Audit Profile:
Papua New Guinea

Development As a Supreme Audit Institution

The Office of the Auditor-General of Papua New Guinea commenced operations as a Supreme Audit Institution on 1st December, 1973, when Papua New Guinea (PNG) attained self-government from Australia. The country became fully independent in 1975.

The Audit office has undergone remarkable professional and organisational changes. All these changes were aimed at enhancing its status as a SAI. To start with, in 1973 the Office was under the direct control of the Prime Minister's Department. In 1975, the National Parliament passed the Public Services (Interim Arrangement) (Status of the Auditor-General) Act which set up the Auditor-General's Office as an independent Department. The Act bestowed Departmental Head Status on the Auditor-General giving him powers to settle audit policies, and perform his statutory roles independently. Despite these legislative changes, the Auditor-General continued to function under the Department of Prime Minister, with the Secretary of the Prime Minister "providing services to the Auditor-General's Office". On 8th March, 1978, the National Executive Council approved a separate Divisional Vote in the yearly Appropriation Act for the Auditor-General's Office. The approval of separate Divisional Vote was brought into operation in 1979. Legislation aiming at further improvement in the independent status of the office was drafted and presented to government. The enactment of the legislation has since been approved by the National Parliament on March 1,1989 and the Audit Act 1989 cetified to by the Speaker on March 29,1989. The Act will come into operation in accordance with a notice in the National Gazette by the Head of State, acting with, and in accordance with, the advice of the Minister.

Establishment and Statutory Role

The Auditor-General's Office was established under the provisions of Section 213 of the Constitution of Papua New Guinea as a Supreme Audit Institution (SAI).

Under the provisions of Section 214 of the Constitution, the Auditor-General is required to inspect, audit and report at least once in every fiscal year to the National Parliament on the Public Accounts of Papua New Guinea, and on the control of, and on transactions with, or concerning the public moneys.

Scope of Audits

Operationally, the scope of the Auditor-General's functions provide for inspecting, auditing and reporting on accounts, finances and properties of:-

All arms, departments, agencies and other institutions of the national and provincial governments;
All bodies set up by an Act of Parliament, or by executive or administrative act of the national executive for governmental or official purposes; and
Audit of public corporations whose moneys and or properties are derived from public moneys or property of Papua New Guinea.

The powers of the Auditor-General's Office as the Supreme Audit Institution in the independent State of Papua New Guinea, are stipulated in the Public Finances (Management) Act of 1986.

Apart from the powers which are briefly discussed in the foregoing paragraphs, the Auditor-General is vested with various other powers including full and free access to all accounts and records that relate directly or indirectly to:-

The collection, receipt, expenditure or issue of public moneys;
The receipt, custody, disposal, issue or use of stores or other property of the government.

The Public Finances (Management) Act of 1986 also gives the Auditor-General powers to examine the above accounts with the object of ensuring that:-

All accounts have been properly maintained;
All applicable laws have been observed as far as collection and custody of public moneys including assessment and collection of revenues; and
Expenditure of public money has been authorised as provided by law and has been spent to accomplish the purposes for which they were appropriated.

Organisational Structure

The existing organisation structure of the Papua New Guinea Auditor-General's Office provides for two wings (i) the Operations wing and (ii) the Services wing. Each of these two is discussed below.

The structure at the top provides for the Head of the Department (SAI) as the Auditor-General. The Auditor-General is assisted by the Deputy Auditor-General.

The Operations Wing

The operations wing consists of three Divisions:-

The Commercial Division
The Provincial Government Division
The National Government Division

The Commercial Division is responsible for the audits of Government owned companies, public bodies and other statutory authorities whose properties are derived from Public Moneys of Papua New Guinea. The Division is supervised and directed by Assistant Auditor-General (AAG) Commercial Division. The AAG (Commercial Division) reports directly to the Auditor-General and is assisted by Senior Audit Inspectors and Audit Inspectors of various grades.

The Provincial Government Division emerged after the certification of the Organic Law on Provincial Governments which came in through the Amendment of the Papua New Guinea Constitution in 1976. The powers of the Auditor-General (AG) under this constitutional amendment were extended to "inspect, audit and report on public moneys and properties of Provincial Governments". For purposes of auditing the Provincial Governments, the country is divided into four Geographical zones ie; Papuan, New Guinea Mainland, Highlands and Islands Regions each with a Regional Manager. This Division is also supervised by Assistant Auditor-General. The AAG (Provincial Government Division) who reports directly to the Auditor-General, is assisted by Senior Audit Inspectors and Audit Inspectors of various grades.

The National Government Division deals with the audit of all arms and Departments of the National Government. The Division, just like the other two is headed by the Assistant Auditor-General. This officer also reports directly to the Auditor-General and is assisted by Senior Audit Inspectors and Auditors of various grades.

