Service Delivery Performance in the Provinces of New Ireland and Milne Bay 2013-14

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    Audit review to determine if the Provincial and District Administrations expended PSIP and DSIP funding and Function Grants in compliance with the PF(M)A and Finance Instructions and to improve service delivery within the province and district.

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  • Service Delivery Performance in the
    Provinces of New Ireland and Milne
    Bay – 1 January 2013 to 31 December
    2014

    Auditor-General’s Office of Papua New Guinea

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  • Service Delivery Performance in the Provinces of New
    Ireland and Milne Bay – 1 January 2013 to 31 December
    2014

    Audit review to determine if the Provincial and District
    Administrations expended PSIP and DSIP funding and Function
    Grants in compliance with the PF(M)A and Finance Instructions and
    to improve service delivery within the province and district.
    Specifically, the assessment of the PSIP and DSIP on:

    • The total amount of PSIP and DSIP funds received by the
    Province and District and the total amount spent during the
    period under review;
    • Whether expenditure incurred was on items permitted by
    relevant Finance Instructions and was within the respective
    key sectors; and
    • Compliance with the requirements of the Finance Instructions
    and the PF(M)A.

    Auditor-General’s Office of Papua New Guinea

    1

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  • Telephone: 301 2203 Fax: 325 8295 Website: www.ago.gov.pg Email: agopng@ago.gov.pg

    OFFICE OF THE AUDITOR-GENERAL
    30 June 2015
    The Honourable Theodore Zurenuoc, 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, and the Audit Act 1989 (as amended), I have undertaken an
    audit review to determine if the Provincial and District Administrations expended PSIP and
    DSIP funding and Function Grants in compliance with the PF(M)A and Finance Instructions
    and to improve service delivery within the province and district, specifically, the assessment
    of the PSIP and DSIP.
    I submit the report of this audit and the report is titled “Service Delivery Performance in
    the Provinces of New Ireland and Milne Bay – 1 January 2013 to 31 December 2014 .”

    Following its tabling in Parliament, the report will be placed on the Auditor-General’s Office
    Homepage-http://www.ago.gov.pg

    Auditor- General

    2

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  • Contents
    Contents ……………………………………………………………………………………………………………………………………………………3
    Acronyms and Definitions…………………………………………………………………………………………………………….7
    Executive Summary …………………………………………………………………………………………………………… 8
    Key Findings and Recommendations…………………………………………………………………………………………….9
    Recommendations…………………………………………………………………………………………………………10

    Recommendation No.1 ……………………………………………………………………………………. 11
    Recommendation No.2 ……………………………………………………………………………………. 11
    Recommendation No.3 ……………………………………………………………………………………. 11
    Recommendation No.4 ……………………………………………………………………………………. 11
    Recommendation No.5 ……………………………………………………………………………………. 11
    Recommendation No.6 ……………………………………………………………………………………. 11

    1. I ntrodu cti on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
    Background ……………………………………………………………………………………………………………………………….. 12
    Review Objective …………………………………………………………………………………………………………………….. 13
    Review Scope, Approach and Methodology……………………………………………………………………………….. 13

    Governance Arrangements ………………………………………………………………………………………………………….. 14
    Provincial and District Services Improvement Programs……………………………………………………….. 14
    Function Grants and Minimum Priority Activities…………………………………………………………………. 15
    Roles and Responsibilities ………………………………………………………………………………………………………… 16
    Payment of Funds to Recipients………………………………………………………………………………………………… 17
    2. Assessment of Service Delivery by Province ………………………………………………………… 18

    Milne Bay Province ………………………………………………………………………………………………………………….. 18
    Appendix 1: Overview of Findings ………………………………………………………………………………………………… 24

    Appendix 2: Detail of Irregular Transactions ………………………………………………………………………….. 25
    Appendix 3: Minimum Priority Activities and Performance Indicators ……………………………………….. 47

    3

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  • Acronyms and Definitions
    Acronym Definition

    COI Certificate of Inexpediency

    DDA District Development Authority

    DDP District Development Program

    DIRD Department of Implementation and Rural Development

    DPMT District Project Management Team

    DoF Department of Finance

    DoT Department of Treasury

    DSIP District Services Improvement Program

    FYDP Five Year Development Plan

    JDP&BPC Joint District Planning and Budget Priority Committee

    JPP&BPC Joint Provincial Planning and Budget Priority Committee

    LLG Local-level Government

    MPA Minimum Priority Activities funded by the Function Grants

    NEFC National Economic and Fiscal Commission

    OLPG&LLG Organic Law on Provincial Government and Local-level
    Government

    PF(M)A Public Finance (Management) Act 1995

    PGAS PNG Government Computerised Accounting System

    PSIP Provincial Services Improvement Program

    PSTB Provincial Supply and Tender Board

    PWU Provincial Works Unit

    4

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  • Executive Summary
    1. In 2007 the PNG National Government allocated K10 million to each of the Districts
    to be managed through a District Services Improvement Program (DSIP). The funding has
    continued at this rate each year since then, although not all Districts have received their full
    entitlement each year. Subsequently, the National Government established the Provincial
    Services Improvement Program (PSIP) in 2013 with the allocation to each Province of an
    additional K5 million for each District within the Province. Function Grants are also allocated
    to each province on an annual basis to enable the provinces to provide basic services, in
    health, education, transport, primary production and village courts.
    2. Initially, the objectives of the PSIP and DSIP were to provide minimum service
    delivery standards through the re-establishment of basic infrastructure and facilities in the
    areas of health, education, law and justice, water quality and sanitation, transport,
    communication and rural electrification. In October 2012, the government directed that the
    services improvement funds would be broken down into six sectors, allocated in proportions
    with 30 per cent devoted to Infrastructure, 20 per cent each to Health and Education, with
    the remaining 30 per cent divided equally between Law and Justice, the Economic Sector
    and Administration.
    3. The Auditor-General’s Office is conducting a review of Service Delivery Performance
    in the Provinces of PNG, focussing on the provision of services under the Provincial Services
    Improvement Program (PSIP), the District Services Improvement Program (DSIP) and the
    various Function Grants. This is the first in a planned series of reports which examined PSIP,
    DSIP and Function Grants disbursements during 2013 in the New Ireland and Milne Bay
    Provinces totalling K80 million in SIP allocations
    4. The Organic Law on Provincial Governments and Local-level Governments (OLPGLLG)
    provides the overarching framework for the planning and budgeting of local project
    delivery. Within this broad framework, a detailed set of cascading plans and budgets are
    required to be produced, including rolling Five Year Development Plans (FYDPs). The Joint
    District and Joint Provincial Planning and Budget Priority Committees (JDP/JPP&BPC) are
    responsible for overseeing all aspects of planning and budgeting for each District and
    Province.
    5. The conduct of the review was significantly influenced by some of the findings set
    out in this report. In particular, the supporting documentation available to the AGO has not
    been of a standard that adequately supports accountability for project management and
    implementation. To address this, the AGO sought to reconstruct events wherever possible
    including in one instance taking oral evidence from key parties involved. Taking these
    constraints into account, the available evidence shows that in 2013, more than K21 million
    was expended on SIP projects that were either unauthorised by the proper authorities, or in
    breach of the procurement rules. The review also identified a large number of irregular
    transactions which will be passed to relevant authorities for further investigation.
    6. The report makes six recommendations to improve service delivery, including that
    finance instructions be strengthened to provide clearer guidance to Provincial and District
    Administrators and Treasurers and the need for proper recordkeeping and accountability in
    districts and provinces.

    5

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  • Key Findings
    Lack of transparency in funding sources
    7. While the administrations of all districts and both Provinces stated that the full
    allocation of SIP funds had been received, only the Alotau District Treasury could provide a
    PGAS generated report on DSIP and PSIP revenue. One of the District Treasurers admitted
    that funds deposited in the operating account over K1 million were assumed to be DSIP and
    no further checks were conducted.
    8. This lack of transparency makes the monitoring of expenditure of DSIP or PSIP
    extremely difficult and generates uncertainty as to how much funding has been received.
    From an audit perspective it is difficult to align DSIP or PSIP expenditure with the relevant
    sectors if evidence of receipt of the funding is not provided.
    Allocation of DSIP funding
    9. Function grants are allocated to a Province using a formula that takes into account
    the cost of delivery of MPAs in the Province and the Province’s ability to generate its own
    internal revenue. PSIP funding is allocated to a Province at a rate of K5 million per District in
    the Province. However DSIP is set at a specific amount for all Districts. In 2013 all Districts
    were allocated and received K10 million. The same allocation is made regardless of the cost
    of building and maintaining infrastructure in different Districts.
    10. However, the cost of construction and maintenance of infrastructure is greater in
    the more remote Districts and therefore remote Districts will not be able to deliver the
    same level of services as other Districts for the same level of funding.
    Timing of DSIP and Function Grant funding
    11. All district administrations expressed concern over the timing of the release of DSIP
    and Function Grant funding. Delay in the receipt of DSIP funding is often used as an excuse
    for poor performance with regard to DSIP expenditure. Ideally, a significant proportion of
    DSIP funds should be received by the Districts in the first quarter of the year. In most
    Districts this does not occur.
    Lack of rolling Five Year Development Plan
    12. No province or district reviewed had a rolling FYDP. The concept of a rolling FYDP is
    that it is reviewed and updated each year by the JPP/JDP&BPC so that the province or
    district at all times has a FYDP in place. A FYDP allows the updating of the development
    plans to reflect changing conditions or priorities within the province or district.
    13. A rolling FYDP also sets out the detail of the development needed by the province or
    district which is then further assessed and prioritised by the JPP&BPC or JDP&BPC and
    assessed annually for continued suitability. The lack of a rolling FYDP goes some way to
    explaining why there is often little connection between the projects described in the
    development plan and the projects actually authorised by the JPP&BPC or JDP&BPC.
    Non-closure of DSIP Trust Accounts
    14. The review found that PSIP and DSIP grants were managed in accordance with
    Finance Instruction 1A/2013. However, old DSIP Trust Accounts have not been closed.
    District Treasurers advised that they have not been instructed by the Department of Finance
    to close the old DSIP Trust Accounts. All districts reviewed still have a DSIP Trust Account
    open often with funds available. DoF should issue an instruction to close all DSIP Trust

    6

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  • Accounts.
    Inappropriate use of funding
    15. With the exception of Alotau District, the review identified a large number of
    payments for purposes that were not consistent with the intent of the funding. The
    payment of wages and allowances from DSIP funds was common in all Districts and included
    examples of payments for casual office staff, drivers and reserve police officers for
    Christmas and New Year operations. These wages should be paid from the recurrent budget
    and not SIP funds. The review also noted instances where function grants were used for
    purposes such as contributing to funeral expenses for former teachers including new clothes
    for relatives.
    16. Most of the Districts reviewed showed evidence of DSIP funding being used for
    expenditure that should have been funded from the Open Member’s Discretionary Budget.
    A contributing factor to the inappropriate use of PSIP and DSIP funding is a lack of explicit
    instructions concerning the type of expenditure considered appropriate. The spending of SIP
    and Function Grant funding on inappropriate expenditure has a direct impact on the level of
    services delivered at provincial and district level.
    Lack of co-ordination with National Agencies in the provision of infrastructure
    17. The review identified cases where SIP funds had been expended on the construction
    of service delivery infrastructure in the form of a police station and a health centre.
    However, these facilities were not operational because the relevant Department had not
    provided staff. The value of these two projects alone is almost K1 million. In these
    circumstances, there had been failure to reach prior agreement between the provincial and
    district administrations and the relevant agency, concerning resourcing issues prior to the
    construction of the facility.
    18. In these cases, K1 million of SIP funding has not achieved value for money. Project
    costs should be assessed over a reasonable whole of life cost, and demonstrate how people
    will benefit from the investment.
    Missing documentation
    19. With the exception of Alotau District, Provincial and District Treasuries were unable
    to produce the supporting documentation for all transactions requested. In the Kavieng
    District, the Treasurer was unable to produce any documentation for payments made from
    the DSIP Trust Account.
    20. The absence of financial documentation means that auditors are unable to verify the
    details of transactions. It is also a breach of Section 68(1) of the PF(M)A. The inability to
    produce key documents such as development plans and minutes of important meetings
    indicate that insufficient importance is placed on accountability in the decision making
    process.

