Call for External Auditor TERMS OF REFERENCE FOR GUASSA PROJECT AUDIT OF KKSGRANT FUND

1.      BACKGROUND

Germany is currently supporting programs in Ethiopia in the priority areas of sustainable economic development and vocational education, agriculture and food security, and conservation and sustainable use of natural resources (biodiversity). In line with this the Karl Kübel  Stiftung für Kind und Family (KKS) in Cooperation with the Federal Ministry for Economic Cooperation and Development, Germany (BMZ) were made a Project agreement with Population Health and Environment Ethiopia Consortium on 01.20.2020 to implement the project on “Improving the living conditions of the poor in 7 villages in Guassa by harmonizing efforts for food security and environmental sustainability’’, project ID 5445, in the North-Shewa Zone, Amhara Region, Ethiopia.

Purpose of the Contract

In accordance with the project agreement between Karl Kübel Stiftung and the Project Holder which forms the legal basis of the above-mentioned project (annex 1), the purpose of this contract is to furnish Karl Kübel Stiftung with objective proof of the proper and correct use of the funds made available to the project, based above all on a thorough examination of accounts of all receipts and payments and the related documentary evidence.

The Audited Statement of Accounts is the sole responsibility of the Chartered Accountant and shall accordingly be signed by the Auditor only. The two above-mentioned parties hereby agree on an audit to be carried out as stated in the following:

Scope and Location of Auditing

The auditing shall be conducted at the location of the project, in particular at the place where the project bookkeeping is done. Each annual audit shall also include a field visit to the project area. The auditor’s assignment includes the following tasks:

1. To examine the propriety of project accounting operations and their conformity with the agreements and relevant national regulations.
2. To examine the tools and procedures of internal control for the project.
3. To examine the bank accounts (sub-account, FC project account(s), LC account) opened especially and exclusively for the project, and any further bank accounts of the projects (if applicable according to the national regulations).
4. To examine whether the person(s) enjoying power of disposal over the project bank account is/are the same or among those officially authorized to represent the Legal Holder of the project.
5. To examine whether there have been any changes regarding staff enjoying authorization to represent the legal holder of the project.
6. To examine all payment transactions of and within the project especially accuracy and completeness of records and evidences of records and bank charges for fund transfers received from the Karl Kübel Stiftung.
7. To examine the project bookkeeping accounts with their supporting documents of all receipts and payments in the national currency; to verify whether a clear distinction has been maintained between amounts actually paid out at the point of time when the accounting period ends and payments not yet effected but to be recognized as expenditure for the same period based on the obligations incurred.
8. To examine whether the local contributions to be provided as part of the project have actually been received, duly shown in the books, and properly used for the financing of project expenditure; to verify information on the income that was due but actually received after the end of the period under review from local contributions, if any.
9. To examine whether any interests were gained from payments of Karl Kübel Stiftung, local contributions and/ or any third party, and if so, whether the interest gained was properly used for the financing of project expenditure.
10. To examine the inventory of all movables of a value exceeding ETB 10.000,00 and purchased with money from project funds; to examine compliance with project-tied use of long-lived objects within the periods stipulated in the Project Agreement (Article III / 12); to examine evidence of their value.
11. If immovable were purchased or buildings erected as part of the project, to examine evidence of ownership or of right of disposal in the name of the project holder or the beneficiaries, and to find out whether any encumbrances or obligations to third parties were created; also, to examine whether they are being used for the project purpose for which they were destined as stipulated in the Project Agreement (Article III / 6).
12. For construction programs (housing, latrine, multipurpose buildings etc.) the Chartered Accountant has to certify that the plot on which the building has been constructed, are registered in the name of the beneficiary/benefiting family. Besides that, it is to be certified that between the Project Holder and the beneficiaries an agreement has been signed to guarantee that within a period stipulated in Article III. 12 of the project agreement, the beneficiaries are not going to sell their houses/latrines/plots and will enjoy the rights to utilize the constructed building as specified in the project extract.
13. To examine whether, in the case of procurement, service and buildings contracts of a value exceeding ETB 20.000,00 at least three quotations or tenders were invited and received, thus documenting most economical and efficient use possible of funds made available for purchasing or construction purposes; if no quotation or tenders were obtained, the auditor shall give an assessment whether the investment was reasonable and justified in his/her written report.

In case of procurement, service and especially buildings contracts of a value exceeding ETB 175.000,00, the official Ethiopian procurement regulations have to be applied. At least three quotations or tenders have to be invited and received, documenting most economical and efficient use of funds.

1. To examine whether any reserves have been created from funds disbursed and if so, whether the consent of the Karl Kübel Stiftung to do so has been obtained.
2. To examine and explicitly mention in his report, whether installments received from the Karl Kübel Stiftung had been spent according to the approved cost- and financing plan within three months after receipt. If not, the amount unspent and the justification why these funds have not been spent have to be explained in the auditor’s report.
3. In the case of Revolving Funds / matching loans established with project funds or created through the project activities in the name of people’s organizations to examine whether the same have been utilized in accordance with the terms laid down in the project extracts, especially referring to the loan purpose, the defined target groups and loan modalities (Article III / 10 of the Project Agreement). This examination concerns the first allocation of loans as well as the repayments by the beneficiaries and the loans and an assessment of the revolving fund management structures.
4. To examine whether written agreements or written understandings have been made with regard to the long term utilization of Revolving Funds / matching loans between the Project Holder and the respective Community-Based Organization (CBO). Such long term binding agreements should include a clear definition of the purpose of the Revolving Fund / matching loans as well as the terms and conditions of its utilization. The auditor’s report shall also include an assessment about the income and expenditure, repayment rate and sustainability of the funds.
5. To examine whether any depreciation or imputed costs, which are no payment, have been included in the statements of receipts and payments.
6. To examine whether the project vehicles are registered in the name of the project holder, (not in the name of individuals) are insured and used exclusively for project purposes and whether the logbooks are duly kept and filled by the user of the vehicle.
7. To examine whether a written Child Protection Policy (Mandatory for Projects dealing directly with Children) or a Code of Conduct (Mandatory of all other Projects) with respect to the prevention of the maltreatment of children (violence and sexual abuse) and the management of associated risks have been established and signed by all employees, volunteers, consultants and visitors who have direct contact with the children beneficiaries of this project.
8. To undertake visual inspections of project activities and project investments in the project area.
9. To review the audit statements of the partner NGO – especially the annual audits submitted by the partner NGO to the government departments and other donors, especially those donors from Germany. The Auditor shall include his findings/observations, if any, in the annexed Table (Auditors finding/observations and recommendations and the project holders response)

