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About DKH
Diakonie Katastrophenhilfe provides humanitarian aid worldwide. It is registered in Kenya as Diakonie Emergency. The non-profit organization supports people affected by natural disasters, war and displacement and who are not able to cope on their own in the emergency situation they find themselves in. Our focus and effort is to help people in great need worldwide regardless of their colour, religion and nationality. One of the most important principles of our work is impartiality and independence. Diakonie Katastrophenhilfe painstakingly observes its aim not to become an instrument for political, economic or military interests, particularly in conflict areas. Projects and programs are designed to suit the local conditions and are integrated in the economic, social and political context of a specific country or region. Diakonie Katastrophenhilfe is committed to the basic principles of humanitarian aid as laid down in the Code of Conduct of the red Cross and Red Crescent and of non-governmental aid organizations in the context of assistance. Closely cooperating with local partners and being a member of the ACT Alliance (Action by Churches Together), Diakonie Katastrophenhilfe has been delivering humanitarian aid with local partners in the Horn of Africa since the 1990s. The organization maintains country offices in Somalia, South Sudan and Ethiopia (integrated office with our sister organization Bread for the World) and a Regional Office in Nairobi, which coordinates and streamlines the humanitarian aid programmes in the region and provide quality assurance
BACKGROUND
Diakonie Katastrophenhilfe is currently implementing a Regional, Multi-sectoral, German Federal Foreign Office (AA) project titled’ ‘Multi-sectoral and integrated humanitarian response with focus on food security and livelihood for conflict and climatic shocks affected vulnerable people and communities in Somalia, South Sudan and Ethiopia’, - Project No. K-AFK-2021-9002. The overall goal of the project is to contribute to saving lives, improving access to basic services and restoring living conditions of conflict and climatic shock affected vulnerable people and communities in Somalia, South Sudan and Ethiopia. This project commenced on 1st May 2021 and is ending on 31st Dec 2023. The project is mainly implemented by partners in the 3 countries precisely, 5 NNGOs in Ethiopia (2) and Somalia (3) and 1 INGO in South Sudan which has sub-granted 3 other National Organizations in South Sudan alongside Diakonie Katastrophenhilfe
The period to be audited is from 1st May 2021 to 31st March 2022. The project will end on December 31st, 2023.The expected expenditure amount to be Audited is Eur 4,541,904. The auditors will complete the exercise in time for the entire audit and submit the report (including the documents mentioned below) to reach DKH within 1.5 months, at the latest after the end of the exercise.
OBJECTIVE OF THE PROJECT AUDIT
The objective of the audit of the Project Financial Statements (PFSs) is to enable the auditor to express a professional opinion on the financial position of the project by31st of arch 2022, on funds received and expenditures incurred for the audited period.
The auditor would carry out the audit of the project in accordance with the International Standards on Auditing (ISA), the International Standard on Assurance Engagements (ISAE) 3000 and the International Standard on Quality Control (ISQC), all in their most recent version. As part of the audit process, the auditor may request from Partner abroad written confirmation concerning statements made in connection with the audit “Engagement Letter “.
PREPARATION OF PROJECT ANNUAL FINANCIAL STATEMENTS
It is the responsibility of the project partners and the DKH office in Nairobi-Kenya to prepare the financial statements including adequate disclosure of the accounts. These persons are also responsible for the application of accounting policies and preparation of the FSs in accordance to international financial reporting standards.
The project books of accounts provide the basis for preparation of the Project Financial Statements by the representative of the partner and are established to reflect the financial transactions in respect of the project. The representative of the office abroad maintains adequate internal controls and supporting documentation for transactions.
The partners of the above project and the representative of the office in Nairobi-Kenya, are responsible for ensuring the maintenance of proper accounting records in accordance with the generally accepted accounting principle as well as requirements of the back donor. They are also responsible for the submission of all the accounting records related to the projects and all other relevant records (e.g. progress reports) and related information to the auditors according to time frame agreed with the auditor that allows smooth audit assignment.
SCOPE OF THE AUDIT
The Auditor designs and carries out the audit in accordance with the objective and scope of this engagement and the procedures. The Auditor may apply techniques such as inquiry and analysis, (re)computation, comparison, other clerical accuracy checks, observation, inspection of records and documents, inspection of assets, obtaining confirmations or any others deemed necessary in carrying out these procedures.
The auditor obtains sufficient appropriate verification evidence from these procedures to be able to draw up a report of factual findings.
