Many State Organizations Are Struggling to Manage Their Financial Affairs


Auditor GeneralI am concerned over the number of entities that do not submit current year financial statements for audit, and the overall poor state of financial management structure in most public entities whose statements are subject to my audit and inspection.

Audits performed by the Office of the Auditor-General in the 2013/2014 Audit Cycle have shown that many Public Bodies and State organizations are struggling to manage their financial reporting responsibilities.


The overall purpose of financial statements is to provide information about the financial position and performance of an organization. The information is useful to a wide range of stakeholders and the statements constitute a formal record of the financial and business activities of an organization. As such, the statements are core component of an organizations governance and accountability.

Non - submission of the financial statements for audits in a timely manner greatly limits the ability of stakeholders to monitor performance and make informed decisions regarding the organization. This contributes to a build up in the number of audits in arrears, it contributes to a lack of accountability reporting in a timely manner, and furthermore, the non-tabling of Annual Reports on performance and management by public entities in the Parliament.


It is the management of the public body that is responsible for preparing and presenting financial statements for my audit and inspection. It is also the responsibility of management to ensure that an adequate and effective internal control system is maintained to ensure that complete and accurate financial statements are produced on a timely basis.

Section 63 (4) of the PFMA requires each public body to prepare and furnish to its Minister before June 30 each year, a report on its operations for the year ended 31 December proceeding together with Financial Statements in respect of that year. These Financial Statements under the PFMA section must be audited by the Auditor General.


This Audit report provides a third party assurance that the Financial Statements and other material provided to the Parliament are free from material misstatement and errors in accounting procedures.

After the complete report is provided, it must be tabled in Parliament by the Minister responsible.

Despite these legislative requirements, 62 entities had not submitted their 2013 financial statements to be audited and overall some 54 financial statements for 2012 and prior years have not been submitted for Audit.

Of the 101 audit opinions issued (including a backlog of Audits going back to 2003), 27 were unqualified, 38 were qualified and 36 were Disclaimer Audit Opinions.


The high number of Disclaimer Audit Opinions issued are a reflection of the poor state of accounting, record-keeping and financial management practices in a number of public bodies.

A disclaimer opinion is produced when insufficient competent evidential matter exists to form an audit opinion due to scope and limitation or uncertainties.

In the last two years, the Auditor Generals Office of PNG has increased the number of organizations subject to its audit.

In the audit cycle for 2013/2014 period, the AGO undertook audits on 89 public entities, which consisted of 74 public bodies and their subsidiaries and 15 National Government Owned Companies.


Out of the 89 public entities that were supposed to submit their Financial Reports before June 30 of 2014, only 34 of these entities have submitted their statements, while 65 have chosen not too, in violation of the PFMA act and the spirit of the Constitution.


The Auditor General also carried out audits on 9 Projects managed by the State’s implementing agencies. These projects audited were:


1. Civil Aviation Development Investment Program (CADIP)

2. Cocoa Pod Borer Project.

3. Cocoa Quality Promotion Project.

4. Japanese Fund for Poverty Reduction Project.

5. Lae Port Development Project.

6. National Agriculture Research Institute/PNG Incentive Fund Project.

7. National Capital District Commission Urban Youth Employment Project.

8. Port Moresby Sewerage System Upgrading Project (POMSSUP).

9. Productive Partnership in Agriculture Project.


The AGO is also responsible for reporting on the Audits of 6 companies, in which the National Government has a minority shareholding, that are audited by the private sector.

I call upon the relevant State Agencies that have not submitted Annual Reports to do so as soon as possible or seek the assistance of my office.

We will assist you to comply with your Financial Reporting responsibilities.

All Auditor General reports can be found in current reports in Parliament.

These reports can also be accessed on our website which will be re-launched with a new look soon.


Auditor-General of Papua New Guinea

Auditor-General's Office

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