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: [email protected] 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.

    – 13 –

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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
    errors and fraudulent activities to go undetected. There was a possibility that
    payments drawn for APEC meetings related expenses may not be registered under
    the APEC payments register or fictitious payments could be registered under the
    APEC meetings expenditures.

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    Due to the fact that the Department of the PM&NEC had not maintained separate
    bank accounts for transacting the APEC meeting related expenses, I was unable to
    complete my audit procedures to verify the completeness of the payments made from
    the channel. Additionally, system generated trial balances which should summarize
    the capture of all transactions from the four (4) payment channels, and as a basic
    requirement for maintaining set of accounts was not provided for my review.

    I recommended that going forward centralized accounting systems are maintained to
    facilitate proper record keeping and timely report productions.

    Audit Requirements

    Section 24 of the APEC Act, states that the Authority shall appoint an independent
    Probity Auditor, who shall advise the Authority and Chairman of the APEC 2018
    Supply and Tenders (S&T) Board on matters of transparency and probity. I was
    unable to confirm whether a probity auditor had been engaged progressively
    throughout the years as no service agreements nor their audit reports were furnished
    to me.

    In addition, I noted as per Section 29 of the APEC Act that the Authority was to
    furnish to the Minister a final report on the activities and performance of the
    Authority and on its winding up. The report was to include an audit report “prepared
    by a first-tier firm of auditor and accountants with an office in Port Moresby” and be
    tabled in Parliament by the Minister during the first siting of Parliament after receipt
    of the report by the Minister.

    As detailed in my observation number one (1) of this report, the audit and report on
    each of the five (5) financial years had been long delayed with high considerations
    given to the specified time of reporting under applicable legislations.

    Furthermore, I noted that Section 29(2)(a) of the APEC Act is silent on the Auditor-
    General of Papua New Guinea conducting the audit of the Authority by stating that a
    “first-tier firm of auditors and accountants with an office in Port Moresby” will
    report on the financial statements of the Authority. Hence, this provision conflicts
    with the mandate and powers given to the Auditor-General of Papua New Guinea
    under Section 214 of the Constitution and other enabling Act of Parliament including
    Part II of the Audit Act 1989 (as amended) and Section 63 of the Public Finances
    (Management) Act, 1995 (as amended) to conduct the audit of all public bodies
    including the statutory authorities and State-owned companies funded by the State.

    I recommended that all public bodies and authorities that are established by an Act of
    Parliament using public funds are subject to audit by the Auditor-General of Papua
    New Guinea under the requirements of the Constitution, the Public Finances
    (Management) Act, 1995 (as amended) and the Audit Act 1989 (as amended).

    – 15 –

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    I also emphasized that probity auditors should be engaged as required by the
    respective enabling Act. Service agreements and final audit reports of the probity
    auditors should be filed appropriately for easy reference when needed.

    I further highlighted that going forward, enactment of any such laws by Parliament
    must ensure to avoid such oversight that causes conflict with the existing laws in
    particular of my constitutional responsibility as the State auditor.

    Human Resources Capabilities

    Section 9 of the APEC Act, states that the APEC Operations taskforce is responsible
    for providing oversight of the APEC CEO to ensure his functions and that of the
    Authority are performed properly. Section 12 further states that the functions of the
    APEC CEO are to carry out the day-to-day business of the Authority, implement the
    decision of the Operations Taskforce and administer the staff of the Authority in an
    efficient and effective manner and in accordance with the Operations Plan 2018. The
    APEC CEO is also responsible and accountable to the Government in relation to these
    functions.

    Throughout the course of the audit, I faced significant delays and difficulties in
    receiving the requested documentation as detailed in my observation number three (3)
    of this report. As part of the risk assessment procedures for APEC audit, I had
    requested for the meeting minutes of the Authority, fraud registers, budgets and other
    monitoring tools maintained in relation to the APEC 2018 PNG meetings.

    However, these documents could not be provided to me at the conclusion of this audit.
    I also could not obtain few of the transactions listings which had been outstanding and
    supporting source documents for some sampled transactions.

    As such, I could not comment on whether the Authority had the necessary human
    resource capabilities employed to effectively and efficiently run the Authority not
    only in accordance with the relevant legislature but even in line with standard best
    practice.

    I recommended that going forward a proper filing and retention policies and
    procedures are designed and implemented by such public authorities. Maintenance of
    accounts and other reporting documents should also be centralized.

    Moreover, the Minister and operations taskforce of such public authorities must
    ensure that management of the authorities are performing their functions as required
    and are held accountable on a progressive basis. The CEOs of such authorities should
    also ensure that they have a strong team of staff that have the necessary skills,
    knowledge and accountability to perform their duties efficiently and effectively.

    – 16 –

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    Lack of Timely Recovery and Disposal of Assets

    Section 26 of the APEC Act, states that upon winding up of the Authority, all assets of
    the Authority are to be transferred to the State. Section 28 further states that surplus
    funds and assets, after discharging liabilities, shall be disposed in consultation with
    the Operations Plan 2018 (I was not provided with a copy of the plan to determine
    whether the plan has been executed as approved by relevant authority). I noted that a
    total of 326 motor vehicles were purchased by the Government of Papua New Guinea
    through the bank account of the Department of PM&NEC. The purchases included 40
    Maserati’s and 3 Bentleys which were luxury vehicles. In addition, the partner
    countries donated 166 vehicles. Accordingly, a total of 492 vehicles were available
    for use during the APEC PNG 2018 meetings. I further noted that a significant
    amount of funds were also spent by JSTF and PM&NEC on hire cars.

    Under the instruction by the Secretary of the Department of Finance (DOF), all
    vehicles should be returned and accounted for. However, at the conclusion of this
    audit, 109 vehicles out of the 492 were yet to be recovered from certain individuals
    still in possession of these vehicles according to Department of Finance (DOF) latest
    information provided to me on 15 February 2021.

    I understand that an APEC Assets Disposal Committee had been set up for the
    purpose of making sure that all vehicles are accounted for and are properly disposed
    off through public tender process or allocated and distributed to public and statutory
    bodies, provincial and district government arms, NGO, hospitals and other charitable
    organisations.

    The Department of Finance (DOF) latest report further states that 257 vehicles were
    distributed to public and statutory bodies, provincial and district government arms,
    NGO, hospitals and other charitable organisations. 192 vehicles were to be disposed
    off through public tender, which includes the 109 vehicles yet to be recovered from
    certain individuals.

    I noted that for the luxury vehicles, in particular, 38 Maserati’s are yet to be sold and
    are currently housed in a warehouse. I further noted that the vehicles are currently
    lying idle and are also uninsured which exposes the State to the risk of losses in an
    event of a fire or theft. The value of these assets may be also depreciated. I
    recommended that a full asset register of all assets is prepared and that assets are
    physically verified. The register must include those transferred to State and disposed.
    I also recommended that the relevant government departments take proactive
    measures to ensure that the remaining assets are disposed through transparent tender
    processes.

    In addition, I highlighted that while the assets remain unsold they should be properly
    stored, monitored and insured to minimise the risk of losses.

    – 17 –

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    Liabilities as at the Winding-Up could not be Verified of their Validity and
    Completeness

    Section 27 of the APEC Act states that upon winding up of the Authority, all liabilities
    of the Authority are to be transferred to the State and discharged by the Department of
    Finance.
    As per the information disclosed in the financial report in page 13, the liabilities of the
    Authority amounted to K58,385,368 as at 31 December 2019. I was not provided with
    all relevant supporting documentation to verify the validity of the liabilities. As a
    result, I was unable to determine the existence and accuracy of the creditor listings
    provided and payables recorded as at 31 December 2019.

    I recommended that going forward, the Authority, Department of Finance and other
    relevant stakeholders must perform a thorough and proper reconciliation to ensure the
    accuracy of the creditors which the State is liable to settle.

    Payments made to Circumvent the Laws Appeared to Occur

    My inspection of the Authority’s transaction listings for its five (5) years of
    operations revealed that certain transactions appeared to have duplicate descriptions,
    dates and amounts. I have sampled some of these payments suspected of duplication
    for testing.

    Based on the supporting evidences I obtained, invoices with large amounts that
    exceeded K500,000 were broken down into smaller parts possibly to slip under the
    approval limits for the purpose of making the approval and payment processes
    quicker. Such practice has been notably a departure from compliance with Section 21
    of the APEC Act which requires amounts over K500,000 to be put up for public
    tender. The practice also circumvented and breached requirements under the Public
    Finances (Management) Act, 1995 (as amended).

    Majority of such transactions suspected of duplication remain outstanding for testing
    and lack of supporting documentations for my review. As a result, I was unable to
    comment on the existence, accuracy or appropriateness of these transactions and the
    impacts they could have on the respective years’ financial reports.

    I recommended that going forward proper processes and controls in terms of
    obtaining approvals and payments must follow prescribed financial authority limit set
    under such Authority’s own Act and the Public Finances (Management) Act, 1995 (as
    amended) for transparency, accountability and compliance. Having noted the
    suspected payment duplications, I also recommended that reconciling of creditors on a
    regular basis is necessary to ensure fictitious invoices with intention to increase the
    creditors balance are not included.

    – 18 –

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    Payments not included in the Authority’s Special Purpose Financial Reports

    The APEC Haus was constructed for the APEC 2018 meetings in Papua New Guinea.

    I understand that the costs to construct the building was done through an arrangement
    between Oil Search Limited (‘OSL’) and the Internal Revenue Commission (the
    ‘IRC’) in that the tax credits of OSL were used to pay for the construction costs of the
    building rather than being paid to the IRC.

    The construction costs were not taken up in the financial reports of the Authority,
    however, I do note that this was a significant cost in relation to the APEC 2018
    meetings and should have been appropriately disclosed. I have not viewed any
    documentation on this matter.

    I recommended that a separate audit be done on the APEC Haus. This audit should
    not only cover the appropriateness of the cost of construction of the building but also
    an assessment of the utilisation of the building and its current earning capacity.

    State Contribution to Hilton Hotel

    I noted that K100 million (US$30 million) was paid by the State through Kumul
    Petroleum Holdings Limited as its contribution for the construction of Hilton Hotel,
    which was purposely built to accommodate guests for the APEC events. However,
    this amount was not disclosed in the Financial Reports of the Authority.

    2.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Authority ceased to exist as it was set up as a
    short term entity for the duration of the APEC 2018 meetings preparation and hosting.
    The 2019 report has been my last Report and I will not report on the Authority in my
    future Reports.

    – 19 –

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  • 3. BANK OF PAPUA NEW GUINEA

    3.1 INTRODUCTION

    3.1.1 Legislation

    The Bank of Papua New Guinea (BPNG) was established under the Central Banking
    Act (Chapter 138). This Act was in operation until 16 June 2000 when it was repealed
    and replaced by the Central Banking Act 2000.

    3.1.2 Objectives of the Bank

    The main objectives of the Bank of PNG as stipulated in the new Act are to:

    formulate and implement the monetary policy with a view to achieving and
    maintaining price stability;
    formulate financial regulation and prudential standards to ensure stability of the
    financial system in PNG;
    promote an efficient national and international payments system; and
    subject to the above, to promote macro-economic stability and economic growth
    in PNG.

    3.1.3 Functions of the Bank

    The primary functions of the Bank are to:

    issue currency;
    act as banker and agent of the Government;
    regulate banking, credit and other financial services as empowered by the Act or
    by any other law of the Independent State of PNG;
    manage the gold, foreign exchange and other international reserves of PNG;
    perform any function conferred on it by or under international agreement to
    which PNG is a party;
    perform any other functions conferred on it by or under any other law of PNG;
    and
    advise the Minister as soon as practicable where the Bank considers that a body
    regulated by the Central Bank is in financial difficulty.

    – 20 –

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    3.1.4 Structural Reforms at the Bank

    In addition to the Central Banking Act, three (3) other Acts were legislated in 2000
    which gave additional responsibilities to the Bank. These other Acts are:

    1. Banks and Financial Institutions Act 2000;
    2. Superannuation Act 2000; and
    3. Life Insurance Act 2000.

    Each of these Acts provide additional responsibilities to the Bank.

    3.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Bank for the year ended 31 December 2020 was in progress.

    – 21 –

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  • 4. BORDER DEVELOPMENT AUTHORITY

    4.1 INTRODUCTION

    4.1.1 Legislation

    The Border Development Authority was established under the Border Development
    Authority Act 2008. This Act came into operation on 7 October 2008. However, this
    Act was repealed and abolished Border Development Authority by Parliament
    through Border Development Authority (Repeal) Act 2019.

    4.1.2 Objectives of the Authority

    The objectives of the Authority are to manage and fund development activities in the
    Border Provinces of PNG and to make provision for the functions and powers of the
    Authority and for related purposes.

    4.1.3 Functions of the Authority

    The functions of the Authority generally are to consult with relevant agencies and to
    supervise and co-ordinate all development activities in each of the border provinces
    and, without prejudice to the generality of the foregoing, are:

    the co-ordination of the planning and implementation of capital works,
    infrastructure and socio-economic programs in respect to:

    – education, health care, road networks, communications, transport system,
    electricity, water, sewerage and all activities relevant to the improvement
    of basic living standards in the border provinces;
    – liaison with public bodies, non-government organisations and private
    enterprise in identifying and negotiating sources of funding for short to
    medium-term activities;
    – the co-ordination of the development of specifications for contracts for all
    capital and infrastructure works and the advertising, evaluation and
    awarding of such contracts;
    – the supervision and monitoring of the implementation of all contracts
    relating to such capital and infrastructure works;
    – the transformation of border provinces into agro-financial sectors by
    developing their respective natural resources; and
    – the promotion of investors, both foreign and local, into the border
    provinces and to encourage and facilitate international cross-border and
    inter-border trade.

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    the establishment of programs and regulatory framework for immigration
    including the monitoring of immigrants and immigrant activity along the
    border with respect to:

    – establishment of proper state of the art offices and facilities for relevant
    government agencies, including customs, immigration, quarantine, police,
    defence force, such as security monitoring systems, communications,
    transport, electricity, water, sewerage, staff accommodation, computers
    and all other facilities that would be relevant to the administration of
    border activities;
    – establishment of dialogue and co-operation with the respective cross-
    border authority or government for the prevention of diseases, drug
    trafficking, human smuggling, money laundering and other illicit
    activities; and
    – the development of long-term activities for the establishment of
    infrastructure and other facilities.

    such other functions as are likely to assist in the border administration activities.

    4.1.4 Subsidiary of the Authority

    The Subsidiary of the Authority is Papua New Guinea Maritime Transport Limited.
    Comments in relation to the Company are contained in paragraph 4A of this Report.

    4.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Authority for the year ended 31 December 2014 had been completed but I was
    unable to evaluate the results and complete the report.

    The Authority had submitted its financial statements for the years ended 31 December
    2015, 2016 and 2017 for my inspection and audit. However, my efforts to conduct
    these audits were unsuccessful as the Authority’s Office located at the NDB Building
    in Waigani was locked. In addition, my attempts to locate the current Office were
    unsuccessful.

    The Authority had not submitted its financial statements for the years ended 31
    December 2018 and 2019 for my inspection and audit.

    However, I noted that the Authority was abolished by Parliament in 2019. Further, I
    was unable to establish whether proper procedures were followed to account and
    dispose or transfer assets in the custody of the Authority back to the State.

    – 23 –

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  • 4A. PAPUA NEW GUINEA MARITIME TRANSPORT LIMITED
    (Subsidiary of the Border Development Authority)

    4A.1 INTRODUCTION

    4A.1.1 Legislation

    The Papua New Guinea Maritime Transport Limited was incorporated under the
    Companies Act on 3 September 2009. The Company is wholly owned by the Border
    Development Authority.

    I noted that the Border Development Authority Act 2008 was repealed and abolished
    Border Development Authority by Parliament through Border Development Authority
    (Repeal) Act 2019.

    4A.1.2 Function of the Company

    The primary function of the Company is to take charge of the management and
    operations of seven vessels acquired and maintained by the Border Development
    Authority. The vessels are to serve the border provinces and other maritime provinces
    in the country.

    4A.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Company had not submitted its financial
    statements for the years ended 31 December 2013 to 2020 for my inspection and audit
    despite numerous reminders.

    Since the parent entity was abolished in 2019, I will continue to report until Papua
    New Guinea Maritime Transport Limited is fully liquidated and deregistered.

    – 24 –

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  • 5. CIVIL AVIATION SAFETY AUTHORITY OF PAPUA NEW
    GUINEA

    5.1 INTRODUCTION

    5.1.1 Legislation

    The Civil Aviation Safety Authority (CASA) of Papua New Guinea was established
    on 1 January 2010 after the enactment of the Civil Aviation Act 2000 (as amended).

    5.1.2 Functions of the Authority

    The principal functions of the Authority are to:

    undertake activities that promote safety in civil aviation at a reasonable cost;
    ensure the provision of air traffic services, aeronautical communications
    services and aeronautical navigation services; and
    ensure the provision of meteorological services and science.

    5.2 AUDIT OBSERVATIONS AND RECOMMENDATION

    5.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Authority for the years ended 31 December 2019 and 2020 were
    issued on 12 August 2020 and 30 June 2021 respectively. The reports contained
    similar Qualified Opinions, hence, only the 2020 report is reproduced:

    “QUALIFIED OPINION

    In my Opinion, except for the effects of the matters described in the Basis for
    Qualified Opinion paragraphs below:

    (a) the financial statements of Civil Aviation Safety Authority for the year ended
    31 December 2020:

    (i) give a true and fair view of the financial position and the results of its
    financial performance and cash flows for the year ended on that date;
    and

    (ii) the financial statements have been presented in accordance with the
    International Financial Reporting Standards and other generally
    accepted accounting practice in Papua New Guinea.

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    (b) Proper accounting records have been kept by the Authority, as far as appears
    from my examination of those records; and

    (c) I have obtained all the information and explanation required.

    BASIS FOR QUALIFIED OPINION

    Revenue and Receivables from National Airports Corporation (NAC) and PNG
    Air Service Limited (PNGASL) (now renamed “NiuSky Pacific Limited”)

    Section 147E of the Civil Aviation Act, 2000 stipulates for the NAC and the PNGASL
    to remit a percentage of airport facility charges, security levies and upper airspace
    aeronautical charges to Civil Aviation Safety Authority (CASA). Those charges
    comprised 30 percent (%) of CASA’s annual collection in 2020. In respect of monthly
    invoicing and collections from these two debtors, I noted that CASA’s invoicing is
    dependent upon calculations and data only available to NAC and PNGASL which are
    technically not accessible or assessable by CASA. Given the technical and logistical
    difficulties, it has been difficult for CASA to have independent data to compute its
    share of the revenue. As a result, CASA could not compute the amount of revenue
    receivable from the two entities. The current situation places CASA in a position
    where it is unable to accurately record and collect the income owing by NAC and
    PNGASL. The income and the related receivables from the two entities are material,
    which can potentially affect the financial statements and disclosures of CASA as at
    the reporting date. Due to those limitations, I was not able to verify the completeness
    and accuracy of revenue and receivable balances reported in the financial statements
    for the year ended 31 December 2020.

    Value of Land

    Note 17 to the financial statements contains the Authority’s property, plant and
    equipment at a net book value of K5,917,000. The land and building of the Authority
    should have distinct values per valuation report however, no values were assigned to
    the land.

    I noted that a valuation done in 2018 covered only the buildings while the land on
    which those buildings are on were not valued nor recorded in the Fixed Assets
    Register (FAR). As a result, the total fixed assets of the Authority as reported in the
    financial statements has been materially understated.”

    – 26 –

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    5.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Authority for the years ended 31 December
    2019 and 2020 were issued on 12 August 2020 and 30 June 2021 respectively. The
    reports contained similar observations, hence, only the 2020 observations are
    reproduced:

    Internal Audit Recommendations

    I noted numerous internal audit recommendations remain unattended at the year end,
    and most of these have been carried forward into succeeding years without resolving.

    Out of a total of 97 issues flagged by the Internal Audit since 2016, only 22 issues
    have been resolved and 75 or 77% of the issues were still open for management
    rectification.

    I stressed that every internal audit recommendation must be resolved to ensure that
    internal system deficiencies are improved and irregularities are prevented thus, adding
    value to CASA’s functions and overall objectives. I recommended the management to
    allocate staff to immediately attend to and rectify the outstanding internal audit
    recommendations.

    Procurement Policy Manual (PPM) and Finance Policy & Procedural Manual
    (FPPM)

    I was informed that Procurement Policy Manual and Finance Policy & Procedural
    Manual (FPPM) of CASA were under-going review and approval. However, no draft
    copies were provided for my review.

    I highlighted that updated Financial Policy & Procedural Manual with Standard
    Operating Procedures on all areas of financial activities are necessary to comply with
    financial standards and to ensure systematization of procedures. I recommended the
    management to ensure a comprehensive review, compilation, and completion of the
    CASA’s FPPM.

    The management responded as follows:

    “The Financial Policy & Procedural Manual is being revised and updated and
    expected to be completed by end of July 2021. The revision is necessary in the light of
    the National Procurement Act and various amendments to the Public Finances
    Management Act.”

    – 27 –

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  • 6. CLIMATE CHANGE AND DEVELOPMENT AUTHORITY
    (formerly Office of Climate Change and Development)

    6.1 INTRODUCTION

    6.1.1 Legislation

    The Office of Climate Change and Development (OCC&D) was created on 22 March
    2010 through NEC Decision No. 54/2010. On the same date, the NEC in its Decision
    No. 53/2010 had noted and approved NEC Decision No. 181/2009 which abolished
    the former Office of Climate Change and Environmental Sustainability (OCC&ES).
    The former OCC & ES was created in 2009 and operated under the Department of
    Environment and Conservation.

    On 10 November 2011, the NEC through its Decision No. 96/2011 had approved to
    rescind and amend NEC Decision No. 53/2010, 54/2010 and 55/2010 and approved
    for the creation and establishment of PNG Climate Change Authority (PNGCCA).
    However, SCMC in its meeting held on 22 May 2012 had withheld the submission of
    the organisational structure as the certified governing Act was not in place.

    Then on 27 November 2012, the NEC approved to rescind whole of NEC Decision
    No. 96/2011 of 10 November 2011. As a result, establishment of the PNG Climate
    Change Authority was abandoned. However, on 28 July 2015, the National
    Parliament passed the Climate Change (Management) Act 2015 (No. 19 of 2015) and
    certified by the Acting Speaker of the National Parliament on 20 November 2015.
    Finally, the Climate Change and Development Authority came into existence on that
    date.

    6.1.2 Objectives of the Authority

    The objectives of the Authority are to provide a coordination mechanism at the
    national level for research, analysis and development of the policy and legislative
    framework for the management of climate change within the Government’s National
    Strategy on Climate-Compatible Development (CCD) as per NEC Decision No.
    55/2010.

    6.1.3 Functions of the Authority

    Major functional responsibilities of the Authority are:

    policy development:
    ‒ adopt and incorporate national strategies and plans on climate change
    compatible development into the national development strategies and
    plans;
    ‒ coordinate and facilitate the implementation of the National Strategy on
    Climate Compatible Development;

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  • Climate Change and Development Authority

    ‒ align national development policies and plans to ensure climate
    compatibility across different government departments;
    ‒ commission research and development to support the development of a
    comprehensive greenhouse gas inventory and a more comprehensive
    understanding of the impacts of climate change in the country; and
    ‒ formulate and refine the policy framework and legislation.

    coordination of projects and programs:
    ‒ coordinate with relevant government departments, NGOs, Private Sectors
    and indigenous landowners (or local forest custodians) to implement and
    manage pilot projects, demonstration projects and programs.

    stakeholder management and consultation:
    ‒ collaborate and coordinate with development partners to inform and
    improve upon the Government’s preliminary policy initiatives;
    ‒ coordinate the development of a robust Measurement, Reporting and
    Verification (MRV) system and a fair and equitable benefit sharing
    mechanism to protect rights and interest of resource owners; and
    ‒ communicate to the people of PNG the benefits (economic, social and
    environmental) arising from the implementation of the National Strategy
    for Climate Compatible Development.

    funding and international negotiations:
    ‒ implement a national financial strategy in collaboration with development
    partners to build capacity for Reducing Emissions from Deforestation and
    Forest Degradation Plus Conservation, Sustainable Forest Management
    and Carbon Stocks Enhancement (REDD+) and other aspects of climate
    compatible development; and
    ‒ support the Government of PNG with the international climate change
    negotiations and climate change funding in order to provide consistent and
    reliable data and finances to improve and sustain forest governance and
    livelihoods of the forest communities.

    6.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    6.2.1 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 were issued on 31 August
    2020 and both the 2016 and 2017 on 30 June 2021 respectively. The 2015 and 2016
    reports contained Disclaimer of Opinions while the 2017 report contained a Qualified
    Opinion. For the purpose of this Report:

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    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters described in the Basis for
    Qualified Opinion paragraphs below, the accompanying financial statements are:

    a) based on proper accounts and records; and

    b) in agreement with those accounts and records, and show fairly the state of
    affairs of the Authority for the year ended 31 December 2017 and the results of
    its financial operations and cash flows for the year then ended.

    BASIS FOR QUALIFIED OPINION

    Opening Balances

    My report for the year ended 31 December 2016 was a disclaimer of opinion on the
    basis that I could not satisfy myself as to the accuracy, existence and completeness of
    the cash, fixed assets and all income and expenditure accounts balances reported in
    the statement of receipts and payments or disclosed in the notes to the financial
    statements for the year ended 31 December 2016. The cash and fixed assets balances
    at 31 December 2016 were taken up as opening balances at 1 January 2017, while the
    income and expenditure balances of 2016 were presented as comparative year figures.

    I was unable to perform alternative audit procedures to confirm the valuation,
    existence, accuracy and completeness of the 2016 closing accounts balances taken up
    as opening balances at 1 January 2017 or as comparative year figures in the financial
    statements for the year ended 31 December 2017.

    Accordingly, I could not determine what adjustment might be necessary on the
    opening balances of the cash and fixed assets as at 31 December 2017 and
    comparative year’s income and expenditure figures presented.

    Cash at Bank – K419,452

    My review of the Authority’s Cash and Cash Equivalents balance of K419,452 as
    disclosed in Note 4 to the financial statements revealed the following:

    A variance of K281,540 existed between the cashbook balance and the financial
    statements amount of K419,452 as disclosed in Note 4 to the financial
    statements. No explanation was provided for the variance;

    The CCDA Trust Account had a cash balance of K65,130 at the year end.
    However, no monthly bank reconciliations were prepared during the year. I was
    not able to perform the necessary audit procedures to ascertain the valuation,
    accuracy and existence of the K65,130 in the CCDA Trust account as at 31
    December 2017;

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  • Climate Change and Development Authority

    I was not provided with the independent bank confirmations on all the
    Authority’s bank accounts balances at year end;

    Various cheques worth K159,989 which related to payments made from the
    main operating bank account remained unpresented for more than one (1) year
    and had become stale. These cheques were not timely investigated and properly
    written back or adjusted;

    Internal controls surrounding the management and use of petty cash has been
    very weak. There was no petty cash policy in place to determine the use and
    acquittal of petty cash advances including the petty cash float amount. Also,
    petty cash register and supporting documents were not provided for my
    verification. Accordingly, I was unable to validate petty cash payments totalled
    K14,620; and

    Overall controls over cash management functions of the Authority has been very
    weak therefore, it has not been practical to place reliance on the effectiveness of
    the cash management functions.

    As a result of these shortcomings, I was unable to ascertain the accuracy,
    completeness and existence of the total cash and cash equivalent balance of K419,452
    as reported at the year-end.

    Fixed Assets – K2,776,232

    The Authority disclosed its fixed assets at K2,776,232 in Note 5 to the financial
    statements. However, the Authority did not maintain a Fixed Assets Register
    capturing all the fixed assets acquired over the years to date. In the absence of Fixed
    Assets Register, I was unable to extend my audit procedures to satisfy myself as to the
    valuation, accuracy and existence of the fixed assets balance disclosed as at 31
    December 2017.

    Operating Expenditures – K3,028,896

    I noted during my review of the Authority’s operating expenditures that payments
    totaled K273,705 could not be substantiated due to lack of supporting
    documentations. The payment vouchers requested could not be provided for my
    verification. As such, I was not able to gain reasonable assurance over the occurrence,
    reasonableness and authenticity of the above payments. Accordingly, I was unable to
    conclude on the accuracy and completeness of the total expenditures balance
    disclosed in the financial statements for the year ended 31 December 2017.”

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    6.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Authority for the years ended 31 December
    2015 were issued on 31 August 2020 and both the 2016 and 2017 on 30 June 2021
    respectively. These reports contained similar observations, hence, only the 2017
    report is reproduced:

    Internal Control Environment

    My review on the overall internal control environment revealed that the Authority did
    not have an approved tailor-made accounting and operational policies and procedures
    specifically in the areas of accounting, procurements, fixed assets and human
    resources to guide personnel in their routine operational activities as well as to
    maintain continuity and consistency of operations.

    I advised that internal control mechanisms including accounting manuals, operational
    guidelines and policies promote uniform application of processes across all levels of
    management for effective operation of any organization. Therefore, I recommended
    the management to create accounting manuals and other operational guidelines and
    policies and communicate to all levels of the management for implementation and
    adherence.

    I also stressed that lack of such policies create avenues for abuse of public funds
    including the risk of fraud and malpractice without detection.

    Management concurred with my recommendations and advised that drafting of the
    manuals are currently in progress with the assistance given by the Building Resilience
    to Climate Change (BRCC) Project.

    Internal Audit Unit

    I noted that an Internal Audit Unit has been included in the Authority’s organizational
    structure. However, the Unit has not been established to review internal processes and
    systems of the Authority and to provide necessary recommendation to the
    management for improvement. The Internal Auditor position has remained vacant to
    date.

    I brought this to the attention of the management and stressed that lack of internal
    audit functions encourage system break-downs and weak internal controls which may
    result in mismanagement and abuse of public resources. Hence, I recommended the
    management to utilize the internal audit unit and appoint an internal auditor as soon as
    practicable.

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  • Climate Change and Development Authority

    The management noted my finding and responded as follows:

    “Position OCCDEX06-Internal Auditor is a permanent position within the current
    approved structure. However, the position has remained vacant because the
    successful candidate at the time of recruitment could not be released by the
    Department of Finance as he was a probationary officer with DoF. Also, the
    recruitment of this position was put on halt due to DPM instructions on freezing
    recruitment at that time”.

    Non-Compliance with Public Finances (Management) Act, 1995 (as amended)

    The Authority had not submitted its financial statements for the year ended 31
    December 2017 on a timely basis to enable me to conduct the audit and issue the audit
    report within the time frame prescribed by the Public Finances (Management) Act,
    1995 (as amended).

    I brought this recurring issue to the attention of the management and the management
    responded that the 2017 financial statements was not submitted on time due to staff
    constraints and office relocations. However, they are fully aware of this issue and
    have now taken measures by providing the financial statements for the other
    subsequent years to my Office for inspection and audit.

    Non-Establishment of the Authority’s Board

    Part II, Division 2 of the Climate Change (Management) Act 2015 requires
    establishment of a Board with the primary function of providing general control and
    guidance over the exercise of the functions and powers of the Authority. However, the
    Authority since its inception has been operating without a Board.

    As such, I was not able to comment whether or not the affairs and operations of the
    Authority for the financial year ended 31 December 2017 were fairly managed,
    decisions deliberated were in the best interest of the Authority or set objectives were
    successfully achieved.

    I recommended the management of the Authority to consider establishing a Board to
    be compliant with Part II, Division 2 of the Climate Change (Management) Act, 2015.

    The Authority noted my finding and responded that the Board did not meet due to the
    delay in appointment of the ex-officio members. Further, amendment of the Climate
    Change (Management) Act, 2016 is aimed for August 2021 Parliament sitting. After
    amendments are done and with revenue collections coming in, the Board will be set
    up as provided for by the law.

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    Budget Documents

    I was not provided with the Recurrent and Development budget documents for the
    fiscal year 2017 despite numerous requests. As such, I was unable to perform the
    budget analysis against actual expenditures incurred during the year or comment on
    the effectiveness of the budget process.

    I brought this to the attention of the management and the management responded as
    follows:

    “There was a budget submitted to NEC, however the office has moved from three (3)
    different locations and in the process, it has misplaced the documents. We embrace
    this issue; subsequently we will ensure all documents are appropriately kept”.

    Cash Management

    The Authority maintained two (2) bank accounts (CCDA Operating Account and
    CCDA Trust Account) in 2017. My review of these bank accounts revealed the
    following control weaknesses:

    Monthly bank reconciliations for the CCDA Trust Account were not prepared in
    2017. Hence, the Authority did not comply with the Financial Management
    Manual, Part 4, and Division 1, Para 4 which requires all Departmental Heads
    and Statutory Authorities to ensure that their bank accounts are reconciled on a
    monthly basis;

    The Authority’s monthly bank reconciliations for the main operating account
    were prepared by the accountant without any reviews performed by an
    independent and senior manager to validate the accuracy of the amounts stated
    in the reconciliation statements. Further, the bank reconciliations were not dated
    as evidence for timely preparation; and

    Internal controls surrounding the management and use of petty cash has been
    very weak. There was no petty cash policy in place to determine the use and
    acquittal of petty cash advances including the petty cash float amount. There
    was no petty cash register and supporting documents to substantiate a total cash
    payment of K14,620.

    I drew management’s attention to the weaknesses identified and recommended for
    immediate remedial actions.

    The management has taken note of my findings and advised that a bank reconciliation
    officer is now assigned to perform the monthly reconciliations and reviews are done
    by the accountant.

    – 34 –

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  • Climate Change and Development Authority

    Fixed Assets Management

    I noted that the Authority had not maintained a Fixed Assets Register (FAR) during
    the year under review. In addition, there was no policy formulated by the Authority in
    relation to acquisition, capitalization and disposal of its fixed assets. Also, no
    evidence was provided to substantiate that the Authority conducts routine and annual
    stock-take of its fixed assets.

    I advised the management that FAR is a control measure that registers acquisition of
    all fixed assets at historic cost values for proper valuation and to have control over
    them to claim ownership right, and to manage risks of assets being misused or lost
    through theft. I also stressed that the Public Finances (Management) Act, 1995 (as
    amended) and Financial Management Manual Instruction, Part 32 requires all public
    bodies to ensure that adequate control is maintained over its assets, or assets in its
    custody.

    These issues were brought to the management’s attention, however, no improvement
    has been noted to date.

    Personnel Emoluments

    My review of personnel emoluments paid to casual and short-term contract officers
    which included wages, leave fares and other employee related benefits that are not
    paid through the Alesco Payroll revealed the following:

    Salary and Wages Tax (SWT) deducted from short-term contract and casual
    staff of the Authority including deductions made for manual back payments for
    Higher Duty Allowances have not been remitted to Internal Revenue
    Commission (IRC) breaching Section 299G of the Income Tax Act 1959 (as
    Amended);

    The Authority has not been making contribution to any superannuation fund
    despite the employees (short-term contract and casual officers) were employed
    for more than three (3) months. As such, the Authority had not complied with
    the requirements of the Superannuation Act 2000 and General Order 17;

    Leave fare entitlements totaled K164,371 paid during the year were made direct
    to the employees and not to Travel Agents or Airline Companies as required for
    all public servants. The Authority also did not have in place any documented
    leave and travel policy to provide staff with clear and consistent information on
    such matters;

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    I noted instances where cash payments for wages totaled K46,449 were not
    signed off and dated on the cash collection sheets by the casual employees as
    evidence of cash received by the genuine recipients. Further, I noted on two
    occasions where the cash collections sheets were being signed off by persons
    other than the recipient raising doubts on the genuineness of the recipients;

    A total of K524,148 were paid to casuals and short-term contract officers in
    2017. However, payments were not supported with signed timesheets attached
    to the vouchers to indicate that the staffs were paid according to the actual
    number of hours worked;

    I noted an instance where advance in wages for four (4) pay fortnights worth
    K84,386 was paid in a lump-sum on Pay Cash Cheque number 4729. Pre-paid
    wages in my view is dubious in nature, however, no explanation was provided
    for my comfort; and

    I noted payments totaled K43,120 were paid as sitting allowances for CCDA’s
    internal screening committee. Further, a total of K3,500 was paid as allowances
    for conducting interviews for new recruits. I was not provided with the approved
    rates/schedules or the necessary documented policy which caters for such
    practices.

    I brought these issues to the attention of the management and advised for appropriate
    remedial actions.

    Management has taken note of my findings and responded that:

    “CCDA is now paying casual contributions to Nambawan Super;

    All casuals are now paid wages through their own bank accounts; and

    The senior management allowances paid during the year was in relation to the
    CCDA Board formation but the secretariat failed to provide the meeting minutes
    and HR failed to apply the rates on the payments. Management has taken note
    on the issues and views provided.”

    Other Internal Control Weaknesses

    Other internal control weaknesses noted during my review were:

    Payments totaled K291,446 in relation to travel and subsistence expenses for the
    year were not acquitted by the designated staff of the Authority. I also observed
    that a Travel Advances Register was not maintained by the Authority in 2017
    and the prior years, breaching requirements under the Financial Management
    Manual Part 20, paragraphs 11.2 and 12.10;

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    A consultant was engaged and was paid K51,001 during the year. I was not
    provided the contract agreements or supporting explanations. As such, I was not
    able to confirm whether or not a proper tendering process was followed in
    engaging the consultant; and

    Payments totaled K216,093 were committed without obtaining three (3) written
    quotations or without entering into a formal contract agreement as required by
    Financial Instructions 2/2013 (point 5.1).

    I drew management’s attention to these weaknesses and the management stated that
    the issues raised have been taken note of.

    6.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Authority for the years ended 31 December 2018 and 2019 had been completed
    and the results were being evaluated.

    The Authority had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 37 –

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  • 7. COCOA BOARD OF PAPUA NEW GUINEA

    7.1 INTRODUCTION

    7.1.1 Legislation

    The Cocoa Board of Papua New Guinea was established under the provisions of the
    Cocoa Act 1981.

    7.1.2 Functions of the Board

    The principal functions of the Board are to:

    control and regulate the growing, processing, marketing and export of cocoa and
    cocoa beans and the equalisation and stockholding arrangements within the
    cocoa industry;
    promote research and development programmes for the benefit of the cocoa
    industry; and
    promote the consumption of PNG cocoa beans and cocoa products.

    7.1.3 Subsidiary of the Board

    The Cocoa Coconut Institute Limited of PNG (formerly PNG Cocoa and Coconut
    Research Institute) was amalgamated with PNG Cocoa and Coconut Extension
    Agency Limited in 2003. The Institute is owned equally by the Cocoa Board and the
    Kokonas Indastri Koporesen (KIK) of PNG. Comments in relation to the Cocoa
    Coconut Institute Limited of PNG are contained in paragraph 8 of this Report.

    7.1.4 Project and Stabilisation Funds

    The Board as a Trustee administers the Cocoa Stabilisation Fund as required under
    Part IV and VI of the Cocoa Act 1981. Further, the Board manages the Cocoa Pod
    Borer Project Fund as well. Comments in relation to the Funds are contained in
    paragraphs 7A and 7B of this Report respectively.

    7.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Board for the fifteen months period ended 31 December 2018 had been completed
    and results were being evaluated. The Board had prepared its financial statements to
    align its accounting period to match with Papua New Guinea’s financial year ending
    31 December each year instead of cocoa year ending 30 September. As such, I will
    now be auditing the Board’s financial statements for a financial year.

    The Board had not submitted its financial statements for the years ended 31 December
    2019 and 2020 for my inspection and audit.

    – 38 –

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  • 7A. COCOA POD BORER PROJECT FUND

    7A.1 INTRODUCTION

    7A.1.1 Framework

    The National Government has funded the Cocoa Pod Borer Project based on the
    Project Proposal for Cocoa Pod Borer Management Project submitted by the Cocoa
    Board of Papua New Guinea. The Project is administered by the Cocoa Board of
    Papua New Guinea and was implemented in 2010.

    7A.1.2 Objectives of the Project Fund

    The Principal objectives of the Project Fund are to:

    facilitate the impartation of skills and knowledge on better management
    practices that will result in the reduction of Cocoa Pod Borer (CPB) infestation
    to less than 10% of production and increase cocoa yields;
    introduce and/or enhance farmers’ skills and knowledge in the combined use of
    basic CPB management via the five Golden rules and the Integrated Pest
    Disease Management Technology; and
    provide farmer support by way of making high yielding cocoa planting
    materials, tools, equipment and chemicals readily available or accessible to
    cocoa farmers which would enable effective adaption of good management
    practices.

    7A.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Project Fund for the fifteen months period ended 31 December 2018 had been
    completed and results were being evaluated. The Project Fund had prepared its
    financial statements to align its accounting period to match with Papua New Guinea’s
    financial year ending 31 December each year instead of cocoa year ending 30
    September. As such, I will now be auditing the Project Fund’s financial statements for
    a financial year.

    The Project Fund had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 39 –

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  • 7B. COCOA STABILISATION FUND
    (Subsidiary of Cocoa Board of PNG)

    7B.1 INTRODUCTION

    7B.1.1 Legislation

    The Cocoa Stabilisation Fund was established under Section 19 of the Cocoa Act
    1981. The Fund is administered by the Cocoa Board of PNG with the objective of
    establishing price stabilisation, price equalisation and stockholding arrangements
    within the cocoa industry.

    7B.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Stabilisation Fund for the fifteen months period ended 31 December 2018 had
    been completed and results were being evaluated. The Stabilisation Fund had
    prepared its financial statements to align its accounting period to match with Papua
    New Guinea’s financial year ending 31 December each year instead of cocoa year
    ending 30 September. I will now be auditing the Stabilisation Fund’s financial
    statements for a financial year.

    The Stabilisation Fund had not submitted its financial statements for the years ended
    31 December 2019 and 2020 for my inspection and audit.

    – 40 –

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  • 8. COCOA COCONUT INSTITUTE LIMITED OF PAPUA NEW
    GUINEA

    8.1 INTRODUCTION

    8.1.1 Legislation

    The Cocoa Coconut Institute Limited of Papua New Guinea (formerly PNG Cocoa
    and Coconut Research Company Limited) was amalgamated with PNG Cocoa and
    Coconut Extension Agency Limited in 2003. The Company is owned equally by the
    Cocoa Board of PNG and the Kokonas Indastri Koporesen (KIK) of PNG.

    8.1.2 Functions of the Company

    The principal functions of the Company are to:

    conduct research into all aspects of Cocoa and Coconut growing and production
    and all aspects of the Cocoa and Coconut industries;
    promote research and beneficial programs for these industries;
    provide assistance to all persons and bodies engaged in any aspect of the Cocoa
    and Coconut industries;
    produce planting materials for the Cocoa and Coconut industries; and
    provide consultancy services.

    8.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    8.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Company for the years ended 31 December 2014, 2015 and 2016
    were issued on 22 February 2021. The reports contained similar Disclaimer of
    Opinions, hence, only the 2016 report is reproduced:

    “DISCLAIMER OF OPINION

    Because of the significance of the matters described in the Basis for Disclaimer of
    Opinion paragraphs below, I have not been able to obtain sufficient appropriate audit
    evidence to provide a basis for an audit opinion. Accordingly, I do not express an
    opinion on the accompanying financial statements of Papua New Guinea Cocoa
    Coconut Institute Limited for the year ended 31 December 2016.

    – 41 –

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    BASIS FOR DISCLAIMER OF OPINION

    Cash at Bank – K1,528,341

    In 2016, the Company maintained thirty-eight (38) bank accounts. During my review
    and examination, unreconciled balances from prior-year of K86,426 were carried
    forward without proper explanation and supporting documentation. Further, bank
    reconciliations for seven (7) bank accounts with balances totaling K242,267 were not
    prepared and reviewed on a timely basis. As a result, I was unable to place reliance on
    the effectiveness of the controls surrounding the management of the cash, nor validate
    the existence, accuracy and correctness of the cash balance disclosed as at 31
    December 2016.

    Fixed Assets – K5,077,681

    The Company did not maintain a proper, complete and accurate Fixed Assets Register
    (FAR) to record necessary particulars of assets including the date and value of
    purchase, assets serial numbers, and depreciation for assets under its custody. I was
    unable to physically inspect certain assets against the records to confirm the existence
    and condition of these assets due to the absence of a proper register. I further noted
    that the Company did not conduct an annual stock take of its assets to verify the
    existence, ownership and valuation of assets even dating back over a decade. As a
    result of these discrepancies, I was unable to conclude on the accuracy and
    correctness on the fixed assets balance as K5,077,681 at 31 December 2016.

    Cash Flow Statement

    My review of the Cash Flow Statement revealed that the Company disclosed
    adjustments to retained earnings totaling K1,535,890 without proper supporting
    documentation. As a result, I was unable to verify and confirm the cash at bank
    balance of K1,528,341 disclosed as at year end.

    PIP Project Funds

    I observed that the Company recognized and disclosed PIP grants as income totaling
    K13,000,000 since 2013, further contravening the accounting convention under IAS
    20 (Accounting for Government Grants and Disclosure of Government Assistance).
    The Company did not correctly record and disclose the PIP grants to match the project
    expenses incurred during the year. Consequently, a liability account (deferred income)
    was not created to reflect the unused portion of the grant at year end resulting in the
    incorrect treatment and disclosure of the PIP grants. Further, I was not provided with
    the PIP submission and relevant records detailing the purpose and subsequent use of
    PIP grants received in 2016.

    – 42 –

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  • Cocoa Coconut Institute Limited of Papua New Guinea

    GST Clearing Account – K492,153

    Disclosed under Trade Debtors is the GST Clearing account for GST inputs and
    outputs. My review revealed that the balance of K492,153 in the GST Clearing
    account was not supported with the relevant GST lodgements and reconciliations. As
    a result, I was unable to comment on the appropriateness and validity of the balance
    disclosed as at 31 December 2016.

    Provision for Long Service Leave – K1,009,548

    My review of the provision for long service leave revealed that there were no
    schedules and supporting documents maintained by the Company to confirm the
    balance as K1,009,548 at balance date. As a result, I was unable to confirm the
    accuracy of the balance representing Provision for Long Service Leave at year end.

    Sale of Londip Plantation

    My review of the plantations revealed that the Londip Plantation in East New Britain
    was about to be sold through tender. I was not provided with copies of shareholders
    meeting minutes and/or resolutions pertaining to the sale through tender. I was unable
    to confirm the process involved in the sale of the plantation and whether the sale was
    in the best interest of the Company, its shareholders and the stakeholders. Further, I
    was unable to establish the fair value of the Plantation and whether the sale process
    was successfully completed.”

    8.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Company for the years ended 31 December
    2014, 2015 and 2016 were issued on 22 February 2021. The reports contained similar
    matters, hence, only the 2016 report is reproduced:

    The Board Meeting Minutes

    During my review, I observed that no proper Board Meeting Minutes were maintained
    by the Company in 2016. As a result, I was unable to comment and conclude on
    whether there were proper proceedings held and whether all major transactions and
    decisions passed and transpired were in the best interest of the Company, the Cocoa
    and Coconut Industry and the State.

    – 43 –

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  • Cocoa Coconut Institute Limited of Papua New Guinea

    Non-Compliance with the Public Finances (Management) Act, 1995
    (as amended)

    The Company has not submitted its financial statements for the year ended 31
    December 2016 on a timely basis to enable me to conduct the audit and submit the
    audit report within the time frame prescribed by the Public Finances (Management)
    Act, 1995 (as amended). Consequently, the Board has breached Section 63(2) and
    63(4) of the Public Finances (Management) Act, 1995 (as amended).

    Liquidation

    At the time of the review of the accounts and records of the Company for the year
    ended 31 December 2016, I noted that the Company was in the process of being
    liquidated with core research and extension functions reverted back to the Cocoa
    Board and Kokonas Indastri Koporesen accordingly. However, I was not provided
    with the appropriate liquidation documents and substantive Ministerial and Board
    deliberations. Further, I noted that no independent liquidator was appointed to date.

    Operational Manuals and Policies

    I observed that the Company had no approved Manuals and Policies to ensure
    proper controls are in place and operating effectively in accordance with Section 62
    of the Public Finances (Management) Act, 1995 (as amended). I was unable to
    place reliance on the overall internal control and governance structure and further
    establish whether there were clear directions for the management to run the
    operations of the Company.

