewerage Limited
In addition, the issues identified in the internal audit reports
showed control weaknesses
and therefore create an environment for abuse that may cause the
Company losses.
Consequently, I was unable to comment on the efficiency and
effectiveness of the
controls surrounding the management of the stock.Valuation of Land
The Company accounts for the land assets at fair or market value.
The last market
valuation of these properties was carried out in 25 September 2013
and no subsequent
valuation exercise was performed thereon. The last market valuation
may not be
reflective of the current market value of the property as at 31
December 2016. While
there is no explicit mention of the regularity of valuation in the
accounting standards,
the timing of valuation should be sufficient and timely enough to
reflect the fair value
of the property at any given reporting date. I recommended the
management to assess -
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-
the necessity for every property to be updated with its market
valuation through
property appraisal.Annual and Long Service Leave
The Company policy on the annual and long service leave states that
furlough/long
service leave is only applicable after fifteen (15) years of service
whereby staff may
apply for six months leave, and pro-rated accrual on furlough may
commence after
three (3) years of employment and furlough/long service leave is
paid at a rate of nine
(9) days per year. However, during my review, I noted the following
deviation to the
Company’s policy:• There are a number of employees who have exceeded the allowable
leaves during
the year resulting in a negative balance on the respective
calculated leave balance;
• The calculation for annual and long service leaves also included
employees who
have already resigned;
• New employee salary rates were not used in the calculation of
annual and long
service leave;
• One employee who worked for the Company less than fifteen (15)
years took long
service leave; and
• Furlough/Long service leave has been accrued for a number of
employees who
had less than three (3) years of service.These had resulted in variances in my calculation against the
balance of annual leave
and long service leave as at 31 December 2016. I recommended the
management to
utilise Technology One System and integrate leave calculation. And I
strongly
encouraged the management to have regular review process of the
Company’s annual
and long service leave provision to ensure completeness, existence
and accuracy and
management responded as follows:-278-
NCD Water and Sewerage Limited
“Management notes auditor’s views and agree that we will review
-
Page 406 of 475
-
all long service and
annual leave provisions quarterly to monthly. Management noted
some issues when we
migrated into Techone from Able Payroll, consultant was engaged
to fix the issues.
Management to stop approving advances against long service leave
until staffs qualify
(15 years) or upon termination of employment.”New Accounting Software (TechOne)
The Company uses Enterprise Resource Planning (ERP) accounting
software called
Technology One. Technology One has series of modules which can
cater for finance,
budgeting, human resources & payroll, assets management,
inventory management and
project management to name a few.My general observations of the system are as follows:
• Relevant modules required such as accounts receivable and
sales, inventory
management, project management are yet to be installed;
• It appears that the baseline system has been installed without
much tailoring to
the business requirement of the Company. This is evident from
the difficulty in
producing basic and standard reports that one would ordinarily
expect from an
ERP system; and
• No consideration has been given to key stakeholders in the
implementation of the
ERP system. A properly procured system considers all
stakeholders who feed
information into or receive information from and allows
integration
electronically. This improves efficiency and reduces errors
associated with
manual entries. One such consideration is the integration of
the sales and debtors
management which has been outsourced to a third party who use
their own
systems.Significant investment has occurred in both time and money and
it will be difficult to
justify limitations in value of the system to the Company. I
recommended the
management to carry out a Post Implementation Review (PIR) on
the Information
Technology (IT) system and management took note of my
recommendation. -
Page 407 of 475
-
70.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the year ended 31 December 2017 was in progress.The Company had not submitted its financial statements for the
years ended 31
December 2018 and 2019 for my inspection and audit.-279-
71. PAPUA NEW GUINEA PORTS CORPORATION LIMITED
(Formerly PNG Harbours Limited)71.1 INTRODUCTION
71.1.1 Legislation
PNG Harbours Limited was incorporated under the Companies Act on
19 June 2002 in
accordance with the privatisation policy approved by the NEC in
1999. The Company
changed its name to Papua New Guinea Ports Corporation Limited on
7 March 2006.71.1.2 Functions of the Company
The general functions of PNG Ports Corporation Limited include
the regulation,
management, control and operation of declared ports; the movement
of shipping
therein; and the maintenance of light ships, buoys, beacons,
moorings, wharves, docks,
piers, jetties, landing stages, slips, landing ramps and
platforms.71.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
71.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the Company’s
financial statements for the year ended 31 December 2018 was
issued on 30 June 2020.
The report contained a Qualified Opinion.“QUALIFIED OPINION
-
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-
In my opinion, except for the effects of the matters referred to
in the Basis for Qualified
Opinion paragraphs:(a) the financial statements of PNG Ports Corporation Limited for
the year ended
31 December 2018;(i) give a true and fair view of the financial position and
the results of its
financial performance and cash flows for the year ended on
that date; and(ii) the financial statements have been presented in
accordance with the
Companies Act 1997, International Financial Reporting
Standards and
other generally accepted accounting practice in Papua New
Guinea.(b) proper accounting records have been kept by the Company, as
far as appears from
my examination of those records; and(c) I have obtained all the information and explanations
required.-280-
Papua New Guinea Ports Corporation Limited
BASIS FOR QUALIFIED OPINION
Port Assets, ADB Loan Liability and State Equity Funding which all
related to the
Lae Port (Tidal Basin) Development not taken up in the Books, and
off the Balance
Sheet of the CompanyNote 24 (b) to the financial statements disclosed contingent asset
and liability at K734
million and K434 million respectively. These balances related to the
development of
Lae Tidal Basin which were transferred by Kumul Consolidated
Holdings (KCH) to the
Company. I received written confirmation from KCH that the transfer
was done to
effect the National Executive Council (NEC) Decision No: 121/2017
which resolved
for transfer of all liabilities incurred on the construction of the
Lae Tidal Basin and
resulting assets to PNG Ports Corporation Limited. -
Page 409 of 475
-
The Company has been generating income from the improved Lae Port
(asset) since the
transfer of the completed project facilities in April 2015. However,
the Company had
not recorded this important revenue generating asset to the value of
K734 million, the
ADB loan liability of K434 million and the State’s equity funding
balance of K233
million in its books and reflected in the balance sheet. Instead,
the Company opted to
disclose as contingent asset and liability. This promotes the
financial statements of the
Company to be incomplete and is a departure from IAS 1, Presentation
of Financial
Statements.Consequently, the asset and liability position of the Company could
be materially
misstated. Should necessary adjustments be initiated, I was unable
to quantify the
resultant impact that such adjustments might have on the financial
position and
financial performance of the Company for the year ended 31 December
2018.Authenticity of Payments made to a Contractor and Valuation of Work
in
Progress related to Lae Industrial Park Development ProjectNote 15(c) to the financial statements disclosed a loan amount of
K350 million obtained
from Exim Bank of China for design, construction and
commercialization of the
Western Side of the Lae Tidal Basin into Industrial Real Estate. Out
of the loan amount,
a total of K133.3 million was drawn between 2017 and 2018 and paid
to a contractor
engaged for the project. However, I was not provided with sufficient
audit evidence
including project progressive status report by Project Manager
specifying percentage
of milestone achieved and instalment payment amount recommended. I
applied
professional judgement upon inspection of the project site that the
level of work done
at the site might not worth the K133.3 million paid to the
contractor and recorded in the
Company’s books as Work in Progress (WIP).Consequently, I was unable to comment on the validity of the
payments made to the
contractor, nor was I able to ensure accuracy and completeness of
the Work in Progress -
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-
and associated liabilities disclosed in the financial statements as
at 31 December 2018.”-281-
Papua New Guinea Ports Corporation
Limited71.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Company for the year
ended 31 December 2018
was issued on 30 June 2020. The report contained the following
observations:Lack of Supporting Documentations to Validate Payments and
Valuation of Work
DoneMy review of the Company’s payments during the year revealed an
invoice valued at
K58,157,498 and paid to a contractor without any support of
proper documentary
evidences of the work done. This amount was a second payment
whilst first payment
of K75 million had been made in 2017. As a result, cumulative
payments made to that
particular contractor up to 31 December 2018 totaled K133.3
million. I applied
professional judgement upon inspection of the project site that
the level of work done
at the site might not worth the K133.3 million paid to the
contractor and recorded in the
Company’s books as Work in Progress (WIP). I raised this issue
to the management
and management responded as follows:“A second payment of 15% or K58,157,498 of the sum of the
contract was paid
consistent with the contract payment schedule.”Payments not Supported with Contract Agreements
The Company engaged various security companies during the year
under review. My
review of the payments made to the security companies revealed
that amounts of
K3,523,376 and K1,945,511 were paid to Ranger Protection Limited
and Wasman
Security Services Limited respectively. However, I was not
provided with the contract -
Page 411 of 475
-
agreements and all relevant supporting documentations to
validate the payments made.
As a result, I was not able to substantiate the basis for making
the payments, and
confirm whether due processes were followed in awarding the
contract to the security
firms. I raised this issue to the attention of the management
and management responded
as follows:“The previous board approved for the service to be continued on
a month by month
basis until a security firm is contracted through a tender
process”Payments beyond the Approved Contract Value
The Board of the Company approved full development cost of the
CRCE Tower
Limited – Office Complex at K43.5 million which included GST.
