Terms of Reference for Special Purpose Grant Financial Statement (SPGFS) Audit

Principal Recipient (PR):

World Vision International – Somalia Program

and

World Vision United Kingdom

Grant Name: SOM-T-WV**

Title of Program: To decrease the burden of Tuberculosis in Somalia **

Period covered by the audit:

1^st January 2021– 31st^th December 2021**

Contents

1. Program background, audit structure and description of entities. 3

1.1 Program Background.. 3

1.2 Program Entities and audit approach. 4

2. Contacts [to be provided confidentially to the auditor]: 5

3. Objectives of the Audit. 6

4. Responsibility for the preparation of Special Purpose Grant Financial Statements (SPGFS). 6

5. Special Purpose Grant Financial Statements (SPGFS). 6

6. Available documents and facilities. 7

7. Audit Scope of Work. 8

8. Audit Procedures. 9

8.1 Planning. 9

8.1.1. Kick off Meeting with the Principal Recipient: 9

8.1.2. Planning Activities, Audit Plan and Audit Work Programs. 10

8.2 Materiality. 10

8.3 Fieldwork. 10

8.3.1 Obtaining evidence regarding the design of controls and performing tests of controls. 10

8.3.2 Substantive Procedures. 11

8.3.3 Sampling and other means of selecting items for testing. 11

8.3.4 Analytical procedures. 11

8.3.5 Using the work of internal auditors. 11

8.3.6 Using the work of an expert. 12

8.3.7 Written representations. 12

8.3.8 Complementary letter. 12

8.3.9 Debriefing Memorandum (‘Aide Mémoire’). 12

8.3.10 Audit Exit Meeting in country. 12

9. Auditor’s report and Language. 12

10. Management Letter. 13

10.1 Internal Control Framework. 13

10.2 Risk Management. 14

10.3 Other important disclosures. 14

10.4 Reports’ review process. 15

10.4.1 Draft report. 15

10.4.2 Final report. 15

11 Auditor performance assessment, rotation and termination.. 16

11.1 General Guidelines for Management Letter (M/L). 16

1. Program background, audit structure and description of entities

1.1 Program Background **

Tuberculosis (TB) is a public health emergency in Somalia. The estimated incidence is extremely high at 286 per 100,000 population; the prevalence is estimated at 581 per 100,000 population; and mortality (excluding HIV/TB) is 64 per 100,000 population (WHO Global TB Report 2013). According to WHO, the case detection rate (CDR) is 41% which means that 59% of all the cases remain undetected. The long-standing insecurity and the mobility of the population has negatively affected the TB epidemiology.

During the civil war most of the health infrastructure was seriously damaged and/or looted. Rebuilding of the health sector is challenged by insecurity, a shortage of professional staff, financial resources, and financial and operational fragmentation. Due to political fractions, the role of the central government to coordinate an effective TB response has been limited. To date, TB prevention and care services have been provided by international and national NGOs and local authorities.

Funding from the Global Fund for TB began in August 2004 with a Round 3 grant. The Round 3 grant focused on improving the infrastructure to be able to provide TB services including (a) the renovation of 18 TB centers; (b) capacity building for national program and laboratory staff; (c) the scale-up of DOTS; and (d) strengthening of M&E activities. Somalia was subsequently awarded a Round 7 TB grant which focused on addressing the gaps identified in the Round 3 grant and allowed for expansion of TB services particularly through the operationalization of additional TB management units.

The Phase 2 Round 7 grant and the Round 10 grant were consolidated to form the SOM-T-WV grant. The consolidated grant aimed to expand and improve TB services. In an effort to address the emergence of MDR TB, the grant was materially reprogrammed in March 2013 to include MDR TB treatment and the MDR TB program began enrolling patients as of 1 September 2013. The estimated prevalence of multidrug-resistant TB (MDR TB) among new cases is 5.2% and among retreatment cases is 40.7% in 2012. Given there has been no MDR TB treatment program until September 2013, the only option for treatment for people diagnosed with MDR TB was to leave Somalia and seek treatment in other countries, particularly Kenya, which increased immigration related tensions between the two countries.

During Phase 1 TB/HIV activities were set up in 28 TBMUs (43% of the TBMUs). This has led to a rapid increase of the number of TB patients with known HIV status. Based on these results, it is proposed to increase the target for TBMU coverage with TB/HIV activities to 85% by 2017 at a rate of roll out of approximately 20 TBMUs per year. Strengthening of the referral system is planned to address some of the shortfalls in the provision of CPT or ART to HIV-positive TB patients.

Under the Phase 2, the grant will aim to improve case detection and treatment success. To date, 65 TBMUs with sputum microscopy have been established for a population of over 10 million. The Phase 2 grant will support the expansion of the laboratory capacity to 100 TBMUs by the end of Phase 2, in an effort to meet the WHO minimum recommendation. The aim will be to provide an integrated health service where possible.

The Phase 2 grant will also focus on reaching key affected populations, particularly mobile/migrant populations. In addition, the Phase 2 grant will allow for the expansion of culture labs from one current lab in the country to three labs to align with the WHO minimum recommendation. One of the culture labs will be upgraded to conduct DST as DST is currently done outside of Somalia which increases turnaround times and delays initiation of second line treatment. The roll out of the MDR TB program will continue under Phase 2 with the operationalization of two additional MDR-TB treatment facilities so there will be one in each zone by 2017.

The grant implementation period is from 1^st January 2021 to 31^st December 2023 with a budget of US$ 29,081,030. The original approved budget for the period under audit is US$10,827,973 of which WVI-S budgeted to disburse US$ 3,552,601 to the Sub-recipients (SRs) contracted. A budget revision was approved on 5^th November 2021.

1.2 Program Entities and audit approach **

The auditor must be completely impartial and independent from all aspects of management or financial interests in the PR and sub-recipients or any other directly related entities. The auditor should not, during the period covered by the audit nor during the undertaking of the audit, be employed by, serve as director for, or have any financial or close business relationships with any senior participant in the management of the PR or sub-recipients. Any relationship that might possibly compromise his/her independence must be disclosed to the PR before the signing of the agreement. Global Fund requires a consolidated financial statement of the PR and sub-recipient receipts and expenditures for audit purposes.

