Terms of Reference for Audit of Ngos

Annex 1

Terms of Reference for Audit of NGOs

(GFATM Programme- FY2008) in North Sudan

TABLE OF CONTENTS

Introduction

A.Background

B.Project Management

C.Consultations with concerned parties:

D.Description of Financial Reports to be audited

E.Audit Services Required

F.The Audit Report and Management Letter

a.Audit Report

b.Management Letter

Annex 1: Audit Services Required

Annex 2: Qualifications of an Auditor

Annex 3: Sample Audit Report (for an unqualified opinion)

Annex 4: Definition of Audit Opinions

Annex 5: Categorization of Audit Findings by Risk Severity

Annex 6: Classification of possible causes of Audit Findings

Annex 7: Sample - Certified prior year (2007) Follow-up action plan -

Annex 8: Sample - Current year (2008) Follow-up action plan

Annex 9: Specimen - Submission form for audited awards and audit opinions

Introduction

A. Background

General information relating to UNDP – GFATM agreement

The General Assembly of the United Nations has established the United Nations Development Programme to support and supplement the national efforts of developing countries at solving the problems of their economic development and to promote social progress and better standards of life.

The Global Fund to fight AIDS, Tuberculosis and Malaria (GFATM) is a Swiss National Governmental Organization (NGO), which grants seek to increase availability of reliable information to guide program planning and management through baseline surveys and improved health management information systems.

As the principal recipient of the North Sudan GFATM grants, UNDP implements or oversees the implementation of the program in accordance with the terms of the agreement signed between UNDP and the Global Fund (GF), which is administered using UNDP regulations, rules and procedures. The principal recipient is responsible and accountable to the Global Fund for all resources it receives under the said agreement and for the results that are to be accomplished. Additionally, UNDP’s role as principal recipient covers four areas, namely: Institutional and Programmatic, Financial Management and Systems, Procurement and Supplies Management, and Monitoring and Evaluation.

The principal recipient can provide GFATM funding to other entities (sub-recipients) to carry out activities contemplated under the program. In this case, UNDP is responsible for the results it and sub-recipients are to accomplish. The principal recipient’s accountability and reporting to the Global Fund includes funds disbursed to all sub-recipients and to the activities that sub-recipients carry out using program funds. The principal recipient is responsible for assessing that systems are in place before transferring funds to the sub-recipient and for monitoring sub-recipients’ performance.

List of Projects and Agreement with sub-recipients

In 2008 UNDP signed agreements with sub-recipients to implement the HIV / AIDS Round 3 Grant across the country:

HIV/AIDS Round 3 Grant:

-WHO and UNICEF main sub-recipients, and not subject to audit as per agreement between UN Agencies.

-Six local NGOs, as showed in the table below with their areas of interventions for the period of April 2008 to April 2009.

The TOR is directed to the audit of special purpose financial statements, which are referred to as Combined Delivery Reports (CDR).

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B. Project Management

Description of the projects

UNDP North Sudan Office is currently managing five grants from the GFATM, where one of these grants is subject to this audit: The HIV/AIDS Round Three Grant (SUD _305_G04 _H).

The goal of HIV/AIDS Round Three Grant is to fight HIV / AIDS in Northern Sudan to maintain the current level of HIV /AIDS epidemic less than 2% among general population (2004-2008), while avoiding stigmatization among vulnerable groups through provision of a package of preventive services and quality VCT services to high-risk and bridging population in large cities to increase the prevalence of safe sexual behaviors among them; reducing the vulnerability of general adult population and young people to HIV /AIDS; reducing the risk of transmission of HIV infection and other blood born infections through transfusion of blood products; improving the quality of life of PLWHA through provision of quality care and support and ensuring a secure environment for people infected and affected by HIV / AIDS.

Project budget and Sources of funding

As per the Global Fund policies and procedures: out of the life time budget of each grant the disbursement is done annually, or depending on the project needs, biannually, i.e., during 2008 UNDP received two installments of the grant totaling US$ 2,898,586.79 ; the table below indicates the details of the funds released to the Principal Recipient (UNDP):

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Contracting and disbursing funds to sub-recipients

The financial management of the grants is one of the primary responsibilities of UNDP as Principal recipient. In this context, UNDP has ensured monitoring of the disbursements through adequate financial management systems.

Being in line with the Global Fund performance based funding principle, UNDP disbursed funds to its sub-recipients only after achievement of targets and utilization of funds based on the bank statements.

Usually UNDP provides NGOs (sub-recipients) with advance payments for the first quarter (Q1) to start the implementation of the programme; then on a quarterly basis, UNDP receive a progress report from the Sub-recipients. The progress report includes both programmatic and financial data. This report is reviewed by the Global Fund Unit and will include all the clarifications needed in order to enable the disbursement to be made for the next quarter.

