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• Part IV Report of the
  Auditor-General
  2020

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• Phone: (+675) 3012200 Fax: (+675) 325 2872 Email: agopng@ago.gov.pg Website: www.ago.gov.pg

  OFFICE OF THE AUDITOR-GENERAL
  30 September 2021

  Honourable Job Pomat, MP
  Speaker of the National Parliament
  Parliament House
  WAIGANI
  National Capital District

  Dear Mr Speaker,

  In accordance with the provisions of Section 214 of the Constitution of the Independent State
  of Papua New Guinea, I forward herewith a copy of my report signed on 30th September 2021
  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
  Auditor-General

  Level 6 PO Box 423
  TISA Investment Haus WAIGANI, NCD
  Kumul Avenue, NCD Papua New Guinea

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• 2020 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 ………………………………………………………………………………………………………. xix-xxix

  SECTION A – PUBLIC BODIES AND THEIR SUBSIDIARIES

  PARA SUBJECT PAGE
  NO. NO.

  1. Foreword …. ………………………………………………………………………………………………………………………. 1
  2. APEC Papua New Guinea 2018 Co-ordination Authority …………………………………………………………… 3
  3. Bank of Papua New Guinea …………………………………………………………………………………………………. 20
  4. Border Development Authority and its Subsidiary …………………………………………………………………… 22
  4A. Papua New Guinea Maritime Transport Limited …………………………………………………..24
  5. Civil Aviation Safety Authority of Papua New Guinea ………………………………………………………………. 25
  6. Climate Change and Development Authority … ………………………………………………………………………. 28
  7. Cocoa Board of Papua New Guinea and its Subsidiaries …………………………………………………………. 38
  7A. Cocoa Pod Borer Project Fund ………………………………………………………………………39
  7B. Cocoa Stabilisation Fund …………………………………………………………………………….40
  8. Cocoa Coconut Institute Limited of Papua New Guinea……………………………………………………………. 41
  9. Coffee Industry Corporation Limited and its Subsidiaries ……………………………………………………….. …48
  9A. Coffee Industry Fund …………………………………………………………………………………55
  9B. Kofi Management Services Limited …………………………………………………………………57
  9C. Patana No. 61 Limited ……………………………………………………………………………….58
  10. Conservation and Environment Protection Authority ……………………………………………………………….. 60
  11. Government Printing Office ………………………………………………………………………………………………….. 62
  12. Independence Fellowship Trust …………………………………………………………………………………………. ..67
  13. Independent Consumer and Competition Commission …………………………………………………………….. 68
  14. Industrial Centres Development Corporation ………………………………………………………………………….. 70
  15. Internal Revenue Commission. …………………………………………………………………………………………….. 76
  16. Investment Promotion Authority …………………………………………………………………………………………… 78
  17. Kokonas Indastri Koporesen and its Subsidiaries ……………………………………………………………………. 79
  17A. Papua New Guinea Coconut Extension Fund ………………………………………………………………. 81
  17B. Papua New Guinea Coconut Research Fund ………………………………………………………………. 82
  18. Kumul Consolidated Holdings and its Subsidiaries …………………………………………………………………. 83
  18A. General Business Trust ………………………………………………………………………………………86
  18B. Kumul Technology Development Corporation Limited ……………………………………………88
  18C. PNG Dams Limited ……………………………………………………………………………………92
  19. Legal Training Institute ………………………………………………………………………………………………………… 93
  20. Mineral Resources Authority ……………………………………………………………………………………………….. 96
  21. National Agriculture Quarantine and Inspection Authority ……………………………………………………….. 106
  22. National Agricultural Research Institute ……………………………………………………………………………….. 108
  23. National AIDS Council Secretariat……………………………………………………………………………………….. 112
  24. National Broadcasting Corporation ……………………………………………………………………………………… 117

  -i-

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• PARA SUBJECT PAGE
  NO. NO.

  25. National Capital District Commission and its Subsidiaries ……………………………………………………… 127
  25A. National Capital District Botanical Enterprises Limited ………………………………………………… 129
  25B. Port Moresby Nature Park Limited …………………………………………………………………………… 130
  26. National Cultural Commission …………………………………………………………………………………………….. 132
  27. National Economic and Fiscal Commission ………………………………………………………………………….. 136
  28. National Fisheries Authority ……………………………………………………………………………………………….. 138
  29. National Gaming Control Board and its Subsidiary ………………………………………………………………… 145
  29A. National Gaming Control Board Community Benefit Fund Trust …………………………………… 146
  30. National Housing Corporation and its Subsidiary …………………………………………………………………… 148
  30A National Housing Estate Limited ………………………………………………………………………………. 149
  31. National Information and Communications Technology Authority …………………………………………….. 150
  32. National Maritime Safety Authority ………………………………………………………………………………………. 155
  33. National Museum and Art Gallery ……………………………………………………………………………………….. 160
  34. National Research Institute ……………………………………………………………………………………………….. 163
  35. National Roads Authority……………………………………………………………………………………………………. 168
  36. National Training Council ………………………………………………………………………………………………….. 174
  37. National Volunteer Service …………………………………………………………………………………………………. 178
  38. National Youth Development Authority…………………………………………………………………………………. 179
  39. Office of the Insurance Commissioner ………………………………………………………………………………… 181
  40. Oil Palm Industry Corporation ……………………………………………………………………………………………. 189
  41. Ombudsman Commission of Papua New Guinea ………………………………………………………………….. 199
  42. Papua New Guinea Accident Investigation Commission …………………………………………………………. 200
  43. Papua New Guinea Customs Service ………………………………………………………………………………….. 207
  44. Papua New Guinea Forest Authority ……………………………………………………………………………………. 208
  45. Papua New Guinea Immigration and Citizenship Services Authority ………………………………………… 210
  46. Papua New Guinea Institute of Medical Research …………………………………………………………………. 212
  47. Pacific Institute of Leadership and Governance …………………………………………………………………….. 216
  48. Papua New Guinea Maritime College …………………………………………………………………………………. 221
  49. Papua New Guinea National Institute of Standards and Industrial Technology …………………………. 224
  50. Papua New Guinea Sports Foundation ……………………………………………………………………………….. 226
  51. Papua New Guinea University of Technology and its Subsidiaries …………………………………………… 228
  51A. National Analytical and Testing Services Limited………………………………………………………… 229
  51B. Unitech Development and Consultancy Company Limited …………………………………………… 234
  52. Parliamentary Members’ Retirement Benefits Fund ………………………………………………………………. 241
  53. Public Curator of Papua New Guinea…………………………………………………………………………………… 242
  54. Road Traffic Authority ……………………………………………………………………………………………………….. 243
  55. Security Industries Authority ……………………………………………………………………………………………….. 245
  56. Small and Medium Enterprises Corporation ………………………………………………………………………….. 246
  57. Tourism Promotion Authority ……………………………………………………………………………………………… 248
  58. University of Goroka and its Subsidiaries ……………………………………………………………………………… 249
  58A. Unigor Consultancy Limited ………………………………………………………………………..262
  58B. Unigor Humi Catering Limited ……………………………………………………………………..263
  59. University of Natural Resources and Environment …………………………………………………………………. 264
  60. University of Papua New Guinea and its Subsidiaries ……………………………………………………………. 266
  60A. Unisave Limited ……………………………………………………………………………………..268
  60B. Univentures Limited ………………………………………………………………………………………………. 269

  -ii-

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• SECTION B – NATIONAL GOVERNMENT OWNED COMPANIES

  PARA SUBJECT PAGE
  NO. NO.