The audit of the projectwill include such tests and auditing procedures as the auditor will consider necessary under the circumstances. Special attention should be paid by the auditor as to whether:
a) all applicable relevant rules and regulations of Diakonie Katastrophenhilfe (DKH), German Federal Foreign office (GFFO) and the contractual engagements have been adhered to. These include the:
- Cooperation Agreement;
- Administrative Procedures;
- DKH Standards for reporting;
- Approved budget (cost Plan);
- Rules and regulations of GFFO (AN Best P and BNBest), above all spending deadlines and utilization of funds for purposes intended for.
b) Funds have been provided and used in accordance with the relevant financing agreements and the relevant donor regulations from GFFO, with due attention to economy and efficiency, and only for the purposes for which they were provided;
c) Goods, works and services financed have been procured in accordance with the relevant financing agreements, including specific provisions of the donor and their procurement Policies and Procedures;
d) All necessary supporting documents, records, and accounts have been maintained in respect of all project activities, including expenditures reported using Statements of Expenditure (SOE). The auditor is expected to verify that respective reports issued during the period agree with the underlying books of account;
e) Designated Accounts have been maintained in accordance with the provisions of the relevant financing agreements and funds disbursed out of the Accounts were used within the required timeframe and only for the purpose intended in the financing agreement;
f) National laws and regulations have been complied with, and that the financial and accounting procedures approved for the project (e.g. financial procedures manual, etc.) were followed and used;
g) Assets procured from project funds exist and there is verifiable ownership by the partner office.
In complying with International Standards on Auditing, the auditor is expected to pay particular attention to the following matters:
a) Fraud and Corruption: Consider the risks of material misstatements in the financial statements due to fraud as required by ISA 240: The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements. The auditor is required to identify and assess these risks (of material misstatement of the financial statements) due to fraud, obtain sufficient appropriate audit evidence about the assessed risks; and respond appropriately to identified or suspected fraud;
b) Laws and Regulations: In designing and performing audit procedures, evaluating and reporting the results, consider that noncompliance by the Partner abroad with laws and regulations may materially affect the financial statements as required by ISA 250: Consideration of Laws and Regulations in an Audit of Financial Statements;
c) Governance: Communicate audit matters of governance interest arising from the audit of financial statements with those charged with governance of an entity as required by International Standards on Auditing 260: Communication of Audit Matters with those Charged with Governance:
d) Risks: In order to reduce audit risk to an acceptable low level, determine the overall responses to assessed risks at the financial statement level, and design and perform further audit procedures to respond to assessed risks at the assertion level as required by Internal Standard on Auditing 330: the Auditor’s Procedures in Response to Assessed Risks.
PROJECT FINANCIAL STATEMENTS (PFSs)
The auditor should verify that PFSs have been prepared in accordance with the international accounting standards and give a true and fair view of the financial position of the project at the relevant date and of resources and expenditures for the financial year ended on that date
The Project Financial Statements (PFSs) should include:
a) A statement of funds received, showing funds received from the DKH Head Office in local and foreign currencies;
b) A statement of Expenditures (SOEs);
c) If relevant a Balance Sheet;
d) A cash flow statement;
e) A summary of the principal accounting policies that have been adopted, and other explanatory notes;
f) A list of material assets acquired or procured to date with project funds.
As an Annex to the PFSs, the auditor should prepare a reconciliation of the amounts as “received by the Project”, with those shown as being disbursed by the Bank (Balance on Hand).
STATEMENT OF EXPENDITURES (SOEs) / JOURNAL LISTING The appropriate exchange rates are used, based on the GFFO and DKH Financial Policy;
a) The Exchange Rates Table includes the organization’s calculation methods for exchange rates;
b) The exchange rates in the Exchange Rates Table are the same as those used in the journal listing;
d) The columns in the voucher lists are filled with all the necessary details required;
e) In principle, all inspected documents have to be the original copies. Especially, proofs of payments are to be checked;
f) The items registered as capital assets correspond to those recorded in the inventory listing;
g) Examine, on a test basis, that there is supporting documentation related to reported expenditure. The size of the test shall be based on the auditor’s risk analysis, which should be stated in the report. The auditor shall report the identified amount in case there is any missing supporting documentation;
h) Follow up whether salary costs debited to the project correspond to the agreed percentages and are recorded throughout the duration of the year in a systemized way and examine whether the salary costs can be verified by sufficient supporting documentation;
i) Examine partner compliance with rules and regulations with regard to applicable local taxes and social security fees;
j) Examine partner compliance with all relevant rules and regulations of GFFO and the expenditure deadlines per disbursement;
k) Follow up whether the Partner abroad has adhered to any other DKH HQ Financial & procurement guidelines if applicable;
l) The total withdrawals under the SOE should be part of the overall reconciliation of Bank disbursements;
m) The auditor should examine the eligibility of financial transactions during the period under examination and fund balances at the end of such a period;
n) The adequacy of internal controls for this type of disbursement mechanism;
o) The operation and use of the designated fund in accordance with the financing agreement;
DESIGNATED ACCOUNT
In conjunction with the audit of the Project PFSs, the auditor is also required to review the activities of the designated account associated with the project. The Designated Account usually comprises:
a) Income received from DKH Head office;
b) Interest that may have been earned on the accounts;
c) Withdrawals related to project expenditures;
d) Transfers from and to other projects
e) Account balances at the end of such a period.
