Country Coordinating Mechanism Nigeria Advert TORs for External Auditor

Terms of Reference for single entity External Audit of Global Fund (TGF) Supported Programs

 

 

 Recipient: Country Coordinating Mechanism Nigeria

Grant Number: NGA-CFUND-1203

Title of Program: CCM Funding – Expanded Funding Application

Period covered by the audit: [01/11/2012 – 31/10/2013]

________________________________________________________________________

 

Terms of Reference

 

1.      Program background, audit structure and description of entities

1.1.Program Background:

Country Coordinating Mechanism (CCM) Nigeria for the Global Funds to Fight HIV/AIDS, Tuberculosis and Malaria is a partnership com­posed of all key stakeholders in the country’s response to the three diseases but does not handle Global Fund financing itself. It is responsible for submitting proposals to the Global Fund, nominating the entities accountable for adminis­tering the funding, and overseeing grant implementation.

1.2.  Program Entities and audit approach:

The objective of the audit is to express a professional opinion on the financial statements of the organisation and its donor funded projects. These Financial Statements, among others, consist of the Income and Expenditure, Balance Sheet and Cash Flow statement which show the financial position, surplus and cash flow for the year under review. They are also required to express a professional opinion on the soundness of the systems of internal controls, Compliance with the CCM Nigeria Financial Rules and Regulations, compliance with the procedures in respect of Regular Budget and Extra Budgetary resources; and compliance with the applicable donor’s financial rules and regulations.

2.     Contacts [to be provided confidentially to the auditor]

The CCM shall provide a list of important contacts for the conduct of the audit including their full contact details.  This should include at a minimum: Chairman, Executive Secretary, Finance and Admin officer, program officer, Monitoring and Evaluation Officer, Chairman of oversight committee and RMC.

 

3.     Available documents and facilities

The CCM shall provide the auditor with access to all books and records pertaining to the grant as requested by the auditor.  An indicative list of the documents which may be requested by the auditor includes: 

·         The grant program financial statements;

·         Grant agreements;

·         Main supporting schedules to the financial statements including: income and expenditure, assets and liabilities, cash records;

·         Interim monthly or quarterly grant activity reports (programmatic as well as financial);

·         General ledger, cash book, other important books and records;

·         Original supporting documentation to all reported expenditures (invoices, full support for all procurement procedures, payrolls, bank vouchers, journal vouchers etc);

·         Bank statements;

·         Important correspondence between GF and CCM pertaining to grant implementation matters;

·         Financial procedures manuals, systems descriptions or any other documentation explaining the processes contributing to the production of reliable financial reports and maintaining internal control;

·         Minutes of management meetings;

·         Internal audit reports relevant to GF expenditures or any systems, governance or other issue which impinges on GF grants.

 

4.     Objectives of the Audit

4.1.The objective of the audit of the Grant Program Financial Statements (GPFS) is to enable the auditor to express an opinion on:

a)     Whether the financial position of the grant program at the end of the reporting period and of the funds received and expenditures for the reporting period, are presented fairly in all material respects by the CCM in the GPFS;

b)     Whether, in all material respects, the grant funds have been used in conformity with the provisions of the Grant Agreement, including the approved budget and workplan and any amendments thereto as contained in implementation letters;

c)      Whether the GPFS agree with the program accounts (books of account) which provide the basis for preparation of the GPFS and reflect the financial transactions of the program;

d)     Whether the GPFS agree or reconcile with other information reported to GF i.e. Progress Updates and Enhanced Financial Reports.  

 

5.     Responsibility for the preparation of Grant Program Financial Statements (GPFS).

5.1.The responsibility for the preparation of the GPFSs to be audited  lies with the CCM.

5.2.The CCM will prepare the GPFSs in accordance with applicable accounting standards, being cash accounting or modified cash accounting[1].

5.3.The CCM is responsible for ensuring that effective financial management systems are in place capable of producing reliable financial statements in the required format.

 

6.     Grant Program Financial Statements (GPFS).

The GPFS should include:

a.      An Income and Expenditure Statement (IES) or a Statement of Sources and Uses of funds (SSUF) by CCM;

b.      A statement of Budget versus Actual Expenditures for the grant program, shown by the GF cost categories in the format of the Budget in the grant agreement;

c.       Notes to the Financial Statements describing the applicable accounting principles in place and a detailed analysis of the main figures;

d.      A note, statement or annex providing a comprehensive list of all fixed assets purchased using grant funds, with dates, with original values and the current condition and location of the assets as at the reporting date.

e.       

7.      Audit Scope of Work

7.1.The audit will be carried out in accordance with International Standards on Auditing (ISA) or International Standards of Supreme Audit Institutions (ISSAIs) and will include such tests and controls as the auditor considers necessary under the circumstances.

7.2.Fraud and Corruption: In accordance with ISA 240, ISSAI (The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements) or applicable national auditing standards, the auditors shall identify and evaluate risks related to fraud, obtain or provide sufficient evidence of analysis of these risks and assess properly the risks identified or suspected.

7.3.Laws and Regulations: In preparing the audit approach and in executing the audit procedures, the auditor shall evaluate CCM’s compliance with the provisions of laws and regulations that might impact significantly on the GPFSs as required by ISA 250, ISSAI 1250 (Consideration of Laws and Regulations in an Audit of Financial Statements) or applicable national auditing standards.

7.4.   Governance: Communicate with the CCM’s Management responsible for Governance regarding significant audit issues related to governance in accordance with ISA 260, ISSAI 1260: (Communication with those charged with Governance) or applicable national auditing standards.