  61. Foreword …………………………………………………………………………………………………………………………. 273
  62. Air Niugini Limited and its Subsidiaries ………………………………………………………………………………… 275
  62A. Air Niugini Cargo Limited ………………………………………………………………………………………. 277
  62B. Air Niugini Properties Limited … ……………………………………………………………………………… 278
  62C. Business Travel Centre Limited ……………………………………………………………………………… 279
  62D. Link-PNG Limited ………………………………………………………………………………………………….. 280
  63. Kumul Agriculture Limited ……. ………………………………………………………………………………………….. 281
  64. Kumul Petroleum Holdings Limited and its Subsidiaries …………………………………………………………. 282
  64A. Eda Oil Limited …………………………………………………………………………………………………….. 283
  64B. Kumul Exploration (Asia) Limited. …………………………………………………………………………… 284
  64C. Kumul Gas Foreland 239 B.V. ………………………………………………………………………………… 285
  64D. Kumul Gas Foreland 261 B.V . ……………………………………………………………………………….. 286
  64E. Kumul Gas Foreland 268 B.V . ……………………………………………………………………………….. 287
  64F. Kumul Gas Foreland 269 B.V . ……………………………………………………………………………….. 288
  64G. Kumul Gas Niugini B.V. …………………………………………………………………………………………. 289
  64H. Kumul Lending Co Pte Limited ……………………………………………………………………………….. 290
  64I. Kumul LNG Limited. ……………………………………………………………………………………………… 291
  64J. Kumul Petroleum (Development) Limited ……………………………………………………… 292
  64K. Kumul Petroleum (Investments) Limited…………………………………………………………………… 293
  64L. Kumul Petroleum (Kroton) Limited. …………………………………………………………………………. 294
  64M. Kumul Petroleum (Pipeline) Limited ………………………………………………………………………… 295
  64N. Kumul Petroleum (Tech & Advisory) Limited. ……………………………………………………………. 296
  64O. Kumul Petroleum Marketing Pte Limited………………………………………………………………….. 297
  64P. Kumul Security Agent Limited .. ……………………………………………………………………………… 298
  64Q. NPCP Oil Company Pty Limited ……………………………………………………………………………… 299
  65. Kumul Telikom Holdings Limited and its Subsidiaries …………………………………………………………….. 300
  65A. Bemobile Limited and Subsidiary ……………………………………………………………… 301
  65A.1 Bemobile (Solomon Islands) Limited ………………………………………………………… 302
  65B. PNG DataCo Limited ………………………………………………………………………………………….. 303
  65C. Telikom (PNG) Limited and its Subsidiaries. ………………………………………………………….. 307
  65C.1 DATEC (PNG) Limited …………………………………………………………………………… 313
  65C.2 Kalang Advertising Limited ……………………………………………………………316
  65C.3 Media Niugini Limited (EMTV) ………………………………………………………..318
  65C.4 PNG Directories Limited ………………………………………………………………321
  66. Livestock Development Corporation Limited …………………………………………………………………………. 326
  67. Mineral Resources Development Company Limited ………………………………………………………………. 327
  68. Motor Vehicles Insurance Limited and its Subsidiaries …………………………………………………………… 328
  68A. Pacific MMI Limited ……………………………………………………………………………………………. 329
  68B. Pacific Re Limited ………………………………………………………………………………………………. 330
  69. National Airports Corporation Limited and its Subsidiaries………………………………………………………. 332
  69A. Airport City Development Limited …………………………………………………………………………… 337
  69B. Airports Investments Limited …………………………………………………………………………………. 338
  70. NCD Water and Sewerage Limited (Eda Ranu) …………………………………………………………………….. 339
  71. Papua New Guinea Ports Corporation Limited ………………………………………………………………………. 357
  72. PNG Air Services Limited ………………………………………………………………………………………………….. 363
  73. PNG Power Limited …………………………………………………………………………………………………………… 364
  74. Post PNG Limited …………………………………………………………………………………………………………….. 366
  75. Water PNG Limited …………………………………………………………………………………………………………… 368

  -iii-

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• SECTION C – NATIONAL GOVERNMENT SHAREHOLDINGS IN OTHER COMPANIES

  PARA SUBJECT PAGE
  NO. NO.

  76. Foreword …………………………………………………………………………………………………………………………. 385
  77. Bougainville Copper Limited ……………………………………………………………………………………………….. 387
  78. Gogol Reforestation Company Limited…………………………………………………………………………………. 389

  SECTION D – PROBLEM AUDITS (AUDITS IN ARREARS)

  PARA SUBJECT PAGE
  NO. NO.

  79. Foreword………………………………………………………………………………………………………………………… 393
  79.1 Exclusion of Entities from Statutory Bodies…………………………………………………….393
  79.2 Exclusion of Entities from Future Report………………………………………………………..393
  80. Audits in Arrears ……………………………………………………………………………………………………………… 395
  80.1 General ……………………………………………………………………………………………………………… 395
  80.2 Responsibility for preparation of Financial Statements ……………………………………………… 395
  80.3 Legislative Requirements …………………………………………………………………………………….. 396
  80.4 Current Year Audits (2020 Audits) …………………………………………………………………………. 396
  80.5 Status of Current Year Audits ……………………………………………………………………………….. 398
  80.6 Audits in Arrears (2019 and prior years) …………………………………………………………………. 400
  80.7 Long Outstanding Financial Statements …………………………………………………………………. 403
  80.8 Status of Audits as at 30 June 2021 ………………………………………………………………………. 406
  Acknowledgements ………………………………………………………………………………………………………….. 409
  Schedule A – Current Year Audits ………………………………………………………………………………………. 413
  Schedule B – Status of Audits in Arrears ……………………………………………………………………………… 416
  Schedule C – Long Outstanding Financial Statements ………………………………………………………….. 420
  Schedule D – Government Shareholding in Companies…………………………………………………………. 424
  Schedule E – Audit in Arrears (2019 and Prior years) completed during 2020/2021 ………………….. 425

  -iv-

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• GENERAL

  A. FOREWORD

  My Annual Report to the National Parliament for the 2020 financial year is presented
  in four Parts. Part I deals with the Public Accounts of Papua New Guinea (PNG), Part
  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 and associated entities.

  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 Development 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;

  -v-

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• 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 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-

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• 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) Act, 1995 (as amended)

  The submission of the financial statements of statutory bodies for audit is required
  under Section 63(1) and (3) of the Public Finances (Management) Act, 1995 (as
  amended). 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 Public Finances (Management) Act (PFMA)
  and Section 3 of the Audit Act.

  -vii-

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• General

  C. AUDIT OF PUBLIC BODIES

  C.1 Scope of Audit

  The full scope of my audit responsibility in respect of Public Bodies covers the
  Statutory Bodies and their subsidiaries, National Government owned companies and
  their subsidiaries, and the companies in which the government holds minority
  interest.

  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. However, a section has been tasked with the audit of
  information systems per the recent organisational restructure.

  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 and their subsidiaries.

  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 2020 to June 2021 (2020/2021
  Audit Cycle). The Report covers the audits of these entities’ financial statements for a
  number of years, not just 2020.

  In 2020 there were 127 public entities subject to audit by my Office, consisting of 59
  Public Bodies and their 21 Subsidiaries and 14 National Government Owned
  Companies and their 33 Subsidiaries.

  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, performance and cash flows of an organisation. The information is useful to a
  wide range of stakeholders and the financial statements constitute a formal record of the
  financial and business activities of an organisation. As such, the financial 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 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-

• Page 15 of 309

• Executive Summary

  E.3 Submission of current year Financial Statements

  Section 63(1) and (3)(a) of the PFMA requires ‘…a statutory body to prepare and furnish
  to the Finance Departmental Head before end of fourth calendar month from close of a
  fiscal year, a performance and management report of its operations for the year ended 31
  December preceding, together with financial statements to enable the Finance Minister to
  present such report and statements to the Parliament…’

  Before submitting the financial statements to the Minister, Section 63(3)(c) requires a
  statutory body to submit the financial statements to the 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, 69 entities had not submitted their 2020 financial
  statements to be audited in addition to some 128 financial statements for 2019 and prior
  years that not been submitted for audit (Refer Table A). As compared to last year, the
  situation has deteriorated during this cycle.

  Due to Covid-19 pandemic outbreak, Government response has resulted in various lock-
  downs and reduced economic activities which has resulted in reduction of current year
  audits to 3 during 2020/2021 cycle. Further, 48 audits were either substantially completed,
  in progress or to commence shortly and 69 audits were unable to commence due to the
  non-submission of the financial statements during the cycle.

  The details of the audits in arrears and those entities whose financial statements have been
  outstanding for a number of years are shown in Attachment ‘B’.

  Table A

  STATUS OF AUDITS AS AT 30 JUNE 2021 (END OF 2020/2021 CYCLE)

  Non
  Financial
  Audits Audits to Operational
  Audits Audits in Statements Total Total
  Year Substantially Commence Entities/
  Completed Progress not 2020/2021 2019/2020
  Completed Shortly Ceased
  Submitted
  Companies
  2020 3 – 38 10 69 7 127 –
  2019 27 15 19 8 52 1 122 123
  2018 24 13 14 6 30 – 87 117
  2017 20 7 8 7 19 – 61 83
  2016 10 7 1 5 11 – 34 48
  2015 7 5 2 3 6 – 23 28
  2014 2 5 1 1 4 – 13 18
  2013 – 4 – 1 4 – 9 10
  2012 2 2 – 1 2 – 7 7
  2011 – 2 – 1 – – 3 3
  2010 – 1 – 1 – – 2 2
  Total 95 61 83 44 197 8 488 439

  -x-

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• Executive Summary

  Table A above shows that 239 audits were either completed, substantially completed or still
  in progress as at 30 June 2021. The details are graphically depicted in Attachment ‘C’,
  which also included the arrears of prior years.

  Table A also shows that of the 127 current year audits (2020), only 3 were completed,
  with 38 audits in progress. A further 10 audits were to commence shortly. Graphical
  description of the status of current year 2020 audit units (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 2020 to June 2021) by the audit, 95 audit reports were issued.
  Of the 95 audit reports issued, 23 were unqualified, 35 were qualified, 33 were
  Disclaimer of Opinions and 4 Adverse Opinion. The details are captured in Attachment
  ‘D’.

  Types of Audit Opinions issued for each entity over the period of nine years from 2012 to
  2020 are detailed in Attachment ‘E’.

  Audit reports issued for certain entities have more than one year covered during the period.
  The recent audit report of these entities is reproduced in this Report. Further information on
  other years audit reports can be obtained from the minister responsible, the entity or this
  office.

  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,
  inadequate capacity and competence of staff ineffective internal control systems. Other issues
  noted are also highlighted in paragraph E.9.

  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 no proper
  procedures are being followed in the acquisition and disposal of assets;

  1 The types of audit opinions are: Unqualified Opinion – A Company’s financial statements are presented fairly, in all material
  respects in conformity with generally accepted accounting principles. Qualified Opinion – The financial statements “except for”
  certain issues fairly present the financial position and operating results of the firm. The except for opinion relates to inability of the
  auditor to obtain sufficient objective and verifiable evidence in support of business transactions of the Company being audited.
  Disclaimer Opinion – When insufficient competent evidential matter exists to form an audit opinion due to scope limitation or
  uncertainties. Adverse Opinion – The Company’s financial statements do not present fairly the financial position, results of
  operations, or changes in financial position or are not in conformity with generally accepted accounting principles.

