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ADB’s Efforts to Strengthen Public Financial Management and Reduce Corruption in Papua New Guinea

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In recent years, the Asian Development Bank (ADB) has made significant progress in strengthening public financial management and reducing corruption in Papua New Guinea (PNG). Key achievements include reduced loan processing times, more accurate cost estimates, and improved disbursement rates.

Challenges Persist

Despite these advancements, challenges persist. For instance:

  • Frequent mismatches between government agencies’ project requests and budget appropriations continue to cause undue pressure on tender and procurement requirements.
  • Poor information from the Department of Works and Implementation’s Road Asset Management Systems hampers detailed project design, leading to unspent allocations being deposited in poorly managed trust funds.

Improvements Needed

In the energy sector, ADB has been working with PNG Power (PPL) to improve financial management practices. While PPL has generally satisfactory financial management, improvements are needed in:

  • Internal control procedures
  • Integration of systems into its Oracle-based accounting system

Additionally, PPL’s inability to generate sufficient revenue from user charges has led to depriving assets of maintenance, threatening service quality and sustainability.

ADB’s Risk Management Plan

To address these challenges, the ADB has developed a Risk Management Plan with specific actions to strengthen public financial management, procurement, and corruption prevention. The plan includes measures such as:

Public Financial Management

  • Strengthening public financial management through capacity development programs in planning framework, prioritization, project selection, and financial reporting.
  • Improving infrastructure design and readiness through technical assistance.

Procurement Transparency

  • Implementing measures to ensure procurement transparency, including timely disclosure of information on consultant and contractor selection.

Corruption Prevention

  • Enhancing efforts to establish robust mechanisms to mitigate the risk of process manipulation for personal gain.
  • Encouraging government agencies to conduct regular internal audits and contracting external audits with international standard audit firms.

Sector-Level Measures

  • Applying international supervision consultants to monitor construction and operational activities
  • Specifying contractors’ rights to audit and examine records and accounts
  • Conducting independent external auditing of contracts and financial statements

Results

The ADB’s efforts have already yielded positive results, including:

Selected Indicators

  • Public Financial Management:
    • Successful piloting of statutory authority financial monitoring framework to at least 20 agencies
    • Average infrastructure procurement timeline reduced to 26 weeks by 2020 (2014 baseline: 52 weeks)
  • Procurement:
    • Average number of contract variations per project reduced from four to one by 2020
  • Corruption:
    • Number of institutions submitting unqualified annual reports six months after fiscal year close reduced to zero by 2020

Source

Asian Development Bank