Terms of Reference for External Audit Services at SNV

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Terms of Reference for External Audit Services
EOI No.: SNV/EOI/001/2023
OPENING DATE: January 23, 2023
CLOSING DATE: January 28, 2023
CLOSING TIME: 17:00 Kigali time
DESCRIPTION: REALMS project External Audit Services for Fiscal Year(s) November 2021 to October 2022.
Ethical And Business Conduct Requirements
SNV is committed to integrity in procurement, and only selects suppliers based on objective business criteria such as price and technical merit.
SNV does not tolerate fraud, collusion among offerors, falsified proposals/bids, bribery, or kickbacks. Any firm or individual violating these standards will be disqualified from this procurement, barred from future procurement opportunities, and may be reported to both the Office of the Inspector General.
Employees and agents of SNV are strictly prohibited from asking for or accepting any money, fee, commission, credit, gift, gratuity, object of value or compensation from current or potential vendors or suppliers in exchange for or as a reward for business. Employees and agents engaging in this conduct are subject to termination and will be reported to the Office of the Inspector General. In addition, SNV will inform the Office of the Inspector General of any supplier offers of money, fee, commission, credit, gift, gratuity, object of value, or compensation to obtain business.
Offerors responding to this ToR must include the following as part of the proposal submission:
• Disclose any close, familial, or financial relationships with SNV or project staff. For example, if an offeror’s cousin is employed by the project, the offeror must state this.
• Disclose any family or financial relationship with other offerors submitting proposals. For example, if the offeror’s father owns a company that is submitting another proposal, the offeror must state this.
• Certify that the prices in the offer have been arrived at independently, without any consultation, communication, or agreement with any other offeror or competitor for the purpose of restricting competition.
• Certify that all information in the proposal and all supporting documentation are authentic and accurate.
• Certify understanding and agreement to SNV’ prohibitions against fraud, bribery and kickbacks.
Background
The following are the terms of reference (‘ToR’) on which the Lead project Agency/Recipient (SNV NETHERLANDS DEVELOPMENT ORGANIZATION) agrees to engage an audit firm ‘the Auditor’ to perform a project Audit and to report in connection with the Agreement;
Project: Regenerative Agricultural Livelihoods and Market System (REALMS)
Reference no: RG-1910-01413.
With the donor “STICHTING IKEA FOUNDATION” concerning the REALMS project where in these ToRs the ‘Contracting Authority/Donor’ is mentioned and refers to STICHTING IKEA FOUNDATION which has signed the Agreement with the Recipient to finance the project. The Donor is not a party to this engagement.
The REALMS project is a Multi country project implemented in two countries; Kenya and Rwanda.


1.1 Responsibilities of the Parties to the Engagement
Recipient refers to SNV NETHERLANDS DEVELOPMENT ORGANIZATION that has signed the
Agreement with the Contracting Authority/Donor.
• SNV NETHERLANDS DEVELOPMENT ORGANIZATION is responsible for providing a Financial Statements for the REALMS project financed by the Donor and for ensuring that these Financial Statements can be properly reconciled to the SNV NETHERLANDS DEVELOPMENT ORGANIZATION records and accounts in respect of the project tasks.
• The SNV NETHERLANDS DEVELOPMENT ORGANIZATION accepts that the ability of the Auditor to perform the procedures required by this engagement effectively depends upon recipient providing full and free access to its staff and records and accounts.
• The SNV NETHERLANDS DEVELOPMENT ORGANIZATION shall provide the auditors with all the necessary documentation to perform the assignment properly; in particular the following information shall be provided to the auditors before the beginning of the assignment
1. Project Agreement;
2. Annual Progress Report;
3. Project Implementation Manual
4. Organizational charts along with names and titles of senior managers;
5. Names of officers responsible for Project management and financial management of the project.
6. Description of information technology facilities and computer-based accounting systems in use.
‘The Auditor’ refers to the Auditor who is responsible for performing the agreed-upon
procedures as specified in these ToRs, and for submitting a report of factual findings to the
Snv Netherlands Development Organization.