A single annual external audit of the program financial statements fulfills all the Global Fund requirements for Principal Recipient audits. However, an audit of the PR’s financial statements without specification of the program sources and uses of funds is not adequate. The annual audit of a Principal Recipient should cover the PR’s receipts and expenditures, and a consolidated financial statement of the PR and sub-recipient receipts and expenditures. The auditor will perform a consolidated grant specific audit (one audit opinion for the whole grant i.e. for the PR and the sub- recipients, combining the balances and the transactions of the PR and the sub-recipients).

The external auditor will also issue an audit report for each sub-recipient as a separate entity. The following shall apply:

a) The audit will cover the activities of World Vision International- Somalia Program (WVI-S) as the Principal Recipient of GF TB in Somalia program and the selected Sub-Recipients of this program in accordance with the agreement signed with them. The audit scope is limited to WVI-S to the extent that it is the PR for the GF TB in Somalia Program and as an Implementing Principle-Recipient (SR) as well. All other grants of WVI-S are therefore excluded from this audit.

b) The audit will be carried out in accordance with International Standards on Auditing (ISA). The audit period will be for the period 1^st Jan 2021 to 31^st December 2021

c) The auditor will gather sufficient audit evidence to substantiate in all material respects the accuracy of the information contained in supporting schedules attached to the Statement of Sources and Uses of Funds (Cash Flow Statement).

d) If any of the above are not conformed to, then the auditor must state so in the audit report and indicate the alternative standards followed.

e) Where applicable, the need for opinion on WV Somalia’s compliance with specific covenants in the agreement will be provided to the auditor in writing.

a. A copy of the Grant Agreement between World Vision International – Somalia program and World Vision UK (the PR) and the GF will be availed to the auditor. Copies of all correspondence between the PR and the GF relating to compliance, calculation of compliance or interpretation of definitions used in the covenants will be provided.

The financial records and books of the Principle Recipient WVI-S and the SRs except the UN agency World Health Organisation (WHO). The auditor is expected to conduct in-country verification where practical while performing the audit exercise.

A map showing the various locations is provided separately, expected coverage is at least 50 – 60% 0f the TB centers/Facilities in the field See Annex 4: Audit Mapping 2021

No.

Entity Name

Legal status

Original Budget (USD)

Revised Budget

1

World Vision SR

Nonprofit Organization

558,123

620,196

2

CISP – Comitato Internazionale per lo Svilppo dei Popoli

Nonprofit Organization

39,985

39,985

3

COOPI – Cooperazione Internazionale

Nonprofit Organization

177,809

177,809

4

International Medical Corps UK

Nonprofit Organization

22,922

22,922

5

Manhal Charitable Organization

Nonprofit Organization

215,495

215,495

6

Mercy USA

Non-profit Organization

317,444

317,444

7

MOH FGS

Ministry of Health

285,717

285,521

8

MOH PL

Ministry of Health

157,175

177,692

9

MOH SLD

Ministry of Health

240,555

252,675

10

Muslim Aid

Nonprofit Organization

398,376

403,224

11

Physicians for Social Responsibility-Finland

Nonprofit Organization

97,504

97,504

12

Saacid

Nonprofit Organization

54,101

54,101

13

Star Intellectual Group for Humanitarian Activities – SIGHT

Nonprofit Organization

166,254

166,254

World Health Organisation – TB

UN Organization

497,136

444,118

Zamzam Foundation

Non-Profit Organization

294,006

294,006

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

The Principal Recipient shall provide a list of important contacts for the conduct of the audit including their full contact details. This should include at a minimum: Principal Recipient Chief Executive and Chief Finance Executive, Program Manager, Grant Finance Manager, sub-recipient Chief Executives, Program Managers and key finance contacts.

3. Objectives of the Audit

The objective of the financial audit is to enable the auditor to express an independent professional opinion on:

i. Whether the Special Purpose Grant Financial Statements (SPGFS) present fairly in all material respects the financial position, funds received and expenditures by the Principal Recipient (and sub-recipients^[1]) for the reporting period and in accordance with the applicable accounting framework;

ii. 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;

The objective of the audit is also to evaluate, obtain sufficient understanding and comment on whether the program internal control framework is satisfactory and to report on the weaknesses identified. The auditor must review the internal control framework of the Principal Recipient and key sub-recipients identified by the Global Fund Country team in consultation with the Principal Recipient. This review includes any third-party agent managing a process in the implementation of the grant^[2].

4. Responsibility for the preparation of Special Purpose Grant Financial Statements (SPGFS).

The responsibility for the preparation of consolidated SPGFS or of separate SPGFSs for each entity covered by the audit, if applicable, lies with the Principal Recipient which delegates the responsibility to the sub-recipients for their respective sub-grants.

5. Special Purpose Grant Financial Statements (SPGFS).

1. The SPGFS should include the following components:

i. In the currency of the grant agreement^[3], an Income and Expenditure Statement (IES) showing the Global Fund’s funds received, any other income received and all grant expenditures^[4]. Grant expenditures should be reported against the budget in the format appended to the guidelines. There should be one corresponding to the period of 01 January 2020 until 31 December 2020, and another one covering the closing period from 01 January 2021 until 30 June 2021;

ii. Any other notes applicable including as a minimum the breakdown of the following: The reconciliation between the IES and the AFR (at the cost group level) providing clear information on the reasons for any variance on expenditures reported in both documents, this is to be done for the period 01 January 2020 until 31 December 2020;

iii. Supplemental statements on advances and fixed assets, for the entire period, including:

1. a statement showing sub-recipient advances and reconciliation of the total amount of grant funds advanced by the Principal Recipient to sub-recipients and total grant cash balance with sub-recipient recorded expenditure and Principal Recipient/sub-recipient cash balances at the end of the reporting period;
2. summary statement of assets showing the fixed assets purchased with grant funds. This summary statement should show the assets brought forward from previous periods (opening balances) as well as the additions, disposals, write-offs 0f the period being audited and the closing balance^[5]; and
3. The notes to the supplemental statements. These notes include information that would enhance a user’s understanding of the supplemental statements (significant assumptions, accounting estimates and related disclosures etc.) as well as the necessary tax recoverable disclosures^[6].