7.5.Risk: With a view to reducing audit risks to an acceptable level, the auditors will apply appropriate audit procedures and handle anomalies/risks identified during their evaluation. This is in accordance with ISA 330, ISSAI 1330 (The Auditor’s Responses to Assessed Risks) or applicable national auditing standards;

7.6.   Related Party:In accordance with ISA 550, ISSAI 1550 (Related Parties) or applicable national auditing standards, the auditor shall identify and evaluate related party risks and the adequacy of controls on the same;

7.7.Reliance on the work of experts:Depending on the complexity of certain activities, the Auditors may integrate technical experts in their team. In such a case, the Auditors will conform to ISA 620: (Using the Work of an Auditor’s Expert), INTOSAI’s ISSAI 1620 on Using the Work of an Auditor’s Expert or applicable national auditing standards. The necessity for the use of an expert’s work should be brought to the attention of the CCM and GF for mutual agreement on scope and cost implications;

 

In addition to the actions considered necessary by the auditor in order to form their opinion on the financial statements, additional procedures will be required in relation to the following:

a.      Compliance with applicable legislation – Verify that the transactions comply in all material respects with any applicable legislation;

b.      Grant expenditures - Funds received by the CCM from disbursements, were spent in conformity with the approved budget and workplan existing at the time of the expenditure and in line with provisions of the Grant Agreement, including any applicable grant conditions (as amended by any Implementation Letters), with due attention to economy and efficiency, and only for the purposes for which the funds were provided. The  auditor is expected to verify a high proportion of grant expenditures, to identify any ineligible expenditures and to reconcile the reported expenditure with other reports to TGF;

 

c.       System of internal controls - Assessment of the adequacy and effectiveness of the accounting and overall internal control system to monitor expenditures at all levels of the Program and other financial transactions including special attention to the adequacy and effectiveness of controls around cash transactions. Comprehensive assessment of the adequacy and effectiveness of the regular cash reconciliations and petty cash management;

d.       Follow up on the findings of previous audit reports – The auditor should follow up on management’s intended actions to address the findings of previous audits, including external audit, LFA reviews, relevant internal audits and audits issued by the Office of the Inspector General (OIG) of TGF. The auditors should examine: (a) the eligibility and correctness of financial transactions during the period under review and account balance at the end of the period; (b) Operation and use of the account in accordance with the Grant Agreement, Implementation or Management Letters; and (c) Adequacy of internal controls over the operation of the account;

 

e.      Designated bank accounts - Where Designated Accounts have been used by CCM, they have been maintained and operated in accordance with the provisions of the Grant Agreement and in accordance with the Global Fund’s rules and procedures;

f.        Safeguarding of assets - Verify that the CCM has put in place mechanisms for the tracking and safeguarding of assets purchased with grant funds and that they are being used for the intended purposes. Verify that CCM’s fixed assets register exists, is maintained in accordance with the Grant agreement; that property rights or related beneficiaries’ rights are established in accordance with the Grant’s conditions;

g.      Goods and services - have been procured transparently, competitively and in accordance with the Grant Agreement and relevant procurement Guidelines approved by TGF

h.      Data retention and supporting documentation - Necessary supporting documents, records, and accounts have been retained in compliance with provisions of the Grant Agreement.  Procedures exist for security and management of electronic data (backup systems and procedures, etc.);

i.        Counterpart financing[2] – Whenever counterpart financing is required under TGF policy the auditor should use available sources of information to assess whether the requirement has been met comment specifically thereon.    

 

8.     Auditor’s report

8.1. In preparing the audit report, the selected audit firm will issue an appropriate audit opinion on the financial statements in accordance with ISA or ISSAI.  Where additional agreed upon procedures have been included in the assignment, the report shall also be provide in accordance with these standards.

8.2.  The expected contents of the auditor’s opinion would include at least the following:

a.      Expressing an opinion on whether the GPFS in its entirety present fairly in all material respects the transactions of the grant program for the period and financial position at the period end and that the funds were utilized for the purposes defined by the grant agreement and any implementation letters authorizing amendments to the grant and the grant expenditure, in the context of programmatic achievements and addresses economy and efficiency; 

b.      That it is prepared under an agreed scope of work and its intended use.  In particular the report should confirm the entities covered by the audit opinion and whether the opinion is a consolidated or a separate entity opinion.

c.       The period covered by the opinion;

d.      Confirming the adequacy of accounting standards and principles that have been applied and indicate the effect of any deviations from those standards and principles; 

e.      Confirming that the audit standards comply with ISA or ISSAI requirements in all material respects;

f.        Confirming that sufficient audit evidence has been gathered to substantiate in all material respects the accuracy of the GPFS;

g.      Expressing an opinion on the system of internal control to confirm that it provides an adequate control environment for the orderly and efficient control of grant resources, including the safeguarding of assets, the accuracy and completeness of the accounting and financial records as well as the timely preparation of reliable and transparent financial statements

 

9.     Management Letter.

9.1. In addition to the audit report, the auditors will prepare a management letter in which they shall:

a.      Set out any instances of non-compliance with the Grant agreement that were noted by the auditors in the course of their work to form an opinion on the GPFS;

 

b.      Provide a schedule of ineligible expenditures identified by the auditors in the course of their work; 

 

c.       Comment on instances of non-compliance in the accounting records, procedures, systems and controls that were examined during the course of the audit with particular reference to ineligible expenditures and systematic weaknesses;

 

d.      Provide recommendations to address the observed deficiencies and areas of weakness in systems and controls which may be effected promptly;

 

e.      Communicate matters that have come to their attention during the audit which might have a significant impact on the implementation and sustainability of the grant;

 

f.           Report on the implementation status of recommendations contained in previous audit reports;

 

g.      Include responses made by the CCM in discussing audit recommendations, along with a timeline for implementing agreed recommendations. In cases where either the CCM does not accept an audit finding or the auditor disagrees with the adequacy of the management response, the management report will acknowledge that disagreement. All observations and recommendations will be discussed with CCM management before the letter is finalized.