    7

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  • Recommendations
    21. The review of service delivery in selected provinces has identified that there is an
    urgent need for improvement in key administration practices. The AGO’s recommendations
    relate to the findings presented above and if implemented fully, are intended to improve
    the quality of service delivery at sub-national level.
    Recommendation No.1
    22. The AGO recommends that Provincial Administrators clearly identify the purpose of
    funds deposited into the relevant District Treasury Operating Account. This will ensure that
    Funding such as Function Grants are identified separately from other grants and Districts are
    aware of the purpose of these funds.
    Recommendation No.2
    23. The AGO recommends that JPP&BPCs and JDP&BPCs (now DDA Boards) develop
    Rolling Five Year Development Plans and monitor achievements against these plans
    annually. This will ensure that an up to date is in place each year that is focused on the
    current needs of the Province or District.
    Recommendation No.3
    24. The AGO recommends that the Department of Finance
    (a) issue guidance for Open Member’s and Governors on the proper use of funds
    allocated under DSIP and PSIP, to ensure that these funds are used for their
    intended purposes, and
    (b) develop and implement a cost-effective, systematic, risk based approach to
    verifying payment data to test compliance with funding purposes.
    Recommendation No.4
    25. The AGO recommends that Treasury informs Districts Administrations when DSIP
    funds are received so that payments made late in the year can be carried over and ensure
    continuity of projects in the following year.
    Recommendation No.5
    26. The AGO recommends that the Department of Finance issue an instruction that all
    DSIP Trust Accounts be closed and that funds remaining in the account be returned to
    Consolidated Revenue.
    Recommendation No.6
    27. The AGO recommends that, to meet legal and other accountability requirements,
    District and Provincial Administrations develop and implement recordkeeping standards and
    practices that addresses their recordkeeping responsibilities.

    8

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  • 1. Introduction
    Background
    1.1 Since the 1980s, the Government of PNG has allocated funding to MPs to spend in
    their electorates, initially through the Electoral Development Fund (EDF) and, more recently,
    through the District Services Improvement Program (DSIP). In the 2013 budget (and again in
    the 2014 budget) PNG’s 89 open electorates (normally made up of one or two districts)
    were allocated K10 million each, more than double the previous average annual allocations
    under the EDF from 2007-2012. The fact that DSIP has been increased by this amount
    increases the risks associated with its expenditure
    1.2 In addition, K5 million is allocated to each electorate on an annual basis through the
    Provincial Services Improvement Program (PSIP). The PSIP (K445 million total) is more than
    the amount the provinces receive through function grants (K398 million in 2013). Adding
    these amounts to the DSIP gives a total amount of more than K1 billion, for these programs
    every year from 2013 onwards under a combined Services Improvement Program (SIP).
    1.3 The governance arrangements in place for these three funds place decision making
    in the hands of committees in which politicians have significant influence on spending
    decisions. The Joint District Planning Budget Priorities Committee (JDPBPC) is the decision-
    making body for the DSIP. It is chaired by the MP of the district (or electorate) and also
    includes Local Level Government (LLG) presidents and community members. The District
    Administrator is the chair of the JDPBPC. The PSIP is managed through the Joint Provincial
    Planning Budget Priority Committee (JPPBPC), which is normally chaired by governors of the
    provinces, and also includes constituency or open MPs.
    1.4 Although these committees have ultimate responsibility for deciding how the funds
    will be spent, the rules established by Government make clear that SIP funds are not a
    discretionary account for MPs, but are intended to finance basic infrastructure, and to
    improve service delivery. According to administrative guidelines for spending SIP funds
    issued by the Department of Implementation and Rural Development (DIRD) in 2013, 40 per
    cent of funding under all three programs is to be spent on services improvement in the
    areas of health and education. This is a significant amount (more than K400 million) and is
    more than four times the amount that provinces also receive through function grants for
    health and education.
    1.5 In 2014 the Auditor-General’s Office responded to concerns about the state of
    service delivery in PNG by commencing a review of Service Delivery Performance in the
    Provinces. In view of the level of funding involved, the AGO review focuses on the provision
    of services under the Provincial Services Improvement Program (PSIP), the District Services
    Improvement Program (DSIP) and the Function Grants. These three sources of funding are
    all intended to contribute to the delivery of services within the province whether delivery
    occurs at provincial or district level. It should be noted that although services are also
    provided by LLGs, there are no clearly established mechanisms for service delivery spending
    at that level and as a result, funds expended by LLGs have been excluded from the review.
    1.6 For the purposes of assessment, 2013 was chosen as the period under review. The
    methodology for the review has been trialed in the New Ireland and Milne Bay Provinces

    9

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  • and this is the first in a planned series of reports on the findings of the review. The Districts
    of Kirawina/Goodenough, Samarai Murua and Alotau were reviewed in Milne Bay Province
    and Kavieng and Namatanai in New Ireland Province.
    Review Objective
    1.7 The objective of the review was to determine if the Provincial and District
    Administrations expended PSIP and DSIP funding and Function Grants in compliance with
    the PF(M)A and Finance Instructions and to improve service delivery within the province
    and district. Specifically, the assessment of the PSIP and DSIP examined:
    • The total amount of PSIP and DSIP funds received by the Province and District and
    the total amount spent during the period under review;
    • Whether expenditure incurred was on items permitted by relevant Finance
    Instructions and was within the respective key sectors and
    ;

    • Compliance with the requirements of the Finance Instructions and the PF(M)A.
    Review Scope, Approach and Methodology
    1.8 Expenditure of PSIP and DSIP funds allocated in 2013 were examined for compliance
    with Finance Instruction 0 1 /2013 of 1 January 2013, Finance Instruction 1 A/2013
    o f 14 June 2013, and Finance Instruction 2/2013 of 20 May 2013. The PSIP, DSIP and
    LLGSIP Administrative Guidelines dated 1 January 2013, endorsed jointly by the Secretary,
    Department of Finance and the Acting Secretary of DIRD and issued by the Chief Secretary
    to Government are also relevant and were taken into consideration.
    1.9 Copies of Five Year Development Plans (FYDPs) were examined and individual
    projects were identified. Minutes of JPPBPC and JDPBPC meetings were obtained where
    available and attempts were made to identify linkages between projects found in the FYDP
    and the projects assessed, prioritised and approved by those Committees. Expenditure
    under PSIP and DSIP was also examined to determine whether the projects identified in the
    FYDP and the meeting minutes were actually implemented and where possible, attempts
    were made to inspect projects. Interviews were held with key staff of the Provincial
    Administrations and the District Administrations to determine the governance framework
    within which PSIP and DSIP was allocated and expended, and the capacity of the
    Administration to manage the funds.
    1.10 A number of transactions were selected from the PGAS Expenditure Transaction
    Details report and examined in detail. This involved obtaining payment vouchers for each
    selected transaction and examining these together with all supporting documentation to
    ascertain compliance with the PF(M)A and the Finance Instructions. Analysis of the
    expenditure was also carried out to determine the extent to which Function Grants were
    directly expended on Minimum Priority Activities (MPAs).1
    1.11 The review findings were communicated to the Provinces and Districts in
    Management Letters. Provincial and District Administrators were given the opportunity to
    respond to the Management Letters to provide additional information to clarify the opinion
    offered by the AGO. The only response received to the Management Letters was from
    Alotau District which noted and agreed with all findings.

    1 MPAs are discussed in more detail in Paragraph 1.20

    1.12The conduct of the review hass been significantly influenced by some of the
    findings set out in this report. In 11
    10 particular;

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  • • None of the districts within Milne Bay or New Ireland Provinces identified Function
    Grant funding in the allocations received from the Provincial Administrations. For
    this reason the expenditure of Function Grants for Milne Bay and New Ireland
    Provinces was examined only at Provincial level;
    • In many instances documentation was not produced to the review team. Changes in
    leadership within the districts often resulted in an inability to produce minutes of
    JDPBPC meetings. At provincial level technical problems with computers meant that
    minutes of the JPPBPCs could not be produced.
    • There was an inability of District and Provincial Treasuries to produce adequate
    financial records. The review team attempted to examine a sample of financial
    transactions based on specific selection criteria. In all District and Provincial
    Treasuries some items of documentation to support the financial transactions were
    missing. In Kavieng District this included financial documentation to support all
    transactions from the DSIP Trust Account in 2013. In many cases District Treasuries
    could not provide PGAS reports on DSIP revenue for 2013.
    • The District Administrator (DA) Namatanai and key staff of the administration
    declined to be present for the review. The DA was subsequently summonsed to a
    hearing by the Auditor General in Kavieng in July 2015 at which a number of
    questions arising from the examination of financial reports were raised. However,
    the current DA was not employed in the district during 2013 so was not in a position
    to comment on many of the transactions. Although the DA was able to confirm that
    significant items paid for in 2013 from DSIP funds had not been delivered.
    1.13 Travel to Esa’ala District was not possible due to safety concerns regarding travelling
    off-shore by banana boat. The District Treasurer and District Administrator Esa’ala District
    had produced a large amount of documentation for examination by the review team during
    a visit to Alotau early in 2015 but Esa’ala officials declined to travel to Alotau again for the
    review, therefore the district was not included in the review.

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  • Governance Arrangements
    Provincial and District Services Improvement Programs
    1.14 The key principles of PSIP and DSIP are: greater ownership, affordability, value
    adding, sustainability, leadership and optimum resource utilization. Underpinning the key
    principles is the Government’s Policy of “Achieving National Equity in Development through
    the Strengthening of Basic Service Infrastructure”. The theme of the policy encapsulates the
    spirit of the PSIP, DSIP and LLGSIP and is directly related to the Ten Principles of the Medium
    Term Development Plan (MTDP 2010-2015), DSP (2010-2030) and Vision 2050.
    1. The original objective of the PSIP and DSIP was to provide minimum service delivery
    standards through the re-establishment of basic infrastructure and facilities in the areas
    of health, education, law and justice, quality water and sanitation, transport,
    communication and rural electrification. In October 2012, NEC Decision NG 102/2012
    directed that the SIP funds would be broken down into six sectors with the following
    allocation of SIP funds:30% to Infrastructure Services Support
    2. 20% Health Services Improvement
    3. 20% Education Services Support
    4. 10% Law and Justice Services
    5. 10% Economic Sector Support
    6. 10% Administration, broken down into 3% for general administration support including
    JPP/JDPBPCs and the Project Management Teams, 3% for project related travel by the
    Chairpersons JPP/JDPBPCs or their delegates and 4% project scoping and mobilization
    costs.
    1.15 All Provinces and Districts are required to have a rolling FYDP which provides the
    direction for development based on the sectoral key priority areas of the National
    Government. From this plan PSIP and DSIP projects are to be identified, assessed, prioritized
    and approved for implementation by the JPP/JDPBPC and a list of approved projects
    forwarded to DIRD together with the relevant Project Formulation Documents.
    1.16 The expenditure of PSIP and DSIP funds is governed by the Provincial or District
    Management Team under the leadership of the elected Member of Parliament as
    chairperson of the JPP/JDPBPC while the actual expenditure of the funds is monitored by
    the Provincial or District Administrator and facilitated and reported by the Provincial or
    District Treasurer. PSIP and DSIP funds are to be expended within the framework provided
    by the PF(M)A and Finance Instructions and are to comply with all policies and procedures,
    including procurement procedures, and to ensure value for money.
    1.17 Up until June 2013 a trust account was used for DSIP funds. From June 2013 the
    Provincial Treasury Operating Account has been used for PSIP funds and the District
    Treasury Operating Account used for DSIP funds. Financial Instruction 1A/2013 dated
    14 June 2013 documents the PGAS chart of accounts which is to be used by the Treasuries
    for PSIP and DSIP transactions. During 2013 (the period under review) funds could be moved
    from one sector to another (except the 10% administration component) provided that the
    reallocation was approved by the JPP/JDPBPC and justified in a letter to and approved by
    the Minister for Planning in consultation with DIRD and the Secretary Department of
    Finance.