However, the
contractor considered the development cost of K43.5 million as
GST exclusive and had
been invoicing the Company with GST again added on. As a result,
the Company
overpaid a total of K2,667,750 to the contractor. I raised this
issue to the attention of
the management and management responded as follows:-282-
Papua New Guinea Ports Corporation
Limited“The management has sought professional tax and legal advice in
which opinion has
independently confirmed that no GST should have been charged by
the contractor by
terms and the legal structure of the agreement. Thus, management
has already taken
the position that it will deduct the GST overpayment from the
final outstanding
milestone claims.”71.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the year ended 31 December 2019 was in progress. -
Page 412 of 475
-
-283-
72. PNG AIR SERVICES LIMITED
72.1 INTRODUCTION
72.1.1 Legislation
PNG Air Services Limited was incorporated under the Companies
Act and
commenced operation in January 2008 after its incorporation on
30 April 2007. The
Company was established in accordance with Section 143(6) of the
Civil Aviation Act
2000 (as amended) which envisaged the establishment of a Company
to deliver “air
traffic services, aeronautical navigation services and
aeronautical communication
services and all related services in Papua New Guinea and the
airspace for which it -
Page 413 of 475
-
is responsible.”
PNG Air Services Limited as a State Aviation Enterprise (SAE) is
an independent
self-funding Company. The two shares issued by the Company are
equally held by
the Minister for Civil Aviation and the Minister for Finance on
behalf of the
Independent State of Papua New Guinea. The Company has its own
operating
certificates and operates independently from other Aviation
Entities established under
the Civil Aviation Act 2000 (as amended).72.1.2 Functions of the Company
PNG Air Services Limited was established with a purpose of
delivering safe and
efficient air navigation services to the aviation industry and
the travelling public. It
ensures provision of quality Communication, Navigation,
Surveillance (CNS) and Air
Traffic Management (ATM) services to both domestic and
international customers
who operate within the PNG airspace, at a reasonable cost, hence
to be a leader in
providing world standard air navigation services. PNG Air
Services Limited makes
sure that the radio coverage in PNG both VHF and HF are improved
and that efficient
and effective air traffic services are maintained.72.2 STATUS OF FINANCIAL STATEMENTS
The Company had advised me as per the letter dated 14 November
2016 that it would
appoint its own auditor for the 2016 and subsequent years’
audits. However, I advised
the Company of my responsibility under Section 214(3) of the
Constitution of the
Independent State of PNG, to inspect and audit and report to
Parliament on all bodies
set up by an Act of Parliament.At the time of preparing this Report, the Company had not
submitted its financial
statements for the years ended 31 December 2016, 2017, 2018 and
2019 for my
inspection and audit.-284-
-
Page 414 of 475
-
73. PNG DATACO LIMITED
73.1 INTRODUCTION
73.1.1 Legislation
The PNG DataCo Limited came into existence on 2 December 2010
after the name was
changed from Whittlesea Limited. Whittlesea Limited was
incorporated under the
Companies Act on 21 April 2010.On 6 February 2014, the National Executive Council (NEC) in its
Decision No. 32/2014
approved for immediate operations of the PNG DataCo Limited as a
100% Majority
State Owned Enterprise (SOE) to oversee and implement the
National Transmission
Network (NTN) Impact Project Strategy and Objectives as approved
by the NEC
Decision No. 268 of 2010, NEC Decision No. 107 of 2011 and NEC
Decision No. 108
of 2012.PNG DataCo Limited is governed by the Companies Act, the
Independent Public
Business Corporation of PNG Act, and the regulator – National
Information and
Communication Technology Authority Act. The Company came into
operations in
February 2014.73.1.2 Objectives of the Company
The key objectives of the Company are to:
• work towards the PNG Government’s Policy on ICT to refurbish
the existing
transmission network, extend its availability across the
country, allow new
transmission networks to develop, and to increase technical
capabilities to support
high-speed broadband;
• develop the National Transmission Network (NTN) as the
efficient domestic and
international telecommunication transmission network and that
the NTN is
available on a wholesale and non-discriminatory basis to all
licensed operators of
the telecommunication industry to stimulate and foster social
and economic
developments in Papua New Guinea using State Owned assets and
new network -
Page 415 of 475
-
investments;
• provide internet gateway services at the international
gateway;
• improve the availability of broadband transmission
telecommunication services
within PNG and internationally;
• improve performance of telecommunication services in terms of
responsiveness;
• lower the cost of telecommunication services to end users;
and
• ensure the current network operations are scalable,
standardise network and IT,
invest in required capabilities to build low-cost position,
develop deal making
capabilities, and best-in-class execution capabilities.-285-
PNG DataCo Limited
73.1.3 Functions of the Company
The main functions of the Company are to:
• develop the National Transmission Network (NTN) as the
efficient domestic and
international transmission network; and• supply high value and market driven suite of data services on
a wholesale and non-
discriminatory basis to all licensed operators and ISPs (i.e.
holders of a Network or
applications licenses) leveraging its exclusive network asset
base.73.2 AUDIT OBSERVATIONS
73.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the financial
statements of the Company for the year ended 31 December 2016
was issued on 20
May 2020. The report contained a Qualified Opinion.“QUALIFIED OPINION
In my opinion, except for the effects of the matter referred to
in the qualification
paragraph below:(a) the financial statements of PNG DataCo Limited for the year
ended 31 -
Page 416 of 475
-
December 2016:
(i) give a true and fair view of the financial position and
the results of its
operation and cash flows for the year ended on that date;
and(ii) the financial statements have been presented in
accordance with the
Companies Act, International Financial Reporting
Standards and other
generally accepted accounting practices in Papua New
Guinea;(b) proper accounting records have been kept by the Company; and
(c) I have obtained all the information and explanations as
required.BASIS FOR QUALIFIED OPINION
The financial statements disclosed that the carrying value of
property, plant and
equipment was K167.45 million as at 31 December 2016, of which
K166.38 million
was fibre optic lines and associated construction in progress.
In accordance with IAS
36, Impairment of Assets, an entity shall assess at the end of
each reporting period
whether there is any indication an asset may be impaired.-286-
PNG DataCo Limited
If such indication exists, the entity shall measure the
recoverable amount of the asset
and compare the recoverable amount of the asset to its carrying
amount. If the carrying
amount exceeds the recoverable amount of the asset an impairment
charge is to be
recorded.Based on my audit procedures, I identified evidence to support
the existence of
impairment indicators of the fibre optic lines asset at 31
December 2016. However, the
company has not performed an impairment assessment as required by
IAS 36. Also, the
Company has not prepared information to enable assessment of the
recoverable amount
of its fibre optic lines asset as at 31 December 2016. I was
unable to obtain sufficient
appropriate audit evidence to assess whether the carrying amount -
Page 417 of 475
-
of the fibre optic lines
asset exceeds the recoverable amount for the year end. As a
result, I was unable to
satisfy myself about the accuracy of the carrying value of the
property, plant and
equipment as at 31 December 2016 and any impairment loss that
might have been
recognised in the profit and loss account for the year ended.
Consequently, I was unable
to determine whether any adjustments to these amounts were
necessary.OTHER MATTER
Compliance with Public Finances (Management) Act 1995
The financial statements for the year ended 31 December 2016 was
approved and issued
on 13 May 2020 and was submitted to my Office. The Directors did
not meet the
deadline set by Section 63 of the Public Finances (Management)
Act 1995 for audited
financial statements of public bodies/companies owned by the
State to be furnished to
the Minister before 30 June of the subsequent year.”73.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the year ended 31 December 2017 had been completed
and the results
were being evaluated.The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements of the Company for
the year ended 31
December 2018 was in progress.The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit.-287-
-
Page 418 of 475
-
74. PNG POWER LIMITED
74.1 INTRODUCTION
74.1.1 Legislation
PNG Power Limited (PPL) was incorporated by the Privatisation
Commission under
Section 3(1) of the Electricity Commission (Privatisation) Act
2002 as the successor
company to the PNG Electricity Commission (ELCOM), a statutory
corporation
established under the Electricity Industry Act (Chapter 78).• the Electricity Commission (Privatisation) Act transferred
to PNG Power Limited:(i) all of ELCOM’s right, title and interest to any and all
assets other than those
transferred to PNG Dams pursuant to items 1(a) and (c),
including, without
limitation, the electricity generation assets located in
the areas of Sirinumu
Dam and Yonki Dam;
(ii) all of ELCOM’s liabilities other than those transferred
to PNG Dams
pursuant to item 2(b); and
(iii) all water use permits held by ELCOM and referred to in
Section 7(1) of the
Act.• transferred all of the employees of ELCOM to the employment
of PNG Power
Limited;
• declared PNG Power Limited as a “651-cifi1-d (ntity” for the
purposes of Section
8 of the Act;
• in accordance with the privatisation policy of the
Privatisation Commission, all the
issued shares of PNG Power Limited were transferred to the
Privatisation
Commission (and deemed transferred to the successor to the
Privatisation
Commission, the Independent Public Business Corporation of
Papua New Guinea
(IPBC of PNG), now Kumul Consolidated Holdings as the
trustee of the General
Business Trust under the Independent Public Business
Corporation of Papua New
Guinea Act; and
• the consideration for the transfers referred to in items (i)
and (ii) was nil.74.1.2 Functions of the Company
-
Page 419 of 475
-
The functions of the Company are to plan and co-ordinate the
supply of electricity
throughout the country; to generate, transmit, distribute,
reticulate and sell electricity;
and to provide to the public bodies and the State, services
related to sale, consumption
and use of electricity.-288-
PNG Power Limited
74.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the year ended 31 December 2018 was in progress.The Company had not submitted its financial statements for the
year ended 31
December 2019 for my inspection and audit. -
Page 420 of 475
-
-289-
75. POST (PNG) LIMITED
75.1 INTRODUCTION
75.1.1 Legislation
Post (PNG) Limited was incorporated on 24 December 1996 under
the Companies Act.
