Request for Proposal – Professional Audit Services, CEFA

Tender No: REF: FSSFS-CEFA 2022 12

SECTION 1 – LETTER OF INVITATION TO SUBMIT TECHNICAL AND FINANCIAL PROPOSALS

Nairobi, the 25^th of April 2022

Re: Professional Audit Services

Dear Madam/Sir:

1. The European Committee for Training and Agriculture (“CEFA”) has received financing from the International Fund for Agricultural Development (“IFAD”) for Food Security and Sustainability in Fragile Situations (FSSFS) Project and intends to apply a portion of the proceeds of this grant to eligible payments under this contract, for which this Request for Proposal is issued.
2. CEFA invites you to submit technical and financial proposals in accordance with the documents attached to this letter and the annexed Terms of References (TOR). The Client intends to hire a professional firm (the “Auditor”) to provide Professional Audit Services on the FSSFS project in Somalia.

• The Auditor may sub-contract selected activities provided that the said services will not exceed 20% of the total consultancy work.
• A firm will be selected under *the Quality and Cost-Based Selection (QCBS)* method in accordance with the procedures set out in the IFAD Procurement Handbook which are provided on the IFAD website [https://www.ifad.org/documents/38711624/39421018/proc_handbook_e.pdf/2febc53a-4244-4447-a788-d06a632fd3b5].

1.Background

The International Fund for Agricultural Development (IFAD) is aiding the CEFA in the form of Grant no. 2000002010 and additional Grant no. 2000003131.

A financing agreement has been signed between IFAD and CEFA: refer to appendix 1

IFAD requires the borrower to appoint an independent auditor to audit the accounts related to the project, in accordance with the IFAD Handbook on Financial Reporting and Auditing.

The reporting entity is Food Security and Sustainability in Fragile Situations (FSSFS) .

The entity prepares its financial statements in accordance with the IPSAS “Financial Reporting under the Cash Basis of Accounting” standards.

The auditor conducts its audit in terms of International Standards of Audits (ISA).

The European Committee for Training and Agriculture (CEFA) is an International Non-Governmental Organization established in 1972 and active in 10 Countries in Africa, Latin America and Eastern Europe. CEFA’s medium- and long-term interventions in agricultural, environmental and Human Rights sector are focused on the sustainable development of the communities, achieved by involving local counterparts and by promoting the active participation of the beneficiaries.

In performing the engagements, the auditors should familiarize themselves with:

• IFAD/CEFA Handbook on Financial Reporting and Auditing
• The conditions stipulated on the grant agreement – project eligible expenditures
• List of required supporting documents as listed at www.ifad.org/grantforms.

2.Objectives

The objective of this audit is to enable the auditor to express an opinion on whether the financial statements (including additional disclosures as outlined in Scope of the Financial Audit present fairly, in all material respects, the financial position of the reporting entity as at [insert year-end date], and/or the results of its operations and its cash flows for the years then ended, in conformity with the IPSAS “Financial Reporting under the Cash Basis of Accounting” standards.

The following are the terms of reference (‘ToR’) on which CEFA agrees to engage audit firm ‘the Auditor’ to perform an Audit and to report in connection with the Agreement with the International Fund for Agricultural Development (IFAD) concerning FSSFS project where in these ToRs the ‘Contracting Authority’ is mentioned this refers to IFAD which has signed the Agreement with CEFA and finances the services. The Contracting Authority is not a party to this engagement.

3. Responsibilities of OF CEFA

1. General

CEFA refers to the entity that provides the services and that has signed the Agreement with the Contracting Authority.

• CEFA is responsible for providing a Financial Statements for the services financed by the Grant no. 2000002010 and additional Grant no. 2000003131and for ensuring that these Financial Statements can be properly reconciled to CEFA records and accounts in respect of these services.

• CEFA accepts that the ability of the Auditor to perform the procedures required by this engagement effectively depends upon CEFA providing full and free access to its staff and records and accounts.

• Ensure that the accounting policies are consistently applied and disclosed.

• Ensure that appropriate internal controls are implemented to prevent misstatements and susceptibility to fraud.

• Ensure compliance with all relevant laws and regulations that pertain to the entity, as well as with the financing agreement between the CEFA and IFAD.