    Plantation and Sundry Income

    My review of the income earned and recorded from sale of produce and other
    miscellaneous activities revealed severe break-down in the internal controls. The
    following were noted;

    receipting of income from the Plantation sites and provincial centers lacked
    proper control and monitoring. Records of sales and income generated outside
    of the Head Office were not always submitted on a timely basis;
    there was no Receipt Register which the Company keeps records of all receipt
    books to be used throughout the business segments resulting in lack of audit
    trail;
    there was no segregation of duties in receipting and banking of sales income. It
    was noted that the same person issuing the receipt is the one doing the banking;
    and
    I also noted that banking, in most cases, took more than three days.

    – 44 –

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    I was unable to place reliance on the effectiveness of the controls surrounding the
    process of receipting, banking and posting of sales income. Further, I was unable to
    determine whether all income generated was received and correctly recorded in the
    books of the Company for the year ended 31 December 2016.

    GST Receivable – K2,078,871

    During my review, I noted that the Company did not prepare and remit to the Internal
    Revenue Commission (IRC) GST returns on a timely basis. It is a requirement under
    Sections 63-66 of the Goods and Services Tax Act, 2003 to remit monthly GST
    returns to IRC by 21st day after month-end. Failure to remit GST returns on time will
    result in penalties of additional tax payable at the rate of ten percent (10%) on the
    amount owing and twenty percent (20%) calculated on an annual basis under Section
    85(1) of the Goods and Services Tax Act, 2003.

    Tax Liability – K6,716,664

    During my review, I noted that the Company did not remit Group Tax (Salary and
    Wages Tax) to IRC on a timely basis. As a result, tax liability has accumulated
    causing constraints to cash flows and budget. I made reference to the Income Tax Act,
    1959 (as amended), that all Group Tax should be remitted to IRC within seven (7)
    days after month-end. An employer who fails to remit salaries or wages tax in relation
    to its employees is liable to pay the amount of unpaid tax together with any additional
    penalties that may be imposed. I further noted that the tax liability disclosed by the
    Company as at 31 December 2016 was K6,716,664.

    I brought this to the attention of the management and was informed that: “This had
    been taken up at the shareholders level. Shareholder is liaising with IRC in this
    regard.”

    Remittance of Employee Superannuation Contributions – K60,778

    My review of the superannuation remittances revealed that contributions totaling
    K60,778 were deducted from employees of the Company but not remitted to the
    NasFund (formerly National Provident Fund) on a timely basis. I made reference to
    breaches in Sections 76 and 77 of the Superannuation (General Provisions) Act,
    2000 and the Superannuation (amended) Regulation, 2004 and further advised that
    employees may have been disadvantaged of interest accrued on contributions and
    other superannuation benefits.

    The management responded to my comments as follows:

    “PNGCCIL was not in a financial position to make these contributions at that
    time.”

    – 45 –

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  • Cocoa Coconut Institute Limited of Papua New Guinea

    Personnel Emoluments – K7,401,465

    During my review, I observed the following weaknesses in areas of human resources
    and payroll in 2016:

    the Company did not have an updated human resource policy manual for use by
    all staff in relation to human resources and payroll activities;
    the current staff restructure was not properly approved by the appropriate
    authorities;
    there was lack of proper records of recruitments and termination maintained by
    the Company;
    no proper records and schedules of gratuity, higher duty allowances, leave
    entitlements and other allowances and benefits was maintained;
    lack of proper wages sheets and calculation worksheets;
    no proper attendance register was maintained by the Company relating to laborers
    employed in plantations; and
    weaknesses in the proper maintenance of personnel files.

    I was therefore unable to place reliance on the controls surrounding the Human
    Resource and gain comfort over the accuracy and correctness of the balance
    representing personnel emoluments disclosed in the Statement of Income and
    Expenditure for the year then ended.

    Weak Procurement Processes

    My review of the expenditures revealed the following weaknesses in the procurement
    processes;

    payments totaling K51,148 were performed without following proper procedures
    in obtaining three (3) written quotations from suppliers as required by the Public
    Finances (Management) Act, 1995 (as amended); and
    there was no approved procurement policy for compliance by the Company.

    As a result, I was unable to comment on the effectiveness of the internal controls
    surrounding the procurement processes of the Company and perform the necessary
    audit procedures to determine the authenticity of the amounts due to the above
    limitation on my scope.

    The management took note of my findings and responded as follows;

    “We agree and take note of the findings. Most payments we made to preferred
    suppliers as some of them meet our specific requirements especially when purchasing
    operational material.”

    – 46 –

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  • Cocoa Coconut Institute Limited of Papua New Guinea

    Lack of Travel Acquittals

    My review of the travel and subsistence expenses revealed a lack of travel acquittals
    by concerned staff of the Company during the year. It is a requirement under Financial
    Management Manual Part 20, paragraph 11.2 that cash advanced to officers travelling
    overseas on official duty must acquit travel advances within fourteen (14) days of
    return from duty travel. Part 20 paragraph 12.10 of the Manual further stipulates that
    advances to officers for domestic duty travels to be acquitted within seven (7) days of
    return from duty travel by submitting an acquittal form. I observed that the Company
    did not have a travel advance register and a related policy for the year under review.
    As a result, I was unable to comment on the effectiveness of the internal controls and
    further verify the validity of travel related payments disclosed as K1,122,610 at 31
    December 2016.

    8.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Company had not submitted its financial
    statements for the years ended 31 December 2017 and 2018 for my inspection and
    audit.

    The management had advised that the Company had been liquidated and deregistered
    in 2018 with research and extension functions reverted to Kokonas Indastri
    Koporesen and Cocoa Board respectively. That being the case, 2018 will be my last
    year of audit.

    – 47 –

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  • 9. COFFEE INDUSTRY CORPORATION LIMITED

    9.1 INTRODUCTION

    9.1.1 Legislation

    The Coffee Industry Corporation Limited (CICL) was incorporated under the
    Companies Act as a company limited by guarantee and was conferred with statutory
    powers relating to the control and regulation of the production, processing, marketing
    and export of coffee by the Coffee Industry Corporation (Statutory Functions and
    Powers) Act 1991. Under this Act, the undertakings of the Coffee Industry Board, the
    Coffee Development Agency and the Coffee Research Institute were, on 1 October
    1991, transferred to and vested in the Coffee Industry Corporation Limited.

    The members of the Corporation according to the Articles of Association are from the
    Growers Associations, the Coffee Exporters Association, the Plantation Processors
    Association, the Block Development Association, the Secretary – Department of
    Agriculture and Livestock, the Secretary – Department of Finance and the Secretary –
    Department of Trade and Industry. The liability of each member is limited to an
    amount not exceeding one hundred Kina.

    9.1.2 Functions of the Corporation

    The principal functions of the Corporation are to:

    engage in research, extension, promotion, marketing, administration, management
    and control of the coffee industry in PNG;
    act in the best interests of coffee producers; and
    promote development of the coffee industry in PNG.

    9.1.3 Fund and Subsidiaries of the Corporation

    The Corporation has a Fund and two subsidiary companies namely, Coffee Industry
    Fund, Kofi Management Services Limited and Patana No.61 Limited. Comments in
    relation to the Fund and the subsidiaries are contained in paragraphs 9A, 9B and 9C
    respectively of this Report.

    9.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    9.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Corporation for the years ended 31 December 2017 and 2018 were
    issued on 18 June 2021. The reports contained similar Disclaimer of Opinions hence,
    only the 2018 report is reproduced:

    – 48 –

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  • Coffee Industry Corporation Limited

    “DISCLAIMER OF OPINION

    Because of the significance of the matters described in the Basis for Disclaimer of
    Opinion paragraphs below, I have not been able to obtain sufficient appropriate audit
    evidence and accordingly, I am unable to express an opinion on the financial
    statements of Coffee Industry Corporation Limited for the year ended 31 December
    2018.

    BASIS FOR DISCLAIMER OF OPINION

    Opening Balances

    My report on the financial statements of the Company for the year ended 31
    December 2017 was a disclaimer of opinion due to my inability to ascertain the
    accuracy and validity of all the assets and liabilities accounts’ balances. These
    balances have been taken up as opening balances for the 2018 financial year. I was
    unable to perform alternative audit procedures to ascertain the validity and accuracy
    of the opening balances of all the assets and liabilities taken up at 1 January 2018.

    Since the opening balances enter into the determination of the results of operations,
    equity movements and cash flows of the Company for the year ended 31 December
    2018, any adjustment found to be necessary on the opening balances would have
    consequential effects on the financial performance, equity movements and cash flows
    of the Company for the year ended. As such, I was unable to determine whether any
    such adjustment might be necessary for the year ended 31 December 2018 and the
    comparative year figures.

    Unreconciled Account Balances

    At year end, cash and cash equivalent balances from various bank accounts
    amounting to K1,931,940 and trade and other payables balance of K1,066,783
    remained unreconciled. Due to lack of reconciliations of these significant account
    balances, I could not confirm the accuracy of the balances. Additionally, I was unable
    to perform alternative audit procedures to ascertain the validity, accuracy and
    completeness of the balances. Therefore, I could not determine the financial impact
    the un-reconciled balances might have on the financial position, profit and loss
    account, cash flows and equity movement of the Company for the year ended 31
    December 2018.

    Salary and Wages Tax Payable

    CICL had an estimated combined tax liability amount (tax base and penalties) of
    K3,100,000 relating to salaries and wages tax. This amount was not recorded in the
    books and omitted from the financial statements of the Company at year end.

    – 49 –

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  • Coffee Industry Corporation Limited

    I also noted that the payroll team has been working in isolation from the finance team
    of the Company hence, payroll liabilities were not reported appropriately and on time
    for recording in the financial reporting system. As a result, I was unable to comment
    on the accuracy and completeness of the Company’s overall payroll tax liabilities as
    at 31 December 2018.

    Employee Provisions

    Employee provisions recorded in the financial statements at year end were K139,173
    and K6,524 for long service leave and annual leave respectively. These balances have
    been carried forward since 2016 without being estimated or measured in the current
    year. Accordingly, the recorded and unrecorded liabilities were estimated to be
    material at year end. I was not provided with any further audit evidence to confirm
    the validity, accuracy and completeness of the balances.

    Impairement of Investment in Subsidiaries

    The Coffee Industry Corporation Limited (CICL) had investment in Patana No. 61
    Limited at K100,000. The investee’s audited net asset was a deficit of K254,401
    resulting in the carrying value being higher than its audited net assets. At year end,
    the investment in Patana Company No. 61 Limited was significantly impaired.
    However, the management believed that this investment had not impaired. Due to lack
    of proper valuation, I was unable to validate and confirm the management’s assertion
    regarding the non-impairment of the investment in Patana No. 61 Limited.

    Kofi Management Services Limited (KMSL)

    KMSL is a wholly owned subsidiary of the Coffee Industry Corporation Limited
    (CICL). In accordance with the Companies Act 1997 and International Financial
    Reporting Standards (IFRS), the results of KMSL should be reported separately as a
    separate entity and a consolidation performed by the parent Company as part of
    parent-subsidiary reporting. However, currently CICL had included results of KMSL
    in its financial statements, which is not appropriate. Since the incorporation of
    KMSL, there were no proper structures set up to ensure its financial affairs and
    performance results are reported separately.

    Further, CICL through its subsidiary KMSL owns several coffee plantations. The
    International Accounting Standards, IAS 41 – Agriculture provides for guidance on
    the treatment and measurement of such biological assets. These plantations or
    biological assets have not been brought into account resulting in potential
    misstatement of KMSL’s financial information.

    – 50 –

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  • Coffee Industry Corporation Limited

    Non-Consolidation of Subsidiaries

    The Company had not consolidated the financial statements of its subsidiaries, Kofi
    Management Services Limited and Patana No. 61 Limited. I noted that the
    shareholdings by CICL in these subsidiaries as at 31 December 2018 exceeded 50%.
    Therefore, consolidated financial statements for the Group is required by IAS 27,
    Consolidated and Separate Financial Statements. I could not determine the effects on
    the financial statements of the failure to consolidate.

    EMPHASIS OF MATTER

    Status of the Coffee Industry Corporation Limited

    I was provided with copy of the Coffee Industry Corporation (Statutory Function and
    Powers) Act 1991 and according to this Act, Coffee Industry Corporation is a
    Corporation and not a “Limited Company”. Unless Parliament by an Act had amended
    the existing Act to corporatize the Coffee Industry Corporation, the word Limited uses
    by the Corporation is not appropriate. I was not provided with the amended Act for me
    to determine the appropriateness of incorporating this Corporation under the
    Companies Act 1997.”

    9.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Company for the years ended 31 December
    2017 and 2018 were issued on 18 June 2021. The reports contained similar
    observations hence, only the 2018 report is reproduced:

    Bank Reconciliation

    CICL has over 50 bank accounts to cater for its operational requirements. Through
    discussions with management, I noted that some of these bank accounts have been
    dormant and others operational. At the time of this report, only the main operational
    bank accounts have been reconciled whilst all the others remained unreconciled.
    There was lack of important internal control measures including timely and regular
    process of preparing bank reconciliations, review and approval by senior finance
    officers to ensure that all financial transactions have been captured and recorded, and
    that there are no possibilities of occurrence of fraud or fraudulent transactions
    processed through the bank accounts.

    I recommended the management to prepare up-to-date reconciliations of all the bank
    accounts, preferably on a monthly basis, and that the reconciliations are reviewed,
    approved and signed off by senior finance officers.

    – 51 –

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    The management responded as follows:

    “The management had taken appropriate action regarding the subject in addressing
    the issue. Bank reconciliations of all bank accounts maintained to be completed
    before financial reports being produced are accepted to ensure completeness of the
    accounting process.”

    Treatment of MOA Funds

    Included in the CICL bank balances were several bank accounts set up specifically to
    capture funds made available through Memorandum of Agreement (MoA) between
    CICL and certain Provincial and District governments for their coffee development
    and specific needs. However, at year end, most of these MoA funds were not utilised
    and recorded by CICL as income in the profit and loss account.

    IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
    outlines how to account for government grants and other assistance. Government
    grants are recognised in profit or loss account on a systematic basis over the periods
    in which the entity recognises expenses for the related costs for which the grants are
    intended to compensate. Further, grants related to assets requires setting up the grant
    as deferred income or deducting it from the carrying amount of the asset.

    I recommended CICL to comply with the requirements of IAS 20 Accounting for
    Government Grants and Disclosure of Government Assistance. I advised that in future
    when funds are received, bank (asset) be debited and a deferred income account
    (liability) be credited. As soon as the specific projects under the MoA commence and
    costs or expenses incurred, the deferred income is released, income recognised and
    relevant expenses or assets recorded.

    Management noted my comments and advised to improve in 2019 and subsequent
    years.

    Tax on Assessable Benefit Allowances

    I noted that certain management staff were provided with institutional houses or rental
    accommodation. As such, those staff provided with accommodation under this
    arrangement would attract an assessable benefit allowance. Therefore, his/her salary
    tax be computed in accordance with the prescribed rates provided for by the Internal
    Revenue Commission (IRC). Also, any contract employee provided with a motor
    vehicle with fuel, and allowed unrestricted use also attracts an assessable benefit
    allowance.

    In 2018, I noted that certain staff benefiting from the assessable allowances were not
    correctly taxed. My request for supporting documentations and explanation from the
    Payroll team to justify why assessable benefit allowances were not taxed remained
    outstanding at the time of this report.

    – 52 –

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    I therefore concluded that the Company had not administered salary and wages tax
    correctly and not being compliant to IRC tax regulations.

    Salary and Wages Taxes (SWT)

    Salaries and Wages Tax (SWT) are deducted fortnightly from staff payroll and
    remitted to Internal Revenue Commission (IRC). According to IRC, K3.1 million
    related to salary and wages tax liability existed at 31 December 2018. The balance is
    represented by K2.4 million in tax base (salaries and wages tax) and K0.7 million in
    penalties for none payment and late lodgment. The K3.1 million potential tax liability
    was not recorded in the books and financial statements of CICL at the year end.

    I advised the management to ensure that payroll reports containing the SWT amount
    computed and deducted fortnightly from staff are processed and booked into the
    accounting systems fortnightly, and SWT returns are prepared and lodged monthly
    with IRC. Recommendation has also been made for timely payment of SWT to avoid
    unnecessary and unbudgeted penalty charges by IRC.

    The management responded as follows:

    “The management notes the recommendations and have taken appropriate action to
    ensure SWT are accounted for and remittances lodged on a timely basis to IRC.

    Currently SWTs are paid directly via kundupei deductions on a fortnightly basis.
    CICL management is in communication with IRC and Department of Treasury to find
    a solution to pay off or write-off the outstanding tax liabilities through the assistance
    from annual budgetary support.”

    Information Technology (IT) System

    I identified that IT Policy and Procedural Manual had not been formally adopted by
    CICL. The key risk factors due to the lack of such critical document are:

    There was no formal Business Continuity Management Plan. Such document
    would identify whether there was a managed process in place that addresses the
    information security requirements for developing and maintaining business
    continuity throughout the organization;
    There was no formal Disaster Recovery Plan. For instance, there were daily
    back-ups performed by CICL however, there were no regular test performed to
    ensure that the back-up files are usable/readable in the event of a disaster;
    No documentations around Access Controls, especially whether;

    – an access control policy is developed and reviewed based on the business
    and security requirements,
    – both logical and physical access control are taken into consideration in the
    policy, and

    – 53 –

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    – the users and service providers were given a clear statement of the
    business requirement to be met by access controls, and

    No documentations on Information Security Incident Management Policy, to
    ensure information security events are reported through appropriate
    management channels as quickly as possible.

    I recommended the management to ensure a detailed IT Policy and Procedural
    Manual is developed, accepted and implemented immediately.

    The management responded as follows:

    “The management notes the observation and recommendation and has directed
    appropriate technical officers to establish IT Policy and Procedural Manual and take
    corrective measures to address all IT issues going forward.”

    Financial Month End and Year End Closure

    Generally Accepted Accounting Practices (GAAP) requires entities to ensure a proper
    month end and year-end financial closure process. CICL had generally failed to
    ensure proper month end and year end close processes were performed.

    Key issues noted are:

    Long outstanding and delayed reconciliation of all balance sheet items;
    Accounting system opened and not properly rolled over to the next period;
    No cut-off time set for transactions processed especially towards the period end;
    Due to lack of proper closure, there was a high possibility of inaccurate,
    incomplete and unjustifiable financial report provided to key stakeholders
    including the Management, Board of Directors, Government and Donor agencies;
    and
    Not performing such important financial process exposes CICL to high-risk
    environment susceptible for misappropriation, fraud and theft of its assets.

    9.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Company for the year ended 31 December 2019 was in progress.

    The Company had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 54 –

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  • 9A. COFFEE INDUSTRY FUND
    (A subsidiary of Coffee Industry Corporation Limited)

    9A.1 INTRODUCTION

    9A.1.1 Legislation

    The Coffee Industry Corporation (Statutory Functions and Powers) Act 1991
    provided for the establishment of the Coffee Industry Fund (CIF). The main purpose
    of the Coffee Industry Fund is to stabilise the coffee industry by giving the Coffee
    Industry Corporation the financial ability to implement schemes relating to
    stabilisation and equalisation of coffee prices and stock holdings of coffee.

    9A.2 AUDIT OBSERVATIONS

    9A.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Fund for the years ended 31 December 2017 and 2018 were issued
    on 18 June 2021. The reports contained similar Disclaimer of Opinions, hence, only
    the 2018 report is reproduced:

    “DISCLAIMER OF OPINION

    Because of the significance 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
    financial statements of the Coffee Industry Fund for the year ended 31 December
    2018.

    BASIS FOR DISCLAIMER OF OPINION

    Opening Balances and Corresponding Figures

    My report for the year ended 31 December 2017 was a disclaimer of opinion. I was
    not able to satisfy myself as to the accuracy and completeness of the opening balances
    due to limitation on the scope of my audit, since essential accounting records
    including General Ledger and Trial Balance from which the financial statements were
    prepared were not made available to enable me to verify the accuracy and
    completeness of amounts reported in the financial statements. Since these opening
    balances enter into the determination of the results of operations and cash flows of the
    Company in 2018, I was unable to determine whether adjustments to the statement of
    financial position, statement of comprehensive income, and notes to the financial
    statements might have been necessary for the year ended 31 December 2018.

    – 55 –

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  • Coffee Industry Fund

    Limitation on the Scope of my Audit

    My examination on the Funds’ accounts and records revealed that no proper
    accounting and financial records were maintained in 2018. Essential accounting
    records including the General Ledger and Trial Balance from which the financial
    statements were prepared were not made available to enable me to verify the accuracy
    and completeness of all the amounts reported in the financial statements at year end.
    Lack of source documents and inappropriate record keeping had placed a limitation
    on the scope of my audit. Consequently, it was impracticable for me to carry out all
    my planned audit procedures to determine the accuracy and completeness of all the
    balances disclosed in the financial statements for the year ended 31 December 2018.”

    9A.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the audit of the
    accounts and records and the examination of the financial statements of the Fund for
    the year ended 31 December 2019 was in progress.

    The Fund had not submitted its financial statements for the year ended 31 December
    2020 for my inspection and audit.

    – 56 –

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  • 9B. KOFI MANAGEMENT SERVICES LIMITED
    (A subsidiary of Coffee Industry Corporation Limited)

    9B.1 INTRODUCTION

    9B.1.1 Legislation

    Kofi Management Services Limited was incorporated under the Companies Act on
    21 February 2014 by the Executive Management of Coffee Industry Corporation
    Limited (CICL). The Company is a 100% owned subsidiary of Coffee Industry
    Corporation Limited which commenced its full business operations in 2017.

    9B.1.2 Objectives of the Company

    The Company’s prime objectives are:

    to manage and grow property portfolios in terms of property investment,
    development and improvement of current commercial properties in PNG;
    to manage research developed coffee blocks into commercial plantation thus
    exporting coffee to international markets; and
    to generate income with marginalised profit to support the recurrent budget of
    CICL.

    9B.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection
    and audit of the accounts and records and the examination of the financial
    statements of the Company for the year ended 31 December 2019 was in progress.

    The Company had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 57 –

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  • 9C. PATANA NO. 61 LIMITED
    (A subsidiary of Coffee Industry Corporation Limited)

    9C.1 INTRODUCTION

    9C.1.1 Legislation

    Patana No. 61 Limited was incorporated under the Companies Act. The Company was
    acquired by the Coffee Industry Corporation Limited on 10 February 1994 and has a
    total issued capital of two ordinary shares of K1.00 each. The Company is wholly
    owned by the Coffee Industry Corporation Limited. The principal activity of the
    Company is to invest in property.

    9C.2 AUDIT OBSERVATIONS

    9C.2.1 Comments on Financial Statements

    My reports in accordance with the provisions of the Companies Act on the financial
    statements of the Company for the years ended 31 December 2017 and 2018 were
    issued on 18 June 2021. The reports contained similar Disclaimer of Opinions, hence,
    only the 2018 report is reproduced:

    “DISCLAIMER OF OPINION

    Because of the significance 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
    financial statements of the Patana Company No. 61 Limited for the year ended 31
    December 2018.

    BASIS FOR DISCLAIMER OF OPINION

    Opening Balance

    My report for the year ended 31 December 2017 was a disclaimer of opinion. I was
    not able to satisfy myself as to the accuracy and completeness of the opening balances
    due to limitation on the scope of my audit, since essential accounting records
    including General Ledger and Trial Balance from which the financial statements were
    prepared were not made available to enable me to verify the accuracy and
    completeness of amounts reported in the financial statements. Since the opening
    balance enter into the determination of the results of operations and cash flows of the
    Company in 2018, I was unable to determine whether adjustments to the statement of
    financial position, statement of comprehensive income and notes to the financial
    statements might have been necessary for the year ended 31 December 2018.

    – 58 –

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  • Patana No. 61 Limited

    Limitation on the Scope of my Audit

    My examination on the Company’s accounts and records revealed that no proper
    accounting and financial records were maintained in 2018. Essential accounting
    records including the General Ledger and Trial Balance from which the financial
    statements were prepared were not made available to enable me to verify the accuracy
    and completeness of all the amounts reported in the financial statements at year end.
    Lack of source documents and inappropriate record keeping had placed a limitation
    on the scope of my audit. Consequently, it was impracticable for me to carry out all
    my planned audit procedures to determine the accuracy and completeness of all the
    balances disclosed in the financial statements for the year ended 31 December 2018.”

    9C.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the audit of the
    accounts and records and the examination of the financial statements of the Company
    for the year ended 31 December 2019 was in progress.

    The Company had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 59 –

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  • 10. CONSERVATION AND ENVIRONMENT PROTECTION
    AUTHORITY

    10.1 INTRODUCTION

    10.1.1 Legislation

    The Conservation and Environment Protection Authority Act 2014 was drafted and
    Certified on 30 May 2014, establishing the Conservation and Environment Protection
    Authority (CEPA).

    Prior to May 2014, the Conservation and Environment Protection Authority was
    operating as a Department of National Public Service.

    10.1.2 Functions of the Authority

    The functions of the Authority are to:

    do all things necessary for the conservation and protection of the environment in
    accordance with the environmental conservation laws and any policy directions of
    the Minister and the National Executive Council;
    co-ordinate with provincial and local-level governments and sub-national
    authorities to foster, manage and monitor environmental conservation strategies
    and programmes in the country;
    relation to land under the care, control and management of the Authority:

    – to establish and maintain zoological and botanical parks and gardens;
    – to permit and assist zoological and botanical research; and
    – to construct buildings, walks, drives, fences, enclosures, dams, reservoirs,
    drains and other structures for or in connection with the purposes of the
    Authority;

    impose and receive rents, fees, charges and bonds in respect of its functions under
    any environmental conservation law, including but not limited to providing
    services related to the approval and issue of environment permits and the
    investigation and audit of activities under the Environment Act 2000;
    promote Papua New Guinea’s laws, regulations and policies relating to
    conservation and environment matters within the country and overseas;
    give advice to the Minister and maintain dialogue with other government
    agencies on environmental conservation laws and policies;
    encourage, accept, administer and allocate aid monies, whether from within the
    country or elsewhere, for purposes consistent with its objects;

    – 60 –

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    accept donations, gifts, devises and bequests made to the Authority and control,
    manage and develop those donations, gifts, devises and bequests in accordance
    with any conditions attached to them;
    where it considers it necessary or convenient to do so, to establish committees
    and similar bodies in relation to its functions, in accordance with regulations and
    to that effect; and
    perform such other functions and duties as may be conferred on it by the
    Authority’s Act or any other law.

    10.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Authority for the year ended 31 December 2018 was in progress.

    The Authority had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 61 –

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  • 11. GOVERNMENT PRINTING OFFICE

    11.1 INTRODUCTION

    11.1.1 Legislation

    The Government Printing Office was established by the British Colonial
    Administration in 1888.

    The functions of the Printing Office are empowered by Section 252 of the
    Constitution, the Interpretation Act (Chapter 2) and Printing of the Laws Act
    (Chapter 333).

    11.1.2 Objective of the Office

    The main objective of the Government Printing Office is to provide efficient and
    quality printing services to the executive arm of the government, judicial arm of the
    government, government departments and various statutory bodies at an affordable
    cost.

    11.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    11.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Office for the years ended 31 December 2016 and 2017 were issued
    on 16 November 2020. The reports contained similar Disclaimer of Opinions, hence,
    only the 2017 report is reproduced:

    “DISCLAIMER OF OPINION

    Because of the significance of the matters described 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
    financial statements of Government Printing Office for the year ended 31 December
    2017.

    – 62 –

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    BASIS FOR DISCLAIMER OF OPINION

    Limitation on the Scope of my Audit

    Opening Balances

    I issued a disclaimer of opinion in respect of the year ended 31 December 2016 and
    prior years as I was unable to satisfy myself as to the accuracy of the opening
    balances. I was also unable to quantify the effects of misstatements, if any, which
    might have a bearing on the results of the operations of the Office. Since the opening
    balances of 2017 enter into the determination of the balances reported in 2017
    financial statements, I was unable to place reliance on the closing balances stated in
    the financial statements and the reliability of the financial records maintained by the
    Office for 2017.

    Cash at Bank – K2,849,723

    I noted that the Printing Office disclosed K2,849,723 as its Cash at Bank closing
    balance at year end. My review of the account revealed that the Bank reconciliations
    were system generated and there was no evidence to indicate that reconciliations were
    checked by a senior officer for accuracy. Further, the bank reconciliations were not
    prepared on a monthly basis. Additionally, reconciling items have not been
    investigated resulting in stale cheques, and deposits in transit have not been cleared.
    As such, I was not able to neither verify and confirm the accuracy and completeness
    of the Cash at Bank balance nor place reliance on the effectiveness of the controls
    maintained by the Government Printing Office over cash.

    Trade Debtors – K6,255,841

    My review of the Trade Debtors account revealed that 96% of the total debts have
    been outstanding for over 90 days. Some of them were long outstanding debts dating
    back to 2010. Further, I noted that those debts that have been outstanding for over a
    year have not been provided for as doubtful debts on a consistent basis. Long
    outstanding debts show that the Printing Office did not have an effective debt
    collection policy. Consequently, debts outstanding over a year may potentially pose a
    risk of becoming bad debts and would eventually have an impact on the financial
    statements.

    Casual Wages – Scope Limitation

    The Printing Office has disclosed K481,496 as wages for casual staff in its financial
    statements for the year. However, the Printing Office did not provide the necessary
    supporting documents to substantiate the above payments. As a result, I was unable to
    confirm whether or not the above casual wages expenses were incurred for the benefit
    of the Printing Office.”

    – 63 –

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    11.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Office for the years ended 31 December 2016
    and 2017 were issued on 16 November 2020. The reports contained similar
    observations, hence, only the 2017 report is reproduced:

    Financial Accounting and Reporting

    My review of the accounts revealed that the final accounts were prepared by the
    Printing Office for the first time after years of contracting it out to a private firm. I
    noted that the posting of accounting transactions had some errors which have resulted
    in the discrepancies between source documents and ledger reports for the accounts
    receivable, sales receipts, cash payments and cash at bank ledgers during the year
    under review. I brought this to the attention of the Office and management responded
    as follows:

    “We are pleased to say that we are progressing towards fully automating the
    quotation, sales and receipting processes and we will see a lot of improvement in this
    area while disbursement transactions will still be manually imputed. We have
    recruited an experienced Accountant against the Manager Finance position to
    oversee and manage all the finance and accounts requirements and especially ensure
    the newly installed MYOB software is fully functional with no major hiccup.”

    Fixed Assets Register – General Controls

    My review of the fixed assets and capital acquisition for the year ended 31 December
    2017 revealed that the Printing Office had not fully complied with Part 32 of the
    Financial Management Manual by not maintaining a regularly updated Fixed Assets
    Register. The following discrepancies were noted: no proper stock take was done to
    identify and update assets that were working, faulty, obsolete or missing; assets
    totaling K127,511 had been captured in the Fixed Assets Register directly from the
    expense disbursement vouchers without proper asset descriptions and coding for ease
    of access and location; and tangible assets had not been properly coded in the Fixed
    Assets Register and also tagged and labelled. The management also did not maintain
    asset bin cards for each office to monitor the location, movement and condition of
    assets therein. As such, I was not able to comment on the accuracy and completeness
    of the balances of Property Plant & Equipment disclosed in Note 3 of the financial
    statements.

    Lack of proper maintenance of the Fixed Assets Register is a direct breach of the
    Public Finances (Management) (Amendment) Act 2016 (s.62) and the Financial
    Management Manual (Part 32). In addition, assets acquired by the Printing Office are
    susceptible to theft, misuse and abuse when proper control measures are not taken into
    consideration.

    – 64 –

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    Inventory/Stock – Valuation and Disclosure

    My review of the current assets of GPO revealed that the inventory components had
    not been adequately valued and disclosed as a Current Asset in the financial
    statements for the year under review. The International Accounting Standards 2
    provides for proper valuation and disclosure of Inventory as a current asset in the
    Statement of Financial Position.
    Due to non-recognition of stocks in the current assets, it was evident that stocks were
    recognized as expenses in the income statement which overstated the expenses and
    understated the current assets.

    Management responded that GPO is in progress of automating all its inventory and
    consumable items whereby it will satisfy this concern of non-recognition of inventory
    as a current asset.

    Revenue & Expenditure – Segregation of Duties

    My review of the cash collection from sales and banking procedures revealed that
    there were inadequate controls surrounding the invoicing, receipting, banking and
    records keeping. All these functions are performed by the same officer.

    Further, my examination of the procurement processes for expenses revealed that
    there had been inadequate controls surrounding the raising of payment vouchers,
    checks and approvals made on the payments as there seem to be only one officer
    performing all the tasks. Lack of segregation of duties may weaken the internal
    controls and pose a risk of manipulation of records and misappropriation of cash.

    Management concurred with my observations and assured that corrective actions will
    be taken.

    Disbursements without Proper Authorization and Source Documents – K690,848

    My review of the operational expenditures revealed that there had been payments
    made without proper authorization and supporting documents. The Printing Office is
    in breach of the Public Finances (Management) (Amendment) Act 2016 and the
    Finance Instructions.

    Management responded that with the recent appointment of a Finance Manager to
    oversee this area, they anticipate compliance improvement in this area. All checks and
    verification are now handled by the Finance Manager.

    – 65 –

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  • Government Printing Office

    Staff Travel Expenses – K32,596

    My review of the staff travels expenses revealed that the Printing Office did not
    maintain a Travel Acquittal Register to keep proper records of all the duty travel
    advances taken. I also noted that travel expenses amounting to K32,596 were not
    acquitted. It is a requirement under Financial Management Manual Part 20
    Paragraph 12.2 that a Financial Delegate/Authorizing officer shall maintain a
    Register of Advances for officers on duty travel. It must also be noted that it is a
    requirement under the Financial Management Manual Part 20 Paragraphs 11.2 and
    12.10 that cash advanced to officers on overseas official duty must acquit travel
    advances within fourteen (14) days of return from duty travel and advances to officers
    for domestic duty travels to be acquitted within seven (7) days of return from duty
    travel by submitting the acquittal form.

    In the absence of Travel Acquittal Register and the corresponding travel advance and
    expense acquittal documents, I was unable to confirm whether the staff travel
    payments made were for the intended purposes.

    11.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Office for the year ended 31 December 2018 had been completed and the audit
    report is expected to be issued shortly.

    The Office had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 66 –

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  • 12. INDEPENDENCE FELLOWSHIP TRUST

    12.1 INTRODUCTION

    12.1.1 Legislation

    The Independence Fellowship Trust was established under the Independence
    Fellowship Trust Act (Chapter 1040).

    12.1.2 Objective of the Trust

    The objective of the Trust is to benefit village development by making annual awards
    to selected citizens for the purposes of broadening their knowledge and experience, as
    well as implementing and encouraging that development.

    12.1.3 Functions of the Trust

    The functions of the Trust are to:

    make selections of candidates to receive the awards of fellowships;
    determine the number and value of awards; and
    invest the funds of the Trust.

    12.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Trust had submitted its financial statements
    for the year ended 31 December 2020 and arrangements were being made to
    commence the audit shortly.

    – 67 –

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  • 13. INDEPENDENT CONSUMER AND COMPETITION
    COMMISSION

    13.1 INTRODUCTION

    13.1.1 Legislation

    The Independent Consumer and Competition Commission was established by the
    Independent Consumer and Competition Commission Act 2002. The Act came into
    operation in January 2003.

    13.1.2 Functions of the Commission

    The main functions of the Commission are to:

    formulate and submit to the Minister policies in the interest of consumers;
    consider and examine and where necessary, advise the Minister on the
    consolidation or updating of legislation providing protection to the consumers;
    liaise with Departments and other agencies of Government on matters relating to
    consumer protection legislation;
    receive and consider complaints from consumers on matters relating to the
    supply of goods and services;
    investigate any complaint received;
    make available to consumers general information affecting the interests of
    consumers;
    liaise with business, commercial and professional bodies and associations in
    order to establish codes of practice to regulate the activities of their members in
    their dealings with consumers;
    advise consumers of their rights and responsibilities under laws relating to
    consumers protection;
    promote and participate in consumer education activities;
    establish appropriate systems whereby consumer claims can be considered and
    redressed;
    liaise with consumer organisations, consumer affairs authorities and consumer
    protection groups overseas and to exchange information on consumer issues
    with those bodies;
    arrange for the representation of consumers in court proceedings relating to
    consumer matters; and
    do all other things relating to consumer affairs.

    – 68 –

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  • Independent Consumer and Competition Commission

    13.2 AUDIT OBSERVATIONS

    13.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Commission for the year ended 31 December 2019 was issued on 30
    June 2021. The report did not contain any qualification.

    13.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Commission had not submitted its financial
    statements for the year ended 31 December 2020 for my inspection and audit.

    – 69 –

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  • 14. INDUSTRIAL CENTRES DEVELOPMENT CORPORATION

    14.1 INTRODUCTION

    14.1.1 Legislation

    The Industrial Centres Development Corporation was established under the Industrial
    Centres Development Corporation Act 1990 which came into operation on 23 August
    1990. The Corporation commenced trading on 5 January 1994.

    14.1.2 Functions of the Corporation

    The main functions of the Corporation are:

    overall planning and implementation of the Government’s industrial centre
    development programme;
    preparation of feasibility studies in order to identify appropriate forms of
    industrial development;
    to identify therewith or otherwise, regions and sites in the country for industrial
    centres; and
    to do such supplementary, incidental or consequential acts, as are necessary for
    the development and promotion of industrial centres in PNG.

    14.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    14.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Corporation for the year ended 31 December 2018 was issued on 20
    October 2020. The report contained a Qualified Opinion:

    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters referred to in the Basis for
    Qualified Opinion paragraphs below:

    a) the financial statements are based on proper accounts and records; and

    b) the financial statements are in agreement with those accounts and records, and
    show fairly the state of affairs of the Corporation for the year ended 31
    December 2018 and the results of its financial operations and cash flows for
    the year then ended.

    – 70 –

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  • Industrial Centres Development Corporation

    BASIS FOR QUALIFIED OPINION

    Trade Debtors – Malahang Industrial Centre (MIC)

    The Corporation had disclosed its trade debtors balance as K4,188,403 (included as
    part of total debtors of K4,738,821) in the financial statements as at 31 December
    2018. I noted that of the K4,188,403 receivables, K3,393,750 has been outstanding for
    a considerable period of time, therefore the collectability of this amount is in doubt.
    Further, I was unable to establish whether the Corporation had made adequate
    provision against these debts.

    As a result, I was unable to satisfy myself as to the accuracy and collectability of the
    trade debtors as reported at the year end.

    UIC – Land Sales Debtors – K289,566

    Included in the total debtors of K4,738,821 were land sales debtors totaled K289,566.
    I observed that land sales debtors have been outstanding since 2008. The Corporation
    had not provided adequate provision for doubtful debts in its accounts. Consequently,
    I was unable to ascertain the accuracy, correctness and collectability of the trade
    debtors as reported in the financial statements as at 31 December 2018.

    Provision for Doubtful Debts – K2,216,677

    I noted that the Corporation had increased the provision for doubtful debts by
    K724,345 to K2,216,677. However, there was no policy on provisions and basis of
    calculations of provision for doubtful debts. Further, I was not provided with either
    the schedule and general ledger transactions listing of the doubtful debts of K724,345
    as disclosed in the financial statements. As a result, I was unable to ascertain the
    accuracy, completeness and valuation of the provision for doubtful debts as disclosed
    in the financial statements as at 31 December 2018.

    Cash at Bank (MIC Bond Account) – K394,233

    The independent bank confirmation certificate for the Bond account with Malahang
    Industry Centre for the year ended 31 December 2018 was not provided for my
    review. As a result, I was unable to confirm the closing bank balance as reported in
    the financial statements.”

    14.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Corporation for the year ended 31 December
    2018 was issued on 20 October 2020. The report contained the following
    observations:

    – 71 –

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    Non-Compliance with the Public Finances (Management) Act, 1995 (as amended)

    The Corporation had not prepared and submitted its financial statements to my Office
    before 31 March 2018 to enable me to conduct the audit and issue the audit report
    within the time frame stipulated in the Public Finances (Management) Act, 1995 (as
    amended). Consequently, the Corporation had breached Section 63(2) and 63(4) of the
    above act.

    Board Minutes

    I noted that there were four (4) Board meetings held during the year under review.
    However, all the meeting minutes were not signed by the Chairman to confirm the
    minutes were correct and true recording of the proceedings at the meetings. As a
    result, I was unable to comment and conclude on whether there were proper
    proceedings held and whether all major transactions and decisions made and
    transpired were in the best interest of the Corporation. I queried the management of
    the Corporation and they responded to my observation as follows:

    “The management has agreed and gave direction to the Board Secretary to ensure all
    board meeting minutes are signed chronologically to confirm that minutes are true
    and correct resolutions of the Board. The management has directed that in future, the
    Board Secretary to ensure this is done and have it vetted by the Managing Director
    one week immediately after each Board Meeting and have it sign by the Chairman.”

    Staff Advance

    My review of the Corporation’s staff debtors revealed that there was no proper
    control, monitoring and recovery of the staff advances. As a result, recouping staff
    advances was slow and ineffective. I also noted that the Corporation has no policy on
    staff advances to control, monitor, recover and deal with those who don’t comply with
    it.

    As such, staff advances amounting to K110,293 has been outstanding (without
    movement) for a considerable period of time. The management responded to my
    query as follows:

    “Management also agreed and directed during its meeting that this list be checked,
    reviewed and the outstanding balances be confirmed and letters be written to the
    people concerned to pay the outstanding or legal action will be taken against them.
    And because these accounts have been outstanding for so long and deemed
    uncollectable, the other option is for management to seek Board approval to write
    these debts off.”

    – 72 –

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    Fixed Assets

    During my review of the Fixed Assets Register, I noted that there were no asset
    identification numbers or tags allocated to each asset listed in the Register. As a
    result, I was unable to identify the existence of the assets in the Register. Furthermore,
    during my physical inspection of vehicles owned by the Corporation revealed that
    some of the vehicles were not registered with “Z” plates despite my prior years’
    recommendation. I drew this issue to the attention of the Management and they
    responded as follows:

    “After the stock-take, current usable assets will be tagged with a specific
    identification for ease of reference. This exercise will be carried out on all Centres
    including the Head Office. And for Z plates on state vehicles, management has taken
    note of the concern raised by the Auditor on this matter and have given an
    undertaking that this issue will be address with appropriate steps taken to ensure this
    is done.”

    GST Payable – K896,684

    During my review of GST, I observed that the Corporation had not submitted the GST
    Returns for the year under review as per the GST Act 2003 (Section 63-66) which
    stipulates that GST has to be remitted within 21 days for the subsequent taxable
    period or (accounting period). This practice would attract penalty by IRC in additional
    tax payable at the rate of 10% on the amount owing and 20% calculated on annual
    basis. I sought explanation from the ICDC Management and they responded to my
    concern as follows:

    “GST payables relates mainly to unpaid invoices from MIC tenants who have
    accounts in arrears with rentals. This is directly related to Trade Debtors. We have
    had several meetings with IRC POM and Lae with regards to outstanding GST
    returns and we both agreed to settle the outstanding liability and moving forward and
    reaching an agreement for them (IRC) to waiver the charges/penalties imposed. After
    complying and remitting payments on a timely basis, we are now current with GST
    and SWT. IRC and ICDC are working together on this.”

    Ulaveo Industrial Centre (UIC) – Project Grant – K300,000

    During my review of the government grants, it was revealed that K1 million for UIC
    Project under PIP was deposited to the Department of Trade, Commerce and
    Industries’ bank account. However, I noted that only K700,000 was deposited or
    transferred into ICDC’s bank account on 19 December 2018. The balance of
    K300,000 was still outstanding at the time of audit in June 2020. As a result, I was
    unable to ascertain the completeness of the government grant as disclosed in the
    financial statements and to confirm if the Corporation is owed K300,000 by the

    – 73 –

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    Department and if it is recoverable. I brought my observation to the management of
    the Corporation and they responded as follows:

    “The whereabouts of the balance of K300,000 is now being investigated by
    Commerce and Industry. We have contacted the Department on this matter and were
    advised that it is currently under investigation. Commerce and Industry will advise.”

    Land Sales – K95,512

    State lease (land) owned by the Corporation was primarily for the purpose of
    development of Industrial areas, however, I noted a land sales transaction at Ulaveo
    Industrial Centre in 2018 for K95,512 contrary to the purpose for which the
    Corporation was established. I brought this query to the attention of the management
    and they responded as follows:

    “Land portion 3770 and 3771 Kokopo, Rabaul, ENB. Under previous management,
    improper land sales and land dealings occurred. The current administration was
    tasked by the Board to investigate and correct those improper land dealing, sale of
    land included. This particular land in question was offered for sale in 2013. It was
    revealed that there were two buyers for this particular land, both whom had paid up
    the 10% deposits. After considerations, the offer to the Chinese was dropped with
    deposits forfeited and subsequent offer was given to East New Britain Development
    Corporation to complete the transaction, hence the Titles at completion.”

    Travel Advance/Acquittal Register

    The Corporation had not maintained Travel Advance/Acquittal Register for all travels
    and travel related expenses of K337,763 despite my recommendation in my previous
    audits. Due to non-existence of the Advance/Acquittal Register during the year under
    review, I was unable to validate the travel advances of K125,964 against the
    acquittals. The management responded to my query as follows:

    “Management has taken note and agrees that this is an ongoing problem. A Travel
    Acquittal Officer has now been appointed to ensure this is done and is now
    maintaining a Travel Advance/Acquittal Register file.”

    Goods and Services Procurement Process Weaknesses

    My review of the Corporation’s procurement processes revealed the following control
    weaknesses:

    The total cheque payments of K104,506 have lacked three (3) quotations for
    goods and services worth K5,000 and over as required by the Public Finances
    (Management) Act, 1995 (as amended);

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    The total expenses of K101,876 had no proper supporting documentations such
    as invoices, receipts and cheque copies to substantiate the validity and
    completeness of the expenses incurred for the year ended 31 December 2018;
    and
    There were some payments that were not approved by the Managing Director
    and Corporate Service Director apart from signing the cheques for payments.

    As a result, I was unable to place reliance on the effectiveness on the controls
    surrounding the procurements process of the Corporation. Also, the Corporation was
    in breach of Public Finances (Management) Act, 1995 (as amended). I brought these
    issues to the attention of the management and they responded that:

    “Appropriate measures and steps have been taken to comply with the Public Finances
    (Management) Act, 1995 (as amended) to address some of the issues highlighted such
    as obtaining three (3) quotes for payments over K5,000 and to ensure all proper
    documentation are attached with payments vouchers duly signed and approved by the
    accountable Officers.”

    Other Internal Control Weaknesses

    Other weaknesses noted during my review were:

    inadequate control over cash encashment and payment to suppliers;
    reconciliations of general ledger accounts were not prepared on a periodic basis;
    there were no assets identification numbers or tags allocated to each assets listed
    in the Fixed Assets Register;
    the salary history cards for the staff were not updated by the HR in terms of base
    salary, higher duty allowance, other allowances and leave records such as
    recreational, sick, compassionate and long service leaves;
    recreational leave fares were paid to the employees and dependents without
    valid supporting documents such as birth and marriage certificates; and
    there was no Internal Audit Unit established as per Section 9 Subsection 6 of the
    Public Finances (Management) Act, 1995 (as amended).

    I drew management’s attention to these weaknesses and I was advised that steps have
    been taken to address these issues.

    14.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Corporation had not submitted its financial
    statements for the years ended 31 December 2019 and 2020 for my inspection and
    audit.

    – 75 –

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  • 15. INTERNAL REVENUE COMMISSION

    15.1 INTRODUCTION

    15.1.1 Legislation

    The National Executive Council (NEC) in its meeting on 5 December 2013, Decision
    No: 419/2013 approved that the Internal Revenue Commission (IRC) be transformed
    into an Independent Statutory Authority through a separate Act of Parliament.

    In accordance with the NEC Decision, the Internal Revenue Commission Act 2014
    was certified on 5 August 2014. In September 2014, the Internal Revenue
    Commission started carrying out its operations as a Statutory Authority.

    Prior to September 2014, the Internal Revenue Commission was operating as a
    Department of the National Public Service under the Department of Finance.

    15.1.2 The Objective of the Commission

    The objective of the Internal Revenue Commission is to raise revenue for the
    government from taxes imposed on income that is liable to be taxed under the taxation
    laws it administers. The Commission assesses and collects taxes. It conducts tax
    education and awareness campaigns, and proposes tax administration reform
    measures to ensure that a conducive business environment is established for collecting
    right amount of taxes.

