1.    Introduction

Parent Federation of Person with Intellectual Disabilities (PFPID), a Non-Governmental Organization established in 2011 in Nepal. With 36 member organizations, PFPID is a national human rights organization leading the intellectual disability movement in Nepal. PFPID works in the following interventions:
  • Organizing, empowering and mobilizing PWIDs (self advocates, parents) and their organizations
  • Increasing visibility and awareness (of PWIDs and their organization and issues)
  • Strengthening the knowledge base (conceptual understanding/technical know-how)
  • Developing tools, methods, materials approaches resources (that would support in developing better understanding; supporting/facilitating various actors to take appropriate action such as advocacy, access to services, delivery of services)
  • Evidence and Knowledge based Advocacy: Using the evidences and knowledge gained for effective advocacy
2.    Assignment Background

PFPID has obtained grant from the different donor agencies. Donor audit shall be carried out for the period 1 January 2019 to 31 December 2019 and Statutory Audit shall be carried out for the period 17th July 2019 to 16th July 2020.

Objectives and scope of the audit

  • The auditor shall examine the financial report for the period “January-December 2019” as well as 17 July 2019 to 16 July 2020 and express an opinion in accordance with ISA 805 on whether the financial report of PFPID’s project as submitted to donor agency corresponds to PFPID's accounting records and agreed budget and donor's instructions for financial reporting.
  • The auditor shall examine, assess and report on compliance with the terms of the agreement and prevailing relevant laws and regulations.
  • Apart from the audit conducted in accordance with ISA 805, the auditor shall examine, and report, the project in accordance with ISRS 4400 which includes the following points:
  1. Examine whether the funds are kept in a separate account and whether this account is signed jointly by at least two authorised signatories.
  2. Examine if funds have been transferred through a bank account to any other implementing party (sub-granted partner), if applicable, examine if agreements are signed with that party and if this audit instruction has been followed, and if the agreement are in accordance with the agreement between donor agency and the partner organisation, which includes reviewing if procurement and anti-corruption requirements has been passed on and followed.
  3. Examine if funds that have been transferred to another party has been done via signed requisitions (scanned copy is accepted) and if receipt has been obtained from the sub-granted partner.
  4. Examine whether salary costs charged to the project are recorded throughout the duration of the year in a systemized way and examine whether the salary costs can be verified by sufficient supporting documentation and if time sheets are used to track salaries that are charged to the project.
  5. Examine whether the organisation complies with tax legislation and pays social security contributions.
  6. Examine whether the financial report includes a comparison for each budget line between the actual outcome and the budget approved by the donor agency regarding the costs of activities for the period in question.
  7. Based on materiality and risk, the auditor will review whether the reported costs have sufficient supporting documentation.
  8. Examine if the procurement rules have been followed.
  9. If the organisation uses a modified cash basis as its accounting basis, the auditor shall report on whether the chosen accounting basis is acceptable for the financial report that has been established.
  10. Verify that the closing balance of the previous period is the same as the opening balance for the current period.
  11. Verify the closing balance at the end of the financial year.
  12. Verify the closing balance to be refund to project at the end of the agreement period (applicable for last year of agreement/project cycle only).
  13. Regardless of materiality, quantify amounts of costs that have insufficient supporting documentation.
  14. Examine whether exchange rate losses/gains are reported.
  15. Examine whether the organisation has accounting software that allows for adequate accounting records (i.e. project accounting) and whether supporting vouchers are kept in an orderly fashion that enables verification of costs.
  16. Examine if there are clear and sufficient segregation of duties regarding payments to vendors and employees in relation to the size of the organisation.
  17. If relevant, review the way of handling cases of misappropriation of funds and/or other forms of corruption including the actions taken to recuperate misappropriated funds thereby verifying that Anticorruption Policy has been followed.
Instructions for audit in subsequent links

There shall be an unbroken chain of Auditor’s Reports and Management Letter down to, and including, the final organization/local partner in receipt of the grant. This means that, if funds have been transferred to another organization (such as a sub-granted partner, i.e. a separate legal entity), these funds shall also be subject to an audit by an external auditor.

The contracted organization has the responsibility for audits in subsequent links in the chain and that the organization's auditor expresses an opinion on the organization's internal controls of audits in subsequent links in the chain.

Checks of audits in subsequent links in the chain are important and the responsibility for performing controls of this type rests with the audited organization. The Audit reports for subsequent links are not to be submitted to project but should be available if requested by project. Each link has the responsibility for controls of audit for the previous link according to the following:

1. Assessment of auditor (external, independent, qualified)
2. Control and assessment of independent auditor’s reports (ISA 805, ISRS 4400 and Management Letter) and Management response.

Auditor’s reporting
Timely submission of the auditor’s report to project is essential for the successful completion of projects yearly reporting to the back donor Forum. It is therefore recommended to start the audit work before the end of the financial year even though no reporting is required at that time.
The audit shall result in reports from the auditor following the formats given below:

Independent Auditor´s report

Management Letter

Record all communication on essential issues with the board or organisation executive and submit it in a management letter. If the auditor has no observations to report, this shall also be recorded in the management letter.
  • Information on whether the project has been carried out in accordance with agreement and the approved budget.
  • Observations on shortcomings regarding the administrative organisation and internal control system.
  • Observations whether relevant laws and regulations have been followed in procurement of goods and services, payment of VAT, taxes and social contributions etc.
  • Report if anything important has occurred within the organisation, apart from the project to be audited. When relevant, the Management Letter shall also state if PFPID has taken any measures based on the issues raised by the auditor in the previous year’s Management Letter.
  • The report must include details of the audit method used and its scope.
Financial report

The auditor shall sign the audited financial report and attach it to the Independent Auditor´s report. The auditor shall verify that the instructions from donor agency for the financial report.

3.    Qualification Criteria of the Audit Team
•    The audit firm should be registered for at least 3 years.
•    The engagement partner should be FCA and the audit team should have a full time Chartered Accountants as a team leader during the engagement.
•    Prior experience in Myrights and LEV Denmark funded audit shall be given priority.

4.    Timeline

The external audit needs to start the assignment by the First week of January and submit all the reports by the end of the January.

5.    Proposal

The audit firm shall submit the technical and financial proposal inside separate sealed envelopes to PFPID by 20 December 2019. The technical proposal shall consist of at least following information:
•    Prior Similar Experience
•    Audit Methodology
•    Experts to be engaged with CVs
•    Audit Timeline
•    Firm Profile
•    Legal Registration Documents including Tax Clearance Certificate

The financial proposal should be with a fixed cost quotation during the audit.

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