Terms of References
General Audit Partners
for Resilience Program (PfR) MFS II 2011 - 2015
DSO/MO-527/10
I. Background
As
partner in the “Partners for Resilience Program”, the Netherlands Red Cross
supported the Indonesia Red Cross (PMI) to implement activities in targeted
communities by enhancing their capacity to mitigate and manage future disasters
and other vulnerabilities through an Integrated program of Disaster Risk
Reduction (DRR), Climate Change Adaptation (CCA) and Eco-systems Restoration
Management (ERM). The program is conducted in 2 districts in East Nusa Tenggara
(Nusa Tenggara Timur - NTT) and at PMI National Head Quarter. It started in
2011 and will continue until September 2015.
Cash
advance disbursements on quarterly base to PMI were the main system of support for
the implementation of the project. PMI subsequently provided and still provides
financial reports on a monthly basis.
The PfR programme is part of a
global programme, funded by the Dutch Ministry of Foreign Affairs (MoFA) and
co-funded by The Netherlands Red Cross (NLRC). The collaboration between PMI and
the NLRC is defined in a Memorandum of Understanding (MoU). The collaboration
is subject to the grant contract between MoFA and NLRC, and the planned audit
is part of the obligations determined in this grant contract between MoFa and
NLRC.
The
project activities conducted by PMI finish by the end of September 2015. This
will be followed by a financial reconciliation process in October - November
2015. In accordance with the accountability requirements the financial
statements over the total program are required to be audited. For practical
reasons the audit over the years 2011 – 2014 will be done soonest while the
audit over the period January – September 2015 will start in October.
II. Audit
objectives
- The audit should be carried out in accordance with generally accepted auditing standards (ISA).
- The audit should comprise as many observations as are considered necessary under the circumstances.
- The opinion of the auditor about the underneath mentioned specific objectives of the audit need to be reflected in the audit report and are as follows:
- To state an opinion on the financial statement, in particular whether it gives a true and fair view of revenue and expenditure in accordance with the conditions laid down in the decision and with generally accepted accounting principles.
- To evaluate the recipient’s internal control system, estimate the audit risk and identify any matters worth mentioning, including any material weaknesses in internal control.
- To make observations in order to determine whether the recipient has complied with all material aspects of the conditions laid down in the MoU. All material matters not meeting the afore mentioned conditions and all indications of illegal acts have to be identified. Such observations shall also include the requirements relating to any contribution to be made by the grant recipient.
- Check whether the reported activities and reported expenditures comply with: the signed MoU (including budget) and approved budget revisions.
- Check whether all eligible costs are charged to and paid within the eligible period.
- Check whether no assets (buildings, stock or land) have been bought and charged to this programme.
- Check whether no reserves have been made with money of this programme. Only a reserve for severance (termination benefits, only is case of national law) is allowed.
- Check whether the organisation complies with the following conditions:
- The applicable rules, regulations and laws were applied to the reported amounts;
- The quality of the process of internal control, validation of the expenditures, contracting and monitoring were performed well;
- Evaluate whether the administration gives a good and complete understanding of:
- The amounts received from the NLRC;
- Return payments to the NLRC;
- The amounts justified by the PMI
III. Scope of the audit
- Preparation of the audit
- The auditor should assess the follow-up to the findings and recommendations of other relevant audits.
- Drafting the audit plan
- The auditor should draw up an audit plan which should include an examination of the design and operation of the internal control system, analytical procedures and substantive tests.
- Implementation
- The auditor should audit the financial statement on the basis of the audit plan in order to issue an auditor's report.
- The auditor should request a letter of representation from the grant recipient's management stating that, to the best of its knowledge, the financial statement encompasses all transactions and is accurate and complete in all respects.
- The auditor should ensure that the audit working papers contain sufficient documents of an appropriate and relevant nature and should document the audit procedures used and the results obtained in the working papers.
- The auditor should check that the contracts concluded between the grant recipient and other organisations involved in the activities referred to in the decision have been audited.
The
steps listed at III. 1, 2 and 3 are not exhaustive or restrictive and may not
impose any limitations on the auditor's professional judgement. Any
restrictions on the scope of the audit should be mentioned in the auditor's report.
IV. Reporting
The long-form report
should include the following elements:
- The aim and scope of the financial audit, the audit criteria applied, where relevant, and any restrictions imposed on the scope of the audit.
- The financial statement with disclosures and the accounting principles applied.
- An auditor's report stating clearly the auditor's opinion of the financial statement. In the case of an unqualified auditor's report, the following text should be used:
- "We have audited the financial statement of * at * for the period from * to *. The financial statement is the responsibility of the entity's management. Our responsibility is to express an opinion on the financial statement based on our audit.”
- For the financial section a report per applicable currency is required.
- A table of received transfers and exchanged amounts will be checked and confirmed by the auditor.
- The following text needs to be incorporated in the auditor’s report:
- “We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. We believe that our audit provides a reasonable basis for our opinion.
In
our opinion, the financial statement gives a true and fair view of the
financial position of the entity as of 31 December 2015 and of the balance of
operating income and expenses for the year then ended in accordance with
generally accepted accounting principles. The obligations imposed by the grant
decision have also been complied with."
V. Review
The
minister of Foreign Affairs of the Netherlands reserves the right to
review the audit. The auditor concerned should assist this review and should
supply the reviewer with all relevant documents relating to the audit.
VI. Audit
working papers
The audit
firm must keep orderly and accessible working papers. These should be kept for
a period of ten years from the date of completion of the audit.
VII. Conditions
of implementation
- The auditor will follow the financial guidelines of PMI, however the auditor is expected to specifically consider and evaluated that:
- No reserves can be charged to the funding
- No investments can be charged to the funding
- Report on any other revenue such as interest
- Costs are eligible when charged and paid in the period from 1 January 2011 up to and including 31 December 2015. Liabilities are not eligible costs after 31 December 2015.
- The total of the reviewed expenses per project will be at least 60% of the total reported expenditures, 60% of each budget line and cost category (defined by the ledger of the accounting programme).
All expenses exceeding €500 or the equivalent in local currency will be
reviewed by the auditor, plus a substantial share of those below €500.
VIII. Fees
Each bidder is required to submit a
cost proposal or fee in IDR, which is considered an all-inclusive fee.
IX. Timing Of Audit
The draft audit report and opinion
should be received 10 working days after completion of audit field work. They
should be A4 formatted in English and copied 2 hard copies.
X. Submission and Deadline of Offers
The closing date of proposal
submission is 13 July 2015 at 05.00 pm. The proposal should be submitted in sealed
envelope to Netherlands Red Cross/Tini Sirait Wisma PMI Lt. 5 Jl. Wijaya 1 No.
63 Kebayoran Baru – Jakarta Selatan 12170 or email to TSirait@redcross.nl.