    15.1.3 The Powers and Functions of the Commission

    The powers and functions of the Internal Revenue Commission are to enable the
    Commissioner General to:

    administer and enforce the revenue laws;
    promote compliance with the revenue laws;
    take such measures as may be required to improve service provided to taxpayers
    with a view to improving efficiency and maximising revenue collection;
    take such measures as may be required to counteract tax fraud and other forms
    of tax evasion;
    advise the State on matters relating to taxation and to liaise with relevant
    stakeholders on such matters;
    represent the State internationally in respect of matters relating to taxation; and
    carry out such functions as are given to the Internal Revenue Commission under
    this Act or any other law.

    – 76 –

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  • Internal Revenue Commission

    15.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records, and the examination of the financial statements of
    the Commission for the years ended 31 December 2016 and 2017 had been completed
    on 23 April 2019 and 20 June 2019 respectively.

    The Management responded to the 2016 management letter on 20 August 2020,
    however, I was not able to issue the report due to outstanding issues relating to the
    financial statements.

    The Management responses along with the signed financial statements for 2017 were
    being awaited to finalise the audit reports.

    The Commission had not submitted its financial statements for the years ended 31
    December 2018, 2019 and 2020 for my inspection and audit.

    – 77 –

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  • 16. INVESTMENT PROMOTION AUTHORITY

    16.1 INTRODUCTION

    16.1.1 Legislation and Objective of the Authority

    The Investment Promotion Authority was established under the Investment Promotion
    Act 1992. The objective of the Act was to provide for the promotion of investment in
    the interests of national, social and economic development. This Act repealed the
    National Investment and Development Act (Chapter 120) and the Investment
    Promotion Act 1991.

    16.1.2 Functions of the Authority

    The principal functions of the Authority are to:

    provide information to investors in the country and overseas;
    facilitate the introduction of citizens and foreign investors to each other and to
    activities and investments of mutual benefits;
    provide a system of certification of foreign enterprises;
    advise the Minister on policy issues which relate to the Act; and
    maintain a register of foreign investment opportunities.

    16.2 AUDIT OBSERVATIONS

    16.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Authority for the year ended 31 December 2019 was issued on 12
    November 2020. The report did not contain any qualification.

    16.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Authority had submitted its financial
    statements for the year ended 31 December 2020 for my inspection and audit and
    arrangements were being made to commence the audit shortly.

    – 78 –

  • Page 116 of 309

  • 17. KOKONAS INDASTRI KOPORESEN
    (Formerly Copra Marketing Board of PNG)

    17.1 INTRODUCTION

    17.1.1 Legislation

    The (NEC) through its Gazettal Notice No. G19 abolished the Copra Marketing
    Board Act 1992 on 4 June 2002 and replaced it with Kokonas Indastri Koporesen Act
    2002 which established the Kokonas Indastri Koporesen (KIK). The new Act
    decentralised copra buying and selling in PNG and required KIK to only regulate the
    copra price in PNG.

    17.1.2 Functions of the Koporesen

    The principal functions of the Koporesen are to regulate and assist in the export and
    marketing of copra in the best interest of the copra producers of PNG and to
    administer the PNG Coconut Extension Fund and the PNG Coconut Research Fund.

    17.1.3 Funds of the Koporesen

    The Kokonas Indastri Koporesen Act, 2002 subsequently established PNG Coconut
    Extension Fund and PNG Coconut Research Fund. Comments in relation to these
    Funds are contained in paragraphs 17A and 17B respectively of this Report.

    17.2 AUDIT OBSERVATIONS

    17.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Koporesen for the year ended 31 December 2019 was issued on 23
    March 2021. The report did not contain any qualification.

    17.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Koporesen for the year ended 31 December
    2019 was issued on 23 March 2021. The report contained the following observations:

    Journal passed without approval from Superiors – K1,343,194

    My review of the Koporesen’s trade debtors and creditors accounts revealed that a
    General Journal was posted without any approval from the superiors that worth a
    substantial amount of K1,343,194. I have requested for the supporting documents in
    relation to the journals passed but nothing was provided.

    – 79 –

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  • Kokonas Indastri Koporesen

    As a result of the journals passed, Trade Debtors account has increased by
    K1,343,194 and Trade Creditors account has also increased by the same amount.

    Management responded that those journals raised were to reflect the recurrent revenue
    due from Treasury. They would take corrective action and cease raising journals to
    recognize recurrent revenue due from Department of Treasury.

    Provision for Long Service Leave – K784,821

    My review of the Long Service Leave (LSL) provisions revealed a variance of
    K86,240 between the Koporesen’s manual calculation and my reperformance of only
    seven (7) top management being selected. Incorrect calculation of LSL may result in
    over/underpayment.

    I have raised this issue and management responded that they will correct them when
    they fully implement the Able Payroll system this year (2021).

    Fixed Assets Management

    Section 62 of the Public Finances (Management) Act, 1995 (as amended) requires all
    public bodies to ensure that adequate control is maintained over its assets, or assets in
    its custody. My review of the Fixed Assets Register revealed that there was lack in
    respect of the physical control over assets, especially office machines, furniture &
    fittings and equipment. These assets had no asset labels or number tags/codes on them
    for identification and verification purposes of their existence. Hence, I could not
    reliably ascertain the existence of assets listed in the Fixed Assets Register.

    Management responded as follows:

    “We concur with your observations on fixed assets, expecially on office machine,
    furniture and fittings and plant and equipment. Management will be recruiting a
    Senior Accountant who will be tasked to carry out a complete stock take of our assets
    including those transferred from CCIPNG. This action will correct the weakness
    noted going forward.”

    17.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Koporesen had submitted its financial
    statements for the year ended 31 December 2020 and arrangements were being made
    to commence the audit shortly.

    – 80 –

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  • 17A. PAPUA NEW GUINEA COCONUT EXTENSION FUND

    17A.1 INTRODUCTION

    17A.1.1 Legislation

    The Copra Marketing Board (Amendment) Act 1997 provides for the establishment
    of the Papua New Guinea Coconut Extension Fund for the purpose of receiving
    levies and engaging in extension services and related programmes in accordance
    with the terms of the Act.

    17A.1.2 Objective of the Fund

    The objective of the Fund is to engage in extension services and related programs
    by itself or in co-operation with other persons or bodies for the benefit of the Copra
    Industry.

    The Fund was administered by the Copra Marketing Board up to 3 June 2002 and
    has since been administered by Kokonas Indastri Koporesen.

    17A.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Fund had not submitted its financial
    statements for the years ended 31 December 2019 and 2020 for my inspection and
    audit.

    – 81 –

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  • 17B. PAPUA NEW GUINEA COCONUT RESEARCH FUND

    17B.1 INTRODUCTION

    17B.1.1 Legislation and Objective of the Research Fund

    The Papua New Guinea Coconut Research Fund was established by the Kokonas
    Indastri Koporesen Act following the repeal of the Copra Marketing Board
    (Amendment) Act and the cessation of the PNG Copra Research Fund. The Kokonas
    Indastri Koporesen deducts a copra research fee of K4 per tonne of copra purchased
    from producers and pays it to the Research Fund. The Research Fund in turn, pays
    this cess to the Cocoa Coconut Institute Limited of PNG.

    17B.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Research Fund had not submitted its
    financial statements for the years ended 31 December 2019 and 2020 for my
    inspection and audit.

    – 82 –

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  • 18. KUMUL CONSOLIDATED HOLDINGS
    (Formerly Independent Public Business Corporation)

    18.1 INTRODUCTION

    18.1.1 Legislation

    The Independent Public Business Corporation (IPBC) was established under the
    Independent Public Business Corporation of Papua New Guinea Act 2002 (as
    amended) which came into operation on 27 March 2002.

    The above Act was amended through the Independent Public Business Corporation of
    Papua New Guinea (Amendment) Act 2007 at which time the objectives and functions
    of the Corporation were changed.

    A major impact of the amendments made was that the Corporation, the Trusts, the
    State Owned Enterprises or any other enterprises in which the Corporation, the Trusts
    or the State Owned Enterprise holds any interest shall not be subject to the Public
    Finances (Management) Act. The amended Act also excludes the Corporation from
    the application of the Public Services (Management) Act 1995 and the Salaries and
    Conditions Monitoring Committee Act 1988. These amendments came into operation
    on 8 June 2007.

    The Principal Independent Public Business Corporation Act was amended on 12
    August 2015. The name of the Independent Public Business Corporation was repealed
    and replaced with Kumul Consolidated Holdings. The objectives and functions of the
    principal Act were not amended and all dividends declared by Kumul Consolidated
    Holdings shall be paid into the Sovereign Wealth Fund.

    18.1.2 Objectives of the Corporation

    The objectives of the Corporation are to:

    act as trustee of the Trust and hold assets and liabilities that have been vested in or
    acquired by it, on behalf of the State;
    act as a financial institution for the benefit of and the provision of financial
    resources and services to State Owned Enterprises and the State, where approved
    by the National Executive Council (NEC);
    enhance the financial position of the State or State Owned Enterprises; and
    enter into and perform financial and other arrangements that in the opinion of the
    Corporation have as their objective either:

    – the advancement of the financial interests of the State or State Owned
    Enterprises; or
    – the development of the State or any part thereof.

    – 83 –

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    18.1.3 Functions of the Corporation

    The main functions of the Corporation are:

    to administer the Trusts and monitor the performance of the assets of the Trusts
    in such manner as provided under this Act and shall perform such other
    functions as are required under this Act.
    without limiting the generality of Section (1) but subject to the provisions of this
    Act, the Corporation may:
    ‒ undertake the function of holding and monitoring corporation for State
    owned assets and Majority State Owned Enterprises;
    ‒ undertake the function of planning, coordinating and managing State
    assets, infrastructure and projects;
    ‒ determine policies regarding:
    the conduct of its affairs and the affairs of any of the Trusts; and
    the administration, management and control of the Corporation and
    any of the Trusts;
    ‒ borrow, raise or otherwise obtain financial accommodation in PNG;
    ‒ advance money or otherwise make financial accommodation available to
    the State or State Owned Enterprises;
    ‒ act as a central borrowing and capital raising authority for State Owned
    Enterprises;
    ‒ act as agent for State Owned Enterprises in negotiating, entering into and
    performing financial arrangements;
    ‒ provide a medium for the investment of funds of State Owned Enterprises;
    ‒ manage or cause to be managed the Corporation’s financial rights and
    obligations; and
    ‒ such other functions and duties as are prescribed by the Act or any other
    Act.

    18.1.4 Trust of the Corporation

    The Trust of the Corporation is the General Business Trust. Comments in relation to
    the Trust are contained in paragraph 18A of this Report.

    18.1.5 Subsidiaries of the Corporation

    The subsidiaries of the Corporation are Kumul Technology Development Corporation
    Limited (formerly Port Moresby Private Hospital Limited) and PNG Dams Limited.
    Comments in relation to these subsidiaries are contained in paragraphs 18B and 18C
    of this Report respectively.

    – 84 –

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    18.2 AUDIT OBSERVATIONS

    18.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Corporation for the years ended 31 December 2018 and 2019 were
    issued on 28 July 2020 and 15 December 2020 respectively. The reports did not
    contain any qualification.

    18.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Corporation for the year ended 31 December 2020 was in progress.

    – 85 –

  • Page 123 of 309

  • 18A. GENERAL BUSINESS TRUST
    (Trust under Kumul Consolidated Holdings)

    18A.1 INTRODUCTION

    18A.1.1 Legislation

    The General Business Trust was established under Section 31 of the Independent
    Public Business Corporation of PNG Act 2002 (as amended) which came into
    operation on 20 June 2002.

    The Kumul Consolidated Holdings (KCH) (formerly Independent Public Business
    Corporation of PNG) was appointed as Trustee of the Trust and all moneys
    belonging to the Trust shall be invested or dealt with by KCH in accordance with
    the Act;

    At any time before or after the commencement date of the Act, the Minister
    responsible for privatisation matters may vest certain assets and liabilities in the
    Kumul Consolidated Holdings as Trustee of the Trust; and

    All the State Owned Enterprises and other investments owned by the State of PNG
    are vested in the Trust by the Minister responsible for privatisation as approved by
    the NEC from time to time.

    18A.2 AUDIT OBSERVATIONS

    18A.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the Trust’s
    financial statements for the years ended 31 December 2018 and 2019 were issued on
    28 July 2020 and 15 December 2020 respectively. The reports contained similar
    Qualified Opinions, hence, only the 2019 report is reproduced:

    “QUALIFIED OPINION

    In my Opinion, except for the effects of the matters described in the Basis for
    Qualified Opinion paragraphs below:

    (a) The financial statements of General Business Trust for the year ended 31
    December 2019:

    (i) give a true and fair view of the financial position and the results of
    its financial performance and cash flows for the year ended on that
    date; and

    – 86 –

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  • General Business Trust

    (ii) the financial statements have been presented in accordance with the
    International Financial Reporting Standards and other generally
    accepted accounting practice in Papua New Guinea.

    (b) Proper accounting records have been kept by the Trust, as far as appears
    from my examination of those records; and

    (c) I have obtained all the information and explanations required.

    BASIS FOR QUALIFIED OPINION

    Opening Balance of Investment in Kumul Technology Development
    Corporation Limited

    Included in Note 12(a) to the financial report was the Trust’s investment in Kumul
    Technology Development Corporation Limited (KTDCL) with a carrying value of
    K51,000,000 as at 31 December 2019 and K53,321,480 as at 31 December 2018.
    The Trust has an accounting policy of carrying this investment at fair value through
    profit or loss, and the fair value of the investment has been calculated using the net
    asset approach. KTDCL’s assets are mostly investment in properties and share
    investment in Pacific International Hospital (PIH).

    My report on the accounts of Kumul Technology Development Corporation Limited
    (KTDCL) for the year ended 31 December 2018 was qualified on the basis of my
    inability to ascertain accuracy of the opening balance of the investment in PIH.
    KTDCL had not performed a valuation of its investment in PIH for the year ended
    31 December 2017. However, the Company used the results of the 2018 valuation
    exercise to determine the investment value in PIH as of 31 December 2017. I noted
    that the 2018 valuation report considered assumptions, inputs and data that were
    considered not appropriate for 2017. As such, I was unable to satisfy myself by
    alternative means as to the accuracy of the opening balances for investment in PIH.

    Since the opening balances of the investment in KTDCL enter into the
    determination of the statement of comprehensive income and equity movements of
    the Trust for the year ended, any adjustments that may exist on the opening balances
    would have a consequential effect on the financial performance and equity
    movements of the Trust for the year ended 31 December 2018. I was unable to
    determine and quantify the impacts of any such adjustments that may be necessary
    on the financial statements of the Trust for the year ended 31 December 2018, or for
    the corresponding period ended 31 December 2017.

    – 87 –

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  • General Business Trust

    Ownership and Valuation of Lancron Naval Base Property

    As disclosed in Note 10 to the financial report, the Trust’s investment property
    included Lancron Naval Base with a carrying value of K46,628,175 as at 31
    December 2019 and 2018. In my review, I noted that the Trust has an accounting
    policy of carrying this investment in Lancron Naval Base at fair value. However, the
    Trust had used the 2013 valuation of the Lancron Naval Base to determine the
    carrying value as at 31 December 2019 and 2018.

    In addition, I was not provided with the State Lease for this property nor was able to
    satisfy myself by alternative means as to the fair value of the investment property as
    at 31 December 2019 and 2018. As such, I was unable to determine and quantify
    what adjustments might be necessary to the statement of financial position as at 31
    December 2019, the statement of comprehensive income and statement of changes
    in equity for the year ended 31 December 2019, or for the corresponding period
    ended 31 December 2018.

    EMPHASIS OF MATTER

    Restatement of Comparative Balances

    I draw attention to Note 18 to the financial report, which states that amounts
    reported in the previously issued 31 December 2018 financial report have been
    restated and disclosed as comparatives in these financial reports. However, I did not
    qualify this matter.”

    18A.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection
    and audit of the accounts and records and the examination of the financial
    statements of the Trust for the year ended 31 December 2020 was in progress.

    – 88 –

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  • 18B. KUMUL TECHNOLOGY DEVELOPMENT CORPORATION
    LIMITED (A subsidiary of Kumul Consolidated Holdings)

    18B.1 INTRODUCTION

    18B.1.1 Legislation

    This Company was initially registered under the Companies Act on 1 August 1994
    with a name Negliw No. 81 Limited. On 30 September 1994, Negliw No. 81
    Limited was acquired by the Motor Vehicles Insurance (PNG) Trust, now the Motor
    Vehicles Insurance Limited and on 20 March 1996 changed its name to Port
    Moresby Private Hospital Limited.

    Port Moresby Private Hospital Limited was later transferred to the General Business
    Trust on 2 August 2002. Subsequently on 20 April 2016, the Company changed its
    name from Port Moresby Private Hospital Limited to Kumul Technology
    Development Corporation Limited.

    18B.1.2 Objective of the Company

    The objective of Kumul Technology Development Corporation Limited is to
    construct, furnish and equip a building to operate as a hospital.

    18B.2 AUDIT OBSERVATIONS

    18B.2.1 Comments on Financial Statements

    My reports in accordance with the provisions of the Companies Act on the financial
    statements of the Company for the years ended 31 December 2018 and 2019 were
    issued on 28 July 2020 and 15 December 2020 respectively. The reports contained
    similar Qualified Opinions, hence, only the 2019 report is reproduced:

    “QUALIFIED OPINION

    In my Opinion, except for the effects of the matter described in the Basis for
    Qualified Opinion paragraph below:

    (a) The financial statements of Kumul Technology Development Corporation
    Limited for the year ended 31 December 2019:

    (i) give a true and fair view of the financial position and the results of its
    financial performance and cash flows for the year ended on that date;
    and

    – 89 –

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  • Kumul Technology Development Corporation Limited

    (ii) the financial statements have been presented in accordance with the
    Companies Act, International Financial Reporting Standards and other
    generally accepted accounting practice in Papua New Guinea.

    (b) Proper accounting records have been kept by the Company, as far as it appears
    from my examination of those records; and

    (c) I have obtained all the information and explanations required.

    BASIS FOR QUALIFIED OPINION

    Opening Balances

    As disclosed in Note 6 to the financial statements, Kumul Technology Development
    Corporation Limited (KTDCL) had an investment in Pacific International Hospital
    (PIH) with a carrying value of K44,000,000 at 31 December 2019 and K41,821,480
    at 31 December 2018 and 1 January 2018.

    The Company has an accounting policy of carrying this investment at fair value
    through profit and loss. The Company had not performed a valuation for the
    investment in PIH as of 31 December 2017. The Company however, used the result
    of the 31 December 2018 valuation to determine the investment’s carrying value as
    at 31 December 2017. As such, I was unable to satisfy myself by alternative means
    as to the accuracy of the 1 January 2018 opening balance of the investment in PIH.

    Since the opening balance enters into the determination of the statement of
    comprehensive income and equity movement of the Company for the year ended 31
    December 2018, any adjustment that may exist on the opening balance would have
    consequential effect on the statement of comprehensive income and statement of
    changes in equity for the year ended 31 December 2018. As a result of this matter, I
    was unable to determine whether any adjustment may be necessary in respect of the
    statement of comprehensive income and statement of changes in equity for the year
    ended 31 December 2018 presented in the financial statements as comparative
    information.

    EMPHASIS OF MATTER

    Going Concern

    As at 31 December 2019, the Company’s total current liabilities exceeded current
    assets by K3.3 million. The management of the Company asserted that the
    Company’s ability to continue as a going concern is dependent on the ongoing
    financial support of its parent entity, the General Business Trust.”

    – 90 –

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  • Kumul Technology Development Corporation Limited

    18B.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection
    and audit of the accounts and records and the examination of the financial
    statements of the Company for the year ended 31 December 2020 was in progress.

    – 91 –

  • Page 129 of 309

  • 18C. PNG DAMS LIMITED
    (Subsidiary of Kumul Consolidated Holdings)

    18C.1 INTRODUCTION

    18C.1.1 Legislation

    PNG Dams Limited was incorporated under the Companies Act on 5 June 2002.
    This Company was established under Section 3(1) of the Electricity Commission
    (Privatisation) Act 2002 (the ‘Act’) by transferring to it the Sirinumu Dam and
    Yonki Dam from PNG Electricity Commission (ELCOM). This was gazetted
    through Gazettal Notification No. G114 dated 16 July 2002. The Company was
    vested with the IPBC through the Gazettal Notification No. G125 dated 2 August
    2002.

    18C.1.2 Objective of the Company

    The objective of the Company is to store water in the two dams for the controlled
    release of water from the storage for electricity generation.

    18C.2 AUDIT OBSERVATIONS

    18C.2.1 Comments on Financial Statements

    My reports in accordance with the provisions of the Companies Act on the financial
    statements of the Company for the years ended 31 December 2018 and 2019 were
    issued on 28 July 2020 and 15 December 2020 respectively. The reports did not
    contain any qualification.

    18C.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection
    and audit of the accounts and records and the examination of the financial
    statements of the Company for the year ended 31 December 2020 was in progress.

    – 92 –

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  • 19. LEGAL TRAINING INSTITUTE

    19.1 INTRODUCTION

    19.1.1 Legislation

    The Legal Training Institute was established in 1972 under the Post Graduate Legal
    Training Act (Chapter 168).

    19.1.2 Functions of the Institute

    The functions of the Institute are to provide practical training in law, the conduct and
    management of legal offices, trust accounts and related subjects for candidates for
    admission, to a standard sufficient to qualify them for admission to practice as
    lawyers under the Admission Rules as contained in the Lawyers Act of 1986.

    19.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    19.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the Institute’s
    financial statements for the years ended 31 December 2017, 2018 and 2019 were
    issued on 28 June 2021. The reports contained similar Qualified Opinions, hence,
    only the 2019 report is reproduced:

    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters referred to in the Basis for
    Qualified Opinion paragraphs below:

    (a) the financial statements of the Institute are based on proper accounts and
    records; and
    (b) the financial statements are in agreement with those accounts and records, and
    show fairly the state of affairs of the Institute as at 31 December 2019 and the
    results of its operations for the year then ended.

    BASIS FOR QUALIFIED OPINION

    Fixed Assets – K9,995,210

    My review of the fixed assets revealed that the Institute had not maintained a Fixed
    Assets Register. The assets owned by the Institute had not been tagged for easy
    identification and recording purposes. I also noted that the Institute had not carried
    out physical count of fixed assets over the years to ensure that assets have properly
    been recorded and in existence.

    – 93 –

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  • Legal Training Institute

    As a result, I was unable to confirm the valuation, existence and accuracy of the fixed
    assets balance disclosed in Note 7 of the financial statements.

    Limitation of Scope – Salary and Wages – K850,097

    During my review of salary and wages of the Institute, I noted that the salary and
    wages files or reports from Department of Finance were not maintained and provided
    for my review. Consequently, I was unable to perform my audit procedures to
    determine the validity, completeness and accuracy of the salary and wages totaled
    K850,097 as reported in the financial statements.”

    19.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Institute for the years ended 31 December
    2017, 2018 and 2019 were issued on 28 June 2021. The reports contained similar
    observations, hence, only the 2019 report is reproduced:

    Accounting and Administration Procedural Manual

    I noted that the Institute did not maintain a procedural manual for the staff to follow
    and adopt standardized procedures within the Institute for effective control purposes.
    In the absence of this manual, I was unable to establish whether the uniform
    procedures were followed in the accounting, administration and other operational
    areas. Further, I was unable to establish whether the staff members carry out tasks in
    accordance with the prescribed procedures and guidelines applicable to the Institute.

    Council Meeting Minutes

    Section 6(3) of the Post Graduate Legal Training Act, 1972 requires the Council to
    keep minutes of meetings held. During my review, I noted that there were six (6)
    Council meetings held in 2019. However, these Council meeting minutes were not
    signed by the Chairman and the Director nor minutes secretary which means that any
    resolutions or decisions passed in the meetings were classified as unofficial perhaps
    invalid.

    Leave Fares

    During my review and examination of recreational leave, I noted a total of K104,666
    were paid to employees as leave fares. However, I was not able to confirm and verify
    these payments as there were no dependent birth certificates, marriage certificates and
    other legal documents to confirm the legitimacy of the dependents. As a result, I was
    unable to substantiate the existence and validity of the dependents to the leave fares
    claimed by the Institute’s employees.

    – 94 –

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  • Legal Training Institute

    Expenditure – K68,510

    I observed that the Institute made payments totaling K68,510 without obtaining three
    (3) written quotations from reputable suppliers when making payments for
    expenditure exceeding K5,000. I further noted that in the absence of three (3) written
    quotations, the Institute resorted to using statutory declarations to bypass the
    requirements specified under the Public Finances (Management) Act, 1995 (as
    amended). As a result, I was unable to place reliance on the effectiveness of the
    internal controls surrounding the procurement of goods and services of the Institute.

    19.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Institute submitted its financial statements for
    the year ended 31 December 2020 for my inspection and audit and arrangements were
    being made to commence the audit shortly.

    – 95 –

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  • 20. MINERAL RESOURCES AUTHORITY

    20.1 INTRODUCTION

    20.1.1 Legislation

    The Mineral Resources Authority was established by the National Parliament under
    the Mineral Resources Act 2005 on 9 November 2005. This Act came into force on
    January 2006 but the Authority commenced operations in June 2007.

    20.1.2 Objectives of the Authority

    The objectives of the Authority are to achieve stability, industry growth and a degree
    of assurance of future revenues from the mineral industry. More effective
    management of issues concerning landowners and their participation in the
    development process and allow for the development of a more settled investment
    climate and industry development.

    20.1.3 Functions of the Authority

    The functions of the Authority are to:

    advise the Minister on matters relating to mining and the management,
    exploitation and development of Papua New Guinea’s mineral resources;
    promote the orderly exploration for the development of the country’s mineral
    resources;
    oversee the administration and enforcement of the Mining Act 1992, the Mining
    (Safety) Act (Chapter 195A), the Mining Development Act (Chapter 197), the Ok
    Tedi Acts and the Ok Tedi Agreement, the Mining (Bougainville Copper
    Agreement) Act (Chapter 196) and the agreements that are scheduled to that Act,
    and any other legislation relating to mining or to the management, exploitation
    or development of PNG’s mineral resources;
    negotiate mining development contracts under the Mining Act as agent for the
    State;
    act as agent for the State, as required, in relation to any international agreement
    relating to mining or to the management, exploitation or development of PNG’s
    mineral resources;
    receive and collect, on its own account and on behalf of the State, any fee, levy,
    rent, security, deposit, compensation, royalty, costs, penalty, or other money, or
    other account payable under the Mining Act, the Mining (Safety) Act, the Mining
    Development Act, the Ok Tedi Acts and the Ok Tedi Agreement, the Mining
    (Bougainville Copper Agreement) Act and the agreements that are scheduled to
    that Act, or any other Act the administration of which is the responsibility of the
    Authority from time to time;

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    on behalf of the State, to receive and collect from persons to whom a tenement
    has been granted under the Mining Act the security for compliance with the
    person’s obligations under the Act required to be lodged with the Registrar, and
    to hold and such security received or collected;
    on behalf of the State, to administer and be responsible for the administration of
    any public investment program relating to mining;
    conduct systematic geoscientific investigations into the distribution and
    characteristics of PNG’s mineral and geological resources, located on, within or
    beneath the country’s land mass, soil, subsoil and the sea-bed;
    provide small scale mining and hydrogeological survey data services, and
    occupational health and safety community awareness programs;
    collect, analyse, store, archive, disseminate and publish (in appropriate maps
    and publications) on behalf of the State geoscientific information about PNG’s
    mineral and geological resources;
    carry out such other functions as are given to the Authority by this Act or by any
    other law; and
    generally to do such supplementary, incidental, or consequential acts and things
    as are necessary or convenient for the Authority to carry out its functions.

    20.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    20.2.1 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 year ended 31 December 2015 was issued on 21 August
    2020 while 2016, 2017 and 2018 were issued on 29 March 2021. The reports
    contained similar Qualified Opinions, hence, only the 2018 report is reproduced:

    “QUALIFIED OPINION

    In my opinion except for the effects of the matters described in the Basis for Qualified
    Opinion paragraphs below:

    (a) The financial statements of Mineral Resources Authority for the year ended 31
    December, 2018:

    (i) give a true and fair view of the financial position and the results of its
    financial performance and cash flows for the year ended on that date;
    and

    (ii) the financial statements have been presented in accordance with the
    International Financial Reporting Standards and other generally
    accepted accounting practice in Papua New Guinea.

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    (b) Proper accounting records have been kept by the Authority, as far as appears
    from my examination of those records; and

    (c) I have obtained all the information and explanation required.

    BASIS FOR QUALIFIED OPINION

    Opening Balances (Production Levies)

    A Qualified Opinion was issued for the year ended 31 December 2017 in relation to
    income from Rendering of Services reported in the statement of comprehensive
    income (Note 4) and the corresponding trade receivables recognised in the statement
    of financial position. I noted that the Authority did not have proper controls and
    procedures to verify and ascertain the completeness and accuracy of the income and
    the corresponding account receivables recorded in the financial statements. As a
    result, sufficient and appropriate audit evidence was not available to substantiate the
    completeness and accuracy of production levies revenue of K35,087,446. Since the
    opening balances enter into the determination of the current year financial
    performance, I was unable to determine whether adjustments might have been
    necessary in respect of the profit reported for the year.

    Production Levies (Non-Alluvial), Tenement Rentals Income and the
    Corresponding Accounts Receivable

    Reported in the statement of comprehensive income is production levies (non-
    alluvial) income of K33,314,637. The Authority did not have proper controls and
    procedures to verify and ascertain the base and assessable income declared by the
    producing mines, information which is used to calculate the production levies (non-
    alluvial) income and the corresponding accounts receivable. There were no
    satisfactory audit procedures that I could otherwise perform to obtain reasonable
    assurance as to these amounts recorded. As a result, I was unable to obtain sufficient
    and appropriate audit evidence to substantiate the accuracy and completeness of the
    income and the related accounts receivable balance of the Authority at 31 December
    2018.

    Financial Statements Disclosures

    Due to the limitation of available information, the financial statements may not
    present all matters that are required to be disclosed under International Financial
    Reporting Standards, the Public Finances (Management) Act 1995 (as amended) or
    the Mineral Resources Authority Act 2005.

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    As a result of the matters above, I am unable to determine whether any material
    adjustments might have been necessary in respect of the balances recognized and the
    profit for the year reported in the statement of comprehensive income, the amount
    recorded for accounts receivable in the statement of financial position and the
    elements making up the statement of changes in equity and the statement of cash
    flows in the Authority’s financial statements.”

    20.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and the records of the Authority for the year ended 31 December
    2015 was issued on 21 August 2020 while 2016, 2017 and 2018 were issued on 29
    March 2021 and the reports contained similar significant matters, hence, only 2018
    report was reproduced:

    Internal Control Environment

    During the course of my audit, I identified numerous significant weaknesses in the
    Authority’s accounting systems and overall internal control environment operated
    during the year ended 31 December 2018. Management information is insufficient
    and reconciliations are not performed for all items included in the Statement of
    Financial Position and/or reconciliations between the general ledger and sub ledgers
    as and when due, which resulted in delays in receipt of information for the audit.
    Significant reliance is also placed by management on an external consultant engaged
    to assist in the preparation of the year-end reconciliations, and who maintains
    supplementary spreadsheets outside the general ledger, in order to prepare the
    statutory financial statements.

    I recommended that management implement a system whereby reconciliations are
    prepared for all balance sheet accounts and that reconciling items are followed up
    promptly, resolved and entries posted to the general ledger. Management should
    ensure that reconciliations are performed between the general ledger and sub-ledgers
    and that reconciling items and prior period adjustments are followed up promptly in
    order to ensure completeness and accuracy of data for reporting purposes.

    All supplementary spreadsheets maintained by the external consultant should be
    controlled and maintained as part of the accounting records of the Authority.

    Production Levy (Non-Alluvial Income)

    Similar to prior years (2013-2017), I noted that production levies were being
    calculated and remitted by producing mines (“self-invoicing”). Production levies
    income is calculated at 0.25% of assessable income of producing mines constituting
    87% of the Authority’s income in 2018.

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    The Authority does not independently test the veracity (completeness and accuracy)
    of the “self-invoiced” revenue returned by the producing mines and the does not
    maintain a register of mining companies that are required to pay production levies. As
    a result of the lack of control around the determination of production levy income,
    there is a risk that not all producing mines are remitting the required production levy
    to the Authority and that the calculation of assessable income for the year of
    production is not complete or accurate.

    I recommended that management implement policies and procedures whereby it is
    mandatory for all producing mines to declare their assessable income in a
    standardized reporting format ensuring veracity and to be submitted in the actual year
    of production to the Authority.

    Management Accounts

    There was no evidence of preparation and review of management accounts. I gathered
    from the Manager Finance that no management accounts were available for my
    inspection. There is risk that potential losses may affect the entity when there is poor
    monitoring of controls. In addition, lack of budget tracking against the actuals could
    expose the entity to overruns and risk of drifting from set targets.

    To enhance oversight and tracking of budgets against actual performance, I
    recommended that the authority should consider preparing and reviewing
    management accounts on a monthly basis and ensure there is a cut-off date for
    preparation and review of these accounts for timely communication and reporting of
    financial information.

    Internal Audit Function

    I continue to observe non-compliance with the MRA Act, Section 39(5) which requires
    the Authority to appoint an internal auditor who is to provide a written audit report
    not less than quarterly to the Minister and Department of Treasury. Only one internal
    audit work report was prepared in 2015 by an internal auditor and covered financial
    reporting transactions as at 31 December 2013.

    I recommended that management comply with the MRA Act to strengthen the finance
    function by fully resourcing and utilising the internal audit function and to furnish
    reports as required.

    Statutory Financial Statements Audit

    The audit of the 2018 statutory financial statements was not finalised by 31 May 2019
    due to weaknesses in the Authority’s accounting system and overall internal control.
    As such, management was unable to meet the deadline required by Section 36(1) of
    the Mineral Resources Authority Act 2005 for audited financial statements of the
    Authority to be furnished to the Minister responsible for mining before 31 May 2019.

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    In addition, the Authority had not complied with the similar requirement under the
    Public Finances (Management) Act 1995 (as amended). I reminded and
    recommended that management comply with the MRA Act and PFMA by
    strengthening the finance function and to finalise the statutory financial statements in
    accordance with the Acts.

    Royalties Held in Trust

    I have noted that the Authority keeps in its books royalty funds for a number of
    landowner groups. These monies or funds were observed to be held without proper
    royalty trust deeds in place setting out the rights and responsibilities of all parties
    including the operator, the mine, the landowners and the Authority. In the absence of
    royalty trust deeds, legal issues arising from the use of those funds would affect the
    Authority in the future, including rights to interest earned and expectations over the
    credit worthiness of financial institutions the funds are deposited.

    I recommended that all future trust funds held for and on behalf of landowners should
    only be accepted with a properly executed trust deeds.

    Physical Verification of Assets

    As observed in my 2017 audit, the last inspection performed was in 2014. Since then,
    no physical inspection was performed for Port Moresby and other locations. The lack
    of regular reviews, inspection and updating of assets may lead to under resourced
    operations, unnecessary acquisition of assets, or misappropriated assets not identified.

    I recommended that a thorough asset inspection should be carried out annually to
    confirm whether all assets presented in the Fixed Asset Register exist and their
    condition thereof. This exercise may be included for execution in the annual audit
    plan.

    Management noted my concerns and responded as follows:

    “The MRA management has established a team within the Corporate Services
    Division headed by a Team Leader – Assets to administer the annual stock take and
    asset verification exercise going forward. The introduction of the MYOB Exo Business
    Software has also made it possible to administer the asset register.”

    Directors’ Independence Register

    My review revealed that the Authority does not have a system in place to track and
    monitor the independence of its directors by maintaining a Director’s Independence
    Register. In the absence of such, there is risk that management may be compromised
    due to their relationships with other companies in PNG and interests thereof, to
    effectively and objectively execute their roles.

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    I recommended that management consider maintaining a Director’s Independence
    Register to aid, evaluate and monitor its directors’ independence.

    Audit and Risk Committee

    I have gathered that no audit committee or equivalent meetings held during the period
    under review. There is a risk that useful information could be missed, and appropriate
    action may not be taken timely to remedy noted issues. This could potentially result in
    negative impacts to the Authority if proper action is not taken.

    I recommended that the Audit Committee be established and should meet with
    sufficient regularity to enable appropriate discharge of the Committee’s mandates. In
    terms of best practice, the Audit Committee should meet at least once per quarter.

    The management noted my concerns and responded that:

    “Now that the Authority has a full Board, they will entrust the Audit and Finance sub-
    committee to hold a meeting every quarter of the financial year going forward.”

    Bank Reconciliation Reviews

    My review revealed that the bank reconciliation for MRA Operating Account (with
    ANZ) was not dated as prepared and reviewed. I could not confirm the timeliness of
    preparation and review. Bank reconciliations are an anti-fraud control and there is risk
    that errors in the bank and/or cashbook may not be addressed and resolved timely
    which may cause potential losses. Given the nature of cash, there is risk that
    fraudulent activities could be perpetrated and may not be noted and addressed in time.

    I recommended that the preparation and review of bank reconciliations be completed
    on a timely basis. As best practice, it should be done on a monthly basis.

    Ineffective Controls and Timeliness in Invoicing

    As reported in my 2013, 2014, 2015, 2016 and 2017 reports, I still noted that all
    accounts receivable/sales transaction have no (sequential) invoice nor any substantial
    documentation for the calculation of the assessable income and production levy
    except for receipt copies and payment advices from miners. As a result, I am unable
    to perform testing to address the risks identified of misstatement in the revenue
    account. Ineffective ways of raising invoices can encourage fraudulent activities.

    I also noted that the Authority did not raise invoices to customers on a timely basis
    during the period under review as some invoices for 2018 were raised in 2019. There
    is a risk that valid and accurate information may not be available timely to
    management for courses of action and decision making.

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    Again, I recommended that the Authority should establish sequential invoicing to
    address the risk of inaccurate billing which may result in potential losses and other
    impeding issues leading up to incorrect revenue recognition. The management
    responded that:

    “Series of meeting is being held between the Tenement Operation team and the
    Finance team to properly address the timing of invoice preparation.”

    Information Technology General Controls

    The FlexiCadastre system is managed wholly by the Tenements division. The IT
    division is not involved with any independent oversight and access control. Two
    officers in the Finance division including the Corporate Service Executive Manager
    have super-user access to the General Ledger and have access to potentially perform
    unauthorised transactions.

    There are no policies that define the parameters for passwords length, password
    change period and unsuccessfully login attempts, which heightens the risk of
    unauthorised access to the accounting system. There is lack of tracking of issues by
    the IT division and changes made to the general ledger system. Issues noted with this
    system are communicated via email, phone or verbally with no issues log maintained.
    I further noted that, changes made to this system are processed by the system vendors
    with no formal change request documentation, monitoring or testing of the changes by
    the Authority.

    I recommended that the IT division grants and removes access rights to staff for the
    FlexiCadastre systems to ensure access is restricted to only authorised staff and to
    limit the number of super-users. In addition, policies should be formalised for
    passwords, logs maintained for monitoring issues and system change requests.

    The management accepted my comments and responded as follows:

    “MRA IT issues have been closely looked at in 2020. IT policy document has been
    developed and proper controls have now been imposed based on the policy manual
    including the MYOB EXO and FlexiCadestre access and user rights, administrative
    access and user rights, administrative access/controls, segregation of duties and staff
    addition and exit issues.”

    Password Controls

    From my inspection of the Authority’s IT policies, I did not identify a clear guideline
    on frequency of mandatory password change. Not changing passwords for excessive
    periods may create a risk of unauthorized access to information by hackers or
    keystroke loggers.

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    I recommended the Authority to consider establishing a policy to change access
    passwords every 90 days or whichever appropriate. The Authority could explore the
    avenue where the system can be configured in such a way as to give automatic
    password change prompts every 90 days or whichever appropriate.

    Management took note of my concern and advised that a policy will be developed
    going forward.

    Account Reconciliations

    From my audit, it is clear that monthly reconciliations have not been effective. In
    some instances, compilation listing did not accompany reconciliations, and
    compilation listing for debtors and payables were incomplete or not available.
    Reconciliations were not prepared on a timely basis nor evidence of review by the
    Authority’s finance staff observed.

    I have again communicated these matters to the Authority and recommend
    management to strengthen the finance function to improve the process around
    monthly reconciliations.

    Fraud Investigation Log (Register)

    In order to identify and prevent fraud in an organization, maintenance of a fraud
    register serves as an important mechanism. During the course of my audit, I noted that
    there was no fraud register maintained for reported, identified or suspected fraud. Due
    to serious weaknesses in the internal controls and lack of proper accounting and
    maintenance of financial records, there is high risk of fraud taking place. Lack of
    appropriate controls in place to mitigate fraud and monitor fraud related issues could
    potentially increase the risk of fraud.

    I recommended that the authority consider maintaining a Fraud Register through the
    internal audit team or the risk compliance team to ensure all potential fraud cases are
    closely monitored.

    Tax Administration

    I have noted that the review and monitoring processes around submission of GST
    returns, significant contracts, management accounts and production levies were not in
    place. Further, the Authority has unremitted Salaries and Wages Tax amounting to
    K2.7 million at year end. Failure to remit IRC dues on the set dates constitutes non-
    compliance which may result in fines and penalties.

    These issues were highlighted to management and they vowed to take corrective
    actions.

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    Review and Approval of Pay Summary Report not performed

    There is no evidence of proper review and approval being performed for PPE 13 June
    2018 on the detail pay report summary. I was not able to validate whether the payroll
    summary was appropriately reviewed/validated.

    I recommended that the Authority should ensure there are appropriate reviews and
    approval done on pay summary reports and the evidence is appropriately maintained.

    Being a government authority, there is heightened risk that financial resources could
    be lost due to payments to fictitious employees. Management accepted my
    recommendations and responded that review and approval of Payroll issue will be
    rectified and the reviews in payroll and payroll summaries by respective Managers
    will be given priority in 2020 going forward.

    Record Keeping

    I was not able to obtain supporting documents for one of my revenue samples relating
    to K92 Mining. There is risk that transactions could not be validated and opportunities
    for fraudulent activities could occur when records are not appropriately retained.

    I recommended that proper filing of information should be in place and the Authority
    could also explore e-filing and store information on the ‘cloud-based technology’.
    The management noted my recommendation and agreed to address this concerns
    going forward.

    20.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Authority for the year ended 31 December 2019 was in progress.

    The Authority had submitted its financial statements for the year ended 31 December
    2020 and arrangements were being made to commence the audit shortly.

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  • 21. NATIONAL AGRICULTURE QUARANTINE AND INSPECTION
    AUTHORITY

    21.1 INTRODUCTION

    21.1.1 Legislation

    The National Agriculture Quarantine and Inspection Authority (NAQIA) was
    established by the National Agriculture Quarantine and Inspection Authority Act
    1997. This Act came into operation on 29 May 1997.

    Under this Act, all assets used for Quarantine and Inspection Services (other than land
    held by the State) and previously held by the Department of Agriculture and
    Livestock which were necessary to be transferred to the Authority for the purposes of
    the Authority, were transferred to and became the assets of the Authority at
    commencement.

    21.1.2 Objectives of the Authority

    The main objectives of the Authority as mentioned in the Act are the conduct of
    quarantine and inspection of: any animal and species; any fish species; any plant
    species; any products derived from animals, fish and plants; and to prevent pests or
    diseases from entering in or going out of PNG.

    21.1.3 Functions of the Authority

    The functions of the Authority are to:

    advise the Ministry and the National Government on policy formulations and
    legislative changes pertaining to agriculture quarantine and inspection matters;
    monitor and inspect all imports of animals, fish and plants and their parts and
    products, including fresh, frozen and processed food to ensure that the imports
    are free from pests, diseases, weeds and any other symptoms;
    regulate and control all imports of animals, fish and plants and their parts and
    products, including fresh, frozen and processed food to ensure the imports are
    free from pests, diseases, weeds and any other symptoms;
    undertake all necessary actions to prevent arrival and spread of pests, diseases,
    contamination, weeds, and any undesirable changes pertaining to animals, fish
    and plants and their parts and products, including fresh, frozen and processed
    foods;
    monitor, inspect and control the export of animals, fish and plants and their parts
    and products to ensure that they are free from pests, diseases, weeds and any
    other symptoms;

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    undertake all necessary actions to ensure that the export of animals, plants, fish
    and their parts and products are free from pests, diseases, weeds and any other
    symptoms so as to provide quality assurance to meet the import requirements of
    importing countries;
    issue permits, certificates and endorsements pertaining to imports and exports of
    animals, fish and plants and their parts and products to provide quality assurance
    and to ensure that they are free from pests, diseases, weeds and any other
    symptoms;
    inspect and treat vessels, aircraft, vehicles, equipment and machinery that are
    used in importing and exporting animals, fish and plants to ensure that they are
    free from pests, diseases, weeds and any other symptoms;
    regulate the movement of animals and plants from one part of the country to
    another to control and prevent the spread of pests, diseases, weeds and any other
    symptoms;
    undertake and maintain inspection and quarantine surveillance pertaining to
    pests, diseases, weeds and any other symptoms on animals, fish and plants
    within and on the borders of the country;
    monitor, assess and carry out tests on animals, fish and plants and their parts and
    products that are introduced into the Country, to ensure that they are free of
    pests, diseases, weeds and any other symptoms;
    liaise with other countries, international agencies and other organisations in
    developing policies, strategies and agreements relating to quarantine, quality and
    inspection matters in respect of animals and plants;
    provide quarantine and inspection information and services to individuals,
    agencies and other organisations within the Country and overseas in respect of
    animals and plants;
    levy fees and charges for any of the purposes of this Act and any regulations
    made there under;
    exercise all functions and powers and perform all duties which, under any other
    written law, are or may be or become vested in the Authority or are delegated to
    the Authority; and
    do such matters and things as may be incidental to or consequential upon the
    exercise of its power or the discharge of its functions under this Act.

    21.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Authority for the year ended 31 December 2018 was in progress.

    The Authority had submitted its financial statements for the year ended 31 December
    2019 and arrangements were being made to commence the audit shortly.

    The Authority had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

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  • 22. NATIONAL AGRICULTURAL RESEARCH INSTITUTE

    22.1 INTRODUCTION

    22.1.1 Legislation

    The National Agricultural Research Institute (NARI) was established by the National
    Agricultural Research Institute Act 1996. This Act came into operation on 10 October
    1996.

    Under this Act, all monies allocated to or standing to the credit of the research
    division of the Department of Agriculture and Livestock and all assets used for
    research and research related functions previously held by the Department of
    Agriculture and Livestock prior to the operationalisation of the Act were transferred
    to the Institute to become the assets at commencement.

    22.1.2 Objectives of the Institute

    The main objectives of the Institute are to conduct and foster research into:

    ‒ any branch of biological, physical and natural sciences related to agriculture;
    ‒ cultural and socioeconomic aspects of the agricultural sector, especially of the
    smallholder agriculturalists; and
    ‒ matters relating to rural development, relevant to PNG.

    22.1.3 Functions of the Institute

    The primary functions of the Institute are to:

    generate and adapt agricultural technologies and resource management practices
    appropriate to the needs, circumstances and goals of smallholder agriculturalists;
    promote and facilitate applied and adaptive research in food crops, livestock,
    alternative cash crops, and resource management;
    promote the use of appropriate agricultural technologies and provide essential
    technical services to improve the productivity, income, nutritional status and
    food security, resource base and quality of life of rural households and
    communities;
    develop and promote ways of improving the output, quality, harvesting, post-
    harvesting, handling and processing and marketing of food crops, livestock
    produce and alternative crops;
    maintain and conserve the diversity of genetic resources for food and
    agriculture, act as custodian for these resources and promote the effective
    utilisation of these resources in the country;
    update and maintain the national inventory on soil resources and to develop,
    promote and maintain sustainable practices in agriculture;

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    provide agricultural information services, extension service support and other
    such assistance packages to the agricultural sector and to provide liaison and
    access to international agencies that promote agricultural development;
    perform such other functions as are given to it under this Act or any other law;
    formulate national agricultural research policies, define sectoral research
    priorities and allocate funds and advise the Minister and the NEC on these
    matters; and
    generally, do all such things as may be incidental or consequential upon the
    exercise of its powers and the performance of its functions.

    22.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    22.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Institute for the years ended 31 December 2019 and 2020 were
    issued on 23 November 2020 and 18 June 2021 respectively. The reports did not
    contain any qualification.

