Standard Terms of Reference for Annual Audit of the project titled Mupaka Shamba Letu phase II (The Border, our Livelihood),

Introduction

In November 2023, The Embassy of Sweden in Kinshasa decided to award to International Alert a grant of SEK 32,000,000 to be used exclusively for the implementation of the Project titled Mupaka Shamba Letu phase II (The Border, our Livelihood), during the period from 15^th October 2023 to 31^st of December 2026. On 1^st December 2023, the Federal Department of Foreign Affairs FDFA, Direction du Development et de Cooperation DDC Bureau de Cooperation Suisse en RD Congo decided to participate in the implementation of project’s activities by providing at maximum of US$ 3,004,344 for a period from 15^th October 2023 to 30^th September 2027.

International Alert wishes to engage the services of an audit firm for the purpose of auditing the project titled Mupaka Shamba Letu phase II (The Border, our Livelihood), as stipulated in the agreement between International Alert, the Embassy of Sweden in Kinshasa and the Federal Department of Foreign Affairs FDFA, Direction du Development et de Cooperation DDC Bureau de Cooperation Suisse en RD Congo. The audit shall be carried out in accordance with international audit standards issued by IAASB. The audit shall be carried out by an external, independent and qualified auditor.

I. Objectives and scope of the audit

The objective is to audit the financial report for the period from 15^th October 2023 to 31^st December 2024 (The report amount is estimated at $1,300,000) as submitted to both Donors mentioned above and to express an audit opinion according to ISA 800/805 on whether the financial report of Mupaka Shamba Letu phase II (The Border, our Livelihood), is in accordance with the Donors’ instruction for financial reporting as stipulated in the agreement including appendix between both Donors and International Alert .

Overall principles of the procedures to be performed

The auditor is required to plan, execute and report on the financial audit engagement to conclude on the following matter:

• Principles of orderliness (financial regularity/reporting)

Furthermore, the auditor is required to assess whether the partner has adequate policies and procedures in place relating to the following matters (those matters are not covered by the audit engagement in accordance with ISA as mentioned above):

• Existence, adequacy and effectiveness of the Internal Control System (ICS)
• Conformity with the project objectives and adherence to the contract conditions
• Economical conduct of business and effective use of financial resources

To respect these principles, the auditor must analyse the questions mentioned in the annexed Questionnaire (Annex 1). While item 2.1 will be reflected in the audit report prepared in accordance with ISA, items 2.2 to 2.4 will be reflected by the answers of the auditor to the Questionnaire in the Annex 1. Recommendations to the management shall be formulated according to Annex 2 (Management Letter).

Documents of reference

The following documents and matters are to be considered by the auditor as basic references for performing the financial audit:

Legislation:

• National law

Project/program:

• Agreement between SIDA, FDFA and the International Alert relative to the project.
• Project Document / TOR.
• Budgets, financing plans, programs of project activities; #
• Project management procedures.
• Any other documents concerning the project/program.

Accounting:

• Accounting documents subject to the financial audit.
• Financial and operational reports concerning the project/program.

Auditor:

• Prior internal and external audit reports of the partner.
• Any other information requested from the partner by the auditor.

The selected audit firm will also conduct the audit of financial statements of the project for the following periods:

• Financial report for the period of 1^stJanuary 2025 to 31^st December 2025
• Financial Report for the period of 1^stJanuary 2026 to 31^st December 2026
• Final financial report for the period of 1^stJanuary 2027 to 30^th September 2027

II. Additional assignment: in accordance with ISRS 4400 agreed procedures, examine the following areas according to the terms of reference below:

Mandatory assignments that must be included:

• Observe whether the financial report is structured in a way that allows for direct comparison with the latest approved budget.
• Observe and inspect whether the financial report provides information regarding:
• Financial outcome per budget line (both incomes and costs) for the reporting period and columns for cumulative information regarding earlier periods under current agreement.
• When applicable, compare if the opening fund balancefor the reporting period matches with what was stated as closing fund balance in the previous reporting period. 
• A disclosure of exchange gains/losses. Inquire and confirm whether the disclosure includes theentire chain of currency exchange from Sida’s disbursement to the handling of the project/program within the organization in local currency/ies, if applicable.
• Explanatory notes (such as, for instance, accounting principles applied for the financial report).
• Amount of funds that has beenforwarded to implementing partners, when applicable.
• a) Inquire and inspect with what frequency salary costs during the reporting period are debited to the project/programme.

