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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-

• Page 7 of 309

• PARA SUBJECT PAGE
  NO. NO.

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

  -ii-

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• SECTION B – NATIONAL GOVERNMENT OWNED COMPANIES

  PARA SUBJECT PAGE
  NO. NO.

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

  -iii-

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• SECTION C – NATIONAL GOVERNMENT SHAREHOLDINGS IN OTHER COMPANIES

  PARA SUBJECT PAGE
  NO. NO.

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

  SECTION D – PROBLEM AUDITS (AUDITS IN ARREARS)

  PARA SUBJECT PAGE
  NO. NO.

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

  -iv-

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• GENERAL

  A. FOREWORD

  My Annual Report to the National Parliament for the 2020 financial year is presented
  in four Parts. Part I deals with the Public Accounts of Papua New Guinea (PNG), Part
  II deals with National Government Departments and the Provincial Treasury Offices,
  whilst Part III deals with the audit of the Provincial Governments and Local-level
  Governments and associated entities.

  Part IV (this Part) of my Report deals with Public Bodies and their Subsidiaries,
  Government Owned Companies and National Government’s shareholdings in Other
  Companies.

  This Report is divided into four sections:

  Section A deals with Public Bodies and their subsidiaries;
  Section B deals with National Government owned companies;
  Section C deals with the Companies in which the National Government has
  minority shareholdings; and
  Section D is an additional section which provides details of entities that have
  audits which have been in arrears due to non-submission of financial statements.

  The audit findings contained in Sections A and B of this Report have been reported to
  management of the respective entities and to the responsible Ministers.

  A.1 Audit and Delivery of Government Program

  I have carried out audits of Statutory Bodies and their Subsidiaries and other audits as
  mandated. These Statutory Bodies entities are tasked to deliver government services
  to the people of Papua New Guinea.

  Although my report provides opinions on the financial affairs of these entities, other
  audit procedures performed by my Office give a picture of effective delivery of
  government policies and programs particularly by the public sector and their
  contribution to the Medium Term Development Plan III 2018-2022 by attaining an
  inclusive sustainable economic growth through the following key result areas:

  Increase Revenue and Wealth Creation;
  Quality Infrastructure;
  Sustainable Social Development;
  Improved Law, Justice and National Security;
  Improved Service Delivery;
  Improved Governance;

  -v-

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• General

  Responsible Sustainable Development; and
  Sustainable Population.

  In addition, my audit findings that have been repeatedly highlighted show slow
  progress in making improvements to governance structures and public accountability
  mechanisms in relation to expending public finances. Without strong governance
  support, service delivery as envisaged by the National Government risks falling short
  of its objectives.

  Besides the audit of financial statements, I have extended my audit programs into the
  audit of service delivery, performance audit and major public work projects to
  enhance my Office’s ability to deliver reports to Parliament on how well and effective
  the government programs are being delivered.

  B. AUTHORITY TO AUDIT

  B.1 Constitution

  Under Section 214(2) of the Constitution of the Independent State of Papua New
  Guinea, I am required to inspect and audit all bodies set up by Acts of the Parliament,
  or by Executive or Administrative Act of the National Executive for governmental or
  official purposes unless other provisions are made by law in respect of their
  inspection and audit.

  I am also empowered under Section 214(3) if I consider it proper to do so, to inspect
  and audit and report to the Parliament on any accounts, finances or property of a
  body, in so far as they relate to, or consist of, or are derived from public moneys or
  property of Papua New Guinea.

  B.2 Audit Act

  By virtue of Section 214(4) of the Constitution, the Audit Act 1989, which became
  effective from 1 May 1989, provides more details of my functions under sub-sections
  (1), (2) and (3) of the Constitution. The Audit Act that was derived from the
  Constitution elaborates the functions and the duties of the Auditor-General. This Act
  was amended in 1995 and the relevant provisions of the amended Act are explained
  below.

  B.2.1 Auditing and Reporting Requirements

  In Section 8, Sub-sections 2 and 4 of the Audit Act were amended to include
  provisions governing the auditing and the reporting requirements of public bodies
  including government owned companies incorporated under the Companies Act 1997.

  -vi-

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• General

  B.2.2 Matters of Significant Importance

  Under Section 8(2) of the Act, I am required to inspect and audit the accounts and
  records of financial transactions and the records relating to the assets and liabilities
  of these public bodies and their subsidiaries, and to report to the Minister vested
  with the responsibility for the public body and the Minister in charge of Finance any
  irregularities found during the inspection and audit.