    22.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Institute for the years ended 31 December
    2019 and 2020 were issued on 23 November 2020 and 18 June 2021 respectively. The
    reports contained similar observations, hence, only the 2020 report is reproduced:

    Accounting System/Software

    My review of the accounts and records of the Institute for the year ended 31
    December 2020 revealed that the Institute continued to use the Quicken Accounting
    Package to maintain its accounts. I noted that the transactions from the Quicken cash
    ledgers were transferred manually to spreadsheets for reporting purposes as the
    Quicken was programmed to adopt cash basis of accounting. Financial and
    Accounting data is susceptible to mistakes and errors during transfer of data from the
    Quicken to the Spreadsheets. As a result, errors and mistakes are likely to occur and
    affect the fair presentation of balances at year end.

    I have recommended that a suitable and user-friendly Accounting Software/System is
    sourced, installed and utilized by the Institute.

    Management concurred with my recommendation and responded that the new Sage
    Accpac accounting system is being trialed but put on hold pending implementation of
    the Integrated Financial Management System (IFMS) by Department of Treasury and
    Finance. The IFMS is further delayed due to internet connectivity and accessibility at
    all NARI Centers.

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    Land Titles and Valuation

    My review of the Original Owner’s copy of the land titles owned by the Institute
    revealed that three (3) portions of land titles that vests under the Institute requires
    valuation done in order to capture their values in the financial statements. Further, I
    noted that two (2) portions of land at Kilakila with permanent establishments do not
    have land titles.

    Management responded that they are in the process to carry out valuations of the land
    portions 121 at Tring, Wewak, ESP and portions 114 and 115 at Tambul, WHP. The
    application for land title for Kilakila land have been lodged and is pending the
    National Lands Board deliberation.

    Long Outstanding Debtors – K361,359

    My review of Trade Debtors and Prepayments of the Institute for the year ended 31
    December 2020 revealed that a total of K361,359 remained outstanding dating back to
    2015. I noted that some of these long outstanding debts are reimbursable expenses
    from projects and services provided which had not been recovered and had remained
    uncollectible at year end.

    Management concurred with my observation and said that corrective actions will be
    taken to write off uncollectible monies as bad debts progressively.

    Payroll Review

    My review of the payroll files revealed that staff who were benefiting from
    Institutional houses, for tax purposes, a prescribed rate of K150 as per the Tax Table
    effective 1 January 2019 should be used, however, a rate of K131 has been applied.
    Further, Salary and Wages Tax rates applied in the payroll system were incorrect
    compared to the prescribed tax rates per the tax table effective 1 January 2019. As a
    result of these, tax component and net salaries have been impacted.

    Management agreed to my findings and corrective measures have been taken to
    update the prescribed rates in the system effective pay period ending 4 June 2021.

    Leave Fares – K108,209

    As per the General Order 14.47, it states, “An officer shall pay to the State at the time
    of applying for payment of recreation leave fares, a contribution towards the cost of
    the fares which shall be calculated at ten percent (10%) of his/her gross substantive
    fortnightly salary at the date immediately prior to proceeding on recreation leave.”

    – 110 –

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    However, my review revealed that this ten percent (10%) has not been paid to the
    Institute. Due to non-payment of the ten percent (10%) after the leave fares are paid
    out, the Institute is in breach of the General Order 14.47.

    Management agreed to take corrective measure with immediate effect to comply with
    the General Order.

    – 111 –

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  • 23. NATIONAL AIDS COUNCIL SECRETARIAT

    23.1 INTRODUCTION

    23.1.1 Legislation

    The National AIDS Council Secretariat was established under the National AIDS
    Council Act 1997. This Act was certified and became operational on 19 January 1998.

    23.1.2 Objectives of the Council

    The objectives of the Council are to take multi sectoral approaches with a view to:

    prevent, control and to eliminate HIV/AIDS transmission in PNG;
    organise measures to minimise the personal, social and economic impact of
    HIV/AIDS; and
    safeguard personal privacy, dignity and integrity in the face of the HIV/AIDS
    epidemic in PNG.

    23.1.3 Functions of the Council

    The functions of the Council include formulation, implementation, review and
    revision of national policy in accordance with its objects for the prevention, control
    and management of HIV/AIDS and to:

    make recommendations and provide guidelines on the related issues to the
    National Executive Council (NEC), Provincial Governments (PGs) and Local
    Level Governments (LLGs);
    foster, co-ordinate and monitor HIV/AIDS prevention, control and management
    strategies and programmes;
    accept, administer and account for the funds and other resources allocated to it;
    consult and co-ordinate with the appropriate state agencies and other persons
    and organisations on matters related to its activities;
    initiate, encourage, facilitate and monitor preparation and dissemination of
    information, counselling, care and legal services, research on or in relation to
    HIV/AIDS; and
    perform such other functions given to it under Section 5 of this Act or any other
    law.

    – 112 –

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    23.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    23.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Secretariat for the year ended 31 December 2019 was issued on 26
    April 2021. The report contained a Qualified Opinion:

    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters described in the Basis for
    Qualified Opinion section of my report, the financial statements of the Secretariat:

    a) are based on proper accounts and records; and

    b) are in agreement with those accounts and records, and show fairly the state of
    affairs of the Secretariat for the year ended 31 December 2019 and the results
    of its financial operations for the year then ended.

    BASIS FOR QUALIFIED OPINION

    Limitation of Scope – Payment Vouchers

    During my review, I was also unable to verify the authenticity of certain payments
    made by the Secretariat without proper supporting documents. Payment vouchers
    totaling K885,326 incurred were not supported by proper accounting documentation.

    Allocation of Grants

    I noted that Grants totaling K131,659 allocated by the Secretariat to individual
    recipients as well as organizations for awareness programs were not substantiated and
    acquitted to justify that the funds were used for the intended purpose to achieve the
    desirable outcomes.”

    23.2.2 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 Secretariat for the year ended 31 December
    2019 was issued on 26 April 2021. The report contained the following significant
    matters:

    – 113 –

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    Control Environment – Policies and Procedures

    Section 64C of the Public Finance (Management)(Amendment) Act, 2016 requires
    Statutory Bodies to establish, use and regularly update a Financial Management
    Manual to ensure uniform application of processes across all levels of management.
    My prior reports, including the year under review, observed that the Secretariat did
    not have an approved Financial Procedures Manual covering the areas of accounting,
    procurement and fixed assets.

    I highlighted the implications of not having in place a clear defined control
    environment and recommended that a Financial Procedures Manual be established in
    accordance with Section 64C of the Public Finance (Management)(Amendment) Act,
    2016 and communicated to all levels of the management for compliance. The
    Management responded to my observation as follows:

    “The National AIDS Council Secretariat adopts the Public Finances Management Act
    (PFMA) when dealing with procurements of goods and services, administration of
    State properties/assets and accounting for the usage of public funds. Going forward,
    NACS will formulate its financial Procedural Manual based on PFMA.”

    Internal Audit Unit

    I noted that the Internal Audit function was not utilized to review various processes
    including the implementation of effective internal controls and anti-fraud measures
    and recommendation for the management as the Internal Auditor position remaining
    vacant for a number of years. This issue was brought to the attention of the
    management and I recommended that an internal auditor be appointed to take charge
    of the internal audit unit. The management responded to my observation as follows:

    “We admit that the Internal Audit function was not fully utilized due to the former
    internal auditor who was very sick and could not perform his duties more often. The
    internal auditor resigned and the Internal Auditor position has been advertised and
    the recruitment is in progress.

    We have also identified the issue with the accounting system and budgeted funds to
    purchase an accounting software that is suitable for our organization.”

    Fixed Assets

    I observed the following weaknesses in relation to the control of assets owned and in
    the custody of the Secretariat. These issues were still noted, despite prior years’
    recommendations:

    The Secretariat did not have an approved fixed assets policy manual in place for
    assets owned and controlled by the Secretariat;

    – 114 –

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    The Fixed Assets Register (FAR) was not properly maintained in 2019. I observed
    instances where assets maintained in the Register did not have either purchase
    date or purchase price while all assets were not tagged with customized NACS
    codes and captured in the FAR to enable me to locate and verify the existence of
    the assets;
    The Secretariat has not conducted a regular stock-take on its fixed assets for a
    number of years including 2019;
    Physical inspections conducted on vehicles owned by the Secretariat revealed that
    the vehicles were not registered with “Z” plates, breaching the Motor Traffic
    Regulation 1967 Chapter 243 section 19A(e)(i); and
    The Secretariat does not have in place an approved mobile phone policy to
    administer the purchase and usage of mobile phones.

    I was not able to place reliance on the controls surrounding the management and use
    of fixed assets by the Secretariat and whether the fixed assets were properly
    safeguarded.

    Long Over Due Staff Advances

    I observed that staff advances of K33,622, as disclosed in “Note 7” of the financial
    statements, remained outstanding with no movements for over three (3) years. I was
    unable to confirm the collectability of these advances within the stipulated period and
    further recommended the Secretariat to come up with options to collect these debts;
    otherwise consider writing the balance off after the Council’s approval.

    I brought this to the attention of the Management and they responded as follows:

    “The long outstanding of K33,622 was a salary advance obtained by terminated
    Officers. In 2019, the long outstanding staff advances write-off submission was made
    to the Board and is pending approval.”

    Expired/Non-Renewed Employment Contracts

    I noted that employment contracts for certain officers of the Secretariat had expired
    and were not renewed or extended covering the year under review. I was unable to
    confirm and establish the basis of salaries and allowances paid as these senior officers
    continued to perform their roles with full salaries and allowances during the year.

    Based on my observations, I recommended the management to ensure that all
    employment contracts for contract officers are timely renewed and aligned to the
    current SCMC approved rates.

    – 115 –

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    No Tax on Assessable Benefit/Allowances

    I observed that certain staff of the Secretariat were provided with rental
    accommodation and motor vehicle with fuel for unrestricted use. However, my review
    of payroll records revealed that the prescribed amounts for tax purposes have not been
    included in the fortnightly pay calculations in 2019 for assessment of income tax. The
    Secretariat did not comply with the Income Tax Act and Salaries and Wages Tax
    Table effective 1 January 2019 in the calculation of its salaries and wages tax payable
    to IRC.

    I reminded the management of the Secretariat to review their payroll records to ensure
    prescribed taxable amounts are included in the fortnightly tax calculations for those
    staff that are provided with accommodation and motor vehicle with fuel to avoid
    penalties imposed by IRC. The management responded to my findings as follows:

    “Only two (2) senior Officers’ housing allowances were paid direct to the landlords
    as accommodation renal for the property they are renting, which the landlords would
    lodge GST returns and would take care of tax portion to IRC. Accommodation
    allowances were not paid to the senior officers, therefore accommodation allowances
    prescribed amount cannot include the assessment of tax. Whilst all other senior
    officers that were receiving housing allowances together with salaries and allowances
    were fully taxed.

    Two (2) senior officers have sacrificed their vehicle allowances for a 24 hours usage
    of office vehicles. Hence, the prescribed amount of tax does not apply to this two
    Officers.”

    Other Internal Control Weaknesses

    I was not able to ascertain the validity of K48,100 paid to consultants engaged by the
    Secretariat as there were no progressive/periodic reports as a basis for payments
    made.

    I drew management’s attention to these weaknesses and was advised that the
    Secretariat has taken note and appropriate actions will be taken to address these
    issues.

    23.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Secretariat for the
    year ended 31 December 2020 was submitted and arrangements were being made to
    commence the audit shortly.

    – 116 –

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  • 24. NATIONAL BROADCASTING CORPORATION

    24.1 INTRODUCTION

    24.1.1 Legislation

    The National Broadcasting Commission (NBC) was established under the
    Broadcasting Commission Act (Chapter 149). This Act was amended in 1995 by the
    National Broadcasting Commission (Change of Name and Corporate Structure) Act
    1995.

    In terms of Section 4 of the Broadcasting Commission (Change of Name and
    Corporate Structure) Act No. 49 of 1995 the name of the Commission was changed to
    Corporation.

    The Amendment Act No.49 of 1995 came into operation on 23 April 1996 as per
    Gazettal Notification No.G.32.

    24.1.2 Functions of the Corporation

    The principal functions of the Corporation are to provide balanced, objective and
    impartial broadcasting services and in so doing, to take in the interests of the
    community, all such measures as in its opinion are conducive to the full development
    of suitable broadcasting programs.

    The Corporation’s other functions are to:

    ensure that the services that it provides, when considered as a whole, reflect the
    drive for national unity and at the same time give adequate expression to the
    culture, characteristics, affairs, opinions and needs of the people of the various
    parts of the Country and in particular of rural areas;
    do all in its power to preserve and stimulate pride in the indigenous and
    traditional cultural heritage of PNG;
    take extreme care in broadcasting material that could inflame racial or sectional
    feelings; and
    co-operate with the Government in broadcasting social, political, economic and
    educational programs.

    24.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    24.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the Corporation’s
    financial statements for the year ended 31 December 2016 was issued on 10 February
    2021. The report contained a Disclaimer of Opinion:

    – 117 –

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    “DISCLAIMER OF OPINION

    Because of the significance of the matters described 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
    financial statements of the National Broadcasting Corporation for the year ended 31
    December 2016.

    BASIS FOR DISCLAIMER OF OPINION

    Limitation of Scope due to Disclaimer of Opinion on the Previous Years’
    Financial Statements

    My report on the Corporation’s financial statement for the year ended 31 December
    2015 was a disclaimer of opinion in respect to fixed assets, trade and other debtors,
    related party-government debtors and creditors, trade and other creditors and accruals,
    employee provisions, issued capital and asset revaluation reserve. There were no
    satisfactory audit procedures that I could otherwise perform to obtain reasonable
    assurance as to the correctness of the opening balances as at 1 January 2016. Since
    opening balances enter into the determination of the financial position, financial
    performance and cash flows for the year ended 31 December 2016, I was unable to
    determine whether any adjustments that were found to be necessary on such opening
    balances would have a consequential effect on the profit and loss for the year ended
    31 December 2016 and the respective statement of financial position and statement of
    cash flows.

    Trade and Other Receivables – K5,365,040

    In Note 8 to the financial statement, the Corporation reported balances of K1,400,526
    and K4,507,796 for trade debtors and other receivables respectively. However, I noted
    the following issues:

    I was unable to identify the ages of the trade debtor balance;
    No monthly reconciliations have been prepared to identify those that paid up and
    those that did not pay;
    There is a likelihood of some debtors being paid but were not cleared in the
    accounts and may overstate the debtors account;
    No proper procedures in place, particularly in respect of debt recovery; and
    Failure to follow up on debts which have been overdue beyond the normal credit
    terms may result in debts becoming bad unnecessarily and being written off
    subsequently.

    Hence, I was unable to determine the completeness, existence and accuracy of trade
    and other receivable balance at year end.

    – 118 –

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    Property, Plant and Equipment – K206,172,411

    During my review of the fixed assets of the Corporation, I noted the following issues:

    The Corporation did not maintain an updated Fixed Assets Register (FAR) to
    properly record, account and capture fixed assets additions, disposals and transfers
    of assets between Provincial Radio Stations;
    The assets purchased during the year were expensed off instead of being
    capitalized and depreciated over their useful lives;
    A significant variance of K182,671,732 existed between FAR (K295,107,719) and
    trial balance (K112,435,986) for property, plant and equipment;
    A material variance of K4,200,583 existed between FAR (K4,223,699) and trial
    balance (K23,115) for depreciation;
    There were no accumulated depreciation accounts for each type of assets in the
    general ledger; and
    I was not able to confirm physical existence of the Corporation’s assets that are
    located throughout the provinces.

    Due to the above issues, I was unable to place any reliance on the effectiveness of the
    internal controls surrounding the management of the fixed assets of the Corporation.
    Consequently, I was unable to conclude on the valuation, accuracy and existence of
    the fixed assets balance disclosed at year end.

    Related Party – Debtors & Creditors

    As at 31 December 2016, the Government debtors and creditors balances were
    K1,712,894 and K2,769,314 respectively which nets off to the value of negative
    K1,056,420 as noted in Note 9 to the financial statements. However, the following
    discrepancies were noted:

    No debtors aged listing and reconciliations were maintained for the government’s
    debtors account to clearly identify the individual balances and their ages;
    No reconciliation was done to ensure each individual government’s debtors were
    paid and those outstanding during the year;
    K915,762 captured under government creditors that relates to 2012 and prior
    years’ unpresented cheques are yet to be identified and cleared; and
    The government’s creditors account was maintained manually on an excel spread-
    sheet and carried over from year to year without any review or monthly
    reconciliations performed to clear this significant balance.

    As a result, I was unable to conclude on the validity, accuracy and completeness of
    related party-government debtors and creditors balances stated in the financial
    statement as at 31 December 2016.

    – 119 –

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    Employee Provisions – K4,051,263

    The Corporation reported balances of K1,460,513 and K2,589,749 for provisions for
    recreational leave and furlough leave respectively. These balances were brought
    forward from prior year without accounting for any movement in the current year.
    The current year’s employee provisions were manually calculated by the Human
    Resource division and passed to the Finance division for posting into the general
    ledger only at the year-end but contained numerous mistakes and errors resulting in
    incorrect balances. Hence, these were not posted into the general ledger for current
    year’s accounting purpose. In the absence of accounting for employee provisions for
    the year, I was unable to ascertain the completeness, accuracy and validity of the
    employee provision balances at the year end.

    Trade Creditor, Other Creditors and Accruals – K7,948,253

    Note 10 to the Financial Statements shows a total of K7,948,253 for trade creditors,
    other creditors and accruals. During my review, I noted the following:

    The trade creditors sub ledger in the Attaché Accounting System was not properly
    utilized and hence the existing balance was not corresponding to the general
    ledger balance. A manual list containing the unpresented cheques was also
    maintained but this also did not tie to the general ledger balance;
    There was no monthly reconciliation performed throughout the year;
    Significant liabilities have not been accrued and due to recurrent error noted in my
    prior review, I was unable to accurately quantify the balances at year end;
    Payments for good and services were done on cash basis; and
    Total balance of K248,635 was made up of unpresented cheques which were
    carried forward from 2012 to date. No proper information on the nature and
    explanation detailing the unpresented cheques was provided to me.

    As a result, I was not able to confirm the completeness, existence and accuracy of the
    creditors’ and accruals’ balances at the balance date.

    Cash at Bank – K6,117,562

    My review of the cash at bank balance revealed that the Corporation maintains
    twenty-six (26) bank accounts. However, there were no bank reconciliations
    performed for each of the bank accounts during the year. In addition, unpresented
    cheques totaling K5,646,548 from various general ledger accounts were carried
    forward from prior years since 2012. Bank reconciliation is a key control mechanism
    which helps to detect errors and instances of fraud and embezzlement, reconciles bank
    with the cash book and to report a correct ending cash at bank balance. In the absence
    of bank reconciliations, I was unable to place any reliance on the effectiveness of the
    internal controls surrounding the bank reconciliation function nor conclude on the
    accuracy and existence of the cash balance at year end.”

    – 120 –

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    24.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Corporation for the year ended 31 December
    2016 was issued on 10 February 2021. The report contained the following
    observations:

    Non Provision of Source Documents

    During my review, I was not provided with payment vouchers totaling K517,764 for
    my verification. Source documents are the main information in which financial data is
    being derived from. In the absence of these payment vouchers, I was unable to satisfy
    myself as to the accuracy and completeness of the financial information presented in
    the financial statement. In addition, the Corporation has not fully complied with
    Section 62(1) of the Public Finances (Management) Act 1995 requiring public bodies
    to keep proper accounts and records of its affairs.

    No Centralized Monitoring System – IT Call Centre

    My review on the Information Technology (IT) environment revealed that the
    Corporation did not have a call center for default reporting and a network monitoring
    system to allow for centralized monitoring of systems. As a result, the following
    issues were noted:

    Key delays in achieving troubleshooting and/or resolving issues which can lead to
    down time effectively affecting delivery of service to customers which comes
    with a monetary cost and can also affect customer relationship; and
    Current system does not provide extended resource monitoring and management
    capabilities in the form of dashboards, views, reports, capacity planning,
    alerts/recommendations.

    I recommended management to consider investing in running a feasibility study for
    now and if the benefits are exceptional, consideration need to be given on how best to
    move this going forward.

    Management responded to my observation as follows:

    “The recommendation is duly noted. The IT areas are a developing area that needs
    more funding and efforts to improve. The management had realised that and acquired
    new server and appliances in 2018.”

    – 121 –

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    Information Technology (IT) Policy

    I noted that the Corporation did not have in place a fully documented and working IT
    Policy and as a result, the following issues were noted:

    The Corporation did not have policies to address the requirement to protect
    information from disclosure, unauthorised access, loss, corruption and
    interference;
    Key information may be disclosed or made available to unauthorised individuals,
    entities or processes;
    The information may be destroyed in an unauthorised manner; and
    The Corporation is not protected against any liability if any of the above is being
    violated.

    I recommended management to have a policy in place which will protect the
    Corporation from any loss and/or liability that may arise and management have
    responded as follows:

    “The IT manager and his team must develop policies and procedures to lift the
    standard of IT environment. The recommendations are fully noted.”

    Transport and Fuel Management

    My review of the Corporation’s transport and fuel management system revealed gross
    misuse and abuse of the fuel management system where the fuel costs have been
    increasing rapidly until picked up by management and attended to. I noted that an
    internal investigation has already been carried out which confirmed misuse and abuse
    of the fuel vouchers in collaboration with respective fuel service stations being
    associated with. The mismanagement was as a result of weakness in the internal
    control focused much on key controls governing the centralisation and authorisation
    on the issuing of fuel vouchers. I recommended management to:

    Continue with existing arrangement in place which has allowed for the misuse to
    be stopped;
    Consider reviewing other key areas or business functions within the organisation
    that carry the same risk and consider taking the same action; and
    Critically have a look at the “Financial Procedures Manual” recently established
    and seriously consider uplifting any current functions in line with all policies
    established by this manual.

    Management have responded as follows:

    “The management agrees with the recommendation and proper steps were taken in
    2017 and beyond. A transparent process is now followed.”

    – 122 –

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    Internal Controls

    I was unable to confirm whether internal controls were appropriately designed,
    correctly implemented and operating effectively as all the documents to verify and
    confirm the controls regarding fixed assets cycle, procurement cycle and financial
    accounting cycle were not provided to me. As such, I was unable to verify and
    confirm whether all established internal controls are appropriately designed, correctly
    implemented and whether they are operating effectively.

    General Ledger Integrity – General Ledger Reconciliations

    The Corporation has not performed any monthly reconciliation of its entire general
    ledger accounts for better internal control purposes. These general ledger accounts
    were not reconciled and independently reviewed at month end resulting in unresolved
    balances carried forward from year to year. In addition, specific contributing issues
    noted include changes to some key finance positions, no independent review of
    accounting entries prior to posting into the accounting system (Attache), lack of
    understanding of accounting issues, creation of new general ledger without proper
    approval and an unclear financial reporting structure. Consequently, I was unable to
    place any reliance on the effectiveness of the internal controls surrounding the general
    ledger accounts.

    I recommended that the Executive Director Finance and the Accountant to conduct a
    review of the current accounting processes and procedures and implement changes to
    improve the internal control environment.

    Management responded as follows:

    “The management have noted this and appropriate actions were taken in mid-2016
    and beyond. The training of staff with the Attaché software and the CPA training with
    CPAPNG also started in 2017 and beyond.”

    Missing Records and Files

    During my review, certain vital information was not provided as these were either not
    available or missing. I was informed that certain experienced staff members including
    the executive Director Finance and Accountant, who were there in 2014 had left or
    were terminated between 2015 and early 2016. When these staff left, the information
    was misplaced or left somewhere where current finance staff were unable to locate.
    The missing vital information resulted in the limitation of my scope.

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    I recommended that the departing finance staff must go through a proper hand-over
    take-over in order to update new staff with status of their accounting work, records
    and other information within their section before leaving. In addition, the Corporation
    to implement a strict and effective policy and system of filing and records
    management since it is important when there is high staff turnover.
    Management responded as follows:

    “The management noted this and proper hand-over take-over must be performed to
    have proper flow of information and data.”

    Evidence of Poor Accounting Function

    I noted certain general ledger balances relating to assets and provisions were not
    updated or adjusted to reflect the correct positions of the balances in 2016. The
    accounts were provision for furlough and annul leaves, trade and other debtors and
    prepayments. The balances in the general ledger and financial statement were carried
    forward balances for 2015 without any movements. In addition, some adjustments
    identified to be posted into the general ledger in order to amend the balances to reflect
    correct positions were not posted into the general ledger, rendering these balances at
    year end to be incorrect. Consequently, the final trail balance lacked integrity and
    shows evidence of weaknesses in the accounting environment. The trial balance
    contained incorrect balances and did not reflect the true position of the Corporation at
    year end.

    I recommended management to assess the accounting functions and implement
    improvements to basic accounting functions such as monthly general ledger
    reconciliations, review of journal entries and posting of entries.

    Management had responded to my findings as follows:

    “The new management agree with the recommendation and did identify these issues
    and were addressed in 2017and beyond.”

    Journals and Creation of General Ledger Accounts

    I noted significant weaknesses in relation to journal entries and creation of new
    general ledger accounts as follows:

    Some manual journal entries posted into the general ledger system were not
    independently reviewed by the senior accounts officers;
    Some manual journal entries posted were not stamped as posted;
    A complete listing of all manual journal entries processed into the attaché
    system in 2016 was not provided for my review;
    There were many new general ledger accounts created in 2016 but were not
    approved by the management team including the Managing Director; and

    – 124 –

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    Some new general ledgers created have similar functions to those that already
    existed.

    The key controls to detect fraud and errors in financial reporting system are the
    segregation of duties, and the independent review of manual journals posted in the
    ledger system including appropriate approvals for creation of new general ledger
    accounts in the attaché system. Without such controls, the general ledger and the
    resulting financial reports produced may contain incorrect and materially misstated
    balances.

    I recommended the following to the management:

    The manual journal entries prepared by any division including payroll be
    reviewed independently and approved for postings by senior accounts officers;
    The senior accounts officers should collate all journals and maintain a central
    filing in order of their batch numbers and posting dates;
    All journal entries posted should be clearly marked as posted; and
    Any new general ledger accounts created in the general ledger system should be
    properly approved by the designated senior management staff appointed by the
    Managing Director and copies of such approval issued must be properly kept.

    Management had responded as follows:

    “The new management agree with the recommendation and did identify these issues
    and were addressed in 2017and beyond.”

    Group Tax Liabilities

    The Corporation had an outstanding group tax payable balance of K6,942,150 as at 31
    December 2016. This balance had accumulated since 2006 which the Corporation is
    yet to settle in full. In addition, there were no proper records and reconciliations
    performed on the liability outstanding at year end. As a result, I was unable to place
    any reliance on the effectiveness of the internal controls surrounding the group tax
    liabilities. In addition, late lodgment of tax returns and the accompanying payments
    with IRC will result in the imposition of significant penalties. The penalties include a
    flat rate of 20% charge on the amounts outstanding and a further 20% per annum on
    the amounts outstanding from the date when the taxes first became due.

    Management responded as follows:

    “The new management have noted this and talks are with Treasury and Finance
    Department to settle these liabilities. Also, management have taken the action of not
    printing cheques when there are no funds to release.

    – 125 –

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    The practice was by old management hence a re-track was initiated in 2017 and all
    un-presented cheques especially NWSF and IRC are journalized and reversed to clear
    the overdraft position.”

    Non-Compliance with the Public Finances (Management) Act 1995

    The Public Finances (Management) Act 1995 Section 63(2) and 63(4) requires the
    Corporation to furnish to the Minister before 30 June each year, a performance and
    management report of its operations for the year ending 31 December preceding,
    together with financial statements. Before furnishing financial statements to the
    Minister, the Corporation shall submit them to the Auditor-General who shall report
    to the Minister. However, the Corporation had not prepared and submitted its
    financial statements for the year ended 31 December 2016 to my Office on a timely
    basis to enable me to complete the audit on time for tabling the report in the
    Parliament on or before 30 June 2017. Accordingly, the Corporation has breached
    Section 63(2) and 63(4) of the Public Finances (Management) Act 1995.

    24.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Corporation for the year ended 31 December 2017 was in progress.

    The Corporation had not submitted its financial statements for the years ended 31
    December 2018, 2019 and 2020 for my inspection and audit.

    – 126 –

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  • 25. NATIONAL CAPITAL DISTRICT COMMISSION

    25.1 INTRODUCTION

    25.1.1 Legislation

    The National Capital District Government (Preparatory Arrangements) Act 1982
    established the National Capital District Interim Commission. The purpose of this Act
    was to establish an interim government for the NCD and make preparatory
    arrangements for the establishment of a government for the NCD as required by
    Section 4(4) of the National Constitution. The National Capital District Government
    (Preparatory Arrangements) (Amendment) Act 1986 came into operation in 1987.

    The National Capital District Commission Act 1990, which became operational on 5
    November 1990, established the NCD Commission. The introduction of this Act
    resulted in the amalgamation of Motu Koitabu Interim Assembly with the NCD
    Commission. Consequently, the assets, liabilities and the obligations of the Interim
    Assembly were absorbed by the Commission on the commencement date.

    Amendments through the National Capital District Commission (Amendment) Act
    1992 which came into effect on 30 November 1992 resulted in the establishment of
    the Motu Koitabu Council.

    That was followed by the establishment of the system of government for the NCD
    through the National Capital District Commission (Amendment) Act 1995 which came
    into operation on 19 July 1995. The NCD comprises the NCD Commission, the Motu
    Koitabu Council and Local-Level Governments in the NCD.

    25.1.2 Functions of the Commission

    The function of the NCD Commission is to:

    control, manage and administer the NCD to ensure its welfare and that of the
    persons in its jurisdiction.

    25.1.3 Subsidiaries of the Commission

    The subsidiaries of National Capital District Commission are National Capital
    District Botanical Enterprises Limited and Port Moresby Nature Park Limited.
    Comments in relation to these subsidiaries are contained in paragraphs 25A and 25B
    of this Report.

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    25.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Commission for the year ended 31 December 2019 was completed and results
    were being evaluated.

    The Commission had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 128 –

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  • 25A. NATIONAL CAPITAL DISTRICT BOTANICAL ENTERPRISES
    LIMITED (A subsidiary of National Capital District Commission)

    25A.1 INTRODUCTION

    25A.1.1 Legislation

    The NCD Botanical Enterprises Limited was incorporated under the Companies Act
    on 17 January 2000. Port Moresby City Development Enterprises Limited (a 100%
    owned subsidiary of the NCD Commission) holds 94% of the shares and the NCD
    Commission holds the remaining 6% shares directly or indirectly through trust.

    25A.1.2 Objective of the Company

    The main objective of the Company is to take control over the operations of the
    Botanical Gardens.

    25A.1.3 Functions of the Company

    The Company’s activities include the sale of flowers and conducting research
    relating to orchids and horticulture.

    25A.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Company had not submitted its financial
    statements for the years ended 31 December 2013, 2014, 2015, 2016, 2017, 2018,
    2019 and 2020 for my inspection and audit, despite numerous reminders.

    – 129 –

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  • 25B. PORT MORESBY NATURE PARK LIMITED
    (A subsidiary of National Capital District Commission)

    25B.1 INTRODUCTION

    25B.1.1 Legislation

    Port Moresby Nature Park Limited was incorporated on 1 December 2011 under the
    Companies Act. The Company is a subsidiary of the National Capital District
    Commission (NCDC).

    In early 2012, a Deed of Trust was signed between Port Moresby Nature Park
    Limited (being the Trustee) and the National Capital District Commission (being the
    Settlor). The Trust Deed provided the intention of the Settlor (NCDC) to make Port
    Moresby Nature Park Limited a charitable body to be known as “Port Moresby
    Nature Park Trust.”

    On 11 June 2012, the Port Moresby Nature Park Limited was granted status of a
    charitable body based on the nature of its business operations.

    25B.1.2 Objective of the Company

    The objective of the Company is to allow the residents and visitors to Papua New
    Guinea (PNG) enjoy a botanical and zoological experience consisting of the flora
    and fauna of PNG in a safe, secure setting in Port Moresby, for the purposes of
    education and for the purposes beneficial to the community, including:

    allowing persons, including residents of, and visitors to PNG, to enjoy the
    benefits of flora and fauna of PNG in a peaceful, well-ordered and secure
    recreational settings in the grounds of the Port Moresby Nature Park;
    encouraging a greater understanding of the cultural significance of the flora,
    fauna and environment of PNG;
    furthering the appreciation and learning of PNG in relation to the flora, fauna
    and environment of PNG;
    promoting the use of the Port Moresby Nature Park to stimulate interest and
    research into PNG flora, fauna and environment and assisting the conservation
    efforts of the Government of PNG and the National Capital District
    Commission (NCDC) in relation to the environment; and
    allowing students from any educational institute to gain practical training,
    education and research opportunities on specific terms.

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    25B.1.3 Functions of the Company

    The functions of the Company include:

    encouraging, promoting and supporting the use of new and established
    technologies to make the unique natural environment of PNG more accessible
    to the public of PNG;
    promoting, assisting and initiating research in PNG into the study of PNG
    flora, fauna and the environment including the provision of such financial
    assistance as may be necessary to enable or assist such research;
    promoting, supporting and initiating research in PNG on the flora, fauna and
    environment of PNG and educating and informing different communities
    about the results of such research;
    providing a forum for information from international contributors from the
    global community for the purpose of educating the PNG public in relation to
    the flora, fauna and environment of PNG;
    doing such other lawful acts and things as are incidental to or conducive to the
    attainment of any of the foregoing activities; and
    generally:
    ‒ carrying out fund raising schemes and charitable projects for the purpose
    of the Company, including exhibition and competitions; and
    ‒ establishing, promoting and fostering workshops and other educational
    activities for the purpose of the Company.

    25B.2 AUDIT OBSERVATIONS

    25B.2.1 Comments on Financial Statements

    My report in accordance with the provisions of the Companies Act on the inspection
    and audit of the accounts and records of the Company for the year ended 31
    December 2017 was issued on 25 August 2020. The report did not contain any
    qualification.

    25B.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection
    and audit of the accounts and records and the examination of the financial
    statements of the Company for the year ended 31 December 2018 was in progress.

    The Company had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 131 –

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  • 26. NATIONAL CULTURAL COMMISSION

    26.1 INTRODUCTION

    26.1.1 Legislation

    The National Cultural Commission was established under the National Cultural
    Commission Act 1994. This Act came into operation on 15 November 1994, thereby
    repealing the National Cultural Committee (Interim Arrangements) Act 1993.

    Under the Act, all assets held by and obligations and liabilities imposed on the former
    National Cultural Committee immediately before the operationalisation of the Act on
    that date were transferred to the Commission.

    26.1.2 Functions of the Commission

    The main functions of the Commission are to:

    perform the cultural functions of the former National Cultural Committee and in
    this connection, to assist and facilitate, preserve, protect, develop and promote
    the traditional cultures of the indigenous people of PNG;
    encourage the development, promotion and protection of the contemporary
    cultures of PNG;
    facilitate the marketing of selected and approved aspects of the cultures of PNG;
    co-ordinate with related Government and Non-Government agencies on cultural
    matters;
    co-ordinate cultural activities with provincial cultural bodies;
    liaise with Non-Government organisations on cultural matters; and
    liaise with international cultural organisations.

    26.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    26.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Commission for the years ended 31 December 2018 and 2019 were
    issued on 29 September 2020 and 15 June 2021 respectively. The reports contained
    similar Qualified Opinions, hence, only the 2019 report is reproduced:

    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters referred to in the Basis for
    Qualified Opinion paragraphs below:

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    (a) the financial statements of the Commission are based on proper accounts and
    records; and

    (b) the financial statements are in agreement with those accounts and records, and
    show fairly the state of affairs of the Commission as at 31 December 2019 and
    the results of its operations for the year then ended.

    BASIS FOR QUALIFIED OPINION

    Internal Control Environment

    During my review, I noted that the Commission’s internal control environment had
    quite improved during the year under review, however, there were some areas that
    needed more improvements. I noted, especially at the three (3) Cultural Institutions –
    Institute of PNG Studies, National Performing Arts Troupe and the National Film
    Institute that there was lack of segregation of duties. The staff employed by the
    Cultural Institutions lacked necessary qualifications to perform the finance and
    accounting tasks allocated to them.

    Furthermore, they were not familiar with the Public Finances (Management) Act,
    1995 (as amended), General Orders and other Financial Management Manuals or
    Instructions to strengthen the internal control system of the three (3) Cultural
    Institutions. As such, I was unable to rely on the overall internal control system of the
    Commission during the year under review. Consequently, I was unable to place
    reliance on the Commission’s financial statements for the year ended 31 December
    2019.

    Cash at Bank – K103,933

    During my review on the bank reconciliations, I was not provided with the bank
    confirmation certificates for National Film Institute, National Performing Arts Troupe
    and Institute of PNG Studies accounts for the year ended 31 December 2019.
    Additionally, I was not provided with all the necessary information for me to carry
    out my audit procedures. As a result, I was unable to verify and confirm the accuracy
    and completeness of the balance disclosed at the year end.

    Cost Centre Accounting Information

    During my review, I noted that the accounting information for the National Film
    Institute, National Performing Arts Troupe and Institute of PNG Studies were not
    provided by the Commission for my examination and inspection. I was unable to
    verify the expenditures (acquittals of payments), internal revenue collection reports,
    fixed assets and other documentary evidences during my review.

    – 133 –

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    Consequently, I was not provided with all the necessary information to enable me to
    carry out my audit procedures to confirm whether proper accounting records have
    been maintained by the National Film Institute, the National Performing Arts Troupe
    and Institute of PNG Studies.

    Fixed Assets – K5,903,288

    My review of the fixed assets and capital expenditures of the Commission for the year
    ended 31 December 2019 revealed that the Commission had not maintained a Fixed
    Assets Register for all non-current assets acquired over the years-to-date. I also noted
    that the Commission’s acquisitions and disposals of assets were not properly
    accounted for.

    Further, there was no physical stock take under taken by the Commission to confirm
    the existence of assets. Since fixed assets of the Commission are susceptible to theft
    and misuse, the Commission must have appropriate control mechanism in place to
    safeguard these assets. As a result, I was unable to ascertain the completeness,
    existence and valuation of the fixed assets totaling K5,903,288 as reported in Note 2
    to the financial statements at the year end.”

    26.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Commission for the years ended 31 December
    2018 and 2019 were issued on 29 September 2020 and 15 June 2021 respectively. The
    reports contained similar observations, hence, only the 2019 report is reproduced:

    Bank Reconciliations and Segregation of Duties

    My review on the bank reconciliations revealed that the Commission together with its
    three (3) Cultural Institutions had prepared their bank reconciliations on a monthly
    basis. However, I noted that no one has independently reviewed the bank
    reconciliations generated to ascertain the accuracy of the reconciliations. As a result, I
    was unable to identify whether segregation of duties were implemented by the
    Commission.

    Revenue Receipting and Segregation of Duties

    I noted that internal revenue for National Film Institute (NFI) totaling K73,840 was
    not receipted during the year under review. I also noted that NFI did not maintain a
    receipt book to record all income from International Film Companies. Further, there
    was no segregation of duties maintained in receipting and depositing of income.

    – 134 –

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    Non-Maintenance of Travel Advances/Acquittal Register

    My review of the travel and subsistence expenses revealed that the Commission had
    not maintained the Travel Advances/Acquittal Register as required under Financial
    Management Manual (Part 20). I noted that the travelling officers have not fully
    acquitted their travel advances totaling K227,653 by attaching all source documents
    such as the hotel and hire car receipts, boarding passes and ticket butts.

    It is a requirement as per the Financial Management Manual Part 20 paragraph 11.2
    that cash advanced to officers travelling overseas on official duty travel must acquit
    travel advances within 14 days of return from duty travel. At the same time Part 20
    paragraph 12.1 of the Manual stipulates that advances to officers for domestic duty
    travels to be acquitted within 7 days of return from duty travel by submitting an
    acquittal form and documents.

    I drew this matter to the attention of the Management and I was advised that this
    recommendation is being implemented.

    Internal Control Weaknesses

    Other internal control breakdowns and weaknesses noted during my audit are
    summarized as follows:

    i. During my review of staff personnel files both permanent and casual, I noted
    that staff personnel files and salary history cards were not updated;

    ii. My review of various payments of the two (2) Cultural Institutions at Goroka
    indicated that some payments had no proper approval from Section 32 Officers
    which were the Directors of each Institution; and

    iii. My review of the expenditures during the year revealed that some payments
    were made without obtaining three (3) written quotations from reputable
    suppliers for expenditures exceeding K5,000 as required by the Financial
    Instructions and the Public Finances (Management) Act, 1995 (as amended).
    Further, encashable cheques made to paymaster for various expenses had no
    proper acquittals attached to determine or confirm if the funds have been
    utilized for the intended purposes.

    26.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Commission had not submitted its financial
    statements for the year ended 31 December 2020 for my inspection and audit.

    – 135 –

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  • 27. NATIONAL ECONOMIC AND FISCAL COMMISSION

    27.1 INTRODUCTION

    27.1.1 Legislation

    The National Economic and Fiscal Commission was established in April 1996 under
    the National Economic and Fiscal Commission Act 1996 and Section 117 of the
    Organic Law on Provincial and Local-level Governments.

    27.1.2 Functions of the Commission

    The main functions of the Commission are to:

    provide assessment and views on national macro and micro economic issues and
    their relevance on the overall development of rural and urban communities;
    consider and co-ordinate requests by Provincial Governments and Local-level
    Governments for foreign grants, loans and other financial assistance for
    development purposes;
    ensure that Provincial Governments and Local-level Governments obtain a fair
    share of the national wealth and make recommendations to the NEC on the
    allocation of grants to Provincial Governments and Local-level Governments;
    recommend suitable economic development strategies and sound fiscal
    management policies to the Minister responsible for financial matters;
    carry out cost and benefit analysis on the development of all natural resources
    and the impact of such development on national development and make such
    analysis available to the NEC;
    review public accounting and related practices;
    make yearly reports and recommendations to the NEC through the Minister
    responsible for financial matters;
    assist the Provincial and Local-level Service Monitoring Authority with
    assessments and views on the planning and implementation systems of the
    Provincial Governments and Local-level Governments;
    establish and maintain a gradation system for the purpose of classifying
    provinces and districts according to the stages of development of each;
    assist the Provincial and Local-level Service Monitoring Authority in carrying
    out its other functions; and
    provide advice to the Minister responsible for Provincial Government and
    Local-level Government (now Inter Government Relations) matters as and when
    required.

    – 136 –

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    27.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Commission had not submitted its financial
    statements for the years ended 31 December 2019 and 2020 for my inspection and
    audit despite numerous reminders from my Office.

    – 137 –

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  • 28. NATIONAL FISHERIES AUTHORITY

    28.1 INTRODUCTION

    28.1.1 Legislation

    The National Fisheries Authority was established under the Fisheries Management
    Act 1998. This Act came into operation on 11 February 1999 and replaced the
    Fisheries Act 1994. Under this Act, all assets including monies held in trust accounts
    which were held or occupied by the National Fisheries Authority established under
    the Fisheries Act were transferred to and became assets of the Authority.

    28.1.2 Functions and Powers of the Authority

    The primary functions and powers of the Authority are described as follows:

    ‒ manage the fisheries within the fisheries waters in accordance with this Act,
    taking into account the international obligations of PNG in relation to tuna
    and other highly migratory fish stocks;
    ‒ make recommendations to the Board on the granting of licences and
    implement any licensing scheme in accordance with this Act;
    ‒ liaise with other agencies and persons, including regional and international
    organisations and consultants, whether local or foreign, on matters
    concerning fisheries;
    ‒ operate research facilities aimed at the assessment of fish stocks and their
    commercial potential for marketing;
    ‒ subject to the Food Sanitation Act, the Commerce (Trade Descriptions) Act,
    the Customs Act, the Customs Tariff Act and the Exports (Control and
    Valuation) Act control and regulate the storing, processing and export of fish
    and fish products;
    ‒ appraise, develop, implement and manage projects, including trial fishing
    projects;
    ‒ prepare and implement appropriate public investment programmes;
    ‒ collect data relevant to aquatic resources;
    ‒ act on behalf of the Government in relation to any domestic or international
    agreement relating to fishing or related activities or other related matters to
    which the Independent State of PNG is or may become a party;
    ‒ make recommendations on policy regarding fishing and related activities;
    ‒ establish any procedures necessary for the implementation of this Act,
    including tender procedures;
    ‒ implement any monitoring, control, and surveillance scheme, including co-
    operation, agreements or arrangements with other States or relevant
    international, regional or sub-regional organisations, in accordance with this
    Act; and

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    the Authority has, in addition to the powers otherwise conferred on it by this Act
    and any other law, full powers to do all things that are necessary or convenient
    to be done for or in connection with the performance of its functions and the
    achievement of its objectives.

    28.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    28.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the Authority’s
    financial statements for the years ended 31 December 2017 and 2018 were issued on
    11 September 2020 and 29 June 2021 respectively. The reports contained similar
    Disclaimer of Opinions, hence, only the 2018 report is reproduced:

    “DISCLAIMER OF OPINION

    Because of the significance of the matters described in the Basis for Disclaimer of
    Opinion paragraphs, I have not been able to obtain sufficient appropriate audit
    evidence to provide a basis for an audit opinion. Accordingly, I was unable to and do
    not express an opinion on the financial statements of the National Fisheries Authority
    for the year ended 31 December 2018.

    BASIS FOR DISCLAIMER OF OPINION

    Opening Balances and Impact on Current Year Financial Performance

    The audit report on the financial statements of the Authority for the year ended 31
    December 2017 was a disclaimer of opinion. There were no satisfactory audit
    procedures that I could otherwise perform to obtain reasonable assurance as to the
    correctness of the opening balances as at 1 January 2018. Since opening balances
    entered into the determination of the financial position, financial performance and
    cash flows for the year ended 31 December 2018, I was unable to determine whether
    any adjustments that were found to be necessary on such opening balances would
    have a consequential effect on the profit and loss for the year ended 31 December
    2018 and the respective statement of financial position and statement of cash flows.

    Loss of Financial Records

    The Authority had lost the general ledger after a virus attack in April 2018 which
    resulted in the loss of all transactions for the period January 2018 through to March
    2018. Although the finance team was able to reconstruct the general ledger and able
    to generate a trial balance, purchase order details and accounts receivable aging by
    using available reconciliations, banks and customer statements prior to the virus
    attack, the issue remains that the Authority now had reconstructed financial records
    rather than original financial records for this period.

    – 139 –

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    Consequently, I was unable to perform cut off and subsequent events testing
    procedures over the original general ledger transactions for the 2018 financial year.

    The loss of data impacted the entire general ledger transactions over this period and I
    was not confident of the completeness and accuracy of the financial records for this
    financial year. As a result, I was unable to assess the completeness of revenue and
    expenditure transactions for the year ended 31 December 2018.

    Property, Plant & Equipment

    The statement of financial position as at 31 December 2018 included Property, Plant
    and Equipment valued at K163,458,543 million. During my review, the following
    issues were noted:

    Assets were not physically inspected and checked every two (2) years as per the
    Authority’s fixed assets policy to confirm existence and to monitor the physical
    condition of the assets. Fixed assets could have gone missing or damaged and
    still be recorded in the Fixed Asset Register (FAR) as an existing asset instead
    of being disposed, devalued, or written off;

    Assets with a finite lifespan were not subjected to annual assessment for
    impairment indicators as required by IAS 16 – Property, Plant & Equipment;

    Land properties recorded in the asset register did not have details of the relevant
    title documents held by the Department of Lands & Physical Planning as proof
    of ownership; and

    The Authority did not provide a schedule which reconciles the movement in
    property, plant and equipment detailing additions, disposals and depreciation for
    the year from the Fixed Asset Register to the general ledger. Adjustments raised
    in prior year audits relating to fixed assets had not been posted to the Fixed
    Asset Register.

    As a result of the above issues, I was unable to obtain reasonable assurance over the
    completeness, accuracy, ownership and existence of the Property, Plant and
    Equipment recorded by the Authority.

    Contributed Capital

    A contributed capital of K19,139,858 was originated as a loan from the State in 2003.
    The loan was forgiven in 2006 and has been reported as contributed capital since that
    period. However, the Authority had not provided any documentation to support the
    loan being converted to equity. In addition, the Authority’s attempt to obtain
    supportive information from the government to appropriately treat the contributed
    capital being converted to equity had not been made available.

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    The balance was then disclosed as adjustment to retained earnings. As a result, I was
    unable to obtain reasonable assurance over the presentation of this item in the
    financial statements.

