TOR FOR PROVISION OF EXTERNAL AUDIT SERVICES

Donor: EMBASSY OF THE KINGDOM OF NETHERLANDS (EKN)

Project Title: CONNECT project

Background Information

The Institute for Community Based Sociotherapy (ICBS) is a Non-Governmental Organization (NGO) registered in the Netherlands. The institute works as a global expertise network, uniting professionals, and organizations from different parts of the world that implement communitybased sociotherapy (CBS). CBS has been developed in 2005 in Rwanda, as an integrated Mental Health and Psychosocial Support (MHPSS) and Peacebuilding (PB) approach.

ICBS is implementing the CONNECT project funded by the Embassy of the Kingdom of the Netherlands (EKN) and the coordination of the project is managed through our regional office in Rwanda. This project aims at scaling up the CBS approach in the Great Lakes Region. The project will be implemented by a consortium of four organizations: ICBS in partnership with Community Based Sociotherapy Rwanda (CBS Rwanda), the Anglican Church of Rwanda, Byumba Diocese (E.A.R. Byumba) and Transcultural Psychosocial Organization(TPO) Uganda.

1. Objective of the Audit

The overall objective of the audit is to enable the auditors to express an independent professional opinion on the financial position of the project and to ensure that donor funds have been utilized for their intended purposes and in line with donor rules and regulations. ICBS’S internal policies and guidelines and as well as in compliance with the country of operations statutory requirements.

2. Scope of the Audit

We expect the auditor to have an onsite visit to ICBS partner Country Offices in Rwanda, Uganda and the regional office in Kigali for expenditure review and verification of vouchers. 

The audit will be conducted in accordance with the International Standards on Auditing and will include such tests of transactions and tests of the existence, ownership, valuation of assets and liabilities as the auditors consider necessary. They shall obtain an understanding of the accounting and internal control systems to assess their adequacy as a basis for the preparation of the financial reports, and to establish whether proper accounting records have been maintained by the project holder. Special attention shall be given to the fact that income through funds from ICBS and other aid agencies are earmarked funds. This earmarking is based on the objectives/goals and measures defined in the project as well as on the approved expenditure budget and finance plan. The balances of earmarked funds (project balances) shall be shown as liabilities at the end of the accounting period. In addition, the auditors shall analyze the economical and sparing use of funds in accordance with the established local price structures and the contracting practices for placing orders/procurements. The auditors might be required to visit some of the field locations to verify the project assets.

The audit is not designed to identify all significant weaknesses in the project’s systems but, if such significant weaknesses come to the auditors’ notice in the course of the audit process, the auditors shall provide such details in the consolidated audit report of the consortium partners including the lead party separately, or in individual and consolidated Management Letter(s) as appropriate.

3. Specific Audit activities.

The activities described in part A and B must be performed for all consortium partners including the lead party. The activities described in part C must be performed for the lead party. These activities focus on the consolidated report prepared on the basis of the individual reports of the consortium partners and the lead party.

The activities can be summarised as follows:

As part of the standard audit procedures, the auditors may request the project managers to provide written confirmation of certain oral representations which they may have received during the audit on matters having a material effect on the annual financial statement. For the auditors to proceed smoothly with the examination, they shall request sight of all documents or statements, which are due to be issued with the annual financial statement.

The responsibility for safeguarding the assets of the project holder and the responsibility for the prevention and detection of fraud, error and non-compliance with law or regulations rests with the project managers. However, the auditors shall endeavor to plan their audit to provide reasonable assurance of detecting material misstatements in the annual financial statement or accounting records (including those resulting from fraud, error or non-compliance with law or regulations). 

The aim of the audit of the financial statements is to establish whether they meet the requirements laid down in the standards framework. The auditor must ascertain that:

1. If the accrual accounting system has been used, the explanatory notes mentioning which portion of the costs was paid within the period covered by the financial statements and which amount has been recognised for items that are payable;
2. Expenditures (or costs) have been properly recognised and that expenditures (or costs) are related to the activities mentioned in the decision;
3. Receipts or revenues have been recognised in full and that revenues have been received. The auditor will examine consistency with the revenue sources included in the approved budget and use their knowledge of the organisation, for example in relation to the auditing of annual financial statements;
4. The financial statements are structured with the same level of detail and with the same cost/expenditure categories as the submitted and approved budget. Please note, this requirement only applies to the costs/expenditure of the consortium partner/lead party. Commitments to local cooperating partners should be presented on a separate line. The budget must also be recorded in the financial statements. The individual financial statements form the basis for the consolidated financial statements. This is explained in more detail in 3C above;
5. Expenditures/costs are evidenced by supporting documents. The auditor must determine on the basis of their professional judgement whether the supporting documents suffice as audit information/evidence and are appropriate to the nature of the activity and the accompanying approved budget;
6. Discrepancies of more than 10% per budget line between the actual figure and approved budget are explained. Variances of EUR 5,000 or less do not need to be explained. The individual financial statements form the basis for the consolidated financial statements. This is explained in more detail in 3C above;
7. The accounting policies used are explained in the financial statements, and are consistent with the approved budget and the annual financial statements;
8. The system for allocating indirect costs/overheads to the activity is explained in the explanatory notes. The auditor must assess whether the allocation system has been used in the financial statements in accordance with the explanatory notes to the financial statements and with the approved budget. The associated audit activities are carried out in conjunction with those described at 9, namely ascertaining that expenditures/costs are recharged on the basis of actual expenditures/costs. These activities only need to be performed in respect of the individual financial statements;
9. Expenditures/costs are recharged to the funded activities on the basis of actual costs in accordance with the principles laid down in the model budget.
10. The auditor ascertains that the selected external invoices are compliant with the organisation’s procurement policy. The auditor also ascertains that this procurement policy ensures that suppliers are selected objectively by requiring that several bids be sought from a threshold amount of EUR 33,000.4 Any departures must be explained by the organisation in the financial statements;
11. The number of hours and hourly rates claimed for internal and external staff where the hourly rate exceeds a threshold of EUR 225 per hour (excl. VAT) has been explained by the applicant in the financial statements. The total amount concerned must be included in the financial statements. The individual financial statements form the basis for the consolidated financial statements. This is explained in more detail in 3C below.
12. Examination of participants (beneficiary) lists created during the implementation of Connect project activities as part of the Project funding: check that lists are available, legible and correspond to the procurement records, payment documents and financial reports.