This Company was formed following the NEC Decision No. 18/96 of
17 April 1996 to
corporatise the Post and Telecommunications Corporation (PTC)
and separate it into
three entities, namely: Telikom PNG, Post PNG and PNG
Telecommunication
Authority (PANGTEL) now known as National Information and
Communications
Technology Authority (NICTA) as established by Section 8 of the
National Information
and Communications Act.As a result of the NEC Decision, all assets, rights,
liabilities, staff and regulatory powers
and business of the PTC relating to Postal Services were, as per
the allocation statement
approved by the Minister for Communications, transferred on 31
December 1996 at net
book value to Post (PNG) Limited. Post (PNG) Limited is a 100%
state-owned
Company and it commenced trading on 1 January 1997.75.1.2 Objectives of the Company
The primary objectives of the Company are to:
• provide domestic and international postal services to meet the
reasonable needs of
the people, Government, non-governmental organisations and
business enterprises
of PNG; -
Page 421 of 475
-
• manufacture and market postage stamps, philatelic products and
other products for
use in connection with services provided by Post PNG;
• provide money transfer services within the Independent State
of PNG and between
PNG and other places;
• engage in research relating to postal products and activities;
• provide packet and parcel carrying services;
• provide courier and freight services;
• provide mail house, documents exchange and contract mail
management services;
• carry on any business or activity that is related, incidental,
ancillary or
complementary to the provision of domestic and international
postal services;
• provide fund transfer services, act as agent on behalf of
other entities, bodies and
organisations in relation to banking arrangements and in the
collection of premium
rates, licence fees, other like services and operate a savings
bank; and
• perform functions relating to the provision of postal services
in a manner consistent
with PNG’s obligations under any convention.-290-
Post (PNG) Limited
75.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
75.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the inspection
and audit of the accounts and records of the Company for the year
ended 31 December
2018 was issued on 16 October 2019. The report did not contain
any qualification.75.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act on
the inspection and
audit of the accounts and records of the Company for the year
ended 31 December 2018
was issued on 16 October 2019. The report contained the following
observations:Stock
-
Page 422 of 475
-
I noted that the Company’s stock increased over K2 million. My
review of this stock
revealed that a number of stock were very old but the Company
still recognized them
as stock. In addition, the Company does not have a standard
policy to manage the
obsolete and damaged stock. As a result, I was unable to comment
on the effectiveness
of the controls surrounding the management of the Company’s
stock.Internal Audit Report-International Inbound Process
An internal audit conducted into the International Inbound
Process at mail cargo at the
airport revealed that the International Inbound function was not
in compliance with the
relevant policies, systems and procedures that were set up to
manage it. The report also
identified that there are significant delays in the billing of
international postal operators
which are said to be in millions of kina. I recommended the
management to implement
the various recommendations specified in the report as a matter
of priority and the
management responded as follows:“O LnL1JIPInJIL1J(ees to continue the review of the process of
the International Inbound
Mail Cargo and will analyze the recommendations by its internal
audit department for
S(RFIIViPS(RYIPITJVLQIW-Ix(iJy RI PLiciJePT”Provision for Doubtful Debts
As reported in my prior year audit reports, I noted that the
Company’s debtors remained
consistent in the current year by K9.65 million. However, the
Company did not
adequately provide for the doubtful debts to cover the trade
debtors in the event that the
debtors become bad. In addition, the process of debt recovery and
the staff involved in
it were slow. Further, the Company does not have a policy in
place to appropriately
provide for the doubtful debts and manage the debt recovery/
collection process.
Consequently, I was unable to comment on the controls surrounding
the management
of trade debtors and their provision for doubtful debts.
-291- -
Page 423 of 475
-
Post (PNG) Limited
75.3 STATUS OF FINANCIAL STATEMENTSAt the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the year ended 31 December 2019 was in progress.-292-
76. TELIKOM (PNG) LIMITED
-
Page 424 of 475
-
76.1 INTRODUCTION
76.1.1 Legislation
Telikom (PNG) Limited was incorporated under the Companies Act.
This Company
was formed following the NEC Decision No. 18/96 of 17 April 1996
to corporatise the
Post and Telecommunications Corporation (PTC) and to separate it
into three entities
namely: Telikom (PNG) Limited, Post PNG Limited and National
Information and
Communication Technology Authority (NICTA) formerly known as
(PANGTEL).As a result of the NEC Decision, all assets, rights,
liabilities, staff and regulatory powers
and business of the PTC relating to Telecommunication Services
were transferred on
31 December 1996 at the net book value to Telikom (PNG) Limited
as per the allocation
statement approved by the Minister for Communications. Telikom
(PNG) Limited is a
100% State Owned Company and it commenced trading on 1 January
1997.76.1.2 Objectives of the Company
The primary objectives of the Company are to:
• be the successor Company to the Telikom Divisions of PTC
within the meaning
of and for the purposes of the Telikom (PNG) Limited Act;
• supply telecommunication services within PNG and between PNG
and other
places;
• carry on any business or activity relating to
telecommunications either inside or
outside of PNG;
• publish telecommunications directories, and to supply
directory information
service;
• supply, install and maintain customer equipment and customer
lines;
• develop, manufacture, market and supply facilities and
software;
• supply value added services;
• utilise its network, installations and facilities for
purposes other than
telecommunications, to the extent that such network
installations and facilities are
not fully utilised in the supply of telecommunications;
• carry on any business incidental to telecommunication;
• unless otherwise advised to the contrary by the Minister -
Page 425 of 475
-
acting in accordance with
a directive of the NEC to:-293-
Telikom (PNG) Limited
‒ act as an adviser to the Government of PNG on matters
relating to
telecommunication activities in PNG;
‒ represent PNG as a member of, and actively participate, in
international
bodies concerned with the administration of
telecommunication services;
‒ enter into international agreement relating to
telecommunication activities;
and
‒ perform functions relating to the provision of
telecommunication services
in a way consistent with PNG’s obligations under any
convention; and• exercise such powers to negotiate, prepare, execute and perform
any contracts or
management arrangements of the State as may be delegated to it
or conferred on it.76.1.3 Subsidiaries of the Company
The subsidiaries of Telikom (PNG) Limited are DATEC (PNG)
Limited, Kalang
Advertising Limited, Media Niugini Limited (EMTV) and PNG
Directories Limited.
Comments in relation to these subsidiaries are contained in
paragraphs 76A, 76B, 76C
and 76D of this Report respectively.76.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the years ended 31 December 2015, 2016 and 2017 were
completed and
results were being evaluated. -
Page 426 of 475
-
The fieldwork associated with the inspection and audit of the
accounts and records and
the examination of the financial statements for the years ended
31 December 2018 and
2019 were in progress.-294-
76A. DATEC (PNG) LIMITED
(A Subsidiary of Telikom (PNG) Limited)76A.1 INTRODUCTION
76A.1.1 Legislation
Datec (PNG) Limited was incorporated under the Companies Act.
The Company was
fully acquired by Telikom (PNG) Limited from Steamships Trading
Company
Limited on 1 August 2014. The Company is a wholly owned
subsidiary of Telikom
(PNG) Limited.76A.1.2 Function of the Company
Datec (PNG) Limited’s principal activity is in the provision and
support of technology
applied solutions including business critical ICT consulting,
solutions and services,
IT outsourcing, business process outsourcing, internet services,
electronics and
computer retail, training and wide-ranging technical support.76A.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
76A.2.1 Comments on Financial Statements
-
Page 427 of 475
-
My report in accordance with the provisions of the Companies Act
on the inspection
and audit of the accounts and records of the Company for the
year ended 31 December
2017 was issued on 3 March 2020. The report did not contain any
qualification.76A.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of the Company for the year
ended 31 December
2017 was issued on 3 March 2020. The report contained the
following observations:Review and Approval of Manual Journal Entries – Segregation of
DutiesMy review of the Company’s journal entries processed during the
year revealed that
there was no proper segregation of duties in place in the review
and posting of manual
journal entries. In order for an internal control to be
effective, there should be
adequate division of responsibilities among those who perform
control activities and
those who review such activities. Segregation of duties reduces
the risk of error and
serves as a deterrent to fraud which could have materially
misstate the financial
statements.-295-
Datec (PNG) Limited
Accounting for Projects RevenueThe Company recognized the revenue earned from the projects when
cash was
received instead of when the services were performed. This reflected
cash basis of
accounting which is not in accordance with the accounting standards
and the
Company’s Accounting Policy of accrual basis.The Company should account for its project revenue when the services
are performed -
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-
to the customer regardless of when the services have been settled.