    12

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  • Function Grants and Minimum Priority Activities
    • Provinces also receive Function Grants with which to deliver MPAs. The Function
    Grants are calculated using a formula which takes into account the estimated
    recurrent cost in each Province of providing a defined set of service delivery
    functions including administration, less the anticipated revenue of the Province.
    There are five Function Grants each with specific deliverables noted below:Health
    Function Grant

    o Operation of rural health facilities
    o Drug distribution
    o Integrated health outreach patrols
    • Education Function Grant
    o Provision of school materials

    o Supervision by Provincial/District Officers
    o Operation of District Education Offices
    • Transport Maintenance
    o Road and bridge maintenance
    o Airstrip maintenance

    o Wharves and jetties maintenance
    • Agriculture
    o Extension activities for agriculture, fisheries and forestry
    • Village Courts
    o Operations of village courts
    1.20 These are the minimum activities that must be funded from the Function Grants
    each financial year. Function grants can be used for funding other recurrent goods and
    services within each functional area. The National Economic and Fiscal Commission (NEFC)
    reports each year on its assessment of the allocation of Function Grants against key
    performance indicators (KPIs) for each Function Grant. The NEFC reports indicate that no
    province has delivered 100 per cent of the function grant allocated against the KPIs.
    Roles and Responsibilities
    1.21 Service delivery in PNG has been affected by the progressive devolution of powers
    from the national to subnational governments after independence. In 1977 the Organic Law
    on Provincial Government (OLPG) was passed, which provided authority for sub-national
    governments to provide and administer services. The OLPG attempted to decentralize
    responsibility for delivery of services, but it didn’t clearly allocate responsibilities between
    the levels of government. Further decentralization came in 1995 with the enactment of the
    Organic Law on Provincial Governments and Local Level Governments (OLPGLLG), which was
    a significant administrative change and was an attempt to clarify the responsibilities of
    provincial and local level governments. The 2013 District Authority Act was an amendment
    to the OLPGLLG and further decentralized administrative functions to the district level.
    1.22 As a result, service delivery in PNG is complex, with all levels of Government
    13

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  • contributing to varying degrees. For example in the Health sector there are hospitals which
    are funded and managed by the National Department of Health and others that are
    managed by the Provincial Administrations. Health centres are often managed and
    resourced by the Districts while the LLGs manage aid posts. Generally speaking the
    Department of Health is responsible for staffing but the sub-national authorities are
    responsible for infrastructure, equipment and supplies using funding from a number of
    sources. In the education sector, the National Department of Education is responsible for
    developing, implementing and coordinating national education plans and policies. Provincial
    and local level governments are responsible for developing and operating schools and most
    school infrastructure development is carried out at the provincial level.
    1.23 For the 2013 year, SIP Guidelines described the JPP/JDP&BPC as playing the central
    role in the development of the Five Year Rolling Development Plan, the key development
    document within the Province or District. On a regular basis the JPP/JDP&BPC is to assess,
    evaluate and prioritise the development projects documented in the Development Plan.
    This should provide the basis of an Annual Plan. The SIP Guidelines and Finance Instructions
    specify that the Development Plan is to be a rolling FYDP. This means that on an annual
    basis the FYDP should be assessed for continued suitability, updated if required and
    extended for a further year to ensure that the Province or District has in place at all times a
    plan which recognizes the sometimes changing need of the Province or District.
    1.24 With regard to the Function Grants, Provincial and District Administrations have
    established Sector heads which are responsible for the management of respective Function
    Grants. The way in which Function Grants are administered differs from Province to
    Province. In some Provinces parts of the Function Grants are distributed to District
    Administrations while in other Provinces the Districts are bypassed and funding is
    distributed directly to Local-level Governments.
    Payment of Funds to Recipients
    1.25 Not all Provinces or Districts receive their full SIP funding each year. Similarly,
    Provinces and Districts may receive their allocations at different times of the year. The
    allocation of SIP and Function Grant funding depends on the availability of funds and the
    National Government’s cash flow. With careful management the timing of the allocation of
    the SIPs should not be an issue for the Provinces or Districts as funding received late in the
    year can be carried over to the following year so projects should continue without undue
    delay.
    1.26 It may however be a problem for the delivery of MPAs under the Function Grants
    where progress is monitored and reported annually. In addition to this no Province receives
    100% of the funding necessary to carry out all MPAs which means that Provinces are
    required to provide additional funding into MPAs. The extent to which this occurs varies
    from Province to Province.

    14

  • Page 17 of 46

  • 2. Assessment of Service Delivery by
    Province
    Milne Bay Province
    2.1 Milne Bay was one of the two Provinces chosen for the trial of the Service Delivery
    Performance Review. The purpose of selecting Milne Bay Province was to determine
    whether the methodology could be equally applied to Provinces that are perceived to have
    different standards of service delivery. Milne Bay Province is generally considered by
    National Agencies such as DoF, DoT and AGO to perform fairly well.
    2.2 In Milne Bay Province the Health Function Grant is passed directly to the Provincial
    Health Authority which appears to be well managed and resourced and the hospital is well
    maintained. However the hospitals and clinics in the more remote Districts are not
    adequately maintained. For example on Kiriwina the hospital is in very poor condition. The
    same can be said of education where the Sector Head for Education at the Provincial
    Administration reported that the more remote schools are not inspected regularly so the
    level of education services reported to be delivered in remote areas cannot be verified at
    provincial level.
    2.3 The Province appears to perform well in transport infrastructure. The roads and
    bridges around Alotau are well maintained. Many of the roads around Alotau are paved
    with bitumen and the main roads out of Alotau such as the road to East Cape are graded
    regularly. In Kiriwina/Goodenough and Samarai Murua Districts roads are reasonably well
    maintained though not paved. The standard of roads in the Districts is adequate for the
    volume and type of traffic.
    2.4 Alotau and the other Districts in the Province have no road access for goods and all
    supplies are delivered by sea. As a result, there is a greater emphasis on facilities such as
    wharves and boat ramps within Milne Bay Province with priority given to the construction
    and maintenance of wharves, jetties and boat ramps. The location of Kiriwina/Goodenough
    and Samarai Murau Districts also meant that the cost of delivering services is much higher
    due to the need to have goods brought in from Alotau or other major ports by sea.
    2.5 In terms of administration basic documents such as a FYDP and minutes of the
    JPP&BPC meetings could not be produced for review. This indicates a weakness in the
    capacity of the administration to carry out basic functions such as centralised records
    management.
    2.6 The district that performed best in terms of the delivery of services was Alotau. The
    level of services delivered by Alotau District was good and decisions concerning expenditure
    were generally sound. The fact that Alotau town is also the administrative centre of Milne
    Bay Province no doubt contributed to the services available. For example the Provincial
    Health Authority contributes greatly to the availability of health services and there are many
    educational institutions within Alotau to cater for the District’s educational needs.
    2.7 However the review team found that Alotau District also managed its resources in a
    manner that contributed favourably to the availability of facilities within the District. An

    15

  • Page 18 of 46

  • example is the construction of the informal market which was managed by the District
    Administration using casual labour and DSIP funding.
    2.8 The difference between Alotau District Administration and other administrations
    both in Milne Bay Province and in New Ireland Province was that it was possible to observe
    linkages between projects identified in the FYDP, the analysis, assessment and prioritisation
    of those projects by the JDP&BPC and DSIP expenditure. This meant that the District had a
    clear direction for infrastructure planning and it was the projects highlighted in the FYDP
    that were actually analysed, prioritised, approved and implemented. The review team found
    that in Alotau District DSIP funding was expended in accordance with the PF(M)A and
    Finance Instructions and that there were very few transactions which did not comply with
    the intent of DSIP funding.
    2.9 Samarai Murau District is centred around the island of Misima. Roads are of gravel
    construction, but appear to be adequate for the volume and type of traffic. Privately owned
    generators are used extensively to provide power to the few businesses on the island.
    2.10 The major infrastructure project during the period covered by the review was the
    provision of subsidised roofing iron to households within the District under the Healthy
    Island Living Concept project. Documentation concerning the project used a recent drought
    as the driving force and the provision of roofing iron and water tanks was meant to capture
    rainwater. At the time of the review there was evidence of roofing iron being used
    extensively on Misima but no water tanks had been purchased.
    2.11 The District Administrator advised that the provision of roofing iron was the first step
    in the project and that this would at least provide shelter for the people. Presumably the
    provision of water tanks, in line with the intent of the project, will follow at a later date. A
    more efficient use of the funding would have been to spend some of the allocation on water
    tanks to be supplied with the roofing iron thereby allowing the conservation of water by
    collecting rainwater.
    2.12 The main priorities of the District according to the current FYDP (2011-2015) were
    health and education. The plan highlighted that Samarai Murua has a young population with
    41% of people under the age of 15 years which will place additional demands on health and
    education services in the years ahead. One long-term goal for the District is to reduce the
    population growth rate from 2.3% in 2000 to 2.2% in 2015 and 2.0% in 2030.
    2.13 When examining expenditure transactions the review team noted that there were
    some very large expenditure items referring to a very small number of projects. For example
    the only infrastructure project during 2013 was the supply of roofing iron and ridge capping
    with expenditure of K937,835. There was also expenditure of more than K700,000 on school
    desks and chairs which appears to be excessive and K495,000 on solar lamps which was
    forecast in the FYDP. The review team noted that just one JDP&BPC meeting was held
    during 2013. JDP&BPC meetings are supposed to be held at least once each quarter with
    additional meetings held as needed. One JDP&BPC meeting per year may not be sufficient
    to adequately assess, prioritise and approve projects.
    2.14 Kiriwina/Goodenough is another island District of Milne Bay Province. The District
    Administration is located on Kiriwina Island. Facilities on the island are very basic. Initiatives
    that have been noted in other Districts such as rural electrification and the development of
    industries have not been pursued in Kiriwina/Goodenough and almost half a million kina of

    DSIP expenditure in 2013 consisted of 20
    19
    18
    17
    16 hand-outs of funding from the Open

  • Page 19 of 46

  • Member to churches and schools as ‘member’s commitment’ and hand-outs of food to the
    general population.
    2.15 There are numerous trade stores selling basic food items on the island but very little
    opportunity for most people to generate additional income. The review noted three
    transactions totalling K125,000 described as funding for sawmills which were difficult to
    reconcile with the lack of suitable timber on the island.
    2.16 The District appears to have suffered from a lack of planning and poor financial
    governance resulting in poor service delivery. For example, it has become the practice for
    community groups to conduct basic road maintenance. In 2013 K70,000 was paid to
    community groups for this purpose. However this is done totally without planning by the
    Administration. A group of people decide to do a bit of maintenance and then present an
    invoice for payment. It appears to be the same groups that are maintaining small sections of
    roads in and around their villages while road maintenance is badly needed in other areas.
    The use of community groups for this purpose could be an efficient use of resources and a
    way to provide additional income for communities if planned and monitored by the District
    Administration.
    2.17 The review team noted expenditure on two infrastructure projects during 2013. Both
    projects were for the construction of classrooms for two schools at a total cost of K450,000.
    The District Administration did not manage these projects but paid the funds directly to the
    schools to manage the projects themselves. The largest expenditure item, other than the
    school classroom projects, was for K2 million spent on pest control.
    2.18 The review team noted three payments of K38, 042 on one cheque made payable to
    Bank of South Pacific Limited. Supporting documentation included a letter from the bank
    concerning a missing amount of K152, 170. K114, 127 was paid to the bank from DSIP
    funds so that the bank would open the agency again on the island.
    New Ireland Province
    2.19 New Ireland Province is comprised of Kavieng and Namatanai Districts and the
    Provincial Administration and Kavieng District Administration are both located in Kavieng
    town. This is a similar arrangement to Milne Bay Provincial Administration and Alotau
    District Administration being co-located.
    2.20 Kavieng is a small town of pot-holed roads which functions on half a day of power
    each day. Part of the town receives power in the morning and the other part of the town in
    the afternoon. Disruptions to basic functions occur each day because of the power sharing
    arrangements. There is a considerable amount of noise produced by the use of generators
    by some businesses. Roads, even those in the middle of town, are generally in poor
    condition.
    2.21 The Province does not have a FYDP and minutes of JPP&BPC meetings were not
    produced for review so it is not possible to comment on any links between planning,
    prioritising, approving and implementing projects by the JPP&BPC.
    2.22 According to information that was provided to the AGO, the 2013 budget listed
    15 projects under the various sectors. However, during 2013 the Provincial Administration
    had just two infrastructure projects underway which had been started but were incomplete.

    One was the construction in Kavieng town of a Governor’s Residence and the other was the
    construction of Government Haus in Namatanai. Neither of these projects was reflected in

  • Page 20 of 46

  • any planning documents, nor do they satisfy the criteria for funding under the DSIP, the PSIP
    or Function Grants.
    2.23 The review was unable to form an opinion on the delivery of Minimum Priority
    Activities (MPAs) due to the lack of information available at the time of the review. Most
    Provinces report annually on the delivery of MPAs under the various function grants
    however the Provincial Administration could not provide a report or any relevant
    information on the MPAs due to staff absences, including the Provincial Administrator. The
    inability of staff within the Administration to access information for the review team is an
    indication of weaknesses within the Administration.
    2.24 Examination of PGAS transactions reveals that significant sums of DSIP funding have
    not been spent on the maintenance or construction of infrastructure but on other
    expenditure including:
    • K594,926 of K650,000 allocated for the construction of the Namatanai Technical
    College was used to pay school fees for selected students.
    • K35,200 paid for the retrenchment of public servants.
    • Over K100,000 paid to consultants for feasibility studies and other services which by
    2015 had not resulted in any projects actually starting.
    • K22,450 in potentially fraudulent payments were noted.

