TERMS OF REFERENCE FOR PROJECT AUDIT
1.0 Introduction

Diakonie Katastrophenhilfe is the humanitarian assistance agency of the Protestant Churches in Germany with headquarters in Berlin. Through its partner organizations, Diakonie Katastrophenhilfe provides humanitarian aid worldwide. It supports people who have fallen victim to natural disasters, war, and displacement and who are not able to cope on their own in the emergency they find themselves in.

In Somalia, Diakonie Katastrophenhilfe has been running intensive relief programs for more than twenty years. In close cooperation with its local partner organizations, Diakonie Katastrophenhilfe works across several sectors including WASH, education in emergency, food security, livelihoods, and Vocational training.

Diakonie Katastrophenhilfe- Somalia Crisis program, in partnership with Center for Peace and Democracy (CPD) Somalia, is implementing a project titled ‘Education in the emergency project for most vulnerable internally displaced persons in Galkacyo South district, Galkacyo’. The project has been running from 1st December 2021 and ends on 31st December 2023. The project value is Eur 1,100,000.

2.0 Key Tasks and Responsibilities

The auditors express an opinion on whether the financial statements for the project under consideration, including

• balance sheet of the project holder (if relevant in the given context of the project)
• income and expenditure account of the project holder (if relevant in the given context of the project)
• receipt and payment account/cash flow statement of the project including opening and closing balances of earmarked funds and a comparison with the approved budget

gives a true and fair view of all essential matters and whether it has been properly prepared by the above-mentioned requirements. In arriving at their opinion, they are required to consider the following matters and to report on them accordingly:

a) Whether proper accounting records have been kept by the project holder
b) Whether the project holder’s financial statement is in agreement with the accounting records and returns
c) Whether funds from DKH were utilized in compliance with the purpose of the earmarking of funds.
d) Whether the auditors have obtained all the information and explanations, which they consider necessary for their audit.
e) Whether all the articles in the grant agreement were complied with.

3.0 Scope of audit

The audit will be conducted by the International Standards on Auditing. The format of the audit must comply with the format prescribed by ISA 800. The audit will include such tests and controls as the auditor considers necessary including visits to project offices and sites. The auditors shall obtain an understanding of the accounting and internal control systems to assess their adequacy as a basis for the preparation of the financial reports and to establish whether the project holder has maintained proper accounting records. Special attention shall be given to the fact that income through funds from DKH and other aid agencies are earmarked funds. This earmarking is based on the objectives/goals and measures defined in the project as well as on the approved expenditure budget and financing plan. The balances of earmarked funds (project balances) shall be shown as liabilities at the end of the accounting period. In addition, the auditors shall analyse the economical and sparing use of funds by the established local price structures and the contracting practices for placing orders/procurements

The audit is not designed to identify all significant weaknesses in the project’s systems but, if such significant weaknesses come to the auditors’ notice during the course of the audit, the auditors shall report on it in their report, or their Management Letter as appropriate.

The responsibility for safeguarding the assets of the project holder and the responsibility for the prevention and detection of fraud, error, and non-compliance with laws or regulations rests with the project managers. However, the auditors shall endeavour to plan their audit to provide reasonable assurance of detecting material misstatements in the annual financial statement or accounting records (including those resulting from fraud, error, or non-compliance with laws or regulations).

The auditor should carry out an in-depth verification of a sample of the documents by contacting the project stakeholders e.g. the project staff, beneficiaries, and suppliers, and do a field visit to the project sites.

4.0 Audit Report

The following documents should be provided by the auditors upon completion:
• Auditor’s report/opinion including a compliance statement in respect of the earmarking of DKH funds. The audit report shall contain the opinion of the audit firm on whether project funds were exclusively used for the project and by the cooperation agreement.
• Audited financial statement(s) of the project(s) under consideration
(balance sheet, income, and expenditure account of the project holder, if relevant in the given context of the project)
(receipt and payment account/cash flow statement of the project including opening and closing balances of earmarked funds and a plan-actual comparison/variance report with the approved budget)
• Management Letter.
• Notes to the accounts reporting on.
a) List of income/receipts according to origin/source
b) Foreign currency transactions (incl. examination of exchange transactions)
c) List of all bank accounts in the country and abroad.
d) List and explanations of debts/accounts receivable related to debtors, amount, reason, and time of emergence.
e) List and explanation of liabilities related to creditors, amount, reason, and time of emergence, incl. the balance of earmarked funds according to origin/purpose.
f) Statement on assets, in particular evidence of new acquisitions and compliance with DKH approval, if applicable (e.g. buildings, vehicles)
g) Legal claims of staff to severance pay and retirement pensions

5.0 Location

The audit will be carried out at the offices of CPD in Mogadishu and Galkacyo.

6.0 Time frame

The auditors should complete the audit and submit the final report and all required documents by 20th February 2024.

7.0 Requirements

Eligible Audit firms should meet the criteria evidenced by the required documents below. The following documents should be provided in the bid

• Company profile
• Technical and financial proposal (Audit Methodology, Proposed Plan, Curriculum Vitae for the partner, manager, and key staff proposed for the audit team)
• Accreditation by a recognized professional accounting body e.g. ICPAK, ACCA
• Practicing license of the firm and of the individual members who will be involved in the exercise.
• Experience of the audit firm with audit reporting under International Standards on Auditing (ISA)
• References for similar audits performed within the last three years
• Any actual or potential conflict of interest in taking up this role should be highlighted.
• Good standing certificates of the team members from the professional accounting body.
• Evidence of experience with audits of organizations similar to CPD and DKH
• Experience with regulations of international donors (EU, UN, etc) and (as an add-on) with German donors (BMZ, German Foreign Office, etc.)
• Should preferably have access to the project implementation area.
• Knowledge of systems and procedures of financial management and accounting in the area of humanitarian aid organizations