6. Available documents and facilities

The Principal Recipient will provide the auditor with access to all books and records pertaining to the grant as requested by the auditor, including a list of all key Principal Recipient and sub-recipient locations, noting the key documents held at each location. An indicative list of the documents which may be requested by the auditor includes:

i. The grant program financial statements;

ii. Grant and sub-grant agreements, including the detailed budgets;

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

iv. Interim monthly or quarterly grant activity reports, as applicable (programmatic as well as financial);

v. General ledger, cash book, other important books and records held at either Principal Recipient or sub-recipient level;

vi. Original supporting documentation to all reported expenditures (invoices, full support for all procurement of health products or other procurements requiring tender procedures, payrolls, bank vouchers, journal vouchers etc.) held at either Principal Recipient or sub-recipient level;

vii. Bank statements;

viii. Important correspondence between Global Fund and Principal Recipient, Principal Recipient and sub-recipients pertaining to grant implementation matters;

ix. Financial procedures manuals, systems descriptions or any other documentation explaining the processes contributing to the production of reliable financial reports and maintaining internal control, either at Principal Recipient or sub-recipient levels;

x. Minutes of management meetings;

xi. Internal audit reports relevant to Global Fund expenditures or any systems, governance or other issue which impinges on Global Fund grants.

7. Audit Scope of Work

The audit should be conducted in accordance with International Standards on Auditin and will include such tests and controls as the auditor considers necessary under the circumstances.

As part of the comprehensive audit report, the auditor must report on the following aspects:

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

ii. Reconciliation of General ledger with SPGFS: Review of the general and program ledgers to determine whether costs incurred were properly recorded ensuring that the costs charged to the grant reconcile to the program and general ledgers. Reconciliation of the SPGFS to the underlying records, principally the cash book.

iii. Grant expenditures: Funds received by the Program^[7] from disbursements, or generated by the Program’s funds^[8], were spent in conformity with the approved budget and work plan 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), and only for the purposes for which the funds were provided. The auditor should also pay attention to the shared costs especially on the allocation mechanism and review these costs for accuracy, completeness and reasonableness;

iv. Eligible costs: Review of the costs charged to the grant identifying and quantifying any ineligible costs as well as agreeing expenditure to supporting documents on a sample basis. Compare actual expenditure with the budget, and obtain explanations for variances obtained (unapproved material budget variations should be included in the ineligible expenditure schedule)

v. System of internal controls: Assess the Principal Recipient and key risky sub-recipient’s internal controls based on the COSO framework. The auditor will be requested to identify the key controls of the program (entity, process and transaction levels) for each of the main operational processes and test them for effectiveness (design and operation). Based on risk, the auditor must review the internal control framework (financial and non-financial controls)^[9] of the Principal Recipient and key sub-recipients identified by the Global Fund Country team in consultation with the Principal Recipient. If an important process is outsourced or entrusted to a third-party^[10]**, the auditor must also include such third-party in the scope of the review. For the Focused countries, the auditor should limit their assessment to the financial controls of the Principal Recipient/sub-recipients. Specific attention should also be paid to controls with respect to the risk of fraud at the Principal Recipient and sub-recipients.

vi. Follow up on the status of 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, relevant internal audits and audits issued by the Office of the Inspector General (OIG) of the Global Fund;

vii. Designated bank accounts: Where designated accounts (including those being used under an approved pooled funding program implementation mechanism) have been used by the Principal Recipient and sub-recipients, 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;

viii. Funds flow mechanisms: Review of the procedures used to control the funds, including their channelling to contracted financial institutions and other implementing entities. Review the bank accounts and the controls on those bank accounts. Perform positive confirmation of balances, as necessary.

ix. Safeguarding of assets: Verify that the Principal Recipient 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 Program’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 standard terms and conditions;

x. Disbursements to Sub Recipients: Verify that disbursements made by the Principal Recipient to sub-recipients are in line with the sub-recipient sub-grant agreements and the approved work plan and budget. Verify that the Principal Recipient follows adequate process for validating expenditure reports submitted by the sub-recipients;

xi. 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.);

In addition, the Global Fund may request the auditors to review the following areas of concern, in which case the additional scope would be agreed between the Global Fund and the auditors in advance:

xii. Goods and services – have been procured transparently, competitively and in accordance with the Grant Agreement and relevant procurement Guidelines approved by the Global Fund;

xiii. Procurement systems for pharmaceutical and health products^[11]** – Review of the procurement procedures to determine whether sound commercial practices including competition were used, reasonable prices were obtained, and adequate controls were in place over the quality and quantities of products received;

xiv. Human Resource costs – Review of direct salary charges to determine that salary rates are reasonable for that position, in accordance with those approved by the Global Fund when approval is required and supported by appropriate payroll records.

xv. Travel and related costs – Review of travel and transportation charges to determine whether they are adequately supported and approved.

8. Audit Procedures

8.1 Planning

8.1.1. Kick off Meeting with the Principal Recipient:

The auditor will arrange for an opening meeting with the Principal Recipient and the LFA to discuss and explain the planning, fieldwork and reporting. The auditor will explain the nature, objectives and scope of the audit.

During the preparatory and kick-off meetings, the auditor may request additional information and documents that he/she considers necessary or useful for the planning and fieldwork of the audit. The auditor may contact the Principal Recipient directly to obtain such information. In addition the auditor should establish contact with LFA prior to and during the audit exercise.

8.1.2. Planning Activities, Audit Plan and Audit Work Programs

For each grant, the auditor should plan the audit so that it is performed in an effective and efficient manner. Adequate planning involves ensuring that appropriate attention is devoted to important areas of the audit, that potential problems are identified and resolved on a timely basis and that the audit is properly organized and managed within the due dates.