    2.25 Kavieng District Administration is located in Kavieng town. Whilst there appears to
    be some benefit to the co-location of the provincial and district administration in Milne Bay
    Province this is not apparent in New Ireland. A full review of Kavieng District’s expenditure
    under DSIP was not possible as the District Treasury was unable to produce any
    documentation for transactions from the DSIP Trust Account. This amounts to all
    transactions for the first six months of 2013.
    2.26 The review noted that contractors and consultants were appointed on the
    recommendation of the Member or through an expression of interest. These include
    funding of K300,000 to a private company to bring their earthmoving equipment to Kavieng
    from Simbu (an additional payment of K50,000 to the company was also noted); a contract
    with a company worth K300,000 per year to audit project funds, formulate project
    documentation, secure funds through donors and the Department of National Planning and
    conduct feasibility studies; appointment of a company as project manager/coordinator of a
    Project Development Unit with funding of K200,000; and payment of K154,704 to an
    architect for the construction of a police station (these are very basic buildings and usually
    prefabricated or built to a basic design).
    2.27 The review also found over K30,000 paid in advance to a company for fuel in
    amounts of K2,000, K4,000 or K6,000 per transaction, an amount of K60,000 paid to a local
    trading company described as repayment of money borrowed and K212,510 paid to
    educational institutions for school fees for individual students.
    2.28 The other District in New Ireland Province is Namatanai which is located 258
    kilometres from Kavieng. A bitumen road begins a few kilometres north of the town and
    ends a few kilometres south, which bypasses Namatanai town. This is the main road which

    was constructed by the National Government. The roads around Namatanai town are dirt
    and generally in poor condition. Some power is provided by generator but it is unreliable

  • Page 21 of 46

  • and most businesses operate their own generators. At one time the town was powered by a
    hydro power plant but it fell into disrepair and was replaced by generators.
    2.29 The District Administrator was informed by letter of the dates that the review would
    take place however the administrator and key members of the administration were not in
    attendance on the days that the team conducted the review. The review team was able to
    obtain PGAS reports and sight payment vouchers at the District Treasury and this was the
    basis of the review.
    2.30 The District Administrator was subsequently summonsed to a hearing in Kavieng by
    the Auditor-General using his powers under the Audit Act. The District Administrator
    attended the hearing and co-operated fully. However, as he was not the District
    Administrator during the period under review the information he was able to provide was
    limited. Key documents such as the FYDP and minutes of JDP&BPC meetings (if any were
    held) could not be produced.
    2.31 This is an indication of poor record keeping within the District Administration. Key
    documents should be kept on file and hard copies should be available for reference by staff
    to assist with planning and monitoring of DSIP expenditure.
    Conclusion
    2.32 In summary Milne Bay Province, in particular Alotau District performed best of the
    entities reviewed. Though a lack of compliance with Finance Instructions and DSIP, PSIP and
    LLGSIP Guidelines was noted there was no evidence of fraudulent transactions in either
    administration. Evidence of fraud or irregular transactions possibly suggesting fraud was
    observed at all other entities reviewed. A summary of findings is provided at Appendix 1 and
    further details of irregular transactions are at Appendix 2.
    2.33 Poor planning and poor decision making by New Ireland Province and the other
    Districts impacted significantly on the quality of service delivery. Particularly in New Ireland
    Province there were many non-compliant or irregular transactions. SIP funding is intended
    to improve service delivery through the construction or maintenance of infrastructure. In all
    locations except Alotau (at both province and district level) it was very difficult to see any
    positive outcome for service delivery despite the millions of kina received annually
    specifically for this purpose.
    2.34 Both Provinces and all Districts reported that they had received their full allocation
    of funds however Alotau was the only entity reviewed that could produce a PGAS revenue
    report as evidence showing the dates and amount of DSIP funding. Other entities could
    show Appropriations and Cash Fund Certificate Authorisations on PGAS reports but these
    figures are simply entered into PGAS and do not in themselves provide evidence that the
    funds were received. This is most likely an error within the District Treasuries. The
    Department of Finance has been approached on a number of occasions to provide financial
    data on funding allocated to the provinces and districts but to date this has not occurred.
    2.35 Expenditure was noted in both provinces and all districts that were inconsistent with
    the purpose of the funding. For example travel allowances were paid that could not be
    shown to be related to DSIP projects and all entities reviewed showed the payment of
    school fees for individuals from SIP funds which should be used to improve the delivery of

    services through the construction or maintenance of infrastructure. There were similar
    inconsistencies with Function Grant expenditure.

  • Page 22 of 46

  • 2.36 The inability to produce FYDPs and minutes of JPP/JDP&BPC meetings is a significant
    failure of accountability. Documenting decisions and the basis on which they are made, is
    essential in any organisation’s corporate governance and critical to accountability. Proper
    records also help the organisation to deal positively with legal risks and should be available
    both electronically and in hard copy for easy reference. Similarly, missing financial
    documents are the responsibility of the head of a department (in this case the
    Administration or Treasury) under the PF(M)A (S5(1)(b)) specifically the requirement that all
    accounts and records relating to the functions and operations of the department are
    properly maintained. All entities reviewed were unable to produce all financial documents
    requested by the review team. In the case of Kavieng District this included payment
    vouchers and supporting documentation for all transactions from the DSIP Trust Account,
    that is, key financial records for the first six months of 2013.
    2.37 A high level of compliance with the PF(M)A was observed at Alotau District.
    However, all other entities exhibited very low levels of compliance with the PF(M)A
    particularly in the area of procurement. There were examples of splitting invoices to avoid
    going to tender, appointing a preferred supplier while failing to obtain written quotations
    for significant purchases and falsely claiming a sole supplier status to avoid going to tender.
    The purpose of obtaining quotations and going to open tender is to ensure value for money
    by allowing the market place to set the price.
    2.38 The review identified several transactions which suggested potential fraud and these
    have been referred for further investigation by the AGO’s Forensic Audit Unit. These
    included a number of transactions totaling just under K20,000 over a period of months
    suggesting systemic fraud and K500,000 in one transaction. It is unlikely that this review has
    identified all potential cases of fraud that may have occurred, but what has been identified
    to date is most likely an indication of persistent and wide-spread abuse of DSIP, PSIP and
    Function Grant funds.

  • Page 23 of 46

  • Appendix 1: Overview of Findings
    Issue Milne Bay Alotau Kirawina/ Samarai/ New Kavieng Namatanai
    Province District Goodenough Murua Ireland
    Province
    SIP Funding 20 10 10 Million 10 10 10 10 Million
    Allocation Million Million Kina Million Million Million Kina
    Kina Kina Kina Kina Kina
    Rolling 5 Year
    Development
    No No No No No No No
    Plan

    Availability
    of No Yes No No No No No
    Documents
    Compliance
    No No No No No No No
    with PF(M)A
    Potential
    No No Yes Yes Yes Yes Yes
    Fraud
    Value of
    Irregular K2.3m K1.7m K2.0m K4.5m K3m K1.8m K3.7m
    Transactions

    21

  • Page 24 of 46

  • A ppe n dix 2 : De t a il of Ir r e gu la r
    Transactions
    Milne Bay Provincial Administration
    Payment to the Department of Works (Alotau Branch) for the Construction of a Foot Path
    in Alotau
    The Department of Works (Alotau Branch) entered into a contact with the Works
    Supervision Unit of the Milne Bay Provincial Government for the construction of a foot path
    in Alotau town. Although the actual contract was not sighted, the project was identified as
    the construction of a 2 meter wide foot path, covering a distance of 2.9 kilometres from
    Goilanai to Cameroon. Payment vouchers and correspondences indicate that the initial cost
    of the project was estimated at K100,000 but subsequently increased to K490,000 through a
    letter of variation.
    A brief acquittal report dated 3 October, 2013 was provided by the Department of Works to
    the Milne Bay Provincial Works Supervision Unit on the expenditure of the initial K100,000
    and also to request additional funding for the project. However, the report failed to
    adequately account for the expenses already incurred, including payments to Community
    Base Contractors which represented more than 80% of the project expenses. Furthermore,
    it appears that Works Unit failed to properly assess the status of the project before
    allocating further funding.
    Also, as the project was expected to cost more than K50,000, three written quotations
    should have been obtained to select the most suitable contractor. However, the Works Unit
    did not obtain the required number of quotes. The failure to obtain three written
    quotations for expenditure over K50,000 amounts to a breach of Finance Instructions and
    the PF(M)A.
    Furthermore, the lack of proper acquittal of project funds indicates poor accountability and
    transparency by the Department of Works. Also, the absence of a monitoring and evaluation
    report, suggests that the Works Unit had failed to properly monitor the implementation of
    the project and did not conduct a proper assessment for additional funding.
    Purchase of Earth Moving Machinery from UMW Niugini for K1,358,500
    The Milne Bay Provincial Administration purchased a Dozer and 1 Excavator from UMW
    Niugini at a total cost of K1,358,500. The acquisition of the earth moving machines was
    approved by the Provincial Supplies and Tender Board during its meeting number 5/2013
    held on 24 September, 2013. The purchase of the machines was also supported by an
    Authority to Pre-Commit signed by the Provincial Administrator in accordance with the
    Finance Instructions and the PF(M)A.
    However, it could not be ascertained if other suppliers were invited to participate in the
    bidding process for supply of the machinery. Furthermore, the contract between the Milne
    Bay Provincial Administration and UMW Niugini for the supply of the machines was not
    sighted and ownership documents were not provided for review and examination.
    Therefore, in the absence of ownership documents it was not possible to establish the

    22

  • Page 25 of 46

  • ownership of the machines or to ascertain whether the machines had been recorded in an
    asset register.
    Moreover, the absence of a contract between UMW Niugini and the Milne Bay Provincial
    Administration for acquisition of earth moving machinery worth K1,358,500 is also in breach
    of the Finance Instructions and the PF(M)A since payments over K500,000 must be
    facilitated through a Contractual Agreement between the concerned parties.
    Contract between Delta Timber Limited and the Works Supervision Unit for the
    construction of 3km of track from Poi to Nunumai Section Road
    Delta Timber Limited was contracted by the Works Supervision Unit to construct a track,
    linking Poi to Nunumai section road at a total cost of K300,000. Records indicate that the
    company was registered with the Investment Promotions Authority (IPA) but it did not have
    a valid Certificate of Compliance (COC) in respect of year 2013. However, there was a lack of
    information to confirm whether or not a minimum of three written quotations were
    obtained as required by Finance Instructions and the PF(M)A.
    Missing Payment Vouchers
    Out of the expenditure transactions selected for testing, payments totalling more than
    K928,000 were not provided for verification. Details are provided in the table below;.
    Cheque Number Payee Date Amount K

    3037 (missing digit) NEW Engineering Surveys 27 May 2013 17,714

    30343 CCT 27 May 2013 1,968

    30747 NWS Engineering Surveys 12 June 2013 17,714

    30738 CCT 12 June 2013 1,968

    35912 Falstaff Limited 17 October 2013 25,000

    32546 Samarai Murua Exports 7 August 2013 100,000

    30615 Catholic Diocese of Alotau 4 June 2013 300,000

    40191 AAM Brisbane 15 December 2013 150,000

    36522 Masurina Ltd 7 November 2013 297,793

    36953 Green Agro Technology 22 November 2013 8,683

    37946 Leslie Lavong 14 December 2013 8,000

    Total 928,840

    The absence of the payment vouchers and the supporting documents meant that it was not
    possible to verify the authenticity of the payments referred to in theTable . Furthermore,
    the loss or misplacement of financial documents and information raises concerns about the
    safe keeping of the financial records by the Milne Bay Provincial Treasury . .

    Education Functional Grants for Equipment Used for Other Expenses
    23
    25
    24

  • Page 26 of 46

  • Expenditure transaction details ledger for the Education Function Grant for 2013 showed an
    amount of K80,000 allocated for purchase of equipment. However, a total expenditure of
    K77,649 was spent on the hire of sea vessels and boats and recorded as other operational
    expenses. Under the government chart of accounts, hire of ships or boats are classed as
    expenditure for transport and fuel.
    Furthermore re-allocation of funds from one vote to another must be approved by the JPB
    & BPC or by the Minister responsible for National Planning, Implementation and Monitoring
    where his or her authority is required. In this case, the hire of the marine vessels from funds
    allocated for purchase of equipment was not authorised, and should be further investigated
    by the relevant authority.
    Payment to MV Matos Shipping K10,000
    On 17 May 2013, an amount of K10,000 was paid to MV Martos Shipping for the charter of a
    boat to repatriate a teacher at Salamo High School. The cost of the charter covered the route
    from Alotau to Salamo High School then to Losuia as the teacher was residing in Alotau
    . However, it was observed that the payment made was the highest quotation whilst the
    lowest was for K7,500 by another boat company. The rationale for selecting the highest
    quote was not explained.
    Payment to MV Aurora K46,200
    On 31 December 2013, an amount of K46,200 was paid to the operators of MV Aurora. The
    purpose of the payment was for the charter of a boat for teachers’ deployment and
    transportation of school materials. However, the payment was made despite the lowest
    quotation of K36,000 provided by another shipping company.
    The PF(M)A is very clear on engaging suppliers with the lowest quotation to ensure
    affordability and economy, and to avoid waste of public funds. In the two instances noted
    above, the payments made did not comply with the PF(M)A, as they were the highest
    quotations..