    Implementation of International Financial Reporting Standards (IFRS) 9
    Financial Instruments

    IFRS 9 is a new Accounting Standard that became mandatory for the first time in the
    31 December 2018 financial year. The Authority has not implemented IFRS 9 in the
    31 December 2018 financial year. As a result, I was unable to determine whether any
    material adjustments might have been necessary in respect of the opening balances,
    balances recognised at 31 December 2018, the result for the year reported in the
    statement of comprehensive income and the elements making up the statement of
    financial position, statement of changes in equity and the statement of cash flow in the
    Authority’s financial statements.

    Investments in Interest Bearing Deposit (IBD) – K22,911,583 (2018:
    K197,227,919)

    As at 31 December 2018, Investments in Interest Bearing Deposits (IBD) was reduced
    by K174 million from K197 million in 2017 to K22.9 million. Dividends paid to the
    Government of PNG on the other hand was K423 million in 2018 as reported in Note
    19 to the financial statements. Upon my enquiry on the possible reasons for the
    reduction in the IBD, I was informed that the reduction was due to the PMMR Act,
    2017 and the monies transferred by Department of Finance were treated as Dividends
    for the year. However, I was not provided with sufficient appropriate audit evidence
    such as Government directives or advices to satisfy myself on the accuracy and
    correctness of the dividend balance disclosed in the financial statements. Further, I
    was unable to confirm whether all the monies transferred were made appropriately
    and to legitimate accounts as no proper supporting documents were furnished for my
    verification.

    Contingent Liabilities – K800,000

    A number of legal claims were made against the Authority and were outstanding as at
    the beginning and end of the reporting period. The Authority disclosed the associated
    contingent liabilities in the financial statements based on their estimate. However,
    their estimates were different from the confirmation of the external solicitors. For
    each subsequent period, prior to reporting, management will need to assess the
    accuracy of the estimate by reviewing the crystallization of the liabilities. However,
    evidence of management performing subsequent reviews on the assessment of
    estimates were not available. As a result, I am of the view that management’s
    independent assessment of the contingent liabilities may not be a true reflection of
    their state.”

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    28.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Authority for the years ended 31 December
    2017 and 2018 were issued on 11 September 2020 and 29 June 2021 respectively. The
    reports contained similar observations, hence, only 2018 report is reproduced:

    Non-Compliance with the Public Finances (Management) Act, 1995 (as amended)

    The Public Finances (Management) Act, 1995 (as amended) Section 63(1) and 63(3)
    requires the Authority to furnish to the Secretary before 30 April each year, a
    performance and management report of its operations for the year ending 31
    December preceding, together with financial statements. Before furnishing financial
    statements to the Minister, the Authority shall submit them to the Auditor-General
    who shall report to the Minister. However, the Authority has not prepared and
    submitted its financial statements for the year ended 31 December 2018 to my Office
    on a timely basis to enable me to complete the audit on time for tabling the report in
    the Parliament on or before 30 April 2019. Accordingly, the Authority has breached
    Section 63(1) and 63(3) of the Public Finances (Management) Act, 1995 (as
    amended).

    Expired Employee ID Cards

    I observed that employees were using employment identification cards that had
    expired. There were no adequate controls in place to ensure employment
    identification cards were current and valid.

    Without properly ensuring that employees were using valid identification cards, there
    may be high risk of fraudulent activities associated with staffs who were no longer
    employees of the Authority. I raised this issue and recommended management to
    replace the expired identity cards with recent and valid ones and retrieve the old
    cards.

    Management responded as follows:

    “ID cards were indeed issued to staff but not all. As per HR record, about 155 staff
    members’ ID cards were arranged last year around March. However, those who did
    not get ID cards were from Lae Port office and NFC. Due to system crash in April
    2018 records were destroyed hence we were unable to finally complete. The Authority
    is fully aware of this issue and already in the process of addressing by ensuring ID
    cards will be delivered to all staff by end of November 2019.”

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    Information Technology (IT) Controls – Setting Password Expiry Limit

    During my review of the information system and related controls, I noted that
    mandatory changes to passwords were not set. I recommended that passwords should
    be changed at least every 90 days to decrease the risk of data security being breached.
    The management noted and concurred with my recommendations.

    Prior Years Audit Adjustments

    The Authority has not reflected audit adjustments for prior years dating back to 2012.
    This had resulted in the prior year financial statements not reconciled to the general
    ledger. The Authority had failed to report to my Office any material misstatements
    that might have occurred as a result of the prior year adjustments in compliance to
    Section 5 (1b) of the Public Finances Management Act 1995 (as amended).

    Risk Assessment and Monitoring

    During my review, I noted that there were no formal procedures established to
    identify, assess, monitor and address risks affecting the Authority. Instead,
    management was in the process of establishing an internal audit team. I recommended
    management to consider having a risk committee in place to supervise the risk
    management policies of the Authority. In response to my finding, the management
    advised that internal audit staff were hired to address these issues.

    Revenue Recognition

    During the year under review, I noted that the Authority failed to maintain a register
    of fishing agreements that had been entered into and the related invoices and
    payments were not appropriately raised and recognised in the correct accounting
    period. This has resulted in the revenue being either understated or overstated in the
    financial statements. Although the adjustments were noted and taken up in the
    financial statements, the Authority has to maintain a register of fishing agreements
    and keep track of the invoices raised and payments made.

    Human Resources and Payroll – High Levels of Staff Advances or Loans
    (Recurring Issues)

    I noted that staff loans and travel advances not yet acquitted had the following issues:

    Some advances and loans related to employees who no longer employed by the
    Authority;
    No ceiling cap for staff advances disbursement;
    Advances were being disbursed even when there was still an existing unpaid
    balance;
    Travel advances had not been acquitted for by staff; and

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    I was unable to verify the advances shown as acquitted and posted in the general
    ledger as there were no supporting documents provided.

    As a result, I was unable to comment on the effectiveness of the controls surrounding
    the management of staff advances and loans.

    28.3 STATUS OF FINANCIAL STATEMENTS

    The Authority had submitted its financial statements for the year ended 31 December
    2019 and arrangements were being made to commence the audit shortly.

    The Authority had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 144 –

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  • 29. NATIONAL GAMING CONTROL BOARD

    29.1 INTRODUCTION

    29.1.1 Legislation

    The National Gaming Control Board was established under the Gaming Control Act
    2007. The Act came into operation on 1 May 2007. The objective of the Act is to
    provide for the control of all forms of gaming; including lotteries, games and wagers,
    gaming machines and casinos and for their operations, and for related purposes. This
    Act has repealed the Gaming Machine Act 1993.

    29.1.2 Functions of the Board

    The principal functions of the Board are to:

    promote probity and integrity in gaming;
    maintain the probity and integrity of persons engaged in gaming in the country;
    promote fairness, integrity and efficiency in the operations of persons engaged in
    gaming in the country;
    reduce any adverse social impact of gaming;
    promote a balanced contribution by the gaming industry to general community
    benefit and amenity; and
    consider applications for and where appropriate grant permits and licenses under
    this Act and to control the operations of gaming machines as specified in this
    Act.

    29.1.3 Fund of the Board

    National Gaming Control Board Community Benefit Fund Trust is the Fund of the
    Board. Comments in relation to the Fund are contained in paragraph 29A of this
    Report.

    29.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Board for the year ended 31 December 2016 was completed and the results were
    being evaluated.

    The Board had submitted its financial statements for the year ended 31 December
    2017 and arrangements were being made to commence the audit shortly.

    The Board had not submitted its financial statements for the years ended 31 December
    2018, 2019 and 2020 for my inspection and audit.

    – 145 –

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  • 29A. NATIONAL GAMING CONTROL BOARD COMMUNITY
    BENEFIT FUND TRUST (A subsidiary of National Gaming Control
    Board)

    29A.1 INTRODUCTION

    29A.1.1 Legislation

    The Community Benefit Fund (CBF) was established under Section 163(6)(a) of the
    Gaming Control Act 2007 on 1 May 2007 when the Act was passed and certified by
    the Parliament.

    The Gaming Control Act authorises the Board of National Gaming Control Board
    (NGCB) to establish a “Community Benefit Fund” and shall open a trust account to
    be called the “Community Benefit Fund Account” in which payments of 14% of
    monthly gaming revenues are made.

    The Trust is managed and operated by a Board of Trustees comprised of the
    Chairman of the NGCB Board and four additional Trustees as members appointed
    by the Minister in the National Gazette, and in accordance with the terms of a trust
    deed that is settled by the Board.

    The CBF started its operations in 2008.

    29A.1.2 Objectives of the Fund Trust

    The objectives of the Fund Trust are to:

    provide for and apply the income and capital of the Trust towards generally
    charitable purposes, including without limitation, the alleviation of poverty, the
    advancement of education, sports development and other purposes generally
    beneficial to the people of Papua New Guinea;
    undertake research into the problems associated with gambling activities
    including the social and economic impact of gambling on individuals, families
    and the communities at large; and
    promote community awareness and education in respect of problem gambling
    and the provision of counselling, rehabilitation and support services for problem
    gamblers and their families.

    29A.1.3 Function of the Fund Trust

    The principal function of the Fund Trust is to provide for and apply the income and
    capital of the fund towards generally charitable purposes, including but not
    exclusive of the following areas:

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    provision and improvement of social welfare;
    development of sports and improvement of recreational facilities;
    improvement of education and learning tools (not including school fees);
    assistance to churches and religious groups;
    provision of medical assistance;
    assistance to education, health and law and order projects; and
    undertake research into problems on gambling and promote community
    awareness and education on negative aspects of gambling.

    29A.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection
    and audit of the accounts and records and the examination of the financial
    statements of the Fund for the year ended 31 December 2016 was completed and the
    results were being evaluated.

    The Fund had submitted its financial statements for the year ended 31 December
    2017 and arrangements were being made to commence the audit shortly.

    The Fund had not submitted its financial statements for the years ended 31
    December 2018, 2019 and 2020 for my inspection and audit.

    – 147 –

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  • 30. NATIONAL HOUSING CORPORATION

    30.1 INTRODUCTION

    30.1.1 Legislation

    The National Housing Commission Act (Chapter 79) was repealed by the National
    Housing Corporation Act 1990. The assets and liabilities of the former National
    Housing Commission were transferred to the National Housing Corporation in March
    1990.

    30.1.2 Functions of the Corporation

    The principal functions of the Corporation are to:

    improve housing conditions;
    provide adequate and suitable housing or letting to eligible persons;
    sell houses to eligible persons;
    make advances to eligible persons and approved applicants to enable them to
    become the owners of houses occupied by them;
    develop residential land by way of providing adequate services for human
    settlements;
    carry out and promote research or investigations into matters connected with
    urban development and human settlements; and
    maintain dwellings and associated buildings vested in the Corporation.

    30.1.3 Subsidiary of the Corporation

    The National Housing Corporation has a subsidiary company, National Housing
    Estate Limited. Comments in relation to National Housing Estate Limited are
    contained in paragraph 30A of this Report.

    30.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Corporation for
    the years ended 31 December 2015, 2016 and 2017 had been submitted. However, the
    audits were being delayed due to lack of cooperation from the Corporation.

    The Corporation had not submitted its financial statements for the years ended 31
    December 2018, 2019 and 2020 for my inspection and audit.

    – 148 –

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  • 30A. NATIONAL HOUSING ESTATE LIMITED
    (A Subsidiary of National Housing Corporation)

    30A.1 INTRODUCTION

    30A.1.1 Legislation

    National Housing Estate Limited (NHEL) was incorporated on 28 September 2007
    under the Companies Act. The incorporation of the company was based on the
    National Executive Council (NEC) Decision No. 304/2006 in accordance with
    Section 27 of the National Housing Corporation Act 1990.

    Subsequently, the NEC Decision No. 70/2007 endorsed its establishment as a
    Special Purpose Company of the National Housing Corporation.

    The Company commenced its normal operations from 1 January 2010.

    30A.1.2 Objective of the Company

    The principal purpose of the Company is to manage certain National Housing
    Corporation owned properties for commercial development in Port Moresby, to
    generate income for the National Housing Corporation and to deliver its mandate.

    30A.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Company had submitted its financial
    statements for the years ended 31 December 2010, 2011, 2012, 2013 and 2014.
    However, the audits were being delayed due to lack of cooperation from the
    Company.

    The Company had not submitted its financial statements for the years ended 31
    December 2015, 2016, 2017, 2018, 2019 and 2020 for my inspection and audit.

    – 149 –

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  • 31. NATIONAL INFORMATION AND COMMUNICATIONS
    TECHNOLOGY AUTHORITY

    31.1 INTRODUCTION

    31.1.1 Legislation and Objective of the Authority

    The National Information and Communications Technology Authority (NICTA) was
    established on 1 November 2009 by the National Information and Communications
    Technology Act 2009. The Authority succeeds the PNG Radio Communications and
    Telecommunication Technical Authority (PANGTEL) which was established on 1
    January 1997 as part of the Government’s policy to corporatise the Post and
    Telecommunication Corporation (PTC) and to have it divided into three different
    organisations namely: Telikom PNG Limited, Post PNG Limited and PANGTEL.

    NICTA is a government statutory authority, established to regulate the
    telecommunication industry in PNG.

    Under the Post and Telecommunication Corporation (Corporatisation) Act 1996
    assets, rights and liabilities as well as employees of the Corporation were transferred
    to PANGTEL as per the allocation statement approved by the then Minister for
    Communications at the net book value recorded in the books of the Corporation as at
    31 December 1996. In the same manner, the assets, rights and liabilities as well as
    employees of PANGTEL were transferred to NICTA by virtue of Section 305 of the
    National Information and Communications Technology Act.

    31.1.2 Functions of the Authority

    The main functions or principal activities of the Authority are to exercise all licensing
    and regulatory functions in relation to the Information and Communications
    Technology Industry and perform all other functions as stated under Section 9 of the
    National Information and Communications Technology Authority Act 2009.

    31.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    31.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the Authority’s
    financial statements for the year ended 31 December 2016 was issued on 18 August
    2020. The report contained a Qualified Opinion:

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    “QUALIFIED OPINION

    In my Opinion, except for the effects of the matters described in the Basis for
    Qualified Opinion paragraphs below:

    (a) the financial statements of National Information & Communications
    Technology Authority for the year ended 31 December, 2016:

    (i) give a true and fair view of the financial position and the results of its
    financial performance and cash flows for the year ended on that date;
    and

    (ii) the financial statements have been presented in accordance with the
    International Financial Reporting Standards and other generally
    accepted accounting practice in Papua New Guinea.

    (b) Proper accounting records have been kept by the Authority, as far as appears
    from my examination of those records; and

    (c) I have obtained all the information and explanation required.

    BASIS FOR QUALIFIED OPINION

    Land and Building Titles

    The statement of financial position at 31 December 2016 includes land and buildings
    with a net book value of K37,849,437. Included in this balance are certain properties
    with an aggregate net book value of K11,532,778 for which I have not been provided
    with sufficient appropriate audit evidence (legal titles) supporting the Authority’s
    ownership over the properties. In addition, I have been informed by the management
    that there are ongoing disputes over the legal ownership of a number of those
    properties. As a result of these matters, I am unable to conclude on the
    appropriateness of the recorded value of land and buildings in the statement of
    financial position.

    K10.5 Million Loss on Purchase of Badihagwa Land

    The full payment of K10.5 million for the purchase of the Badihagwa Land has been
    fully impaired in 2016 as the management assessed that the amount may no longer be
    recoverable. Despite full payment in prior years for the agreed selling price, the title
    has not been transferred and NICTA did not obtain any control of the property to date.
    Prior to full payment of the selling price, NICTA’s management overlooked the
    moratorium suspending all land dealings in Special Agriculture and Business Leases
    and did not consider other ongoing disputes existing to date over the legal ownership
    of the aforementioned property.

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    Had management followed due process and conducted due diligence surrounding the
    purchase of the property, the K10.5 million loss could have been avoided.

    Further, although there were indications that malfeasance may have been involved,
    my procedures were limited to the conduct of statutory audit and did not confirm
    actual fraud, which may be uncovered in a forensic investigation.

    Retained Earnings

    Included in the retained earnings account is an amount of K2,186,409 as at 01 January
    2016 pertaining to unrealized foreign exchange gain. I was not provided with
    sufficient appropriate audit evidence to verify the amount. Accordingly, I am unable
    to state whether the opening balance of retained earnings included in the financial
    statements is free from material misstatement. Consequently, I am unable to
    determine whether any adjustments to the retained earnings might have been
    necessary.

    Investment Property

    The statement of comprehensive income for the year ended 31 December 2016
    includes a total rental revenue of K499,262. This income was derived from the rental
    of certain properties included within the land and building account under property,
    plant and equipment in the statement of financial position. To the extent that the
    properties are held to earn rental income or derived capital gains, they are likely to
    meet the definition of investment property. However, I have not been provided with
    sufficient appropriate audit evidence to support the basis on which properties earning
    rental income have remained classified as land and buildings in the financial
    statements. Consequently, the Authority would have not complied with the
    International Accounting Standards (IAS 40) – Investment Property.”

    31.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection of the
    accounts and records of the Authority for the year ended 31 December 2016 was
    issued on 18 August 2020. The report contained the following observations:

    Non-Adherence to Asset Capitalization Policy

    My review revealed that assets worth more than K1,000 have been expensed outright
    on several occasions during the year. This is a violation of the Authority’s
    capitalization policy whereby, assets of value greater than K1,000 are recorded as
    fixed assets.

    I recommended that the Authority adheres to its written policy on the capitalization of
    fixed assets.

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    Non-Adherence to Motor Traffic Regulations (Chapter 243)

    I noted that all motor vehicles owned by the Authority were not registered with ‘Z’
    number plates to comply with the Motor Traffic Regulations (Chapter 243), Section
    19A.

    I recommended that the Authority adheres to this Regulation being a state Authority.
    The management acknowledged the issue when I raised it during my review.

    Review of Employee Contract

    During my audit, I noted that a particular expatriate officer was allocated a motor
    vehicle and at the same time was receiving motor vehicle allowance. Per employee
    contract, the employee will only be provided with either a motor vehicle or a motor
    vehicle allowance, at the option of the employee. The Authority has misapplied this
    allowance resulting in double dipping.

    Fixed Assets Register (FAR)

    During my examination of the Fixed Assets Register (FAR), I noted that the Register
    was not properly updated on a timely basis. As a result, several fixed assets written
    off have accumulated depreciation amounts more than the asset cost written off.

    I recommended the Authority to review and monitor its Fixed Asset Register regularly
    to avoid over/under depreciation of its fixed assets upon disposal or writing off. The
    management has acknowledged the issue and will ensure to regularly review and
    monitor its Fixed Asset Register.

    Lack of Timely Reconciliation and Review of Account Balances

    Whilst most of the significant general ledger (GL) accounts were examined with
    appropriate GL reconciliations, some were not reconciled at the end of the year such
    as the fixed assets, salary & wages tax payable, goods and services tax payable and
    interest bearing deposit with Kina Bank.

    I recommended that management should conduct general ledger reconciliations on a
    periodic basis across all relevant GL accounts and ensure that variances are
    investigated and resolved in a timely manner. Periodic reconciliation of GL accounts
    assists in detecting any unrecorded transactions which may materially misstate the
    financial statements. A monthly self-assessment checklist approach should be put in
    place to monitor the timely completion of all reconciliations. The management
    acknowledged the issue and will ensure to properly reconcile the GL accounts.

    – 153 –

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    Robust Credit and Collection and Effective Policy on Bad Debt Provisioning

    There were several long outstanding accounts receivable invoices reported in the
    books without evidence of subsequent collection at the date of the audit report. Long
    outstanding accounts receivable balances suggest inadequate credit control and
    monitoring and exposes the Authority to the risk of non-recoverability of invoices.

    I recommended that the Authority should revisit its policy on customer credit
    monitoring to ensure that past due invoices are appropriately monitored, followed-up
    and actioned to ensure effective account collection from customers. Moreover, a
    policy on bad debt provisioning should be established to ensure that long outstanding
    invoices that are not recoverable are adequately provided for.

    Maintenance of Supporting Documents

    In a number of cases, I have noted that the Authority’s transactions do not have
    relevant supporting documents. In order to provide adequate substantial evidence
    establishing the existence and accuracy of transactions, I recommended that all
    transactions be supported by required documentation.

    Update of Motor Vehicle Insurance Coverage

    My audit revealed that a motor vehicle sold during the year was still included under
    the Authority’s insurance cover. I was therefore, unable to comment on the
    effectiveness of the internal control operated during the year relating to the
    administration of motor vehicle insurance.

    Minutes of Board Meetings

    I noted during my review that all minutes of meetings were signed by the Chief
    Executive Officer even though the meetings were presided by either the Chairman or
    another Board Member. As such, I was unable to comment and conclude on the
    appropriateness of the proceedings.

    31.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Authority for the year ended 31 December 2017 has been completed and results
    were being evaluated.

    The Authority had submitted its financial statements for the years ended 31 December
    2018 and 2019 and arrangements were being made to commence these audits shortly.

    The Authority had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 154 –

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  • 32. NATIONAL MARITIME SAFETY AUTHORITY

    32.1 INTRODUCTION

    32.1.1 Legislation

    The National Maritime Safety Authority was established by the National Maritime
    Safety Authority Act 2003.

    32.1.2 Functions of the Authority

    The functions of the Authority are to:

    perform the functions and exercise the powers as are conferred upon it by this
    Act or under any other law;
    co-ordinate search and rescue operations for vessels in distress or lost at sea
    pursuant to the terms and conditions of a search and rescue plan prepared by the
    Minister, from time to time, and approved by the Authority;
    co-ordinate with other agencies and persons, including regional and
    international organisations and consultants, whether local or foreign, on matters
    concerning maritime safety, marine pollution prevention or search and rescue
    operations at sea;
    collect data relevant to maritime safety, marine pollution prevention and search
    and rescue operations at sea;
    act on behalf of the State in relation to any domestic or international agreement
    relating to maritime safety, marine pollution prevention or search and rescue
    operations at sea to which the State is or may become a party;
    make recommendations on policy to the Minister regarding maritime safety,
    marine pollution prevention and search and rescue operations at sea;
    provide consulting services, training and management services relating to any of
    its functions whether in PNG or overseas;
    where appropriate to consult with:

    ‒ other agencies of National Government;
    ‒ Provincial Governments;
    ‒ Local-level Governments; or
    ‒ commercial, industrial and other relevant bodies and organisations, in
    relation to matters affecting them in the performance of its functions;
    and

    generally to do such supplementary, incidental or consequential acts and things
    as are necessary or convenient for carrying out its functions.

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    32.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    32.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the Authority’s
    financial statements for the year ended 31 December 2019 was issued on 31 May
    2021. The report did not contain any qualification.

    32.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Authority for the year ended 31 December
    2019 was issued on 31 May 2021. The report contained the following matters:

    Stale Cheques – K1,095,521

    During my review of the bank reconciliations, I noted that there were un-presented
    cheques amounting to K1,095,521 for the Authority’s main operating account that had
    been outstanding since 2018. These cheques had been un-presented for more than one
    (1) year and have become stale. The cheques were not timely investigated and
    properly written back or adjusted. I drew this observation to the Management of the
    Authority and they responded as follows:

    “Management acknowledges this and confirmed we are currently investigating the
    matter and all unpresented cheques will soon be written back and necessary
    accounting treatment applied.”

    ANZ Credit Card

    My review of the Credit Card of K20,000 with ANZ bank revealed that K7,982 was
    in the account as per the bank statement as at 31 December 2019. However, I did not
    sight the reconciliation of the replenishment of the balance owed and acquittals of the
    payments in terms of receipts of payments from the Credit Card. I queried the matter
    and the Management of the Authority responded as follows:

    “Management acknowledges and confirmed acquittal of Credit Card is normally
    maintained however, the file was misplaced during the recent office refurbishment
    exercise. Also note the Credit Card account was put on hold in 2018 when the PMMR
    Act was implemented so the Credit Card wasn’t used. We requested strategic Budget
    Committees (SBC, PMMR Act 2017) approved as requested by ANZ but, was too slow
    so the account was closed.”

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    Trade Debtors – K14,731,391

    My review of the Authority’s trade debtors of K14,731,391 at 31 December 2019
    revealed that a large number of debtors amounting to K3,758,450 were outstanding
    for more than 90 days. I further noted that most of these long outstanding debtors may
    not be collectable. I brought this matter to the attention of the Management and the
    Management responded as follows;

    “Management has developed a debt management policy to address the debts that are
    falling behind the due dates for collection and allow provision for doubtful debts. One
    of the outcomes of the policy is to enforce the relevant legislation on detaining vessel
    for non-payment of levies. The Management has created an enforcement unit and is
    currently detaining vessels who do not pay on time. This has seen major improvement
    in debt collection in 2020. Also provisions for doubtful debts have been increased in
    line with the debt management policy and unrecoverable debts will be written off
    when Board approves.”

    Fixed Assets

    During my review of the Fixed Assets Register, I noted that there was a section within
    the Corporate Service Division (CSD) that is in charge of fixed assets of the
    Authority. Furthermore, the Authority’s fixed assets were inputted and maintained in
    the Great Plain Assets Register Module but in a depreciation schedule report format.
    However, the Fixed Assets Register maintained by the section in the CSD was not
    updated and reconciled with the Fixed Assets depreciation schedule report in the
    Great Plain accounting system as at 31 December 2019. I further noted that the
    Authority has conducted a complete stock take in 2018 however, I was not provided
    with the updated stock-take report despite my requests. I brought this matter to the
    attention of the Management and the Management responded as follows;

    “Management acknowledges this and confirms that since NMSA records and keeps its
    Fixed Assets Register in excel, each department was asked to keep their own registry
    as well with Finance and Administration Department looking after the consolidated
    register. In an effort to systemise the FAR, management procure FAR software from
    Great Plains and all assets previously kept in excel was imported to Great Plains in
    December, 2019. For a start all records and asset listings are currently being
    verified, updated and reconciled to Great Plains Fixed Assets Register module. The
    exercise will continue into 2021 until all records in Great Plains are fully updated.”

    – 157 –

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    Purchase of Ministerial APEC Vehicles

    During my review in 2018, I noted that the Authority purchased two executive
    support vehicles for the Ministry of Transport and Infrastructure totaling K410,585.
    The vehicles have been disclosed in the Fixed Assets Register of the Authority
    however, I was unable to verify the existence and legal ownership of the vehicles as I
    was not provided vehicle registration details and had no access for physical
    inspection. As a result, I was unable to verify the existence and legal ownership of the
    two (2) vehicles. I queried the Management and they responded to my query as
    follows;

    “Management acknowledged this and confirmed that two vehicles purchased were
    part of NMSA’s contribution to the APEC Summit approved by NMSA Board. We
    have enquired with Department of Transport and was advised vehicles are with APEC
    Committee. The Management has written to APEC committee for the vehicles to be
    returned to NMSA for Board’s deliberation. To date, we are still waiting and
    following up with APEC Committees for their response.”

    ‘Z’ Plates on State Vehicles

    During my physical inspection of vehicles owned by the Authority, I observed that the
    vehicles were not registered with “Z” plates. The vehicles were purchased with public
    funds and are owned by the Authority and are deemed as State properties as per the
    Motor Traffic Regulation Chapter 243 Section 19A which requires that State owned
    vehicles are to be registered with a “Z” plate. I drew my observation to the
    Management of the Authority and they responded as follows:

    “NMSA Act 2003 does not provide for the Authority to fully comply to all other
    government General Orders and our internal policy does not require us to have Z
    plates on the Authority’s motor vehicles.”

    Staff Salary History Cards

    During my review of the personnel files for certain selected officers of the Authority,
    I observed that the Authority has not maintained salary and history cards for
    employees in their respective personnel files. A salary history card should show an
    updated base salary, allowances, gratuities and the updated leave records for each
    employee. Proper filing of employee’s history and salary cards would enable the
    payroll staff to easily access the information and calculate the staff entitlements
    correctly including provisions for leave entitlements. As a result, I was unable to
    confirm the approved rate of salaries and allowances and the leave records for the
    officers from their personnel files. I brought this to the attention of the management
    and the Management responded to my concern as follows:

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    “The Management acknowledged that and will address this issue in 2020. Delays
    were attributed to the termination of the HR Manager which affected the HR
    Department’s functions has recently recruited a Manager and is currently working on
    improving this area highlighted.”

    Leave Fares

    During my review of Leave fares, I noted that the Authority has not complied with
    General Order 14.47 which requires that “An officer shall pay to the State at the time
    of applying for payment of recreation leave fares, a contribution towards the cost of
    the fares which shall be calculated at ten percent of his/her gross substantive
    fortnightly salary at the date immediately prior to proceeding on recreation leave.”
    Officers going on leave with leave fares were not paying the ten percent (10%) fee or
    contribution for airfares. Furthermore, I was unable to determine the validity and
    authenticity of the staff dependants of the leave fares paid as there was no birth
    certificates in the staff respective personnel files to comply with General Order 14.41.
    I brought this observation to the management of the Authority and they responded as
    follows:

    “Management acknowledged and confirms application of the airfares are in line with
    NMSA policy and the basis of our policy was to attract and retain staff. It is very
    difficult to attract skilled labour in shipping industry, especially seafarers, ship
    inspectors, etc against private sector. NMSA Policies are drawn up and is approved
    by Board capturing these factors. The management is also currently updating the
    records of staff eligible for leave fares and to confirm the validity of their dependents
    and will have it completed and ready before the next audit cycle.”

    32.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Authority had not submitted its financial
    statements for the year ended 31 December 2020 for my inspection and audit.

    – 159 –

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  • 33. NATIONAL MUSEUM AND ART GALLERY

    33.1 INTRODUCTION

    33.1.1 Legislation

    The National Museum and Art Gallery of Papua New Guinea was established under
    the provisions of the National Museum and Art Gallery Act 1992. This Act came into
    operation on 15 April 1992.

    33.1.2 Functions of the Museum

    The main functions of the Museum are to:

    protect and conserve the cultural and natural heritage of PNG;
    research and document the prehistory of PNG and manage the national
    archaeological collections, and monitor archaeological research in PNG;
    maintain the national register of traditional and archaeological sites;
    identify and maintain a register of national cultural property and monitor the
    collection and export of artefacts; and
    issue permits and perform other duties as required by the National Cultural
    Property (Preservation) Act (Chapter 156).

    33.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    33.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Museum for the year ended 31 December 2019 was issued on 30
    June 2021. The report did not contain any qualification.

    33.2.2 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 Museum for the year ended 31 December
    2019 was issued on 30 June 2021. The report contained the following matters:

    No Proper Database and Policy for Collections

    My review of the Museum collections database revealed that there was no proper
    centralized database to accurately track and monitor storage and movement of
    collections for the Museum.

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    The collections data initially stored under file maker pro were migrated into Vernon
    Collection Management Software (CMS). My review via Vernon revealed inaccuracy
    as movement of collections were not properly posted and tracked. Further, I noted the
    following;

    1. Posting of collections data into Vernon is currently in progress and not fully
    completed;
    2. Not one (1) single collection from Contemporary Arts Branch had been posted
    into Vernon CMS;
    3. Museum was unable to reliably confirm total count of collections, only the
    Anthropology Branch responded to my query by providing a total count of
    collections; and
    4. No proper collection policy to guide the Museum on its collection program.

    I drew this matter to the Management of the Museum and they responded as follows:

    “NMAG agrees that this is a major issue. Work continues on the Vernon database but
    it is noted that this is a multi-year project and requires both additional financial and
    human resources.”

    Lack of Three Quotations – K38,665

    My examination on expenses revealed several payments totaling K38,665 were paid
    without obtaining three (3) written quotations from three (3) different suppliers. It is a
    requirement under Division 3, paragraph 14 of the Financial Management Manual
    that, “three (3) written quotes must be obtained for purchases valued between K5,000
    and under K100,000”. The Museum did not comply with the Public Finances
    (Management) Act, 1995 (as amended) which governs the management and use of
    public funds. I brought this observation to the attention of the management and they
    responded as follows:

    “The Management acknowledges the issue. A policy re quotations was included in the
    NMAG Financial Manual and additional training will be provided. Purchasing
    officer to note circumstances where three quotations not obtained & explain reason
    on memo and FF3 form.”

    Third Party Payments – K13,850

    My review of payments revealed that transactions totaling K13,850 were made to
    third parties other than parties initially engaged by the Museum. I advised
    management that it was not appropriate for the Museum to raise payments to third
    party individuals other than the company that raised the invoice to Museum for
    payment under its name as a separate legal entity.

    The Management acknowledged and accepted the recommendation for payments to
    be made only to contracted entity.

    – 161 –

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    Land Title

    My review of the land titles revealed that the Museum does not have under its custody
    the owners` copy of the land titles. I requested to sight such instruments but was only
    provided copies of the Titles. I was unable to confirm if the owner’s Land Title is
    under the custody of the Museum. I drew this observation to the management and the
    management responded to my observation as follows:

    “NMAG confirms that only copy documents held at museum. NMAG Asset Officer
    working to have Title Deeds re-issued by Lands Department.”

    Salary & Wages Tax

    During my review of the Salary, Wages and Allowances expenses, I noted that the
    salary and wages tax component for the manual (casual) payroll had not been remitted
    to the Internal Revenue Commission (IRC) for the year under review. The Museum is
    in breach of the Income Tax Act, 1959 under Section 299G (3) where it states that
    group tax should be paid to IRC within seven days of the following month. As a result
    of non-remittance of group tax to IRC, the Museum may be subject to penalties set
    out in Section 299H of the Income Tax Act, 1959. I brought this issue to the
    management of the Museum and they responded to my observation as follows:

    “National Museum & Art Gallery acknowledges the issue. Finance has been
    instructed to ensure compliance.”

    Non Compliance to Superannuation Act

    The Superannuation (General Provisions) (Amended) Act 2002, Section 78, stipulates
    that the employee contributions is to be paid within fourteen days of the date of
    deduction and the employer contributions be paid within fourteen days of each month.
    However, during my review, I noted that both the employee and employer
    contributions, particularly the manual (casual) salary and wages earners have not been
    remitted to the Super Fund (Nambawan Super Limited) for the year under review. As
    a result, the Museum is in breach of the above mentioned Act. I drew this issue to the
    Management of the Museum and they responded as follows:

    “National Museum & Art Gallery acknowledges the issue. Finance has been
    instructed to ensure compliance.”

    33.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Museum had not submitted its financial
    statements for the year ended 31 December 2020 for my inspection and audit.

    – 162 –

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  • 34. NATIONAL RESEARCH INSTITUTE

    34.1 INTRODUCTION

    34.1.1 Legislation

    The National Research Institute (NRI) was established under the Institute of Applied
    Social and Economic Research Act (Chapter 165). The name of the Institute was
    changed from ‘PNG Institute of Applied Social and Economic Research’ to ‘National
    Research Institute’ following the approval of the NEC through its Decision No. 42/90
    of 7 March 1990.

    The Institute of Applied Social and Economic Research (Amendment) Act 1987 came
    into operation on 1 January 1988, and on this date, the promotion and cultural
    functions of the former Institute of PNG Studies; and functions to do with Educational
    Research for National and Provincial Departments of Education carried out by the
    former Educational Research Unit (UPNG), formed part of the National Research
    Institute.

    34.1.2 Functions of the Institute

    The functions of the Institute include:

    the promotion of research into PNG society and economy;
    the undertaking of research into social, political and economic problems of PNG
    in order to formulate practical solutions to such problems;
    where practicable, the provision, by agreement with the body concerned, of
    consultancy services to the Government and to Government institutions;
    the promotion of the functions and objects of the Institute of PNG Studies; and
    research into all aspects of education for National and Provincial Departments of
    Education.

    34.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    34.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the Institute’s
    financial statements for the year ended 31 December 2017 was issued on 17
    November 2020. The report contained a Qualified Opinion:

    – 163 –

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    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters referred to in the Basis for
    Qualified Opinion paragraphs below:

    (a) The financial statements of the Institute are based on proper accounts and
    records; and

    (b) The financial statements are in agreement with those accounts and records,
    and show fairly the state of affairs of the Institute as at 31 December 2017 and
    the results of its financial operations for the year then ended.

    BASIS FOR QUALIFIED OPINION

    Property, Plant and Equipment – K39,076,370

    My examination of the fixed assets and related records revealed that the Institute has
    not maintained a Fixed Assets Register (FAR) during the year under review. In the
    absence of a FAR, I was unable to perform the necessary audit procedures to confirm
    the existence, valuation and condition of assets owned by the Institute. Similarly, I
    was unable to confirm whether depreciation totaling K351,763 was fairly disclosed
    and place any reliance on the effectiveness on the internal controls surrounding the
    management of the assets.

    This issue was highlighted in my 2015 and 2016 reports as well however, the Institute
    is yet to implement my recommendations.

    Missing Payment Vouchers – K902,004

    The Institute did not maintain proper accounts and records of its operating
    expenditures for the year under review. Payments totaling K902,004 were missing
    from the payment voucher files. As a result, I was unable to extend my audit
    procedures to gain assurance over the completeness, accuracy and authenticity of
    these payments. Furthermore, the Institute has breached Section 62(1) of the Public
    Finance (Management) (Amendment) Act, 2016 which requires the Institute to keep
    proper accounts and records of its transactions and affairs.”

    34.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Institute’s financial statements for the year
    ended 31 December 2017 was issued on 17 November 2020. The report contained the
    following significant matters:

    – 164 –

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    Internal Control Weaknesses

    Internal control weaknesses noted during my review are as follows:

    The Institute has been operating without an approved operational and financial
    manual. The existing one was still in draft form but was already in use without the
    Council’s approval. Accordingly, I was not able to comment on the standards of
    the operations in relation to the systems and controls; and

    There was no Internal Audit Unit established as per the requirements under
    Section 9 (1)(a) and (f) of the Public Finances (Management) Act, 1995 as
    amended recently in 2016.

    These issues were also raised in my prior year audit report.

    Bank Reconciliations

    My review of the four (4) bank accounts maintained by the Institute revealed that
    bank reconciliation statements were not prepared and reviewed on a timely basis. As a
    result, I was unable to place reliance on the effectiveness of the controls surrounding
    the bank reconciliation function of the Institute.

    I also brought this issue to the attention of Management in my prior year audit reports
    and was advised that necessary steps would be taken to address this issue.

    Trade Debtors Reconciliation

    The Institute did not maintain proper records of the debtors aged listing and
    reconciliation from the MYOB Accounting System. The debtors aged listing is a
    control mechanism to keep track of outstanding amounts due from customers whereas
    the reconciliation ensures that there are no unexplained differences between the aged
    listing and the general ledger. Accordingly, I was not able to confirm whether
    appropriate segregation of duties were in place for these controls.

    Prepayment – K164,123

    My review of the prepayment account revealed that an advance payment of K164,123
    relating to the former Director’s vehicle allowance remained outstanding as at balance
    date. It has been outstanding for more than a year for the Institute to recoup the
    amount.

    I brought this issue to the attention of Management again and was advised as follows:

    – 165 –

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    “The Institute will recoup the outstanding amount from the terminal payment of the
    former Director. The Institute has provided the terminal payment calculations to the
    Department of Personnel Management team for verification whereby the former
    Director owes K63,057.32. At the time of writing, the Director has repaid the
    outstanding funds of K63,057.32. The financial implications will be reflected in the
    2020 Financial statements.”

    Staff Accommodation

    During my review of personnel emoluments, I noted that two (2) NRI officers were
    paid housing allowances and at the same time were being provided accommodation
    by the Institute, resulting in double benefits received by each officer. The practice is
    deemed as double dipping and is in breach of the normal Public Service guidelines.

    I recommended the Management to cease fortnightly payment of housing allowances
    to officers provided with accommodation and was advised in the following response:

    “Management notes your observation and can now confirm that this was a
    management oversight the housing allowance for staff concerned was ceased in the
    first pay of 2018.”

    Housing Benefits – Incorrect Tax Administration

    According to the revised tax rates effective from 1 July 2012 by the Internal Revenue
    Commission, Port Moresby is categorized under Area 1 for tax purposes in relation to
    housing benefits provided by the employer. I observed that the correct prescribed
    value of the benefit for tax purposes were not included in the calculation of fortnightly
    salary and wages tax. Consequently, the Institute had failed to administer tax in the
    correct manner and had under taxed concerned officers thus, breaching the provisions
    of the Income Tax Act 1959.

    I recommended the Management to ensure all housing benefit taxes are accurately
    calculated and applied to staff salary/wages and remitted to the Internal Revenue
    Commission.

    Salary and Wages Tax

    My review of the salary and wages account revealed that the Institute’s group tax was
    not remitted to the Internal Revenue Commission on a timely basis. The Income Tax
    Act, 1959 (as amended) stipulates that monthly salary and wages tax should be
    remitted to the IRC within seven (7) days of the following month. As a result, the
    Institute has not complied with the above act with timely tax remittances to the Tax
    Office.

    – 166 –

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    I advised the Management to remit all salary and wages tax to the IRC at the end of
    every month and the Management concurred with my recommendation.
    Staff Personnel Files

    I noted that the Institute did not properly maintain staff personnel files with
    supporting documents such as salary history cards to enable me to verify the
    salary/wages, allowances and other benefits paid to staff during the year. Further, I
    noted that the birth certificates and salary/wages declarations were not available for
    my verification of the leave fares paid and the tax rebates claimed for all dependents.
    Basing calculations on insufficient records exposes the Institute to the risk of paying
    incorrect salary and benefits to its officers.

    This issue was also raised in my prior year audit report.

    Payroll System

    The Institute had been manually calculating and recording all pay summaries on excel
    spreadsheets per pay period over the years including the year under review. The data
    kept in spreadsheets are not encrypted and if tampered could lead to errors or
    omissions which can go undetected. Consequently, I was unable to rely on the
    controls over the administration of payroll expenses.

    I drew management’s attention to this weakness and the Management concurred with
    my recommendation with the following response:

    “Management notes your observation and confirms that the Institute has made
    progress to automate the payroll system The Able Computing Payroll System (trial
    version) was installed in August 2018. Additionally, the vendor is to confirm the
    system’s compatibility with requirements of the IRC and Superannuation. Relevant
    officers are currently in training and we anticipate the system to be fully operational
    by the end of 2020.”

    34.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Institute for the
    year ended 31 December 2018 had been submitted and arrangements were being
    made to commence the audit shortly.

    The Institute had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 167 –

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  • 35. NATIONAL ROADS AUTHORITY

    35.1 INTRODUCTION

    35.1.1 Legislation

    The National Roads Authority was established by the National Roads Authority Act
    2003 and came into operation in 2004.

    35.1.2 Objectives of the Authority

    The objectives of the Authority are to:

    raise funds for the maintenance of public roads;
    ensure the efficient preparation of effective annual road maintenance
    programmes; and
    ensure that all routine, specific and emergency maintenance of roads and road
    rehabilitation and reconstruction funded by the Authority are executed in a
    transparent, effective and efficient manner, in order to optimise the contribution
    of road assets to the economic and social development of Papua New Guinea.

    35.1.3 Functions of the Authority

    The functions of the Authority are to:

    establish and operate a Road Fund from road user charges, budget and other
    sources;
    establish resources to enable the Authority to perform its functions;
    maintain and manage updated data on asset conditions using the Road Asset
    Management System, Bridge Inventory and Bridge Maintenance and other
    approved systems;
    formulate and determine prioritised annual road maintenance plans and
    programmes using the Road Asset Maintenance System, Bridge Inventory and
    Bridge Maintenance and other approved systems to be supported by the road
    sector cost recovery revenues;
    establish annual road maintenance funding requirements in accordance with the
    future annual road maintenance plans;
    determine and implement road user charges in accordance with the financial
    resource requirements of the annual road maintenance plans;
    deliver the required routine, specific and emergency road maintenance in
    accordance with the maintenance service levels established for each class or type
    or road, through the contracting of independent contractors, to monitor and
    supervise the contracts as they are executed;

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    deliver road improvement, and road restoration when required, by undertaking the
    design studies necessary for the programmed road improvement or rehabilitation
    projects by:

    ‒ prepairing corresponding construction plans, specifications, cost estimates,
    and the other documents required for the proper tendering of the programmed
    works;
    ‒ monitoring and supervising the works as are executed, by such qualified
    consultants and/or contractors as are engaged; and
    ‒ ensuring safety audits on design, construction, maintenance and safety aspects
    of road;

    establish and sustain contract management capacity to ensure the validity of
    contracts and the effective management of contracts awarded for the execution of
    agreed road maintenance works and rehabilitation and reconstruction projects;
    ensure that all contracts are tendered through a transparent and competitive
    procedure to ascertain economic efficiency and sustainability in delivery of road
    maintenance and rehabilitation works;
    keep adequate records and to maintain a management information system which
    provides the Board and staff with accurate and timely information on
    commitments, expenditures and revenue for the purchase of consultancy and
    contracting services and other purchases and outlays;
    report publicly and transparently on collection of user charges, revenues, and in
    detail on the use of the revenues on the road maintenance programmes in
    accordance with internationally accepted accounting principles;
    establish environmental management capacity;
    provide a continuing programme of professional staff development and required
    skills training for non-professional staff; and
    construct, erect or affix signs or marks on road transport infrastructure in
    accordance with the Motor Traffic Act (Chapter 243).

    35.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    35.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the Authority’s
    financial statements for the year ended 31 December 2019 was issued on 25 April
    2021. The report did not contain any qualification, however, a matter relating to the
    material uncertainty of the Authority’s going concern was emphasised:

    – 169 –

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    “EMPHASIS OF MATTER

    Material Uncertainty Related to Going Concern

    I draw attention to Note 13 in the financial statements and in accordance with Section
    2(m) of the Road (Management & Fund) Act, 2020, the National Road Authority Act,
    2003 has been repealed. The proposed migration from the Authority to the
    Department of Works and Implementation is expected to be completed by April 2021
    and, as such, the Authority ceases to exist after April 2021. As stated in Note 13, this
    condition, along with other matters set forth indicate that a material uncertainty exists
    that may cause significant doubt on the Authority’s ability to continue as a going
    concern.

    My opinion is not modified in respect of this matter.”

    35.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Authority for the year ended 31 December
    2019 was issued on 25 April 2021. The report contained the following observations:

    Accounting and Operational Procedures Manuals

    During my review, I was provided with a copy of a draft accounting and operational
    procedures manual, however, it was not finalized and approved for use by the
    management of the Authority. Internal control mechanisms such as accounting and
    operational procedures manual and policies should be well documented, formally
    established and communicated to all levels and functions of the Authority to be used
    by all personnel in their routine operational activities. This has been a recurring issue
    that the management is yet to address.

    As a result, I was unable to measure and comment on the standards of operations
    relating to systems and controls and whether uniform procedures were followed in
    respective Divisions/Sections of the Authority.

    Management responded as follows:

    “Most functions of the Authority have well documented policies and procedures for
    routine operational activities. Update to the draft financial & accounting policies and
    procedures manual is subject to institutional reforms that are currently in progress.
    We are also aware that complete reliance on a financial manual is old fashioned or
    outdated. With advances in technology, many resources for learning are available on
    the internet that staffs are able to source online to help complete the routine tasks”.

    – 170 –

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    Equity – K22,526,115

    Total equity disclosed as at 31 December 2019 was K22,526,115. During my
    examination, I noted adjustments totaling K5,288,363 were disclosed, however,
    proper supporting documentation were not maintained for audit verification pursuant
    to Section 62 of the Public Finances Management Act, 1995 (as amended).

    Management noted my comments and advised that corrective measures have been
    taken to address this issue for the 2020 accounts.

    Finance Department Payroll Liability – K12,740,878

    The Department of Finance pays for the salaries and allowances through Alesco
    (Government) Payroll for employees of the Authority based on the understanding that
    the amounts paid will be refunded. I observed that the Authority had been accruing
    salaries and allowances paid by Department of Finance since 2011 without any
    settlements to date. Comments and recommendations made in the 2011-2018 audits
    for the settlement of the liability were not implemented by management. As a result,
    amount totaling K12,740,878 outstanding as at 31 December 2019 reflected a liability
    which I could not establish whether settlement will be made in the foreseeable future.
    Further, I was not able to conclude whether the amount will have any impact on the
    overall liquidity position of the Authority.

    I recommended the management to assess the existence and basis of the liability and
    make necessary amendments to the accounts of the Authority accordingly and
    management responded to my concern as follows:

    “Audit recommendation is noted and corrective action will be taken. We will clear the
    total outstanding liability from our books and provide details to the auditor (AG) for
    noting. Notwithstanding the above, NRA responses to 2018 audit stands”.