9.2.  It must be clearly noted on the face of the Management Letter that it is a confidential document and must be treated as such.

9.3.  The Management Letter should state that the auditor acknowledges and agrees that the Management Letter shall be shared with GF and the Local Fund Agent (LFA) on a confidential basis.

9.4.The Management letter should use a system of grading points depending on their level of severity in line with that proposed in the Guidelines for the annual audits of PRs’ and SRs’  financial statements.

 

10        Auditors’ Qualifications

 

The firm appointed as the Auditor should: (a) be a member(s) of an internationally recognized professional accounting body with the required national licenses to perform statutory audit (b) have demonstrated experience and knowledge of federal government and donor agencies operations, and (c) must have sufficient managers and other staff with relevant qualifications and experience to undertake the audit.

 

 

11   Quality Assurance

 

The firm appointed must ensure that it has appropriate quality assurance procedures in place to ensure the audit are carried out in line with International Auditing Standards and the Auditing or Accounting Standards issued by the Financial Reporting Council of Nigeria and to ensure its audit procedures and tests satisfy the requirements of ISA and the Nigerian Accounting Standards Committee in all material respects.

 

12 Auditors’ Independence

 

The auditor must be independent from all aspects of management. It is expected that the auditor should not have any financial or other material interests in the entity being audited, including those of its implementing or supervising agency or directly related entities. The auditor should not, during the period covered by the audit nor during the undertaking of the audit, by employed by, serve as a director of, or have any financial or close business relationships with any senior participant in the management of the entity. The auditor is statutorily required to disclose any relationship that might possibly impair his/her independence.

 

13.Reporting Timelines

 

In line with the requirements of The Global Fund, the external auditor must ensure it completes the audit and submits the final audit report to the CCM by 15 June 2014 to enable the CCM meets its reporting deadline of 30 June 2014..

 

 

 

14        General Information

14.1 The audit report and accompanying management letter, including the CCM’s responses, should be received by the Global Fund within six (6) months after the end of the reporting period under audit.

14.2 The selected audit firm will also be granted timely, full and unrestricted access to CCM’s  financial management system, accounting record, asset, property and personnel that may assist in clarifying any matter related to the audit.

14.3 To assist the selected audit firm in planning the audit, the CCM will make available as a minimum the documents and informationstated below. It is highly recommended as part of auditing requirements on understanding the nature of the entity’s operations, that the auditors familiarize  themselves with the following:

a.      GF’s Guidelines for the annual audits of financial statements:  Guidelines and Tools - The Global Fund to Fight AIDS, Tuberculosis and Malaria;

 

b.      Grant agreements between the CCM and GF. Any correspondence from GF approving a reprogrammed budget affecting the audited year;

 

c.       Expenditure Reports;

 

d.      CCM’s approved Finance, Procurement, and other relevant Manuals;

 

14.4 The auditors are strongly encouraged to contact the LFA prior to preparing the audit plan enabling the LFA to highlight any key weaknesses and areas of concern upfront. During the course of the audit, the Auditors are encouraged to contact the LFA as and when needed to obtain any additional information/clarification.






[1]The Global Fund stipulates a minimum requirement of cash accounting or modified cash accounting.  The accrual accounting basis may also be used.  If either modified cash or accrual basis is used there must be reconciliation with the cash basis of accounting in the financial statements.

Terms of Reference for single entity External Audit of Global Fund (TGF) Supported Programs

 

 

 Recipient: Country Coordinating Mechanism Nigeria

Grant Number: NGA-CFUND-1203

Title of Program: CCM Funding – Expanded Funding Application

Period covered by the audit: [01/11/2012 – 31/10/2013]

________________________________________________________________________

 

Terms of Reference

 

1.      Program background, audit structure and description of entities

1.1.Program Background:

Country Coordinating Mechanism (CCM) Nigeria for the Global Funds to Fight HIV/AIDS, Tuberculosis and Malaria is a partnership com­posed of all key stakeholders in the country’s response to the three diseases but does not handle Global Fund financing itself. It is responsible for submitting proposals to the Global Fund, nominating the entities accountable for adminis­tering the funding, and overseeing grant implementation.

1.2.  Program Entities and audit approach:

The objective of the audit is to express a professional opinion on the financial statements of the organisation and its donor funded projects. These Financial Statements, among others, consist of the Income and Expenditure, Balance Sheet and Cash Flow statement which show the financial position, surplus and cash flow for the year under review. They are also required to express a professional opinion on the soundness of the systems of internal controls, Compliance with the CCM Nigeria Financial Rules and Regulations, compliance with the procedures in respect of Regular Budget and Extra Budgetary resources; and compliance with the applicable donor’s financial rules and regulations.

2.     Contacts [to be provided confidentially to the auditor]

The CCM shall provide a list of important contacts for the conduct of the audit including their full contact details.  This should include at a minimum: Chairman, Executive Secretary, Finance and Admin officer, program officer, Monitoring and Evaluation Officer, Chairman of oversight committee and RMC.