Valuation of Foreign Currency Denominated Accounts Payable
My review of the Company’s accounts payable balances showed that its
foreign
currency denominated outstanding invoices were not properly valued
at end of year
closing rate. Although I had recalculated the appropriate closing
rate and concluded
that the differences were immaterial, foreign currency denominated
account balances
in the books must be appropriately revalued to PGK at the end of
each month using
the prescribed closing rate (e.g BSP) and capture the correct
foreign exchange gain
or loss in the income statement.Manual Calculation for Inventory Provisioning
The Company’s policy for provision for inventory obsolescence
encompasses several
criteria. During my review, I noted that one of the criteria was not
considered in the
calculation of the inventory provision. The lack of proper review of
the manual
calculation for inventory provision exposes the Company to
misstatements and error
which may go undetected. I recommended management to consider
implementing
guidelines for reviewer to ensure the review process is performed
with sufficient
granularity.Authorized Bank Signatories
The signatories of the Company’s bank accounts were not updated to
reflect the
current management. Instead the signatories of the former chief
executive officer,
chief financial officer and finance controller remain listed as part
of current officers.
This may attract an opportunity of payment that may not be properly
authorized by
current authorized signatories. I recommended the management to
update its roster of
bank signatories to reflect the current management.Proper Use and Monitoring of Goods Received Not Invoiced Account
(GRNI)My review of the GRNI account revealed certain costs in which
invoices were already
received at balance sheet date but were not properly removed from -
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-
GRNI listing. In
addition, the Company does not maintain a proper reconciliation of
GRNI balance
which should only show the breakdown of the balance at the end of
the year.-296-
Datec (PNG) Limited
I recommended the management to revisit its reconciliation
process for GRNI and
ensure that is periodically monitored to effectively assist in
detecting any unrecorded
or overdue GRNI balances which may have materially misstate the
financial
statements.Control Findings from Information Technology (IT) Environment
My review of the IT control environment revealed following
issues:a) Periodic access rights review or recertification for all in-
scope application
system is yet to be established;
b) Majority of EZY ISP application users are accorded super
admin/power admin
access profiles on the system. Review of transactions or
activities of super-users
for the all in-scope applications are yet to be established;
c) Undocumented granted of access rights to user excess
information within
applications and untimely removal of user accounts of
terminated employees;
d) Absence of service level agreements with the software houses
may mean that
there is no mutually agreed and legally defined basis
regarding service quality,
deliverables, delivery timelines, priorities and
responsibilities between the
Company and the software houses;
e) Periodic backup recovery testings were not performed and
back-up tapes were
not stored in a secure offsite location. I also noted
consistent Pronto tape back-
up failures;
f) Lack of formal password policy and user authentication. No
password policy
exists to govern password settings. Password configurations
are found to be
below industry standard especially password length, age,
history, complexity -
Page 430 of 475
-
and lockout settings. User ID naming convention implemented
for user accounts
was inconsistent; and
g) There was no change in management register/monitoring tool in
place.76A.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2018 and 2019 were
in progress.-297-
76B. KALANG ADVERTISING LIMITED
(Subsidiary of Telikom (PNG) Limited)76B.1 INTRODUCTION
76B.1.1 Legislation
Kalang Advertising Limited was incorporated under the Companies
Act. The
Company is wholly owned by Telikom (PNG) Limited.The ownership of the Company changed following the National
Court Order of 9
September 1997 which allowed Telikom (PNG) Limited to convert
the debt due from
Kalang Advertising Limited into shareholding. Subsequently,
Kalang issued 535,424
ordinary shares to Telikom (PNG) Limited on 31 October 1997.76B.1.2 Functions of the Company
Kalang Advertising Limited was set up primarily to take over the
activity of
commercial radio broadcasting previously under the National -
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-
Broadcasting
Commission.The Company carries on the business of producers, consultants
and promoters of
Broadcast Television, Community Television, Video, Audio, Film,
Visual, Cassettes
Recordings, Productions and Recordings.76B.2 AUDIT OBSERVATIONS
76B.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the inspection
and audit of the accounts and records of the Company for the
year ended 31 December
2016 was issued on 26 August 2019. The report did not contain
any qualification,
however, with an emphasis of matter.
“EMPHASIS OF MATTERMaterial Uncertainty Related to Going Concern
I draw attention to Note 1.1 in the financial statements, which
indicates that the
Company incurred a net loss of K493,055 for the year ended 31
December 2016 and
as of that date, the Company’s current liabilities exceeded its
current assets by
K1,720,508.-298-
Kalang Advertising Limited
These events or conditions, along with other matters set out in
Note 1.1, indicate the
existence of a material uncertainty that may cast significant
doubt about the
Company’s ability to continue as a going concern and therefore
the entity may be
unable to realize its assets and discharge its liabilities in
the normal course of business
and at the amounts stated in the financial statements.”76B.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the -
Page 432 of 475
-
financial statements of
the Company for the years ended 31 December 2017, 2018 and 2019
were in progress.-299-
76C. MEDIA NIUGINI LIMITED (EMTV)
(A Subsidiary of Telikom (PNG) Limited)76C.1 INTRODUCTION
76C.1.1 Legislation
Media Niugini Limited (EMTV) was incorporated under the
Companies Act. The
Company was acquired by Telikom (PNG) Limited from Fiji
Television Limited
(FijiTV) on 4 February 2016. -
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-
The Company was founded in 1985 by two local businessmen in a
joint venture with
the Nine Network of Australia. In July 1987, the Company
commenced broadcasting
through its national television service. In 1990, Nine Network
acquired 100%
ownership of Media Niugini Limited and later sold its interest
in the Company to Fiji
Television Limited (FijiTV) in December 2004. The Company then
operated as a
subsidiary of FijiTV.The Company is now a wholly owned subsidiary of Telikom (PNG)
Limited.76C.1.2 Functions of the Company
Media Niugini Limited, trading as EMTV, provides television
broadcasting services
in Papua New Guinea.The Company offers:
• current affairs, national news, weather reports and special
documentaries; and
• shows in the areas of sports, lifestyle, entertainment, drama,
children, religion,
music and others.76C.2 AUDIT OBSERVATIONS
76C.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies Act
on the inspection
and audit of the accounts and records of the Company for the
year ended 31 December
2017 was issued on 23 October 2019. The report did not contain
any qualification,
however, an emphasis of matter.-300-
Media Niugini Limited (EMTV)
“EMPHASIS OF MATTER
-
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-
Material Uncertainty Related to Going Concern
I draw attention to Note 2 in the financial statements, which
indicates that the
Company incurred a net loss of K5,690,441 for the year ended 31
December 2017
and as of that date, the Company’s current liabilities exceeded
its current assets by
K13,678,998. These events or conditions, along with other
matters set out in Note 2,
indicate the existence of a material uncertainty that may cast
significant doubt about
the Company’s ability to continue as a going concern and
therefore, the Company
may be unable to realize its assets and discharge its
liabilities in the normal course of
business and at the amounts stated in the financial
statements.”76C.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2018 and 2019 were
in progress. -
Page 435 of 475
-
-301-
76D. PNG DIRECTORIES LIMITED (Formerly E. H. O’Brien Limited)
(Subsidiary of Telikom (PNG) Limited)
76D.1 INTRODUCTION76D.1.1 Legislation
Edward H.O’Brien Limited is a Company incorporated under the
Companies Act. The
Company is jointly owned by Telikom (PNG) Limited (54%) and
Edward H.O’Brien
Enterprise of Sydney, Australia (46%). The Company changed its
name to PNG
Directories Limited in 2002.76D.2 AUDIT OBSERVATIONS
76D.2.1 Comments on Financial Statements
My report in accordance with the provisions of the Companies
Act on the inspection
and audit of the accounts and records of the Company for the
year ended 31 December
2017 was issued on 30 September 2019. The report did not
contain any qualification.76D.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of
the Company for the years ended 31 December 2018 and 2019 were
in progress. -
Page 436 of 475
-
-302-
77. WATER PNG LIMITED (Formerly PNG Water Board)
77.1 INTRODUCTION
77.1.1 Legislation
PNG Waterboard was established by the National Water Supply and
Sewerage Act 1986
which came into operation on 1 January 1987. The 1986 Act
repealed the National
Water Supply and Sewerage Act (Chapter 393) and thereby
abolished the National
Water Supply and Sewerage Board. On 10 December 2010, PNG Water
Board changed
its name to Water PNG.On 21 January 2017, the National Water Supply and Sanitation Act
2016 came into
effect paving for this utility (Water Supply and Sanitation
Services) provider to be
corporatised as a Company. As a result, the former Water PNG was
abolished and a
new company, Water PNG Limited was incorporated on 30 March
2017. Water PNG
Limited operates as a company effective from the date of its
incorporation.77.1.2 Functions of Water PNG Limited
The functions of the Company are:
(a) to provide, design, construct and maintain such water supply
systems as may be
required for collection, production, supply and use of water
for private and
public purposes in and for cities, towns and rural areas in
accordance with this
Act;
(b) to provide, design, construct and maintain such sanitation
systems as may be
required in and for the disposal of sewage and wastewater in
and for cities,
towns and rural areas in accordance with this Act;
(c) to secure and provide an adequate supply of water in
accordance with this Act;
(d) to manage, operate and maintain water supply systems and -
Page 437 of 475
-
sanitation systems
owned by the Company and such other installations as maybe
erected or
constructed by the Company;
(e) to work with provincial governments and through them, with
authorities
involved in district administration, and where appropriate
with other State-
Owned enterprises, to further the objectives of this Act;
(f) to comply with the Public Health Act (Chapter 226), the
consumer protection
provisions of the Independent Consumer and Competition
Commission Act
2002 and the Environment Act 2000, and to abide by such
water quality and
sewerage discharge standards as are from time to time in
force; and
(g) generally, to do such supplementary, incidental or
consequential acts and things
as are necessary or convenient for carrying out its
functions.-303-
Water PNG Limited
77.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS
77.2.1 Comments on Financial Statements
My report in accordance with the Companies Act on the Company’s
financial
statements for the period 1 April 2017 to 31 December 2017 was
issued on 2 June 2020.