    Motor Vehicle – K862,205

    During the course of the audit, I noted two project vehicles registered as BFU 078 and
    HAU 803 in custody of NRA were not included in the Fixed Asset Register (FAR).
    As a result, I was unable to ascertain the completeness of the fixed assets of the
    Authority for the year under review.

    I recommended the management to adjust the accounts accordingly and they
    responded that:

    “NRA does not account for project related assets such as the motor vehicles
    mentioned simply because they are supplied by a Contractor under the specific
    Contract Agreement. NRA pays for the maintenance costs and disposes it after its
    useful life”.

    – 171 –

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    Incorrect Tax Administration

    My review of salaries and allowances revealed that senior officers who were provided
    with motor vehicles and accommodation were not taxed according to the prescribed
    rates. The appropriate value for officers who are provided with motor vehicles with
    fuel and without fuel in lieu of motor vehicle allowance paid in cash is K125 and K95
    respectively. Accommodation (rental) in lieu of cash are also taxed at a prescribe rate
    per type of housing and area as describe under salaries and wages tax table effective 1
    January 2019. The Authority had failed to administer tax correctly for concerned
    officers and had not complied with the provisions in the Income Tax Act 1959.

    Management noted my concern and advised that corrective actions have been taken in
    early 2021.

    Staff Rental Accommodation – K941,424

    I observed no changes to the rental contracts for staff accommodation despite prior
    years’ recommendations relating to rentals paid to personal companies or companies
    owned by spouses and related parties of NRA employees. Further analysis revealed
    that landlords are spouses of the contract officers who register their companies with
    IPA in the pretext of leasing their properties to NRA contract officers.

    The above practice is deemed improper when procedures were not adhered to in the
    expense of the entity for personal gain by officers of the Authority. As per the Income
    Tax Act 1959, this practice may be viewed as an offence to defraud the state by
    evading compulsory tax obligations.

    I have recommended the management to immediately cease this practice and they
    responded as follows:

    “All leases with relevant landlords are usually prepared by the legal team, who
    conducts company searches for proper checks before informing the management on
    the outcome. Part of the check is to ensure that a company is properly registered and
    complies with the Companies Act 1997. This includes ensuring that section 16 of the
    Act is duly noted.

    We are fully aware that if the rental payments are made directly to a person,
    salary/wages tax will definitely apply, but all accommodation rentals were paid in
    accordance with lease agreements held with relevant landlords or property managing
    companies. We will review the matter and discuss with each officer concerned to look
    at other avenues to secure their accommodation either through real estate agents or
    other parties”.

    – 172 –

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    Staff Leave Expenses – K361,646

    My review of the leave fare expenses revealed that there were no birth and marriage
    certificates for dependents and spouses attached together with leave form or kept in
    the personnel files to verify the dependents and spouse claimed for leave fares paid
    during the year. It is a requirement under Section 14.41 of the General Orders that any
    dependents claimed for leave fares must be under the age limit of 19 years.
    Consequently, I was not able to confirm that the Authority has complied with the
    requirements of the General Orders mentioned above.

    Management noted my recommendation and advised that corrective actions had been
    taken in early 2021.

    Treatment and Disclosure for Weighbridge

    The Weighbridge at 9 mile, Lae, Morobe Province, was capitalized as a fixed asset of
    the Authority and depreciation charged. However, according to the definition of assets
    (IAS 16), the cost of an item of property, plant and equipment shall be recognised as
    an asset if; it is probable that future economic benefits associated with the item will
    flow to the Authority. Since NRA is or will not be collecting fees and charges, it has
    not met the definition of an asset and should not be recognized as an asset.

    Since weighbridge is presumed to be a public good, I am unable to comment on its
    disclosure as an asset.

    Management responded to my concern as follows;

    “NRA built the Weighbridge with the intention to generate revenue through fees and
    charges for the Authority from the start up to the year 2020. Which means the
    expenditure for the Weighbridge was correctly capitalized, however, no depreciation
    was charged up until 2019 when we started charging depreciation to disclose a true
    and fair net book value in the financial statements.

    The plan is that, once the institutional reforms are completed in early 2021, NRA will
    transfer the operations of the Weighbridge to the Road Transport Authority (RTA),
    which will include the transfer of some fixed assets and the Weighbridge expenditure
    capitalized by way of a write off to expense on NRA side”.

    35.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Authority had submitted its financial
    statements for the year ended 31 December 2020 and arrangements were being made
    to commence the audit shortly.

    – 173 –

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  • 36. NATIONAL TRAINING COUNCIL

    36.1 INTRODUCTION

    36.1.1 Legislation

    The National Training Council was established under the National Training Council
    Act 1991. Although the Act came into operation on 5 December 1991, the Council
    formally began operating in April 1992 following its inauguration.

    36.1.2 Objectives of the Council

    The objectives of the Council are to:

    foster the comprehensive development of training with regard to the needs and the
    resources of the country;
    foster the co-ordination of training institutions so that the most effective use can
    be made of resources available for training which ensures increased productivity
    and capacity building in the workforce;
    make the benefits of training as widely as possible;
    plan and encourage the development of a system of training fitted to the
    requirements of the country and its people;
    establish, preserve and improve standards of training throughout the country;
    make the most effective use of the resources available for training related
    purposes in so far as this can be done by legislative and administrative measures;
    and
    generally augment and support the role and functions of the Commission for
    Higher Education as specified in the Higher Education Act (Chapter 397).

    36.1.3 Functions of the Council

    The principal functions of the Council are to be responsible for supervising and
    managing the implementation of the National Training Policy and for monitoring,
    reviewing and revising the National Training Policy when necessary; to provide
    guidelines to the NEC, Provincial Government, and the in-service Training
    Institution’s Governing Councils on any issues related to training; and to formulate
    and publish guidelines on human resource requirements, localisation and
    indigenisation issues and related matters.

    36.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    36.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Council for the year ended 31 December 2017 was issued on 9
    February 2021 while the 2018 and 2019 reports were issued on 30 June 2021.

    – 174 –

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    The reports contained similar Qualified Opinions, hence, only the 2019 report is
    reproduced:

    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters referred to in the Basis for
    Qualified Opinion paragraphs below:

    (a) the financial statements of the Council are based on proper accounts and
    records; and

    (b) the financial statements are in agreement with those accounts and records, and
    show fairly the state of affairs of the Council as at 31 December 2019 and the
    results of its operations for the year then ended.

    BASIS FOR QUALIFIED OPINION

    Fixed Assets – K943,801

    My review of the fixed assets revealed that the Council did not maintain a proper
    Fixed Assets Register (FAR). Consequently, there is a difference of K399,354
    between the FAR total of K544,447 and the Financial Statements balance of
    K943,801. Furthermore, the FAR does not have records of depreciations, book value
    of assets, disposals and assets identification references to monitor assets.

    Consequently, I could not reliably ascertain the completeness, accuracy and valuation
    of the fixed asset balance disclosed. In addition, it is a non-compliance to the Public
    Finances (Management) Act, 1995 (as amended), where it requires in Section 62, for
    all public bodies to ensure that adequate control is maintained over its assets, or assets
    in its custody.

    Missing Payment Vouchers – Scope Limitation

    The Council had not provided expense requisition vouchers totaling K77,405 for my
    inspection and review. As a result, I was unable to substantiate the validity and
    authenticity of payments amounting to K77,405. Missing vouchers imply a scope
    limitation on the application of all audit procedures. No proper maintenance of
    accountable documents by the Council is a breach of the Public Finances
    (Management) Act, 1995 (as amended).”

    – 175 –

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    36.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Council for the year ended 31 December 2017
    was issued on 9 February 2021while the 2018 and 2019 reports were issued 30 June
    2021. The reports contained similar observations, hence, only the 2019 report is
    reproduced:

    Accounting System

    My review of the accounting records and transactions of the Council’s Cashbook
    revealed that the accounting and recording of transactions, events, and accounts is
    manually maintained in excel spreadsheets. The manual recording and accounting
    system is susceptible to errors, misstatements and omissions that lack proper backup
    for loss of data and information. The reliability and integrity of the manual
    bookkeeping and accounts could not be ascertained.

    Management concurred with my comments and made an undertaking that they would
    continue to consult with the Finance Department on the possible installation and use
    of the Integrated Financial Management System (IFMS).

    Personnel Files Maintenance

    My review of the human resources and payroll management revealed that most of the
    personnel files for employees did not contain vital personnel information such as
    updated salary/wages declaration forms, updated dependents declarations and
    identifications such as marriage certificates, birth certificates for children or statutory
    declarations for dependents.

    Management concurred with my findings and would ensure staff files are updated and
    maintained with relevant important documents.

    Gratuity Payment for Director – Double Dipping

    My review of the personnel emoluments revealed that the Director has requested for
    advance gratuity and was paid out through the NTC operating account in 2018. The
    same amount of gratuity for the same period was paid through his salary by the
    Finance Department through Alesco Payroll. My further analysis revealed that this
    advance has not been recouped by the Council.

    I have recommended in my last year’s report that the money be repaid to the Council
    and the Director has agreed to repay a total of K45,000 back to the Council
    throughout the four-year period starting 2021 and all receipts of payments made will
    be made available in the annual audits for verification.

    – 176 –

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    Leave Fares

    My review of the leave fares revealed that payments totaling K42,225 were made in
    the nature of hired transport fares to employees entitled to leave fares. These were
    land and sea transport fares from the main centres (town) to the home districts
    (village). The payments were extravagant as there was no proper basis.

    The payment of vehicle hire for land transport and sea transport is a breach of the
    Public Service General Orders 14.48 where it states that; “fares for that matter (main
    centre to home district) shall be by the normal public transport and not in the nature of
    hired transport.”

    Non-Acquittal of Travel Advances

    My review of the travel and subsistence expenses revealed that the Council did not
    maintain a travel register with acquittal files. The travel and subsistence expense
    totaling K223,656 for the year could not be reliably verified as being acquitted due to
    lack of acquittal files and travel register.

    Consequently, I was unable to ascertain the propriety and validity of the travel and
    subsistence expenses incurred.

    Management responded that officers have been instructed to complete acquittals upon
    return from duty travels.

    Payments Without Proper Supporting Documentation

    My review of the operational expenditures revealed that total payments of K139,537
    made without supporting documents such as; the three (3) required written quotations,
    acquittals and official letters/memos. No proper maintenance of accountable
    documents by the Council is a breach of the Public Finances (Management) Act, 1995
    (as amended).

    I have recommended the Council to ensure that proper procurement processes are
    followed and are performed in accordance with the PFMA and the management
    accepted my recommendation.

    36.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Council had not submitted its financial
    statements for the year ended 31 December 2020 for my inspection and audit.

    – 177 –

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  • 37. NATIONAL VOLUNTEER SERVICE

    37.1 INTRODUCTION

    37.1.1 Legislation

    The National Volunteer Service was established on 12 April 1990 under the National
    Volunteer Service Act 1990.

    37.1.2 Functions of the Service

    The principal functions of the National Volunteer Service are to promote a spirit of
    sacrifice and service to the people of PNG; to provide labour, skills, education and
    training to the community for development projects; to cooperate and assist National
    and Provincial Government agencies as well as other organisations whose goals
    include the development of the people of PNG, in achieving their plans and purposes;
    and to encourage and participate generally in the advancement of the development of
    PNG.

    37.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Service had not submitted its financial
    statements for the years ended 31 December 2017, 2018, 2019 and 2020 for my
    inspection and audit despite numerous reminders from my Office.

    – 178 –

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  • 38. NATIONAL YOUTH DEVELOPMENT AUTHORITY
    (Formerly National Youth Commission)

    38.1 INTRODUCTION

    38.1.1 Legislation

    The National Youth Development Authority was established under the National Youth
    Development Authority Act 2014. This Act came into operation on 21 October 2014,
    thereby repealing the National Youth Commission Act 1999. The Authority
    commenced its operational activities under the new name on 1 January 2015.

    Under the National Youth Development Authority Act 2014, all the assets, properties,
    rights, obligations and liabilities which immediately before the coming into operation
    of this Act were vested in or imposed on the Commission, are, on that coming into
    operation, transferred to and became the assets, properties, obligations and liabilities
    of the Authority.

    38.1.2 Functions of the Authority

    The functions of the Authority are to:

    advise the Ministry and the National Government on policy formulation and
    legislative changes pertaining to youth affairs;
    authorise, coordinate, implement and monitor youth development activities at
    the National, Provincial and Local-Levels;
    develop and provide policy and technical advice to the Provincial Governments
    and Local-Level Governments on matters pertaining to youth;
    establish standards, regulate and monitor the level of services and training
    offered to youth by Government and non-profit organisations;
    monitor the execution of National Youth Development Plans at the Provincial
    and District levels;
    empower and provide opportunities to enable youth to participate meaningfully
    in activities at the International, National and Local-Level;
    generate revenue and fund youth programs and activities;
    report to the Minister on any matters referred to it by the Minister from time to
    time;
    establish and maintain a strong youth network at the National, Provincial,
    District and Local-Level areas; and
    promote awareness and disseminate information on youth matters through its
    network.

    – 179 –

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    38.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Authority for the
    year ended 31 December 2018 had been submitted and arrangements were being
    made to commence the audit shortly.

    The Authority had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 180 –

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  • 39. OFFICE OF THE INSURANCE COMMISSIONER

    39.1 INTRODUCTION

    39.1.1 Legislation

    The Office of the Insurance Commissioner was established under the Insurance Act
    1995. The Trust Fund of the Insurance Commissioner was established in accordance
    with Section 15 of the Public Finances (Management) Act 1995.

    The Office of the Insurance Commissioner was funded by Treasury Department prior
    to 1998. In accordance with Section 64C subsection 4 (a) and (b) of the Insurance Act
    1995, the Office of the Insurance Commissioner became a self-funded organisation
    through 1% levy collected from the Insurers’ and Brokers’ annual revenue from 1998.

    39.1.2 Function of the Insurance Commissioner

    The main function of the Insurance Commissioner is; the regulator for general
    insurance businesses in Papua New Guinea who administers the Insurance Act 1995
    and issues licences to:

    Insurers;
    Brokers; and
    Loss adjusters.

    39.2 STATUS OF FINANCIAL STATEMENTS

    39.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Commissioner for the year ended 31 December 2018 was issued on
    31 May 2021. This report contained a Disclaimer of Opinion:

    “DISCLAIMER OF OPINION

    Because of the significance of the matters described in the Basis for Disclaimer of
    Opinion paragraphs below, I have not been able to obtain sufficient appropriate audit
    evidence and accordingly, I am unable to and do not express an opinion on the
    financial statements of the Commissioner for the year ended 31 December 2018.

    – 181 –

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    BASIS FOR DISCLAIMER OF OPINION

    Opening Balances

    During my review, I noted that the trust fund was opened in 1998 to deposit the
    collection of 1% levy fees from the Insurers and Brokers to support the operation of
    the Office of Insurance Commissioner. However, the Commissioner’s accounts and
    records were never being audited since its establishment and 2017 accounts were
    disclaimed. As a result, I was unable to verify the opening balances of 2018 financial
    statements to ascertain the completeness and accuracy of the opening account
    balances.

    Data Loss

    During my review, I noted that insurance 1% levy schedules and other relevant data
    were lost by the IT Consultant who was engaged by the Commissioner in September
    2018 to work on the server. The office failed to take any precautionary measures by
    backing up their data on a regular basis. As a result, I was unable to rely on the
    accounts and records prepared by the Consultant as they were not reliable.
    Furthermore, I was not able to determine the validity and authenticity of the receipts
    and payments of the Office as disclosed in the financial statements.

    Cash at Bank – K5,169,286

    The independent bank confirmation certificate for the bank account number
    100058793 with Bank of South Pacific for the year ended 31 December 2018 was not
    provided for my review. As a result, I was unable to confirm the closing bank balance
    as reported in the financial statements.

    Fixed Assets – K259,241

    During my review of the fixed assets, I noted that the fixed assets balance of
    K259,241 disclosed in the financial statements only represented the assets from 2016
    to 2018. The carrying balance of all assets dating back to 1998 when the Insurance
    Commission was established could not be determined. As a result, the balance
    disclosed in the financial statement was materially understated.

    1% Levy Income – K3,893,098

    During my review of the 1% levy income, I was not provided with all the annual
    returns and audited financial statements for all insurers to confirm the insurers’
    premium balances from which the 1% levy was calculated. The Commissioner
    calculates 1% levy income based on the audited financial statements and the annual
    returns figures. In the absence of proper source documents, I was unable to comment
    on the validity, accuracy and completeness of levy income stated in the financial
    statements.”

    – 182 –

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    39.2.2 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 Commissioner for the year ended 31
    December 2018 was issued on 31 May 2021. The report contained the following
    significant matters:

    Non-Submission of Financial Statements

    The Office of Insurance Commissioner has not prepared and submitted its financial
    statements for the year ended 31 December 2018, to enable me to conduct the audit
    within the timeframe stipulated by the Act. Consequently, the Insurance
    Commissioner has breached Sections 63 (2) and 63 (4) of the Public Finances
    (Management) Act, 1995 (as amended).

    Bank Account – 100058793?

    During my review, I noted that the OIC’s Trust Fund generates interest and that the
    proceeds from the interest earned are deposited into BSP bank account number
    100058793? (one digit missing). A total of K5,602 interest earned were deposited into
    this account during the year under review. However, there was no cash book or bank
    reconciliations maintained for this bank account. As a result, I was unable to verify
    and confirm the existence, accuracy, completeness and the ownership (account name)
    of the bank account. I drew this to the management of the Insurance Commissioner
    and they responded as follows:

    “The bank account#:100058793 is an account that the OIC Trust Fund interests are
    transferred automatically from OIC Trust Fund account each month. The advice from
    bank is that it is an account kept and managed by the Department of Finance. We will
    liaise with the Department of Finance on the details of this bank account.”

    Bank Reconciliation – Segregation of Duties

    My review on the bank reconciliations revealed that there was no segregation of
    duties implemented between the preparer and the reviewer during the year under
    review. The bank reconciliation is a key control mechanism which helps to detect
    errors and instances of fraud and irregularities and ensures the bank records are
    reconciled with the cash book. As a result, I was unable to place reliance on the
    effectiveness of the controls surrounding the bank reconciliation function. I brought
    this matter to the attention of the management and the management responded as
    follows:

    “We assure you that the segregation of duties issue will be resolved as we will be
    having new staff added to our structure. This will be also complemented by the
    Finance Manual and Policies being put together.”

    – 183 –

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    Fixed Assets

    During my review of the fixed assets I noted that the Commissioner has not
    maintained a Fixed Assets Register since the establishment of the Office of Insurance
    Commissioner. However, only the assets purchased from 2016 to 2018 were disclosed
    in the financial statements without the opening balances. As a result, I was not able to
    verify the existence, ownership and accuracy of the fixed assets valuation as at 31
    December, 2018. Management responded to my observation as follows:

    “The Office of the Insurance Commissioner has obtained a Fixed Assets Register and
    will be maintaining all our assets in this software which is called the MEX Assets
    Management. The Office of the Insurance Commissioner will be reporting assets from
    the new software.”

    Licensed Broker Levy

    During my review of the revenue, I noted that the Commissioner had not been
    collecting the 1% levy fees from the Brokers as stipulated in Section 64 (c) 2 of the
    Insurance Act, 1995. There are seven (7) licensed Brokers operating in the country
    without paying any fees. As a result, the Commissioner is losing revenue by not
    collecting the 1% levy from the Licensed Brokers as stipulated in the Insurance Act
    1995.

    I drew this issue to the attention of the Management and they responded as follows:

    “We appreciate your comments and will take appropriate actions soon on this matter.
    We agree we are missing out on the revenue part for the OIC.”

    No Levy Penalty Charged

    During my review of levy collections, I noted that a number of insurers have not paid
    their levy fees on due dates. These levy fees were still outstanding for more than 30
    days which attracts penalty fees (a fine not exceeding K10,000) to be charged to the
    Insurers as stipulated under Section 64(c) (5) of the Insurance Act, 1995. However,
    the Commissioner has not invoked this provision to warn the defaulted Insurers. I
    queried the OIC’s management of this issue and they responded to my query as
    follows:

    “We take note of this findings and will seek legal advice from the correct Authorities
    to comply with the Insurance Act. We will also be employing a legal officer to assist
    with these matters.”

    – 184 –

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    Personnel Files

    My review of permanent staff personnel files revealed that the contract of
    employment and offer letters for staff were not filed and maintained in the staff
    personnel files. The following documents were not filed properly in their respective
    personnel files:

    History cards to show the up to date leave records;
    Salary cards to record the changes to the salary and allowances for each officer;
    Salary and wages declaration forms to show the declared dependents to claim for
    leave fares and income tax calculations; and
    Birth certificates to verify and confirm the ages of the dependents claiming the
    leave fares.

    In the absence of the above valid documents, I was unable to verify and confirm the
    leave records, changes to salary, declared dependents and their ages and tax
    calculations. I drew this observation to the Commissioner’s management and they
    responded as follows:

    “The management appreciates your recommendations on the employee salary history
    cards, salary and wages declaration forms and birth certificates for each staff
    personnel files.”

    Casual Staff Tax and Tax Remittance

    My review of wages revealed that the Commissioner has calculated tax every
    fortnight from the casual wages as well as overtime for pay one to twenty-six totaling
    K26,067 for the year ended 31 December 2018. However, this was not recorded or
    taken up in the MYOB accounting system of the Commissioner. Furthermore, casual
    wages tax of K26,067 was not remitted to the Internal Revenue Commission (IRC) in
    accordance with the Income Tax Act, 1959 (as amended). I brought these issues to the
    attention of the management and they responded to my observation as follows:

    “The Office of the Insurance Commissioner will take corrective actions on this issue
    on the casual staff tax and tax remittance to IRC in future years. Also the office will
    remit all salary and wages tax to IRC at the end of each month.”

    Travel and Subsistence

    During my review of the travel and subsistence, I noted the following discrepancies:

    The OIC did not maintain a Travel Advance/Acquittal Register to keep proper
    records of all the duty travel advances taken;

    – 185 –

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    The payment of accommodation for travels both overseas and domestic travels
    were paid by cash to the officer travelling instead of paying to the service
    providers;

    Receipts and invoices from the hotels are not attached to both the payment
    vouchers and the acquittal forms as per General Order 13.94c;

    Payments for accommodations for domestic travels were made based on
    proforma invoices instead of invoices and quotations;

    No three written quotations were obtained to comply with the requirements of
    Public Finances (Management) Act, 1995 (as amended) and Financial
    Instructions 2/2013 (point 5.1) which requires that “Purchases for amounts
    between K5001 and K500,000 should require three written quotations”;

    For overseas travels, the travelling officers were receiving in cash US$ 250 per
    night for accommodation and US$200 travelling allowances which has no basis
    to substantiate the rates being used; and

    For overseas travels, the commissioner gets US$2,500, deputy commissioner
    gets US$2,000 and assistance commissioner gets US$1,500 allowances
    respectively for visa fees, telephone, fax, taxi and entertainment. However, there
    is no policy or basis for the extra allowances taken for overseas travels. In
    addition, no proper acquittals were made to account for the advances paid to
    them. As a result, I was unable to verify the rates and whether the payments
    were made for the intended purposes.

    I drew my observation to the management and the management responded as follows:

    “The management takes full note on this issue and will consider necessary steps to
    improve on this item. We’ll apply control measures on these expenses especially on
    travel and subsistence and few travel costs that were en-cashed as you have pointed
    out. We will ensure three quotations for accommodations and vehicle hires travelling
    within the country, receipt and acquittals be kept in filling system as per your
    recommendations.”

    Payments without Contract Agreements

    There were Service Providers engaged by the Commissioner during the year under
    review to provide services to the Commissioner totaling K801,699. However, I was
    not provided with the contract agreements to confirm the validity and the correctness
    of the payments made to them. I was not able to verify the amount presented in the
    financial statements due to absence of contract documents.

    – 186 –

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    I queried the Commissioner’s management of my observation and the management
    responded to my query as follows:

    “We take note of this issue and the office will improve on this matter as one of the
    priority issues when we wish to have goods and services purchased for the office.”

    Internal Control Weaknesses

    Other internal controls breakdown and weaknesses noted during my audit are
    summarized as follows:

    My examination of expenses revealed that payments totaling to K469,237 were
    paid without obtaining three quotations. As a result, I was unable to ascertain if
    value for money was obtained for goods and services procured.

    A total payment of K449,505 (from the sample tested) were without any
    supporting documents. As a result, I was unable to ascertain the validity of the
    payments.

    I noted that some service providers had been engaged by the Commissioner during
    the year under review to provide services to the Commissioner. However, I was
    not provided with the contract agreements to confirm the validity and the
    correctness of the payments made to them.

    I was not able to substantiate the validity and the authenticity of payments
    amounting to K29,546 due to lack of supporting documents.

    The OIC paid cash payments totaling K33,140 for various payments and no
    proper acquittals attached to determine or confirm that the payments were utilized
    for the intended purposes.

    During my review of procurement of goods and services, I noted that the
    Commissioner did not use FF3-(Payment Requisition) and FF4-(General Expense)
    to raise payments for the operation of the Commissioner and the payment
    documents were not approved or signed by either the Commissioner or the Deputy
    Commissioner. As a result, I was unable to identify if proper controls and
    segregation of duties were implemented by the Commissioner in the procurement
    of goods and services.

    There were instances where payments totaling K321,572 had no delivery
    dockets/consignment and other supporting documents to confirm if the actual
    goods purchased had been delivered to the Commissioner for their intended
    purposes. As a result, I was not able to confirm if the goods purchased were
    actually delivered to the Commissioner.

    – 187 –

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    I noted during my review of payments that OIC does not have a proper filing
    system in place. As a result, many documents (payment vouchers) were missing
    from the files.

    Physical inspection of vehicles owned by the Commissioner revealed that the
    vehicles were not registered with “Z” plates. The vehicles were purchased with
    public funds and are owned by the Commissioner and are deemed as State
    Properties.

    During my review of the Motor Vehicle Hire account, I noted that total payments
    of K249,598 were used for hiring of vehicles. I was unable to verify whether the
    payments of hiring vehicles were genuine and for the benefit of the
    Commissioner.

    The Management agreed to take necessary action to rectify the above internal control
    issues.

    39.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Commissioner had not submitted its financial
    statements for the years ended 31 December 2019 and 2020 for my inspection and
    audit.

    – 188 –

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  • 40. OIL PALM INDUSTRY CORPORATION

    40.1 INTRODUCTION

    40.1.1 Legislation

    The Oil Palm Industry Corporation was established by the Oil Palm Industry
    Corporation Act 1992 which came into operation on 1 June 1992. Under the Act, all
    assets (other than land held by the State) and liabilities previously held or occupied by
    the Division of the Department of Agriculture and Livestock responsible for the
    provision of extension services to oil palm industry, were transferred to the
    Corporation at commencement date.

    40.1.2 Functions of the Corporation

    The main functions of the Corporation are to:

    promote the development of the oil palm industry;
    encourage the increase in productivity by efficient provision of extension services
    to smallholders;
    provide advice and disseminate information and educate smallholders regarding
    oil palm production methods; and
    consult, liaise and collaborate with the State and other agencies involved in the oil
    palm industry.

    40.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    40.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the Corporation’s
    financial statements for the year ended 31 December 2012 was issued on 18 August
    2020 and the report contained a Disclaimer of Opinion:

    “DISCLAIMER OF OPINION

    In my opinion, because of the existence of the limitation of scope on my work as
    described in the Basis for Disclaimer of Opinion paragraphs, and the effects of such
    adjustments, if any, that might have been determined to be necessary had the
    limitations not existed, I am unable to and do not express an opinion on the financial
    statements of the Corporation for the year ended 31 December 2012.

    – 189 –

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    BASIS FOR DISCLAIMER OF OPINION

    Cash and Cash Equivalent

    As at the year end, the Corporation recorded cash and cash equivalent to the value of
    K3,097,977. Included in this balance is an amount of K241,181 related to Oro Harvest
    Net Revolving Fund, an amount of K2,320,132 related to IBD held with Kina Bank,
    an amount of K1,812(cr) related to Kavieng project bank account, an amount of
    K59,713(cr) related to Popondetta project bank account, an amount of K11,149(cr)
    related to Milne Bay project bank account and an amount of K380,792 related to
    Bialla project bank account. Management was not able to apply appropriate bank
    reconciliation procedures and therefore these accounts remained unreconciled with
    significant variances. Consequently, I was unable to comment on the completeness,
    existence, accuracy and the validity of the cash and cash equivalent balance as
    reported in the Corporation’s financial statements as at 31 December 2012.

    MYOB Transaction Files

    The transactions of the Corporation are captured and recorded in the MYOB
    accounting software. The Corporation did not maintain a single MYOB files for its
    respective project offices. Instead, it maintained several versions of the MYOB files
    for the 2012 financial year making it difficult to maintain and retrieve these files. As a
    result of the poor record keeping, management was not able to locate the MYOB file
    containing the 2012 transactions for the Popondetta Project office. This has placed
    limitations on my effort to test the transactions balances reported as at the year then
    ended for the Popondetta Project.

    Trade and Other Debtors

    The trade and other debtors balance of K2,738,538 comprised of K1,689,706 trade
    debtors and K1,048,832 other debtors as stated in Note 5 of the financial statements.
    Included in the other debtors’ balance is an amount of K882,614 related to sundry
    debtors, an amount of K15,235 related to HQ levy payable, an amount of K124,962
    related to staff advance and an amount of K13,845 related to bond fee. The general
    ledger of the accounts making up these balances was not reconciled. Further, I was
    not provided with the required audit information or other appropriate records for me
    to conduct audit tests on these balances and their subsequent receipts. Therefore, I
    was unable to satisfy myself as to the completeness, existence, accuracy and the
    validity of the trade and other debtors as reported in the Corporation’s financial
    statements as at 31 December 2012.

    – 190 –

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    Inventories

    As at 31 December 2012 inventories were recorded at K116,422 in the financial
    statements. I did not observe the counting of physical inventories as at 31 December
    2012. In addition, adequate inventory records were not maintained during the period.
    Owing to the nature of the Corporation’s records, I was unable to satisfy myself as to
    the inventory quantities by other alternative audit procedures. Furthermore, the
    Corporation did not maintain satisfactory records for the valuation of its inventories.
    Consequently, it was not practicable to extend my audit procedures to satisfy myself
    on the completeness, existence, accuracy and valuation of inventories.

    Property, Plant and Equipment

    The Corporation’s total property, plant and equipment as at the year then ended was
    K4,702,764. This balance includes an amount of K126,088 related to the Milne Bay
    Project Office, an amount of K250,199 related to Kavieng Project Office, an amount
    of K108,243 related to OPIC Head Office, an amount of K1,092,219 related to
    Popondetta Project Office, and an amount of K1,201,937 related to Bialla Project
    Office. All these project offices did not maintain reconciliations between the fixed
    assets general ledger and the Fixed Assets Register. In addition, the assets registers
    were incomplete in that registers for certain assets categories were not maintained for
    the above respective project offices. Consequently, it was not practicable to extend
    my audit procedures to satisfy myself on the completeness, existence, accuracy and
    valuation of the Corporation’s property, plant and equipment and related depreciation
    expense of K566,691 in Note 14 to the financial statements.

    Trade and Other Creditors

    As at 31 December 2012, trade and other creditors balance of the Corporation were
    recorded at K2,942,931. Included in this balance and as stated in Note 8 to the
    financial statements is an amount of K1,313,432 representing trade creditors, an
    amount of K277,155 representing sundry creditors and an amount of K1,352,344
    representing provisions and accruals. The general ledgers of the above mentioned
    accounts were not reconciled as at the year end. Important details such as detailed
    aged creditors listing in respect of the trade creditors, tax returns and IRC statement of
    account in respect of the GST and Group Tax and other schedules or list explaining
    the balances were not maintained. In addition, my review of the trade and other
    creditors also included audit procedures designed to test for unrecorded liabilities. I
    was not able to test for unrecorded liabilities as management was not able to provide
    the required information. As a consequence of poor record keeping, inadequate
    accounting procedures and significant compliance issues identified in these areas, I
    was unable to verify the completeness, accuracy and validity of trade and other
    creditors balance.

    – 191 –

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    Retained Earnings

    The retained earnings balance of K5,170,536(dr) was derived after processing an
    adjustment of K64,181 as indicated in the statement of changes in equity. The
    adjustment was processed as a balancing adjustment to tie prior year retained earnings
    balance to that of the current year as the retained earnings account were not
    reconciled. The Corporation was unable to explain the variance in the retained
    earnings account to which the above adjustment was processed to rectify during my
    review. Therefore, I was not able to verify the accuracy and the validity of the
    retained earnings amount.”

    40.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Corporation for the year ended 31 December
    2012 was issued on 18 August 2020. The report contained the following observations:

    Internal Control over Financial Reporting

    The Oil Palm Industry Corporation maintains separate books of accounts for seven of
    its cost centres. Five of these were related to the Milne Bay, Kavieng, Hoskins, Bialla
    and Popondetta project offices whereas the other two were for the head office
    operations and revenue account which were basically for head office functions. My
    review of the internal controls over financial reporting within these operations
    revealed that adequate accounting records were not properly maintained including
    important registers such as investment registers, fixed assets registers, staff advance
    registers, general journal documentations and important reconciliations. The general
    ledgers of these cost centres were also not properly reconciled.

    In the light of these shortcomings which placed limitations on my effort to obtain
    sufficient appropriate audit evidence for my opinion, I was not able to comment on
    the accuracy, completeness and the validity of the balances reported in the statement
    of financial position and the statement of income and expenditure for the year ended
    31 December 2012.

    Audit and Certification of Accounts

    Section 63 of the Public Finances (Management) Act, 1995 requires all statutory
    bodies such as the Oil Palm Industry Corporation (OPIC) to furnish financial
    statements six (6) months after year end. The fact, that I was reviewing the 2012
    financial statements in 2020, which was about seven (7) years after its due date, which
    means that the Corporation is in breach of the requirement of the above Act.

    The prolonged delay in the audit and certification of the OPIC accounts since 2012
    may indicate that the management at that time lacked good management skills and
    that there was no transparency and accountability in handling public funds.

    – 192 –

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    I recommended management to expedite the audit certification process of the
    outstanding accounts of the Corporation from 2013 to 2019.

    Management concurred with my recommendation and advised that the Corporation is
    in the process of completing the 2013 – 2019 audits.

    OPIC Act Review

    The Oil Palm Industry Corporation (OPIC) came into existence following the
    enactment of the Oil Palm Industry Corporation Act, 1992. Twenty-eight (28) years
    has lapsed since its establishment and the need for a review of this act is important for
    both the Corporation and the industry. I noted from my review that a resolution was
    passed at the board level for a review of the act. However, since 2012 management
    did not drive this agenda forward hence; the OPIC Act review is still outstanding as of
    the date of this review report.

    OPIC may not be able to drive the industry forward due to impediments posed by the
    Act in its current state.

    I recommended the management to drive this agenda forward as a matter of priority,
    and they responded as follows:

    “This agenda has been deliberated at the board level for a while. Various
    stakeholders involved including the ICCC amongst others and the industry players.
    The current management is keen to drive this agenda forward.”

    Engagement of Financial Consultant

    I noted during my review that a consultant was engaged to prepare and compile the
    books of the Corporation for the 2012 financial year. My review of the work
    undertaken by the consultant revealed that the general ledger of the various project
    offices including that of the head office were either not reconciled correctly or not
    reconciled at all. Important registers, such as fixed assets registers, staff advance
    registers and investment registers were not maintained correctly.

    Further, I also noted that there was no need to engage a consultant to do the work of
    an accountant when the Corporation has in employment a financial controller and 6
    project accountants for its project offices at Head Office, Kavieng, Bialla, Hoskins,
    Popondetta and Milne Bay. This practice can lead to misuse of the Corporation’s
    funds or may also indicate lack of foresight and good management skills.

    I recommended management to obtain a copy of the consultancy agreement and
    understand the terms of reference or the scope of the agreement to ensure that all
    activities of such terms of reference were fulfilled. Otherwise, withhold remaining
    unpaid monies until such activities are achieved.

    – 193 –

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    Management responded as follows:

    “We concur with the observation. The current management was of the same view
    hence, decided not to entertain this consultant once more. We will utilize accounts
    staff we have and do our accounts in-house going forward.”

    OPIC Website

    I noted during my review that the Corporation does not have an official website. In
    this day and age having a website is of paramount importance in any organization.
    This will enable the Corporation to disseminate government policies, industry news,
    board and/or management decisions and other important information to growers,
    milling companies, employees and other stakeholders on a timely basis over this
    medium of exchange.

    Budgetary Process

    During my review of the Corporation’s budgetary process, I was not provided with
    the budget document for the year then ended with a report on the comparison of actual
    against budget and explanations on the variances. Consequently, I was unable to
    establish whether:

    the budget document was comprehensive;
    the projection of income and expenditures were realistic;
    key budget elements/objectives were communicated right down to the project
    level;
    key budget objectives were achieved; and
    expenditures were controlled within the budget ceilings.

    In the absence of a realistic budgetary process:

    The Corporation would not achieve, or may take a very long time to achieve its
    organizational plans and visions;
    Financial decisions would be made on an ad-hoc basis without due consideration
    and proper analysis of its implications; and
    Poor cash flow – not enough cash to meet the operational requirements of the
    Corporation.

    I recommended the Corporation to develop a realistic and comprehensive budget;
    develop a process of budget implementation and monitoring and ensure any other
    significant expenditure or commitments which were not covered in the budget for the
    period should be approved by the board.

    – 194 –

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    Management responded to my comments as follows:

    “Observation noted. We will try to improve on the areas of budget process
    highlighted and implementation of recommendations.”

    Mill Production Reports

    The Corporation generates its revenue solely from the growers’ levy and voluntary
    levy of K4 per ton respectively. The data that is required for the calculation of invoice
    amount by each project office is the production quantity in tonnage. This important
    data is derived from the monthly mill production reports generated by the milling
    companies. The various project offices rely on this information from the respective
    milling companies to prepare their invoices for the month.

    I noted during my review that the mill productions were independently/privately
    managed by the respective milling companies and so were the monthly mill
    production reports. The respective OPIC Project Offices did not have
    representative(s) at the mills to independently verify these monthly production
    reports. As the OPIC levy revenue was directly proportional to the production
    quantities in tonnage, I observed that there was a need to ensure that the integrity of
    the mill production reports were intact just to ensure there was no manipulation of the
    mill production quantities by the milling companies to understate the monthly levies
    payable to OPIC. Furthermore, any attempt by the milling companies to manipulate
    production quantities may easily slip through without being noticed as OPIC did not
    have in place relevant controls to detect such activities.

    I recommended the following:

    OPIC to engage a consultant to carry out an independent review on the IT controls
    related to the equipment or machine that produces the monthly production reports.
    This is basically to look into and report back on the possibility of manipulation of
    the monthly production quantities by the milling companies;

    Project Officers had to be on site to witness the generation of monthly
    production reports;

    OPIC to come up with a strategy to do random checks on the milling companies;
    and

    Identify alternative or second layer of control mechanisms to verify the same
    production quantities.

    – 195 –

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    Management responded as follows:

    “Valid observation. Since taking office, the current management is improving on all
    areas of management hence, we anticipate to do random checks for the start and later
    identify and implement relevant control measures towards the end of the year.”

    Organizational Structure, Approved Salary Scale, Employment Contracts,
    Employee Benefits Listing and Employee Provisions

    I was not provided copies of the organizational structure, the SCMC approved salary
    scale, the employment contracts for senior management and the staff listing with
    benefits. Therefore, I was unable to establish if the current structure is relevant given
    the size of the Corporation’s operations and whether or not the employee salary levels
    and benefits are in line with SCMC approved salary scales.

    I recommended management to address these issues going forward.

    Oil Palm Levy

    The top four oil palm producing countries in the world are Indonesia, Malaysia,
    Thailand and Nigeria. They supply more than 50% of the world’s oil palm demand.
    Indonesia and Malaysia alone supply more than 40% of the world’s demand for oil
    palm. To sustain their economies and industries, these countries also impose levy on
    the oil palm produce. The levies are imposed on the Crude Palm Oil (CPO) export.
    This is different to how OPIC imposes levy which is based on the Fresh Fruit Bunch
    (FFB) or the raw material of the oil palm.

    The levies imposed by those countries were significantly much higher than the K4 per
    ton levy currently imposed by the Corporation. Their levies were in the range of $20-
    $50 per ton of CPO export. This is equivalent to K60-K150 per ton. Currently, a
    couple of the oil palm producing economies are shifting away from the old rules of
    levies to a new set of rules where levy prices are set with reference to CPO world
    market price.

    Further, there are also other interesting events and advancement in technologies such
    as the usage of oil palm bi-product as bio-diesel which is at advanced stage in the
    above-mentioned economies.

    My review of the above pricing differences between PNG and the various oil palm
    producing economies, coupled with the advancement in oil palm bi-product usages
    such as bio-diesel, indicates that there is a need for the Corporation to review its
    current levy pricing rules to accommodate those changes and to be at par with the rest
    of the world.

    The current levy pricing rule is advantageous only to the milling companies.

    – 196 –

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    I recommended management to review the current levy imposed by the Corporation
    and set a new levy pricing rule that is fair to both the Corporation and other stake
    holders in the country including the milling companies, exporters and the growers.

    Management responded to my comments as follows:

    “Observations noted. This will be done through a multi-stakeholder approach. First
    of which will be to amend OPIC Act which will pave way for review of pricing
    amongst others. The OPIC Act review agenda has been deliberated for some time
    now. The current management is intending to drive this agenda forward as a matter
    of priority.”

    Land and Buildings

    I noted during my review that titles to land and buildings to which the Corporation’s
    project offices are located are still with the Department of Agriculture and Livestock.
    These titles were not transferred at the time of the creation of OPIC. The Corporation
    does not have the right to the land and buildings it occupies.

    I brought this to the attention of the management and recommended them to liaise
    with the Department of Agriculture and Livestock regarding this issue.

    Management responded as follows:

    “OPIC is still under the Department of Agriculture and Livestock. Transfer of rights
    to land and buildings would be a way forward following the review of the OPIC Act.
    The current management is committed to this review.”

    Income (Kavieng, Popondetta, Milne Bay)

    I was unable to confirm the Grower Levy income and Voluntary Levy income for the
    Kavieng Project Office by confirming to the other supporting source documents such
    as mill production reports, invoices and receipts. I also was not able to confirm
    income for Popondetta Project Office as the MYOB file containing the transactions
    could not be located. Further, I was not provided the supporting documents for other
    income for Milne Bay Project Office for my verification. As such, I was unable to
    determine the completeness and accuracy of these Project Offices’ income.

    I recommended management to ensure control is exercised over record keeping and
    data management and ensure that accounts staff are properly trained on the
    importance of proper record keeping. Also it was recommended that data back-up for
    MYOB files must be made on a regular basis and that the final version of the MYOB
    file for every year end must be sent to the Head Office for final back-up and storage.

    Management took note of my concern and assured me to improve on this including
    other weak areas.

    – 197 –

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    Operating Expenses

    During my review of the operating expenses, I noted the following payments to the
    Financial Controller.

    Back Pay

    An amount of K10,299 was paid to the Financial Controller (FC), on 28
    February 2012 as back-pay for period August 2011 to February 2012. I was not
    provided details of the approval, board decision or any other correspondences
    that resulted in the back-pay entitlements to confirm its validity.

    Advance Payment

    An amount of K10,689 was paid to Institute of Business Studies (IBS) being for
    school fee payment for the Financial Controller’s child during the year. This
    amount was expensed instead of taken up as an advance. In addition,
    reconciliation prepared in 2013 showed that several advances were paid to the
    FC in 2012 and 2013 amounting to K34,379. Of the amount, K26,379 still
    remained outstanding.

    Medical Insurance Payment

    An amount of K11,480.92 was paid to Pacific MM Insurance for medical
    insurance cover for the Financial Controller. I was not able to confirm against
    staff employment contracts, board decisions, or any other reliable documents
    whether medical insurance cover is compulsory for OPIC employees.

    I recommended management to ensure adequate documentation is in place for every
    payment and ensure reconciliations of staff advances are done accurately and on a
    timely basis.

    40.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Corporation for the year ended 31 December 2013 had been completed and results
    were being evaluated.

    The fieldwork associated with the inspection and audit of the accounts and records
    and the examination of the financial statements of the Corporation for the year ended
    31 December 2014 was in progress.

    The Corporation had not submitted its financial statements for the years ended 31
    December 2015, 2016, 2017, 2018, 2019 and 2020 for my inspection and audit.

    – 198 –

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  • 41. OMBUDSMAN COMMISSION OF PAPUA NEW GUINEA

    41.1 INTRODUCTION

    41.1.1 Legislation

    The Ombudsman Commission was established under Section 217 of the Constitution
    of the Independent State of PNG. The principal objectives of the Commission are: to
    ensure that all governmental bodies are responsive to the needs and aspirations of the
    people; to help in the improvement of the work of governmental bodies and the
    elimination of unfairness and discrimination by them; to help in the elimination of
    unfair or otherwise defective legislation and practices affecting or administered by
    governmental bodies; and to supervise the enforcement of the Leadership Code.

    41.1.2 Functions of the Commission

    The functions of the Commission are to:

    investigate on its own initiative or on complaint by a person affected, any conduct
    on the part of any State or provincial or local governmental, or other governmental
    body or a member or officer or employee of any such body, any member of the
    personal staff of the Governor-General, Minister or the Leader or Deputy Leader
    of the Opposition, or any other body or person as may be declared by an Organic
    Law or an Act of Parliament, to which the Leadership Code applies;
    investigate any defects in any law or administrative practice appearing from any
    such investigation;
    investigate any case of an alleged or suspected discriminatory practice within the
    meaning of a law prohibiting such practices;
    any functions conferred upon it by Part III Division 2 (Leadership Code) of the
    National Constitution; and
    any functions conferred upon it by or under an Organic Law.

    41.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Commission for
    the years ended 31 December 2019 and 2020 had been submitted and arrangements
    were being made to commence the audits shortly.

    – 199 –

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  • 42. PAPUA NEW GUINEA ACCIDENT INVESTIGATION
    COMMISSION

    42.1 INTRODUCTION

    42.1.1 Legislation

    The Papua New Guinea Accident Investigation Commission was established under
    Section 218 of the Civil Aviation Act 2000 (as amended) and came into operation in
    January 2011.

    42.1.2 Objective of the Commission

    The principal purpose of the Commission is to determine the circumstances and
    causes of accidents and incidents with a view to avoiding similar occurrences in the
    future, rather than to ascribe blame to any person.

    42.1.3 Functions of the Commission

    The principal function of the Commission is the investigation of aviation
    accidents and incidents;
    The Minister may, by notice in the National Gazette, direct the Commission to
    investigate any serious land or marine transport accident or incident;
    Where a direction is given under Subsection (2), all references to an “aircraft”
    shall be read as a reference to the vehicle or vessel or other form of transport
    involved in the accident or incident to be investigated; and
    Without limiting the principal function under Subsection (1), the Commission
    shall also have the following functions:

    ‒ make such inquiries and investigations as it considers appropriate in order
    to ascertain the cause or causes of accidents or incidents;
    ‒ co-ordinate and direct all such inquiries and investigations and to
    determine which other parties, if any, should be involved in the
    investigation;
    ‒ prepare and publish findings and recommendations, if any, in respect of
    any such inquiries and investigation;
    ‒ where requested by the Minister, to deliver a written report on each
    investigation to the Minister, including any recommendations for changes
    or improvements that it considers will ensure avoidance of accidents and
    incidents in the future;
    ‒ co-ordinate and co-operate with other accident investigation organisations
    of Contracting States, including taking or collecting evidence on their
    behalf;

    – 200 –

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    ‒ request from the Authority or PNG Air Traffic Services (PNGATS) or any
    other person such information as it considers appropriate regarding any
    accident or incident that the Commission believes that it is required to
    investigate under this Act;
    ‒ perform any other function or duty conferred on the Commission under
    any Act or prescribed by regulations; and
    ‒ with the consent of the Minister, to provide consulting services, training
    and management services relating to any of its functions, whether in PNG
    or overseas.

    42.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    42.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the Commission’s
    financial statements for the years ended 31 December 2019 and 2020 were issued on
    17 May 2021 and 30 June 2021 respectively. The 2019 report contained a Qualified
    Opinion while the 2020 report did not contain any qualification.