 

3.     Available documents and facilities

The CCM shall provide the auditor with access to all books and records pertaining to the grant as requested by the auditor.  An indicative list of the documents which may be requested by the auditor includes: 

·         The grant program financial statements;

·         Grant agreements;

·         Main supporting schedules to the financial statements including: income and expenditure, assets and liabilities, cash records;

·         Interim monthly or quarterly grant activity reports (programmatic as well as financial);

·         General ledger, cash book, other important books and records;

·         Original supporting documentation to all reported expenditures (invoices, full support for all procurement procedures, payrolls, bank vouchers, journal vouchers etc);

·         Bank statements;

·         Important correspondence between GF and CCM pertaining to grant implementation matters;

·         Financial procedures manuals, systems descriptions or any other documentation explaining the processes contributing to the production of reliable financial reports and maintaining internal control;

·         Minutes of management meetings;

·         Internal audit reports relevant to GF expenditures or any systems, governance or other issue which impinges on GF grants.

 

4.     Objectives of the Audit

4.1.The objective of the audit of the Grant Program Financial Statements (GPFS) is to enable the auditor to express an opinion on:

a)     Whether the financial position of the grant program at the end of the reporting period and of the funds received and expenditures for the reporting period, are presented fairly in all material respects by the CCM in the GPFS;

b)     Whether, in all material respects, the grant funds have been used in conformity with the provisions of the Grant Agreement, including the approved budget and workplan and any amendments thereto as contained in implementation letters;

c)      Whether the GPFS agree with the program accounts (books of account) which provide the basis for preparation of the GPFS and reflect the financial transactions of the program;

d)     Whether the GPFS agree or reconcile with other information reported to GF i.e. Progress Updates and Enhanced Financial Reports.  

 

5.     Responsibility for the preparation of Grant Program Financial Statements (GPFS).

5.1.The responsibility for the preparation of the GPFSs to be audited  lies with the CCM.

5.2.The CCM will prepare the GPFSs in accordance with applicable accounting standards, being cash accounting or modified cash accounting[1].

5.3.The CCM is responsible for ensuring that effective financial management systems are in place capable of producing reliable financial statements in the required format.

 

6.     Grant Program Financial Statements (GPFS).

The GPFS should include:

a.      An Income and Expenditure Statement (IES) or a Statement of Sources and Uses of funds (SSUF) by CCM;

b.      A statement of Budget versus Actual Expenditures for the grant program, shown by the GF cost categories in the format of the Budget in the grant agreement;

c.       Notes to the Financial Statements describing the applicable accounting principles in place and a detailed analysis of the main figures;

d.      A note, statement or annex providing a comprehensive list of all fixed assets purchased using grant funds, with dates, with original values and the current condition and location of the assets as at the reporting date.

e.       

7.      Audit Scope of Work

7.1.The audit will be carried out in accordance with International Standards on Auditing (ISA) or International Standards of Supreme Audit Institutions (ISSAIs) and will include such tests and controls as the auditor considers necessary under the circumstances.

7.2.Fraud and Corruption: In accordance with ISA 240, ISSAI (The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements) or applicable national auditing standards, the auditors shall identify and evaluate risks related to fraud, obtain or provide sufficient evidence of analysis of these risks and assess properly the risks identified or suspected.

7.3.Laws and Regulations: In preparing the audit approach and in executing the audit procedures, the auditor shall evaluate CCM’s compliance with the provisions of laws and regulations that might impact significantly on the GPFSs as required by ISA 250, ISSAI 1250 (Consideration of Laws and Regulations in an Audit of Financial Statements) or applicable national auditing standards.

7.4.   Governance: Communicate with the CCM’s Management responsible for Governance regarding significant audit issues related to governance in accordance with ISA 260, ISSAI 1260: (Communication with those charged with Governance) or applicable national auditing standards.

7.5.Risk: With a view to reducing audit risks to an acceptable level, the auditors will apply appropriate audit procedures and handle anomalies/risks identified during their evaluation. This is in accordance with ISA 330, ISSAI 1330 (The Auditor’s Responses to Assessed Risks) or applicable national auditing standards;

7.6.   Related Party:In accordance with ISA 550, ISSAI 1550 (Related Parties) or applicable national auditing standards, the auditor shall identify and evaluate related party risks and the adequacy of controls on the same;

7.7.Reliance on the work of experts:Depending on the complexity of certain activities, the Auditors may integrate technical experts in their team. In such a case, the Auditors will conform to ISA 620: (Using the Work of an Auditor’s Expert), INTOSAI’s ISSAI 1620 on Using the Work of an Auditor’s Expert or applicable national auditing standards. The necessity for the use of an expert’s work should be brought to the attention of the CCM and GF for mutual agreement on scope and cost implications;

 

In addition to the actions considered necessary by the auditor in order to form their opinion on the financial statements, additional procedures will be required in relation to the following:

a.      Compliance with applicable legislation – Verify that the transactions comply in all material respects with any applicable legislation;

b.      Grant expenditures - Funds received by the CCM from disbursements, were spent in conformity with the approved budget and workplan existing at the time of the expenditure and in line with provisions of the Grant Agreement, including any applicable grant conditions (as amended by any Implementation Letters), with due attention to economy and efficiency, and only for the purposes for which the funds were provided. The  auditor is expected to verify a high proportion of grant expenditures, to identify any ineligible expenditures and to reconcile the reported expenditure with other reports to TGF;

 

c.       System of internal controls - Assessment of the adequacy and effectiveness of the accounting and overall internal control system to monitor expenditures at all levels of the Program and other financial transactions including special attention to the adequacy and effectiveness of controls around cash transactions. Comprehensive assessment of the adequacy and effectiveness of the regular cash reconciliations and petty cash management;

d.       Follow up on the findings of previous audit reports – The auditor should follow up on management’s intended actions to address the findings of previous audits, including external audit, LFA reviews, relevant internal audits and audits issued by the Office of the Inspector General (OIG) of TGF. The auditors should examine: (a) the eligibility and correctness of financial transactions during the period under review and account balance at the end of the period; (b) Operation and use of the account in accordance with the Grant Agreement, Implementation or Management Letters; and (c) Adequacy of internal controls over the operation of the account;

