This year, 2014, has been a tremendous year in capacity building for officers of the Auditor General Office.

Auditor General Philip Nauga said that this year there has been a large increase in AGO staff attending workshops, conferences and presenting white papers in PNG as well as overseas.

Also three officers have completed the CPA coursework and received their certificates. One of the officers, Molna Maria Andrew, Senior Auditor with the Audit Division was one of 3 AGO staff to recieve CPA certificates in 2014. More officers will take part in the CPA program.

Criticisms of the Auditor Generals Office by the Public Accounts Committee in 2012 has spurred the PNG Audit Office to improve its service delivery in two years, under the leadership of the Auditor General Mr Philip Nauga.

Speaking to his staff in his Christmas address, Mr Nauga said that in 2012, the year he was appointed, PAC released a scathing criticism on the office for failing in its constitutional duties to provide the PAC and other stakeholders with Audit reports of Government and State bodies that were up to date. The criticism was based on the fact that in 2012, the Audit Office could only provide reports for 2009.

Mr Nauga said that now in 2014, all their reports provided to the PAC are now current. This incredible change he attributed to the dedication of his officers and new initiatives that were implemented since his appointment.

Under the requirements of the Constitution, the Auditor General conducts audits, evaluations and investigations to assess the economy, efficiency, effectiveness and accountability of public resources entrusted to public sector agencies and entities and their programs. The Auditor General reports the outcomes to the Parliament of the audits, at which point and in the normal course of events, these reports are referred to the Public Accounts Committee. Where appropriate the PAC conducts a hearing into matters raised and the Auditor General along with others are called upon to assist with the inquiries.

In 2012, the PAC felt handicapped by the lack of current audit reports available for it to execute its important function. As a result, the Auditor General was heavily criticized.

In a proactive response, the Auditor General embarked on an ambitious program to bring as many outstanding and current audits to completion. He also sought to improve the systems, procedures and policies needed to ensure that the PAC and other stakeholders will always get reports that are up to date.

Since 2012, the PNG Audit Office has completed a large number of audits and special reports including;

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.
10. The Effectiveness of Solid Waste Management in Papua New Guinea
11. Access to Safe Drinking Water in the National Capital District
12. District Services Improvement Program
13. Management and Reporting of Trust Accounts
14. Review of the Integrated Financial Management System (IFMS) Projects.

Mr Nauga said they have developed new policies to make sure that the office delivers information that is current.

This includes a policy to do audits regardless of whether or not the organisations have produced their financial statements for the period.

Since 2012, the Auditor Generals Office of PNG has been steadily increasing its staff numbers to improve its service delivery more effectively than has been the case in previous years.

In 2012, the auditor general had 130 officers. To date the AGO has increased its numbers to 151 officers and has current approved ceiling of 184 staff members.

The increase in staff numbers has led to a corresponding increase in output from the AGO, as it has completed more Audit reports and special reports in the last two years than in previous years.

The Auditor General Mr Philip Nauga believes that more officers are needed to deliver more audit reports and other duties effectively to the benefit of all stakeholders and the nation.

He said auditing is an extremely labour intensive and time consuming activity. In previous years the office was unable to deliver its mandate effectively due to a very small group of auditors tasked with producing reports for a nation that has experienced tremendous level of growth in the past 20 – 10 years.

It is more important than ever that the AGO deliver its reports on time and up to date to the Public Accounts Committee and other stakeholders, for development and planning processes.

Mr Nauga explained that this year his office has embarked on a process of restructuring, and aligning with the goal to increase its delivery of priority reports and increasing its numbers. They have submitted their restructure plans and re-alignment manpower to the Department of Personal Management. The Auditor General has requested an increase in the staff ceiling to 270 officers.

Under this restructure the Provincial Government Auditing Division and the Performance Audit Division will have the largest increase in staff numbers, with 104 officers for the Provincial Division and 36 for the Performance Audit Division. Other divisions will see moderate increase in staff numbers.

I 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:

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The PNG Auditor-General, Philip Nauga is pleased with the progress on the renovations to the PNG Audit Office, which are soon to be complete.

He said that since 1998 when the old office structure was established, there have not been any changes.

As a result, 20 years of dirt, clutter and disorganization has accumulated, affecting the performance of the AGO officers and the organization as a whole.

Beginning in 2013 and through to 2014, he has had the different levels of the PNG Audit offices dismantled, renovated, re-painted and cleaned.

The offices are now spacious, better organized with more light let in the windows with a good view of the surrounding Waigani urban eco-system including the John Guise stadium.

The Auditor General’s Office of Papua New Guinea, in partnership with the Pacific Association of Supreme Audit Institution (PASAI), hosted a Tier 1 – Workshop on the Fundamentals of Government Auditing at the Laguna Hotel in Port Moresby from 3rd November to 7th November 2014.

This is the first PASAI workshop to be hosted by the Office since 1975 and the participants came from six Pacific countries including PNG. A total of 19 attended, of which seven participants were from the hosting Office. The international participants were from Vanuatu, Solomon Islands, Nauru, Federated State of Micronesia and Samoa.

All international participants were first time visitors to Papua New Guinea and quickly realised how different and culturally diverse the country is. Three out of the four workshop facilitators were from the PNG Auditor-General’s Office who are trained in the different audit approaches and practices. They were given technical support by the PASAI technical Advisor, Mrs. Agnes Aruwafu, based in the PASAI office in Auckland, New Zealand.

The objective of the workshop was to impart basic auditing skills and knowledge based on the PASAI adopted auditing principles and standards as a basis of developing the audit capacity of Supreme Audit Institutions within the Pacific Region.

The workshop covered topics on fundamental government auditing principles, role of the Auditor- General, overview of the audit process, structure and content of Auditing Standards, understanding the audit entity, assessing internal controls, audit evidence and documentation. Various sessions covered auditing bank and cash equivalents, analytical review procedures, data collection methods, follow up of audit recommendations, assessing computer data reliability, time management and audit reporting. As part of the program the auditors were given basic training on how to detect fraud, waste and abuse in public institutions.

The workshop ended on Friday with a guided tour of Port Moresby to its important and historical site. The program was officially closed by the Auditor General of PNG Mr. Philip NAUGA at the Holiday Inn after handing out Certificates of Successful Completion of Tier 1 Fundamentals of Government Auditing.

The Auditor General’s Office wishes to thank all the relevant government agencies who assisted in the preparation and the delivery of a successful workshop.