    Payment of K50,000 advanced to an Officer
    On 31 December 2013, an amount of K50,000 was paid to an officer in the Department of
    Agriculture and Livestock to purchase and resell coffee on behalf of the Milne Bay Provincial
    Government. Whilst it was a good initiative to explore other means of raising internal
    revenue for the government, it was not possible to ascertain if the money spent achieved its
    purpose, as there was no acquittal report from the officer .

    Alotau District
    Expenditure Under DSIP Project Mobilisation
    An examination of the PGAS Expenditure Transaction Details report showed that K93,817
    out of an appropriation of K400,000 under Project Mobilisation was expended on travel
    allowances and accommodation. The review was unable to ascertain if the travel was
    directly related to project mobilisation. A payment of K69,500 for a land survey was noted

    however most of the expenditure was on operational expenses such as office furniture,
    printing and sign writing. There was a payment of K15,000 with a description ‘support police

  • Page 27 of 46

  • ops’. While little appears to have been expended on project related activities from this
    allocation the review noted a payment of K11,570 for site clearance from DSIP Education.
    Out of a total allocation of K400,000 almost 25 per cent has been expended on items that
    do not appear to be legitimate expenses connected to project mobilisation. Expenditure
    that would have been expected from this allocation includes feasibility studies or project
    scoping. This means that legitimate expenses connected to project initiation such as the site
    clearance mentioned above may be being funded from another DSIP sector which can cause
    funding constraints in other areas.
    Higher Education Tuition
    The review noted an expenditure of K250,000 on higher education tuition from DSIP
    Education. This does not fit with the primary objective of DSIP which is to improve minimum
    service delivery standards through the re-establishment of basic infrastructure and facilities.
    Activities consistent with the intent of DSIP funding would be the construction of class
    rooms or teacher housing under the Education sector as this would have a lasting benefit.
    The payment of tuition fees for a relatively small number of students is not an economical,
    effective or efficient way to improve education for the entire District as the payments
    benefit the select group of people whose tuition is funded without providing ongoing
    benefits to the District.
    Payment of Wages and/or Overtime from DSIP Funding
    The review noted that a total amount of K33,766 of DSIP funds was expended on wages or
    overtime payments. K28,660 of this amount was expended by the Open Member’s Office.
    As previously stated the primary purpose of DSIP funding is to provide minimum service
    delivery standards through the re-establishment of basic infrastructure and facilities,
    including socio-economic activities for essential services such as health, education, law and
    justice, quality water and sanitation, transport (air, sea and land), communication and rural
    electrification.
    The allocation of DSIP funds to wages and/or overtime payments reduces the amount of
    funding available for the improvement of service delivery. An exception to this is an amount
    of approximately K100,000 used to fund casual wages for the construction of the informal
    markets.
    This project was adequately managed by the District Administration and the markets were
    constructed within the allocated timeframe and budget. The alternative would have been to
    obtain three written quotations and hire a contractor to do the work. This would most likely
    have cost more and would have taken longer to achieve and on this basis, the District
    Administration’s decision to manage the project themselves appears to have been sound.
    Payment to Digicel
    On 24 December 2013 K1 million was paid to Digicel (PNG) for the purpose of
    construction/installation of a mobile phone tower. This is consistent with the Five Year
    Integrated Development Plan.

  • Page 28 of 46

  • Discussions with the District Administrator and senior officers revealed that the
    Administration had reached an agreement with Digicel under which the Administration
    financed mobile phone towers in the District for the sole use of Digicel. In return Digicel
    provided small hand-held tablets and internet access to Year 12 students within the District.
    Digicel had also agreed to provide one handset with K10 credit to each household in the
    District. While this initiative provided mobile phone coverage to certain areas within the
    District it also provided a commercial advantage to a single private company and
    guaranteed a revenue stream for the term of the agreement.
    The improvement of communications is clearly a priority for the District and is identified as
    a legitimate use of DSIP funds. However it would have been better if the costs, benefits and
    risks of entering into an agreement with a single supplier had been identified. Other
    options, such as the construction of a tower that could have been leased to Digicel or any
    mobile phone carrier should have been explored.
    Expenditure Under Law and Order
    According to the PGAS Expenditure Transaction Details report K920,292 of the K1.5 million
    appropriated to DSIP Law and Order was expended. Of this amount over K500,000 was
    allocated to games and the provision of sporting equipment. The only significant item of
    expenditure that comes within the guidelines of DSIP was K349,280 allocated to a roofing
    project. However this should not have been expended under the Law and Order sector.
    Whilst it can be argued that the provision of sporting equipment and the staging of games
    and competition can provide a healthy diversion for the District’s youth these activity should
    not be financed from DSIP funds which should be applied to the replacement or
    refurbishment of infrastructure and the socio-economic activities described above.
    Samarai/Murua
    Payments to Karridale Limited
    At the first JDP&BPC meeting of 2011 it was resolved to purchase 40,000 sheets of roofing
    iron under the Healthy Island Living Concept Program. Quotations were received from three
    companies; one for K2,465,991, anotherfor K3,864,960 and the successful bidder Karridale,
    for K2,344,000.
    Procurement of this value is supposed to be facilitated through open tender managed by
    the Provincial Supply and Tender Board. However, on 3 February 2013 K1.3 million was paid
    to Karridale Limited, with the payment divided between five separate invoices which were
    virtually identical to each other. Splitting a single procurement into multiple invoices to
    avoid review or competitive selection, can be a strong indicator of corruption.
    Good Success Limited
    The review noted a number of payments to Good Success Limited. One was part payment
    for roofing iron with a total amount of K204,270. While procurement of this amount
    normally requires three written quotations and a pro-forma contract, in this case payments
    were split to avoid competitive selection processes.
    There were other payments to Good Success Limited relating to the purchase of desks and
    chairs for schools. A letter from the District Treasurer to the District Administrator dated 11
    December 2012 refers to three separate claims raised for Good Success Limited amounting
    to K699,960 and advises the District Administrator that the claims should be combined as

    one to comply with procurement 26
    27 procedures which for this amount would

  • Page 29 of 46

  • necessitate an open tender process managed by the Provincial Supply and Tender Board.
    However, the payments were split over three smaller amounts. These payments represent
    a clear breach of procurement procedures.
    Counterpart Funding for Fishery Activities
    On 12 August 2013, five cheques of K60,000 each, were issued as counterpart funding for
    fishery activities. Each one of the payments was made following submissions from
    individuals in the community to the office of the Open Member. Some of the submissions
    were seeking financial assistance and others appeared to be on behalf of companies for
    items supplied, however the supporting documentation is either incomplete or unrelated to
    the payments that were made.
    These payments are inappropriate as fishery activities were not approved projects under
    the 2013 DSIP Budget. The items in question appear to be matters that should have been
    settled from the Member’s Discretionary Budget and should not be financed from DSIP
    funds.
    Payment of Individuals wages
    On 23 December 2013 K3,000 was paid to an individual for services rendered. The
    supporting documentation explains the reason for engaging the individual was ‘to do
    logistics for administration and Member’s Office from October to December 2013’. Services
    rendered include assisting the Member’s Executive Officer and Project Officer to distribute
    Healthy Island Living Concept equipment to wards, assisting the Member’s Executive Officer
    to do education data validation and assisting the Member’s Executive Officer and Project
    Officer to do logistics for the Member’s patrol with the District Administrator to Murua LLG.
    However, wages should not be financed through DSIP funds which should be allocated to
    infrastructure projects.

    Payments to Misima Island Trader
    On 4 October 2013 K17,727 was paid to Misima Island Trader Ltd. Included in this amount
    was a payment of K5,000 on a separate invoice also dated 4 October 2013. The purpose of
    the payment was for general stationery and groceries supplied for teachers in service. The
    review found that there are no itemised lists of the goods provided for the amount, nor a
    record of delivery or receipt of the goods.
    On 25 June 2013 K53,600 was paid to Misima Island Trader. Included in this payment was an
    amount of K48,900 for vehicle maintenance. However, there are no detailed invoices
    showing the maintenance carried out or identification of the vehicles maintained.
    Payments to Iwaky’s Agro Consultancy Service
    Between 13 August 2013 and 15 December 2013 payments totalling K29,500 were made to
    Iwaky Agro Consultancy or Kata Iwaky. The purpose of the payments was project
    mobilization for updating agriculture data in Louisiade Rural LLG. The supporting
    documentation included Contract Agreement between Iwaky’s Agro Consultancy Services
    and the Division of Agriculture and Livestock, a copy of the 2013 DSIP Budget showing an
    allocation of K50,000 for a data survey and a letter from the Deputy Rural Development

  • Page 30 of 46

  • Officer to the District Treasurer informing the Treasurer that the consultancy service is being
    contracted to Iwaky Agro Consultancy Services.
    The document also revealed there was a copy of a letter to the District Administrator from
    the Examiner stating that three quotations are required and requesting evidence of the
    District Project Management Team (DPMT) awarding the contract. The Acting Rural
    Development Officer has answered the letter stating that three quotations are not required
    as it is payment for project mobilization (30%) and that there hadn’t been a meeting of the
    DPMT since 2012.
    An examination of documentation by the review team shows that whilst an amount of
    K50,000 has been allocated to the data survey the requirements for procurement of this
    amount is for three written quotations to be obtained. In addition, the review notes that
    despite no Certificate of Compliance being provided tax was withheld only from the final
    payment of K5,000 and not the payments of K15,000 and K10,000.
    Payment of individual’s rent expenses
    On 14 August 2013 K5,400 was paid to an individual. The purpose of the payment is for
    outstanding rental for March to August 2013. Examination of the supporting documentation
    shows that the rental is for a property rented by the Health Extension Officer (HEO)
    Samuari.
    In a letter to the Open Member the HEO explains that the arrangement was endorsed by
    the District Administration. However there is documentation attached to the payment that
    acknowledges that the officer is not entitled to rental assistance. There is also a notation on
    the Requisition for Expenditure stating that the officer is not entitled to rental and
    instructing that a check should be made with the Provincial Health Authority to determine
    the HEO’s conditions of employment. It is clear from the supporting documentation that the
    HEO is not entitled to have rental paid. In any event, this is not an appropriate use of DSIP
    funds.

    Payments to Kingstown Holdings Limited
    On 18 December 2013 K368,940 was also paid to Kingstown Holdings Limited for ridge
    capping. Two quotations were included in the supporting documentation for this payment.
    On 19 December 2013 K423,860 was paid to Kingstown Holdings Limited for roofing iron.
    This project is consistent with the FYDP and the 2013 DSIP Budget. However procurement of
    this amount requires three written quotations.
    On 25 November 2013, K347,000 was also paid to Kingstown Holdings Limited for the
    purchase of solar lamps for lighting under the Healthy Island Living Concept Program. This
    project was not part of the FYDP but was included in the 2013 DSIP Budget which was
    approved by the JDP&BPC. The amount of the invoice was K495,000 and an additional
    payment of K148,000 was subsequently paid on 20 December 2013.
    All payments are a breach of procurement requirements in that procurement up to
    K500,000 requires three written quotations. The payments for the solar lights were
    supported by only two written quotations.
    It has also been noted that as the ridge capping is necessary for the successful application of
    the roofing iron, the purchases are related and should have been managed as one

    procurement item. In that case the value 30
    29
    28 is more than K800,000 so the

  • Page 31 of 46

  • procurement should have been facilitated by open tender managed by the Provincial Supply
    and Tender Board. Splitting the procurement into two parts gives the appearance of
    attempting to circumvent established procurement procedures.
    Samarai-Murua District Investment Limited
    The review found a number of payments to the company related to maintenance of the
    barge MV Samarai-Murua and for funding to pay for the repatriation of patients transferred
    to Alotau for medical treatment. Examination of documents revealed that Samarai-Murua
    District Investment Limited is a company established by the District Administration for the
    purpose of operating the MV Samarai-Murua.
    The review noted an initial allocation of K300,000 of which K150,000 was paid in June 2013,
    a further payment of K171,834 (both for repairs and maintenance of the MV Samarai-
    Murua) and a payment of K25,000 for medical repatriation also paid in September 2013.
    These are significant expenses which may benefit the community, but should not be paid
    from DSIP funding which is intended to provide minimum service delivery standards through
    the re-establishment of basic infrastructure and facilities.
    Water Supply Feasibility Study
    On 25 June 2013 K10,000 was paid to an individual and this was followed by a further
    payment of K18,000 on 14 August 2013. The purpose of the payments was for a water
    supply feasibility study. A water supply feasibility study was not included in the FYDP but
    had been included in the 2013 DSIP Budget and approved by the JDP&BPC.
    The document Background Justification and Relevance of the Project indicates that only two
    quotations were received. Procurement of this value requires three written quotations.
    Neither quotation was attached to the payment. Awarding of a contract of this value
    without the appropriate written quotations is a breach of procurement requirements.