  -xi-

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• Executive Summary

  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 remittance of taxes to IRC (Group Tax & GST);
  Accounting, administrative and procedural manuals not being available;
  Employment contracts, salaries and contract gratuities not available; and
  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 on or 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 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 on or before 30 April each year for my audit and inspection.
  However, out of 127 public entities only 51 (43%) entities have submitted their financial
  statements for 2020 (Refer Schedule A (i), (ii), (iii) & (iv)) for my audit and inspection up to
  the time of preparing this Report. A total of 69 entities have failed to comply with this
  provision (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 the minister
  responsible to the Parliament (per PFMA).

  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 and those charged with
  governance 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.

  -xii-

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  Recommendation

  My Office recommends the rigorous enforcement of the provisions of Section 63 of the PFMA
  and a legislative requirement be 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 accountability and good
  governance in the public sector.

  During the cycle, 53 entities have audit units in arrears totaling 128. Details of audits that
  have gone into arrears due to non-submission of financial statements since 2012 are given
  below in Table B and Schedule ‘B(iv)’.

  Table B
  Financial Statements Not Submitted
  Para. No. of
  No. Section
  No. Entity Year Audits
  1 A 4 Border Development Authority 2018 & 2019 2
  2 A 4A Papua New Guinea Maritime Transport Limited 2013 to 2019 7
  3 A 7 Cocoa Board of Papua New Guinea 2019 1
  4 A 7A Cocoa Pod Borer Project Fund 2019 1
  5 A 7B Cocoa Stabilisation Fund 2019 1
  6 A 8 Cocoa Coconut Institute Limited of Papua New Guinea 2017 & 2018 2
  7 A 10 Conservation and Environment Protection Authority 2019 1
  8 A 11 Government Printing Office 2019 1
  9 A 14 Industrial Centres Development Corporation 2019 1
  10 A 15 Internal Revenue Commission 2018 & 2019 2
  11 A 17A Papua New Guinea Coconut Extension Fund 2019 1
  12 A 17B Papua New Guinea Coconut Research Fund 2019 1
  13 A 24 National Broadcasting Corporation 2018 & 2019 2
  14 A 25A National Capital District Botanical Enterprises Limited 2013 to 2019 7
  15 A 25B Port Moresby Nature Park Limited 2019 1
  16 A 27 National Economic and Fiscal Commission 2019 1
  17 A 29 National Gaming Control Board 2018 & 2019 2
  18 A 29A National Gaming Control Board Community Benefit Fund Trust 2018 & 2019 2
  19 A 30 National Housing Corporation 2018 & 2019 2
  20 A 30A National Housing Estate Limited 2015 to 2019 5
  21 A 34 National Research Institute 2019 1
  22 A 37 National Volunteer Service 2017 to 2019 3
  23 A 38 National Youth Development Authority 2019 1
  24 A 39 Office of the Insurance Commissioner 2019 1
  25 A 40 Oil Palm Industry Corporation 2015 to 2019 5
  26 A 44 Papua New Guinea Forest Authority 2019 1
  27 A 45 Papua New Guinea Immigration and Citizenship Service Authority 2019 1
  28 A 50 Papua New Guinea Sports Foundation 2016 to 2019 4
  29 A 51 Papua New Guinea University of Technology 2019 1
  30 A 51A National Analytical and Testing Services Limited 2018 & 2019 2
  31 A 51B Unitech Development and Consultancy Company Limited 2018 & 2019 2
  32 A 53 Public Curator of Papua New Guinea 2018 & 2019 2
  33 A 55 Security Industries Authority 2017 to 2019 3
  34 A 58 University of Goroka 2018 & 2019 2

  -xiii-

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• Executive Summary

  Para. No. of
  No. Section
  No. Entity Year Audits
  35 A 58A Unigor Consultancy Limited 2016 to 2019 4
  36 A 58B Unigor Humi Catering Limited 2016 to 2019 4
  37 A 59 University of Natural Resources and Environment 2016 to 2019 4
  38 A 60 University of Papua New Guinea 2018 & 2019 2
  39 A 60A Unisave Limited 2012 to 2019 8
  40 A 60B Univentures Limited 2012 to 2019 8
  41 B 62 Air Niugini Limited 2019 1
  42 B 62A Air Niugini Cargo Limited 2019 1
  43 B 62B Air Niugini Properties Limited 2019 1
  44 B 62C Business Travel Centre Limited 2019 1
  45 B 62D Link-PNG Limited 2019 1
  46 B 64C Kumul Gas Foreland 239 B.V 2017 to 2019 3
  47 B 64D Kumul Gas Foreland 261 B.V 2017 to 2019 3
  48 B 64E Kumul Gas Foreland 268 B.V 2017 to 2019 3
  49 B 64F Kumul Gas Foreland 269 B.V 2017 to 2019 3
  50 B 64G Kumul Gas Niugini B.V 2017 to 2019 3
  51 B 66 Livestock Development Corporation Limited 2019 1
  52 B 67 Mineral Resources Development Company Limited 2019 1
  53 B 72 PNG Air Services Limited 2016 to 2019 4
  128
  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;
  List of outstanding financial statements were forwarded to the Public Accounts
  Committee for their necessary action; 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;
  ‒ PNG Customs Service; and
  ‒ Tourism Promotion Authority.

  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.

  -xiv-

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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. Despite the regulatory mechanism in place, 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 pay salaries and allowances without any monitoring from this Committee.
  Consequently, they have contravened Section (3) of the SCMC 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
  (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 and other legal
  provisions 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;
  PNG Air Services Limited; and
  PNG Sustainable Development Program Limited.

  E.9 Lack of Basic Accounting Records and Inadequate Control Systems

  As reported in previous years, during the course of audits I noted serious deficiencies in
  accounting and record keeping practices and compliance to internal controls. These
  deficiencies, which contributed to the limitation on the scope of my audit procedures,
  included:

  Bank, Creditors and other 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;

  -xv-

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• Executive Summary

  Asset stock-takes not being carried out resulting no proper transfer and consistent
  valuation of assets;
  Property being acquired or disposed of without proper procedures being followed and
  lack of timely recovery and disposal of Assets;
  Failure to comply with International Financial Reporting Standards in the preparation of
  the financial statements;
  Breach of Public Finances Management and other statutory provisions;
  Entities paying housing allowances and Board members allowances without tax;
  Accounting, administrative and procedural manuals not being available;
  Ineffective or no internal audit functions;
  Liabilities as at the wind-up could not be verified of their validity and completeness;
  No proper control mechanisms within the revenue and expenditure cycle;
  No proper control, monitory and recovery of staff Advances and Trade Debtors;
  Issues surrounding Information Technology (IT) Systems;
  Human Resource, Accountant and Financial Consultant capabilities; and
  Ineffective budget controls.

  The above factors contributed to the limitations on the scope of my audits which have been
  reported in accordance with Section 8(2) of the Audit Act, 1989 (as amended) and resulted in
  the issuance of Types of Opinion in respect of reports issued during the year, as shown in
  Attachment ‘D’.

  E.10 Poor Financial Management

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

  -xvi-

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• Executive Summary

  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;
  Parliament must increase its reviews of the management of public entities and provide
  Chief Executive Officers with incentives to improve their management structures;
  Appointing Boards that are result oriented and service driven; and
  Regular performance reviews on entities and those charged with governance.

  E.13 Project Audits

  My Office is also tasked to undertake projects audits. However, these are special purpose
  financial statement audits and directed to specific stakeholders thus reported separately.

  There are 27 number of audit reports issued during the period covered. All projects funded
  are under loan agreement with Asian Development Bank (ADB), World Bank (WB), Japan
  International Cooperation Agency (JICA) and International Fund for Agricultural
  Development (IFAD) programs it covers Works and Implementation, Water and Sanitation
  programs, Climate and Maritime Safety programs, Energy Sector programs and Social and
  Economic Sector Development programs.

  E.14 Creation, Amalgamation and Abolishment of Entities

  Over the years I have been observing a number of entities being created and later abolished,
  amalgamated or restructured. The challenges faced by my Office is that soon after creation,
  amalgamation or winding-up/abolishment, whether through Acts of Parliament or executive
  directives, these entities do not communicate to my Office for me to exercise my mandated
  responsibilities. Most of the times, I am placed in situations where I could not determine the
  actual efforts and resources put into creation of such entities and unfortunately could not do
  the same when the entities wind-up or cease to exist by decisions of the executive
  government. The cost and benefits of such actions at this stage could not be correctly
  ascertained by me.

  -xvii-

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• Executive Summary

  E.15 Challenges Face by My Office

  During the year and prior years, my office had faced a lot of challenges which had affected
  much of my mandatory duties. One which has limited my responsibilities is lack of sufficient
  funding. As a Constitutional office, I have not received any funding through Public Accounts
  Committee (PAC) and Parliament but only through Department of Finance. As a result,
  necessary funding were not received on time and funding received is not sufficient enough to
  cater for my operations, specifically, to fund recruitment or employing qualified auditors.