The assessment of the risks of material misstatement at the financial statement level, and thereby the auditor’s overall responses, is affected by the auditor’s understanding of the control environment.

The auditor should have an audit plan documenting the audit approach and key principles of audit planning, fieldwork and reporting. The auditor should have audit work programs that detail and document the audit tests and procedures.

Before the start of the fieldwork and before the kick-off meeting, the auditor should provide to the Global Fund Finance Specialist^[12] and the Principal Recipient, the audit plan for each grant including the scope of the review. Enhanced focus will be placed on the audit approach at the Principal Recipient but also at the selected sub-recipients.

8.2 Materiality

The auditor should apply materiality and a risk-based approach to detect material errors and misstatements in the expenditure and revenue stated in the Grant Financial Statements, whether caused by error or fraud.

The auditor uses professional judgment to assess whether a finding of non-compliance is material. A reasonable basis should be determined as used by the auditor to set the materiality level. For instance, the threshold may be applied to the total amount of gross expenditure^[13] for the Grant for the period being audited. Gross expenditure is the total actual expenditure incurred for the Grant before deduction of Grant related revenue (e.g. interest).

8.3 Fieldwork

8.3.1 Obtaining evidence regarding the design of controls and performing tests of controls

The auditor will perform procedures to obtain evidence regarding the design of controls and perform tests of controls if he/she considers this appropriate or necessary for the purpose of this financial audit.

The auditor will focus the tests of controls on key financial controls, which relate to the subjects described in the terms of reference and which are relevant to the management of the risks. Findings of significant weaknesses and deficiencies in the design or operating effectiveness of the Principal Recipient controls should be reported in the Management Letter.

For Core countries, High Impact countries and a selected number of high risk Focused countries, the auditor must review the internal control framework (financial and programmatic) of the Principal Recipient and key sub-recipients identified by the Global Fund Country team in consultation with the Principal Recipient and report thereon. At the discretion of the Country Team, such testing could be performed during an interim audit at the Principal Recipient.

8.3.2 Substantive Procedures

The auditor should perform substantive procedures to be responsive to his/her assessment of the risks of material errors or misstatements in the expenditure and revenue stated in the Grant Program Financial Statements, whether caused by error or fraud. The results of tests of controls, if any, should be taken into account. The auditor should perform substantive procedures which cover the subjects described in the terms of reference and which are relevant to the management of the risks^[14].

Regarding the risk of fraud, the auditor must comply with the International Standard on Auditing 240 “the Auditor’s responsibilities relating to fraud in an audit of financial statements”

8.3.3 Sampling and other means of selecting items for testing

When designing and performing tests of controls and substantive tests, the auditor should apply audit sampling or other means of selecting items for testing. Audit sampling involves the application of audit procedures to less than 100% of items within a population of audit relevance (e.g. a class of transactions or account balance) such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which to draw conclusions about the entire population.

Audit sampling can use either a statistical or a non-statistical approach. The auditor may use a judgmental selection of specific items from a population (e.g. high value or key items, all items over a certain amount, items to obtain information or items to test control activities).

While selective examination of specific items will often be an efficient means of obtaining evidence, it does not constitute sampling. The projection to the entire population, of results of procedures applied to items selected in this way is not possible; accordingly, selective examination of specific items does not provide evidence concerning the remainder of the population. Sampling, on the other hand, is designed to enable conclusions to be drawn about an entire population based on testing a sample drawn from it.

The auditor must clearly provide details of the expenditure coverage by budget line and recipient and the sample selection methodology. Annex 3 to these terms of reference should be used to document this information.

8.3.4 Analytical procedures

Analytical procedures must be performed by the auditor, such procedures consists in verifying the financial data by assessing the plausible connections between both financial and non-financial information. The analytical review of actual expenditure incurred with the Grant budget (budget – actual comparisons) is a critical compliance check.

8.3.5 Using the work of internal auditors

If relevant for the audit, ISA 610 “Using the Work of Internal Auditors” should be used by the auditor. If the auditor assesses that the internal audit function can be relied on for the assignment, the auditor should:

• Evaluate the specific work of the internal auditor and to what extent such work can be considered for the audit.
• Assess if the work of the internal audit is adequate for the objective of the audit.

Where the Principal Recipient has an internal audit function and the auditor does not rely on it, the auditor will be required to provide recommendations for improvement of the internal audit function in a dedicated section in the management letter.

8.3.6 Using the work of an expert

The auditor may use the work of an individual or organization presenting an expertise in a field other than accounting or auditing, that is necessary to obtain sufficient evidence to reach his/ her conclusion. The auditor should comply with ISA 620 (Using the Work of an Auditor’s Expert) insofar as this ISA is relevant to the audit.

8.3.7 Written representations

Per the standard requirement stipulated in ISA 580 – Written Representations, the Principal Recipient Management should provide the auditor with a written representation letter. The auditor must request a letter of representation signed by the member(s) of the management of the Principal Recipient who has the primary responsibility for the grant and its financial aspects.

8.3.8 Complementary letter

The auditor may, at any time during the audit process, draw up a complementary letter if he/she considers that the Global Fund must be made aware of facts and issues that are urgent, very unusual or of particular interest and importance to the Global Fund.

For instance, this could be the case of any fraud or irregularity that has occurred or that is likely to occur. The Global Fund will decide on follow-up measures including, where appropriate, the launching of an investigation by its Office of Inspector General.

8.3.9 Debriefing Memorandum (‘Aide Mémoire’)

The auditor will draft a Debriefing Memo for the closing meeting which will provide the main findings for discussion. The Principal Recipient should send a copy of the memo or draft report to the Global Fund.

8.3.10 Audit Exit Meeting in country

The auditor should organize a closing meeting with the Principal Recipient. The purpose of this meeting is to discuss the Debriefing Memo and to obtain the confirmation and initial comments of the Principal Recipient on the auditor’s findings and recommendations. The auditor and the Principal Recipient can agree outstanding information to be provided by the Principal Recipient and where applicable, a deadline for submission.

