Home > Corruption, Papua New Guinea > National Provident Fund Final Report [Part 84]

National Provident Fund Final Report [Part 84]

November 27, 2015 Leave a comment Go to comments

Below is the eighty-fourth part of the serialized edited version of the National Provident Fund Commission of Inquiry Final Report that first appeared in the Post Courier newspaper in 2002/3.

NPF Final Report

This is the 84th extract from the National Provident Fund (now known as NASFUND) Commission of Inquiry report. The inquiry was conducted by retired justice Tos Barnett and investigated widespread misuse of member funds. The report recommended action be taken against several high-profile leaders, including former NPF chairman Jimmy Maladina. The report was tabled in Parliament on November 20 by Prime Minister Sir Michael Somare.

Executive Summary Schedule 9 Continued

Tender Procedures and Nepotism

Management contract price in excess of NPF Board approval

The total cost of the new AS400 machine was within the amount approved under Section 61 of the PF(M) Act. However, the amount paid was greater than the earlier quotes provided by Datec to NPF and on which the board provided its original approval.

Evidence given by Mr Ta’eed and Mr Vere of Datec

Mr Ta’eed gave evidence (Transcript pp. 8128-42) that:

  • The AS400 which NPF had was over utilised;
  • Datec had advised NPF that a performance analysis of the computer system was required;
  • The return advice revealed that the system was too small for NPF’s needs, which was already known.

Reasons for choosing the AS400

Mr Ta’eed advised that:

  • The software NPF required ran only on AS400 machines;
  • A different machine with a different software had to have everything converted to the AS400, which is exactly what happened in 1993 when NPF moved from the McIntosh system to AS400.
  • NPF was the only authorised reseller of IBM equipment in PNG and the only service centre in PNG.


At paragraph, the commission found that:

(a) Once NPF had committed itself to Datec and purchased both software and sophisticated unique hardware it, was hooked into Datec/IBM with Datec being the only supplier in PNG. There was then no scope for seeking competitive tenders; and

(b) NPF management and trustees failed their duty to NPF members in not seeking independent expert opinion and advice before making this commitment to Datec.


There were imperfections in NPF accounting records for the financial years 1998 and 1999 as mentioned in paragraph 12.6.

Computer purchase in 1999

See previous table

Disposal of computer equipment in 1999

The fixed asset register did not record any disposal of computer equipment in 1999. However, old Y2K non-compliant computers were disposed of by tender, restricted only to NPF staff. This method of disposal of assets can be criticised as a form of nepotism. Clearly, NPF did not determine the market values of these computers and therefore would have lost substantial income for its members.


At paragraph 12.7, the commission has found that:

(a) NPF management were in breach of Section 61 of the PF(M) Act by not seeking board and Ministerial approval for the additional expenditure incurred in the purchase of the new computer hardware;

(b) Management failed in their fiduciary duties for not seeking the maximum price for the used PC’s and other computer equipment sold during this period;

(c) THE Board and Management failed in their fiduciary duties to seek a second opinion about the new computer hardware they were purchasing;

(d) The sale by tender of PC’s and other computer related hardware to staff, without obtaining a proper market value for them, is deemed an act of favouritism and nepotism and loss of additional income to members of the fund; and

(e) Mr Wright exceeded his financial delegation in approving a Bloomberg Screen for his own office use, costing K41,515.03. He is personally liable for the loss suffered by NPF because of this purchase.

Procurement Of Stationery And Office Supplies

NPF’s financial statements for 1995 to 2000, recorded various costs for stationery and office supplies.

Costs were constant from 1995 to 1998 but took a quantum leap in 1999.

While the commission understands that some increases can be attributed to the general increase in cost in the country due to economic factors in 1999, the increased cost in stationery and office supplies cannot be fully explained by such economic factors.

This view is clearly supported by the fact that stationery and office supplies cost for 2000, returned to its normal level.