  E.16 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).

  -xviii-

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• Executive Summary

  ATTACHMENT ‘A’

  STATUS OF CURRENT YEAR AUDITS 2020 BY ENTITIES

  No. Status of Current Year Audits Number of Entities
  2020 Report 2019 Report
  1 Audits completed and reports issued thereon (Schedule A) 3 3
  2 Audits substantially completed (Schedule A) – 1
  3 Audits in progress (Schedule A) 38 32
  4 Audits to commence shortly (Schedule A) 10 9
  5 Financial Statements not submitted (Schedule A) 69 78
  6 Non Operational Entities/Ceased Companies (Schedule D) 7 –
  127 123

  Status of Current Year Audits 2020
  Non Operational Audits completed and reports
  Entities/ Ceases issued thereon (Schedule A) Audits substantially
  Companies (Schedule 2% completed (Schedule A)
  0% Audits in
  D)
  progress
  6%
  (Schedule A)
  30%

  Audits to commence
  Financial Statements not shortly (Schedule A)
  submitted (Schedule A) 8%
  54%

  Audits completed and reports issued thereon (Schedule A) Audits substantially completed (Schedule A)
  Audits in progress (Schedule A) Audits to commence shortly (Schedule A)
  Financial Statements not submitted (Schedule A) Non Operational Entities/ Ceases Companies (Schedule D)

  Please refer to details in Schedule ‘A’ on Pages 413 to 415 and Schedule ‘D’ on Page 424.

  -xix-

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• Executive Summary

  ATTACHMENT ‘B’

  STATUS OF AUDITS IN ARREARS BY NUMBER OF AUDITS
  (2019 AND PRIOR YEARS)

  No. Status of Audits in Arrears by No. of Audits (2019 & prior years) Number of Audits
  2020 Report 2019 Report
  1 Audits substantially completed (Schedule B) 61 48
  2 Audits in progress (Schedule B) 45 59
  3 Audits to commence shortly (Schedule B) 34 30
  4 Financial Statements not submitted (Schedule B) 128 101
  268 238

  Status of Audits in Arrears by number of Audits
  (2019 and prior years)
  Financial Statements not submitted
  (Schedule B)
  Audits substantially
  48%
  completed (Schedule B)
  23%

  Audits in progress
  Audits to commence (Schedule B)
  shortly (Schedule B) 17%
  13%

  Audits substantially completed (Schedule B) Audits in progress (Schedule B)
  Audits to commence shortly (Schedule B) Financial Statements not submitted (Schedule B)

  Please refer to details in Schedule ‘B’ on Pages 416 to 419.

  -xx-

• Page 26 of 309

• Executive Summary

  ATTACHMENT ‘C’

  STATUS OF AUDITS AS AT 30 JUNE 2021

  Number of Audits
  No. Status of Audits
  2020 Report 2019 Report
  1 Audits completed and reports issued thereon (Schedules A & E) 95 81
  2 Audits substantially completed (Schedules A & B) 61 49
  3 Audits in progress (Schedules A & B) 83 91
  4 Audits to commence shortly (Schedules A & B) 44 39
  5 Financial Statements not submitted (Schedules A & B) 197 179
  6 Non Operational Entities/Ceased Companies (Schedule D) 7 –
  487 439

  Status of Audits as at 30 June 2021
  Non Operational Entities/
  Financial Statements not Ceased Companies
  (Schedule D) Audits completed and
  submitted (Schedule A & B)
  40% 1% reports issued thereon
  (Schedule A & E)
  20%

  Audits to commence
  shortly (Schedule A & B) Audits substantially completed
  Audits in progress
  9% (Schedule A & B)
  (Schedule A & B)
  13%
  17%

  Audits completed and reports issued thereon (Schedule A & E) Audits substantially completed (Schedule A & B)
  Audits in progress (Schedule A & B) Audits to commence shortly (Schedule A & B)
  Financial Statements not submitted (Schedule A & B) Non Operational Entities/ Ceased Companies (Schedule D)

  Please refer to details in Schedules ‘A’, ‘B’ and ‘E’ on Pages 413 to 415, 416 to 419 and 425 to 427 respectively.

  -xxi-

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• Executive Summary

  ATTACHMENT ‘D’

  TYPES OF AUDIT OPINIONS ISSUED

  (i) UNQUALIFIED OPINION

  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 13 Independent Consumer and Competition Commission 2019 1
  2 A 16 Investment Promotion Authority 2019 1
  3 A 17 Kokonas Indastri Koporesen 2019 1
  4 A 18 Kumul Consolidated Holdings 2018 & 2019 2
  5 A 18C PNG Dams Limited 2018 & 2019 2
  6 A 22 National Agricultural Research Institute 2019 & 2020 2
  7 A 25B Port Moresby Nature Park Limited 2017 1
  8 A 32 National Maritime Safety Authority 2019 1
  9 A 33 National Museum and Art Gallery 2019 1
  10 A 35 National Roads Authority 2019 1
  11 A 42 Papua New Guinea Accident Investigation Commission 2020 1
  12 A 46 Papua New Guinea Institute of Medical Research 2019 1
  13 B 64K Kumul Petroleum (Investments) Limited 2017 & 2018 2
  14 B 65B PNG DataCo Limited 2017 to 2019 3
  15 B 65C.1 DATEC (PNG) Limited 2018 & 2019 2
  16 B 74 Post (PNG) Limited 2019 1
  23
  (ii) QUALIFIED OPINION

  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 5 Civil Aviation Safety Authority of Papua New Guinea 2019 & 2020 2
  2 A 6 Climate Change and Development Authority 2017 1
  3 A 14 Industrial Centres Development Corporation 2018 1
  4 A 18A General Business Trust 2018 & 2019 2
  5 A 18B Kumul Technology Development Corporation Limited 2018 & 2019 2
  6 A 19 Legal Training Institute 2017 to 2019 3
  7 A 20 Mineral Resources Authority 2015 to 2018 4
  8 A 23 National AIDS Council Secretariat 2019 1
  9 A 26 National Cultural Commission 2018 & 2019 2
  10 A 31 National Information and Communications Technology Authority 2016 1
  11 A 34 National Research Institute 2017 1
  12 A 36 National Training Council 2017 to 2019 3
  13 A 42 Papua New Guinea Accident Investigation Commission 2019 1
  14 A 46 Papua New Guinea Institute of Medical Research 2018 1
  15 A 47 Pacific Institute of Leadership and Governance 2015 to 2017 3
  16 A 48 Papua New Guinea Maritime College 2019 1
  17 A 51A National Analytical and Testing Services Limited 2012 1

  -xxii-

• Page 28 of 309

• Executive Summary

  Para. No. of
  No. Section Entity Year
  No. Audits
  18 B 65C.2 Kalang Advertising Limited 2017 to 2019 3
  19 B 65C.4 PNG Directories Limited 2018 1
  20 B 71 Papua New Guinea Ports Corporation Limited 2019 1
  35
  (iii) DISCLAIMER OPINION

  Para. No. of
  No. Section Entity Year
  No. Audits
  1 A 2 APEC Papua New Guinea 2018 Co-ordination Authority 2015 to 2019 5
  2 A 6 Climate Change and Development Authority 2015 & 2016 2
  3 A 8 Cocoa Coconut Institute Limited of Papua New Guinea 2014 to 2016 3
  4 A 9 Coffee Industry Corporation Limited 2017 & 2018 2
  5 A 9A Coffee Industry Fund 2017 & 2018 2
  6 A 9C Patana No.61 Limited 2017 & 2018 2
  7 A 11 Government Printing Office 2016 & 2017 2
  8 A 24 National Broadcasting Corporation 2016 1
  9 A 28 National Fisheries Authority 2017 & 2018 2
  10 A 39 Office of the Insurance Commissioner 2018 1
  11 A 40 Oil Palm Industry Corporation 2012 1
  12 A 58 University of Goroka 2017 1
  13 B 65C Telikom (PNG) Limited 2015 to 2018 4
  14 B 65C.4 PNG Directories Limited 2019 1
  15 B 69 National Airports Corporation Limited 2019 1
  16 B 70 NCD Water and Sewerage Limited (Eda Ranu) 2017 & 2018 2
  17 B 77 Water PNG Limited 2018 1
  33
  (iv) ADVERSE OPINION

  Para. No. of
  No. Section Entity Year
  No. Audits
  1 B 51B Unitech Development and Consultancy Company Limited 2015 to 2018 4
  4

  -xxiii-

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• Executive Summary

  ATTACHMENT ‘E’

  COMPARATIVE AUDIT OPINIONS ISSUED (2012–2020)