At the request of the Global Fund Country Team, the auditor will also debrief the Country Coordinating Mechanism on the conclusion of the audit. The Local Fund Agent should, at the request of the Global Fund, also be invited to participate in this meeting. For the Focused countries, attendance of the LFA is mandatory.

9. Auditor’s report and Language

In preparing the audit report for each grant, the auditor must comply with the financial audit report template provided in Annex 3 of the auditing guidelines. The auditor will issue:

• an opinion on the consolidated financial statements in accordance with ISA or ISSAI.
• an opinion on the implementer’s compliance with the grant agreement in accordance with ISA or ISSAI.

The audit report should be presented in one of the official Global Fund languages as indicated in the terms of reference. Annex 3 to these terms of reference presents the comprehensive auditor’s report template that will be used by the auditor.

10. Management Letter.

In addition to the audit report, the auditor will prepare a Management Letter for each grant in the Portfolio, consolidating Principal Recipient and sub-recipient findings. The Management Letter must not only provide a response to the review of the internal control but also to the financial risk profile of the grant (Principal Recipient and key selected sub-recipients).

10.1 Internal Control Framework^[15]**

The Management Letter must highlight the weaknesses in the internal control framework of the grant noted with respect to the processes mentioned in paragraph 7.11 of these terms of reference. For each weakness, the auditor is requested to provide a recommendation. For Core and High Impact countries having an interim audit, a Management Letter shall be issued on the internal control framework. The auditor must also present a summary of the control procedures of the Principal Recipient in the Management Letter.

The auditor must comment on instances of non-compliance in the accounting records, procedures, systems and controls that were identified during the course of the audit with particular reference to ineligible expenditures and systematic weaknesses.

The auditor must 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 program in the Management Letter which shall include the following five sections at a minimum:

· Internal control: this section should capture all other key internal control issues noted by the auditor in performing the review described in the scope of work particularly in the following sub-categories (a) Financial Management, (b) Sub-recipient management (c) Program management (d) Stock management;

· Compliance with grant agreement and applicable law: this section should highlight any instances of non-compliance with the relevant grant agreement that were noted by the auditor in the course of their work in forming an opinion on the SPGFS or confirm that none has been identified in the sample tested. This implies that the auditor should ensure that the expenditure corresponds to the activity approved in the detailed budget for the relevant period under review as well as corresponds to any subsequent budgetary adjustments including the required necessary approvals for such budget reallocations;

· Value for Money: this section should capture the auditor’s view on the Principal Recipient and sub-recipient’s considerations regarding economy and efficiency as part of the auditor’s review of grant expenditures. The Global Fund country team can make a request for this additional service to be delivered by the auditor. All issues noted around value for money (control deficiency, estimated loss incurred as a result of inefficient process and others) should be stated in this section of the Management Letter;

· Ineligible and unsupported expenditures: this section should provide a schedule of non-compliant expenditures identified by the auditors in the course of their work;

· Follow-up on previous audit report: in this section, the auditor will report on the implementation status of recommendations contained in previous audit reports.

10.2 Risk Management

Specific to the Financial management section in the Management Letter, the auditor is expected, to categorize each finding, where applicable, into one of the six sub-categories of the Global Fund defined financial risks and to provide a summary table showing the findings per sub-risk category and grading. The six categories are:

• Inadequate Flow of Funds Arrangements;
• Inadequate Internal Controls;
• Financial Fraud, Corruption and theft;
• Inadequate Accounting and Financial Reporting;
• Limited Value for Money; and
• Inadequate Auditing Arrangements.

The definitions of each of these categories are provided in the Global Fund Financial Risk Management guidelines^[16]. The auditor is expected, to categorize each finding, where applicable, into one of these six sub-categories and to provide a summary table showing the findings per sub-risk category and grading.

10.3 Other important disclosures

Based on the findings of the internal control framework review (eventually including a third-party agent) and the grade of these weaknesses, the Management Letter must include a high-level executive summary with the following statistics and information:

• The financial risk rating per risk category
• The quality of the financial statements provided by the Principal Recipient prior to the auditor’s proposed adjustments
• Statistics on the number of findings per grade and their evolution over time
• Summary of key control procedures of the recipients, such as policies on procurement, travel, expenditure allocation etc.
• The auditor’s judgement of what are the key audit risks and the methodology used to address these key risks.
• The number of recommendations from previous audit solved and those not solved
• Any other important information management should focus their attention on.

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

• It must be clearly noted on the face of the Management Letter that it is a confidential document and must be treated as such.
• The Management Letter should state that the auditor acknowledges and agrees that the Management Letter shall be shared with Global Fund and the Local Fund Agent (on a confidential basis).

· The Management Letter should use a system of grading points depending on the level of severity in line with that proposed in the Guidelines for Annual Audit of Global Fund Grant Program Financial Statements.

10.4 Reports’ review process

10.4.1 Draft report

The auditor should submit the draft report to the Principal Recipient by 31^st May 2022. The Principal Recipient would provide comments on the auditor’s draft report within 10 calendar days from receipt of the draft report. The relevant Global Fund’s Country Team may also request to review the draft report. Following the review of the draft report, should the Global Fund request the auditor to carry out additional work, a new reporting deadline could be agreed.

The auditor should submit an updated draft report which takes into account the comments to the Principal Recipient (and eventually the Global Fund) within five calendar days from receipt of the comments. The Principal Recipient would provide feedback to the auditor on the updated draft report within five calendar days.

If the Principal Recipient ‘s comments are not received within this deadline, the auditor reminds the Principal Recipient until a written reply from the Principal Recipient is received. In case of excessive delays from the Principal Recipient (more than ten calendar days), the auditor should contact the Global Fund to find out an appropriate solution.

10.4.2 Final report

Once the Auditor receives the final comments from the Principal Recipients, the final report is expected to be issued within the next five calendar days. The audit report and accompanying Management Letter, including the Principal Recipient’s responses, must be received by the Global Fund within six (6) months after the end of the reporting period under audit. Successful reception of the audit report and Management Letter implies that all reiterations between the Principal Recipient and the auditors including review by the Global Fund or any of its agents must be completed and finalized before the six-month submission deadline.