The report contained a Disclaimer of Opinion.“DISCLAIMER OF OPINION
I am unable to express an opinion on the accompanying financial
statements of the
Company, because of the significance of the matters described in
the basis for
disclaimer of opinion paragraphs below, I have not been able to
obtain sufficient
appropriate audit evidence to provide a basis for an audit
opinion on the financial
statements.BASIS FOR DISCLAIMER OF OPINION
-
Page 438 of 475
-
Limitation of Scope due to Opening Balances
My audit report for the 15 months period ended 31 March 2017 was
a Disclaimer of
Opinion due to the limitation of scope on the opening balances.
A number of general
ledger accounts had unknown material amounts which related to
prior years’ opening
balances. The unexplained opening balances had not been
reconciled prior to migration
from the former Magix accounting system to the current Pronto
accounting system. I
was unable to satisfy myself as to the accuracy and completeness
of the opening
balances of fixed assets, trade debtors, other current assets,
asset revaluation reserve,
trade payables, other payables and long-term borrowings. Since
these opening balances
entered into the determination of the results of operations and
cash flows of Water PNG
for the period under review, I was unable to determine whether
any adjustments to the
results of operations, financial position and cash flows might
have been necessary for
the period ended 31 December 2017.Current Assets
Note 3 to the financial statements disclosed a total of
K7,774,368 as Other Current
Assets. Of the total, 88% or K6,851,067 could not be confirmed
as to the accuracy as I
was not provided with the necessary reconciliations, schedules
and supporting
documentation for my review of the following Other Current
Assets account balances:-304-
Water PNG Limited
Kina
Prepayments 2,516,121
Home Ownership Scheme 247,914
Suspense Account 253,699
Bank Suspense Account 1,480,883
Novated Lease Suspense 151,167 -
Page 439 of 475
-
Sundry Debtors 2,120,172
Accrued Income 81,111
TOTAL 6,851,067As a result, I was unable to obtain sufficient and appropriate audit
evidence to ensure
the completeness and accuracy of the above balances taken up under
Other Current
Assets as at 31 December 2017.Current Liabilities
Note 5(b) to the financial statements disclosed total Other Payables
and Accruals at
K19,781,099. Out of the total, I was not provided with the relevant
supporting
documentations including listings and reconciliations of the
following liabilities to a
value of K15,592,757 (79%) for my review:Kina
Outstanding Accrued Expenses 12,075,605
Business Payment Tax 349,449
Purchase Clearing Account 2,367,021
Interest Withholding Tax 71,640
Contract Retention (Clearing Account)729,042
TOTAL 15,592,757Therefore, I was unable to perform my audit procedures to assess the
completeness and
accuracy of the transactions recorded in the general ledger and the
balance presented as
current liabilities in the financial statements. Consequently, I am
unable to determine
the accuracy and completeness of the Current Liabilities taken up in
the financial
statements for the period ended 31 December 2017.Deferred Grant – Current
Note 8(a) to the financial statements disclosed Deferred Grant –
Current at K6,264,697.
I was not provided with the relevant supporting documentations
including listing and
reconciliation for performing my audit procedures to determine the
movement and
assess the completeness and accuracy of the balance as presented in
the financial
statements. Consequently, I was unable to determine the accuracy and
completeness of
the balance of the Deferred Grant – Current taken up in the
financial statements for the
period ended 31 December 2017. -
Page 440 of 475
-
-305-
Water PNG Limited
Non- Current Liabilities
Note 6 and 8(b) to the financial statements disclosed Non-Current
Liabilities totaled
K163,891,473 as shown below:Kina
Bonds & Refundable Deposits 6,252,767
ADB Loan 104,918,261
Deferred Income 51,238,867
Lease Liability 1,481,578
TOTAL 163,891,473I was not provided with all the relevant reconciliations, schedules
and supporting
documentations for my review. Hence, I could not perform the
necessary audit
procedures to evaluate the balances. Consequently, I was unable to
determine the
completeness and accuracy of the Non-Current Liabilities taken up in
the financial
statements for the period ended.Capital Works-In-Progress
Note 7 to the financial statements included Work-In-Progress (WIP)
at K34,756,881. I
was not provided with complete listing and status report of all
projects that have been
in progress at the time of this report. Therefore, I could not
perform the necessary audit
procedures to substantiate the completeness, existence and accuracy
of the value of
WIP. Further, I could not determine whether there has been timely
transfer of completed
projects to proper fixed asset categories to which they relate. As a
result, I could not
conclude on the completeness and accuracy of the depreciations
charged for the period
and possible impacts this might have on the profit and loss account.
Consequently, I am
unable to comment on the correctness of the value of WIP as at 31
December 2017 and
the depreciations charged to the profit and loss account.Land and Building
Note 7 to financial statements disclosed value of the Land and
Building totaling -
Page 441 of 475
-
K28,847,391. Of the total, K8,633,734 was pertaining to land and
K20,213,656 for the
value of buildings. However, listing of the portion of lands and
buildings were not
provided for my review. In addition, Water PNG does not have the
land titles for the
portions of land it owns. I was unable to ensure the legal ownership
over the land taken
up in the books.”-306-
Water PNG Limited
77.2.2 Audit Observations Reported to the Ministers
My report to the Ministers under Section 8(2) of the Audit Act
on the inspection and
audit of the accounts and records of Water PNG for the period 1
April 2017 to 31
December 2017 was issued on 3 June 2020. The report contained
the following
observations:General Ledger Account Reports
The system generated general ledger transaction reports provided
to me were not user-
friendly. The format provided did not have details of suppliers,
payment reference,
transaction description and GL account totals for all business
units combined. I
requested for a better organized report but was not addressed
due to system capacity
issues. A lot of time was spent sorting the transactions in
order to get the transactions
organized in a meaningful format to conduct my review of the
accounts. Furthermore,
some of the account balances from the report did not agree with
the trial balance. Also,
no regular reconciliation was performed on General Ledger
accounts. I brought this to
the attention of management and they responded as follows:“We agree to the audit observation and advise that
reconciliation are done for 2018 I
and 2019.” ii -
Page 442 of 475
-
Land Titles
I noted that Water PNG does not have title deeds for all the
properties (lands and
buildings) it owns. Water PNG was unable to provide proper
listing of the land and
buildings it claimed to own. I brought this to the management’s
attention and they
responded as follows:“We engaged our permanent land officer and a Consultant to
resolve that issue.”Provision for Income Tax
Water PNG now operates under the Companies Act 1997 and it is
liable to pay
Company Tax in accordance with the PNG Income Tax Act 1959.