    Repatriation of a Deceased Body
    On 4 October 2013, K15,000 was paid to MV Tama Shipping Services for the repatriation of a
    deceased body. The review notes that Samarai-Murua District Investments Limited receives
    an annual budget to cater for medical repatriation.
    Expenditure of this value requires three written quotations. The payment of this invoice
    without obtaining three written quotations is a breach of procurement requirements. The
    repatriation of the body of a deceased person should not be funded by DSIP.
    Kirawina/Goodenough District
    Payment to PNG Pest Control

    On 15 October 2013 K340,000 was paid to PNG Pest Control. There are two documents
    supporting this payment. One states that the payment is for pest control management and
    spray of white ants for Losuia Health Centre whilst the other states that the payment is for
    ‘pest control management and spraying of Losuia station for all staff houses, offices, schools
    and health centre, police station and etc’. Both documents quote invoice 02745 which
    states that the service provided was the initial treatment for control of subterranean
    termites for the hospital building.

    The Examiner has queried the payment stating that two cheques, one for K165,000 made
    payable to PNG Fumigation Services and one for K201,300 made payable to PNG Pest

  • Page 32 of 46

  • Control were written on 11 April 2013 and collected the same day. The first cheque was in
    payment for treatment for the Kiriwina High School and health centres and the second
    cheque was in payment for treatment for the Kiriwina High School.
    On 9 December 2013 a further cheque for K615,000 was also made payable to PNG Pest
    Control for fumigation work done at Losuia to the District Office, Treasury, Council
    Chamber, Airport Terminal and houses. The amount was made up of three invoices, for
    termite treatment for the hospital building (exactly the same description of the service
    provided as invoice 02745 described above), and a second invoice number 02745 but with a
    different date and description.
    These payments require further explanation. The same invoice number has been used twice
    and two separate invoices for different amounts show the same description. Given the total
    value of the payments (over K1 million) this matter should have been managed by open
    tender by the Provincial Supply and Tender Board. Payments for pest control were raised in
    the Management Letter sent by the AGO to the District Administrator of Kiriwina
    Goodenough however no response was received.
    Diodio Elementary School
    On 23 August 2013 K10,000 was paid to the DioDio Elementary School. PGAS records
    describe the payment as ‘member’s commitment’. A note handwritten on the supporting
    documentation states that the amount is to be reimbursed from Education Sector funds
    when funds are available. This is not an appropriate use of DSIP funds and there is no
    evidence that the payment was reimbursed.
    Payments for Sawmill
    On 20 December 2013 two payments each of K42,057 were made, one to an individual and
    one to a company related to the individual for a Lucas Saw Mill and accessories. Approval
    had been given to pay K84,115 to North Kiriwina Timber Mill Omarakana at the JDP&BPC
    meeting held on 19 November 2012.
    While the payment was approved by the JDP&BPC for the purpose of establishing a sawmill,
    it is not part of the FYDP. There are no records to suggest that the alternate use of the
    funding was considered or approved by the JDP&BPC. The review team considers the
    original approval of funding for a sawmill for Kiriwina lacks sound reasoning given the lack of
    mill-able timber on the island. Furthermore the review team visited the site where Mr
    Pulayasi was to establish the facility and noted a very small, incomplete structure which
    does not reflect an investment of K84,115 of DSIP funding.
    Payment to Kiriwina High School Canteen
    On 20 December 2013 K25,390 was paid to Kiriwina High School Canteen. The supporting
    documentation shows that goods were supplied by the Canteen for a variety of reasons
    however there are several instances of cash or cheques being obtained by the staff of the
    Open Member.
    The supporting documentation includes a letter dated 30 November 2013 from the
    Headmaster of the Kiriwina High School acknowledging that he had breached the PF(M)A by

  • Page 33 of 46

  • providing the funds to staff of the Open Member and requesting that the money be repaid
    as the Internal Auditor had given him until the end of December to rectify the matter.
    The circumstances surrounding the obtaining of cash and cheques from the Canteen by staff
    of the Open Member require further explanation. No explanation was received from the
    District Administrator.
    Payment to Bolubolu Vocational Training Centre
    On 20 December 2013, K250,000 was paid to Bolubolu Vocational Training Centre for the
    construction of a double classroom. The supporting documentation includes a letter from
    the Open Member to the District Administrator dated 14 December 2013 instructing that a
    number of payments be made from DSIP funding.
    The construction of the classroom for Bolubolu Vocational Training Centre is not a project
    under the FYDP, nor was it approved at the JDP&BPC meeting 01/2012 for implementation
    in 2013. The review team noted that no infrastructure projects were actually managed by
    the District Administration but instead sums of money were paid directly to a school or
    church for them to manage the construction.
    There needs to be greater linkages between the initiatives included in the Five Year
    Integrated Development Plan and DSIP expenditure. The District Administration should pay
    an active role in the implementation of infrastructure projects to ensure value for money
    and that the projects are delivered as planned.
    Payment to Moratau Circuit United Church
    On 22 May 2013 K20,000 was paid to Moratau Circuit United Church – Goodenough as the
    Member’s Commitment to the church as host of the Papuan Island Regional Synod. There is
    a note on file that the money is to be reimbursed by the Member, however the District
    Administrator informed the review that this did not happen. A number of instances were
    noted where the Member has committed money which was subsequently paid from DSIP
    funds to be reimbursed at a later date, but the reimbursements did not occur.
    These payments do not come within the guidelines for the use of DSIP funds. The Open
    Member receives a discretionary budget which should be used for this type of expenditure.
    DSIP funds should only be used for projects identified in the FYDP and approved by the
    JDP&BPC.
    Payment of K10,000 to Salona Trading Losuia
    This cheque is actually for the Losuia Police Station as payment for fuel, rations and
    allowances for police to carry out Christmas and New Year operations. This payment is one
    of several made to business entities as a means of providing cash for various reasons. This is
    necessary as the bank agency often does not have cash and requires several days to clear
    cheques. Presumably payees can obtain cash quickly by cashing a cheque through a trade
    store.
    Using a business entity as a means of cashing a cheque does not contribute to transparency
    in financial transactions and is to be discouraged. Furthermore police operations should not
    be financed by DSIP funds.
    Payments to JJ Tiarere Construction

    31

  • Page 34 of 46

  • Two payments totalling K14,000 were made for maintenance of the magistrate’s house in
    Losuia in November and December 2013. The supporting documentation consists of a copy
    of the one page contract agreement which details the conditions of the contract but fails to
    specify the services that will be performed as part of the contract.
    Procurement of this value requires three written quotations. There is no supporting
    documentation to indicate compliance with procurement procedures as specified in the
    PF(M)A and Finance Instructions.
    Payment to Kauteyava Trading and Salona Trading
    On 20 August 2013 K23,000 was made payable to Kauteyava Trading for ‘food stuff’ for
    distribution to various communities for an Easter Program as instructed by the Open
    Member. A note on file states that the money is to be reimbursed from the Open Member’s
    DSG funding. The record shows that the money was not reimbursed. On 21 August 2013 a
    similar payment of K36,583 was made to Salona Trading as part payment for the same
    Easter Program.
    The documentation included with the payment of K23,000 to Kauteyava Trading and the
    payment of K36,583 to Salona Trading indicates that K95,000 was spent on food to be
    distributed by the Open Member to villages in the District. This is not appropriate
    expenditure under DSIP.
    Payment to an Individual
    On 18 October 2015 cheque number 241507 for K10,000 was made payable to an individual
    in payment of artefacts obtained by the Open Member. The supporting documentation
    includes an invoice/statement number 12 itemising the artefacts supplied and a letter
    stating that they were used for decoration of the hall used for fundraising for Team Milne
    Bay at the Holiday Inn on 30 October 2012.
    The price of K10,000 for the items purchased is excessive and is not reasonable value for
    money. This is not a suitable activity to be financed by DSIP funds.

    Purchase of Computers
    On 15 October 2013 K24,791 was paid to Daltron. Enquiries revealed that this was for the
    purchase of five lap top computers for the District Treasury staff. Three written quotations
    were obtained for the lap tops however the supplier was not the lowest quotation.
    The resourcing of District Treasuries is the responsibility of the Department of Finance. All
    equipment required by the District Treasury should be provided by the Department of
    Finance. This is an inappropriate allocation of DSIP funds.
    Payment to Bank of South Pacific Limited
    On 20 August 2013 three payments of K38,042 were paid to the Bank of South Pacific
    Limited. Supporting documentation includes a letter from BSP concerning a missing amount
    of K152,170. This suggests that there was a fourth payment of K38,042 to make up the full
    amount however this was not financed from DSIP funds.
    Enquiries with District Treasury staff revealed that there was a BSP agency located within
    the District Treasury and staffed by District Treasury Officers. An audit and subsequent

    32

  • Page 35 of 46

  • investigation by BSP revealed the missing funds. BSP closed the agency and would not
    reopen until all money was reimbursed. This is the only bank presence on the island and
    caused much inconvenience to residents. All missing money was reimbursed by the District
    Administration and the agency reopened.
    District Treasury staff were of the opinion that the matter was investigated by the Provincial
    Treasury but that it had not been referred to the police for criminal investigation. However,
    the missing BSP funds appears prima facie to be illegal and should have been referred to
    police for full investigation. The reimbursement to BSP is not an appropriate use of DSIP
    funds.
    Payment to Dapaldy Limited
    On 03 September 2013 K39,491 was paid to Dapaldy Limited for the purchase of mobile
    phones and lap tops. There is no supporting documentation apart from the invoice for the
    goods. Three written quotations should have been obtained for procurement of this value.
    Payment to Hessed Trading
    On 17 December 2013 K10,000 was paid to Hessed Trading. The PGAS Expenditure
    Transaction Details report gives the description of goods/services as ‘Member’s
    commitment’. A file record states that the payment is for the maintenance of three dinghies
    and three 40hp engines in Alotau. There is a notation that the dinghies are personal and not
    the responsibility of the District Administration.
    Supporting documentation includes a memo from the District Treasurer stating that a
    number of claims had been paid on instructions from the Open Member’s office and that
    the payments had never been endorsed by the JDP&BPC. The memo refers to continuous
    pressure from the Member to process the claims. There are also comments from the
    Examiner requesting instructions from the Member as the payment is not related to DSIP.
    This appears to be an example of the Member using his influence to have inappropriate
    payments made from DSIP funds. No comment on this issue was received from the District
    Administration.

    Payment to Oyabia/Orabesi Sunday School
    On 1 October 2013 K25,000 was paid to Oyabia/ Orabesi Sunday School for the purchase of
    Sunday School uniforms. This had been approved by the JDP&BPC under resolution number
    19/2012 at meeting number 01/2012. No information was given in the supporting
    documentation regarding the number of uniforms to be purchased or the unit price of the
    uniforms.
    The primary objective of DSIP funding is to provide minimum service delivery standards
    through the re-establishment of basic infrastructure and facilities. This is not an appropriate
    use of DSIP funds.
    Payments to Community Groups for Road Maintenance
    The review found that nearly K70,000 had been paid to various community groups for road
    maintenance in 2013. Staff of the District Treasury explained that this is not a planned
    activity but when community groups are so inclined they carry out some road maintenance
    and submit an invoice for payment. As a general rule the roads on Kiriwina are adequate

    and the review considers that having 33
    34 maintenance carried out by community

  • Page 36 of 46

  • groups is beneficial to the island. However the maintenance should be planned and
    monitored to ensure that the work is carried out when necessary to a pre-determined
    standard.
    Having community groups carry out road maintenance whenever they wish is not an
    efficient way to provide this service. Road maintenance should be pre-planned according to
    where maintenance is required. An agreement should then be formalized with community
    groups and the work inspected prior to payment. This is an appropriate use of DSIP funds
    but should be better managed.
    Payment to DOME KRB Ltd
    On 3 December 2013 K100,000 was paid to DOME KRB Ltd as payment for water supply and
    sanitation scoping for Kiriwina. There is a notation on the documentation by the District
    Treasurer indicating that there was a lack of proper documentation supporting the claim but
    that due to continuous pressure from the District Administrator’s office he had no choice
    but to process the payment.
    Supporting documentation includes an invoice and a letter from the company to the Open
    Member expressing interest in carrying out the scoping. The Financial Management Manual
    states that expressions of interest are not to be used for procurement purposes but merely
    for obtaining an indication of the cost. Procurement of this value requires three written
    quotations. The appointment of this company on the basis of an expression of interest is a
    breach of the PF(M)A.
    Purchase of Pharmaceuticals
    On 12 December 2012 K170,000 was paid to Toitop Pharmaceuticals Ltd for the purchase of
    medical supplies for Losuia and Goodenough Health Centres. The basis for the purchase was
    a letter of recommendation from a Rotary Project Medical Officer who had been
    approached by Toitop Pharmaceuticals regarding the establishment of an alternative or
    supplementary system for medical supplies. Policy Submission number 16/2012 resulting
    from JDP&BPC meeting number 01/2012 held on 19 November 2012 shows that the matter
    had been discussed and approved at that meeting.
    In January 2013 K170,000 had been paid to Toitop Pharmaceuticals Ltd and although some
    items were received in February 2013. Attempts to communicate with the company were
    unsuccessful. A further order was placed with the company on 14 March 2013 but no
    medical supplies were received. It appears that no action was taken to recover the money
    from Toitop Pharmaceuticals Ltd. and that this matter has not been pursued.
    Procurement of this value requires three written quotations. The supply of drugs is a
    Minimum Priority Activity under the Health Function Grant and not an appropriate use of
    DSIP funds.
    Payments to Kidron Land Conveyance Services
    On 21 and 30 September 2013 K90,000 was paid to Kidron Land Conveyance Services for
    services involved in the identification of the rightful owners of Boli Point and Kaibola Beach,
    two sites at which a wharf and jetty were to be constructed. Supporting documentation
    includes minutes of JDP&BPC meeting number 01/2012 held on the 19 November 2012
    which refers to a submission to engage the company and a contract dated 6 January 2013