The auditor should submit three original hard copies to the Principal Recipient and one electronic copy of the final report to the Principal Recipient and to the Global Fund^[17].

In any case, the Principal Recipient should ensure the auditor sends directly to the Global Fund an electronic copy of the reports^[18]

11 Auditor performance assessment, rotation and termination

The audit must refer to the relevant sections of the Global Fund Guidelines on Grant audit regarding how their performance will be assessed and the implications thereof on the contract.

12 General Information

The audit report and accompanying Management Letter, including the Principal Recipient’s responses, should be received by the Global Fund within six (6) months after the end of the reporting period under audit.

• The selected audit firm will also be granted timely, full and unrestricted access to Principal Recipient’s (and Sub-recipients’) financial management system, accounting record, asset, property and personnel that may assist in clarifying any matter related to the audit.
• To assist the selected audit firm in planning the audit, the Principal Recipient will make available as a minimum the documents and information stated 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:

i. The Global Fund’s Guidelines for the annual audits of Global Fund Grant Program Financial Statements: Guidelines and Tools – The Global Fund to Fight AIDS, Tuberculosis and Malaria;

ii. Grant agreements between the Principal Recipient and the Global Fund and sub-grant agreements concluded with sub-recipients. Any correspondence from the Global Fund approving a reprogrammed budget affecting the audited year;

iii. Progress Updates (PU/DRs) and Management Letters. Confirmation of amounts disbursed and outstanding at the Global Fund should also be obtained;

iv. Annual Financial Reports (AFR);

v. Guidelines for Budgeting on Global Fund programs: The Global Fund Guidelines for Grant Budgeting;

Principal Recipient’s approved Finance, Procurement, Sub-recipients’ Management and other relevant Manuals;

vi. It is also recommended to obtain an understanding of the Proposal/Concept Note under which the grant is being implemented. Proposals are available at the following link Grant Portfolio – The Global Fund to Fight AIDS, Tuberculosis and Malaria and then navigate to the respective country page.

The auditor should contact the LFA prior to preparing the audit plan enabling the LFA to highlight any key weaknesses and areas of concern up front. During the course of the audit, the auditor is encouraged to contact the LFA as and when needed to obtain any additional information/clarifications.

12.1 General Guidelines for Management Letter (M/L)

The following is a general guide on the essential elements of the M/L and should not be viewed as an exhaustive list of requirements. Guidance should be sought from the IAASB’s:

i. standard on communicating management letter issues to those charged with governance of an entity: http://web.ifac.org/download/ISA_260_standalone_2009_Handbook.pdf

ii. also that on reporting internal control deficiencies:

http://web.ifac.org/download/ISA_265_standalone_2009_Handbook.pdf.

In the case of public-sector or government auditors (i.e. the Supreme Audit Institution) guidance can be obtained from INTOSAI Standards (see Chapter 4’s Reporting Standards in Government Auditing of INTOSAI’s Code of Ethics & Auditing Standards: http://intosai.connexcc-[hosting.net/blueline/upload/1codethaudstande.pdf).](http://intosai.connexcc-hosting.net/blueline/upload/1codethaudstande.pdf)

A typical M/L format follows:

STRICTLY PRIVATE AND CONFIDENTIAL

[*It must clearly be noted on the face of the Management Letter that it is a confidential document* and must be treated as such, in accordance with Global Fund Policy]

[The Management Letter should state that the auditor acknowledges and agrees that the Management Letter shall be shared with the Global Fund on a confidential basis. The audience of the letter, however, is the PR/SR]

(Name of PR) – MANAGEMENT LETTER FOR THE AUDIT OF FINANCIAL STATEMENTS FOR THE YEAR ENDED …….. (*Insert year end date)*

[Background information is provided on the applicable auditing framework that was employed in auditing the Financial Statements, for which there is this management letter]

[The purpose of the financial statement audit should be stated here which is the expression of an opinion on the Financial Statements. Also, a brief description of the methodology used in carrying out the audit as regards the use of testing as the basis for examining evidence supporting the amounts and disclosures contained in the Financial Statements, inter-alia.]

[An explanation of the purpose of the management letter should be provided in terms of the value-added in its provision to management for the improvement of systems and processes for the organization, thereby aiding the achievement of broader organizational goals.]

[A description of system of grading of the management letter issues or findings should be provided in order that the Principal Recipient is able to better prioritize implementation of recommendations emanating from findings. The following system of grading is recommended:

Grade 1 findings are those which are particularly critical and the involvement of management may be required for their resolution. These are high-level issues which impact seriously on the achievement of overall grant goals

Grade II findings are those that may have significant impact on the control environment. Here control environment looks at risk factors derived from management’s attitude to risk regarding operational activities within the Principal Recipient/Sub-recipient organization.

Grade III findings are those which are less significant than Grade 1 and II but nevertheless merit attention.

For each finding:

1.0 [Brief heading for finding and Grade 1, 2 or 3 as is applicable]

[Where there is a criteria (or criterion as the case may be) which is the object of non-compliance by the PR/Sub-recipient, then this must be stated or quoted where applicable. A criterion is defined as any law, policy, regulation or framework that an audited entity has to comply with in carrying out its activities. A deviation or complete non-compliance of it would trigger a finding. In some instances, criteria would not be present hence it would not be necessary to state it here.]

1.1 FINDING

[The condition or issue presently obtaining which could have been as a result of non- compliance of a criteria is stated here fully. This must be consistent with the grading level indicated above. Where possible, the reason(s)/rationale for the non-compliance to the criteria or factors responsible for the finding issue should be stated in a separate paragraph or section under FINDING.]

1.2 IMPLICATION

[The effect of the finding both from a financial and non-financial perspective should be clearly stated here as this will provide better insights to the Principal Recipient /Sub-recipient entity in formulating a robust management response and action plan for implementation of recommendations.]

1.3 RECOMMENDATION

[Practical recommendations relevant to the findings stated in 1.1 above should be put in this category. Recommendations should be capable of eliminating or reducing the effects identified in 1.2 above (to an acceptable level) such that there will be no negative material impact on grant implementation upon its initiation by Principal Recipient /Sub-recipient management.]