  B.2.3 Audit Opinion on Financial Statements

  Section 8(4) of the Audit Act requires me to audit the financial statements of the
  public bodies and to report an opinion to the aforementioned Ministers on:

  Whether the financial statements are based on proper accounts and records;
  Whether the financial statements are in agreement with those accounts and
  records; and
  Whether they show fairly the financial operations for the period which they
  cover and the state of affairs at the end of that period.

  B.3 Public Finances (Management) Act, 1995 (as amended)

  The submission of the financial statements of statutory bodies for audit is required
  under Section 63(1) and (3) of the Public Finances (Management) Act, 1995 (as
  amended). The Section requires each statutory body to prepare and furnish to its
  Minister before end of fourth calendar month from close of a fiscal year, a report on
  its operations for the year ended 31 December preceding, together with financial
  statements in respect of that year duly audited by me.

  The Minister is then required to table the report on the operations and the financial
  statements, together with my report on the financial statements, at the first meeting
  of the Parliament after receiving them.

  B.4 Companies Act 1997

  I am required to audit National Government owned Companies and their
  Subsidiaries under the provisions of the Companies Act 1997. Though these
  companies are registered under the Companies Act 1997, my responsibility to audit
  them is by virtue of Section 63 of the Public Finances (Management) Act (PFMA)
  and Section 3 of the Audit Act.

  -vii-

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• General

  C. AUDIT OF PUBLIC BODIES

  C.1 Scope of Audit

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

  Presently, the limited resources available to my Office are directed primarily
  towards financial attestation and compliance or regularity audit of Public Bodies.
  Due to resource constraints, I have not been able to venture into the audits of
  information systems. However, a section has been tasked with the audit of
  information systems per the recent organisational restructure.

  C.2 Audit Objectives

  Under the Companies Act, I am required to ascertain whether proper accounting
  records have been kept; whether the financial statements comply with generally
  accepted accounting practice; and whether those financial statements give a true and
  fair view of the matters to which they relate. The Act also requires me to report the
  instances of non-compliance with these requirements. More details on the audit
  responsibilities under the Companies Act are provided in Section B of this Report
  which covers the National Government owned companies and their subsidiaries.

  C.3 Reporting Framework

  My audits are conducted in accordance with the International Standards on Auditing
  to provide reasonable assurance that the financial statements are free of material
  misstatements. The audit procedures include examination, on a test basis, of
  evidence supporting the amounts and other disclosures in the financial statements,
  evaluation of accounting policies and significant accounting estimates, and ensuring
  that the financial statements are presented fairly and in accordance with the
  International Financial Reporting Standards (IFRS) and statutory requirements.

  D. APPOINTMENT AND USE OF AUTHORISED AUDITORS

  Section 8(5) of the Audit Act empowers me to employ registered company auditors
  to assist me in undertaking my constitutional duties, where such assistance is
  required.

  During the period covered in the Report, I engaged a number of registered company
  auditors to perform audits of numerous Statutory Bodies and National Government
  owned companies.

  -viii-

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• E. EXECUTIVE SUMMARY

  E.1 Report Coverage

  This Report covers the audit reports issued by my Office on the audits of Public Bodies and
  their Subsidiaries, Government Owned Companies, and National Government’s
  shareholdings in Other Companies during the period July 2020 to June 2021 (2020/2021
  Audit Cycle). The Report covers the audits of these entities’ financial statements for a
  number of years, not just 2020.

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

  I am also responsible for reporting on the audits of 2 Companies, in which the National
  Government has minority shareholding. These entities are audited by private company
  auditors and are reported under Section C of this Report.

  E.2 Consistency in audit findings over a number of years

  The Report’s findings are consistent with those in my previous years’ reports that have
  highlighted my concerns over the number of entities that do not submit current year
  financial statements for audit, and the overall poor state of the financial management
  structure in most public entities whose statements are subject to my audit and inspection.

  The overall purpose of financial statements is to provide information about the financial
  position, performance and cash flows of an organisation. The information is useful to a
  wide range of stakeholders and the financial statements constitute a formal record of the
  financial and business activities of an organisation. As such, the financial statements are a
  core component of an organisation’s governance and accountability. Non-submission of the
  financial statements for audits in a timely manner greatly limits the ability of stakeholders
  to monitor performance and make informed decisions regarding the organisation.