• CEFA 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:

a) Grants Agreement;

b) Two semiannual Progress Report;

c) Procurement Policies and Guidelines;

d) Financial Management Manual;

e) Project organizational chart and coordination structure;

f) Names and qualifications of officers responsible for financial management, accounting and internal audit.

g) Fix Assets Register

h) The project design document, the annual work plan and budget

2. Financial Statements

CEFA shall:

a) Prepare financial statements covering the reporting period January 1st, 2021 to December 31st, 2021, in accordance with IPSAS “Financial Reporting under the Cash Basis of Accounting” standards. In addition the following specific disclosures will be included in the financial statements:

b) Withdrawal application statement– appendix 1 to the IFAD Handbook on Financial Reporting and Auditing of IFAD-financed Projects;

c) Yearly and cumulative statements of sources and application of funds, which should disclose separately

d) IFAD’s funds, other donor’s funds and beneficiary’s funds;

e) Statement of sources and uses of funds- appendix 2 to the IFAD Handbook on Financial Reporting and Auditing of IFAD-financed Projects.

a) Designated Account statement and reconciliation – appendix 3(a) and 3(b) to the IFAD Handbook on Financial Reporting and Auditing of IFAD-financed Project

b) Statement of Expenditure – appendix 4 to the IFAD Handbook on Financial Reporting and Auditing of IFAD-financed Projects – applicable to grants.

c) Yearly and cumulative SOEs by withdrawal application and category of expenditures; reconciliation of the SA.

d) Reconciliation between the amounts shown as received by the project and those shown as being disbursed by IFAD should be attached as an annex to the PFS. As part of that reconciliation the auditor will indicate the procedure used for disbursement (SA funds, letters of credit, special commitments, reimbursement or direct payment) and indicate whether the expenditure is fully documented or uses the Summary of Expenditures format.

e) Notes accompanying the Financial statements

f) Cumulative status of funds by category

g) A statement of comparison between the actual expenditures and the budget estimates

h) Full disclosure of cash balances and

i) Other statements or disclosures relevant to the project .e.g. financial monitoring reports, credit lines etc.

4. Responsibilities of the Auditor

• Auditing Standards
  ‘The Auditor’ is responsible for the formulation of an opinion on the financial statements in accordance with ISA.
• General Principles

By agreeing these ToR, the auditor confirms that:

a) The firm is independent from the project, its staff and activities, in accordance with international best practices.

b) The firm is not providing consultancy services to the project or preparing its project financial statements (nor has it done so in the previous two years).

c) The Auditor is suitably qualified and a member of a professional body affiliated with the International Federation of Accountants (IFAC).

d) The auditor is able to conduct the audit in line with auditing standards acceptable to IFAD, pursuant to paragraph 4.1.

e) The firm can assign an audit team to the audit that has the necessary competence and skills[1].

f) The firm has a proven track record in conducting audits of a similar nature and complexity.

• Management Letter

The management letter is an integral part of the audit package that documents accounting and internal control issues identified by the auditors, including compliance with IFAD’s Procurement Guidelines and such other matters as IFAD may notify CEFA to include in the audit.. The auditors will provide a management letter, outlining any internal control weaknesses, and the adequacy of the accounting control processes of the project, including compliance with IFAD procedures and guidelines.
The management letter should:

a) Outline the auditor’s recommendations to improve identified accounting and internal control issues;

b) Include the responses of project management to the identified control issues, and its proposal to address the issues identified within a specific time period.

c) Where applicable, follow up on the issues identified in the previous year’s management letter.

• 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 CEFA and the Contracting Authority to understand the nature and extent of the procedures performed by the Auditor. Use of the financial and audit reporting is compulsory.

The auditor is required to deliver an audit package that includes:

a) The audited Financial Statement, including additional disclosures as outlined in paragraph 3.2;

b) An audit opinion on the Financial Statements, within the scope as outlined in paragraph 5 of this TOR;

c) A report on factual findings, within the scope of agreed-upon procedures as outlined in paragraph 6 of this TOR. Any ineligible expenditure identified should be clearly mentioned.

d) A management letter, including the information outlined in paragraph 4.3;

The report on factual findings shall at least include:

• Background information of the project subject to engagement. Overview on transaction population and sample
• Short descriptions of the testing process
• Summary of findings
• Detail findings including auditor’s recommendations.
• Include responses of the project management to the identified issues, and its proposal to address the issues identified within a specific time period.
• Where applicable, follow up on the issues identified in the previous year’s report on factual findings.
• List names of the audit team.