 

e.      Designated bank accounts - Where Designated Accounts have been used by CCM, they have been maintained and operated in accordance with the provisions of the Grant Agreement and in accordance with the Global Fund’s rules and procedures;

f.        Safeguarding of assets - Verify that the CCM has put in place mechanisms for the tracking and safeguarding of assets purchased with grant funds and that they are being used for the intended purposes. Verify that CCM’s fixed assets register exists, is maintained in accordance with the Grant agreement; that property rights or related beneficiaries’ rights are established in accordance with the Grant’s conditions;

g.      Goods and services - have been procured transparently, competitively and in accordance with the Grant Agreement and relevant procurement Guidelines approved by TGF; 

h.      Data retention and supporting documentation - Necessary supporting documents, records, and accounts have been retained in compliance with provisions of the Grant Agreement.  Procedures exist for security and management of electronic data (backup systems and procedures, etc.);

i.        Counterpart financing[2] – Whenever counterpart financing is required under TGF policy the auditor should use available sources of information to assess whether the requirement has been met comment specifically thereon.    

 

8.     Auditor’s report

8.1. In preparing the audit report, the selected audit firm will issue an appropriate audit opinion on the financial statements in accordance with ISA or ISSAI.  Where additional agreed upon procedures have been included in the assignment, the report shall also be provide in accordance with these standards.

8.2.  The expected contents of the auditor’s opinion would include at least the following:

a.      Expressing an opinion on whether the GPFS in its entirety present fairly in all material respects the transactions of the grant program for the period and financial position at the period end and that the funds were utilized for the purposes defined by the grant agreement and any implementation letters authorizing amendments to the grant and the grant expenditure, in the context of programmatic achievements and addresses economy and efficiency; 

b.      That it is prepared under an agreed scope of work and its intended use.  In particular the report should confirm the entities covered by the audit opinion and whether the opinion is a consolidated or a separate entity opinion.

c.       The period covered by the opinion;

d.      Confirming the adequacy of accounting standards and principles that have been applied and indicate the effect of any deviations from those standards and principles; 

e.      Confirming that the audit standards comply with ISA or ISSAI requirements in all material respects;

f.        Confirming that sufficient audit evidence has been gathered to substantiate in all material respects the accuracy of the GPFS;

g.      Expressing an opinion on the system of internal control to confirm that it provides an adequate control environment for the orderly and efficient control of grant resources, including the safeguarding of assets, the accuracy and completeness of the accounting and financial records as well as the timely preparation of reliable and transparent financial statements

 

9.     Management Letter.

9.1. In addition to the audit report, the auditors will prepare a management letter in which they shall:

a.      Set out any instances of non-compliance with the Grant agreement that were noted by the auditors in the course of their work to form an opinion on the GPFS;

 

b.      Provide a schedule of ineligible expenditures identified by the auditors in the course of their work; 

 

c.       Comment on instances of non-compliance in the accounting records, procedures, systems and controls that were examined during the course of the audit with particular reference to ineligible expenditures and systematic weaknesses;

 

d.      Provide recommendations to address the observed deficiencies and areas of weakness in systems and controls which may be effected promptly;

 

e.      Communicate matters that have come to their attention during the audit which might have a significant impact on the implementation and sustainability of the grant;

 

f.           Report on the implementation status of recommendations contained in previous audit reports;

 

g.      Include responses made by the CCM in discussing audit recommendations, along with a timeline for implementing agreed recommendations. In cases where either the CCM does not accept an audit finding or the auditor disagrees with the adequacy of the management response, the management report will acknowledge that disagreement. All observations and recommendations will be discussed with CCM management before the letter is finalized.

9.2.  It must be clearly noted on the face of the Management Letter that it is a confidential document and must be treated as such.

9.3.  The Management Letter should state that the auditor acknowledges and agrees that the Management Letter shall be shared with GF and the Local Fund Agent (LFA) on a confidential basis.

9.4.The Management letter should use a system of grading points depending on their level of severity in line with that proposed in the Guidelines for the annual audits of PRs’ and SRs’  financial statements.

 

10        Auditors’ Qualifications

 

The firm appointed as the Auditor should: (a) be a member(s) of an internationally recognized professional accounting body with the required national licenses to perform statutory audit (b) have demonstrated experience and knowledge of federal government and donor agencies operations, and (c) must have sufficient managers and other staff with relevant qualifications and experience to undertake the audit.

 

 

11   Quality Assurance

 

The firm appointed must ensure that it has appropriate quality assurance procedures in place to ensure the audit are carried out in line with International Auditing Standards and the Auditing or Accounting Standards issued by the Financial Reporting Council of Nigeria and to ensure its audit procedures and tests satisfy the requirements of ISA and the Nigerian Accounting Standards Committee in all material respects.

 

12 Auditors’ Independence

 

The auditor must be independent from all aspects of management. It is expected that the auditor should not have any financial or other material interests in the entity being audited, including those of its implementing or supervising agency or directly related entities. The auditor should not, during the period covered by the audit nor during the undertaking of the audit, by employed by, serve as a director of, or have any financial or close business relationships with any senior participant in the management of the entity. The auditor is statutorily required to disclose any relationship that might possibly impair his/her independence.

