A Parliamentary Public Accounts Committee inquiry in Papua New Guinea says the Madang provincial government is responsible for missing aid money earmarked for Manam Islanders.
The national government donated 321,000 US dollars to assist the Manam islanders, who were relocated to mainland care centres from October last year after the island's volcano erupted.
The chairman of the committee, John Hickey, says they asked what happened to the money which was meant for the National Disaster Centre.
He says the acting provincial administrator, Robert Yass, is primarily responsible for the funds, and he had not met the necessary legal requirements.
"And we found that there was gross misappropriation and mismangement and failure to comply with public accountability."
He says the committee is still waiting for a response from Mr Yass.