The audit report should provide sufficient detail as to the nature and extent of the procedures performed by the auditor. The auditor is required to provide the audit package by no later than 30 days after completion of the audit exercise. Reports are to be delivered in English.

5. Scope of the Financial Audit

In performing the audit, at a minimum the auditor shall:

• Obtain an understanding of the internal controls related to the financial reporting

process, to identify and assess any weakness in internal control that might result in misstatements, whether due to fraud or to error;

• Design and conduct audit procedures in response to any weaknesses identified in the internal controls relating to the financial reporting process, to obtain audit evidence that the financial statements are fairly presented and free from material misstatements, in accordance with the applicable accounting framework;

• Verify whether expenditure that was incurred in the name of the project is in line with the terms of the financing agreement (appendix 1) and incurred for the purposes intended in this agreement. Both IFAD and third party funding should be taken into consideration;

• Verify that the amount of the in-kind contribution is reported according to the agreed accounting principles and the reported fair-market value for all in-kind contribution items is reasonable and correctly and fully disclosed in the financial statements;

• Verify that the inventory and fixed assets held by the entity exist, are complete, are

properly accounted and are used for the project purposes;

• Note any weaknesses in the internal control environment and in the financial reporting

process, and communicate those in the management letter

6. Scope of the Agreed upon Procedures

The auditor is required to perform the following specific procedures and report on factual findings as required in paragraph 4.4.
The auditor shall undertake this engagement in accordance with IFAD procedures and guidelines and the International Standard on Related Services (‘ISRS’) 4400 Engagements to perform Agreed upon Procedures regarding Financial Information as promulgated by the International Federation of Accountants (IFAC).

The auditor is expected:

• To carry out the agreed-upon procedures listed in the Section 3 of this TOR – Scope and approach of the audit and agreed-upon procedures engagement.
• To issue report on factual findings that will support IFAD’s conclusions on the eligibility of the reported expenditure. The auditor shall comply with the the IFAD and IFAC Code of Ethics for Professional Accountants, developed and issued by IFAC’s International Ethics Standards Board for Accountants (IESBA), which establishes fundamental ethical principles for auditors with regard to integrity, objectivity, independence, professional competence and due care, confidentiality, professional behavior and technical standards.

1. Withdrawal Application Statement

The auditor is requested to obtain the individual withdrawal applications (WAs) submitted to IFAD, as summarized in the withdrawal application statement, and develop test procedures to:

• Determine whether the Designated Account currency equivalent was determined using the historical exchange rate of transfers to the operating account;

• Determine whether goods and services have been purchased through the SOE mechanism in line with the stipulated SOE threshold;

• Determine whether the expenditures claimed through SOE procedures were properly and appropriately authorized, classified[2] and supported by audit documentation;

• Identify any ineligible expenditure;

2. Designated Account Statement

The auditor is also requested to review the activities of the DA associated with the project including the initial advance, replenishments, interest that may accrue on the outstanding balances, and the year-end balances. The auditor must form an opinion as to the degree of compliance with IFAD procedures and the balance of the DA/SA at year end. The auditor is requested to develop test procedures to
a) Check the accuracy of Designated Account reconciliation;
b) Confirm that the Designated Account(s) have been maintained in accordance with the provisions of the financing agreement;
c) Check the eligibility of withdrawals from the DA/SA during the period under review
d) Check the operation of the DA/SA in accordance with the relevant financing agreement;
e) Check the adequacy of internal controls within the project appropriate for this disbursement mechanism;
and f) the use of correct exchange rate(s) to convert local currency expenditures to United States dollars.