4. Materiality

The auditor will seek reasonable assurance which, when the statistical sampling method is used, means a minimum reliability level of 95%. In other words, the auditor will plan and perform the audit to obtain this level of assurance about whether the financial statements are free of material misstatements and/or uncertainties.

The following materiality levels apply when performing the audit.

If the auditor encounters both accounting errors and uncertainties in the audit while performing the audit, the errors and uncertainties should always be considered individually and together when drawing up the audit opinion.

5. Deliverables

At the end of the exercise, the auditor will be expected to provide the following for consortium partners including the lead party separately and consolidated report;

• Auditor’s report/opinion including a compliance statement in respect of the earmarking of ENK/ICBS funds.
• Audited financial statement(s) of the project(s) under consideration; income and expenditure account of the project, plan-actual comparison / variance report with the approved budget.
• Management Letter
• Notes to the accounts (if necessary)
  1. list of income/receipts according to origin/source
  2. Foreign currency transactions (incl. examination of exchange transactions)
  3. List of all bank accounts and their balances in the country and abroad
  4. Statement on assets, in particular evidence of new acquisitions and the compliance with the ICBS approval, if applicable (e.g. Motorcycles, Printers, camera, tablets, vehicles)

Time Frame of Audit Exercise

The auditors will complete the exercise on time and submit the report (including the documents mentioned above) to reach ICBS within 3 weeks from date of contracting.

Desired Profile of the Auditor(s)

• Audit firm with a regional presence in the Project Implementation countries or with permit to operate in the said countries.
• The audit firm should be registered and have a license from a national or regional professional Accountancy Body.
• The firm should have relevant experience in accounting and auditing of humanitarian projects, especially donor-funded operations.
• The key audit team will comprise, at least:
  • A team leader with at least a degree in auditing/accounting or equivalent with a minimum of 5 years' experience in auditing; and
  • An audit manager with at least 7 years' experience in auditing and with a sound knowledge of Netherlands/European Funded Projects. In addition, he/she should be a member of a recognized accountancy professional body;
  • An assistant auditor with adequate experience and professional qualifications.
• Competency in French by someone in the audit team is an added advantage.

6. Audit Proposed Fees (Benchmark for fees)

Please provide an estimate of fees for the services to be provided. The fees should have a breakdown of amounts or can be written in the form of percentages with the various below thresholds.

Any cost incurred for traveling to the ICBS partners/field offices by auditors is boundby the auditors themselves and to be included in other types of fees.

7. Evaluation Criteria

Proposals will be evaluated in two parts. The technical proposal shall bear 60% of the total marks while the financial proposal shall bear 40% of the total marks.

Bidders are required to score a minimum of 75% points on functionality to qualify to be evaluated in the next level (price). Bidders who do not score the minimum of 75% points on functionality will be disqualified and not be evaluated on price.

Locations

The audit is expected to take place in the ICBS and partners’ offices in Rwanda (Kigali and Gicumbi) and Uganda. The auditor may sample beneficiaries and make call back verifications if necessary.

How to apply

Bid Requirements

The bidders should provide the following documents in their application.

1. A valid registration certificate and proof of having worked in both or either of the 2 countries i.e. Rwanda and Uganda.
2. A Company profile.
3. A technical proposal.
4. A financial quote including a breakdown of all the related costs.
5. List of clients served from NGOs in the project regions will be an added advantage.
6. Proof of membership of a recognised accounting body e.g. ACCA, ICPAK, ICPAR e.t.c
7. Tax compliance certificate in the country of registration.
8. Providing an activity plan (project plan) of actions to achieve the objectives of the external audit function, specifying budgeted hours, timelines and sequence for its audit procedure and level of staff to be assigned;
9. Incorporating CV's of the proposed professional staff of the core management team proposed for the engagement and the authorized representative submitting the proposal. Key information should include the position of the individual in the auditing firm, the role that the individual will have in the engagement, number of years' and type of experience, all tertiary and professional qualifications, professional memberships with international recognized association for accounting and auditing services, and degree of responsibility held in various assignments during the last three (3) years. CVs should be maximum two (2) pages per staff member;

Applications should be addressed to ICBS not later than 2^nd August, 2024 at 05:00pm, by submitting one copy of bid documents including technical and financial proposal showing all details as required in technical specifications. Interested audit firms should send the specified documents to the below email address with the subject line of the email body; Provision of Audit Services. tender@icbs.ngo