Choose a sample of three individuals for three different months and:

• Inquire and inspect whether there are supporting documentationfor debited salary costs.
• Inquire and inspect whether actual time worked is documented and verified by a manager. Inquire and inspect within which frequency reconciliations between debited time and actual worked time is performed.
• Inspect whether the Cooperation partner comply with applicable tax legislation with a look at personal income taxes (PAYE)and social security fees.
• Review and confirm that the Cooperation partner screens IP’s and/or suppliers to ensure that such parties are not subject to the European Union’s financial sanctions list of persons, groups and organisations (EU Sanctions list).

Enquire whether there have been any reported findings from the screening process and if so, report on such findings.

• a) Inspect and confirm that the unspent fund balance (according to the financial report) at the end of the financial year is in line with information provided in the accounting system and/or bank account.
• b)Applicable the final year:Inspect and confirm the unspent fund balance (including exchange gains) in the financial report and confirm the amount that shall be repaid to SIDA and DDC.

Follow up of funds that are channelled to implementing partners

Mandatory assignments that must be included if the Cooperation partner forward funds to implementing partners (IP’s):

Choose a sample of a minimum of 70 % of the total of disbursed funds as well as 70 % of the number of IP’s or a maximum of 10 IP’s.

• Inspect and confirm whether the Cooperation partner has signed agreements with the selected IP’s.
• Inspect and confirm whether the Cooperation partner, in all agreements entered with IP’s, included the requirement to carry out annual audits. The requirement shall specify that these audits shall be carried out with application of ISA (reporting according to ISA 800/805) and a separate assignment according to ISRS 4400 (Revised) should be included for project/programme support. If agreements regarding core support are entered into with IP’s, the audit shall be conducted in accordance with ISA 700 or National standards on auditing.
• Inquire and inspect whether the Cooperation partner has received financial reports and auditor reports from all IP’s included in the selected sample:
• Inquire and inspect whether the Cooperation partner has verified if reports from IP’s are in line with the requirements in the Agreement.
• Inquire and inspect whether the Cooperation partner has documented its assessment of the submitted financial reports and reporting from auditors including management responses and action plans from selected IP’s.
• Inquire and inspect whether the Cooperation partner has documented its follow-up actions based on the information provided in the financial reports and the reporting from the auditor of the selected IP’s.
• Inquire and inspect whether the Cooperation partner has reported substantial observationsfrom selected IP’s audit reports in its communication with Sida. List observations from IP’s audit reports which have been part of this sample.

III. The reporting

The reporting shall be signed by the responsible auditor (not just the audit firm) and shall include the title of the responsible auditor.

Reporting from the ISA assignment

The reporting from the auditor shall include an independent auditor’s report in accordance with the format in standard ISA 800/805 and the auditor’s opinion shall be clearly stated. The financial report that has been the subject of the audit shall be attached to the audit report.

The reporting shall also include a Management letter that discloses all audit findings, as well as weaknesses identified during the audit process. The auditor shall make recommendations to address the identified findings and weaknesses. The recommendations shall be presented in priority order and with a risk classification.

Measures taken by the Cooperation partner to address weaknesses identified in previous audits shall also be presented in the Management Letter. If the previous audit did not have any findings or weaknesses to be followed-up on, a clarification of this must be disclosed in the audit reporting.

If the auditor assesses that no findings or weaknesses have been identified during the audit that would result in a Management Letter, an explanation of this assessment must be disclosed in the audit reporting.

Reporting from the ISRS 4400 (Revised) assignment

The additional assignment according to agree upon procedures ISRS 4400 (Revised) under section II, shall be reported separately in an “Agreed-upon procedures report”.

Performed procedures should be described and the findings should be reported in accordance with the requirements in the International Standard on Related Services 4400 (Revised).

When applicable, the sample size shall be stated in the report.

Audit Duration: The audit work shall be completed within one month from the date of commencement of the audit.

The audit will take place at one International Alert Offices based in Kigali- Rwanda, Bukavu or Goma – DRC.

Payment will be as follows: 20 percent on the date of this contract, 40 percent on the date the recipient receives the final report, and 40 percent on the date Donors approves the final report.

Interested audit firms should submit their technical and financial officer to: DRC.Office@international-alert.org with copy to Rwanda@international-alert.org 

Not later than 15^th December 2024 at 5:30 PM.