 

13.Reporting Timelines

 

In line with the requirements of The Global Fund, the external auditor must ensure it completes the audit and submits the final audit report to the CCM by 15 June 2014 to enable the CCM meets its reporting deadline of 30 June 2014..

 

 

 

14        General Information

14.1 The audit report and accompanying management letter, including the CCM’s responses, should be received by the Global Fund within six (6) months after the end of the reporting period under audit.

14.2 The selected audit firm will also be granted timely, full and unrestricted access to CCM’s  financial management system, accounting record, asset, property and personnel that may assist in clarifying any matter related to the audit.

14.3 To assist the selected audit firm in planning the audit, the CCM will make available as a minimum the documents and informationstated below. It is highly recommended as part of auditing requirements on understanding the nature of the entity’s operations, that the auditors familiarize  themselves with the following:

a.      GF’s Guidelines for the annual audits of financial statements:  Guidelines and Tools - The Global Fund to Fight AIDS, Tuberculosis and Malaria;

 

b.      Grant agreements between the CCM and GF. Any correspondence from GF approving a reprogrammed budget affecting the audited year;

 

c.       Expenditure Reports;

 

d.      CCM’s approved Finance, Procurement, and other relevant Manuals;

 

14.4 The auditors are strongly encouraged to contact the LFA prior to preparing the audit plan enabling the LFA to highlight any key weaknesses and areas of concern upfront. During the course of the audit, the Auditors are encouraged to contact the LFA as and when needed to obtain any additional information/clarification.






[1]The Global Fund stipulates a minimum requirement of cash accounting or modified cash accounting.  The accrual accounting basis may also be used.  If either modified cash or accrual basis is used there must be reconciliation with the cash basis of accounting in the financial statements.

Terms of Reference for single entity External Audit of Global Fund (TGF) Supported Programs

 

 

 Recipient: Country Coordinating Mechanism Nigeria

Grant Number: NGA-CFUND-1203

Title of Program: CCM Funding – Expanded Funding Application

Period covered by the audit: [01/11/2012 – 31/10/2013]

________________________________________________________________________

 

Terms of Reference

 

1.      Program background, audit structure and description of entities

1.1.Program Background:

Country Coordinating Mechanism (CCM) Nigeria for the Global Funds to Fight HIV/AIDS, Tuberculosis and Malaria is a partnership com­posed of all key stakeholders in the country’s response to the three diseases but does not handle Global Fund financing itself. It is responsible for submitting proposals to the Global Fund, nominating the entities accountable for adminis­tering the funding, and overseeing grant implementation.

1.2.  Program Entities and audit approach:

The objective of the audit is to express a professional opinion on the financial statements of the organisation and its donor funded projects. These Financial Statements, among others, consist of the Income and Expenditure, Balance Sheet and Cash Flow statement which show the financial position, surplus and cash flow for the year under review. They are also required to express a professional opinion on the soundness of the systems of internal controls, Compliance with the CCM Nigeria Financial Rules and Regulations, compliance with the procedures in respect of Regular Budget and Extra Budgetary resources; and compliance with the applicable donor’s financial rules and regulations.

2.     Contacts [to be provided confidentially to the auditor]

The CCM shall provide a list of important contacts for the conduct of the audit including their full contact details.  This should include at a minimum: Chairman, Executive Secretary, Finance and Admin officer, program officer, Monitoring and Evaluation Officer, Chairman of oversight committee and RMC.

 

3.     Available documents and facilities

The CCM shall provide the auditor with access to all books and records pertaining to the grant as requested by the auditor.  An indicative list of the documents which may be requested by the auditor includes: 

·         The grant program financial statements;

·         Grant agreements;

·         Main supporting schedules to the financial statements including: income and expenditure, assets and liabilities, cash records;

·         Interim monthly or quarterly grant activity reports (programmatic as well as financial);

·         General ledger, cash book, other important books and records;

·         Original supporting documentation to all reported expenditures (invoices, full support for all procurement procedures, payrolls, bank vouchers, journal vouchers etc);

·         Bank statements;

·         Important correspondence between GF and CCM pertaining to grant implementation matters;

·         Financial procedures manuals, systems descriptions or any other documentation explaining the processes contributing to the production of reliable financial reports and maintaining internal control;

·         Minutes of management meetings;

·         Internal audit reports relevant to GF expenditures or any systems, governance or other issue which impinges on GF grants.

 

4.     Objectives of the Audit

4.1.The objective of the audit of the Grant Program Financial Statements (GPFS) is to enable the auditor to express an opinion on:

a)     Whether the financial position of the grant program at the end of the reporting period and of the funds received and expenditures for the reporting period, are presented fairly in all material respects by the CCM in the GPFS;

b)     Whether, in all material respects, the grant funds have been used in conformity with the provisions of the Grant Agreement, including the approved budget and workplan and any amendments thereto as contained in implementation letters;

c)      Whether the GPFS agree with the program accounts (books of account) which provide the basis for preparation of the GPFS and reflect the financial transactions of the program;

d)     Whether the GPFS agree or reconcile with other information reported to GF i.e. Progress Updates and Enhanced Financial Reports.  

 

5.     Responsibility for the preparation of Grant Program Financial Statements (GPFS).

5.1.The responsibility for the preparation of the GPFSs to be audited  lies with the CCM.

5.2.The CCM will prepare the GPFSs in accordance with applicable accounting standards, being cash accounting or modified cash accounting[1].

5.3.The CCM is responsible for ensuring that effective financial management systems are in place capable of producing reliable financial statements in the required format.