  Financial management in the public sector is the establishment and maintenance of
  policies, processes and procedures to achieve effective and efficient management of public
  funds in such a manner as to achieve the objectives of the organisation. It consists of
  planning, organising, directing, monitoring and controlling the monetary resources of an
  organisation. Unfortunately, many organisations continue to indicate they are incapable of
  managing their financial affairs.

  Weaknesses with financial management are contributing to significant wastage of financial
  resources and indicate a serious lack of transparency and accountability. Ultimately these
  weaknesses adversely impact upon the delivery of services to the citizens of PNG.

  -ix-

• Page 15 of 309

• Executive Summary

  E.3 Submission of current year Financial Statements

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

  Before submitting the financial statements to the Minister, Section 63(3)(c) requires a
  statutory body to submit the financial statements to the Auditor-General and for the
  Auditor-General to report to the Minister in accordance with Part II of the Audit Act.

  Despite these legislative requirements, 69 entities had not submitted their 2020 financial
  statements to be audited in addition to some 128 financial statements for 2019 and prior
  years that not been submitted for audit (Refer Table A). As compared to last year, the
  situation has deteriorated during this cycle.

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

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

  Table A

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

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

  -x-

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• Executive Summary

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

  Table A also shows that of the 127 current year audits (2020), only 3 were completed,
  with 38 audits in progress. A further 10 audits were to commence shortly. Graphical
  description of the status of current year 2020 audit units (excluding arrears) is given in
  Attachment ‘A’. The list of entities is at Schedule ‘A’ (i), (ii), (iii), (iv) & (v).

  E.4 Type of Audit Opinions Issued1

  In the period covered (July 2020 to June 2021) by the audit, 95 audit reports were issued.
  Of the 95 audit reports issued, 23 were unqualified, 35 were qualified, 33 were
  Disclaimer of Opinions and 4 Adverse Opinion. The details are captured in Attachment
  ‘D’.

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

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

  E.5 Key Findings

  The key findings from the audits centered primarily on the non-submission of the financial
  statements, non-compliance with the Salaries and Conditions Monitoring Committee
  (SCMC) regulatory mechanisms for salaries and wages, lack of basic accounting records,
  inadequate capacity and competence of staff ineffective internal control systems. Other issues
  noted are also highlighted in paragraph E.9.

  Bank reconciliations not being prepared in a timely manner or not at all;
  Transactions not having the required supporting documents;
  Fixed asset registers not being properly kept or maintained and improper and
  inconsistent valuation of assets;
  Physical count of assets/stock-take not being carried out properly and no proper
  procedures are being followed in the acquisition and disposal of assets;

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

  -xi-

• 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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  Recommendation

  My Office recommends the rigorous enforcement of the provisions of Section 63 of the PFMA
  and a legislative requirement be established to make the renewal of contracts of Chief
  Executive Officers subject to submission of financial statements and implementation and
  maintenance of prudent financial management.

  This recommendation is to help achieve financial management accountability and good
  governance in the public sector.

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

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

  -xiii-

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• Executive Summary

  Para. No. of
  No. Section
  No. Entity Year Audits
  35 A 58A Unigor Consultancy Limited 2016 to 2019 4
  36 A 58B Unigor Humi Catering Limited 2016 to 2019 4
  37 A 59 University of Natural Resources and Environment 2016 to 2019 4
  38 A 60 University of Papua New Guinea 2018 & 2019 2
  39 A 60A Unisave Limited 2012 to 2019 8
  40 A 60B Univentures Limited 2012 to 2019 8
  41 B 62 Air Niugini Limited 2019 1
  42 B 62A Air Niugini Cargo Limited 2019 1
  43 B 62B Air Niugini Properties Limited 2019 1
  44 B 62C Business Travel Centre Limited 2019 1
  45 B 62D Link-PNG Limited 2019 1
  46 B 64C Kumul Gas Foreland 239 B.V 2017 to 2019 3
  47 B 64D Kumul Gas Foreland 261 B.V 2017 to 2019 3
  48 B 64E Kumul Gas Foreland 268 B.V 2017 to 2019 3
  49 B 64F Kumul Gas Foreland 269 B.V 2017 to 2019 3
  50 B 64G Kumul Gas Niugini B.V 2017 to 2019 3
  51 B 66 Livestock Development Corporation Limited 2019 1
  52 B 67 Mineral Resources Development Company Limited 2019 1
  53 B 72 PNG Air Services Limited 2016 to 2019 4
  128
  Arrears Reduction Strategies

  During the last Audit Cycle, I took steps as in the past to remind various entities of their
  responsibilities to submit the financial statements on a timely basis. These steps include but
  are not limited to the following:

  Issuance of reminder letters to entities on a regular basis until the submission of the
  financial statements;
  My officers visited various entities and held meetings with the Chief Executive Officers
  regarding non-submission of the financial statements and drew their attention to their
  responsibilities under the PFMA and the resultant breach of that Act;
  List of outstanding financial statements were forwarded to the Public Accounts
  Committee for their necessary action; and
  Senior officers of the Division attended various audit committee meetings during the
  cycle and emphasised the importance of bringing the audits up to date. My officers
  attended the following audit committee meetings during the cycle:

  ‒ Internal Revenue Commission;
  ‒ National Capital District Commission;
  ‒ National Housing Corporation;
  ‒ PNG Customs Service; and
  ‒ Tourism Promotion Authority.

  I have set a goal to significantly reduce the audit in arrears situation and the entities listed
  under Attachment ‘F’ indicate the arrears cleared during the audit cycle. This reduction
  largely reflects the collective efforts of all my staff members to better manage the audits in
  arrears.

  -xiv-

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  This can only be achieved by timely submission of financial statements and cooperation of
  the entities’ management to clear the arrears. However, the current health pandemic (Covid-
  19) may pose a challenge in achieving this objective.

  E.7 Non-Compliance with the Salaries and Conditions Monitoring Committee Act (SCMC)

  The SCMC was established as the regulatory mechanism for salaries and wages in the public
  sector. Despite the regulatory mechanism in place, some public bodies do not comply with
  the provisions of this Act because of legislative changes in their constituent Acts. As a result,
  these bodies pay salaries and allowances without any monitoring from this Committee.
  Consequently, they have contravened Section (3) of the SCMC Act which stipulates:

  “(a) The provisions of this Act apply notwithstanding anything in any other law relating to
  the determination of salaries and conditions or employment of employees of a public
  authority; and
  (b) Whereby or under any law, power is given to a public authority, to determine or vary
  the salaries and conditions of employment of employees of the public authority, that
  power shall be exercised subject to this Act.”

  E.8 Non-Compliance with the Audit Act 1989

  Some entities owned by the State have amended their enabling Acts and other legal
  provisions to exclude my Office from performing the audit of those entities and appointed
  their own auditors contrary to the Audit Act and the Constitution. The following state owned
  entities have appointed their own Auditors:

  Fresh Produce Development Agency;
  Kumul Minerals Holding Limited (formerly Petromin Limited);
  National Development Bank Limited;
  Ok Tedi Mining Limited;
  PNG Air Services Limited; and
  PNG Sustainable Development Program Limited.

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

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

  Bank, Creditors and other reconciliation statements not being prepared in a timely
  manner or not being prepared at all;
  Transactions not having supporting documentation;
  Fixed Asset Registers not being properly kept or maintained;

  -xv-

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• Executive Summary

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

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

  E.10 Poor Financial Management

  Over a number of years, I have expressed my concern about public bodies’ poor accounting
  records, weaknesses in internal controls and management information systems, and non-
  compliance with legislative requirements and the International Financial Reporting
  Standards. I also consider that a large number of Chief Executive Officers do not pay
  sufficient attention to financial management in their entities.

  In my view, the concept of effective, prudent and efficient financial management is yet to be
  understood and performed by many Chief Executive Officers.

  E.11 Recommendations for Improvement

  Consistent with comments in previous years’ Reports, I will report to the Parliament in future
  that proper accounting records and adequate internal control systems must exist in all public
  entities subject to my audit.

  For that to be achieved, I believe that Chief Executive Officers are required to exercise
  proper leadership that provides an environment where there is:

  Timely submission of financial statements;
  Improved record keeping and documentation;

  -xvi-

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• Executive Summary

  Maintenance and provision of quality information;
  Effective implementation of internal control systems;
  Sound financial management implemented and adopted by qualified and experienced
  accountants;
  Implementation of my audit recommendations;
  Regular, adequate and timely training on new accounting system (IFMS).

  E.12 Improvement Strategies

  In my view, for improvement to occur:

  Chief Executive Officers must employ well trained and professionally qualified
  accounting staff to manage the financial affairs of the organisation;
  Chief Executive Officers must understand the value of and how to implement a strong
  governance framework and their performance should be regularly assessed against
  implementation of the framework;
  Parliament must increase its reviews of the management of public entities and provide
  Chief Executive Officers with incentives to improve their management structures;
  Appointing Boards that are result oriented and service driven; and
  Regular performance reviews on entities and those charged with governance.