However, I was
unable to determine the method used in calculating the tax
liability. Furthermore, I was
not provided with the necessary calculations, reconciliations
and schedules and
supporting documentation to determine the completeness and
accuracy of the tax
balances. I brought this to the attention of management and they
responded as follows:“The calculation of the income tax is 30% of the net operating
profit which is the total
revenue minus total expenses.”-307-
Water PNG Limited
Expenses recorded in Profit and Loss
Total expenses recorded for the period was K71,974,062. However,
the expenditure
documentations selected for my in-depth test were not provided
for review to determine
the necessity and frequency of the payments and to confirm
whether all expenditures
actually incurred and due care observed. Details are as shown
below:Kina
Allowances 5,385,390
Gratuity Expenses 320,090 -
Page 443 of 475
-
Consultancy Fee 5,066,556
Travel &Accommodation – Local 1,023,900
Travel &Accommodation – Overseas 196,911
Entertainment 120,076
TOTAL 12,112,923I brought this to the attention of the management and they
responded as follows:“The concerned staff have supplied the transaction listing to
verify the expenses without
fully understanding the requirements In addition the shortage of
manpower 333333 due to
recruitment freeze by 333333management became an issue Also
there was an urgency to
333 complete theaudit withspecific time frame Going forward for
2018audit we 333 will
provide all the schedules and necessary supporting
documentation.”77.3 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the fieldwork associated
with the inspection and
audit of the accounts and records and the examination of the
financial statements of the
Company for the years ended 31 December 2018 and 2019 were in
progress.-308-
SECTION C
NATIONAL GOVERNMENT
SHAREHOLDINGS IN -
Page 444 of 475
-
OTHER COMPANIES
-309-
78. FOREWORD
This Section of my Report deals with Companies in which the
Government owns 50%
or less of the issued Share Capital of a Company.The auditing and reporting requirements of these Companies are
stipulated under the
Companies Act, and these have been elaborated in Paragraph 62 of
this Report.As the Government of PNG does not hold majority interest in
these Companies, the
accounts of these Companies are audited by Private Auditors.However, because public monies are invested in these Companies,
my responsibilities
require the inclusion of the summaries of their accounts and the
comments of the Private
Auditors’ Reports in this Section of my Report. Details of these
companies are
contained in paragraphs 79 to 80. -
Page 445 of 475
-
-311-
79. BOUGAINVILLE COPPER LIMITED
79.1 INTRODUCTION79.1.1 Legislation
Bougainville Copper Limited, formerly Bougainville Copper Pty
Limited, was
incorporated under the Companies Act.From 1972 until 1989, the Company operated a large open pit mine
and processing
facility at Panguna on the island of Bougainville in the North
Solomons Province of
PNG. It produced concentrate containing copper, gold and silver
which was sold
primarily under long-term contracts to smelters in Asia and
Europe. On 15 May 1989
production was brought to a halt by militant activity and has
not recommenced since.As at 31 December 2019 the issued capital of the Company were
401,062,500 fully
paid shares, each carrying one voting right. Of these, the
Government of PNG held
76,430,809 (19.06%) shares of the total shares. A further
69,744,640 (17.39%) shares
were held through Eda Minerals Limited totalling 36.4%.The Autonomous Bougainville Government (ABG) holds 146,175,449
shares (36.4%)
through Bougainville Minerals Limited. The remaining 108,711,602
shares (27.11%)
are owned by individual Papua New Guinean and Bougainvillean
shareholders.79.1.2 Objectives of the Company
The main objectives of the Company are to prospect, explore,
quarry, develop,
excavate, dredge for, open, work, purchase or otherwise obtain -
Page 446 of 475
-
copper and other various
metals and minerals.79.2 REPORT OF THE COMPANY’S AUDITORS
A Private Firm of Auditors conducted the audit of the Company’s
financial statements
including the accounts and records for the year ended 31
December 2019 and the audit
report was issued on 30 April 2020. This report contained a
Qualified Opinion.“QUALIFED OPINION
In my opinion, except for the possible effects of the matter
described in the Basis for
Qualified Opinion of my report, the accompanying financial
statements:• comply with International Financial Reporting Standards and
other generally
accepted accounting practice in Papua New Guinea; and-313-
Bougainville Copper Limited
• give a true and fair view of the financial position of the
Company and the Group
as at 31 December 2019 and their financial performance and cash
flows for the
year then ended.BASIS FOR QUALIFIED OPINION
The Company’s subsidiary holds an investment in an unlisted
investment fund with a
carrying value of K1.1 million at 31 December 2019. Management have
not been
provided with audited financial statements of the investee at 31
December 2019 and
there is currently no active market for the sale of units in the
investment fund. As a
result, we have been unable to satisfy ourselves as to the valuation
of K1.1 million of
the investments recognised in the consolidated balance sheet at 31
December 2019.” -
Page 447 of 475
-
-314-
80. GOGOL REFORESTATION COMPANY LIMITED
80.1 INTRODUCTION
80.1.1 Legislation
Gogol Reforestation Company Limited was incorporated under the
Companies Act.As at 31 December 2009, the issued and fully paid up capital of
the Company comprised
102,001 ‘A’ class ordinary shares of K1.00 each and 98,001 ‘B’
class ordinary shares
of K1.00 each. Of these, the Government of PNG held 98,001 ‘B’
class ordinary shares
of K1.00 each, representing 49% of the issued Capital at a cost
of K98,001.80.1.2 Objectives of the Company
The objective of the Company is to be involved in reforestation.
-
Page 448 of 475
-
80.2 STATUS OF FINANCIAL STATEMENTS
At the time of preparing this Report, the audited financial
statements and the audit
reports of the Company for the years ended 31 December 2010,
2011, 2012, 2013, 2014,
2015, 2016, 2017, 2018 and 2019 had not been submitted for my
verification.Further, I was informed by management on 16th July 2013 that the
Company was no
longer in operation since 2011 due to the winding down of the
Company.In 2014, I communicated with Independent Public Business
Corporation (IPBC)
requesting for the winding down documents and IPBC responded that
they had not
received any winding down application nor deregistration
documents with regard to
Gogol Reforestation Co. Limited. My efforts to clarify the status
with Kumul
Consolidated Holdings were unsuccessful. A Company search with
the Investment
Promotion Authority on 14 July 2020 revealed that the Company was
not deregistered.-315-
SECTION D
PROBLEM AUDITS
(AUDITS IN ARREARS)
) -
Page 449 of 475
-
-317-
81. FOREWORD
This Section of my Report deals with problem audits, especially
audits in arrears.
Problem audits denote audit of entities in respect of which I
have not been able to carry
out audits for circumstances detailed in the respective
paragraphs.81.1 EXCLUSION OF ENTITIES FROM STATUTORY AUDIT
Due to non-submission of financial statements by the following
entities due to
amendment to the enabling Act, I was not able to perform the
audit of the following
entities.• Fresh Produce Development Agency;
• Kumul Minerals Holding Limited (formerly Petromin Limited);
• National Development Bank Limited;
• Ok Tedi Mining Limited;
• PNG Air Services Limited; and
• PNG Sustainable Development Program Limited. -
Page 450 of 475
-
-319-
82. AUDITS IN ARREARS
82.1 GENERAL
Audits in arrears are those in respect of which financial
statements have not been
submitted on time for audit to be undertaken, thus placing my
Office in a position where
audits are not able to be conducted on a current year basis
consistent with the
requirements of the Companies Act and the PFMA. Two serious
consequences develop
from this. Firstly, it results in a build-up of audits in
arrears, and these are all audits
other than the current year (2019) audits. The other serious
consequence is that audit
reports issued more than a year or two in arrears serve only to
meet the administrative
or legislative requirements, but their validity from a decision
making stand-point may
be lost due to the time lag.82.2 RESPONSIBILITY FOR PREPARATION OF FINANCIAL STATEMENTS
The responsibility for the preparation and presentation of
financial statements is that of
the management of the auditee organisation. That being the case,
the audit of the
financial statements by the Auditor-General does not in any way
relieve management
of its responsibility to have financial statements prepared on
time.This responsibility also requires management to ensure that an
adequate and effective
internal control system is maintained so as to ensure, inter-
alia, that complete and
accurate financial statements are produced on a timely basis. To
assist management in
producing financial statements that meet the qualitative
characteristics, the
management’s responsibility also extends to ensuring that
professionally qualified and
experienced accounting personnel are engaged. -
Page 451 of 475
-
It is generally true that irrespective of their completeness,
accuracy or reliability,
financial statements that are unduly delayed, lose their
relevance. Although there is no
consensus regarding the length of time that ought to be allowed
to elapse between the
predetermined reporting date and the date when the financial
statements lose their
relevance, there is a need to weigh the relative merits of
preparing them on a timely
basis, let alone the legislative requirements.Relevant and reliable information therefore is useful for
decision making when these
are timely prepared and made available to concerned parties.
Relevance here is relative
to the value and usefulness of the audited financial information
to management and the
parties concerned for decision making. Current information is of
more relevance in the
fight against corrupt practices than information that is out of
date.-321-
82.3 LEGISLATIVE REQUIREMENTS
To ensure the timely preparation of financial statements, Section
63(3)(a) of the Public
Finance (Management) (Amendment) Act 2016 makes it mandatory for
statutory bodies to
prepare and furnish audited financial statements to the Finance
Departmental Head, before
end of the fourth calendar month from close of a fiscal year. The
fact that audit of 42
entities as depicted in Schedule B(iv) had been in arrears due to
non-submission of
financial statements is a direct contravention of the
requirements of Section 63(3)(a)
referred to above.Strict adherence of this requirement, despite its mandatory
nature, has not been enforced
by the respective entities’ managements and the authorities
concerned. My strong
contention is that, enforcement of the above requirements by the
authorities concerned and
the Minister responsible may have been lacking in the past. There -
Page 452 of 475
-
may therefore be a need,
whilst ensuring timely accountability of public resources, to
take certain statutory bodies
to task for non-compliance with mandatory statutory requirements.By virtue of Section 63(4) of the Public Finance (Management)
(Amendment) Act 2016,
the Finance Minister is required to table the reports of the
respective statutory bodies in
Parliament after they are received. The following arrears
situation implies that a lot of
statutory bodies reports may not have been tabled in Parliament
as required, and thus, the
accountability to Parliament in these respects has been far short
of the desired.82.4 CURRENT YEAR AUDITS (2019 AUDITS)
Entities totalling 125 subject to audit by the Auditor-General
comprise 79 Public Bodies
and their subsidiaries, 44 National Government owned companies
and 2 companies in
which the National Government has shareholdings (referred to as
Section ‘C’ Companies).-322-
TYPES OF ENTITIES SUBJECT TO AUDIT
Table 1
-
Page 453 of 475
-
Section Types of Audit
Number of Entities2019/2020
2018/2019(A) Public Bodies and their Subsidiaries 79
80(B) National Government Owned Companies 44
43(C) National Government Shareholdings in other Companies2
2125
125Table 1. Shows the total of Types of Entities subject to Audit.