 

6.     Grant Program Financial Statements (GPFS).

The GPFS should include:

a.      An Income and Expenditure Statement (IES) or a Statement of Sources and Uses of funds (SSUF) by CCM;

b.      A statement of Budget versus Actual Expenditures for the grant program, shown by the GF cost categories in the format of the Budget in the grant agreement;

c.       Notes to the Financial Statements describing the applicable accounting principles in place and a detailed analysis of the main figures;

d.      A note, statement or annex providing a comprehensive list of all fixed assets purchased using grant funds, with dates, with original values and the current condition and location of the assets as at the reporting date.

e.       

7.      Audit Scope of Work

7.1.The audit will be carried out in accordance with International Standards on Auditing (ISA) or International Standards of Supreme Audit Institutions (ISSAIs) and will include such tests and controls as the auditor considers necessary under the circumstances.

7.2.Fraud and Corruption: In accordance with ISA 240, ISSAI (The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements) or applicable national auditing standards, the auditors shall identify and evaluate risks related to fraud, obtain or provide sufficient evidence of analysis of these risks and assess properly the risks identified or suspected.

7.3.Laws and Regulations: In preparing the audit approach and in executing the audit procedures, the auditor shall evaluate CCM’s compliance with the provisions of laws and regulations that might impact significantly on the GPFSs as required by ISA 250, ISSAI 1250 (Consideration of Laws and Regulations in an Audit of Financial Statements) or applicable national auditing standards.

7.4.   Governance: Communicate with the CCM’s Management responsible for Governance regarding significant audit issues related to governance in accordance with ISA 260, ISSAI 1260: (Communication with those charged with Governance) or applicable national auditing standards.

7.5.Risk: With a view to reducing audit risks to an acceptable level, the auditors will apply appropriate audit procedures and handle anomalies/risks identified during their evaluation. This is in accordance with ISA 330, ISSAI 1330 (The Auditor’s Responses to Assessed Risks) or applicable national auditing standards;

7.6.   Related Party:In accordance with ISA 550, ISSAI 1550 (Related Parties) or applicable national auditing standards, the auditor shall identify and evaluate related party risks and the adequacy of controls on the same;

7.7.Reliance on the work of experts:Depending on the complexity of certain activities, the Auditors may integrate technical experts in their team. In such a case, the Auditors will conform to ISA 620: (Using the Work of an Auditor’s Expert), INTOSAI’s ISSAI 1620 on Using the Work of an Auditor’s Expert or applicable national auditing standards. The necessity for the use of an expert’s work should be brought to the attention of the CCM and GF for mutual agreement on scope and cost implications;

 

In addition to the actions considered necessary by the auditor in order to form their opinion on the financial statements, additional procedures will be required in relation to the following:

a.      Compliance with applicable legislation – Verify that the transactions comply in all material respects with any applicable legislation;

b.      Grant expenditures - Funds received by the CCM from disbursements, were spent in conformity with the approved budget and workplan existing at the time of the expenditure and in line with provisions of the Grant Agreement, including any applicable grant conditions (as amended by any Implementation Letters), with due attention to economy and efficiency, and only for the purposes for which the funds were provided. The  auditor is expected to verify a high proportion of grant expenditures, to identify any ineligible expenditures and to reconcile the reported expenditure with other reports to TGF;

 

c.       System of internal controls - Assessment of the adequacy and effectiveness of the accounting and overall internal control system to monitor expenditures at all levels of the Program and other financial transactions including special attention to the adequacy and effectiveness of controls around cash transactions. Comprehensive assessment of the adequacy and effectiveness of the regular cash reconciliations and petty cash management;

d.       Follow up on the findings of previous audit reports – The auditor should follow up on management’s intended actions to address the findings of previous audits, including external audit, LFA reviews, relevant internal audits and audits issued by the Office of the Inspector General (OIG) of TGF. The auditors should examine: (a) the eligibility and correctness of financial transactions during the period under review and account balance at the end of the period; (b) Operation and use of the account in accordance with the Grant Agreement, Implementation or Management Letters; and (c) Adequacy of internal controls over the operation of the account;

 

e.      Designated bank accounts - Where Designated Accounts have been used by CCM, they have been maintained and operated in accordance with the provisions of the Grant Agreement and in accordance with the Global Fund’s rules and procedures;

f.        Safeguarding of assets - Verify that the CCM has put in place mechanisms for the tracking and safeguarding of assets purchased with grant funds and that they are being used for the intended purposes. Verify that CCM’s fixed assets register exists, is maintained in accordance with the Grant agreement; that property rights or related beneficiaries’ rights are established in accordance with the Grant’s conditions;

g.      Goods and services - have been procured transparently, competitively and in accordance with the Grant Agreement and relevant procurement Guidelines approved by TGF; 

h.      Data retention and supporting documentation - Necessary supporting documents, records, and accounts have been retained in compliance with provisions of the Grant Agreement.  Procedures exist for security and management of electronic data (backup systems and procedures, etc.);

i.        Counterpart financing[2] – Whenever counterpart financing is required under TGF policy the auditor should use available sources of information to assess whether the requirement has been met comment specifically thereon.    

 

8.     Auditor’s report

8.1. In preparing the audit report, the selected audit firm will issue an appropriate audit opinion on the financial statements in accordance with ISA or ISSAI.  Where additional agreed upon procedures have been included in the assignment, the report shall also be provide in accordance with these standards.