  Para. Comparative Years
  No. Section Entity
  No. 2020 2019 2018 2017 2016 2015 2014 2013 2012
  1 A 2 APEC Papua New Guinea 2018 D D D D D
  Co-ordination Authority
  2 A 3 Bank of Papua New Guinea UQ UQ UQ UQ UQ UQ UQ UQ
  3 A 4 Border Development Authority D Q
  Papua New Guinea Maritime
  4 A 4A No reports have been issued since 2013 Q
  Transport Limited
  5 A 5 Civil Aviation Safety Authority of Q Q Q Q Q Q Q Q Q
  Papua New Guinea
  Climate Change and Development
  6 A 6 Q D D D D D
  Authority
  Cocoa Board of Papua New
  7 A 7 Q Q Q Q Q Q
  Guinea
  8 A 7A Cocoa Pod Borer Project Fund Q Q UQ UQ UQ UQ
  9 A 7B Cocoa Stabilisation Fund UQ UQ UQ UQ UQ Q
  10 A 8 Cocoa Coconut Institute Limited of D D D D D
  Papua New Guinea
  Coffee Industry Corporation
  11 A 9 D D D D D D Q
  Limited
  12 A 9A Coffee Industry Fund D D D D D D Q
  Kofi Management Services New
  13 A 9B
  Limited Inclusion
  14 A 9C Patana No.61 Limited D D D D D D Q
  15 A 10 Conservation and Environment Q
  Protection Authority
  16 A 11 Government Printing Office D D D D D D
  17 A 12 Independence Fellowship Trust UQ UQ UQ UQ Q Q UQ UQ
  18 A 13 Independent Consumer and UQ UQ UQ UQ Q Q UQ Q
  Competition Commission
  Industrial Centres Development
  19 A 14 Q Q Q Q Q Q Q
  Corporation
  20 A 15 Internal Revenue Commission UQ UQ
  21 A 16 Investment Promotion Authority UQ UQ UQ UQ UQ UQ UQ UQ
  22 A 17 Kokonas Indastri Koporesen UQ UQ UQ UQ UQ UQ UQ UQ
  Papua New Guinea Coconut
  23 A 17A UQ UQ UQ UQ UQ UQ UQ
  Extension Fund
  Papua New Guinea Coconut
  24 A 17B UQ UQ UQ UQ UQ UQ UQ
  Research Fund
  25 A 18 Kumul Consolidated Holdings UQ UQ UQ UQ UQ UQ UQ Q
  26 A 18A General Business Trust Q Q Q Q Q Q D Q
  27 A 18B Kumul Technology Development Q Q Q Q D D D Q
  Corporation Limited
  28 A 18C PNG Dams Limited UQ UQ UQ UQ Q D D D
  29 A 19 Legal Training Institute Q Q Q Q Q Q Q Q
  30 A 20 Mineral Resources Authority Q Q Q Q Q Q Q
  31 A 21 National Agriculture Quarantine Q Q Q Q Q Q
  and Inspection Authority
  National Agricultural Research
  32 A 22 UQ UQ UQ UQ UQ UQ UQ UQ UQ
  Institute
  33 A 23 National AIDS Council Secretariat Q Q UQ UQ Q D D D
  34 A 24 National Broadcasting Corporation D D D D D

  -xxiv-

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• Executive Summary

  Para. Comparative Years
  No. Section Entity
  No. 2020 2019 2018 2017 2016 2015 2014 2013 2012
  National Capital District
  35 A 25 D D D D D D D
  Commission
  36 A 25A National Capital District Botanical No reports have been issued since 2013 D
  Enterprises Limited
  37 A 25B Port Moresby Nature Park Limited UQ UQ UQ UQ Q Q
  38 A 26 National Cultural Commission Q Q D D D D D D
  National Economic and Fiscal
  39 A 27 UQ UQ Q Q Q Q Q
  Commission
  40 A 28 National Fisheries Authority D D D Q Q Q Q
  41 A 29 National Gaming Control Board Q Q Q Q
  42 A 29A National Gaming Control Board Q Q Q
  Community Benefit Fund Trust
  43 A 30 National Housing Corporation D D D
  44 A 30A National Housing Estate Limited No reports have been issued since 2010
  National Information and
  45 A 31 Communications Technology Q D D D D
  Authority (NICTA)
  46 A 32 National Maritime Safety Authority UQ UQ UQ UQ UQ Q Q Q
  47 A 33 National Museum and Art Gallery UQ Q D D D D D D
  48 A 34 National Research Institute Q Q UQ UQ UQ UQ
  49 A 35 National Roads Authority UQ UQ UQ UQ UQ Q Q Q
  50 A 36 National Training Council Q Q Q Q Q Q Q Q
  51 A 37 National Volunteer Service Q Q Q Q Q
  National Youth Development
  52 A 38 D D D D D
  Authority
  Office of the Insurance
  53 A 39 D
  Commissioner
  54 A 40 Oil Palm Industry Corporation D
  Ombudsman Commission of
  55 A 41 Q Q Q UQ Q UQ UQ
  Papua New Guinea
  56 A 42 Papua New Guinea Accident UQ Q Q UQ UQ UQ UQ UQ UQ
  Investigation Commission
  Papua New Guinea Customs
  57 A 43 Q Q Q
  Service
  Papua New Guinea Forest
  58 A 44 D D D
  Authority
  Papua New Guinea Immigration
  59 A 45 UQ Q D D Q Q
  and Citizenship Service Authority
  Papua New Guinea Institute of
  60 A 46 UQ Q Q Q D D D D
  Medical Research
  Pacific Institute of Leadership and
  61 A 47 Q Q Q Q Q Q
  Governance
  Papua New Guinea Maritime
  62 A 48 Q Q Q Q Q D D Q
  College
  Papua New Guinea National
  63 A 49 Institute of Standards and Q Q Q Q Q
  Industrial Technology
  Papua New Guinea Sports
  64 A 50 D D D D
  Foundation
  Papua New Guinea University of
  65 A 51 UQ UQ UQ Q Q D
  Technology
  National Analytical and Testing
  66 A 51A Q
  Services Limited
  67 A 51B Unitech Development and A A A A A Q
  Consultancy Company Limited
  68 A 52 Parliamentary Members’ UQ UQ UQ UQ UQ
  Retirement Benefits Fund

  -xxv-

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• Executive Summary

  Para. Comparative Years
  No. Section Entity
  No. 2020 2019 2018 2017 2016 2015 2014 2013 2012
  Public Curator of Papua New
  69 A 53 D D
  Guinea
  70 A 54 Road Traffic Authority UQ UQ UQ UQ UQ UQ
  71 A 55 Security Industries Authority Q Q Q Q Q
  Small and Medium Enterprises
  72 A 56 Q Q Q Q Q Q
  Corporation
  73 A 57 Tourism Promotion Authority UQ UQ UQ UQ UQ UQ UQ
  74 A 58 University of Goroka D D D D D D
  75 A 58A Unigor Consultancy Limited D D D D
  76 A 58B Unigor Humi Catering Limited No reports have been issued since 2011
  77 A 59 University of Natural Resources D Q Q
  and Environment
  78 A 60 University of Papua New Guinea Q Q D
  79 A 60A Unisave Limited No reports have been issued since 2012
  80 A 60B Univentures Limited No reports have been issued since 2012
  81 B 62 Air Niugini Limited Q Q Q Q
  No reports issued since
  82 B 62A Air Niugini Cargo Limited
  2017
  No reports issued
  83 B 62B Air Niugini Properties Limited
  since 2018
  No reports issued since
  84 B 62C Business Travel Centre Limited
  2017
  85 B 62D Link-PNG Limited UQ
  86 B 63 Kumul Agriculture Limited A
  87 B 64 Kumul Petroleum Holdings Limited UQ UQ UQ UQ UQ
  88 B 64A Eda Oil Limited UQ UQ UQ
  89 B 64B Kumul Exploration (Asia) Limited UQ UQ
  No reports been issued
  90 B 64C Kumul Gas Foreland 239 B.V
  since 2017
  No reports been issued
  91 B 64D Kumul Gas Foreland 261 B.V
  since 2017
  No reports been issued
  92 B 64E Kumul Gas Foreland 268 B.V
  since 2017
  No reports been issued
  93 B 64F Kumul Gas Foreland 269 B.V
  since 2017
  No reports been issued
  94 B 64G Kumul Gas Niugini B.V
  since 2017
  95 B 64H Kumul Lending Co Pte Limited UQ UQ
  96 B 64I Kumul LNG Limited UQ UQ UQ UQ UQ
  Kumul Petroleum (Development)
  97 B 64J UQ UQ UQ
  Limited
  Kumul Petroleum (Investments)
  98 B 64K UQ UQ UQ UQ UQ
  Limited
  99 B 64L Kumul Petroleum (Kroton) Limited UQ UQ UQ
  Kumul Petroleum (Pipeline)
  100 B 64M UQ UQ UQ
  Limited
  Kumul Petroleum (Tech and
  101 B 64N UQ UQ UQ UQ
  Advisory) Limited
  Kumul Petroleum Marketing Pte
  102 B 64O UQ UQ
  Limited
  103 B 64P Kumul Security Agent Limited UQ UQ
  104 B 64Q NPCP Oil Company Pty Limited No reports been issued since 2015
  105 B 65 Kumul Telikom Holdings Limited New Inclusion
  No reports issued
  106 B 65A Bemobile Limited
  since 2018
  Bemobile (Solomon Islands) No reports issued
  107 B 65A.1
  Limited since 2018