Chart 1
National Government Types of Audits National
Government
Owned Companies Shareholdings
in other
Companies
35%
2% -
Page 454 of 475
-
Public Bodies
and theirSubsidiaries
63%
Chart 1. Shows the percentages of Types of Entities subject to Audit
during 2019/2020 Audit Cycle. -
Page 455 of 475
-
-323-
82.5 STATUS OF CURRENT YEAR AUDITS
Each of the 123 entities, except Section ‘C’ Companies are
subject to audit and required
under Section 63(3)(c) of the Public Finance (Management)
(Amendment) Act 2016 to
submit annual financial statements for audit. Information
available in my Office shows that
only 45 entities have submitted their financial statements for
2019 (Schedule A) for audit
up to the time of preparing this Report. A total of 78 entities
have not submitted their 2019
financial statements (Schedule A) for audit in 2019. It could
therefore be logically
concluded that, about 63% of the public bodies might not have
submitted their annual
reports and financial statements for 2019 together with my
reports on them, to the
respective Ministers for tabling in the National Parliament on
or before 30 April 2020.Table 2 and Chart 2 shown below, and Schedule A attached show
the status of the current
year audits. -
Page 456 of 475
-
-324-
STATUS OF CURRENT YEAR AUDITS 2019
Table 2
No. Status of Current Year Audits Number
of Entities
2019/2020
2018/2019
1 Audits completed and reports issued thereon (Schedule A)3
6
2 Audits substantially completed (Schedule A) 1
5
3 Audits in progress (Schedule A) 32
23
4 Audits to commence shortly (Schedule A) 9
17
5 Financial Statements not submitted (Schedule A) 78
72
123
123Table 2. Shows the total of Status of Current Year (2019 Audits)
(Schedule A).Chart 2
Status of Current Year Audits 2019
Audits completed and
reports issued thereon Audits -
Page 457 of 475
-
substantially
(Schedule A) completed
(Schedule A)
3% 1%Audits in progress
(Schedule A)
26%
Audits to commence
shortly (Schedule A)
Financial Statements
7%
not submitted
(Schedule A)
63%Chart 2. Shows the percentages of Audit Status for the Current Year
(2019) during 2019/2020 Audit Cycle. (Schedule A).-325-
-
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-
82.6 AUDITS IN ARREARS (2018 AND PRIOR YEARS)
Records available in my Office show that a total of 128 entities
(238 audits) were in the
Audit in Arrears category due to non-submission of financial
statements on time. Table 3
and Chart 3 shown below, and Schedule B attached provide more
details of these.-326-
-
Page 459 of 475
-
STATUS OF AUDITS IN ARREARS BY NUMBER OF ENTITIES
(2018 AND PRIOR YEARS)
Table 3A
Status of Audits in Arrears by No. of Entities
No. Number of
Entities
(2018 and Prior Years)2019/2020
2018/20191 Audits substantially completed (Schedule B) 30 30
2 Audits in progress (Schedule B) 41 24
3 Audits to commence shortly (Schedule B) 15 16
4 Financial Statements not submitted (Schedule B) 42 36
128
106
Table 3A. Shows the Status of Audits in Arrears by number of
Entities for 2018 and Prior Years during 2019/2020 Audit
Cycle. (Schedule B).Chart 3A
Status of Audits in Arrears by number of Entities
(2018 and prior years)
Financial Statements Audits
substantially
not submitted completed
(Schedule B)
(Schedule B) 23%
33% -
Page 460 of 475
-
Audits
in progress
Audits to commence
(Schedule B)
shortly (Schedule B) 32%
12%Chart 3A. Shows the percentages of Audit Status for Audits in
Arrears by number of Entities for 2018 and Prior Years during2019/2020 Audit Cycle. (Schedule B).
-
Page 461 of 475
-
-327-
STATUS OF AUDITS IN ARREARS BY NUMBER OF AUDITS
(2018 AND PRIOR YEARS)Table 3B
No. Status of Audits in Arrears by No. Of Audits (2018 &
prior years)Number of Audits2019/2020 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 86238 197
Table 3B. Shows the Status of Audits in Arrears by number of Audits
for 2018 and Prior Years during 2019/2020 Audit Cycle.
(Schedule B).
Chart 3BStatus of Audits in Arrears by number of Audits
(2018 and prior years)
Audits substantially
Financial Statements
completed (Schedule B)
not submitted
20%
(Schedule B)
42% -
Page 462 of 475
-
Audits in progress
(Schedule B)
Audits to commence
25%
shortly (Schedule B)
13%Chart 3B. Shows the percentages of Audit Status for Audits in
Arrears by number of Audits for 2018 and Prior Years during
2019/2020 Audit Cycle. (Schedule B).-328-
82.7 LONG OUTSTANDING FINANCIAL STATEMENTS
During this Audit Cycle (2019/2020), 101 audit entities were in
the arrears category,
increased by two compared to prior year (2018). Of these 101
entities, 237 financial
statements for periods ranging from one year to seven years have
still not been submitted.
In other words, they still have financial statements outstanding
for the years from 2012 to
2018. Details of these are shown below in Table 4, Chart 4 and
also in Schedule C
attached. -
Page 463 of 475
-
-329-
LONG OUTSTANDING FINANCIAL STATEMENTS
BY NUMBER OF ENTITIES
(2018 AND PRIOR YEARS)Table 4A
No. Years Outstanding by Entities
Number of Entities2019 Report 2018 Report
1 One Year (Schedule C)
42 20
2 Two Years (Schedule C)
25 5
3 Three Years (Schedule C)
13 2
4 Four Years (Schedule C)
8 1
5 Five Years (Schedule C)
6 4
6 Six Years (Schedule C)
5 3
7 Seven Years (Schedule C) -
Page 464 of 475
-
2 0
8 Eight Years (Schedule C)
0 1101 36
Table 4A. Shows the total of Long Outstanding Financial Statements
by number of Entities during 2019/2020 Audit Cycle.
(Schedule C).
Chart 4ALong Outstanding Financial Statements by number
of Entities45
40
35
30
25
20
15
10
5
0
One Year Two Years Three Years Four Years Five
Years Six Years Seven Years Eigth Years
(Schedule C)(Schedule C) (Schedule C)(Schedule C)
(Schedule C) (Schedule C)(Schedule C) (Schedule C)2019 Report 2018
ReportChart 4A. Shows the percentages of Long Outstanding Financial
Statements by number of Entities during 2019/2020 Audit Cycle
(Schedule C).-330-
LONG OUTSTANDING FINANCIAL STATEMENTS
BY NUMBER OF AUDITS -
Page 465 of 475
-
(2018 AND PRIOR YEARS)
Table 4B
No. Years Outstanding by Audits
Number of Audits2019 Report 2018 Report
1 One Year (Schedule C)
42 20
2 Two Years (Schedule C)
50 10
3 Three Years (Schedule C)
39 6
4 Four Years (Schedule C)
32 4
5 Five Years (Schedule C)
30 20
6 Six Years (Schedule C)
30 18
7 Seven Years (Schedule C)
14 0
8 Eight Years (Schedule C)
0 8237 86
Table 4B. Shows the total of Long Outstanding Financial Statements
by number of Audits during 2019/2020 Audit Cycle.
(Schedule C).Chart 4B
Long Outstanding Financial Statements by
Number of Audits (2018 and Prior Years)
50
45
40
35
30
25
20
15
10
5
0
One Year Two Years Three Years Four Years Five Years
Six Years Seven Eight Years
(Schedule (Schedule (Schedule (Schedule (Schedule -
Page 466 of 475
-
(Schedule Years ( Schedule
C) C) C) C) C)
C) (Schedule C)C)
2019 Report 2018
ReportChart 4B. Shows the percentages of Long Outstanding Financial
Statements by number of Audits during 2019/2020 Audit
Cycle. (Schedule C).-331-
82.8 STATUS OF AUDITS AS AT 30 JUNE 2020
As illustrated in Executive Summary Table A, during July 2019 and
June 2020 Audit
Cycle, a total of 221 audits were undertaken by the Audit Office.
Out of 221 audits
carried out, 81 audit reports were issued. Table 5 and Chart 5
shown below provide
the details of the Status of Audits during the period July 2019
to June 2020. -
Page 467 of 475
-
-332-
STATUS OF AUDITS AS AT 30
JUNE 2020Table 5
No. Status of
Audits
2019/2020Number of Audits 2018/2019
1 Audits completed and reports issued thereon
(Schedules A & E)
81 123
2 Audits substantially completed (Schedules A & B)
49 49
3 Audits in progress (Schedules A & B)
91 55
4 Audits to commence shortly (Schedules A & B)
39 52
5 Financial Statements not submitted (Schedules A & B)
179 158439 437
Table 5. Shows the Status of Audits as at 30 June 2020 for the
2019/2020 Audit Cycle. (Schedules A&E and A&B).Chart 5
Status of Audits as at
30 June 2020Audits completed and
reports issued thereon
-
Page 468 of 475
-
(Schedule A & E) Audits
substantially18% completed (Schedule A & B)
Financial Statements not
11%
submitted (Schedule A & B)
41%Audits to commence shortly Audits in
progress(Schedule A & B) (Schedule A & B)
9% 21%
Chart 5. Shows the percentages of Audit Status as at 30 June 2020
for the 2019/2020 Audit Cycle (Schedules A&E and A&B).-333-
ACKNOWLEDGEMENTS
-
Page 469 of 475
-
My audit staff worked conscientiously and successfully completed
audits entrusted to them.