  E.13 Project Audits

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

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

  E.14 Creation, Amalgamation and Abolishment of Entities

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

  -xvii-

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• Executive Summary

  E.15 Challenges Face by My Office

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

  E.16 Structure of the Report

  This Report is structured as follows:

  Section A – Public Bodies and Their Subsidiaries;
  Section B – National Government Owned Companies;
  Section C – National Government Shareholdings in Other Companies; and
  Section D – Problem Audits (Audits in Arrears).

  -xviii-

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• Executive Summary

  ATTACHMENT ‘A’

  STATUS OF CURRENT YEAR AUDITS 2020 BY ENTITIES

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

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

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

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

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

  -xix-

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• Executive Summary

  ATTACHMENT ‘B’

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

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

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

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

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

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

  -xx-

• Page 26 of 309

• Executive Summary

  ATTACHMENT ‘C’

  STATUS OF AUDITS AS AT 30 JUNE 2021

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

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

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

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

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

  -xxi-

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• Executive Summary

  ATTACHMENT ‘D’

  TYPES OF AUDIT OPINIONS ISSUED

  (i) UNQUALIFIED OPINION

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

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

  -xxii-

• Page 28 of 309

• Executive Summary

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

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

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

  -xxiii-

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• Executive Summary

  ATTACHMENT ‘E’

  COMPARATIVE AUDIT OPINIONS ISSUED (2012–2020)

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

  -xxiv-

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• Executive Summary

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

  -xxv-

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• Executive Summary

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

  -xxvi-

• Page 32 of 309

• Executive Summary

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

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

  -xxvii-

• Page 33 of 309

• Executive Summary

  ATTACHMENT ‘F’

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

  -xxviii-

• Page 34 of 309

• Executive Summary

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

  -xxix-

• Page 35 of 309

• -xxx-

• Page 36 of 309

• SECTION A

  PUBLIC BODIES AND

  THEIR SUBSIDIARIES

  -xxxi-

• Page 37 of 309

• -xxxii-

• Page 38 of 309

• 1. FOREWORD

  This Section of my Report deals with the audit of public bodies and their subsidiaries.

  The auditing and reporting requirements of the public bodies and their subsidiaries are
  stipulated in Section 8 of the Audit Act. My findings in that regard are detailed in
  paragraphs 2 to 60B of this part of my Report.

  -1-

• Page 39 of 309

• -2-

• Page 40 of 309

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

  2.1 INTRODUCTION

  2.1.1 Legislation

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

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

  2.1.2 Functions of the Authority and the Joint Task Force

  1) The functions of the Authority are to:

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

  The Authority shall, in consultation with other government departments and
  State agencies, organise all logistical matters to ensure that:

  correct protocols are afforded to all delegates;
  all APEC related meetings are held on time;
  all meeting venues and accommodation meet world class standards; and
  all infrastructures associated with APEC meetings meet world class
  standards and are completed on time.

  2) The functions of the Joint Task Force are to:

  assess, detect and respond to threats to the safety and security of APEC
  2018, either on land, sea or air, including imminent threats;
  plan, prepare and execute safety and security operations;
  provide logistical and operational support for APEC 2018 safety and
  security operations;
  implement the operations order;

  -3-

• Page 41 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  plan, design, co-ordinate and implement authorised international partner
  support for APEC 2018 safety and security operations;
  declare restricted areas;
  establish and maintain a system of accreditation for safety and security
  purposes;
  establish sector working groups; and
  such other functions as are necessary or incidental to fulfilling its mission.

  The Joint Task Force shall carry out its functions subject to the directions of the
  Commander.

  2.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  2.2.1 Comments on Financial Statements

  My reports to the Ministers under Section 8(4) of the Audit Act on the Authority’s
  financial statements for the years ended 31 December 2015, 2016, 2017, 2018 and
  2019 were issued on 5 March 2021. The respective years’ reports contained similar
  Disclaimer of Opinions, hence, only the 2019 report is reproduced:

  “DISCLAIMER OF OPINION

  Because of the significant of the matters referred to in the Basis for Disclaimer of
  Opinion paragraphs below, I was not able to obtain sufficient appropriate audit
  evidence and accordingly, I am unable to and do not express an opinion on the special
  purpose financial report of the APEC Papua New Guinea-2018 Co-ordination
  Authority for the year ended 31 December 2019.