The Services Wing

The Services wing of the Auditor-General's Office is organised into three sections as follows:-

The Staff Development and Training section which attends to among other functions research, training, professional development and quality review;
The EDP section which conducts systems evaluation, training in Computer Assisted Audit techniques and performs special Reviews of Audit Systems; and
The Finance and Administration section which deals with personnel, transport, stores and finances of the Auditor-General's Office. Except for the Finance and Administration section which is headed by the Accountant, the other two sections are headed by Senior Audit Inspectors assisted by audit inspectors of various grades.

Staffing, Recruitment and Training

The policy of the Papua New Guinea Auditor General's Office is to execute the statutory duties placed on it by the Constitution of the independent State of Papua New Guinea as diligently and as efficiently as possible. The staffing policy is geared towards training national officers in the execution of the statutory duties specified in the Constitution of Papua New Guinea, at the same time preparing nationals to take over senior and middle level positions in the office (localization).

The Office of the Auditor-General of Papua New Guinea is still experiencing a shortage of professionally trained accounting and Financial Management personnel particularly in the professional cadres. Given the current situation in Papua New Guinea whereby the universities and educational institutions do not have the capacity to accommodate all training demands of the country, the Department instituted a "Strategic Plan" for Staff Development and Training of its own staff.

The objectives of the Strategic Plan include:-

Localization of Senior and Management positions within the office;
Development of a Training Programme in auditing and accounting which gives new graduates a sound theoretical and on the job training; and
Development of a career path for National Audit Offices with a view to retain such trained personnel.

A training programme to cater for new auditor trainees (all new graduates) and non-graduate officers who are employed with the Auditor-General's Office, has been formulated and indeed became fully operative in 1985. The training programme carries a number of training phases which range from on-the-job training, as well as in-house courses in auditing on one hand to attending international conferences and getting exposure to professional auditing and accounting firms on the other.

A number of officers have already benefited from staff development programmes which have been sponsored by Canadian International Development Agency, Commonwealth Auditor-General's Office Australia, the International Organisation of Supreme Audit Institutions, and the Asian Organisation of Supreme Audit Institutions (ASOSAI). These range from courses dealing with current issues in auditing eg; Value-For-Money Audits to Practical Attachments.

Audit of Accounts

The Auditor-General's Office has developed and issued Standards of auditing of public enterprises, Government Owned Companies and other autonomous bodies. The Standards became effective in 1982. In addition to the manual of standards, a Manual of Guidelines for tendering, contracting, performance and acceptance of Work of Private Auditors was issued the same year.

The Manual of the Auditor-General's Standards, dwells on the source of authorisation and type of State Auditing in Public Enterprises. These standards which measure up to the International Auditing Standards, focus on general standards, examination and evaluation standards and reporting standards exercised by the Auditor-General under the Public Bodies (Financial Administration ) Act. This Act requires that accounts, financial statements and reports of a public enterprise, be submitted to the Auditor-General, who, in turn, will report to the appropriate minister on:-

Whether the statements are based on proper accounts and records;
Whether the statements are in agreement with the accounts and records and whether they show fairly the financial operations and the state of the affairs of the body; and
Whether the receipt and expenditure and where appropriate the acquisition and disposal of assets by the public body during the year, have been done according to the stipulations of the Act.

The Manual of Guidelines sets out the administrative procedures to be followed when contracting private auditors or contract auditors to inspect, audit, and report on accounts of public bodies together with procedures governing performance, review, reporting and remuneration of work done by private auditors. The manual is meant to ensure that work performed by private auditors, while acting as agents of the Auditor-General, is in accordance with the standards. Worth noting is that the sub-contracting of work arises partly because of the shortage of professionally trained accounting and financial management personnel as already discussed above. Reviewing the work done by private auditors by the Papua New Guinea SAI, is meant to give reasonable assurance as regards reliability, maintenance and adherance to the Standards and Guidelines already mentioned.

Inter Linkages with other Regional and International Supreme Audit Institutions

The Papua New Guinea Auditor-General's Office is a member of three Associations of Supreme Audit Institutions. These institutions are:-

The South Pacific Association of Supreme Audit Institutions (SPASAI);
The Asian Oragnisation of Supreme Audit Institutions (ASOSAI); and
the International Organisation of Supreme Audit Institutions (INTOSAI).

Through these organisations the Papua New Guinea Auditor-General's Office joins hands with other countries' SAI to promote, advance and facilitate exchange of ideas and experiences in the field of public audit. As already mentioned above, the office also enjoys training and continuing education for government auditors organised by these institutions. The training and education is expected to improve the quality of performance in audit work. The linkages also facilitate exchange of expertise and technical assistance among member institutions.

Audit Profile: Papua New Guinea