  -xxvi-

• Page 32 of 309

• Executive Summary

  Para. Comparative Years
  No. Section Entity
  No. 2020 2019 2018 2017 2016 2015 2014 2013 2012
  108 B 65B PNG DataCo Limited UQ UQ UQ Q Q UQ
  109 B 65C Telikom (PNG) Limited D D D D Q Q Q
  110 B 65C.1 DATEC (PNG) Limited UQ UQ UQ UQ UQ UQ
  111 B 65C.2 Kalang Advertising Limited Q Q Q UQ UQ UQ UQ Q
  112 B 65C.3 Media Niugini Limited (EMTV) UQ UQ
  113 B 65C.4 PNG Directories Limited D Q UQ UQ UQ UQ UQ UQ
  Livestock Development
  114 B 66 No reports been issued since 2010
  Corporation Limited
  115 B 67 Mineral Resources Development Q D D D D
  Company Limited
  116 B 68 Motor Vehicles Insurance Limited Q Q UQ UQ Q Q Q Q
  New
  117 B 68A Pacific MMI Insurance Limited
  Inclusion
  New
  118 B 68B Pacific Re Limited
  Inclusion
  National Airports Corporation
  119 B 69 D D D Q Q Q Q
  Limited
  120 B 69A Airport City Development Limited D D D D D D
  121 B 69B Airports Investments Limited UQ UQ UQ
  NCD Water and Sewerage Limited
  122 B 70 D D Q Q Q Q Q
  (Eda Ranu)
  Papua New Guinea Ports
  123 B 71 Q Q UQ UQ UQ Q Q Q
  Corporation Limited
  124 B 72 PNG Air Services Limited Q Q Q Q
  125 B 73 PNG Power Limited D D D D D D
  126 B 74 Post PNG Limited UQ UQ UQ UQ UQ UQ UQ UQ
  127 B 75 Water PNG Limited D D D D D D D

  Keys:
  UQ Unqualified Opinion
  Q Qualified Opinion
  D Disclaimer of Opinion
  A Adverse Opinion
  Grey shades refer to opinions issued in the prior year reports.

  -xxvii-

• Page 33 of 309

• Executive Summary

  ATTACHMENT ‘F’

  AUDITS IN ARREARS (2019 AND PRIOR YEARS) COMPLETED DURING 2020/2021
  AUDIT CYCLE
  Audits Completed
  Para. Total Audits Substantially Total
  No. Section Entity and Reports
  No. Units Completed Units
  Issued
  1 A 2 APEC Papua New Guinea 2018 Co-ordination Authority 2015 to 2019 5
  2 A 4 Border Development Authority 2014 1
  3 A 5 Civil Aviation Safety Authority of Papua New Guinea 2019 1
  4 A 6 Climate Change and Development Authority 2015 to 2017 3 2018 & 2019 2
  5 A 7 Cocoa Board of Papua New Guinea 2018 1
  6 A 7A Cocoa Pod Borer Project Fund 2018 1
  7 A 7B Cocoa Stabilisation Fund 2018 1
  8 A 8 Cocoa Coconut Institute Limited of Papua New Guinea 2014 to 2016 3
  9 A 9 Coffee Industry Corporation Limited 2017 & 2018 2
  10 A 9A Coffee Industry Fund 2017 & 2018 2
  11 A 9C Patana No.61 Limited 2017 & 2018 2
  12 A 11 Government Printing Office 2016 & 2017 2 2018 1
  13 A 13 Independent Consumer and Competition Commission 2019 1
  14 A 14 Industrial Centres Development Corporation 2018 1
  15 A 15 Internal Revenue Commission 2016 & 2017 2
  16 A 16 Investment Promotion Authority 2019 1
  17 A 17 Kokonas Indastri Koporesen 2019 1
  18 A 18 Kumul Consolidated Holdings 2018 & 2019 2
  19 A 18A General Business Trust 2018 & 2019 2
  20 A 18B Kumul Technology Development Corporation Limited 2018 & 2019 2
  21 A 18C PNG Dams Limited 2018 & 2019 2
  22 A 19 Legal Training Institute 2017 to 2019 3
  23 A 20 Mineral Resources Authority 2015 to 2018 4
  24 A 22 National Agricultural Research Institute 2019 1
  25 A 23 National AIDS Council Secretariat 2019 1
  26 A 24 National Broadcasting Corporation 2016 1
  27 A 25 National Capital District Commission 2019 1
  28 A 25B Port Moresby Nature Park Limited 2017 1
  29 A 26 National Cultural Commission 2018 & 2019 2
  30 A 28 National Fisheries Authority 2017 & 2018 2
  31 A 29 National Gaming Control Board 2016 1
  32 A 29A National Gaming Control Board Community Benefit Fund Trust 2016 1
  National Information and Communications Technology
  33
  A 31 Authority 2016 1 2017 1
  34 A 32 National Maritime Safety Authority 2019 1
  35 A 33 National Museum and Art Gallery 2019 1
  36 A 34 National Research Institute 2017 1
  37 A 35 National Roads Authority 2019 1
  38 A 36 National Training Council 2017 to 2019 3
  39 A 39 Office of the Insurance Commissioner 2017 1
  40 A 40 Oil Palm Industry Corporation 2012 1 2013 1
  41 A 42 Papua New Guinea Accident Investigation Commission 2019 1
  42 A 43 Papua New Guinea Customs Service 2017 & 2018 2
  43 A 44 Papua New Guinea Forest Authority 2015 1
  44 A 46 Papua New Guinea Institute of Medical Research 2018 & 2019 2
  45 A 47 Pacific Institute of Leadership and Governance 2015 to 2017 3
  46 A 48 Papua New Guinea Maritime College 2019 1
  47 A 51 Papua New Guinea University of Technology 2018 1
  48 A 51A National Analytical and Testing Services Limited 2012 1 2013 to 2017 5
  49 A 51B Unitech Development and Consultancy Company Limited 2014 to 2017 4
  50 A 52 Parliamentary Members’ Retirement Benefits Fund 2017 to 2019 3
  51 A 53 Public Curator of Papua New Guinea 2014 1
  52 A 56 Small and Medium Enterprises Corporation 2018 1
  53 A 57 Tourism Promotion Authority 2019 1
  54 A 58 University of Goroka 2017 1
  55 A 58B Unigor Humi Catering Limited 2011 to 215 5
  56 A 59 University of Natural Resources and Environment 2015 1

  -xxviii-

• Page 34 of 309

• Executive Summary

  Audits Completed
  Para. Total Audits Substantially Total
  No. Section Entity and Reports
  No. Units Completed Units
  Issued
  57 B 62 Air Niugini Limited 2016 1
  58 B 62D Link-PNG Limited 2016 1
  59 B 63 Kumul Agriculture Limited 2019 1
  60 B 64 Kumul Petroleum Holdings Limited 2019 1
  61 B 64A Eda Oil Limited 2019 1
  62 B 64B Kumul Exploration (Asia) Limited 2019 1
  63 B 64H Kumul Lending Co Pte Limited 2019 1
  64 B 64I Kumul LNG Limited 2019 1
  65 B 64J Kumul Petroleum (Development) Limited 2018 & 2019 2
  66 B 64K Kumul Petroleum (Investments) Limited 2017 & 2018 2 2019 1
  67 B 64L Kumul Petroleum (Kroton) Limited 2019 1
  68 B 64M Kumul Petroleum (Pipeline) Limited 2019 1
  69 B 64N Kumul Petroleum (Tech and Advisory) Limited 2019 1
  70 B 65B PNG DataCo Limited 2017 to 2019 3
  71 B 65C Telikom (PNG) Limited 2015 to 2018 4
  72 B 65C.1 DATEC (PNG) Limited 2018 & 2019 2
  73 B 65C.2 Kalang Advertising Limited 2017 to 2019 3
  74 B 65C.3 Media Niugini Limited (EMTV) 2018 & 2019 2
  75 B 65C.4 PNG Directories Limited 2018 & 2019 2
  76 B 66 Livestock Development Corporation Limited 2010 to 2018 9
  77 B 69 National Airports Corporation Limited 2019 1
  78 B 70 NCD Water and Sewerage Limited (Eda Ranu) 2017 & 2018 2
  79 B 71 Papua New Guinea Ports Corporation Limited 2019 1
  80 B 73 PNG Power Limited 2018 1
  81 B 74 Post (PNG) Limited 2019 1
  82 B 77 Water PNG Limited 2018 1
  92 61

  -xxix-

• Page 35 of 309

• -xxx-

• Page 36 of 309

• SECTION A

  PUBLIC BODIES AND

  THEIR SUBSIDIARIES

  -xxxi-

• Page 37 of 309

• -xxxii-

• Page 38 of 309

• 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 60B of this part of my Report.

  -1-

• Page 39 of 309

• -2-

• Page 40 of 309

• 2. APEC PAPUA NEW GUINEA 2018 CO-ORDINATION
  AUTHORITY

  2.1 INTRODUCTION

  2.1.1 Legislation

  The APEC PNG 2018 Co-ordination Authority was established by the APEC Papua
  New Guinea 2018 Co-ordination Authority Act 2014. The Act came into operation on
  23 December 2014.

  In relation to providing protection and security to the delegates of the APEC PNG
  2018, the Joint Task Force (JTF) was established by Asia Pacific Economic
  Cooperation (APEC) Safety and Security Act 2017. The Act came into operation on
  13 April 2017.

  2.1.2 Functions of the Authority and the Joint Task Force

  1) The functions of the Authority are to:

  liaise and consult with the relevant government departments and State
  agencies and other stakeholders to ensure the efficient and successful
  running of the APEC Meetings 2018;
  enter into and perform contracts for the construction and rehabilitation of the
  APEC Papua New Guinea 2018 venues, ancillary works and 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;
  implement the operations order;

  -3-

• Page 41 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  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 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  2.2.1 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 2015, 2016, 2017, 2018 and
  2019 were issued on 5 March 2021. The respective years’ reports contained similar
  Disclaimer of Opinions, hence, only the 2019 report is reproduced:

  “DISCLAIMER OF OPINION

  Because of the significant of the matters referred to in the Basis for Disclaimer of
  Opinion paragraphs 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 special
  purpose financial report of the APEC Papua New Guinea-2018 Co-ordination
  Authority for the year ended 31 December 2019.

