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
1. Preparation of the audit
The auditor should assess the follow-up to the
findings and recommendations of other relevant audits.
2. Drafting the audit plan
2. 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.
3.
Implementation
3.1
The auditor should audit the financial statement on
the basis of the audit plan in order to issue an auditor's report.
3.2
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.
3.3
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.
3.4
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:
4.1 The aim and scope of the financial audit, the audit criteria
applied, where relevant, and any restrictions imposed on the scope of the
audit.
4.2 The financial statement with disclosures and the accounting
principles applied.
4.3 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.”
"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.”
4.4 For the financial section a report per applicable currency is
required.
4.5 A table of received transfers and exchanged amounts will be
checked and confirmed by the auditor.
4.6 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
1.
The auditor will follow the financial guidelines of
PMI, however the auditor is expected to specifically consider and evaluated
that:
a) No reserves can
be charged to the funding
b) No investments can be charged to the funding
c) Report on any other revenue such as interest
d) 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.
e)
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).
f)
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 8 August 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.