Cover Story

International Journal of Government Auditing– January 2004
Papua New Guinea

Audit Profile: Auditor-General's Office of Papua New Guinea

By Mr. Mark Wani, Auditor General

Until 1973, the audit responsibilities relating to what was then the Territory of Papua and New Guinea were vested with the Australian National Audit Office (Commonwealth Audit Office of Australia). However, when the Territory of Papua and New Guinea attained self-government status from Australia in 1973, it signaled the beginning of a new era marked by passage of the Public Finances (Control and Audit) Act, 1973. The same year, the Office of the Auditor-General was established and the first Auditor-General of Papua New Guinea was appointed. With the attainment of independence in 1975 and the birth of Papua New Guinea as an independent nation, Sections 213 and 214 of the Constitution of the Independent State of Papua New Guinea established the Office of Auditor-General of Papua New Guinea (PNG AGO) as the supreme audit institution of Papua New Guinea (PNG).

Scope of Audit Authority

Section 214 of the Constitution of the Independent State of Papua New Guinea requires the Auditor-General's Office to inspect and audit and report to the Parliament at least once in every fiscal year (as provided by an act of the Parliament) on (1) the Public Accounts of Papua New Guinea, (2) the control of and transactions with or concerning the public moneys and properties of Papua New Guinea, and (3) other functions prescribed by or under constitutional law. The authority of the PNG AGO to become a Parliamentary Auditor is entrenched in the Constitution and was amplified in the Audit Act (1989) to include inspection and audit of accounts, finances, and property of all arms, departments, agencies, and instrumentalities of the national government, as well as all bodies set up by an act of Parliament or by an executive or administrative act of the national executive for governmental or official purposes. The Audit Act elaborates on the provisions of Section 214 of the Constitution by expanding the mandate of the PNG AGO to include the audit of provincial governments, together with their arms, agencies, and instrumentalities. Under the Constitution and the Audit Act, the objective of the PNG AGO is to conduct independent audits and examinations that provide professional and objective information, advice, and assurance to the PNG Parliament on the financial operations of the PNG public sector.

SAI Independence

Section 213(i) of the Constitution of PNG guarantees the independence of the Auditor-General in terms of planning, executing, and reporting on audits performed as the Parliamentary Auditor. Section 20 of the Audit Act amplifies the constitutional provisions by giving the PNG AGO powers to appoint its officers and set its own terms and conditions of employment within the finances provided to it, as stipulated under Section 21 of the same act.

Audit Planning

Effective in the year 2000 and after the Auditor-General's Office finalized the task of documenting its audit processes and procedural guidelines for compliance and attestation audits, the planning and execution of audit work has been performed in accordance with international standards on auditing and guided by professionalism, independence, ethics and integrity, objectivity, and responsiveness in serving the state and public interest with commitment and excellence. Audit work is executed in the following three stages.

  • The Annual Plan is formulated within the broad context of the PNG AGO Corporate Plan. For each of the three major portfolios—the national government departments; provincial and local level governments; and statutory bodies, government-owned companies, and project audits—it spells out the staff days required to perform the audits as well as the staff days available from the audit operations staff. Audits to be done in-house by AGO staff and those to be done by contract auditors are also identified so that a strategy to identify shortfalls in manpower is put in place.
  • Entity-oriented field plans specify in detail the financial statements and records to be audited, including specific staff allocations. The field plans also specify the scope, nature, timing, and extent of procedures to be applied as well as other requirements, including detailed reviews of internal control systems.
  • Audit programs are developed for each audit. These programs put in place the nature, timing, and extent of specific audit procedures for each financial statement component (auditable area); the timing and extent of specific audit objectives (for each auditable area); and assertions to be verified, materiality levels, etc. All audits undertaken by contract auditors are reviewed in-house and the reports are finalized by AGO staff.

Organization, Size, and Types of Work Done

The PNG AGO is currently organized into two wings, operations and support services.