  BASIS FOR DISCLAIMER OF OPINION

  Expenditure Lacking Supporting Documents

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

  -4-

• Page 42 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

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

  Completeness of Receipts from Government – Alesco Payroll

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

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

  Corresponding Amounts

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

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

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

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

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

  -5-

• Page 43 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  EMPHASIS OF MATTERS

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

  Outstanding Liabilities – Creditors

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

  Capital Expenditures

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

  2.2.2 Audit Observations Reported to the Ministers

  My report to the Ministers under Section 8(2) of the Audit Act on the inspection and
  audit of the accounts and records of the Authority for the period 1 January 2015 to 31
  December 2019 was issued on 5 March 2021. The management responses to the audit
  findings are excluded, however they can be found in a separate report delivered to
  Parliament in April 2021. The report contained the following issues:

  Required Reports not Prepared or Furnished in a Timely Manner

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

  -6-

• Page 44 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

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

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

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

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

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

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

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

  -7-

• Page 45 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

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

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

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

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

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

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

  -8-

• Page 46 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

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

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

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

  Lack of Centralized Governance Body and Integration of Management Systems

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

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

  -9-

• Page 47 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

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

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

  Missing Transaction Listings and Source Documents

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

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

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

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

  – 10 –

• Page 48 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

  Table 1.1 Summary of substantive samples by payment channel

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

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

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

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

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

  Establishment of Supply and Tenders Board

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

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

  – 11 –

• Page 49 of 309

• APEC Papua New Guinea 2018 Co-ordination Authority

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

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

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

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

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

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

  My audit procedures identified issues or difficulties are detailed below:

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

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

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

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

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

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

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

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

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

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

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

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

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

  In-complete Financial Reports

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

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

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

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

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.”

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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.”

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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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  ‒ 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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  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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  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.

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  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.

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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.

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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.

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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.

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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.

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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.

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  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 –

• Page 81 of 309

• 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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• Cocoa Coconut Institute Limited of Papua New Guinea

  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 –

• Page 83 of 309

• 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.”

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• Page 84 of 309

• 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 –

• Page 85 of 309

• 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 –

• Page 86 of 309

• 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 –

• Page 87 of 309

• 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 –

• Page 89 of 309

• Coffee Industry Corporation Limited

  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 –

• Page 90 of 309

• Coffee Industry Corporation Limited

  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 –

• Page 91 of 309

• Coffee Industry Corporation Limited

  – 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 –

• Page 92 of 309

• 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 –

• Page 94 of 309

• 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 –

• Page 95 of 309

• 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 –

• Page 96 of 309

• 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 –

• Page 97 of 309

• 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;

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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.

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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.

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• Government Printing Office

  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.”

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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.

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• Government Printing Office

  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.

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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.

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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.

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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.

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  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.

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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.

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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:

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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.”

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• Industrial Centres Development Corporation

  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

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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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• Industrial Centres Development Corporation

  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.

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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.

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  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 –

• Page 115 of 309

• 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.

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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 –

• Page 118 of 309

• 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 –

• Page 119 of 309

• 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 –

• Page 120 of 309

• 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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• Kumul Consolidated Holdings

  18.1.3 Functions of the Corporation

  The main functions of the Corporation are:

  to administer the Trusts and monitor the performance of the assets of the Trusts
  in such manner as provided under this Act and shall perform such other
  functions as are required under this Act.
  without limiting the generality of Section (1) but subject to the provisions of this
  Act, the Corporation may:
  ‒ undertake the function of holding and monitoring corporation for State
  owned assets and Majority State Owned Enterprises;
  ‒ undertake the function of planning, coordinating and managing State
  assets, infrastructure and projects;
  ‒ determine policies regarding:
  the conduct of its affairs and the affairs of any of the Trusts; and
  the administration, management and control of the 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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• Kumul Consolidated Holdings

  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 –

• Page 126 of 309

• 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 –

• Page 130 of 309

• 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 –

• Page 133 of 309

• 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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• Mineral Resources Authority

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

  20.2 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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• Mineral Resources Authority

  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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• National Agricultural Research Institute

  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.”

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• National Agricultural Research Institute

  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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• National AIDS Council Secretariat

  23.2 AUDIT OBSERVATIONS AND RECOMMENDATIONS

  23.2.1 Comments on Financial Statements

  My report to the Ministers under Section 8(4) of the Audit Act on the financial
  statements of the Secretariat for the year ended 31 December 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:

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• National AIDS Council Secretariat

  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;

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• National AIDS Council Secretariat

  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.