  • Page 37 of 46

  • for land conveyancing appointing the company for the investigation and conveyancing of
    selected wharf construction sites on Kiriwin Island for a fee of K165,000.
    There is no indication in the supporting documentation that three written quotations were
    received prior to the submission to appoint the company being passed at the JDP&BPC
    meeting. A notation on the supporting documentation states that the claim was paid due to
    pressure from the office of the District Administrator. This is a breach of procurement
    procedures. The FYDP makes provision for the construction of a jetty on Kiriwina during
    2013. There is no mention of a wharf.
    Purchase of Solar Lighting Kits
    On 14 October 2013 K50,000 was paid to SES Limited as part payment for the purchase of
    solar lighting kits for Kiriwina Goodenough for distribution to all villages in the electorate.
    Supporting documentation includes Policy Submission number 09/2012 from JDP&BPC
    meeting number 01/2012 held on 19 November 2012 endorsing the project. The total value
    of the project was K280,000. The submission states that two quotations were received.
    Procurement of this value requires three written quotations. A unit price of K850 plus GST
    appears to be excessive for a product of this type. This is a breach of procurement
    procedures and represents poor value for money.
    Construction of Double Classroom at Watuluma Secondary School
    On 15 December 2013, K200,000 was paid to Watuluma Secondary School as part payment
    of K350,000 for the construction of a double classroom. The review noted a number of
    instances where large sums of money were paid to schools or churches for infrastructure
    projects.
    DSIP projects should be managed by the District Administration so that sound financial
    governance can be maintained. Handing over large sums of money to schools or churches
    carries risks that the projects will not be delivered to standard.
    New Ireland Provincial Administration
    Construction of Government Haus in Namatanai and Governor’s Residence in Kavieng
    A Contract Agreement was executed by the New Ireland Provincial Government with
    C&C Group Limited for the design and construction of Government Haus in Namatanai and
    the Governor’s residence in Kavieng. A signed but undated copy of the Agreement showed
    that each project was to have been constructed at a cost of K1.96 m, resulting in a total cost
    of K3.92 m. A requirement of the Finance Instruction 01/2013, was that expenditure over
    K3 m was subject to the approval processes and procedures of the Central Supplies and
    Tender Board (CSTB).
    However, it was observed that the projects were not forwarded to the CSTB for approval,
    nor was there a FYDP. Also, there was no other documentation that set out the selection
    criteria for this funding and as a result, there were no records to explain the
    administration’s assessment of the benefits that these projects would contribute to service
    delivery. Furthermore, JPP&BPC meeting minutes were not made available for review to
    ascertain whether the projects were approved through a proper process. Under these
    circumstances, it is difficult to see how the construction of Government Haus in Namatanai
    and the Governor’s residence in Kavieng would improve service delivery, or benefit the
    people who reside within the Province.

    Both projects were managed by Public 41
    40
    36
    35
    39
    38
    37 Works New Ireland Limited, under an

  • Page 38 of 46

  • arrangement whereby all claims of the C&C Group were invoiced to the project
    management company, which in turn would invoice the New Ireland Provincial
    Administration.
    Although not all relevant payment vouchers were provided for review, financial and other
    records show that at the end of 2013, more than K2 m had been paid to Public Works New
    Ireland Limited for building materials and design costs incurred by the C & C Group on the
    two projects.
    It was noted, that the last payment was made in November 2012 and at the time of the
    review, no significant progress had been made on either building with only concrete
    reinforcing on site. Discussions with senior staff of the New Ireland Provincial Administration
    revealed that materials purchased for use on the construction of both projects were of poor
    quality and rejected as unsuitable for use in the construction of the buildings.
    Notwithstanding the delivery of sub-standard materials, and the lack of progress with
    construction, progress payments continued to be made, and in some cases instalments
    were paid that exceeded the requirements of the contract schedule. Advice was received
    that representatives of the administration had travelled to the C & C Group Head Office in
    China but failed to revive the projects or recover the losses from the contractor. The parent
    company in China had indicated that the C & C Group was no longer operating in PNG and
    that the person who had managed its operations in PNG had disappeared with the funds
    that had been paid out under the contract. Furthermore, the actual payments to the
    C & C Group for project from inception through to the end of 2013 could not be verified due
    to the absence of financial records.
    The expenditure and lack of progress on the projects to date represents a significant loss to
    the Provincial Government and acute mismanagement by Public Works New Ireland Limited
    in its inability to properly control, monitor and supervise the project for the amount spent. It
    seems likely that the Provincial Government will incur additional costs to revive the project,
    which will mean funding to other programs under DSIP will be reduced.
    Payments to Aloga No 42 Limited
    On 16 May 2013 K18,081 was paid Aloga No. 42 Limited under the Transport Infrastructure
    Function Grant for road works. This was followed on 13 June 2013 by another payment of
    K55,193, of which K29,309 was also from the Transport Infrastructure Function Grant.
    Supporting documentation includes a letter from a manager of the company requesting
    payment and stating that road works were completed urgently on 22 August 2012 at the
    request of the New Ireland Provincial Governor because Members were going to drive past
    the area on their way to a meeting with the Governor.
    These payments indicate a breach of the procurement process. Expenditure of this value
    requires three written quotations. The need to have the roads around town maintained
    should have been identified in a FYDP, assessed, prioritised and approved by the JPP&BPC
    and implemented accordingly.
    Namatanai Technical College
    Funds totalling K650,000 were allocated to Namatanai Technical College in the year 2013
    from which a total amount of K594,926 was used to pay for school fees of New Ireland
    students attending various educational institutions around the country. JPP&BPC meeting

  • Page 39 of 46

  • minutes were not made available to confirm whether approval was given by the committee
    or the appropriate authority for the re-allocation of funds from the Technical College to the
    payment of school fees. Payment of school fees is not an appropriate use of PSIP funds as it
    benefits a select few individuals and does not improve service delivery to the Province.
    When funds allocated for a particular project are used on other expenditure, the timely
    implementation of the project is adversely affected. In this instance the expenditure of PSIP
    funds for non-PSIP related expenditure reduces the financial ability of the Province to
    deliver Infrastructure developments that will serve the wider population for years to come.
    Irregular Payments to Primary Schools
    Several instances were noted where cheques were raised under the Education Function
    Grant to a number of schools for “repayment of funds borrowed” from these schools by the
    Division of Education or payment to service providers of the schools. The refund payments
    to the schools and payments to service providers are shown below.
    School/Payee Date of Purpose of Payment Amount of
    Payment Payment
    Individual 1 30 May, 2013 Services include pruning of tree & K1,000
    Flowers, cutting down of tree and
    mowing at Rawal Primary School
    Rawal Primary 20 May, 2013 Lawn mowing at Division area K300
    Enuk Community 4 June, 2013 Repayment of funds borrowed for K4,500
    salary officers trip to Port Moresby
    Maiom Primary 30 June, 2013 Repayment of funds borrowed for K5,000
    salary officers trip to Port Moresby
    Rawal Primary 20 June, 2013 Repayment of funds borrowed for K3,000
    contribution towards funeral expenses
    Amba Primary 4 June, 2013 Repayment of funds borrowed for K3,000
    contribution towards funeral expenses
    Rawal Primary 20 June, 2013 Repayment of funds borrowed for K3,000
    contribution towards funeral expenses
    Individual 2 4 June, 2013 Re-imbursement of repatriation K2,650
    expense for wife
    Verification of the payments included the examination of the payment vouchers and
    supporting documentation and interviews with two of the schools. This revealed that no
    funds had been lent to the Education Division and that no repayments had been received by
    the schools. However, the cheques were cashed.
    The invoices that were raised in support of these payments suggest the existence of a scam
    involving individuals and public servants in the New Ireland Province to defraud the
    Provincial Government through bogus claims. These are cases that were uncovered during
    the review of expenditure for 2013 and it is recommended that an investigation be carried
    out for years 2013 to 2015 to determine the extent of the bogus claims.
    Fraudulent activities such as this adversely affect the PSIP projects and programs resulting in
    a decline in service delivery to the Province.
    Retrenchment of Public Servants
    An allocation was made for the retrenchment program of public servants in the New Ireland
    Province in 2013. The actual expenditure for the program during the year under review

  • Page 40 of 46

  • amounted to K35,200. Although the amount expended may seem immaterial, expenditures
    for retrenchment programs are not service delivery related expenses. Moreover, it could
    not be ascertained if the funding for such expenditure was approved by JPP&PBC in the
    absence of meeting minutes.
    Retrenchment program expenses are not appropriate under PSIP as they should be funded
    through the recurrent budget of the Provincial Government. Service delivery to the Province
    is affected when funds are spent on non-PSIP related expenses.
    Rural Health Staff Incentive
    The New Ireland Provincial Administration experienced a shortage of health workers
    particularly in remote and rural areas. In an effort to recruit and retain staff the Provincial
    Administration decided to make incentive payments of K1,734 to 179 health workers from
    PSIP funds. The total amount expended was K299,999. The absence of JPP&BPC meeting
    minutes means that it is not possible to determine if the initiative was approved by the
    JPP&BPC.
    This is an inappropriate use of PSIP funding and effectively reduces the amount of
    infrastructure projects that can be implemented to improve services to the Province. PSIP
    funding is to be used for the same purpose as DSIP funding, that is the re-establishment of
    basic infrastructure and facilities.
    Kavieng District
    LIMS Construction Limited
    The minutes of the JDP&BPC meeting held on 5 November 2012 mentioned the engagement
    of LIMS Engineering Ltd to undertake all District infrastructure development projects. The
    minutes of the first JDP&BPC meeting of 2013 showed the endorsement of a submission
    requesting K300,000 to bring earthmoving equipment from Simbu to Kavieng via Lae.
    On 27 March 2013 a further payment of K50,000 was made to LIMS described as additional
    payment. There is no mention in the JDP&BPC minutes provided of approval for the
    additional expenditure though the 2013 Annual Plan and Budget makes an allocation of
    K350,000 to LIMS Construction. This is a clear indication of disconnection between the
    FYDP, the Annual Plan and Budget and JDP&BPC prioritization and approval.
    This arrangement is not consistent with the requirements of the PF(M)A in general or any
    Finance Instructions pertaining to DSIP or to documented procurement procedures.
    Sons Survey and Project Systems
    The minutes of a special JDP&BPC meeting dated 3 October 2012 state that an expression of
    interest was considered from Sons Surveys and Project Systems who offered services to
    work with the Kavieng JDP&BPC in the area of audit of project funds, formulating project
    documentation, securing of funds through donors and the Department of National Planning
    and conducting feasibility studies on potential areas for project development.
    At another special JDP&BPC meeting on 15 October 2012 it was resolved that the
    Administration continue dialogue with Sons Survey and Project Systems. Later that year it
    was decided that the proposal would be considered when funds became available.
    The first payment to Sons Surveys and Project Systems was made in June 2013 for K18,000,
    described as ‘consultancy’. This payment was made through the DSIP Trust Account,

  • Page 41 of 46

  • however all payment vouchers and supporting documentation for transactions through this
    account are missing. As a result, the purpose of the consultancy, and the basis of the
    payment cannot be determined.
    The PGAS Expenditure Transaction Details report shows a subsequent payment of K49,500
    on 6 August 2013 to Sons Surveys and Project Systems. Examination of the supporting
    documentation indicates that a Memorandum of Understanding between Kavieng District
    and Sons Surveys and Projects Systems for district projects consultancies services was
    signed on 30 July 2013. However there appears to be no approval of the proposal by the
    JDP&BPC. It is possible that approval was given at a meeting the minutes of which have not
    been provided for review.
    As the MOU between Kavieng District and Sons Surveys and Project Systems was not signed
    until 30 July 2013 and there is no supporting documentation for the first payment made on
    28 June 2013 the review cannot determine the rationale for the payment. However the
    MOU which is part of the supporting documentation for the second payment made on
    31 July 2013 states that a monthly administration fee of K20,000 is to be paid together with
    K30,000 for acquitting and reporting expenditure for the past six months and K20,000 for
    project management training for District staff. Provision is also made for a fee for project
    management of not exceeding 30% of the total funding.
    The MOU was to be reviewed after one year. A fee of K20,000 per month plus the fee for
    the additional items adds up to more than K300,000. The requirement for procurement of
    this value is three written quotations. If it was anticipated that the company would actually
    administer and manage projects the amount could very easily reach K500,000 in which case
    public tender would be required.
    The appointment of Sons Surveys and Project Systems based on an expression of interest
    represents a breach of the PF(M)A and the relevant Finance Instructions.
    Quattro Developments
    On 11 July 2013, K140,000 was paid to Quattro Developments. However, supporting
    documentation for the transaction is incomplete. A JDP&BPC resolution approved the
    appointment of Quattro Development PNG Ltd as project manager/coordinator of the
    Project Development Unit (PDU) with funding of K200,000 to finance the operations of the
    PDU.
    The initial payment to Quattro Development for the amount of K140,000 was described as a
    progress claim for work on three initiatives for Murat LLG. However the total cost of the
    three projects stated on the invoice is K580,000.
    Procurement of services to this value should have been by tender managed by the Provincial
    Supply and Tender Board. There is no evidence to suggest that this procurement was
    managed in accordance with the requirements of the PF(M)A and Finance Instructions.
    Payment for Epo Police Station
    Three cheques were drawn in November 2013 for the amount of K154,704. No
    documentation was able to be provided to support any of the cheque payments. From the
    PGAS Expenditure Transaction Details report, it appears that the second cheque was a
    replacement for the first one, which was subsequently replaced by the third cheque. The
    purpose of the original cheque was for the Epo Police Station.