1.4 BENEFITS

[The advantages of implementing the recommendations stated in 1.3 above should be highlighted here from a financial and non-financial perspective. The use of financial data in terms of for example, cost savings, should be stated here.]

1.5 MANAGEMENT’S RESPONSE

[PRs/SRs are required to state the extent to which they agree or disagree with the finding indicated above. This should extend further to whether they agree or disagree with all the other elements to the management letter (i.e. 1.2 to 1.4). These should include reasons for the agreement or disagreement.

As part of the management response the PR should develop an action plan to address any pertinent recommendations emanating from the PR and SR Audits.

Finally, all M/Ls must contain a “**Matters arising from previous audits”** section in tabular form that will serve as a tracking tool in determining the status of implementation of recommendations.]. See below:

MATTERS ARISING FROM PREVIOUS AUDITS

Audit period

covered

Issue (i.e. the finding

identified)

Recommendations

Status of

Implementation

Comments

The period covering the audit is stated here: it should follow chronologically from one year to the next

The findings of previous audits are entered here. The findings should be quoted verbatim or reproduced from the relevant management letter

The recommendations related to the findings from the previous column are entered here quoting verbatim from the relevant management letter

The state of implementation is entered here via the following key:

Y (Yes) – showing full implementation of recommendations,

N (No) – showing that the recommendation remains to be implemented and as such no steps have been taken to commence implementation,

P (Partial) – showing that implementation has commenced but is yet to be completed

For N and P categories, an indication of the audit period from when the finding & recommendation was first identified should be stated, inter- alia

Schedule of non-compliant expenditures

Description

Unsupported expenditures

Expenditures incurred outside of the scope or period of the grant

Expenditures compromised by prohibited practices

Expenditures relating to other types of non-compliance or mismanagement of grant funds (or goods or services purchased with grant funds)

Human Resources

Travel Related Costs

Procurement Related

Other

ll

Internal Control Findings

#

Functional areas

Inadequate Flow of Funds Arrangements

Inadequate Internal Controls

Financial Fraud, Corruption and theft

Inadequate Accounting and Financial Reporting

Limited Value for Money

Inadequate Auditing Arrangements

Grading

I

II

III

I

II

III

I

II

III

I

II

III

I

II

III

I

II

III

1

Financial management

2

Sub-recipient management

3

Program management

4

Stock management

5

Procurement management

6

Compliance with grant agreement and applicable law

7

Follow-up on previous audit report

12. Annexes

12.1 Annex 1: Financial statements accrual basis template

he Principal Recipient will provide financial statements to the auditor as per the required format and form in the guide annex on the link below

https://www.theglobalfund.org/media/9198/core_annualauditsguidelinesannex1_annex_en.docx?u=637153280860000000

12.2 Annex 2: Financial Statements Cash Basis and Commitments Reconciliation Template

https://www.theglobalfund.org/media/9199/core_annualauditsguidelinesannex2_annex_en.docx?u=637153282060000000**

12.3 Annex 3: Comprehensive Auditor’s Report Template – Financial Audit

https://www.theglobalfund.org/media/9200/core_annualauditsguidelinesannex3_annex_en.docx?u=637153281270000000**

12.4 Annex 4: Comprehensive Auditor’s Report Template – Financial Audit

The Principal Recipient will provide the auditor with a detailed mapping of the location of the Tuberculosis clinics and Sub-Recipients .