3. Certified Statement of Expenditure

The auditor is requested to obtain the certified Statement of Expenditure as submitted to IFAD, and develop test procedures to:

• Determine if expenditures incurred are related to the project description in according with the grant agreement;
• Determine whether goods and services have been purchased through the SOE mechanism in line with the stipulated SOE threshold;
• Determine whether the expenditures claimed through SOE procedures were properly and appropriately authorized, classified[3] and supported by audit documentation;
• Identify any ineligible expenditure;

7. Public Closure

IFAD promotes public disclosure of project financial information to enhance the level of

transparency and accountability. IFAD will disclose project audit reports, as appropriate, in

line with the Fund’s disclosure policy. Management Letters issued by auditors are not subject to public disclosure by IFAD. In agreeing to the terms of reference, the auditor explicitly

acknowledges IFAD’s right to publicly disclose audit reports (audited financial statements and audit opinion) and will issue reports without a limitation of use clause..
To facilitate the public disclosure process, the auditor is requested to submit two separate files as follows:

• Audited financial statements and audit opinion on SoE;
• Report on factual findings.

8. Appendices

Appendix 1: Financing/grant agreement(s)

Appendix: Letter to the Borrower

Appendix: IFAD Handbook on Financial Reporting and Auditing of IFAD-financed Projects

Appendix 4: Audit team Requirements

Appendix 4

9. Audit Team Requirements

Qualification and Experience

The auditor will employ staff with appropriate professional qualifications and suitable experience with IFAC standards and with experience in verifying financial information of entities comparable in size and complexity to the Recipient. In addition, the audit team as whole should have:

Experience with programme and projects related to donor funded project by national and/or international donors and institutions. It is desirable that the team leader and, where applicable, the fieldwork team, i.e. either the audit manager (category 2) or the senior auditor (category 3) has

I. experience with audits of IFAD

II. Experience with audits in Eastern Africa (Somalia).

III. Experience with audits of NGOs and Not-for-Profit Organizations

IV. Sufficient knowledge of relevant laws, regulations and rules in the countries concerned (Kenya, Somalia and Italy). This includes but is not limited to taxation, social security and labor regulations, accounting and reporting.

V. Fluency in English

VI. A good knowledge of agricultural research & development and innovation issues in Africa

Team composition

The team of auditors required for this engagement will be composed of a category 1 auditor who has the ultimate responsibility for the expenditure verification and a team which is composed of an appropriate mix of category 2 – 4 auditors.

Categories of staff/experts

Category 1 – (Audit Partner) A Category 1 expert (audit partner) should be a partner or another person in a position similar to that of a partner and be a highly qualified expert with relevant professional qualifications who assumes or has assumed senior and managerial responsibilities in public audit practice. He/she should be a member of a national or international accounting or auditing body or institution. He/she must have at least 12 years of professional experience as a professional auditor or accountant in public audit practice. The audit partner will be the person who will be responsible for the specific contract and its performance as well as for the report that is issued on behalf of the firm. He/she has the appropriate authority from a professional, legal or regulatory body and is authorized to certify accounts by the laws of the country in which the audit firm is registered.

Category 2 – (e.g. Audit Manager) Audit managers should be qualified experts with a relevant university degree or professional qualification. They should have at least 6 years of experience as a professional auditor or accountant in public audit practice including relevant managerial experience of leading audit teams. He/she should be a member of a national or international accounting or auditing body or institution.

Category 3 – (e.g. Senior Auditor) Senior auditors should be qualified experts with a relevant university degree or professional qualification and at least 3 years professional experience as a professional auditor or accountant in public audit practice.

Category 4 – (e.g. Assistant Auditor) Assistant auditors should have a relevant university degree and at least 6 months professional experience in public audit practice.

Curriculum Vitae (CVs)

The auditor will provide the Recipient with CVs of the staff/experts involved in the engagement only. The CV of staff not directly involved in the audit process shall not be submitted. The CVs will include appropriate details for the purpose of the evaluation of the offer on the relevant specific experience for this engagement and the qualifying work carried out in the past.

[1] As outlined in Appendix 4 Audit Team Requirements

[2] The threshold for SOE transactions will be stipulated in the letter to the borrower.

[3] The threshold for SOE transactions will be stipulated in the letter to the borrower

Please see complete REQUEST FOR BIDS and BIDDING DOCUMENTS at the following link:

https://e-fop.org/posts/626668eb5d083500189938e2