    42.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Commission for the years ended 31 December
    2019 and 2020 were issued on 17 May 2021 and 30 June 2021 respectively. These
    reports contained similar observations, hence, only the 2020 report is reproduced:

    Salary and Wages Tax (SWT) Reconciliation

    My review of the Commission’s Statement of Account (SOA) maintained by the
    Internal Revenue Commission (IRC) as at 09 April 2021 revealed a salary and wages
    tax credit and penalty charges of K217,881 and K133,438 respectively for the year
    ended 31 December 2020. However, during the year PNG Accident Investigation
    Commission had not performed reconciliations of the SWT account balance in its
    books against the IRC’s SOA balance to ensure accuracy of the SWT payable.

    I brought this issue to the attention of the management and the management noted my
    observation.

    Late Remittance and Lodgment of Salaries and Wages Taxes (SWT) and
    Returns

    I noted that several remittances and lodgments of the salary and wages taxes and
    returns were not made on the stipulated time. In addition, I noted an amount of
    K42,742 in salary and wages taxes for the month of July 2020 not remitted to IRC.

    – 201 –

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    – 202 –

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    I recommended the Commission to lodge all salary and wages taxes and returns in a
    timely manner to avoid unnecessary penalty and interest that may be imposed by the
    tax authority. Furthermore, I advised the Commission to ensure that all tax payables
    are remitted to IRC.

    The management responded as follows:

    “Audit Observation is noted. Management has commenced liaising with the Internal
    Revenue Commission for AIC’s staggering repayment plan. The AIC is ready to work
    with IRC’s advice on the most appropriate corrective action required to address this
    matter.”

    No Signed Board Meeting Minutes

    The minutes of the Board meetings provided for my review were not signed by the
    Chairman hosting the respective meetings during the year. As such, I was unable to
    verify the legitimacy and validity of the discussions and resolutions made as recorded
    in the minutes. The management advised that although the meetings were held by the
    Board members in person, the minutes were not signed due to the COVID-19
    restriction measures imposed.

    I emphasized that unsigned minutes render any Board discussions and resolutions
    made unenforceable and could bear negative financial impacts. As such, I
    recommended the management to ensure that all the Board meeting minutes are
    signed by the Chairman to validate the Board resolutions made.

    The management responded as follows:

    “Management has noted this audit observation for Board noting and compliance
    going forward. It has not been possible for the board to congregate during the year
    2020, and first quarter of 2021, due to COVID-19 protocols, thus unable to sign most
    of the meeting minutes.”

    Recoverable Medical Bill – Receivable

    I noted that the other receivables account included a medical bill of K45,000 that had
    been paid in advance by the Commission for one of its employees. The employee
    after receiving the medical treatment had resigned from employment with the
    Commission. Subsequent to the reporting period, the Commission collected only
    K20,000 from the medical insurance. A remaining balance of K25,000 recoverable
    was agreed to between the former employee and the Commission to be deducted from
    the former employee’s final pay and leave entitlements payout. After the agreement,
    the former employee refused to cooperate with the Commission which poses a risk
    that the amount could turn out uncollectable.

    – 203 –

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    I recommended the Commission to continue pursuing the former employee to recover
    the outstanding balance before utilizing the repayment terms as agreed to.

    The management responded:

    “Management has noted the audit observation and is pursuing to recover the balance
    from the former employee based on a signed repayment agreement entered into
    between the employee and AIC. The final entitlements have been withheld pending the
    repayment of the balance.”

    Receivable from National Agriculture Quarantine and Inspection Authority
    (NAQIA)

    My discussions with the management revealed that NAQIA would refund all
    payments received from the Commission over the past years as rentals. I was
    informed that this transaction eventuated from discussions made in a meeting held on
    25 November 2020 between NAQIA, the Commission and the Government Office
    Allocation Committee (GOAC) of the Finance Department. However, I was unable to
    confirm the substance of the transaction nor the undertakings made in the discussions
    as no formal resolution has been provided for my review at the time of my audit
    report.

    I recommended that the Commission obtain the signed resolution to properly support
    its claim from NAQIA.

    The management responded:

    “Management has noted the audit observation and AIC is pursuing this with NAQIA.
    Discussions are ongoing.”

    Employment of Accident Investigation Manager and His Salary and Allowances

    I noted that the employment contract of the current Accident Investigation Manger
    has not been duly signed by the Secretary of the Department of Personnel
    Management. In addition, Special International Market Allowances (SIMA) paid up
    to November 2020 to the manager were not taxed.

    I advised the management that such practices amount to non-compliance with the
    requirements of the applicable laws and regulatory frameworks. Accordingly, I
    recommended the Commission to comply with the requirements of its own Act and all
    the relevant laws and regulations governing the employment and remuneration of
    non-citizens. I have raised similar concerns in my prior year report as well.

    – 204 –

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    The management responded as follows:

    “Management and Board have noted the audit observation to comply with Section 8
    of the Public Employment (Non-Citizens) Act (Chapter 342). Management has noted
    the audit observation relating to the SIMA Tax and has taken corrective action on this
    starting November 2020.”

    Fixed Assets Policy

    The Commission does not have a fixed assets policy that provides for procedures and
    requirements for capitalization of all fixed assets and capital expenditures,
    depreciations and disposals. There is a high risk of fixed assets not being registered
    during the year and charged directly to expenses.

    I suggested that the Commission should develop a fixed assets policy that provides
    requirements for capitalization of all fixed assets and capital expenditures,
    depreciations and disposals. A formal fixed assets policy should provide guidance to
    accounting personnel in recording and registration of fixed asset acquisition and avoid
    the time-consuming task of depreciating minor items. Any disposal of fixed asset
    should be done with Board approval and in accordance with the fixed assets policy.

    The management responded as follows:

    “The management has noted the audit observation and aims to put in place a written
    capitalization policy by end of the third quarter of 2021.”

    Internal Audit Function

    The Commission has no internal audit function since its establishment. Several audit
    issues were not identified, discussed and addressed promptly. The Commission should
    establish an Internal Audit Function. The Internal Audit Function should among other
    matters, develop an internal audit plan that would identify and address possible
    problems and areas for improvements on a regular basis.

    Stronger and more active internal audit involvement to the Commission’s procedures
    will provide greater assurance as to the proper functioning of existing internal controls
    as well as insights to possible improvements to existing controls.

    The management responded to my findings as follows:

    “Management has noted the audit observation and will prioritize the recruitment of
    the internal auditor.”

    – 205 –

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    Financial Delegation Authority

    As in the prior year, the Chief Executive Officer (CEO) of the Commission was given
    ultimate (highest) financial authority to approve all expenditure irrespective of the
    values. This practice of giving financial power of approval to a single person with no
    checks and balances may lead to abuse and misuse of public funds.

    The Board should review the Delegation of Financial Authority and establish
    necessary control procedures to avoid possible misuse of public funds of the
    Commission.

    The management stated in its response as follows:

    “Management has noted the audit observation. The authority for financial approval
    and delegation process has been addressed in the Financial Policy & Procedures
    Manual Section 3, Page 14.”

    Fraud and Reporting System

    My enquiry of the Fraud Reporting System revealed that the Commission had no
    fraud reporting system and guideline in place during the financial year under review.
    There is a risk that any fraudulent activities occurring during a year may not be
    detected.

    I recommended the Commission to establish a fraud reporting system and guidelines.
    I further advised that any known or suspected fraud should be investigated and
    addressed by the Commission in a timely manner.

    The management responded:

    “Management has noted the audit observation and will immediately commence
    recruitment of the internal auditor who will be responsible for implementing,
    monitoring and reporting all possible and potential fraud matters.”

    – 206 –

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  • 43. PAPUA NEW GUINEA CUSTOMS SERVICE

    43.1 INTRODUCTION

    43.1.1 Legislation

    The National Executive Council (NEC) in its meeting on 24 July 2014, Decision No:
    216/2014 approved that the Papua New Guinea Customs Service be transformed from
    the National Public Service into an Independent Statutory Authority through a
    separate Act of Parliament.

    In accordance with the NEC Decision, the Papua New Guinea Customs Service Act
    2014 was drafted and certified on 21 October 2014, establishing the Papua New
    Guinea Customs Service as a Statutory Authority.

    Prior to November 2014, the Papua New Guinea Customs Service was operating as a
    Department of the National Public Service.

    43.1.2 The Functions of the Service

    The functions of the Papua New Guinea Customs Service are to:

    administer and enforce the customs laws;
    promote compliance with the customs laws;
    take such measures as may be required to improve service provided to importers
    and exporters with a view to improving efficiency and maximising revenue
    collection;
    take such measures as may be required to counteract customs fraud and other
    forms of duty evasion;
    advise the State on matters relating to customs and to liaise with relevant
    stakeholders on such matters;
    represent the State internationally in respect of matters relating to customs; and
    carry out such functions as are given to the Papua New Guinea Customs Service
    under this Act or any other law.

    43.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Service for the years ended 31 December 2017 and 2018 had been completed and
    results were being evaluated.

    The Service had submitted its financial statements for the years ended 31 December
    2019 and 2020 and arrangements were being made to commence the audit shortly.

    – 207 –

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  • 44. PAPUA NEW GUINEA FOREST AUTHORITY

    44.1 INTRODUCTION

    44.1.1 Legislation

    The Papua New Guinea Forest Authority was established under the Forestry Act 1991
    which came into operation on 25 June 1992.

    The Authority was formed by the amalgamation of the Department of Forests, the
    Forest Industries Council, the Provincial Divisions of Forestry, the Forestry College
    in Bulolo, the Timber Industry Training College and the Research Institute in Lae.

    With the establishment of the Authority the following Acts were repealed: the Forest
    Industries Council Act (Chapter 215); the Forestry Act (Chapter 216); and the
    Forestry (Private Dealings) Act (Chapter 217).

    44.1.2 Objectives of the Authority

    The prime objective of the Authority is to provide for and to give effect to the
    National goals and the directive principles regarding:

    management, development and protection of the Nation’s forest resources and
    environment in such a way as to conserve and renew them as an asset for
    succeeding generations;
    maximisation of PNG’s participation in the wise use and development of the
    forest resources as a renewable asset;
    utilisation of the Nation’s forest resources to achieve economic growth,
    employment creation and increased “downstream” processing of the forest
    resources;
    encouragement of scientific study and research into forest resources so as to
    contribute towards a sound ecological balance, consistent with the national
    development objectives;
    increased acquisition and dissemination of skills, knowledge and information in
    forestry through education and training; and
    pursuit of effective strategies, including improved administrative and legal
    machinery, for managing forest resources and the management of National,
    Provincial and Local interests.

    – 208 –

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  • Papua New Guinea Forest Authority

    44.1.3 Functions of the Authority

    The principal functions of the Authority are to:

    provide advice to the Minister on forest policies and legislation pertaining to
    forestry matters;
    prepare and review the National Forest Plan and recommend it to the NEC for
    approval;
    through the Managing Director, to direct and supervise the National Forest
    Service;
    negotiate Forest Management Agreements;
    select operators and negotiate conditions on which timber permits, timber
    authorities and licences may be granted in accordance with the provisions of the
    Forestry Act;
    subject to the Customs Act, Customs Tariff Act and Exports (Control and
    Valuation) Act to control and regulate the export of forest produce;
    oversee the administration and enforcement of the Forestry Act and any other
    legislation pertaining to forestry matters, and of such forestry policy as approved
    by the NEC;
    undertake the evaluation and registration of persons desiring to participate in
    any aspect of the forestry industry;
    act as agent for the State, as required, in relation to any international agreement
    relating to forestry matters; and
    carry out such other functions necessary to achieve its objectives or given to it
    under the Act or other relevant law.

    44.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Authority for the year ended 31 December 2015 had been completed and results
    were being evaluated.

    The financial statements of the Authority for the years ended 31 December 2016,
    2017 and 2018 had been submitted and arrangements were being made to commence
    the audit shortly.

    The Authority had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 209 –

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  • 45. PAPUA NEW GUINEA IMMIGRATION AND CITIZENSHIP
    SERVICES AUTHORITY

    45.1 INTRODUCTION

    45.1.1 Legislation

    The Papua New Guinea Immigration and Citizenship Services Authority was
    established under the Immigration and Citizenship Service Act 2010. This Act came
    into operation on 9 July 2010.

    Under this Act, all assets used for the Authority services (other than land held by the
    State) which immediately before the coming into operation of this Act, were held by
    the Department of Foreign Affairs and Trade and which, by agreement between the
    Departmental Head of that Department and the Authority are necessary to be
    transferred to the Authority for the purposes of the Authority before coming into
    operation, transferred to and become assets of the Authority.

    45.1.2 Objectives of the Authority

    The objectives of the Authority are the following:

    the management, development and protection of the nation’s interest in so far as
    the security of the nation is protected;
    elimination of corruption and increase in accountability;
    provision of a more flexible operational working environment;
    increased operational and management efficiency in financial management,
    accountability and performance management;
    provision of a mechanism for the achievement of best practice;
    provision of financial and administrative autonomy;
    increased levels of client service delivery;
    encouragement of study and research in areas which will contribute to the
    protection and security of the nation;
    increased acquisition and dissemination of skill, knowledge and information in
    immigration and citizenship through education and training;
    pursuit of effective strategies including improved administrative and legal
    machinery for managing immigration, citizenship and passport matters; and
    ensure the Authority retains its primacy and leadership role with regard to the
    provision of effective border control and security through the effective
    management of entry and stay of people in PNG.

    – 210 –

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    45.1.3 Functions of the Authority

    The functions of the Authority are to:

    perform the functions and exercise the powers conferred on an authorised person
    or an officer under the Migration Act (Chapter 16) or the Passports Act
    (Chapter 17);
    assist the Minister responsible for the administration of the Migration Act
    (Chapter 16) and Passport Act (Chapter 17) in the performance of their
    functions under those Acts respectively;
    assist the Minister responsible for citizenship in the performance of his/her
    functions under Part IV of the Constitution and the Citizenship Act (Chapter
    12);
    collect fees, penalties and other revenue authorised under the Migration Act
    (Chapter 16), Passport Act (Chapter 17) and Citizenship Act (Chapter 12);
    administer the APEC Business Travel Card Scheme under the Migration Act
    (Chapter 16);
    collect, monitor, secure and maintain information and technological systems to
    enable fully integrated and supported immigration, citizenship and passport
    operations;
    undertake development of legislation and policy to support the operations of the
    Authority and the effective administration of the Migration Act (Chapter 16),
    Passport Act (Chapter 17) and the Citizenship Act (Chapter 12);
    advise the Minister on policy issues which relate to this Act and the effective
    administration of the Migration Act (Chapter 16), Passport Act (Chapter 17)
    and the Citizenship Act (Chapter 12);
    exercise and carry out such functions and powers and perform all duties which
    under any other written law are or may be or become vested in the Authority or
    delegated to the Authority by this Act or any other law; and
    carry out such other duties as are necessary, supplementary, incidental to or
    consequential to achieve the objectives or the discharge of its functions under
    this Act.

    45.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Authority for the
    year ended 31 December 2018 had been submitted and arrangements were being
    made to commence the audit shortly.

    The Authority had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 211 –

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  • 46. PAPUA NEW GUINEA INSTITUTE OF MEDICAL RESEARCH

    46.1 INTRODUCTION

    46.1.1 Legislation

    The Papua New Guinea Institute of Medical Research was established by the Institute
    of Medical Research Act (Chapter 166) on 1 January 1980.

    46.1.2 Functions of the Institute

    The primary functions of the Institute are to conduct and foster research into any
    branch of medical science or biology, anthropological and sociological aspects of
    health, and matters relating to public health generally, that are of relevance to PNG.

    46.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    46.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Institute for the years ended 31 December 2018 and 2019 were
    issued on 16 November 2020 and 30 June 2021 respectively. The 2018 report
    contained a Qualified Opinion while the 2019 report did not contain any qualification.

    46.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Institute for the years ended 31 December
    2018 and 2019 were issued on 16 November 2020 and 30 June 2021 respectively.
    These reports contained similar observations, hence, only the 2019 observations are
    reproduced:

    Internal Audit

    During my review on the internal audit division of the Institute, I noted that the
    Institute did not fully utilize the division to review various processes and systems and
    to provide necessary recommendation for the management to improve on the internal
    control weaknesses noted during my audits. There were no internal audit reports
    provided for my review as the internal audit position was vacant at the time of audit.

    I recommended that the Internal Audit function should be fully resourced and utilized.

    Management concurred with my recommendation and would endeavor to fill the
    vacant position.

    – 212 –

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  • Papua New Guinea Institute of Medical Research

    Fixed Assets – K40,000,763

    My review of fixed assets and related records of the Institute revealed the following
    discrepancies:

    IT Software worth K29,693 captured under Note 10 to the financial statements
    did not qualify to be capitalized but should be expensed out as the payments
    were in relation to Anti-Virus License renewal fees. The PNGIMR only pays
    subscription/licensing fees for those antiviruses but does not own the software.
    Hence; the item does not satisfy the ‘ownership’ characteristics of an asset;

    Disposals and write-offs during the years were not appropriately taken-off the
    Register. My physical verification of assets confirmed that a material amount of
    assets in the Register had been disposed/written off but still had their historical
    values captured in the Fixed Assets Register;

    Improvements/upgrades made to existing assets did not have their costs added
    on to the existing assets in the Fixed Assets Register to come up with the new
    historical ending balance, instead these costs were treated as new purchases and
    recorded separately in the FAR; and

    The Institute had not conducted regular stock-take on its assets including
    revaluation exercises on its properties for a number of years up to 31 December
    2019. In the absence of regular stock takes including valuation on its properties,
    management may not be able to identify obsolete, damaged or missing assets on
    a timely basis. Further, the Institute’s land and buildings may not be reflected at
    correct market values.

    As a result, I was unable to place reliance on the effectiveness of the internal controls
    surrounding the management of the fixed assets of the Institute nor conclude on the
    valuation, correctness and existence of the fixed assets amounting to K40,000,763
    disclosed in the financial statements. However, per Note 10 of the financial
    statements, the Institute has done the revaluation of its Land and Buildings in 2020
    which will be reflected in the 2020 financial statements.

    Management responded to my observation as follows:

    “The recommendation is accepted and will take actions to improve the Institute’s
    Fixed Assets Register (FAR) issues. To date, a fixed asset management policy is set in
    place, verification and valuation exercise of the land and building conducted. The
    non-land and building inventory exercise is now in progress”.

    – 213 –

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  • Papua New Guinea Institute of Medical Research

    Current Assets & Liabilities

    My review of all the current assets and liabilities per Note 11 of the financial
    statements revealed that most of these transactions relate to inter-fund transactions
    which have not been cleared at year end. I have requested for aged payables and
    receivables reconciliations but I was advised that the Sybiz accounting system does
    not generate payables and receivables reconciliations. In addition, the Institute does
    not manually prepare reconciliations. As a result, there are uncleared balances still
    sitting under various clearing accounts.

    Without proper reconciliations of payables and receivables, audit could not ascertain
    the completeness of the payable and receivable balances as at year end.

    Management concurred with my recommendation and ensured to take actions to
    reconcile the inter-fund balances.

    Salary and Wages Tax Liability – K4,249,790

    My review of the income tax lodgments revealed that the Institute has been up to date
    with its salary and wages tax lodgments for the year under review. However, my
    further analysis revealed that a summary statement of account provided by IRC dating
    November 2020 shows penalty charges against assessments amounted to K4,249,790
    dating back to 2013. Though numerous dialogues have been established between the
    Institute’s management and the IRC to clear the deadlock, this liability still remains at
    the time of audit.

    I recommended management to continue dialogue with IRC stating all facts relating to
    this amount and resolve this issue.

    Management responded as follows:

    “Management accepts the recommendation and will endeavour to resolve the tax
    issue with IRC. Further, a submission has been made to IRC for a Remission of Late
    Lodgement Penalties for the tax period from 2013 to 2019.”

    Employees Superannuation Contributions

    My review of the personnel emoluments revealed that the payroll division derived
    employee and employer superannuation based on employees’ gross salaries in
    contrast to their base salaries, thereby increasing the employer superannuation
    liability. The Institute is in breach of the Superannuation Act, 2002 as well as the
    Superannuation Regulation, 2000, in that all superannuation calculations are based on
    employee’s base salary.

    – 214 –

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  • Papua New Guinea Institute of Medical Research

    The management concurred with my recommendation and would take immediate
    steps to calculate superannuation contributions using the prescribed rate based on
    Base Salary.

    Leave Fares – K110,382

    My review of leave fares revealed that the Institute did not comply with the
    requirements of General Order 14.47 (GO14.47). GO14.47 requires that “An officer
    shall pay to the State at the time of applying for payment of recreation leave fares, a
    contribution towards the cost of the fares which shall be calculated at ten per cent of
    his/her gross substantive fortnightly salary at the date immediately prior to proceeding
    on recreation leave.”

    I recommended the Institute to comply with the requirements of General Order 14.47
    in the administration and application of leave fares and the management agreed to
    implement the General Order.

    46.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Institute had not submitted its financial
    statements for the year ended 31 December 2020 for my inspection and audit.

    – 215 –

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  • 47. PACIFIC INSTITUTE OF LEADERSHIP AND GOVERNANCE
    (Formerly Papua New Guinea Institute of Public Administration)

    47.1 INTRODUCTION

    47.1.1 Legislation

    The Pacific Institute of Leadership and Governance (formerly Papua New Guinea
    Institute of Public Administration) was established under the Pacific Institute of
    Leadership and Governance Act 2017. This Act came into operation on 1 May 2018
    as per Gazettal Notification No. G262 of 2018 dated 24 April 2018, thereby repealing
    the Papua New Guinea Institute of Public Administration Act 1993.

    Under this Act, all assets held by and obligations and liabilities imposed on the former
    Papua New Guinea Institute of Public Administration immediately before the
    operationalisation of the Act were on that date transferred to the Pacific Institute of
    Leadership and Governance.

    47.1.2 Objectives of the Institute

    The objectives of the Institute are to:

    achieve excellence in providing organisational needs based training focused on
    ethical leadership, strategic planning, corporate services and related
    management processes to enhance public sector performance;
    establish the Institute as the premiere provider of ethical needs based training
    products and programs of choice for the Pacific Island Nations through training
    based partnerships;
    develop, maintain and promote the recognised training standards and
    qualifications regime for public sector organisations in collaboration with the
    department responsible for personnel management and the National Training
    Council; and
    operate as a business concern and raise revenue for the Institute to minimise
    budgetary support from National Government through partnerships established
    with public and private training research and delivery organisations within
    Papua New Guinea and in the Pacific region.

    47.1.3 Functions of the Institute

    The functions of the Institute are to:

    promote excellence in training standards and service delivery to meet the
    aspirations of integrated human development and inclusiveness as required by
    the Constitution;

    – 216 –

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  • Pacific Institute of Leadership and Governance

    conduct applied research, engage consultancies and collaborate with public and
    private sector training organisations and professional bodies, including the
    Papua New Guinea National Research Institute and the National Training
    Council, in order to design an up to date training standards and qualifications
    framework;
    collaborate with the Department of Higher Education, Research, Science and
    Technology in order to establish bringing arrangements for suitably qualified
    diploma students to upgrade their qualifications to recognised degree level at
    selected higher education institutions;
    assist the provincial and district administrations to conduct training needs
    analysis and develop training programs to address the need for financial, human
    resource, planning and project management skills;
    explore, promote and deliver training opportunities for students from Pacific
    Island nations; and
    any other functions conferred upon it by Section 7 of the Public Institute of
    Leadership and Governance Act 2017.

    47.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    47.2.1 Comments on Financial Statements

    My reports to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the Institute for the years ended 31 December 2015, 2016 and 2017
    were issued on 28 September 2020. The reports contained similar Qualified Opinions,
    hence, only the 2017 report is reproduced:

    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters referred to in the Basis for
    Qualified Opinion paragraphs below:

    (a) the financial statements of the Institute are based on proper accounts and
    records; and

    (b) the financial statements are in agreement with those accounts and records, and
    show fairly the state of affairs of the Institute as at 31 December 2017 and the
    results of its operations for the year then ended.

    – 217 –

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    BASIS FOR QUALIFIED OPINION

    Fixed Assets

    The Institute has disclosed its Non-Current Assets as K376,234 at 31 December 2017.
    However, I noted that the Institute did not maintain a Fixed Assets Register for all
    non-current assets acquired by the Institute over the years-to-date. In the absence of a
    Fixed Assets Register, I was unable to ascertain the existence, accuracy and valuation
    of the fixed assets as reported in the financial statements. Further, the amount
    disclosed in the Financial Statements reflects only the additions for the year under
    review, however, it did not carry forward the prior years of acquisitions of properties
    and other assets worth millions of kina located in the Head Office and the four (4)
    Regional Offices nationwide by way of note to the financial statements. I also noted
    that the Institute has not carried out any physical count of fixed assets over the years
    to ensure that assets have properly been recorded and are in existence. As a result, I
    was unable to confirm the valuation, existence and accuracy of the fixed assets
    acquired by the Institute over the years-to-date.

    Limitation of Scope – K19,950

    The Institute did not maintain proper records of payments totaling K19,950 during the
    year under review. My review of the expenditures during the year revealed that
    payments totaling K19,950 were missing or not provided for my verification.
    Consequently, I was unable to perform my audit procedures to determine the validity,
    completeness and accuracy of the payments totalled K19,950 as reported in the
    financial statements.”

    47.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Institute for the years ended 31 December
    2015, 2016 and 2017 were issued on 28 September 2020. The reports contained
    similar observations, hence, only the 2017 report is reproduced:

    Non-Compliance with the Public Finances (Management) Act, 1995 (as amended)

    The Institute had not prepared and submitted its financial statements to my Office
    before 31 March 2018 to enable me to conduct the audit and issue the audit report
    within the time frame stipulated in the Public Finances (Management) Act, 1995 (as
    amended). Consequently, the Institute had breached Sections 63 (2) and 63 (4) of the
    above act.

    – 218 –

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  • Pacific Institute of Leadership and Governance

    Accounting Policy and Procedural Manual

    During my review of the internal controls, I noted that the Institute did not have any
    policy and procedural manual in place to guide its financial and operational activities.
    The policy and procedural manuals serve as control tools to assist staff at all levels to
    execute their duties and responsibilities in accordance with legislative requirements
    and best practice.

    I brought the matter to the attention of the management and I was advised that it had
    identified this requirement as a priority and commenced work on the manual for
    Accounting and Finance process.

    Accounting System (Software)

    The Institute did not have a proper Accounting System (accounting software) in place
    to produce financial reports. The Statement of Receipts and Payments (Financial
    Statements) were being manually prepared and produced using Microsoft Excel
    spreadsheets. The basic accounting records were being maintained on spreadsheets to
    draw monthly Income and Expenditure Reports from which the Statement of Receipts
    and Payments was compiled. I noted this issue during my previous audits and
    recommended the management to consider sourcing an Accounting Software
    appropriate for the entity. The Institute is yet to implement my recommendation.

    Bank Reconciliations

    My review of the bank reconciliations of the Government Operational bank account
    operated by the Institute revealed that monthly reconciliations were performed.
    However, I noticed that these bank reconciliations were not signed and dated by the
    preparer and the reviewer. Thus, I was unable to substantiate whether there was
    segregation of duties and whether the preparations of bank reconciliations were done
    on a timely basis.

    General Fund Account (GFA) Wages

    During my review of the wages, I noted that the Institute had not been remitting
    superannuation contributions for its casual staff who had been employed for more
    than three (3) months with the Institute. This is a requirement of General Order 17
    and Superannuation Act 2002. I also noted that the salary and wages tax (SWT)
    computed on the casual employees’ wages were not remitted to IRC during the year
    under review. I brought the above issues to the attention of the management and I was
    advised that the management took note of the recommendation and was taking
    appropriate action to make remittance to IRC.

    – 219 –

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    General Fund Account (GFA) Overtime

    I observed that there was no evidence of the employees signatures attached to the
    cheque requisitions/vouchers to support that the overtime allowances were paid to
    them. As a result, I was unable to determine whether the overtime totalled K23,377
    were correctly paid or not during the year under review.

    Travel Advances and Acquittal Register

    The Institute had not properly maintained a Travel Advances Register for all duty
    travels and related expenses. As a result, I was unable to trace and authenticate travel
    advances and related expenses amounting to K75,276 during the year under review.
    Consequently, the Institute had breached the Public Finances (Management) Act,
    1995 (as amended) and the Financial Management Manual Part 20 paragraphs 11.2
    & 12.10 which states that cash advanced to officers on official duty travels must
    acquit travel advances within 14 and 7 days for international and domestic travels
    respectively on return from duty travels. In the absence of a properly maintained
    Travel Advance Register, the Institute was unable to monitor the acquittals promptly.

    Lack of Three (3) Quotations – K17,659

    I observed that the Institute made payments totaling K17,659 without obtaining three
    (3) written quotations from reputable suppliers when making payments for
    expenditure exceeding K5,000. Consequently, the Institute had breached the
    requirements specified under the Public Finances (Management) Act, 1995 (as
    amended). As a result, I was unable to place reliance on the effectiveness of the
    internal controls surrounding the procurement of goods and services of the Institute.

    47.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Institute for the
    years ended 31 December 2018, 2019 and 2020 had been submitted for my inspection
    and audit and arrangements were being made to commence the audits shortly.

    – 220 –

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  • 48. PAPUA NEW GUINEA MARITIME COLLEGE

    48.1 INTRODUCTION

    48.1.1 Legislation

    The Papua New Guinea Maritime College was established under the Papua New
    Guinea Maritime College Act (Chapter 355). It was previously known as the Nautical
    Training Institute. However, by virtue of the Nautical Training Institute (Change of
    Name) Act 1985 which became effective on 25 July 1985, the names of Nautical
    Training Institute and Nautical Training Institute Act were changed to PNG Maritime
    College and PNG Maritime College Act respectively.

    48.1.2 Functions of the College

    The principal functions of the College are to provide training and other instructional
    facilities for the theoretical and practical training of persons in maritime skills and any
    other objects incidental or ancillary thereto.

    48.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    48.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the financial
    statements of the College for the year ended 31 December 2019 was issued on 15
    June 2021. The report contained a Qualified Opinion:

    “QUALIFIED OPINION

    In my opinion, except for the effects of the matter referred to in the Basis for
    Qualified Opinion paragraph below:

    a) the financial statements are based on proper accounts and records; and

    b) the financial statements are in agreement with those accounts and records, and
    show fairly the state of affairs of the College for the year ended 31 December
    2019 and the results of its financial operations and cash flows for the year then
    ended.

    – 221 –

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    BASIS FOR QUALIFIED OPINION

    Valuation of Non-Current Assets – K9,975,904

    I noted that since the establishment of the College, there was no valuation exercise
    carried out on its properties and other assets totaling K9,975,904 by an independent
    valuer to determine the fair values of the College’s assets. Further, I noted that the
    College’s Assets recorded in the Fixed Assets Register did not have identification
    numbers or labels assigned to them. Without proper labelling of assets, the
    identification of fixed assets under the College’s custody was difficult for my
    verification.

    Further, the College has not carried out any stock-take on all its fixed assets over the
    years, thus, I was unable to carry out physical inspection to confirm certain fixed
    assets against the records to verify their existence. As a result, I was unable to
    comment on the existence and valuation of fixed assets disclosed in the financial
    statements.”

    48.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the accounts and
    records of the College for the year ended 31 December 2019 was issued on 15 June
    2021. The report contained the following significant matters:

    Title Deeds of College Properties

    During my review of the Land & Buildings, I noted that for eleven (11) properties the
    College had no valid title deeds in place or was unable to locate the deeds for my
    verification. As a result, I was unable to verify the College’s ownership of the eleven
    properties. I brought the above issue to the attention of the College Management and I
    was advised that the College would ensure title deeds of all properties physically
    owned would be pursued. Communication had commenced with various stakeholders
    and would continue until the matter is being resolved.

    Personal Emoluments

    During my review of staff personal files, I noted that the employment contract for the
    Principal of the College was not signed. As a result, I was unable to substantiate and
    validate the salary and allowances paid to the Principal. I brought this matter to the
    attention of management in my previous audits and followed up during the current
    audit as well.

    – 222 –

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    I was advised by the College as follows:

    “The Principal’s contract is the responsibility of the Board to ensure that he has a
    valid contract in place in concurrence of his duties. The matter has been followed up
    by the Management with no success. However, the management is still doing its best
    to ensure DPM provides the Principal a valid contract soon.”

    48.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the College had not submitted its financial
    statements for the year ended 31 December 2020 for my inspection and audit.

    – 223 –

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  • 49. PAPUA NEW GUINEA NATIONAL INSTITUTE OF
    STANDARDS AND INDUSTRIAL TECHNOLOGY

    49.1 INTRODUCTION

    49.1.1 Legislation

    The Papua New Guinea National Institute of Standards and Industrial Technology
    was established by the National Institute of Standards and Industrial Technology
    Act 1993 and came into operation on 3 January 1994.

    The National Standards Act (Chapter 378) and the National Technical Standards
    Act (Chapter 379) were repealed, and all funds standing to the credit of and on
    accounts operated under the authority of the repealed acts and all assets and
    liabilities owned or held by the bodies established under the repealed acts were
    transferred to and became the assets and liabilities of the Institute on the
    commencement of the new Act.

    49.1.2 Objectives of the Institute

    The objectives of the Institute are: to carry out scientific and technological research
    and to develop a National Standards System; to co-operate with international
    organisations of measurement and technical standards; to promote and undertake
    industrial integrated standardisation and quality assurance; and to enter into any
    agreement both within and outside PNG to further the objectives and functions of
    the Institute.

    49.1.3 Functions of the Institute

    The main functions of the Institute are to:

    safeguard PNG against the dumping and supply of unsafe, unhealthy and
    inferior or substandard products;
    establish and co-ordinate the National Standardisation System;
    provide education, training and industrial extension and consultative services
    to assist industries;
    promote public and industrial welfare, health and safety;
    recognise as testing authorities, bodies and institutions;
    establish a National Certification System of conformity;
    assist industries overcome technical barriers on its products and services to
    international trade; and
    assist industries to produce quality products and services.

    – 224 –

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    49.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Institute for the years ended 31 December 2017, 2018 and 2019 were in progress.

    The Institute had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 225 –

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  • 50. PAPUA NEW GUINEA SPORTS FOUNDATION

    50.1 INTRODUCTION

    50.1.1 Legislation

    The Papua New Guinea Sports Foundation was established by the Papua New Guinea
    Sports Foundation Act 2005. This Act was certified on 8 August 2006 and became
    operational on the same date and replaced the Papua New Guinea Sports Commission
    Act 1992.

    Under this Act, all assets held or occupied by and all liabilities and obligations of the
    Papua New Guinea Sports Commission prior to the operation of this Act were
    transferred to and became assets and liabilities and obligations of the Foundation at
    commencement.

    50.1.2 Objectives of the Foundation

    The principal objectives of the Foundation are: to encourage the private sector to
    contribute to the funding of sports to supplement assistance by the government of
    Papua New Guinea; to provide leadership in the development of Papua New Guinea’s
    performance in sports; and to encourage increased participation and ‘Sport for All’ by
    Papua New Guineans in sports.

    50.1.3 Functions of the Foundation

    The principal functions of the Foundation are to:

    advise the Minister in relation to the development of sports;
    co-ordinate activities in Papua New Guinea for the development of sports and
    to develop and implement programs to promote equality of access to and
    participation in sports by all Papua New Guineans;
    develop and implement programs for the recognition and development of
    persons who excel, or who have the potential to excel in sports and persons
    who have the potential to achieve standards of excellence as sports coaches,
    umpires, referees or officials essential to the conduct of sports;
    initiate, encourage and facilitate research and development in relation to
    sports;
    undertake research and development related to sports science and sports
    medicine and to provide sports medicine services and sports science services
    to persons participating in programs of the Foundation;
    establish, manage, develop and maintain facilities for the purposes of the
    Foundation;

    – 226 –

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    collect and distribute information and provide advice on matters related to the
    activities of the Foundation;
    fostering co-operation in sports between Papua New Guinea and other
    countries and to provide access to persons from other countries to the
    resources, services and facilities of the Foundation;
    raise money through the National Sports Trust or by other means for the
    purposes of the Foundation and to administer and expend money appropriated
    by the Parliament or raised in accordance with and for the purpose of the
    Foundation;
    consult and co-operate with appropriate authorities of the National
    Government or the Provinces and Local-level Governments and with other
    persons, associations and organisations on matters related to the activities of
    the Foundation;
    provide advice on matters related to sports to the Papua New Guinea National
    Olympic Committee or other persons, bodies or associations; and
    co-operate with districts, provincial, national and international sporting
    organisations in aiming to foster a sporting environment that is free from the
    unsanctioned use of performance enhancing drugs and doping methods.

    50.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Foundation for the
    years ended 31 December 2016, 2017, 2018, 2019 and 2020 had not been submitted
    for my inspection and audit despite numerous reminders from my Office.

    I was advised by the Foundation’s Management on 3 September 2020 that the
    criminals had broken into their office (Finance and Administration) and stole
    important office equipment and computers that contained financial records.

    – 227 –

  • Page 265 of 309

  • 51. PAPUA NEW GUINEA UNIVERSITY OF TECHNOLOGY

    51.1 INTRODUCTION

    51.1.1 Legislation and Objectives of the University

    The Papua New Guinea University of Technology was established under the
    University of Technology Act (Chapter 170). The University’s aims are to provide
    tertiary educational facilities and to produce qualified men and women to contribute
    to the development of Papua New Guinea.

    51.1.2 Functions of the University

    The University’s principal functions are to encourage and provide facilities for study,
    education and training of technological subjects and branches of learning at tertiary
    level, and to assist in research and the practical application of technological branches
    of learning.

    51.1.3 Subsidiaries of the University

    The University has two subsidiary companies; National Analytical and Testing
    Services Limited and Unitech Development and Consultancy Company Limited which
    were incorporated under the Companies Act.

    Comments in relation to the subsidiary companies are contained in paragraphs 51A
    and 51B of this Report respectively.

    51.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the University for the year ended 31 December 2018 had been completed and results
    were being evaluated.

    The University had not submitted its financial statements for the years ended 31
    December 2019 and 2020 for my inspection and audit.

    – 228 –

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  • 51A. NATIONAL ANALYTICAL AND TESTING SERVICES
    LIMITED (A subsidiary of University of Technology)

    51A.1 INTRODUCTION

    The National Analytical and Testing Services Limited was initially incorporated as
    Champion No. 67 Limited on 10 March 2011. However, on 24 March 2011 the
    former Company name (Champion No. 67 Limited) was changed to what is now the
    National Analytical and Testing Services Limited.

    The shareholders of the Company are Unitech Development and Consultancy
    Company Limited and Star Mountains Institute of Technology Limited, each
    holding 61% and 39% of the total issued shares respectively.

    51A.1.1 Functions of the Company

    The functions of the Company are to provide analytical, pathological and mineral
    testing services:

    analytical testing including tests for food, water, soil, mining or industrial waste;
    pathology testing relating to test for human diseases; and
    mineral (geo) testing involving testing for mineral compositions.

    51A.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    51A.2.1 Comments on Financial Statements

    My report in accordance with the provisions of the Companies Act on the
    Company’s financial statements for the year ended 31 December 2012 was issued
    on 31 August 2020. The report contained a Qualified Opinion:

    “QUALIFIED OPINION

    In my opinion, except for the effects of the matters referred to in the Basis for
    Qualified Opinion paragraphs:

    (a) The financial statements of National Analytical and Testing Services Limited
    for the year ended 31 December 2012;

    (i) give a true and fair view of the financial position and the results of its
    financial performance and cash flows for the year ended on that date;
    and

    – 229 –

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  • National Analytical and Testing Services Limited

    (ii) the financial statements have been presented in accordance with the
    Companies Act, International Financial Reporting Standards and other
    generally accepted accounting practice in Papua New Guinea.

    (b) Proper accounting records have been kept by the Company, as far as appears
    from my examination of those records; and

    (c) I have obtained all the information and explanation required.

    BASIS FOR QUALIFIED OPINION

    Trade and Other Receivables – K1,100,806

    Included in the above balance and as stated in the Note 6 to the financial statement
    is an amount of K24,692 representing staff debtors, an amount of K108,930
    representing GST collected and an amount of K111,905 representing GST paid. I
    was not provided with a staff debtors listing and GST returns file and other
    appropriate records to confirm and verify these balances. As a result, I was unable
    to satisfy myself as to the accuracy, completeness and existence of these balances.

    Inventories – K251,104

    My review noted that the Company had disclosed inventories at K251,104 in the
    statement of financial position. However, I was unable to satisfy myself concerning
    the inventory quantities held at 31 December 2012 as I was not present to observe
    the physical count of inventories. Further, adequate inventory valuation records
    were not maintained during the period. Consequently, I was unable to perform audit
    procedures to confirm the accuracy, valuation and existence of stock balance as at
    31 December 2012.

    Property, Plant and Equipment – K6,228,446

    My review of the Company’s Property, Plant and Equipment revealed the following
    issues:

    Details of additions amounting to K812,058 were not provided for my
    verification;
    K2,975,074 worth of assets were transferred by the shareholder (Unitech
    Development and Consultancy Limited) as equity contribution in kind in 2011.
    However, shareholder’s agreement or valuation report was not provided for me
    to verify the correctness of the balance of the assets transferred;
    The ownership documents in respect of the Land and Buildings worth
    K1,400,000 which was part of the assets transferred was not provided; and
    A physical asset verification exercise was not carried out by the Company to
    verify the existence of the assets.

    – 230 –

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  • National Analytical and Testing Services Limited

    In the absence of these information, I was unable to comment on the accuracy,
    valuation, completeness and existence of the Company’s Property, Plant and
    Equipment balance at year end.

    Related Parties – K158,621

    Included in the above balance and as stated in the Note 11 to the financial statement
    is an amount of K177,501 related to Unitech Debtors account and an amount of
    K166,500 related to Unitech creditors account. Details including tenancy agreement
    in respect of the Unitech Creditor’s account explaining the balance and the
    movements in the accounts were not provided. As a result, I was unable to comment
    on the completeness and accuracy of the related parties balance presented as at 31
    December 2012.

    Share Capital – K7,500,000

    I noted during my review of the share capital of the Company and as per the
    company extract obtained from IPA, 39% was to be Unitech Development and
    Consultancy Limited (UDC) and 61 % is Star Mountain Institute of Technology
    Limited (SMIT). As at year end capital contribution by SMIT amounted to
    K3,000,000 which is 40% as opposed to 61% on the extract. In view of this
    inconsistence, I was unable to comment on the fair statement of share capital
    balance.”

    51A.2.2 Audit Observations Reported to the Ministers

    My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
    audit of the accounts and records of the Company for the year ended 31 December
    2012 was issued on 31 August 2020. The report contained the following
    observations:

    Stock Provision Policy

    The Company did not have in place a system or process of identifying obsolete,
    damaged and slow moving stock. Consequently, the Company did not make
    appropriate provisions for its stock categories at year end. I brought this issue to the
    attention of the management and management responded as follows:

    “We will work out the provision policy in consultation with the PNG University of
    Technology. We are working currently on the inventory to establish a prudent
    inventory management system.”

    – 231 –

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  • National Analytical and Testing Services Limited

    Equipment Purchase Agreement

    A deposit of K200,000 was made to Melanesian Metal Corporation Limited
    (MMCL) as party of an agreement to purchase geo chemical equipment at
    Malahang in Lae. The agreement was entered in 2011 between MMCL and
    PNGSDP for an agreed transaction price of K1.2 million. However, the following
    deficiencies were noted:

    a) There was no separate agreement entered between NATSL and MMCL.
    Instead, the deposit/purchase was done based on the agreement between
    MMCL and PNGSDP; and

    b) The title and ownership of the geo chemical equipment has not been
    transferred to the buyer as stipulated under Section 2 of the agreement.

    Consequently, the Company may not be able to defend any legal claims arising
    from the transaction and the use of the equipment. Further, funds had been
    expended on asset not owned by the Company. I brought these issues to the
    attention of the management and the management responded as follows:

    “The oversight was taken very seriously and conveyed to the management. This
    transaction is now being checked to ascertain whether there was any form of
    understanding between PNGSDP and NATSL prior to the transaction between
    MMCL and NATSL. Otherwise proper legal processes of purchase agreement have
    been stressed to the management and communicated to the Company’s Board as
    well to avoid such oversights in any future agreements the Company may enter
    into.”

    Group Tax

    I noted during my review that the Company did not remit group tax to Internal
    Revenue Commission (IRC) on a timely basis. The group tax has accumulated since
    2011 to K292,794. As a result, the Company did not comply with Sections 65H and
    65I of the Income Tax Act 1959. I brought this issue to the attention of the
    management and management responded as follows:

    “All outstanding group tax liabilities sorted and final payment of outstanding to be
    completed in December 2019. Returns are now furnished on time as per Income Tax
    Act.”

    Tenancy Agreement for Staff Rental

    My review revealed that the Company’s staffs were accommodated in Unitech’s
    staff houses. As at 31 December 2012, a general journal amounting to K111,000
    was processed to recognise total annual rent payable to Unitech.

    – 232 –

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  • National Analytical and Testing Services Limited

    However, I was not provided copies of tenancy agreements to verify the rates. As a
    result, I was unable to confirm the accounting treatment nor was I able to satisfy
    myself as to the effectiveness of the internal controls surrounding staff rentals
    between the University and the Company.

    51A.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection
    and audit of the accounts and records and the examination of the financial
    statements of the Company for the years ended 31 December 2013, 2014, 2015,
    2016 and 2017 have been completed and the results were being evaluated.

    The Company had not submitted its financial statements for the years ended 31
    December 2018, 2019 and 2020 for my inspection and audit.

    – 233 –

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  • 51B. UNITECH DEVELOPMENT AND CONSULTANCY COMPANY
    LIMITED (A subsidiary of PNG University of Technology)

    51B.1 INTRODUCTION

    Unitech Development and Consultancy Company Limited was incorporated under
    the Companies Act.

    51B.1.1 Function of the Company

    The primary function of the Company is to carry on the business and activities of
    consultants, and to render management, industrial, commercial, financial,
    secretarial, public relations, industrial relations and other related services to any
    person, firm or corporation engaged in any business, trade or activity. The Company
    also carries on a business of insect farming.

    51B.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    51B.2.1 Comments on Financial Statements

    My report in accordance with the provisions of the Companies Act on the
    Company’s financial statements for the years ended 31 December 2014, 2015, 2016
    and 2017 were issued on 31 March 2021. The reports contained similar Adverse
    Opinions, hence, only 2017 report is reproduced:

    “ADVERSE OPINION

    In my opinion, because of the significance of the matters described in the Basis for
    Adverse Opinion paragraphs, the financial statements of Unitech Development and
    Consultancy Limited for the year ended 31 December 2017:

    (i) do not give a true and fair view of the financial position of the Company as at
    31 December 2017, the results of its operations, the cash flows and the
    changes in equity for the year then ended; and

    (ii) the financial statements have not been prepared in accordance with the
    Companies Act 1997, International Financial Reporting Standards and other
    generally accepted accounting practice in Papua New Guinea.

    – 234 –

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  • Unitech Development and Consultancy Company Limited

    BASIS FOR ADVERSE OPINION

    Opening Balances

    My report on the financial statements of the Company for the year ended 31
    December 2016 was an adverse opinion in respect of Property Development – Work
    in Progress, Property, Plant and Equipment, Revenue, Employee Costs and
    Consolidation of Subsidiary account. Since the opening balances enter into the
    determination of the results of operations and cash flows of the Company for the
    year ended 31 December 2017, any adjustment necessary on such opening balances
    would have a consequential effect on the financial performance and cash flows for
    the year ended 31 December 2017. As a result, I was unable to determine whether
    any such adjustment to the financial performance and cash flows of the Company
    might be necessary for the year ended 31 December 2017.

    Property Development – Work in Progress (WIP) K11,290,000

    The Company reported a balance of K11,290,000 under Property Development –
    WIP and related balance Unitech Affordable Homes under non-current liabilities in
    the statement of financial position. This balance relates to the revaluation of land
    situated at Tenth City based on independent valuations carried out by Melanesian
    Real Property Valuation Services in 2014. During my review, I noted the following
    issues:

    The land was given to Unitech Development & Consultancy Limited through
    verbal agreement by the University of Technology to hold, develop and sell. I
    have not sighted any written agreement between the University and UDC or the
    University council minutes authorising UDC to hold, develop and sell the land;

    The title to this land was still under the name of the University;

    The amount was classified under Property Development – WIP. However,
    during my physical inspection, I noted that there were no such development
    taking place except for two model houses which were already vandalized and
    not fit for human occupancy; and

    The related amount was disclosed under non-current liability titled Unitech
    Affordable Homes. However, I could not establish the basis on which the
    K11,290,000 was treated again as a liability.