The audit operations wing is further divided into three branches, each of which performs specific audits through its respective divisions. The AGO has been structured so that its branches and divisions can address accountability, transparency, and related governance issues in the public sector. The three branches and the operations divisions under them are as follows.

  • The National Government Branch. Under this branch, the National Government Expenditure Division is responsible for auditing the 28 national government departments and their agencies, while the Public Accounts and Revenue Division is responsible for the audit of the Public Accounts of PNG.
  • The Provincial Government and Local Level Governments Branch has two divisions, which share the task of auditing the 19 provincial governments and their business arms, as well as the 286 local level governments and their business arms.
  • The Statutory Bodies and Special Audits Branch houses two divisions. The Statutory Bodies Division audits all public bodies and their subsidiaries and government-owned companies. The Special Audits Division is responsible for project audits, performance audits, and audit investigations.

The support services wing comprises two divisions, the Finance and Administration Division and the Corporate Services Division. The latter, among other functions, oversees strategic as well as operational planning and implementation functions, the human resources management function, and the legal services unit. The division also develops various operational and administrative systems for the office.

In all, the PNG AGO employs 109 staff, 82 of whom are attached to audit operations. The branches are headed by First Assistant Auditors-General, while the divisions are headed by Assistant Auditors-General. Together with the Auditor-General and the Deputy Auditor-General, they constitute the PNG AGO's senior management. Middle management comprises section heads designated as Directors of Audit/Managers. Various levels of auditors—Senior Auditors, Principal Auditors, and Senior Principal Auditors—perform under each section head. As shown in table 1, AGO divisions and branches are currently required to perform 1,478 audit jobs annually, and these jobs take a total of 11,584 staff days per year. (One staff day is defined as 7.21 hours of audit work per auditor per day.)

Table1: PNG AGO Audit Jobs Required Annually

Division Audit jobs Staff days
Provincial and local level governments 1,095 3,767
Line departments 28 2,245
Public accounts and revenue-generating agencies 10 1,929
Programs and projects 10 50
Statutory bodies 335 3,593
Total 1,478 11,584

 

Human Resources Management

The PNG AGO has always sought to improve its staff 's abilities to perform their jobs by continuing to impart the necessary knowledge and skills through in-house seminars and workshops as well as on-the-job training through attachments to audit offices overseas. Giving staff the opportunity to pursue professional development courses leading to membership in various professional accounting bodies has been a priority, with the AGO assisting staff with payment of membership and examination fees. The AGO has also strengthened and undertaken an ongoing review of the terms and conditions of employment, while maintaining its policy of recruiting graduates to fill various positions within the office. All these activities are aimed at improving the AGO's human resources management.

The AGO has put in place its Five-Year Training Programme, 2000–2005, which provides strategic direction on the knowledge and skills that staff need in order to perform their audit and other tasks. The program is incorporated into the Human Resources Strategic Framework contained in the AGO Corporate Plan (2000–2010).

The office is also finalizing a report that will provide essential inputs to the overall training and staff development agenda for the AGO. The AGO Institutional Strengthening Project has become an integral part of the PNG Government Public Sector Reform agenda, which is being funded through an Asian Development Bank loan. This project is expected to strengthen the PNG AGO's ability to audit for impact by enabling it to perform audits more efficiently, add value to systems, and develop best practices and methods in auditee organizations. It is expected to cost 3.8 million Kina (US$1.4 million) over a period of 3 years. This funding will only address a few selected components of the AGO Corporate Plan.

The project will focus not only on the human resources aspect of training and staff development, but also on modernizing audit processes and the equipment of the PNG AGO, as defined in the AGO Corporate Plan. The Corporate Plan aims at enhancing the capacity of the AGO to perform not only the compliance and attestation audits it currently handles, but also the value-for-money and forensic audits required under the AGO mandate.

For additional information, contact: Office of the Auditor-General of Papua New Guinea, fax: ++675 325 28 72; e-mail: agois@dg.com.pg.