Annex 4: TB Management Units / Hospitals and their Locations

S/No

TBMU / Hospital

State

1. Benadir

Banadir

1. Central Prison

Banadir

1. Daynile

Banadir

1. Dhakinley

Banadir

1. Madina

Banadir

1. Mogadishu Abdiaziz

Banadir

1. Mogadishu Ayan – Hodan

Banadir

1. Mogadishu Bulo/Hubey

Banadir

1. Mogadishu Waberi

Banadir

1. Mogadishu Yaqshid

Banadir

1. Abudwak

Galmudug

1. Adado

Galmudug

1. Dhusamareb

Galmudug

1. Eldere

Galmudug

1. Galkayo South

Galmudug

1. Guriceel

Galmudug

1. Haradere

Galmudug

1. Herale

Galmudug

1. Hobyo

Galmudug

1. Adale

Hirshabelle

1. Balcad

Hirshabelle

1. Beletweine 1

Hirshabelle

1. Beletweine 2

Hirshabelle

1. Bulomarer

Hirshabelle

1. Buq Aqaba

Hirshabelle

1. Daarasalam

Hirshabelle

1. Daryel B/burte

Hirshabelle

1. El Ali

Hirshabelle

1. Jalaqsi

Hirshabelle

1. Jowhar

Hirshabelle

1. Mahaday

Hirshabelle

1. Mahas

Hirshabelle

1. Merka

Hirshabelle

1. Qoryoley

Hirshabelle

1. Afmadow

Jubaland

1. Baradhere

Jubaland

1. Belet-Hawa

Jubaland

1. Bualle

Jubaland

1. Dhobley

Jubaland

1. Dollow

Jubaland

1. Jamame

Jubaland

1. Jilib

Jubaland

1. Kismayo 1

Jubaland

1. Kismayo 2 (MCH)

Jubaland

1. Luuq

Jubaland

1. Elwak

Jubaland

1. Garbaharey

Jubaland

1. Bandarbeyla

Puntland

1. Baargal

Puntland

1. Badhidhin

Puntland

1. Bosaso

Puntland

1. Burtinle

Puntland

1. Dhahar

Puntland

1. Eyl

Puntland

1. Galdogob

Puntland

1. Galkayo North

Puntland

1. Garowe

Puntland

1. Iskushuban

Puntland

1. Jarriban

Puntland

1. Qardo

Puntland

1. Mogadishu Bondeere

Mogadishu/Hamar jab jab/Banadir

1. Afgoye

South west

1. Baidoa

South west

1. Barawa

South west

1. Bayhawa

South west

1. Burhakaba

South west

1. Huddur

South west

1. Tiyeglow

South west

1. Wajid

South west

1. Wanlaweyn

South west

1. Erigavo

Somaliland

1. Harirad

Somaliland

1. Sh. Nour

Somaliland

1. Widhwith

Somaliland

1. Duruqsi

Somaliland

1. Saylac

Somaliland

1. Gudmobiyas

Somaliland

1. Mohamed Moge

Somaliland

1. Baligubadle

Somaliland

1. Gabiley

Somaliland

1. Hargeisa Hospital

Somaliland

1. Finsoma Hargeisa

Somaliland

1. Borama

Somaliland

1. Berbera

Somaliland

1. Burao

Somaliland

1. Ainabo

Somaliland

1. Sheikh

Somaliland

1. Odewyne

Somaliland

1. Las Anod

Somaliland

1. Huddun

Somaliland

1. Buhodle

Somaliland

1. Taalex

Somaliland

1. Hargeisa Culture Lab

Somaliland

1. Hargeisa MDR Centre

Somaliland

1. Mogadishu Culture Lab

Banadir

1. Mogadishu MDR Centre

Banadir

1. Puntland Culture Lab

Puntland

1. Alula

Puntland

1. Karan

Banadir

1. Kaxda

Banadir

Application Process and Requirements

Proposal Evaluation Criteria

1. Mandatory Requirements

• Provide a certified copy of business registration(company/organization)
• Provide a certified copy of tax registration
• Provide information on ownership structure – name of directors/owners of the company(company/organization)
• Successful bidder will be required to sign World Vision Supplier Code of Conduct form

2. Technical Evaluation

2.1 Qualifications

The consultant must have proven expertise and experience in Auditing with special focus. Proof of these is to be provided by submitting, together with the application:

• An overview of relevant works
• Contact details for references
• The proposed team’s CVs

2.2 Requirements in detail:

• Must have a valid professional and legal registration certifying eligibility to practice as an external auditor and express audit opinions pursuant to the laws, rules and other requirements of the country.
• Must be included in the list of accredited auditors of a recognized donor (World Bank, EBRD, USAID, EC (Court of Auditors)
• Must be professionally competent with a minimum ten years’ experience in planning and conducting audits of this nature.
• Must be an independent firm free from conflict of interest with World Vision Somalia/Somaliland, GFSC, LFA, and any other assurance providers for the grant as well as the GF Country team for Somalia/Somaliland.
• Ability to make in person visits to at least 60% of the facilities spread across Somalia/Somaliland
• Previous working experience in Somalia/Somaliland and/or similar challenging operating environments.
• Experience in similar assignment of the Global Fund and/or other multilateral donors.
• Must be aware of the Global Fund/World Vision code of conduct for suppliers and compliant of its provisions.

2.3 Proposal Contents

Proposals from Consultants should include the following information (at a minimum)

· Technical Proposal with clear methodology on how to conduct the audit

· CVs of key consultant(s) attached to the technical proposal

· Proposed timeline/Work plan

• At least 3 References including names and contact information (similar assignments in a similar context)

Financial Evaluation

· A financial proposal with a detailed breakdown of costs (which shall include professional fees and operational budget) quoted in USD. Applicable tax amount must be clearly stipulated and separated from the base costs.

· Payment Terms

· Credit Period

Clarification of Bidding Document

A prospective bidder making an inquiry relating to the tender document may notify WVS in writing at caroline_njuki@wvi.org and joel_okumu@wvi.org . WVS will only respond to requests for clarification received no later than 1/02/2022.

How to Apply **

All interested bidders are requested to submit their proposal in English and by email to somo_supplychain@wvi.org on or before 4^th February 2022. Proposals should be submitted in three distinct/separate attachments, namely. Mandatory Requirements, Technical Proposal and Financial Proposal (Bidders who will combine both technical and financial proposals shall be disqualified)

EMAIL TITLE SHOULD BE; – Special Purpose Grant Financial Statement (SPGFS) Audit

Bids received after deadline shall not be considered.

[1] Depending on the scope of the audit report as described in section 1.2.

[2] E.g. fiduciary agents, fiscal agents, central medical stores, and others. However, this excludes the Global Fund managed processes such as the Pool Procurement Mechanisms/Wambo

[3] The statements may be presented in local currency, but the grant reporting currency equivalents must be shown

[4] When the audited period overlaps two Allocation Utilization Periods (AUP), the Financial Statements prepared by the Principal Recipient must distinguish Revenues and Expenditures for each AUP. This will be the case for extensions funded with the next Allocation funds

[5] The Principal Recipient must maintain a fixed asset register which could be required when needs by the Country Team and the different assurance providers

[6] Refer to the Principal Recipient tax information described in the Core PUDR guidelines for relevant details

[7] Including goods and services from direct disbursements to third parties.

[8] From Interest generated, Revenues, exchange gains, VAT recoveries, recovery of funds from ineligible expenditures or other concept, etc.

[9] Program management and monitoring (including sub-recipients’ management), stock management, financial management (including management of the risk of fraud)

[10] For example, fiduciary agents, fiscal agents, central medical stores, and others. However, this excludes the Global Fund managed processes such as the Pool Procurement Mechanisms/Wambo

[11] Excludes all procurement directly performed by the Global Fund on behalf of the Principal Recipient such as the Pool Procurement Mechanisms/Wambo

[12] The Global Fund Finance Specialist may engage directly with the auditor in instances where independence and the unpredictable nature of audits may be compromised by sharing the detailed audit plan with the Principal Recipient.

[13] PPM related cost should be deducted from this gross total given the low level of risk associated with this mechanism

[14] When Designing and Performing Tests of Controls The …” .

[15] All deficiencies relating to program management, stock management, financial management, etc. not described in the other 4 sections of the Management Letter

[16] Refer to section 2.1 of the guideline

[17] When the Audi firm is directly selected by the PR and therefore has a direct contractual relationship with the PR, it is expected that this contract includes a clause requiring to the Auditor to send directly an electronic copy of the final audit report to the Global Fund.

[18] This is the responsibility of the auditor and should be mentioned in the contract between the PR and the Auditor.