8.2.  The expected contents of the auditor’s opinion would include at least the following:

a.      Expressing an opinion on whether the GPFS in its entirety present fairly in all material respects the transactions of the grant program for the period and financial position at the period end and that the funds were utilized for the purposes defined by the grant agreement and any implementation letters authorizing amendments to the grant and the grant expenditure, in the context of programmatic achievements and addresses economy and efficiency; 

b.      That it is prepared under an agreed scope of work and its intended use.  In particular the report should confirm the entities covered by the audit opinion and whether the opinion is a consolidated or a separate entity opinion.

c.       The period covered by the opinion;

d.      Confirming the adequacy of accounting standards and principles that have been applied and indicate the effect of any deviations from those standards and principles; 

e.      Confirming that the audit standards comply with ISA or ISSAI requirements in all material respects;

f.        Confirming that sufficient audit evidence has been gathered to substantiate in all material respects the accuracy of the GPFS;

g.      Expressing an opinion on the system of internal control to confirm that it provides an adequate control environment for the orderly and efficient control of grant resources, including the safeguarding of assets, the accuracy and completeness of the accounting and financial records as well as the timely preparation of reliable and transparent financial statements

 

9.     Management Letter.

9.1. In addition to the audit report, the auditors will prepare a management letter in which they shall:

a.      Set out any instances of non-compliance with the Grant agreement that were noted by the auditors in the course of their work to form an opinion on the GPFS;

 

b.      Provide a schedule of ineligible expenditures identified by the auditors in the course of their work; 

 

c.       Comment on instances of non-compliance in the accounting records, procedures, systems and controls that were examined during the course of the audit with particular reference to ineligible expenditures and systematic weaknesses;

 

d.      Provide recommendations to address the observed deficiencies and areas of weakness in systems and controls which may be effected promptly;

 

e.      Communicate matters that have come to their attention during the audit which might have a significant impact on the implementation and sustainability of the grant;

 

f.           Report on the implementation status of recommendations contained in previous audit reports;

 

g.      Include responses made by the CCM in discussing audit recommendations, along with a timeline for implementing agreed recommendations. In cases where either the CCM does not accept an audit finding or the auditor disagrees with the adequacy of the management response, the management report will acknowledge that disagreement. All observations and recommendations will be discussed with CCM management before the letter is finalized.

9.2.  It must be clearly noted on the face of the Management Letter that it is a confidential document and must be treated as such.

9.3.  The Management Letter should state that the auditor acknowledges and agrees that the Management Letter shall be shared with GF and the Local Fund Agent (LFA) on a confidential basis.

9.4.The Management letter should use a system of grading points depending on their level of severity in line with that proposed in the Guidelines for the annual audits of PRs’ and SRs’  financial statements.

 

10        Auditors’ Qualifications

 

The firm appointed as the Auditor should: (a) be a member(s) of an internationally recognized professional accounting body with the required national licenses to perform statutory audit (b) have demonstrated experience and knowledge of federal government and donor agencies operations, and (c) must have sufficient managers and other staff with relevant qualifications and experience to undertake the audit.

 

 

11   Quality Assurance

 

The firm appointed must ensure that it has appropriate quality assurance procedures in place to ensure the audit are carried out in line with International Auditing Standards and the Auditing or Accounting Standards issued by the Financial Reporting Council of Nigeria and to ensure its audit procedures and tests satisfy the requirements of ISA and the Nigerian Accounting Standards Committee in all material respects.

 

12 Auditors’ Independence

 

The auditor must be independent from all aspects of management. It is expected that the auditor should not have any financial or other material interests in the entity being audited, including those of its implementing or supervising agency or directly related entities. The auditor should not, during the period covered by the audit nor during the undertaking of the audit, by employed by, serve as a director of, or have any financial or close business relationships with any senior participant in the management of the entity. The auditor is statutorily required to disclose any relationship that might possibly impair his/her independence.

 

13.Reporting Timelines

 

In line with the requirements of The Global Fund, the external auditor must ensure it completes the audit and submits the final audit report to the CCM by 15 June 2014 to enable the CCM meets its reporting deadline of 30 June 2014..

 

 

 

14        General Information

14.1 The audit report and accompanying management letter, including the CCM’s responses, should be received by the Global Fund within six (6) months after the end of the reporting period under audit.

14.2 The selected audit firm will also be granted timely, full and unrestricted access to CCM’s  financial management system, accounting record, asset, property and personnel that may assist in clarifying any matter related to the audit.

14.3 To assist the selected audit firm in planning the audit, the CCM will make available as a minimum the documents and informationstated below. It is highly recommended as part of auditing requirements on understanding the nature of the entity’s operations, that the auditors familiarize  themselves with the following:

a.      GF’s Guidelines for the annual audits of financial statements:  Guidelines and Tools - The Global Fund to Fight AIDS, Tuberculosis and Malaria;

 

b.      Grant agreements between the CCM and GF. Any correspondence from GF approving a reprogrammed budget affecting the audited year;

 

c.       Expenditure Reports;

 

d.      CCM’s approved Finance, Procurement, and other relevant Manuals;

 

14.4 The auditors are strongly encouraged to contact the LFA prior to preparing the audit plan enabling the LFA to highlight any key weaknesses and areas of concern upfront. During the course of the audit, the Auditors are encouraged to contact the LFA as and when needed to obtain any additional information/clarification.






[1]The Global Fund stipulates a minimum requirement of cash accounting or modified cash accounting.  The accrual accounting basis may also be used.  If either modified cash or accrual basis is used there must be reconciliation with the cash basis of accounting in the financial statements.



Relevant Documents

Title Category Files
Monitoring and Evaluation Guidelines and Tool Policies & Guidelines Download
Guidelines for MOUs between PR and SRs MoM Download
1st Minutes of Meeting MoM Download
Assessment of Compatibility of Recipient Policies and Procedures with Global Fund Requirements Policies & Guidelines Download
2nd Minutes of Meeting MoM Download