  • Page 42 of 46

  • A review of the FYDP shows that police stations were planned for Kavieng Urban, Taskul
    (Lavongai), Lakurumau (Tikana) and Panapai (Kavieng Urban). However, no police station
    was planned for Epo. There is no prioritization or approval of the expenditure in the
    JDP&BPC minutes provided to the review.
    Procurement of this value requires three written quotations. Clarification of the purpose of
    this transaction was requested in the Management Letter however no response was
    received. This transaction indicates a lack of co-ordination between the FYDP, the Annual
    Plan and Budget and the actions of the JDP&BPC and a failure to comply with established
    procurement processes and procedures.
    2M Transport
    On 30 August 2013 K16,200 was paid to 2M Transport for the installation of solar energy at
    Tasigina and Taskul Health Centres. An examination of the FYDP, the 2013 Annual Plan and
    Budget and the minutes of the JDP&BPC meetings do not indicate that solar energy
    installation at the health centres was a prioritized initiative.
    In addition to this three quotations are required for procurement of this value. Copies of the
    valuations should be attached to the documentation supporting the transaction.
    Fujianabure Limited
    On 05 April 2013 K90,000 was paid to Fujianabure Ltd in payment for a training program.
    This payment was made from the DSIP Trust Account and no supporting documentation has
    been presented for any transactions from this account.
    There is no justification of the expenditure in the JDP&BPC minutes which have been
    provided. Further information regarding this transaction was requested in the Management
    Letter but has not been produced.
    Purchase of Fishing Vessel
    On 19 April 2013 K400,000 was paid to Kidu Kidu Ltd for the purchase of a fishing vessel. An
    additional K90,000 was subsequently drawn to pay for delivery of the vessel.
    Improvement of fisheries was an initiative of the FYDP and fishing vessel operations was
    nominated as an activity in the 2013 Annual Plan and Budget. Purchase of three vessels was
    mentioned in minutes of the JDP&BPC during 2012.
    As the transaction was made from the DSIP Trust Account no supporting documentation
    was made available for examination. Further information to support this transaction and to
    ensure that procurement was managed in the appropriate manner was requested in the
    Management Letter but was not provided.
    Country Legal
    On 22 April 2013 K54,000 was paid to Country Legal. As this transaction was made from the
    DSIP Trust Account no supporting information is available. Further information is required to
    ensure the validity of the payment.
    Niu Ailan Fisheries
    On 24 June 2013 K100,000 was paid to Niu Ailan Fisheries for MV Blue Marlin. As this
    transaction was made from the DSIP Trust Account no supporting documentation is
    available. Further information is required to ensure the validity of the payment.

    Traffic Island Ltd

  • Page 43 of 46

  • During 2013 over K30,000 was paid to Traffic Island Ltd for fuel. The majority of the
    payments were for amounts of K4,000, K6,000 or K2,000. The invoices which accompany the
    payment records show simply ‘being for fuel’. At the same time nearly K50,000 was paid to
    Islands Petrol. However the payments for Island Petrol were supported by invoices showing
    the amount purchased and the rate per litre. This information was lacking on the invoices
    from Traffic Island Ltd.
    The payments to Traffic Island Ltd are irregular transactions, in that the actual amount of
    fuel purchased and the rate for litre for the fuel is not stated. Payments of this sort show a
    lack of accountability and transparency.
    Piggery Project
    The JDP&BPC approved funding of K40,000 for a piggery project (decision number 72/2013
    of meeting number 08/2013 held on 8 October 2013). This decision was ratified by the
    District Project Management Team in October 2013. The FYDP and the 2013 Annual Plan
    and Budget do not make provision for payments to piggeries.
    Department of Finance, Finance Instruction 1A/2013 dated 14 June 2013 states in S6.2 that
    ‘DSIP projects will be identified, selected and approved by the JDP&BPC with the Open
    Member of Parliament as Chairman. The selection must also be consistent with the existing
    Five Year Rolling Development plan for the District and the Sectoral Key Priority areas
    stipulated by the National Government’.
    The investment in a piggery in Kavieng District suggests that the JDP&BPC is deciding how
    DSIP funds will be expended without reference to the FYDP, as required by the rules.
    Bisi Trading Ltd
    The PGAS Expenditure Transaction Details report for 2013 shows several payments totalling
    more than K80,000 to Bisi Trading Ltd. Two of these payments, totalling K60,000 were
    described in the report as ‘money borrowed’. The supporting documentation indicates that
    these funds were payment for monies borrowed towards the NBC Celebrating 40th
    Anniversary in Kavieng. However, there is no itemized list of goods provided.
    Procurement exceeding K5,000 in value requires three written quotations. Further
    investigation of these payments is required.
    Allocation of K500,000 from DSIP Education for Tertiary Fees
    At the JDP&BPC meeting held on 18 February 2013, it was resolved to allocate K500,000
    from the DSIP Education funds to meet tertiary fees for students of the District and that the
    Chairman would approve the list of recipients. On 17 May 2013 a total of K212,510 was paid
    to various educational institutions from the DSIP Trust Account for the purpose of payment
    of school fees.
    The primary objective of DSIP funding is to provide minimum service delivery standards
    through the re-establishment of basic infrastructure and facilities, including socio-economic
    activities for essential services such as health, education, law and justice, quality water and
    sanitation, transport (air, sea and land), communication and rural electrification. The
    payment of tuition fees benefits the select group of people whose tuition is funded without
    providing ongoing benefits to the District.

  • Page 44 of 46

  • Namatanai District
    Purchase of GPS Units from Panasoa Limited
    On 29 November 2013 K900,000 was paid to Panasoa Limited for the purchase of GPS units
    for vessels in Namatanai. Authorised officials endorsed the documentation with a note to
    the effect that they been pressured by the administrator to pay this claim.
    The invoice for Panasoa Limited dated 27 October 2013 for K900,000 which accompanied
    the payment was for a total of K340,850 for two types of GPS units, K50,150 for monitoring
    centre costs, K9,000 for training, K150,000 for logistics described at vehicles, boat and
    power engines, K100,000 for miscellaneous described as fuel, utility costs, NOC, finance and
    management consultancy and mobilisation and K250,000 for professional services described
    as configuration and setup and resource training.
    Ultimately, it was found that the GPS units for which a quote had been given were
    unsuitable for the purpose. The company subsequently provided suitable GPS units which
    used satellite positioning, installed the units and monitored the units for a period of 12
    months at a total cost of K400,000.
    The payment of K900,000 to Panasoa Limited represents a probable fraud of K500,000
    which appears to have originated from the Provincial Administration. This matter will be
    referred for further investigation by the Auditor-General’s Office.
    Payments to Namatanai Supermarket
    On 30 August 2013 K6,000 was paid to Namatanai Supermarket. The purpose of the
    payment was for diesel fuel so that LLG members could be transported for swearing in
    ceremonies.
    Supporting documentation shows that some forms were overwritten to reflect higher
    amounts than originally intended. However some details and signatures are illegible. The
    invoices showing the number of litres purchased do not square with the amounts paid.
    Overall, an amount of K7,344 was expended for diesel fuel for the swearing in ceremonies of
    LLG members.
    The payment to Namatanai Supermarket requires further investigation. Moreover, the
    purchase of fuel for swearing in ceremonies of LLG members is not an appropriate use of
    DSIP funds.
    The review also identified that in 2013 over K100,000 was paid to Namatanai Supermarket
    for fuel. The payments were for amounts ranging from K2,000 to K10,000 per payment and
    all payments were made in advance of supply of the fuel. However, no acquittal was
    produced to account for the fuel usage, the rate of supply or the cost per litre of the fuel.
    These payments also require further investigation.
    Garden Enterprises Ltd.
    In December 2013, over K400,000 was paid to Garden Enterprises Ltd and a significant
    proportion of this amount was for rations for distribution by the Member. This is not an
    appropriate use of DSIP funds and will be referred for further investigation by the Auditor-
    General’s Office.
    Payment to Mcjan Limited

    42

  • Page 45 of 46

  • On 30 October 2013 K200,000 was paid to Mcjan Limited in payment of various projects for
    the Youths Economic Project Sector. Supporting documentation includes an Expression of
    Interest from Mcjan Limited dated 23 September 2013. Procurement of goods or services of
    this value requires three written quotations. The Financial Management Manual clearly
    states that Expressions of Interest are not acceptable for procurement purposes. This
    payment has not been made in accordance with the requirements of the PF(M)A.
    Payment to DEMAA Ltd.
    On 14 November 2013 K50,000 was paid to DEMAA Ltd. The Project Formulation Document
    which accompanies the payment states that the total value of the project is K50,000
    however the Contract Agreement which is not numbered states that 50% of the contract
    amount of K100,000 is to be paid as a lump sum. The contract and the invoice
    accompanying the payment both state that the payment is a part payment for works on the
    Nabumai teacher’s house. The Project Formulation Document gives the total project cost as
    K50,000 whilst the contract and invoice indicate that the project cost was K100,000.
    However, the District Administrator was unable to explain the difference in costs.
    Payment to Buenas Trading Ltd.
    On 8 May 2013 K270,000 was paid to Buenas Trading Ltd in payment of a master plan for
    Namatanai Town Plaza. However, the minutes of a JDP&BPC meeting on 22 February 2013
    refers to the allocation of an amount of K600,000 for the Namatanai Town Plan.
    Procurement of this value should be managed by public tender through the Provincial
    Supply and Tender Board.
    Supporting documentation includes a document entitled Town Plaza images which show
    images of a proposed future development within Namatanai District. The District
    Administrator is not aware of any development referred to in this document having taken
    place in Namatanai since this master plan was developed. The District Administrator is also
    unaware of any such development being planned for the District.

    43

  • Page 46 of 46

  • Appendix 3: Minimum Priority
    Activities and Performance Indicators
    MPA Performance Indicator
    Health Function Grant
    Operation of rural health facilities Total number and names of health facilities
    Number of health facilities open and staffed
    Health facilities with access to running water in the labour
    ward
    Drug distribution Number of months health facilities were stocked with
    essential supplies
    Integrated health outreach patrols Total number of health patrols conducted including:
    • Number of administrative supervision patrols to
    health facilities
    • Number of patrols with specialist medical officers
    to health facilities
    • Number of maternity child health patrols to health
    facilities
    Education Function Grant
    Provision of school materials Total number of schools by type
    Percentage of schools that received basic school supplies
    before 30 April
    Supervision by Provincial/District Number of schools visited by District or Provincial
    Officers education officers
    Operation of District Education Number of District Education Offices that provided
    Offices quarterly performance reports
    Transport Maintenance
    Road and bridge maintenance Names and approximate lengths of Provincial roads
    maintained
    Names of bridges maintained
    Airstrip maintenance Names of rural airstrips maintained
    Wharves and jetties maintenance Names or wharves, jetties and landing ramps maintained
    Agriculture
    Extension activities for agriculture, Number of extension patrols conducted by Provincial
    fisheries and forestry government staff
    Number of people who attended extension sessions
    Village Courts
    Operations of village courts Number of village courts in active operation
    Number of village courts supplied with operational
    materials
    Number of inspections to village courts

    44