Auditing of Annual Statements

The Auditor shall audit the accounts per calendar year (01.01. 2023 – 31.12.2023)

Auditing Procedure

• The auditing shall be conducted in accordance with the relevant national regulations as well as internationally recognized auditing standards.
• The auditor shall inform KKS about ineligible costs and faulty accounting documents.
• In consultation with KKS the auditor during the auditing process may ask for revisions of the unaudited financial statement becoming necessary due to ineligible costs or vouchers or due to unauthorized overdrafts of more than 20%.
• The auditor may accept rectifications of faulty documents by the project holder during the audit process. These shall be reported in the special notes.
• In addition to the auditing as such, the auditor is invited to provide professional advice in whatever financial management and bookkeeping matters.
• As part of the each annual audit, the auditor shall undertake an exclusive field visit of appropriate duration to the target villages for visual inspection of the activities implemented and project funds invested. The auditor shall interact with the beneficiaries and other stakeholders to crosscheck the information obtained from the project holder and from the project reports and accounts. During the term of the project, the auditor shall ensure to visit the main project components as laid down in the project extract or approved project proposal (pls. refer to Annex 1 of the Project Agreement).

Auditor’s Report

1. The auditor shall draw up his statement according to the format provided by the Karl Kübel Stiftung (Annex 2). The original vouchers must be presented structured in conformity with the items of the financing plan and in chronological order. The Annual Audited Statement of Accounts should also be accompanied by condensed vouchers as hard copy signed and certified by the auditor only (Annex 3).
2. Budget Items that exceed the budget appropriations by more than ± 20% must be explained separately.
3. The audit report shall contain elaboration on the detailed task that has been entrusted and a detailed list of documents which have been made available for inspection.
4. The audit report shall also include precise comments and recommendations on the accounting systems/procedures of the project. Each following audit report shall refer to such recommendations and verify whether the same have been implemented by the project holder.
5. The draft audit report shall be submitted for comments to Karl Kübel Stiftung not later than 15^th February every year. KKS shall provide feedback within 10 days.
6. The final audit report shall be submitted to Karl Kübel Stiftung not later than 28^thof February every year.
7. Once the audit report is approved by KKS Germany, the auditor shall send a scanned copy of the audit report, annual SOA and cumulative SOA duly stamped and signed only by the auditor to KKS, Germany within three working days.
8. Thereafter, the final report shall be sent by the auditor to KKS and one copy to the project holder.
9. Each page of the final Audit Report shall be signed and authorized by the Chartered Accountant.

Confidentiality

The auditor shall take all steps necessary to ensure the secret and confidential nature of all information he may acquire under the provisions of this Contract. He shall make available his findings and report only to Karl Kübel Stiftung and the project holder.

Audit Costs and Remuneration

The Auditor shall receive from PHE EC as a comprehensive remuneration for her/his services an amount of ETB insert the actual amount  in words),inclusive of service tax if applicable, for the audit and the audit reports, for a normal calendar year audit of 12 months.

This amount covers all fees and expenses (including travel to the project office and the annual field visits, food and accommodation) incurred by the auditor. If accommodation, food and travel to/from the project office are provided by the project holder the Auditor has to pay for the same in accordance with the existing policies of the project holder. The project holder will provide transport free of cost between project office and project area.

In case the first audit year is less than 12 month, or the duration is extended for various reasons, the lump sum amount shall be determined by fixing the fees on a prorate basis and the full travel costs and a full board as agreed.

Duration of the Contract

The maximum duration of this contract shall be the complete project-funding period (cf. Agreements) including a possible project extension sanctioned by KKS. In case of premature termination of the contract, the notice period shall be three months. Either party has the right to terminate the Agreement by giving three months’ notice (latest until 30^th September of each year) without assigning reasons.

Miscellaneous Provisions

• The Auditor shall not take up any assignments of the project holder during the duration of this Contract.
• As prescribed by the general norms, the audit firm/independent auditors shall not be generally contracted for the audits for the immediate follow-up / subsequent phases.
• Any alteration to this contract requires prior written consent of the signing organizations. This contract shall be made in two copies (KKS, Auditor).

 Qualification of the Audit Firm:

The audit firms based in Ethiopia /the Capital of Addis Ababa with an internationally reputed audit firm will be eligible to apply. As well as the firm should also fulfill a renewed trade license for 2015 and 2016 EC. Who has a legal license and experience to Provide Audit Service Professional license TIN and VAT registration certificate? Technical proposal which contains Evidence of previous experience in providing similar service both in local and International NGOs along with the financial proposal accompanied by sealed envelope.