Their devotion to duty, their integrity and loyalty are highly
appreciated.I extend my appreciation and gratitude to the Government Printing
Office staff, for their efforts
in completing the printing of this Report within the limited time
frame available. I also
acknowledge the co-operation and the assistance of all Heads of
Public Bodies and National
Government Owned Companies, and Registered Company Auditors and
their staff who assisted
as my Authorised Auditors.I would also like to thank the Chairman and the members of the
Permanent Parliamentary
Committee on Public Accounts of PNG and the Secretary for the
continuous interest shown in
my work.SIGNED AT WAIGANI ON 10th SEPTEMBER
TWO THOUSAND AND TWENTYGORDON KEGA MBA, CPA
Acting Auditor-General of Papua New Guinea -
Page 470 of 475
-
-335-
SCHEDULES
-337-
Schedule ‘A’
STATUS OF CURRENT YEAR (2019) AUDIT
(i) AUDITS COMPLETED AND REPORTS ISSUED THEREON
No. Section Para. No. Entity
No. of Audits
1 A 3 Bank of Papua New Guinea
1
2 A 12 Independence Fellowship Trust
1
3 B 68 Motor Vehicles Insurance Limited
13
(ii) AUDITS SUBSTANTIALLY COMPLETED
No. Section Para. No. Entity
No. of Audits
1 A 5 Civil Aviation Safety Authority of Papua
New Guinea 11
(iii) AUDITS IN PROGRESS
No. Section Para. No. Entity
No. of Audits
1 A 2 APEC Papua New Guinea 2018 Co-ordination
Authority 1
2 A 18 Kumul Consolidated Holdings
1
3 A 18A General Business Trust
1
4 A 18B Kumul Technology Development Corporation
Limited 1
5 A 18C PNG Dams Limited
1
6 A 25 National Capital District Commission
1
7 A 42 Papua New Guinea Accident Investigation
Commission 1
8 B 63 Bmobile Limited
1
9 B 63A Bmobile (Solomon Islands) Limited
1
10 B 64 Kumul Agriculture Limited -
Page 471 of 475
-
1
11 B 65 Kumul Petroleum Holdings Limited
1
12 B 65A Eda Oil Limited
1
13 B 65B Kumul Exploration (Asia) Limited
1
14 B 65H Kumul Lending Co Pte Limited
1
15 B 65I Kumul LNG Limited
1
16 B 65J Kumul Petroleum (Development) Limited
1
17 B 65K Kumul Petroleum (Investments) Limited
1
18 B 65L Kumul Petroleum (Kroton) Limited
1
19 B 65M Kumul Petroleum (Pipeline) Limited
1
20 B 65N Kumul Petroleum (Tech and Advisory) Limited
1
21 B 65O Kumul Petroleum Marketing Pte Limited
1
22 B 65P Kumul Security Agent Limited
1
23 B 65Q NPCP Oil Company Pty Limited
1
24 B 69B Airports Investments Limited
1
25 B 71 Papua New Guinea Ports Corporation Limited
1
26 B 75 Post (PNG) Limited
1
27 B 76 Telikom (PNG) Limited
1
28 B 76A DATEC (PNG) Limited
1
29 B 76B Kalang Advertising Limited
1
30 B 76C Media Niugini Limited (EMTV)
1
31 B 76D PNG Directories Limited
1
32 B 77 Water PNG Limited
132
-339-
(iv) AUDITS TO COMMENCE SHORTLY
No. Section Para. No. Entity
-
Page 472 of 475
-
No. of Audits
1 A 13 Independent Consumer and Competition
Commission 1
2 A 16 Investment Promotion Authority
1
3 A 23 National AIDS Council Secretariat
1
4 A 26 National Cultural Commission
1
5 A 32 National Maritime Safety Authority
1
6 A 33 National Museum and Art Gallery
1
7 A 35 National Roads Authority
1
8 A 48 Papua New Guinea Maritime College
1
9 A 57 Tourism Promotion Authority
19
(v) FINANCIAL STATEMENTS NOT SUBMITTED
Para.
No. of Last Report Date of
No. Section No. Entity
Audits Issued Report
1 A 4 Border Development Authority
1 2013 28-11-16
2 A 4A Papua New Guinea Maritime Transport Limited
1 2012 29-10-15
3 A 6 Climate Change and Development Authority
1 2014 19-03-20
4 A 7 Cocoa Board of Papua New Guinea
1 2017 18-03-19
5 A 7A Cocoa Pod Borer Project Fund
1 2017 18-03-19
6 A 7B Cocoa Stabilisation Fund
1 2017 18-03-19
7 A 8 Cocoa Coconut Institute Limited of Papua New
Guinea 1 2013 09-08-16
8 A 9 Coffee Industry Corporation Limited
1 2016 29-11-19
9 A 9A Coffee Industry Fund
1 2016 29-11-19
10 A 9B Patana No.61 Limited
1 2016 29-11-19
11 A 10 Conservation and Environment Protection
Authority 1 2017 22-06-20
12 A 11 Government Printing Office
1 2015 10-09-18
13 A 14 Industrial Centres Development Corporation
1 2017 02-09-19 -
Page 473 of 475
-
14 A 15 Internal Revenue Commission
1 2015 22-03-19
15 A 17 Kokonas Indastri Koporesen
1 2018 29-05-20
16 A 17A Papua New Guinea Coconut Extension Fund
1 2018 29-05-20
17 A 17B Papua New Guinea Coconut Research Fund
1 2018 29-05-20
18 A 19 Legal Training Institute
1 2016 22-06-20
19 A 20 Mineral Resources Authority
1 2014 15-06-17
20 A 21 National Agriculture Quarantine and
Inspection Authority1 2017 28-08-19
21 A 22 National Agricultural Research Institute
1 2018 14-02-20
22 A 24 National Broadcasting Corporation
1 2015 28-08-19
23 A 25A National Capital District Botanical
Enterprises Limited 1 2012 04-05-15
24 A 25B Port Moresby Nature Park Limited
1 2016 27-08-19
25 A 27 National Economic and Fiscal Commission
1 2018 10-10-19
26 A 28 National Fisheries Authority
1 2016 24-05-19
27 A 29 National Gaming Control Board
1 2015 15-05-19
National Gaming Control Board Community
Benefit
28 A 29A Fund Trust
1 2015 15-05-19
29 A 30 National Housing Corporation
1 2014 21-11-17
30 A 30A National Housing Estate Limited
1 New Inclusion
National Information and Communications
31 A 31 Technology Authority (NICTA)
1 2015 15-05-19
32 A 34 National Research Institute
1 2016 28-06-17
33 A 36 National Training Council
1 2016 28-02-18
34 A 37 National Volunteer Service
1 2016 29-05-17
35 A 38 National Youth Development Authority
1 2017 14-10-19
36 A 39 Office of the Insurance Commissioner
1 2017 13-05-19
-340-Para.
No. of Last Report Date of -
Page 474 of 475
-
No. Section No. Entity
Audits Issued Report
37 A 40 Oil Palm Industry Corporation
1 2011 30-09-16
38 A 41 Ombudsman Commission of Papua New Guinea
1 2018 18-02-20
39 A 43 Papua New Guinea Customs Service
1 2016 31-05-19
40 A 44 Papua New Guinea Forest Authority
1 2014 11-06-20
Papua New Guinea Immigration and
Citizenship
41 A 45 Service Authority
1 2017 13-05-19
42 A 46 Papua New Guinea Institute of Medical
Research 1 2017 25-02-19
43 A 47 Pacific Institute of Leadership and
Governance 1 2014 20-03-20
Papua New Guinea National Institute of
Standards
44 A 49 and Industrial Technology
1 2016 10-12-18
45 A 50 Papua New Guinea Sports Foundation
1 2015 30-04-19
46 A 51 Papua New Guinea University of
Technology 1 2017
11-03-20
47 A 51A National Analytical and Testing Services
Limited 1 2011 04-04-16
48 A 51B Unitech Development and Consultancy
Company Limited 1 2013 22-10-15
49 A 52 Parliamentary Members’ Retirement
Benefits Fund 1 2016 28-02-18
50 A 53 Public Curator of Papua New Guinea
1 2013 18-10-17
51 A 54 Road Traffic Authority
1 2018 27-05-20
52 A 55 Security Industries Authority
1 2016 21-04-20
53 A 56 Small and Medium Enterprises Corporation
1 2017 30-09-19
54 A 58 University of Goroka
1 2016 24-09-18
55 A 58A Unigor Consultancy Limited
1 2015 27-04-20
56 A 58B Unigor Humi Catering Limited
1 New Inclusion
57 A 59 University of Natural Resources and
Environment 1 2014 29-10-16
58 A 60 University of Papua New Guinea
1 2014 03-08-18
59 A 60A Unisave Limited
1 2011 25-08-14
60 A 60B Univentures Limited -
Page 475 of 475
-
1 2011 24-06-14
61 B 62 Air Niugini Limited
1 2015 13-12-17
62 B 62A Air Niugini Cargo Limited
1 New Inclusion
63 B 62B Air Niugini Properties Limited
1 New Inclusion
64 B 62C Business Travel Centre Limited
1 New Inclusion
65 B 62D Link-PNG Limited
1 2015 13-12-17
66 B 65C Kumul Gas Foreland 239 B.V
1 New Inclusion
67 B 65D Kumul Gas Foreland 261 B.V
1 New Inclusion
68 B 65E Kumul Gas Foreland 268 B.V
1 New Inclusion
69 B 65F Kumul Gas Foreland 269 B.V
1 New Inclusion
70 B 65G Kumul Gas Niugini B.V
1 New Inclusion
71 B 66 Livestock Development Corporation
Limited 1 2009 31-10-12
72 B 67 Mineral Resources Development Company
Limited 1 2016 27-04-20
73 B 69 National Airports Corporation Limited
1 2018 24-06-19
74 B 69A Airport City Development Limited
1 2018 24-06-19
75 B 70 NCD Water and Sewerage Limited (Eda
Ranu) 1 2016 18-05-20
76 B 72 PNG Air Services Limited
1 2015 08-08-19
77 B 73 PNG DataCo Limited
1 2016 20-05-20
78 B 74 PNG Power Limited
1 2017 01-05-1978
-341-
Schedule ‘B’