    As a result, I was unable to confirm the completeness, accuracy and classification of
    the balances disclosed in the financial statement.

    – 235 –

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  • Unitech Development and Consultancy Company Limited

    Property, Plant and Equipment – K3,410,055

    During my review, I noted that the Company did not conduct a complete stock-take
    on all its assets for a number of years up to 31 December 2017. Stock-take is an
    essential function where all assets of the Company are properly counted and
    recorded in the Fixed Assets Register and that all assets in the Register are
    physically located, counted and tagged with serial numbers for verification and
    control. In addition, a motor vehicle sold in 2015 was still captured in the Fixed
    Assets Register at 31 December 2017.

    In the absence of regular physical stock-take, I was unable to perform audit
    procedures to confirm the existence of the assets in the Fixed Assets Register and
    the financial statement.

    Revenue – K652,689

    My review of revenue received by the Company during the year 2017 revealed the
    following discrepancies:

    No checks done by person(s) in charge of finance before postings;

    No schedules of receipts and deposits maintained to show the receipts collected
    and deposited during the year;

    Receipts were not filed in sequential order according to their receipt numbers for
    ease of reference and audit trail; and

    Several receipts were missing for me to confirm and verify revenue from
    general ledger to the actual receipts.

    As a result, I was unable to perform audit procedures to confirm the accuracy and
    completeness over the revenue balance presented in the financial statement at year
    end.

    Employee Costs (Payroll) – K180,157

    Payroll summaries maintained for the year under review were incomplete. I was
    unable to extend necessary audit procedures to verify and confirm the balances
    disclosed in the financial statements. As a result, I was unable to confirm the
    accuracy and completeness over the employee costs balance as at 31 December
    2017.

    – 236 –

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  • Unitech Development and Consultancy Company Limited

    Consolidation of Subsidiary Accounts

    The Company has a subsidiary National Analytical and Testing Services Limited.
    The accounts for the year ended 31 December 2017 did not include the effects of the
    subsidiary transactions. A deviation from the International Financial Reporting
    Standards 10 “Consolidated Financial Statements.””

    51B.2.2 Audit Observations Reported to the Ministers

    My reports to the Ministers under Section 8(2) of the Audit Act on the inspection
    and audit of the accounts and records of the Company for the years ended 31
    December 2014, 2015, 2016 and 2017 were issued on 31 March 2021. The reports
    contained similar observations, hence, only 2017 report is reproduced:

    Corporate Governance

    My review of corporate governance revealed the following issues:

    1. Board Meeting Minutes

    Minutes of the meetings held and deliberated in 2017 were not signed by the
    Chairman to authenticate the board meeting minutes. In the absence of signed
    board meeting minutes, I was unable to confirm whether the proceedings
    recorded were true and whether issues deliberated were for the best interest of
    the Company.

    I brought this issue to the attention of the management and they responded as
    follows:

    “We agree with the observation and recommendation to improve the situation.
    We will get the Board Chairman and Secretary to sign the board meeting
    minutes after every meeting as a mandatory requirement.”

    2. UDC Shareholders

    UDC shareholders according to IPA company extract were former Chancellor
    and Vice Chancellor instead of University of Technology. I therefore could
    not determine the legal ownership nor ascertain whether benefits to
    shareholders were appropriately administered if any.

    Management responded to my concern as follows:

    “We agree with the observation. We will file with the IPA to amend the
    necessary change in the IPA records so that University is 100% shareholder
    of the UDC.”

    – 237 –

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  • Unitech Development and Consultancy Company Limited

    3. Unitech Investment Holdings Limited (UIH Ltd)

    In 2014, the UDC Board created Unitech Investment Holdings Limited (UIH
    Ltd) to act as a vehicle for investment to oversee the subsidiaries and to
    manage Land and Housing Development. Land identified as commercial land
    will be passed on to UIH Ltd. This Company was registered with IPA.
    However, no reports such as financial statements or operational activity
    reports were provided for my verification. As a result, I was unable to confirm
    whether the Company was in operation and transactions occurred nor establish
    the basis on which the Company was created as viable and in the best interest
    of the UDC and the University.

    Management advised as follows:

    “We agree with the observation. This company was registered by the Board
    then in October 2013 without the University’s knowledge and consent.
    Therefore, the company has not commenced operations of any sort and has
    been dormant up to now. The company does not have any bank account. The
    University will apply for deregistration of this company as it is not owned or
    related to Unitech Development Consultancy Limited.”

    Reporting Requirements under Companies Act 1997

    Section 179 of the Companies Act 1997 requires the Board of Directors of a
    company to prepare financial statements or accounts of a company within five (5)
    months after the balance date. I noted that the UDC Board and management did not
    comply with this requirement for the 2017 financial year. As a result, the Company
    has breached Section 179 of the Companies Act 1997.

    Journal Entries

    I noted that there were a lot of adjusting and reversal entries being passed. From
    samples selected for verification, I noted the following:

    i) Journals entries posted into the general ledger (GL) were not independently
    reviewed and stamped as posted; and

    ii) No segregation of duties in raising, checking and approving of journal entries
    to ensure officers take responsibility and that the adjustments were necessary
    and valid.

    Independent review of journals posted into the general ledger system is the key
    control to detect fraud and errors in financial reporting. Segregation of duties is
    encouraged in this area. Without such controls, the general ledger and the resulting
    financial report produced may be materially misstated.

    – 238 –

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  • Unitech Development and Consultancy Company Limited

    Trade Receivables and Payables

    The Company reported K1,961,517 and K807,567 for trade and other receivables
    and trade creditors in Notes 9 and 12 to the financial statements respectively. Most
    of these receivables and payables remained outstanding from prior years and were
    due well over 90 days. This indicated that management was not exercising control
    over its debtors nor settle its creditors on a timely basis. Consequently, well overdue
    trade debtors may expose the Company to the risk of being insolvent and the
    Company may not be able to pay its creditors on time and may force the Company
    to liquidate its assets.

    Group Tax Payable

    As per the Income Tax Act, 1959 (as amended), group tax should be remitted to
    Internal Revenue Commission (IRC) within seven days of the following month.
    However, during my review of the group tax liability, I noted that the Company did
    not remit its group tax for the year under review and prior years to IRC on a timely
    basis.

    In the absence of timely remittance of group tax to IRC, the Company has breached
    the Income Tax Act. In addition, failure to remit group tax can also attract penalties
    and additional fees on top of the outstanding balance.

    I brought this issue up to the attention of the management and management
    responded as follows:

    “We agree with the observation and implication. We will make installment plans
    with IRC and start remitting monthly tax returns. We are waiting for IRC to confirm
    but from January 2021 we are paying monthly group taxes.”

    Expenses – K409,765

    My review of the Company’s expenditure revealed the following issues:

    i) Expenses totaling K220,616 (over 54% of the total expenditure) were raised as
    cash cheque payments;

    ii) No segregation of duties as the former managing director and the payroll
    officer were observed to be the only ones involved in raising and approving
    expenditures; and

    iii) Cheque copies not attached with the vouchers for confirmation and no
    evidence of independent reviews before posting of the cheque vouchers.

    – 239 –

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  • Unitech Development and Consultancy Company Limited

    Due to the above observations, I was not able to comment whether expenses were
    paid transparently and correctly recorded. I raised these issues and recommended
    management to establish proper controls and segregation of duties around the
    procurement process.

    51B.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Company had not submitted its financial
    statements for the years ended 31 December 2018, 2019 and 2020 for my inspection
    and audit.

    – 240 –

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  • 52. PARLIAMENTARY MEMBERS’ RETIREMENT BENEFITS
    FUND

    52.1 INTRODUCTION

    52.1.1 Legislation

    The Parliamentary Members’ Retirement Benefits Fund was established under the
    Parliamentary Members’ Retirement Benefits Fund Act 1997 which came into
    operation on 16 July 1997.

    52.1.2 Objectives of the Fund

    The objectives of the Fund are to provide pensions and retirement benefits for
    Members and former Members of Parliament and the former House of Assembly and
    to provide benefits to dependant spouses and juvenile dependants. This Act repealed
    the Parliamentary Members’ Retirement Benefits Act which came into operation in
    1982.

    52.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Fund for the years ended 31 December 2017, 2018 and 2019 had been completed
    and results were being evaluated.

    The Fund had not submitted its financial statements for the year ended 31 December
    2020 for my inspection and audit.

    – 241 –

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  • 53. PUBLIC CURATOR OF PAPUA NEW GUINEA

    53.1 INTRODUCTION

    53.1.1 Legislation

    The Office of the Public Curator of Papua New Guinea was established under the
    Public Curator Act (Chapter 81).

    53.1.2 Functions of the Public Curator

    The main functions of the Public Curator are to act as an administrator of estates; an
    executor appointed under a will by a member of the public; and/or an official trustee.

    53.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Public Curator’s Office for the year ended 31 December 2014 had been completed
    and the audit reports were being finalised.

    The financial statements of the Office for the years ended 31 December 2015, 2016
    and 2017 had been submitted for my inspection and audit and arrangements were
    being made to commence the audits shortly.

    The Office had not submitted its financial statements for the years ended 31
    December 2018, 2019 and 2020 for my inspection and audit.

    – 242 –

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  • 54. ROAD TRAFFIC AUTHORITY (formerly National Road Safety
    Council)

    54.1 INTRODUCTION

    54.1.1 Legislation

    The Road Traffic Authority (formerly National Road Safety Council) was established
    under the Road Traffic Authority Act 2014. This Act was certified on 5 August 2014
    thereby repealing the National Road Safety Act 1997. The Authority only commenced
    its operational activities in 2017.

    Under the Road Traffic Authority Act 2014 all assets, liabilities, rights, entitlements
    and choice-in action of the National Road Safety Council and the Land Transport
    Board which related to the functions of the Council were transferred to the Authority
    upon the commencement of this Act.

    54.1.2 Objective of the Authority

    The objective of the Authority is to manage and administer the regulation, safety and
    efficient use of land transport throughout Papua New Guinea.

    54.1.3 Functions of the Authority

    The functions of the Authority are to:

    establish, administer and enforce regulatory requirements for land transport in
    Papua New Guinea, including setting fees and charges for services provided by
    the Authority;
    within the resources available to the Authority, provide for the safe and efficient
    use of land transport in Papua New Guinea;
    assist, advise and work cooperatively with the Police Force, Provinces and other
    organisations in relation to land transport regulatory matters, road safety and the
    efficient use of land transport;
    monitor the road safety performance of the public road network and to develop
    and implement action plans for improvements;
    manage data for activities within the land transport system including
    maintaining and preserving records, registers and documents in relation to the
    activities;
    undertake investigation into land transport accidents, incidents and report to the
    Minister and public on the findings of such investigations;
    promote and conduct research into land transport regulatory matters and road
    safety;

    – 243 –

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  • Road Traffic Authority

    monitor and evaluate the effectiveness of programs and activities concerning
    land transports regulatory matters and road safety;
    promote and conduct educational and awareness programs to stimulate
    compliance with land transport regulatory requirements and road safety;
    advise the Minister on all functions specified in this section;
    perform other functions as are given to the Authority under this Act, the
    regulations, the rules or any other law; and
    do all things incidental, consequential or convenient in the exercise of the
    Authority’s functions and powers.

    54.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Authority had submitted its financial
    statements for the year ended 31 December 2019 for my inspection and audit and
    arrangements had been made to commence the audit shortly.

    The financial statements for the year ended 31 December 2020 had not been
    submitted by the Authority for my inspection and audit.

    – 244 –

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  • 55. SECURITY INDUSTRIES AUTHORITY

    55.1 INTRODUCTION

    55.1.1 Legislation

    The Security Industries Authority was established under the Security (Protection)
    Industry Act 2004. This Act came into operation on 1 March 2005. The Authority
    commenced its operations in April 2005.

    55.1.2 Functions of the Authority

    The principal functions of the Authority are to:

    grant licenses and permits under the Act;
    fix minimum standards of training applicable to holders of licenses and permits
    respectively;
    establish, provide or approve training institutions and facilities or permit such
    training institutions or facilities as it may approve, to conduct training or to be
    used for training for the purpose of training of persons who intend to perform
    security officers’ duties or security guard duties;
    approve any equipment other than firearms used by a holder of a license or
    permit or required by a customer to be installed on his premises or property;
    ensure that the holder of a license or permit operates or carries out his duties or
    performs his functions in accordance with the terms and conditions of the
    license or permit and subject to the provisions of this Act;
    formulate a Code of Conduct governing the disciplinary matters and work ethics
    within the Industry; and
    undertake such other functions and exercise such powers as may be conferred on
    it by this Act or any other law.

    55.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Authority had not submitted its financial
    statements for the years ended 31 December 2017, 2018, 2019 and 2020 for my
    inspection and audit despite numerous reminders from my Office.

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  • 56. SMALL AND MEDIUM ENTERPRISES CORPORATION
    (Formerly Small Business Development Corporation)

    56.1 INTRODUCTION

    56.1.1 Legislation

    The Small and Medium Enterprises Corporation (formerly Small Business
    Development Corporation) was established under the Small and Medium Enterprises
    Corporation Act 2014. This Act came into operation on 10 February 2015.

    56.1.2 Functions of the Corporation

    The functions of the Corporation are to:

    co-ordinate, monitor and evaluate the implementation of the policies, strategies
    and programs for small and medium enterprises in accordance with the Small
    and Medium Enterprises Policy, the Master Plan of the Government as directed
    by the Small and Medium Enterprises Development Council and the Ministry
    responsible for trade, commerce and industry matters;
    undertake studies concerning the development of small and medium enterprises;
    liaise with the National Executive Council or relevant Ministry in the
    implementation of the policies, strategies and programmes for small and
    medium enterprises;
    being responsible for collecting, sourcing, keeping and disseminating
    information on small and medium enterprises;
    act as the Secretariat to the Council;
    in the manufacturing and services sectors:
    ‒ to undertake promotional activities to promote growth of small and
    medium enterprises;
    ‒ to promote co-operation amongst small and medium enterprises;
    ‒ to encourage industrial linkages with the large industries;
    ‒ to develop human resource in the small and medium enterprises; and
    undertake any work and investments necessary to promote and grow the small
    and medium enterprises sector in the economy.

    56.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Corporation for the year ended 31 December 2018 had been completed and results
    were being evaluated.

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    The Corporation had submitted its financial statements for the year ended 31
    December 2019 and arrangements were being made to commence the audit shortly.

    The Corporation had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 247 –

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  • 57. TOURISM PROMOTION AUTHORITY

    57.1 INTRODUCTION

    57.1.1 Legislation

    The Tourism Promotion Authority was established under the Tourism Promotion
    Authority Act 1993. This Act came into operation on 3 June 1993 thereby repealing
    the Tourism Development Corporation Act 1990. The Authority commenced its
    operational activities on 1 April 1993.

    Under the Tourism Promotion Authority Act all assets held by and obligations and
    liabilities imposed on the Tourism Development Corporation which related to the
    functions of the Authority were transferred to it (the Authority), and the rest of the
    assets and liabilities were transferred to the National Cultural Committee on 3 June
    1993.

    57.1.2 Functions of the Authority

    The principal functions of the Authority are to:

    foster the development of tourism in PNG;
    formulate a tourism policy for consideration by the NEC and to implement the
    tourism policy approved by the NEC;
    promote PNG overseas as a tourist destination;
    co-ordinate the overseas promotional efforts of the PNG tourism industry;
    encourage the provision, development and expansion of tourism infrastructure,
    facilities and products in PNG; and
    enhance awareness within PNG of the tourism industry and tourism opportunities.

    57.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the Authority for the year ended 31 December 2019 had been completed and results
    were being evaluated.

    The Authority had not submitted its financial statements for the year ended 31
    December 2020 for my inspection and audit.

    – 248 –

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  • 58. UNIVERSITY OF GOROKA

    58.1 INTRODUCTION

    58.1.1 Legislation

    The University of Goroka was established under the University of Goroka Act 1997.
    This Act came into operation on 1 January 1997.

    Under this Act, the Goroka Campus of the University of Papua New Guinea was
    transferred to the University of Goroka together with all staff and students, buildings
    and grounds, equipment, teaching and research facilities, and other assets and
    liabilities both within and outside the Campus.

    58.1.2 Objectives of the University

    The objectives of the University are dedicated to the pursuit, advancement and
    dissemination of knowledge, understanding and wisdom; the paying of particular
    attention to the human resource development and other development needs of PNG;
    and endeavouring to achieve academic and professional excellence to meet those
    needs through teaching, research and community service.

    58.1.3 Powers of the University

    The University shall have the power to:

    grant such degrees as are authorised by the Statutes and such diplomas,
    certificates or other academic awards as it determines;
    provide instruction and facilities for study, education and research to persons
    registered as preparing for degrees, diplomas, certificates or other awards of the
    University;
    provide facilities for extramural study and continuing education to persons,
    whether members of the University or not, in such fields and in such manner as
    the University may from time to time determine;
    co-operate in pursuance of any of the objectives of the University with any other
    bodies or persons to enter into agreements authorised by Statute with institutions
    for their affiliation with or incorporation into the University;
    subject to the Salaries and Conditions Monitoring Committee Act, to appoint
    academic, administrative and other staff on such terms and conditions of service
    as the University may determine;
    provide for promoting the health and general welfare of the students of the
    University, including the establishment and supervision of residence;

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    regulate and enforce discipline among the employees and students of the
    University by such measures as the University may determine;
    cancel, annul or revoke any act done in the exercise of these powers; and
    do all such other acts or things as may be done under the provisions of this Act
    or these powers or as may be conducive to the exercise of the attainment of any
    of the objectives of the University.

    58.1.4 Subsidiaries of the University

    The University has two Subsidiary Companies, Unigor Consultancy Limited and
    Unigor Humi Catering Limited which were incorporated under the Companies Act.
    Comments in relation to these Companies are contained in paragraphs 58A and 58B
    of this Report respectively.

    58.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

    58.2.1 Comments on Financial Statements

    My report to the Ministers under Section 8(4) of the Audit Act on the University’s
    financial statements for the year ended 31 December 2017 was issued on 7 April
    2021. The report contained a Disclaimer of Opinion:

    “DISCLAIMER OF OPINION

    Because of the significance of matters described in the Basis for Disclaimer of
    Opinion section of my report, I have not been able to obtain sufficient appropriate
    audit evidence to provide a basis for an audit opinion. Accordingly, I do not express
    an opinion on the accompanying financial statements of the University of Goroka for
    the year ended 31 December 2017.

    BASIS FOR DISCLAIMER OF OPINION

    Opening Balances

    The 2016 audit report was issued with a Disclaimer of Opinion due to limitation of
    scope arising from inability to obtain satisfactory accounting records, source
    documentations and reconciliations to satisfy myself as to the accuracy and
    completeness of opening balances of Fixed Assets, Cash at Bank, Investment, Equity
    and Cash Flows. I was unable to perform sufficient audit procedures to satisfy myself
    as to the accuracy or completeness of the opening balances. Consequently, I was
    unable to quantify the effects of any material misstatements in the opening balances
    that might have consequential effects on the balances stated in the financial statements
    of the University for the year ended 31 December 2017.

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    Statement of Cash Flows

    My review of the cash flows revealed a variance of K10,862,083 between the year-
    end cash balance of K22,529,725 per the Consolidated Cash Flow Statement and the
    Cash at Bank balance of K11,667,642 in the Consolidated Balance Sheet. I further
    observed that the beginning Cash at Bank balance of K12,830,105 did not agree to the
    2016 comparative ending cash balance of K26,421,070 in the Consolidated Cash
    Flow statement, hence a material variance of K13,590,966 noted.

    I was therefore, unable to conclude on the accuracy and completeness of the
    Consolidated Statement of Cash Flows and the cash and cash equivalent balance
    disclosed in the consolidated balance sheet as at 31 December 2017.

    Statement of Changes in Equity

    My review of the consolidated Statement of Changes in Equity in the Internal
    Revenue Account revealed three (3) transactions totaling K6,054,017 were debited to
    historical balance without proper supporting documentation. Due to lack of proper
    supporting documentation, I was not able to gain comfort on the accuracy and
    completeness of the equity balance disclosed as K25,079,929 at 31 December 2017.

    Cash at Bank – K11,667,642

    I observed the following during my review of the cash and cash equivalents balance:

    Variances between the cash at bank general ledger balance stated in the bank
    reconciliation and the cash at bank general ledger balances in the accounting
    system (MYOB) were noted in the Bank Reconciliations for the Grant and
    Internal Revenue accounts. Cumulative variances in aforementioned accounts
    totalled K2,457,803 and K87,117 respectively;
    I was not able to confirm the completeness and accuracy of the year end cash
    balances of the Special Purpose and Menifor Accounts disclosed as K1,147,706
    and K18,079 respectively in the Financial Statements due to lack of independent
    bank confirmations from the commercial banks;
    Bank adjustments (journals) with credit balances of K2,083,216 and K4,618,114
    were noted in the Grant and Internal Revenue account cash ledgers respectively.
    However, relevant supporting documents were not provided for my verification
    and confirmation for the basis of these adjustments;
    Cheques totaling K111,022 drawn through the Grant and Internal Revenue
    Accounts remained unpresented for more than one (1) year and have become
    stale. These cheques were not timely investigated and written back and/or
    adjusted in the accounts of the University; and

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    An amount of K225,135 bearing the receipt # CR011991 dated 6 October, 2016
    remained as outstanding deposit/deposit in transit for more than one (1) year.
    The University had recognized revenue for the prior year which it had not
    received.

    Due to insufficient supporting documentation and explanations, I was unable to
    neither gain comfort over the above transactions nor conclude on the accuracy and
    completeness of the cash at bank balance for the year then ended.

    Fixed Term Deposit – K565,841

    The University maintains fixed term deposits with Bank of South Pacific (BSP), ANZ
    and Westpac banks totaling K565,841 as disclosed at the year end. I was not provided
    with the necessary supporting documentation including investment schedules and
    certificates and independent bank confirmations for verification. I was therefore,
    unable to perform any reconciliation to confirm the existence, accuracy and
    completeness of the Investment and interest income earned as at 31 December 2017.

    Fixed Assets – K91,799,934

    My review of the fixed assets of the University revealed the following:

    Valuation of Land and Building

    The University has not carried out any revaluation exercise on all the land and
    buildings owned, and in its custody, to reflect the fair values of the land and
    buildings in accordance with International Accounting Standards 16
    (Measurement and Recognition). Consequently, I was unable to confirm the
    accuracy and valuation of the balances of K1,817,228 and K89,062,918 relating
    to land and buildings respectively disclosed in financial statement as at 31
    December 2017.

    Depreciation Charge – K3,033,942

    Depreciation charge was disclosed as K3,033,942 at 31 December 2017. I
    observed that depreciation charged was calculated based on the cumulative
    written down values being added to the acquisitions for 2017 without a complete
    and comprehensive Fixed Asset Register and depreciation schedule.
    Accordingly, I was unable to ascertain the completeness, valuation and
    allocation, and accuracy of depreciation expense balance of K3,033,942 and the
    Fixed Assets balance of K91,799,934 presented at year end.

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    Proper Accounting and Disclosure – Fixed Assets

    Physical inspection conducted on certain assets of the University revealed that a
    staff house was burnt down without proper accounting entries on the asset write-
    off reflected in the University’s books. I was therefore, unable to conclude on
    whether Fixed Assets were fairly disclosed, considering write-off’s and
    impairments as at the balance date.

    Trade Creditors – K6,743,316

    The University did not maintain a trade creditors’ aged listing to record and monitor
    outstanding invoices and creditor reconciliations in the year under review. This report
    is vital for monitoring invoices and settlements of bills, as it keeps track of invoices
    that are current, due and overdue and is crucial in ensuring that ending balances
    reconciles with the general ledger. As a result, I was unable to perform the necessary
    audit procedures to confirm the completeness and the accuracy of the creditors
    balance due to limitation of scope.

    Deferred Income – K73,842,307

    Deferred income disclosed at year end was K73,842,307. During my review, I noted
    that most of the projects (student dormitories stages 1-5 and staff housing) which
    corresponded to the deferred income has been completed however, no recognition of
    income was made to reduce the balance. As a result, I was not able to ascertain the
    treatment, completeness, and accuracy of the deferred income balance of K73,842,307
    disclosed at year end.

    Provisions for Staff Entitlements – Annual Leave – K669,308

    My review performed on the annual leave provisions revealed errors in the calculation
    of staff annual leave disclosed in the Financial Statements. I observed that the
    provisions for accrued annual leave for the year were computed based on a 12-month
    period from the date of last leave taken in 2017 to the next recreational leave apart
    from the balance date as a basis. As a result, I was unable to comment on the
    correctness of the staff entitlements balance stated at year end.

    Tuition & Other Fees – K26,936,055

    During my review of the tuition and other fees account, I noted the following
    discrepancies:

    Fraudulent bank deposit documents totaling K337,203 were receipted by the
    Bursary Division with only K4,771 actual deposits in the bank statements
    between the 2017 and 2018 registration periods;

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    A total of K2,084,491 in excess tuition fees receipted in 2017 was incorrectly
    recognized as Tuition Fees resulting in an overstatement of revenue apart from
    recognising this as deferred income in accordance with the measurement and
    recognition requirements of the International Accounting Standards (IFRS 15).
    Excess fees in accordance with the University’s policy are either deferred to the
    subsequent year of study or refunded upon the completion of the program;

    The University incorrectly decreased its current assets (tuition fee receivable) by
    K2,665,703 through journal entry (GJ001248) to recognize tuition fee paid in
    advance (relating to overpayment) instead of correctly reflecting the revenue
    and cash balances by increasing current liabilities (unearned revenue or fees
    paid in advance). As a result, the University’s tuition fee income was overstated
    and current assets understated by K2,665,703;
    Cash disbursements (Debits) and reversals totaling K216,396 and K11,325
    respectively charged against the tuition fees income accounts could not be
    verified due to insufficient supporting documentations from the management;
    Cash receipts totaling K1,973,639 could not be confirmed against the receipt
    books as copies of the receipts were not furnished for my verification; and
    Tuition fees totaling K1,030,616 received from the Distance Flexible Learning
    (DFL) account could not be confirmed as proper receipts and supporting
    documentation were not furnished for my verification.

    As a result, I was unable to ascertain the correctness and accounting treatment of
    tuition fees and further perform necessary audit procedures to gain comfort on the
    validity, accuracy and completeness of tuition fees income received in 2017.

    Accounting Treatment – School Fee Refundable, Refunds and Excess carried
    over Fees

    My review of the school fee refundable, refunds made and excess fees carried over to
    the subsequent year revealed the following discrepancies:

    The University did not correctly account for K2,742,381 of unearned tuition
    fee/excess fees refundable (Liability) relating to continuing students and
    refundable portions;
    Refunds totaling K1,549,677 were made (expensed) and charged against the
    tuition revenue by the University instead of correctly treating this portion
    initially as liability and subsequently reducing when payments are drawn; and
    As a result of the above, the accounting treatment for continuing students and
    10% administration fees noted from excess fees was not correctly recognised as
    income from unearned tuition fees.

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    I was therefore unable able to gain comfort on the correctness of the accounting
    treatments and to conclude on the accuracy and completeness of the amounts relating
    to the tuition fees refundable/excess fees disclosed in the Financial Statements as at
    balance date.”

    58.2.2 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 University for the year ended 31 December
    2017 was issued on 7 April 2021. The report contained the following significant
    maters:

    Council Meetings

    The University’s Standing Orders require the University Council to convene at least
    four (4) times in a year. During my review, I was provided with only one (1) Interim
    Council meeting minutes and as such I was not able to confirm if the Council had
    convened the required number of meetings in accordance with the Standing Orders. In
    addition, I was not able to conclude on whether the affairs of the University and
    decisions made including establishment of delegated authorities were properly
    discussed and sanctioned by the Council.

    I recommended the University to ensure that in the future council meetings should be
    properly convened, meeting resolutions be passed and meeting minutes should be
    duly signed by the chairman and secretary in accordance with the standing orders.

    Operational Policy Manuals

    Despite prior years recommendations, my review revealed that the operational
    procedural manuals used by the University in 2017 were still out-dated. The
    operational and procedural manuals and policies of an entity are control mechanisms
    that ensures uniform application of processes across all levels of management and
    must be formally established, well documented and communicated to all levels and
    functions of the University to be used by all personnel in the routine operational
    activities.

    The absence of clearly documented policy manuals and guidelines gives no clear road
    maps for governing the day to day operations of the University and further creates
    avenues that can lead to abuse of public funds including the risk of fraud and
    malpractice without detection.

    I recommended the University to revisit the outdated policies and ensure to have new
    ones in place. Management responded that they have taken note of our
    recommendation and advised that work is currently done on reviewing the various
    policies mentioned.

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    Internal Audit Function

    I observed that the University did not fully utilize the internal audit function to review
    various processes and systems and to provide necessary recommendation for the
    management to improve on the internal control weaknesses noted during the audits.
    There was no Internal Auditor employed in 2017 after the incumbent was terminated.
    Consequently, I was unable to comment on the systematic and timely review of
    internal processes by the Internal Audit Division and whether the Council was duly
    informed of weaknesses identified.

    I brought this to the attention of the management, and advised that the lack of
    performance and effectiveness in the internal audit function encourages system break-
    downs and weak internal controls resulting in mismanagement and abuse of public
    resources.

    I recommended that the internal audit function is adequately resourced and utilized for
    regular systems and processes reviews.

    Fixed Assets

    Financial Management Manual Instruction Part 32 requires all public bodies to
    ensure that adequate control is maintained over its assets. My prior reports including
    the 2017 audit revealed that the University did not have an updated and complete
    Fixed Assets Register (FAR). Fixed asset acquisitions for the year were captured and
    added to the cumulative balance from prior years. In addition, there was no clear
    policy formulated by the University in relation to the acquiring of assets,
    capitalization and the disposal. I also noted that the University did not conduct a
    complete stock-take on its Fixed Assets for a number of years up to 31 December
    2017.

    Consequently, I was unable to place reliance on the controls surrounding the
    management and use of the fixed assets of the University and further conclude
    whether the fixed assets were properly safeguarded in 2017.

    These issues were brought to Management’s attention on numerous occasions
    however; not much improvement was noted so far.

    Cash at Bank

    My review of the controls surrounding the bank reconciliation function for the
    University’s six (6) bank accounts revealed no segregation of duties. There was no
    indication of the preparer and the reviewer’s name and signature on the
    reconciliations including the dates prepared and reviewed to confirm the accuracy and
    timeliness of the preparation.

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    Due to these control weaknesses, fraudulent bank deposits for inflated amounts were
    receipted by the Bursary Division without proper reconciliations and confirmation. I
    further highlighted the importance of having in place effective controls over cash
    management as cash is very liquid in nature.

    The management noted my finding and advised that they have now taken on board
    two officers who will be responsible for bank reconciliations. These officers will be
    advised to sign off once they complete the reconciliations and pass on to senior
    officers for review and approval.

    Staff Advance Policy

    I noted that the University did not have a staff advance policy to specify the eligibility
    criteria, penalties on default, interest on advance and when advance should be fully
    recouped. In the absence of this control mechanism, I was unable to place any reliance
    on the effectiveness of the controls surrounding the administration of the distress loan
    given to staff members.

    I recommended the University to have in place a staff advance policy to effectively
    manage the advances given to staff members. The Management concurred with my
    recommendations and agreed to take corrective actions.

    Tuition Fees Income – System Breakdown

    I observed a lack of proper coordination between the Bursary and Student
    Administration Divisions in the management of student tuition fees. I further noted
    that proper control mechanisms within the revenue cycle were vague despite my
    recommendations in prior years. Consequently, I was unable to place reliance on the
    internal control mechanisms which proved to be weak and could not deter student
    fraud.

    From the fraudulent receipts of K337,203, only K4771 was deposited. I sought
    explanation on the management’s position for the unaccounted balance of K332,432
    and whether the University is taking appropriate action to implement audit
    recommendations.

    The University acknowledged my finding and responded as follows:

    “We take note of the issue raised and want to comment that this was an unfortunate
    situation and the University was caught off guarded. The students involved in
    defrauding the University were identified and referred to the police for prosecution
    and given exclusion letters.

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    In addressing this unfortunate situation and going forward, the management has
    resolved that all tuition fees should be paid:

    a) Via EFTPOS machines; and
    b) For direct deposits for private and corporate sponsorships including direct bank
    transfers, before receipts are issued, we must check with our statement and
    confirm the deposit and then issue a receipt.”

    Payroll

    My review of the Payroll and human resources management of the University in 2017
    revealed the following weaknesses:

    Payroll System

    I noted that the Payroll system (MYOB) is not integrated with the main line data
    processing and reporting systems of MYOB accounting software. Further,
    payroll calculations were not reviewed and checked by appropriate financial
    delegate on a timely manner. I also noted that there was no proper independent
    staff establishment registry kept and maintained by HR division for regular
    comparison against payroll listings. Consequently, I was not able to place
    reliance on the effectiveness of the internal controls surrounding the
    administration of payroll.

    I drew management’s attention on the implications of not having in place
    effective controls over the administration of payroll and recommended that
    appropriate payroll accounting system be introduced. Similar issues were raised
    in the prior year reports for corrective action to be taken by the University.

    The University responded that they are currently aware of this issue and are
    therefore looking at introducing a new computerised payroll system. Dialogue
    has already started with Department of Treasury/Finance to adopt ALESCO
    Payroll system currently used by most government departments. Budget
    allocation of K100,000 has been made and it is anticipated that this project will
    commence by January 2021.

    Part Time and Casual Employees

    Temporary staff (Lectures) and casuals (Support Staff) were remunerated from
    the Internal Revenue Account but were not included in the approved University
    structure. Further, casuals were engaged by the University for more than a year.
    As such, I was unable to establish whether the University had adequately
    budgeted for these temporary staff based on the approved staff ceiling from
    DPM. Further, I was not able to confirm whether the University has adhered to
    General Order 7, General Orders 10.7 and 10.8 directives.

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    I recommended the University to review its structure and provide for these staff
    and remunerate them from the recurrent account.

    The management concurred with the recommendation and responded as follows:

    “We take note of the issue raised in regards to Part-time and Casual employees
    of the University. We have raised this concern to the various Divisions of the
    University, Human Resource, employing Divisions or Schools and the Top
    Management Team. We are looking for ways to address this as we are mindful
    of the implications that this can have on the institution.”

    Top Management Team (TMT) Allowances

    A total of K133,417 was paid as claims to senior officers of the University as
    TMT approved allowances comprised of housing allowances, public utilities,
    vehicle allowances, cell phone allowances, entertainment allowances, domestic
    services, education subsidies and medical. Officers who qualified for these
    claims were the Vice Chancellor, 2 Pro-Vice Chancellors, Registrar, Bursar and
    Manager HR of the University. These allowances are derived from SCMC
    approved salary scales from DPM and were claimed outside of payroll through
    cheques payments. Given the tax ramifications on these allowances, the
    University had breached the Income Tax Act 1959 with such tax evasion
    practices as I was unable to verify whether proper tax assessments were
    performed and remitted under the Income Tax Act 1959 (as amended).

    I sought explanation from management as to why such practices are allowed by
    the University despite my recommendations to cease this practice to comply
    with the Income Tax Act. The Management is yet to adhere to my
    recommendations.

    Double Dipping of Allowances

    I observed that some Top Management Team (TMT) members received fringe
    benefits (entertainment allowances, utilities and phone allowances) fortnightly
    and also claim through TMT approved allowances. This resulted in double
    dipping of allowances.

    I requested management to provide explanation on why such practices are
    entertained by the University and advised management to cease this practice
    immediately.

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    Salary/Wages Tax Declaration Forms (S3 forms)

    I noted that salary/wage tax declaration forms (S3) were not updated and kept in
    file. Such forms are important to determine how many dependents are being
    declared and/or any variation for tax purposes are assessed and approved. As a
    result, I was unable to confirm the dependents declared for tax purposes on
    payroll.

    I recommended the University to ensure to update and maintain salary/wages tax
    declaration forms regularly for management and audit purposes. Management
    responded that at the beginning of every initial employment of an employee, they are
    given salary/wages tax declaration forms (S3) to complete. It is the responsibility of
    the individual staff to update their personal records by filling in the S3 forms every
    time there is a change in the family dependents.

    Other Internal Control Weaknesses

    Other internal control weaknesses noted during my review include the following:

    There was no segregation of duties over collection, receipting and reconciling
    deposits to cash at bank functions by competent personnel. I noted the lack of
    audit trail and that reconciliations were not promptly done resulting in
    significant variances noted between the income transactions recorded in the
    Cash Receipts Journal and the General Ledger;

    Payments amounting to K343,325 in relation to travel and subsistence expenses
    for the year were not acquitted by the designated staff of the University during
    the year. I also observed that a Travel Advances Register was not maintained by
    the University in 2017 and prior years, contravening Part 20 paragraph 11.2
    and Part 20 paragraph 12.10 of the Financial Management Manual;

    I was not able to confirm whether due processes were followed in the
    engagement of service providers for payments worth K128,286 as I was not
    provided the contract agreements or supporting explanations to substantiate the
    basis for these payments. The University did not observe Financial Instruction
    2/2013 requiring all head of agencies (CEO) to ensure minor contract
    agreements are in place and executed properly for contracts or purchases valued
    between K50,000 – K500,000;

    I was unable to comment on whether the Council expenses had been in the best
    interest of the University and the State. Payments totaling K437,127 were made
    (relating to the Honorarium Policy) to two (2) working groups headed by
    Council Members. Also included in the total payments was K90,000 paid to
    committee chairpersons (Council Members) and K186,500 insurance cover.

    – 260 –

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  • University of Goroka

    I was not able to comment on the legitimacy of the above payment as members
    of the Council are not entitled to insurance cover for medical and professional
    indemnity as a condition of their appointment. Further, the University did not
    maintain proper acquittals for travel and subsistence related expenditures by the
    Council totaling K768,522; and allowances totaling K105,997 paid to Council
    Members could not be reliably ascertained. These payments are in excess of the
    standard stipend allowances for members of the Council per the DPM approved
    rates;

    A total of K302,268 was paid in cash instead of raising cheques to appropriate
    service providers and payees which contravene the requirement of The
    University’s Accounting Manual (Section 6.4.4) which notes that “only in
    exceptional circumstances the cheque signatory may endorse a cheque to be
    paid in cash”;

    I noted instances where payments totaling K91,929 were made to senior officers
    of the University for signing of cheques and for other duties perceived as outside
    their job description. I was unable to ascertain on what basis these payments
    were made to these officers. This practice was noted during the prior years’
    audits as well. Such payments are deemed improper; and

    The University did not fully comply with Section 62(1) of the Public Finances
    (Management) Act 1995 (as amended) requiring Public Bodies to keep proper
    account and records of its affairs. As such, payment vouchers totaling
    K1,041,297 were missing and not provided for my verification.

    Due to lack of source documents and proper record keeping, I was unable to perform
    the necessary audit procedures to ascertain the occurrence and the authenticity of the
    above payments.

    I drew management’s attention to these weaknesses and was advised that the
    University has taken note and steps will be taken to address these issues.

    58.3 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the University had not submitted its financial
    statements for the years ended 31 December 2018, 2019 and 2020 for my inspection
    and audit.

    – 261 –

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  • 58A. UNIGOR CONSULTANCY LIMITED
    (Subsidiary of the University of Goroka)

    58A.1 INTRODUCTION

    Unigor Consultancy Limited is 100% owned by the University of Goroka. It was
    incorporated on 29 March 2000 as a consultancy company under the Companies
    Act.

    58A.1.1 Objectives of the Company

    The Company’s objectives are to:

    advance, promote, assist and encourage the educational purposes of the
    University through;

    ‒ short term programs for and on behalf of the University tailored to the
    needs of clients; and
    ‒ research, consultancy and publication of all educational materials for
    commercial purposes;

    conduct or undertake any other business activity both within and outside of
    PNG; and

    expand and diversify business activities to maximise profits and to promote
    the interest of the Shareholder from time to time.

    58A.1.2 Function of the Company

    The core function of the Company is to provide services in four key areas:

    professional consultancy services, teaching and dissemination of knowledge;
    merchandising of textbooks, educational supplies and stationery;
    printing and publication of educational materials, textbooks, business documents
    and all other forms of print material; and
    cafeteria services.

    58A.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Company had not submitted its financial
    statements for the years ended 31 December 2016, 2017, 2018, 2019 and 2020 for
    my inspection and audit despite numerous reminders from my Office.

    – 262 –

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  • 58B. UNIGOR HUMI CATERING LIMITED

    58B.1 INTRODUCTION

    58B.1.1 Legislation

    Unigor Catering Limited was incorporated under the Companies Act 1997 on the
    14 December 2010. A total of 600,000 shares (100 ordinary shares and 599,900
    preference shares) had been issued at K1 each. The Unigor Consultancy Limited
    acquired 306,000 shares (51%) and the remaining 294,000 shares (49%) acquired
    by Humilaveka Food Company Limited.

    On 16 February 2013, the Company changed its name from Unigor Catering to
    Unigor Humi Catering Limited.

    58B.1.2 Objectives of the Company

    The primary objective of the Company is to give effect to the Joint Venture
    Agreement between the shareholders for the purpose of providing catering
    services to students of the UOG at its main campus at Goroka as a commercial
    venture. The Company may conduct or undertake any other business activities in
    the country from time to time.

    58B.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection
    and audit of the accounts and records and the examination of the financial
    statements of the Company for the years ended 31 December 2011, 2012, 2013,
    2014 and 2015 had been completed and results were being evaluated.

    The Company had not submitted its financial statements for the years ended 31
    December 2016, 2017, 2018, 2019 and 2020 for my inspection and audit.

    – 263 –

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  • 59. UNIVERSITY OF NATURAL RESOURCES AND
    ENVIRONMENT

    59.1 INTRODUCTION

    59.1.1 Legislation

    The University of Vudal was established under the University of Vudal Act 1997. This
    Act came into operation on 1 January 1997 and became operative in the same year.
    The University changed its name to University of Natural Resources and Environment
    in 2008 after the enactment of the University of Vudal (Amendment) Act 2009.

    Under the principal Act, the Vudal University College Campus of the PNG University
    of Technology was transferred to the University of Vudal with all staff and students,
    buildings and land, equipment, teaching and research facilities, and other assets and
    liabilities both within and outside the College Campus.

    Although the new entity was created by the Act in 1997, the finance and accounting
    functions were transferred to the University of Vudal only on 1 January 1998.

    59.1.2 Objectives of the University

    The Act states the objectives of the University as: dedication to the pursuit,
    advancement and dissemination of knowledge, understanding and wisdom; paying
    particular attention to the human resource development and other development needs
    of PNG; and endeavouring to achieve academic and professional excellence to meet
    those needs through teaching, research and community service.

    59.1.3 Powers of the University

    Section 6 of the Act enshrines the University as having the power to:

    grant such degrees as are authorised by the Statutes and such diplomas,
    certificates or other academic awards as it determines;
    provide instruction and facilities for study, education and research to persons
    registered as preparing for degrees, diplomas, certificates or other awards of the
    University;
    provide facilities for extramural study and continuing education to persons,
    whether members of the University or not, in such fields and in such manner as
    the University may from time to time determine;
    co-operate in pursuance of any of the objectives of the University with any other
    bodies or persons to enter into agreements authorised by Statute with institutions
    for their affiliation with or incorporation into the University;

    – 264 –

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  • University of Natural Resources and Environment

    subject to the SCMC Act appoint academic, administrative and other staff on
    such terms and conditions of service as the University may determine;
    provide for promoting the health and general welfare of the students of the
    University, including the establishment and supervision of residences;
    regulate and enforce discipline among the employees and students of the
    University by such measures as the University may determine;
    cancel, annul or revoke any act done in the exercise of these powers; and
    do all such other acts or things as may be done under the provisions of this Act
    or these powers or as may be conducive to the exercise of the attainment of any
    of the objectives of the University.

    59.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and the examination of the financial statements of
    the University for the year ended 31 December 2015 had been completed. The
    management letter was issued on 27 November 2019, and responses were being
    awaited to finalise and issue the audit reports.

    The University had not submitted its financial statements for the years ended 31
    December 2016, 2017, 2018, 2019 and 2020 for my inspection and audit, despite
    numerous reminders from my Office.

    – 265 –

  • Page 303 of 309

  • 60. UNIVERSITY OF PAPUA NEW GUINEA

    60.1 INTRODUCTION

    60.1.1 Legislation

    The University of Papua New Guinea was established under the University of Papua
    New Guinea Act (Chapter 169).

    60.1.2 Objectives of the University

    The objectives of the University include the:

    provision of facilities for study and education;
    giving of instruction and training in all such branches of learning as are provided
    for by the Statutes;
    aiding by research and other means the advancement of knowledge and its
    practical application;
    conferring, after examination, of the degrees of Bachelor, Master and Doctorate
    and such other degrees, diplomas, certificates and other academic honours as are
    authorised by the Statutes;
    provision of facilities for university education throughout the country by the
    affiliation of educational institutions, and by the establishment of tutorial
    classes, correspondence classes, university extension classes, and vacation
    classes, and by such other means as the Council thinks appropriate; and
    liaison, collaboration and reciprocation with other universities and institutions of
    learning, within or outside the country, in the provision of facilities, the
    recognition of degrees and other status, and the interchange of staff, students
    and information, and in any other way not inconsistent with its status as the
    University.

    60.1.3 Subsidiaries of the University

    The University has two subsidiaries namely, Unisave Limited and Univentures
    Limited which were incorporated under the Companies Act. Comments in relation to
    the subsidiaries are contained in paragraphs 60A and 60B of this Report.

    60.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the fieldwork associated with the inspection and
    audit of the accounts and records and examination of the University’s financial
    statements for the year ended 31 December 2015 was in progress for more than three
    years. The audit has been delayed due to lack of cooperation from the management.

    – 266 –

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  • University of Papua New Guinea

    The University had submitted its financial statements for the years ended 31
    December 2016 and 2017 for my inspection and audit. However, due to lack of
    cooperation from the management, the commencement of these audits were being
    delayed.

    The University had not submitted its financial statements for the years ended 31
    December 2018, 2019 and 2020 for my inspection and audit.

    – 267 –

  • Page 305 of 309

  • 60A. UNISAVE LIMITED
    (A subsidiary of University of Papua New Guinea)

    60A.1 INTRODUCTION

    60A.1.1 Legislation

    Unisave Limited was incorporated under the Companies Act on 18 October 2011.

    The incorporation of Unisave Limited was as a result of a Memorandum of
    Agreement (MOA) signed between Univentures Limited, (a company 100% owned
    by University of PNG) and S.I.T Co. Limited of the Republic of South Korea.

    60A.1.2 Objective of the Company

    The parties to this MOA shall endeavor to create mutual commercial benefits
    through assembly and sale of Information Communication Technology (ICT)
    products and various projects which have price and quality competitiveness
    compared with other organisations in PNG. This will be achieved by combining of
    infrastructures and marketing power in PNG provided by Univentures and the
    technical know-how and successful long-term various experience in Korean ICT
    market provided by S.I.T.

    The main business of the Company is to assemble TVs, PCs, laptops, monitors and
    other items which can be included under mutual consent, such as systems
    integration, systems administration and maintenance in information technology.

    60A.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the financial statements of the Company for the
    years ended 31 December 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and
    2020 had not been submitted for my inspection and audit despite numerous
    reminders from my Office.

    – 268 –

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  • 60B. UNIVENTURES LIMITED
    (A subsidiary of University of Papua New Guinea)

    60B.1 INTRODUCTION

    60B.1.1 Legislation

    Univentures Limited was incorporated under the Companies Act on 2 August 2007.
    The Company has a total issued capital of one ordinary share of K1.00 and is
    wholly owned by the University of Papua New Guinea.

    60B.1.2 Functions of the Company

    The activities of the Company are to sell and print books in the Bookshop and the
    Printery respectively, as a business arm of the University of Papua New Guinea.

    60B.2 STATUS OF FINANCIAL STATEMENTS

    At the time of preparing this Report, the Company had not submitted its financial
    statements for the years ended 31 December 2012, 2013, 2014, 2015, 2016, 2017,
    2018, 2019 and 2020 for my inspection and audit despite numerous reminders from
    my Office.

    – 269 –

  • Page 307 of 309

  • – 270 –

  • Page 308 of 309

  • SECTION B

    NATIONAL GOVERNMENT

    OWNED COMPANIES

    – 271 –

  • Page 309 of 309

  • – 272 –