The Auditor shall provide:
• A separate opinion on Project Financial Statements (PFS) Minimum content of the PFS:
1. Yearly and cumulative statements of sources and application of funds, which should disclose separately STICHTING IKEA FOUNDATION’s funds, other donor funds and beneficiaries funds;
2. Statement of sources and application of funds.
3. Yearly and cumulative SOEs (Statement of Expenditures) by Fund requests and category of
expenditures.
1. Reconciliation between the amounts shown as received by the project and those shown as being disbursed by STICHTING IKEA FOUNDATION should be attached as an annex to the PFS.
As part of that reconciliation the auditor will indicate the procedure used for Funds request (Special Accounts (SA), letters of credit, special commitments, reimbursement or direct payment) and indicate whether the expenditure is fully documented or uses the Summary of Expenditures format.
1. Notes accompanying the financial statements
2. Cumulative status of funds.
3. A statement of comparison between the actual expenditures and the budget estimates
4. Full disclosure of cash balances.
5. other statements or disclosures relevant to the project e.g. financial monitoring reports, credit lines etc.
• A separate opinion on the Statement of expenditures / Summary of Expenditures (SOEs); the audit will include a review of SOEs used as the basis for submitting funds requests.
Where ineligible expenditures are identified as having been included in Financial Statements and reimbursed, auditors will note these separately.
The auditor’s opinion should deal with the adequacy of the procedures used by the project for preparing SOEs and should include a statement that amounts used by the Recipient on the REALMS project account on the basis of such SOEs were used for the purposes intended under the agreement.
• A separate management letter addressing the adequacy of the accounting and internal control systems of the Program, including compliance with STICHTING IKEA FOUNDATION’s Procurement Guidelines and such other matters as STICHTING IKEA FOUNDATION may notify the SNV NETHERLANDS DEVELOPMENT ORGANIZATION to include in the audit.
The auditor is requested to:
1. Comment on economy, efficiency and effectiveness in the use of project resources;
2. Comment on achievement of planned project results;
3. Comment on legal and financial obligations and commitments of the project and the extent of compliance or non-compliance there of;
4. Comment on systems and procedures such as improvements in accounting, information technology or computer systems, and operations that may be under development, on which the auditor’s comments are necessary to ensure effective controls;
5. Comment on other activities on which an auditor may consider it appropriate to report
• Auditors shall certify:
1. Whether the PFS are drawn up in conformity with international accepted accounting standards (IFRS)
2. Whether the PFS are accurate and are drawn up from the books of accounts maintained by the Project.
3. Whether the provisions of the Project Agreement are adhered to.
4. Whether Procurement has been undertaken by the Project in accordance with the relevant Articles of the Project Agreement, STICHTING IKEA FOUNDATION’s Procurement Guidelines
5. Carry out a physical verification of any significant assets purchased and confirm their existence and use for project purposes.
6. Whether the project has an effective system of financial supervision or internal audit at all levels.
7. Whether the expenditure claimed through SOEs are properly approved, classified and supported by adequate documentation.
8. The Auditor is a member of the International Federation of Accountants (IFAC).
1.2 Subject of the Engagement
The subject of this engagement is the financial statements of the period; 1st November 2021 to 31st October 2022, for the STICHTING IKEA FOUNDATION Funds. The information, both financial and non-financial, which is subject to verification by the Auditor, is all information which makes it possible to verify that the expenditures claimed by the SNV NETHERLANDS DEVELOPMENT ORGANIZATION in Financial statements have occurred, are accurate and eligible.
1.3 Reason for the Engagement
The SNV NETHERLANDS DEVELOPMENT ORGANIZATION is required to submit to the Donor an Audit report produced by an external auditor.
1.4 Engagement Type and Objective
This constitutes an engagement to perform specific agreed-upon procedures following the STICHTING IKEA FOUNDATION Guidelines on Project Audits provided to the Auditors by the SNV NETHERLANDS DEVELOPMENT ORGANIZATION. The objective of this audit is for the Auditor to verify that the expenditures claimed by the SNV NETHERLANDS DEVELOPMENT ORGANIZATION in the financial statements for the tasks covered by the Agreement have occurred (‘reality’), are accurate (‘exact’) and eligible and to submit to the SNV NETHERLANDS DEVELOPMENT ORGANIZATION a report of factual findings with regard to the agreed-upon procedures performed.