The table below shows the amounts contracted and disbursed to the sub-recipients during the period from April 2008 to April 2009:

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Nature of most significant disbursements:

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Sub-Recipient Contact Information

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C. Consultations with concerned parties:

Prior to the start of audit work the auditor will be required to consult with the UNDP country office and the implementing partner for each project. Further, upon completion of the draft audit report and management letter, the auditor will be required to meet with the UNDP country office to debrief them on its major findings from the audit and its recommendations for future improvements as well as to seek their feedback thereon.

D. Description of Financial Reports to be audited

Description of the Combined Delivery Report and Supporting Schedules

The report to be audited is referred to as the Combined Delivery Report (CDR). This report is prepared by UNDP, using an in-house accounting software package called ATLAS. As described in more detail below, the CDR combines expenditures from three disbursement sources for a calendar year. The three disbursement sources include:

1. Implementing partner (either Government or NGO)

UNDP procedures require that where funds are advanced to the executing agency the agency must submit to the UNDP country office, on a quarterly basis, a financial report including (1) the status of the advance (2) a list of the disbursements made since the previous financial report, and (3) a request for a new advance. The UNDP country office enters the disbursements in ATLAS through the year as the financial reports are received. These implementing partner disbursements are recorded in the Government expenditure column in the CDR.

1. UNDP (country office, headquarters and other country offices)

Disbursements made by UNDP from its own bank accounts are entered in ATLAS by the UNDP country office. These UNDP disbursements are recorded in the UNDP expenditure columns in the CDR. These disbursements may be classified as either direct payments or UNDP support services. This distinction, while very important for audit purposes, is not apparent from the CDR and can only be provided by the UNDP country office as a supporting schedule. A brief description of each category is provided below.

a) Direct Payments - This is where the implementing partner is responsible for the expenditure but requested UNDP to effect payment to the vendor/consultant on its behalf. The implementing partner is accountable for the disbursement and maintains all supporting documentation. UNDP simply effects payments on the basis of properly authorised requests and gives the implementing partner a copy of the related disbursement voucher as evidence that payment was made.

b) UNDP Support Services - This is where the government and UNDP have agreed that UNDP will provide support services to the project and signed a Letter of Agreement. These support services must be described in the Letter of Agreement. UNDP is fully responsible and accountable for these expenditures and, accordingly, maintains all supporting documentation for the disbursement.

1. UN agencies

The UN agency reports its expenditures to UNDP and to the government. The UNDP country office enters the expenditures in ATLAS. These UN agency expenditures are recorded in the UN Agencies expenditure column in the CDR.

At the end of the year, after receiving the fourth quarter financial report from the implementing partner and the year-end expenditure report from the UN agency, UNDP prepares the CDR and submits it to the implementing partner for signature. UNDP will provide the auditor with the signed CDR together with the following supporting documentation.

1. The quarterly financial reports submitted by the implementing partner.
2. A list of the direct payments processed by UNDP at the request of the implementing partner.
3. A list of the disbursement made by UNDP as part of support services provided to the implementing partner.
4. The UN agency expenditure statement for the year.

The signed CDR and supporting documentation for the year 2008 will be ready by 31 March 2009.

Cash balances

The following were the balances of funds (in USD) held by the SRs in the indicated dates:

*Exchange rate: 1US$=2.27SDP

Total value of assets

The NGOs did not procure any item.

E. Audit Services Required

The scope of the audit services is defined as follows:

• The GFATM’s contributions in 2008 to the 6 NGOs are subject to audit.
• The audit will be carried out in accordance with either ISA[1] or INTOSAI[2] auditing standards.
• The audit period is from 1 January to 31 December of the year 2008.
• The scope of the audit is limited to the implementing partner expenditures, which are defined as including (1) all disbursements listed in the quarterly financial reports submitted by the implementing partner and (2) the direct payments processed by UNDP at the request of the implementing partner.
• The auditor will verify the mathematical accuracy of the CDR by ensuring that the expenditures described in the supporting documentation (the quarterly financial reports, the list of direct payments processed by UNDP at the request of the government, the list of disbursements made by UNDP as part of support services, and the UN agency expenditure statement) are reconciled to the expenditures, by disbursing source, in the CDR.
• The auditor will state in the audit report the amount of expenditures excluded from the scope of the audit because they were made by UNDP as part of support services and the amount of total expenditures excluded because they were made by a UN agency.
• The auditor will state in the audit report if the audit was not in conformity with any of the above and indicate the alternative standards or procedures followed.
• The auditor will provide an opinion as to the overall financial situation of the project for the period 1 January to 31 December 2008 and will certify:

1. The Statement of Expenditure (CDR) for the period from 1 January to 31 December 2008;

1. The Statement of cash position reported by the projects as at 31 December 2008; and

1. The Statement of assets and equipment held by the project as at 31 December 2008.

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