The main report (Schedule 9), seeks, in particular, to identify whether:

  • There was failure to comply with tender procedures;
  • Such failures benefited any person;
  • There was any conflict of interest in the procurement of these services.
  • There was any conflict of interest in the procurement of these services.

Summary of suppliers used between January 1, 1995 and December 31, 1999

Out of the total 10 suppliers listed, only four are commonly recognised suppliers. There was also an increase in the amount of purchases from unrecognised suppliers.

The Finance Department inspectors report also uncovered numerous procedural irregularities and weaknesses in this area. The same was found by the Auditor-General in his audit of financial statements for the years ended December 31, 1998 and 1999.

The state of control over procurement, recording and payments — 1995 to 1999


Simon Wanji was responsible for ordering stationery and office supplies. There was no management control over what Mr Wanji was doing.

The only control at the time was that each order had to be accompanied by three written quotes.

Recording Creditors

Normally in many companies, the monies for goods received would be recorded in the creditors ledger and paid after 30 days.

The NPF accounting package used in the period 1995 to 1999 did not have an auditor’s subsidiary ledger. Creditors were only recommended at year-end for reporting purposes, based on unmatched work orders, purchase orders and claim forms.

Payment of creditors

Payment of creditors was ad hoc. NPF did not operate a scheduled payment policy.

Review of payments made

Documentation of the procedures in place between 1995 and 1999 in respect of procurement, recording and payment, reveals crucial weaknesses and in particular, the lack of segregation between ordering and receiving goods, and recording liability and payment to suppliers. Given this situation, there was a high risk of nepotism, fraud, theft and errors occurring and remaining undetected.

Weaknesses identified

  • There was a complete lack of segregation of duties, and functions between ordering, receiving, recording and payment for goods which were, in almost all instances, performed by one officer, Mr W anji;
  • The minimum number of three written quotes were not always obtained;
  • Payment requisitions did not always indicate that the cheque raised was for goods and services; and
  • A creditors subsidiary ledger was not maintained.

Benefit derived

Evidence before this commission indicated that Mr Wanji derived substantial benefits while in his position as officer in charge of accounts payable.

It is also evident that Siri Koae, through his wife, might have also derived benefits but it was to a much lesser degree.


At paragraph 13.5.5, the commission has found that:

(a) There were inadequate procedures in place regarding the procurement, recording and payment of stationery and office supplies. These weaknesses are a significant break down in the control and safeguard of NPF finances;

(b) The controls, which were in place for the procurement, recording and payment of stationery and office supplies, were weak and therefore provided the conditions for nepotism and employee fraud to occur and remain undetected;

(c) Management failed to address procedures for a long time. Through the review of the payment vouchers the commission has come across written notes by Ms Dopeke and once by Henry Fabila, notifying Mr Wanji to obtain three quotes and queries as to why so much stationery was being purchased. These comments were ignored;

(d) These weaknesses resulted in nepotism, “bribes” and other benefits to staff at the expense of NPF;

(e) Mr Wright and Ms Dopeke failed in their duties to the board to identify weaknesses and install appropriate controls and procedures in the financial management of the fund.

Siri Koae

Mr Koae was the manager of the NPF Lae branch between October 1993 and January 1999.

Mr Koae gave stationery and office supplies orders to Bubia, a firm of which his wife, Ms Lari, was co- owner. Ms Lari was also a director of Laiks Printing, a company that provided stationery and office supplies to NPF.

Mr Koae maintained that he received no benefits from Bubia or Laiks Printing.


At paragraph 13.7.4, the commission has found that:

While the evidence does not disclose any criminal act by Mr Koae, his actions were in the commission’s view, improper and dishonest in that he disclosed quotes of other competitors to Bubia and failed to disclose his clear conflict of interest to NPF management.

There is a clear case of nepotism.

Examination of benefits received by Mr Wanji

Laiks Printing

Mr Wanji was a director of Laiks Printing as well as a cheque signatory on its cheque account.

Ten of 15 quotes from Laiks Printing were obtained verbally by Mr Wanji and he recommended that NPF purchase from Laiks Printing.


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