Eligibility means that expenditure have been incurred in accordance with the terms and conditions of the Agreement.
1.5 Scope of Work
1.5.1 The Auditor shall undertake this engagement in accordance with these Terms of Reference and:
- in accordance with the International Standards on Audit (ISA) to perform Agreed-upon Procedures regarding Financial Information as promulgated by the IFAC;
- In compliance with the Code of Ethics for Professional Accountants issued by the IFAC. Although ISRS 4400 provides that independence is not a requirement for agreed-upon procedures engagements, the Donor requires that the auditor also complies with the independence requirements of the Code of Ethics for Professional Accountants.
- In accordance with International Standards on Auditing and in line with STICHTING IKEA FOUNDATION’s Guidelines as per the Agreement.
1.5.2 The Terms and Conditions of the Agreement
The Auditor verifies that the funds provided by the Donor were spent in accordance with the terms and conditions of the Agreement.
1.5.3 Planning, procedures, documentation and evidence.
The Auditor should plan the work so that effective audit can be performed. For this purpose, he/she performs the procedures specified the STICHTING IKEA FOUNDATION Guidelines on Project Audits as per the Agreement and he uses the evidence obtained from these procedures as the basis for the report of factual findings.
The Auditor should document matters which are important in providing evidence to support the report of factual findings, and evidence that the work was carried out in accordance with ISA and these ToR.
1.5.4. Site of Audit.
The Audit for both countries (Kenya and Rwanda) will be carried out at SNV NETHERLANDS DEVELOPMENT ORGANIZATION offices in Kigali-Rwanda.
1.6 Reporting
The report on this audit should describe the purpose and the agreed-upon procedures of the engagement in sufficient detail in order to enable the SNV NETHERLANDS DEVELOPMENT ORGANIZATION and STICHTING IKEA FOUNDATION to understand the nature and extent of the procedures performed by the Auditor.
1.6.1 Periods covered
The reports on this audit should cover the following:
• STICHTING IKEA FOUNDATION Funds for the period; 01st November 2021 to 31th October 2022
Reports covering items a must be delivered no later than 45 calendar days as of the date of
signing the agreement.
• Audit Reporting
The report should be presented in English (language). An executive summary of the audit report in English (language) should be provided along with the report.]
Audit findings and recommendations
All audit findings and recommendations should be reported in a separate management letter. The auditor should explicitly state and specify results (satisfactory and unsatisfactory) of specific procedures for obtaining audit evidence in case of doubt or uncertainty with regard to the eligibility of expenditure in the report. The management letter should include all financial findings made by the auditor regardless of the amount involved.
The management letter should provide at a minimum the following information:
• A general review of project progress and timeliness in relation to progress milestones and the planned completion date, both of which should be stated in the project document.
This is not intended to address whether there has been compliance with specific covenants relating to specific performance criteria or outputs. However, general compliance with
broad covenants such as implementing the project with economy and efficiency might be commented upon, but not with the legal force of an audit opinion.
An assessment of the project’s internal control system with equal emphasis on (i) the effectiveness of the system in providing the project management with useful and timely information for the proper management of the funds and (ii) the general effectiveness of the internal control system in protecting the assets and resources of the project.
A description of any specific internal control weaknesses noted in the financial management of the project and the audit procedures followed to address or compensate for the weaknesses. Recommendations to resolve/eliminate the internal control weaknesses noted should be included.
The management letter should also include the following:
2. The categorization of audit findings by risk severity: high, medium, or low. Definitions of these categories are given in Annex 2.
3. The classification of possible causes of the audit findings. Definitions of these causes are given in Annex 3.
4. Management comments/response (SNV Netherlands Development Organization) as applicable).
1.6.3: Bid Proposal Submission
Interested bidders MUST submit complete quotation and send through an email to [email protected] by January 28, 2023, at 17:00 Hours, Kigali Time.
Recommendations for Improvement
Recommendations should be directed to a specific entity so there is no confusion regarding who is responsible for implementation. The response of the entity should be included in the management letter, immediately following the recommendation.