  BASIS FOR DISCLAIMER OF OPINION

  Expenditure Lacking Supporting Documents

  Cash payments totaling K21,201,364 were stated under the statement of cash receipts
  and payments in the special purpose financial report of the Authority for the year
  ended 31 December 2019. Of the total, payments valued at K16,531,930 were
  selected for my testing, to ensure, legitimacy, existence and accuracy of the payments
  and were appropriately supported with documentation and complied with the APEC
  Papua New Guinea-2018 Co-ordination Authority Act 2014 (the APEC Act) and
  relevant legislature mentioned therein.

  -4-

• Page 42 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  My review noted that a number of documents were either not provided or partially
  provided without sufficient and appropriate supporting documentation. Accordingly, I
  was unable to obtain sufficient and appropriate audit evidence to express an opinion
  whether the cash payments made were legitimate expenditure of the Authority, made
  in accordance with the APEC Act or that the expenditures were accurately recorded in
  the special purpose financial report for the year ended 31 December 2019.

  Completeness of Receipts from Government – Alesco Payroll

  Included in the statement of cash receipts and payments for the year ended 31
  December 2019 were cash receipts from Alesco payroll totaling K1,022,401. Funding
  provided by the Department of Finance, as payments for employees’ wages via the
  Alesco payroll system (Alesco Payroll), has been a significant source of funding for
  the Authority.

  The Authority has determined that it is impracticable to establish control over the
  recording of funding provided by Alesco payroll prior to entry into its financial
  records. As the evidence available to me regarding funding from this source was
  limited, my audit procedures with respect to this funding was restricted to the amounts
  recorded in the financial records. Accordingly, I was unable to obtain sufficient and
  appropriate audit evidence regarding whether this funding recorded was complete.

  Corresponding Amounts

  My audit opinion of the Authority for the year ended 31 December 2018 was
  disclaimed with respect to:

  expenditure totaling K331,025,203 that lacked sufficient and appropriate
  supporting documents for me to test the existence, accuracy and completeness of
  the recorded expenditure items;

  completeness of the receipts from the Department of Finance through the Alesco
  payroll totaling K10,038,628; and

  completeness of the receipts from the Department of PM&NEC totaling
  K21,094,853.

  These amounts are reflected as comparative amounts in the special purpose financial
  report.

  -5-

• Page 43 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  EMPHASIS OF MATTERS

  I draw attention to place emphasis on the following significant matters, whilst not
  qualifying on these issues:

  Outstanding Liabilities – Creditors

  Pages 13 to 15 of the financial report includes details of various capital expenditures
  and liabilities incurred during 2015 to 2019 for conduct of the APEC PNG 2018
  meetings. These expenditures include K58,385,368 disclosed under Note 16(B) as
  outstanding liabilities of the Authority as at 31 December 2019. Of the total liability,
  K38,752,827 was incurred by APEC Authority and K19,632,541 was incurred by Join
  Security Task Force (JSTF) respectively. These amounts were subsequently
  transferred to the Department of Finance. I have not audited these liabilities since
  sufficient and appropriate documentation were not made available for my review.
  Therefore, I was unable to determine their existence, accuracy and legitimacy of these
  liabilities.

  Capital Expenditures

  Note 16(ii) refers to Infrastructure Investment Capital Expenditure. I noted that the
  value of APEC Haus built by Oil Search Limited under tax credit scheme was not
  appropriately disclosed in the financial report. Further, K100 million paid by the State
  as its contribution for the construction of Hilton hotel purposely built for the APEC
  events was not disclosed in the financial report. Accordingly, this could materially
  affect the completeness of the special purpose financial report.”

  2.2.2 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 period 1 January 2015 to 31
  December 2019 was issued on 5 March 2021. The management responses to the audit
  findings are excluded, however they can be found in a separate report delivered to
  Parliament in April 2021. The report contained the following issues:

  Required Reports not Prepared or Furnished in a Timely Manner

  I noted that the Authority had failed to prepare and furnish various reports as required
  under the APEC Papua New Guinea 2018 Co-ordination Authority Act 2014 (the
  APEC Act) on the stipulated times. The various reports that were required under the
  APEC Act are as follows:

  -6-

• Page 44 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  Provisions under Section 6 of the APEC Act required the Authority to provide
  reports on achievement of milestones related to its objectives to the Minister
  responsible for his review to ensure compliance and achievement of the
  Authority’s objectives. There was no evidence available for me to confirm that the
  required reports had been prepared and submitted to the Minister responsible.

  Provisions under Section 15 of the APEC Act required the Authority to prepare
  reports in every 6 month (periodic) or upon request of the Minister responsible or
  the NEC on the progress and performance in relation to its functions. As
  evidenced, these reports had not been prepared and furnished to comply with the
  requirements.

  Provisions under Section 19 of the APEC Act required the Authority to comply
  with Public Finances (Management) Act 1995 (as amended), in specific, Part VIII
  (other than Section 54, 55 and 57), which under Section 63(4) requires that the
  Authority shall be subject to audit for every financial year before 30 June of the
  following year. As evidenced, all the financial reports of the Authority for the
  financial years 2015 to 2018 were submitted to me in December 2019 for conduct
  of the audits.

  Provisions under Section 29 of the APEC Act required the Authority to furnish
  final report on the activities and performance of the Authority and on its winding
  up. The report shall include an audit report. However, these reports had been long
  delayed since the audits of the Authority for the financial years 2015 to 2019 had
  been delayed.

  Accordingly, the Authority had departed from compliance with the relevant
  requirements set out under the APEC Act and the Public Finances (Management) Act,
  1995 (as amended) (PFMA). I was unable to determine the causes of not producing
  the reports or the delays. However, possible causes may include lack of human
  resource capacity or records not maintained in order and were intact to facilitate
  timely reporting.

  As the Authority was not operational at the time of this Report, I recommended that
  management of any organization established as a one-time authority must adopt and
  implement appropriate control measures and processes to ensure the following:

  Adequate and appropriately skilled and knowledgeable personnel are engaged to
  carry out day-to-day functions including the monitoring and reporting processes;
  All source documents are filed and maintained intact under retention policies and
  procedures manual, and the records are centralized to enable timely report
  compilation;
  All required reports are prepared and furnished on the stipulated times;
  Financial reports of such short-lived authorities are prepared at least annually;

  -7-

• Page 45 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  A draft copy of the financial reports for each financial year is forwarded to the
  Office of the Auditor-General before 30 April of the following year to enable the
  Office to conduct audit and issue report to the Parliament as required under the
  Audit Act 1989 (as amended) and the Public Finances (Management) Act, 1995
  (as amended);
  Operational plans, budgets and work plans are drafted, approved by the NEC and
  must exist as control tools before the public funds are receipted and disbursed; and
  All plans and budgets are monitored on a regular and timely basis and variances
  that arise must be factored into variance documents with proper approval given by
  the NEC.

  The Authority’s Bank Account was opened in 2016 and Trust Account in 2018

  Section 22 of the APEC Act states that the Authority shall open and maintain bank
  accounts with Bank of PNG or commercial banks and at all times maintain one such
  bank account. However, the Authority opened its first bank account with Bank South
  Pacific (BSP) only in 2016.

  This was one (1) year after the APEC Act came into force on 23 December 2014 and
  expenditures on APEC meetings preparation were already committed by the
  PM&NEC from 2015. Further, receipts and payments by the Authority’s bank
  accounts from 2016 to 2017 had been minimal until the financial year 2018.
  K176,834,445 was expended by PM&NEC for the financial years 2015, 2016 and
  2017 for the APEC meeting.

  The Asia Pacific Economic Cooperation (APEC) Trust Account was opened on 22
  February 2018 after three (3) years of enactment of the APEC Act. However, the
  controlling public or statutory body of the Trust Account was Department of
  PM&NEC and not APEC Authority. Also, the mandatory signatories to the account
  were Secretary and Deputy Secretary for Operation of the Department of Finance and
  the counter signatories were APEC CEO and Deputy Secretary Operations –
  Department of PM&NEC.

  Further, the Asia Pacific Economic Cooperation (APEC) Security Trust Account was
  opened on 16 January 2018. However, the controlling public or statutory body of the
  Trust Account was Department of PM&NEC and not the APEC Authority. Also, the
  mandatory signatories for the account were Secretary and Deputy Secretary for
  Operation of Department of Finance and the counter signatories are Commissioner for
  Royal Papua New Guinea Constabulary (Police) and Secretary for Defence,
  Department of Defence.

  -8-

• Page 46 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  As a result, the following issues were noted to arise:

  Although the APEC Act was in force in 2015, the Authority failed to comply with
  provisions under Section 22 of the APEC Act to open the bank accounts
  immediately;
  The Department of the PM&NEC continued to receive and disburse funds for and
  on behalf of the Authority, which was not appropriate. I could not see the NEC
  decision or documents on any other arrangements that might have been made to
  decentralize the ultimate financial powers the Authority has under Section 22,
  Subsection 2 to receive and disburse all monies through the Authority’s own bank
  accounts; and
  As the receipts and payments related to APEC meetings were handled by 5
  different entities, register of transactions and record keeping were not centralized
  hence, exposed to high risks of abuse of funds and manipulation of records and
  data.