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• National AIDS Council Secretariat

  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 –

• Page 154 of 309

• 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:

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• National Broadcasting Corporation

  “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.

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• National Broadcasting Corporation

  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.

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• National Broadcasting Corporation

  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.”

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• National Broadcasting Corporation

  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.”

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• National Broadcasting Corporation

  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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• National Broadcasting Corporation

  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

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• National Broadcasting Corporation

  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.

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• National Broadcasting Corporation

  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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• National Capital District Commission

  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 –

• Page 166 of 309

• 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 –

• Page 167 of 309

• 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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• Port Moresby Nature Park Limited

  25B.1.3 Functions of the Company

  The functions of the Company include:

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

  25B.2 AUDIT OBSERVATIONS

  25B.2.1 Comments on Financial Statements

  My report in accordance with the provisions of the Companies Act on the inspection
  and audit of the accounts and records of the Company for the year ended 31
  December 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 –

• Page 169 of 309

• 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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• National Cultural Commission

  (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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• National Cultural Commission

  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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• National Cultural Commission

  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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• National Economic and Fiscal Commission

  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 –

• Page 175 of 309

• 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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• National Fisheries Authority

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

  28.2 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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• National Fisheries Authority

  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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• National Fisheries Authority

  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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• National Fisheries Authority

  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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• National Fisheries Authority

  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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• National Fisheries Authority

  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 –

• Page 182 of 309

• 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.

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• Page 183 of 309

• 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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• National Gaming Control Board Community Benefit Fund Trust

  provision and improvement of social welfare;
  development of sports and improvement of recreational facilities;
  improvement of education and learning tools (not including school fees);
  assistance to churches and religious groups;
  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 –

• Page 185 of 309

• 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 –

• Page 187 of 309

• 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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• National Information and Communications Technology Authority

  “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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• National Information and Communications Technology Authority

  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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• National Information and Communications Technology Authority

  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.

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• National Information and Communications Technology Authority

  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 –

• Page 192 of 309

• 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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• National Maritime Safety Authority

  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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• National Maritime Safety Authority

  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.”

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• National Maritime Safety Authority

  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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• National Maritime Safety Authority

  “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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• National Museum and Art Gallery

  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 –

• Page 199 of 309

• National Museum and Art Gallery

  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:

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• National Research Institute

  “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 –

• Page 202 of 309

• National Research Institute

  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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• National Research Institute

  “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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• National Research Institute

  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 –

• Page 205 of 309

• 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;

  – 168 –

• Page 206 of 309

• National Roads Authority

  deliver road improvement, and road restoration when required, by undertaking the
  design studies necessary for the programmed road improvement or rehabilitation
  projects by:

  ‒ prepairing corresponding construction plans, specifications, cost estimates,
  and the other documents required for the proper tendering of the programmed
  works;
  ‒ monitoring and supervising the works as are executed, by such qualified
  consultants and/or contractors as are engaged; and
  ‒ ensuring safety audits on design, construction, maintenance and safety aspects
  of road;

  establish and sustain contract management capacity to ensure the validity of
  contracts and the effective management of contracts awarded for the execution of
  agreed road maintenance works and rehabilitation and reconstruction projects;
  ensure that all contracts are tendered through a transparent and competitive
  procedure to ascertain economic efficiency and sustainability in delivery of road
  maintenance and rehabilitation works;
  keep adequate records and to maintain a management information system which
  provides the Board and staff with accurate and timely information on
  commitments, expenditures and revenue for the purchase of consultancy and
  contracting services and other purchases and outlays;
  report publicly and transparently on collection of user charges, revenues, and in
  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 –

• Page 207 of 309

• National Roads Authority

  “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 –

• Page 208 of 309

• National Roads Authority

  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 –

• Page 209 of 309

• National Roads Authority

  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 –

• Page 210 of 309

• National Roads Authority

  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 –

• Page 211 of 309

• 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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• National Training Council

  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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• National Training Council

  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 –

• Page 214 of 309

• National Training Council

  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 –

• Page 215 of 309

• 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 –

• Page 216 of 309

• 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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• National Youth Development Authority

  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 –

• Page 218 of 309

• 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 –

• Page 219 of 309

• Office of the Insurance Commissioner

  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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• Office of the Insurance Commissioner