AUDIT REPORT
The auditor will issue an opinion on the project financial statements (PFSs). The annual audit report of the project accounts should include a separate paragraph highlighting key internal control weaknesses and non-compliance with the financing agreement terms.
The addressee of the audit report is the authorized representative of the project holder as well as the country representative of DKH.
The following documents have to be delivered by the auditors:
- Auditor’s report/opinion including a compliance statement in respect of the DKH funds;
- Audited financial statement(s) of the project(s) under consideration (balance sheet, income and expenditure account of the project holder, receipt and payment account / cash flow statement of the project including opening and closing balances of funds and a plan-actual comparison / variance report with the approved budget);
- Management Letter (including comments on the implementation of previous year’s recommendations and new recommendations);
- Notes to the accounts (if relevant in the given context of the project):
a) list of income/receipts according to origin/source;
b) foreign currency transactions (incl. examination of exchange transactions and used exchange rates);
c) list of all bank accounts of the partner in the country;
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;
f) statement on assets, in particular evidence of new acquisitions and the compliance with the DKH approval, if applicable;
g) Unspent balance per audited project
MANAGEMENT LETTER
In addition to the audit report, the auditor will prepare, if the auditor deems it necessary, a management letter, in which the auditor will:
a) Give comments and observations on the accounting records, systems and controls that were examined during the course of the audit;
b) Identify specific deficiencies or areas of weakness in systems and controls, and make recommendations for their improvement;
c) Report on the degree of compliance in the financing agreement and give comments, if any, on internal and external matters affecting such compliance;
d) Communicate matters that have come to his/her attention during the audit which might have a significant impact on the implementation of the project;
e) Comment on the utilization of funds within 3 months of receipt as required by the Donor.
f) Bring to the recipient’s attention any other matters that the auditor considers pertinent.
Ideally, the management letter should also include responses from the partner abroad to the issues highlighted by the auditor.
AVAILABLE INFORMATION
The auditor should have access to all legal documents, correspondences, and any other information associated with the project and deemed necessary by the auditor. The auditor will also obtain confirmation of amounts disbursed and outstanding at the Bank. Available information should include copies of the relevant: project appraisal document; financing agreement; financial management assessment reports; supervision mission reports and implementation status reports.
Time frame & Audit Deliverables
- The consolidated financial report and accounting records of the project under consideration must be made available by the partner and the DKH representative to the auditors during the audit period.
- The auditing process shall be completed within 4 weeks after this date.
- Two copies of the audited financial statements including the audit report, management letter and management response should be received by the audited partner no later than one week after completion of the audit.
- If there is any reason for a delay, this has to be communicated directly to the audited partner by either party (with copies of the correspondence to the other concerned party).
Desired Profile of the Auditor(s)
- Audit firm with a Regional presence in the Project Implementation countries or with permit to operate in the said countries.
- The audit firm must be registered and has a license from a national or regional professional Accountancy Body.
- The firm should have relevant experience in accounting and auditing of humanitarian projects, especially donor-funded operations.
- The key audit team will comprise, at least: (a) An audit manager with at least 7 years’ experience in auditing and with a sound knowledge of German Funded Projects. In addition, he/she should be a member of a recognized accountancy professional body; (b) A team leader with at least a degree in auditing/accounting or equivalent with a minimum of 5 years’ experience in auditing; and (c) An assistant auditor with adequate experience and professional qualifications.
Language
Audit report, Management letter, other communication shall be in english language
Fees
The fees are computed on the basis of the actual time spent on auditing affairs and on the levels of skill and responsibility of staff involved. Unless otherwise agreed, their fees will be billed upon delivery of the documents listed under paragraphs 8 & 9 above and will be payable by DKH Head office Berlin on presentation of the invoice. Diakonie Katastrophenhilfe reserves the right to reduce the fees in case of considerable delays caused by the auditing company regarding the agreed time frame.
How to apply
The bidders should provide the following documents in their application.
1. A valid registration certificate and proof of having worked in the 3 Countries of project implementation (Ethiopia, South Sudan and Somalia)
2. A Company profile.
4. A financial quote including a breakdown of all the relating costs
5. List of clients served from NGOs in the project region will be an added advantage.
Interested eligible bidders may send their applications with the above information to contact.ken@diakonie-katastrophenhilfe.org by 19th June 2022. All e-mails should be sent with the subject line “ Project No. K-AFK-2021-9002 Audit.”
Bidders may seek further clarifications by writing to the same email address.
Kindly note that DKH will not reply to unsuccessful bidders and late submissions will be disqualified for selection.
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