  I recommended that in future the Minister responsible and key stakeholders must
  ensure that bank accounts of such short-lived authorities are opened and utilized in
  compliance with the enabling laws. I advised that using the organization’s own bank
  account increases level of centralization in overall governance, monitoring,
  accounting and record keeping and timely audit of the authorities and to avoid
  unnecessary delays.

  Lack of Centralized Governance Body and Integration of Management Systems

  Receipts and payments of the APEC 2018 meetings funds were handled by five (5)
  different entities namely; the PM&NEC, the Department of Finance, the JSTF, the
  Department of Defence and the APEC Authority itself. Accordingly, establishment of
  a central governance body was necessary to oversee and approve all payments
  processed through the five (5) different channels, and to ensure control over the entire
  operations of the Authority. Section 9 of the APEC Act requires the establishment of
  the APEC Operations Task Force to provide oversight of the Authority. However, no
  meeting minutes of such central governance body were available for my confirmation
  of their existence.

  Further, the five (5) entities operated in isolation using their respective standalone
  systems to capture their share of APEC meetings related transactions. Hence, there
  was no system integration to collate, compile and centralize the transaction data from
  the five (5) payment channels. As a result, transaction listings and payments records
  provided may be incomplete. I also experienced long delays and difficulties in
  receiving the requested information for conducting and finalizing the audits of the
  Authority for the years ended 31 December 2015, 2016, 2017, 2018 and 2019. There
  was no clear audit trail to ensure completeness and accuracy of the final financial data
  presented in the financial reports.

  -9-

• Page 47 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  I emphasized that where financial functions of an organization are decentralized, it is
  more appropriate and prudent to establish a central governance body. I recommended
  that in future the management together with the Minister responsible and relevant key
  stakeholders must ensure that such organizations:

  establish a central governance body to oversee and approve all payments
  processed over decentralized financial functions as seen in this case of the APEC
  Authority; and
  maintain proper accounting records and source documents in line with approved
  filing and retention policy and procedures manual by the organisation itself and
  not at every decentralized organisations.

  Missing Transaction Listings and Source Documents

  My audit procedures to verify appropriateness, completeness and accuracy of the
  payment figures reported in the financial reports for the years ended 31 December
  2015 to 2019 had been limited since a significant number of the documents requested
  were not received by me at the conclusion of this audit.

  The transaction listings provided may be incomplete and about 78% of the payment
  samples selected for testing could not be provided with all relevant source documents.
  I noted that proper filing and archiving systems and processes did not appear to be
  designed and implemented to ensure proper maintenance of all the payments and
  transactions records pertained to the APEC events.

  As the transactions listings provided may not be complete, I could not select samples
  or perform other substantive procedures over a significant sub-population (number) of
  the payments. Based on the transaction listings made available, I have requested 1,403
  payment samples for testing as presented in column 4 of Table 1.1 below. Out of the
  total samples requested only 305 were provided as indicated in column 6 of the table.
  This means 1,098 or 78% of the payment samples requested could not be provided as
  shown in columns 5 and 7 of the table.

  Even though the management claimed that they have provided 60.4% of the payment
  documents, most of the payment vouchers were incomplete without underlying
  documents, including quotes, tender documents, evaluation report, tender board
  resolution, engagement contracts signed by the relevant authorities, etc.

  – 10 –

• Page 48 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  Table 1.1 Summary of substantive samples by payment channel

  Payment Total Value of Number of Outstanding Partially Outstanding
  Channels Payments samples samples samples received samples in
  (entities) (Kina) requested requested samples (%)
  (Kina)
  PM & NEC 209,660,951 161,074,797 664 394 270 59%
  APEC 288,325,818 175,694,272 168 148 20 88%
  JSTF 29,476,439 10,612,681 293 278 15 95%
  DoF – Alesco 11,061,028 2,631,561 278 278 0 100%
  Total 538,524,235 350,013,311 1,403 1,098 305 78%

  I have reported in my other findings that a central governance body did not appear to
  exist to oversee all payments processed through the 5 payment channels. Also, the
  systems they used were not integrated to centralize the financial data and records. As
  a result, transaction listings provided were incomplete and payment samples requested
  could not be provided in entirety.

  Accordingly, I was unable to conclude my audit procedures satisfactorily by
  alternative means to ensure appropriateness, completeness and accuracy of the
  financial information reported in the financial reports. I could not confirm whether the
  payments made have been appropriately approved and paid to genuine service
  providers that were contracted through proper tendering processes.

  I recommended that the management together with the relevant stakeholders to ensure
  such short-lived authorities that arise in future:

  Design and implement proper filling and archiving systems, processes and
  controls to ensure that documents pertaining to operational activities are
  appropriately filed and safely maintained for easiness and fast retrieval whenever
  needed; and
  A policy and procedures manual are drafted, reviewed, approved, implemented
  and closely monitored to ensure effective control is attained in respect of the
  above.

  Establishment of Supply and Tenders Board

  My requests to the Authority to provide listing of the APEC Papua New Guinea
  Supply and Tenders Board members, tender register, contract register, approved
  suppliers and service organization listings, procurement plan, and policies and
  procedures manual for the five (5) years (2015-2019) could not be provided at the
  conclusion of my audit.

  In addition, minutes of the APEC Papua New Guinea Supply and Tenders Board
  deliberations and contract agreements duly signed by the Supply and Tenders Board
  and the NEC according to their financial authority limit to engage contractors were
  not provided for my review.

  – 11 –

• Page 49 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  Per Table 1.1 above payment samples totaled 1,403 at a value of K350,013,311 were
  selected throughout the 5 years. No complete documentation was provided for 78% of
  the samples which included on the tendering and contract awarding processes, and
  contracts agreements signed with the Chairman of the APEC Papua New Guinea
  Supply and Tenders Board and Head of State as required under Section 21(3)(b),
  21(4) and Section 21(5) of the APEC Act respectively. The Authority was required by
  provisions under Section 20 of the APEC Act to establish a Supply and Tenders Board
  (the S&T Board). The provisions under Section 21 of the APEC Act stipulates the
  functions of the S&T Board. The Chief Secretary shall be the Chairman of the S&T
  Board.

  Due to the lack of supporting documentations including the listing of the Supply and
  Tenders Board members and their meeting minutes, I was unable to confirm the
  establishment and existence of the S&T Board. Also, I was unable to ensure
  legitimacy of all contractors engaged and validity of the payments made to the
  contractors and goods and service providers.

  At the conclusion of this audit, the Authority is extinct. Therefore, I recommended
  that management must ensure the following in future:

  Establish, implement or enforce all functions or requirements including set up of
  the Supply and Tenders Board as required under the relevant legislation;
  All appropriate processes and controls are adhered to in line with all applicable
  laws and be held accountable in instances of non-compliance;
  Implement a suitable policy with regard to record keeping so that filing and
  storage of all relevant source documents are well maintained for future review and
  audit; and
  Maintain a centralized governance committee to enforce proper control and
  monitoring over maintenance of the accounts and source documents to enable
  conduct of audit within a set time frame.

  No SCMC/NEC Approval sighted on the Salaries and Conditions of the
  Employees

  I noted that payments of salaries and allowances of the employees of the Authority
  were made from all the five (5) payment channels.

  My audit procedures identified issues or difficulties are detailed below:

  Section 11, Sub-sections 6 and 7 of the APEC Act states that terms and conditions
  of employment of the Chief Executive Officer (CEO) of the Authority shall be
  determined by the National Executive Council (NEC) and the salaries, allowances
  and benefits of the CEO shall be determined by the Salaries and Conditions
  Monitoring Committee (SCMC).

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• APEC Papua New Guinea 2018 Co-ordination Authority

  Section 9(2) of the Salaries and Conditions Monitoring Committee Act 1988 (the
  SCMC Act) states that the CEO of the Authority shall be responsible for ensuring
  that the employees of the Authority are remunerated in accordance with the
  salaries and conditions approved by the SCMC.

  My request for listings of the employees on the Authority’s organizational structure,
  their contracts of employment and the salary structure approved by the SCMC were
  not provided for my review to ensure the salaries and allowances were paid in
  accordance with the NEC determined and the SCMC approved conditions.

  Section 10(1) of the SCMC Act states that a public body (the Authority) cannot
  determine or vary the salaries and conditions of employment of any employee on
  its own accord as such will be void and unenforceable with payment made under
  such arrangement recoverable by the State.

  My request for the listings of all the employees on the Authority’s organizational
  structure and details of performance measures and incentive compensation taken were
  not provided for my review. Should there be any variations made to the salaries and
  conditions of the employees, I was unable to determine whether proper approval was
  sought in accordance with Section 11(1) of the SCMC Act and granted by the SCMC.

  I noted instance where allowances were paid at the rate of K500 per day opposing
  to K200 per day as required under the Public Services General Orders. No NEC
  approval was provided to substantiate the new daily allowance rate used or the
  excess allowance paid. The documentations on a significant number of allowances
  paid under the Joint Security Task Force (JSTF) payments were not provided for
  my review.

  I have selected samples of payroll and allowance payments