  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 –

• Page 221 of 309

• Office of the Insurance Commissioner

  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 –

• Page 222 of 309

• Office of the Insurance Commissioner

  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 –

• Page 223 of 309

• Office of the Insurance Commissioner

  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 –

• Page 224 of 309

• Office of the Insurance Commissioner

  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 –

• Page 225 of 309

• Office of the Insurance Commissioner

  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 –

• Page 226 of 309

• 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 –

• Page 227 of 309

• Oil Palm Industry Corporation

  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 –

• Page 228 of 309

• Oil Palm Industry Corporation

  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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• Oil Palm Industry Corporation

  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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• Oil Palm Industry Corporation

  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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• Oil Palm Industry Corporation

  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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• Oil Palm Industry Corporation

  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 –

• Page 233 of 309

• Oil Palm Industry Corporation

  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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• Oil Palm Industry Corporation

  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 –

• Page 235 of 309

• Oil Palm Industry Corporation

  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 –

• Page 236 of 309

• 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 –

• Page 237 of 309

• 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 –

• Page 238 of 309

• Papua New Guinea Accident Investigation Commission

  ‒ request from the Authority or PNG Air Traffic Services (PNGATS) or any
  other person such information as it considers appropriate regarding any
  accident or incident that the Commission believes that it is required to
  investigate under this Act;
  ‒ perform any other function or duty conferred on the Commission under
  any Act or prescribed by regulations; and
  ‒ with the consent of the Minister, to provide consulting services, training
  and management services relating to any of its functions, 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 –

• Page 239 of 309

• Papua New Guinea Accident Investigation Commission

  – 202 –

• Page 240 of 309

• Papua New Guinea Accident Investigation Commission

  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 –

• Page 241 of 309

• Papua New Guinea Accident Investigation Commission

  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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• Papua New Guinea Accident Investigation Commission

  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 –

• Page 243 of 309

• Papua New Guinea Accident Investigation Commission

  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 –

• Page 244 of 309

• 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 –

• Page 245 of 309

• 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 –

• Page 246 of 309

• 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 –

• Page 247 of 309

• 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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• Papua New Guinea Immigration and Citizenship Services Authority

  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 –

• Page 249 of 309

• 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 –

• Page 250 of 309

• 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 –

• Page 251 of 309

• 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 –

• Page 252 of 309

• 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 –

• Page 253 of 309

• 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 –

• Page 254 of 309

• 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 –

• Page 255 of 309

• Pacific Institute of Leadership and Governance

  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 –

• Page 256 of 309

• 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 –

• Page 257 of 309

• Pacific Institute of Leadership and Governance

  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 –

• Page 258 of 309

• 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 –

• Page 259 of 309

• Papua New Guinea Maritime College

  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 –

• Page 260 of 309

• Papua New Guinea Maritime College

  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 –

• Page 261 of 309

• 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 –

• Page 262 of 309

• Papua New Guinea National Institute of Standards and Industrial Technology

  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 –

• Page 263 of 309

• 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 –

• Page 264 of 309

• Papua New Guinea Sports Foundation

  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 –

• Page 266 of 309

• 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 –

• Page 267 of 309

• 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.

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• Page 268 of 309

• 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 –

• Page 269 of 309

• 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 –

• Page 271 of 309

• 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 –

• Page 272 of 309

• 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 –

• Page 273 of 309

• 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 –

• Page 274 of 309

• 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 –

• Page 275 of 309

• 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 –

• Page 276 of 309

• 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 –

• Page 277 of 309

• 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 –

• Page 278 of 309

• 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 –

• Page 279 of 309

• 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 –

• Page 280 of 309

• 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;

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• Page 281 of 309

• 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 –

• Page 282 of 309

• 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.

  – 245 –

• Page 283 of 309

• 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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• Small and Medium Enterprises Corporation

  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.

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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.

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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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• University of Goroka

  regulate and enforce discipline among the employees and students of the
  University by such measures as the University may determine;
  cancel, annul or revoke any act done in the exercise of these powers; and
  do all such other acts or things as may be done under the provisions of this Act
  or these powers or as may be conducive to the exercise of the attainment of any
  of the objectives of the University.

  58.1.4 Subsidiaries of the University

  The University has two Subsidiary Companies, Unigor Consultancy Limited and
  Unigor Humi Catering Limited which were incorporated under the Companies Act.
  Comments in relation to these Companies are contained in paragraphs 58A and 58B
  of this Report respectively.

  58.2 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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• University of Goroka

  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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• University of Goroka

  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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• University of Goroka

  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.

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  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.

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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 –

• Page 300 of 309

• 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 –

• Page 301 of 309

• 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 –

• Page 302 of 309

• 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 –

• Page 304 of 309

• 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 –

• Page 306 of 309

• 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 –