Report of the Auditor-General Part IV on the Accounts of Public Authorities and Statutory Bodies 2020 Section A

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    Section A of the Auditor-General's annual report for 2020 on the Accounts of Public Authorities and Statutory Bodies established under the Act of Parliament and Government Owned Companies established under the Companies Act.

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  • Part IV Report of the
    Auditor-General
    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-

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  • 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-

  • Page 17 of 309

  • 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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  • Executive Summary

    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-

  • Page 19 of 309

  • 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-

  • Page 20 of 309

  • Executive Summary

    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-

  • Page 21 of 309

  • 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-

  • Page 22 of 309

  • 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-

  • Page 23 of 309

  • 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-

  • Page 24 of 309

  • 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-

  • Page 27 of 309

  • 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-

  • Page 29 of 309

  • 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-

  • Page 30 of 309

  • 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-

  • Page 31 of 309

  • 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-

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  • 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 –

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    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).

    – 12 –

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    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 for staff including that
    of the CEO and requested supporting documentations including pay slips, hours
    worked and rate per hour, proof of identification and signed and dated
    employment contracts to determine whether the salaries and allowances paid were
    properly approved and complied with the SCMC Act, and that the payees were not
    factious or fraudulent.

    However, none of the documentations requested was made available for my review to
    ensure validity and legitimacy of the salaries and allowances paid through the various
    payment channels. Unbelievably, no information was provided for samples selected
    for my test on payments channeled through the Alesco payroll system.

    As a result, I could not ascertain whether the remunerations paid to the Authority’s
    employees and the allowances paid to the security personnel complied with the APEC
    Act, the SCMC Act, the PFMA and the other regulatory frameworks including the
    Public Services General Orders.

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

    All appropriate processes and controls are implemented, enforced and adhered to
    in accordance with all the relevant laws that are applicable and be held
    accountable in instances of non-compliance;

    Implement suitable policies with regard to recordkeeping so that filing and storage
    of all relevant source documents are well maintained for future review and for the
    purpose of audit use; and

    Maintain a centralized governance committee to enforce proper control over the
    overall operations including close monitoring over maintenance of the accounts
    and source documents to enable conduct of audit within a set time frame.

    In-complete Financial Reports

    I was provided with the draft financial reports for the financial years ended 31
    December 2015, 2016, 2017, 2018, and 2019 backed with majority of the transaction
    listings. Though, my audit procedures had been designed to reasonably verify the
    existence, completeness, accuracy and compliance aspects of the sampled transactions
    presented in these reports, the matter of completeness of the data presented in these
    reports could not be reasonably verified given the following findings:

    The Department of PM&NEC had not maintained separate bank accounts for
    transacting the APEC meetings related receipts and payments. During the APEC
    meeting period between 2015 to 2018, K205.6 million was expended from the
    Department of PM&NEC, however they drew the funds from their main
    operational bank accounts and merely registered the payments under APEC
    meetings payments listings/ledgers.

    These payments registers/ledgers were then extracted and supplied for drafting the
    financial reports. It has not been possible for me to trace and agree the APEC
    meetings related transactions listings amounts with the bank statements amounts;
    and

    While thousands of operational transactions were made from its respective
    operational bank accounts in a year, the APEC meetings payments were also
    channeled from the same operational bank accounts posing high risks for posting