EOI from Audit firms
 Emmanuel Hospital Association, GFATM Rd9 HIV-IDU Grant
 Location: Aizawl, Allahabad, Bhopal, Kozhikode, Chennai, Delhi, Dimapur, Guwahati, Imphal, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram
 Last Date: June 25, 2011
 

EOI from Audit firms

Emmanuel Hospital Association, GFATM Rd9 HIV-IDU Grant

Locations: Aizawl, Allahabad, Bhopal, Kozhikode, Chennai, Delhi, Dimapur, Guwahati, Imphal, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram.

Last Date: June 25, 2011 

The Emmanuel Hospital Association (EHA) as a Principal Recipient under The Global Fund Round 9 India HIV Grant invites expressions of interest, detailed organizational profile and quotes from audit firms for quarterly financial audits as per the under-mentioned Audit Plan, Terms of Reference and Guidelines to a Management Letter.  

A total of 31 sub-recipients of the EHA are located at Aizawl, Allahabad, Bhopal, Kozhikode, Chennai, Delhi, Dimapur, Guwahati, Imphal, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram. 

An auditing firm may apply for one or more sites clearly mentioning in the Subject line “Quote for Quarterly Audits at <name(s) of the place(s) from the above list>” and send their offers latest 2:00 pm on Saturday, 25^th June 2011 addresses to the Project Director via email to EhaGF9@gmail.com 

Audit Plan 

Background and scope

The Emmanuel Hospital Association (EHA) is a Principal Recipient under The Global Fund (GFATM) Round 9 India HIV Grant. The Project Management Unit (PMU) of the EHA is mandated under Article 13 of the Standard Terms and Conditions of the Grant Agreement to conduct external audits at the Principal Recipient (PR) and Sub Recipient (SR) levels. Audits of PR and the SR’s programme financial statements are the mandate and fiduciary framework of the GFATM. The GFATM does not require a consolidated financial statement of the PR and their SRs receipts and expenditures for audit purposes. 

These audits are important parts of the assurance process regarding proper use of GFATM funds and provide the basis for decision-making on the disbursement of funds and the renewal of grants within the framework of GFATM performance-based funding principles. The audits are to provide the GFATM with reasonable assurance that disbursed funds were used for the intended purposes in accordance with the grant agreement, the approved budget and the performance framework. 

As per the Grant agreement, it is essential that an audit mechanism be developed to support the reports submitted by the Principal Recipient and Sub-recipients to The Global Fund. 

Selection of Auditors

The PMU follows a transparent process to select auditors. The selection process will be based on competitive bidding by audit firms. The PMU will identify independent auditors at regional levels, to facilitate easy access and proximity to SRs for better coordination and follow up in a cost efficient manner.  

The PMU has identified the following criteria’s that will be applied during the selection process of the auditors:

1. The audit firm should have over 10 years of experience in carrying out audits
2. The firm should have at least 3-5 years experience in handling NGO health care or hospital audits
3. Experience in donor audit will be desirable
4. The firm must be in close proximity to the Sub- recipient
5. The human resource capacity employed in the firm

 The PMU will advertize and request for proposals based on the Term of Reference. 

The PMU will constitute a committee comprising of the Executive Director, Partnership Projects Director & Finance Director of the EHA and, Project Director & Finance Manager of the PMU to review the proposals and select the audit firm(s).

Audit Schedule

The PMU plans to carry out audits at the end of every quarter at the SR level. 

Audit Fee

The PMU will agree on the audit fee depending on the scope and geographical coverage of work assigned to each auditor. The audit fee will include travel cost for the Auditor to visit the field of operation.

Submission and Review of Financial Statements

Due Date: The Auditors will be required to submit the audit report within ten (10) days from the date of start of audit.   

Review of Audited Financial Statements:  The Finance Manager at the PMU will review the audited financial statements, audit opinion and the management letter within fifteen (15) days after receipt from the auditors and submit to the Management the findings. 

The Management will review the audit results and flag critical issues that need to be addressed as part of the management action plan and communicate these to the PMU.  

The PMU will follow up on any audit issues arising at the SR level. Through periodic visits and constant monitoring the PMU will ensure that audit recommendations are implemented. The PMU Finance Manager will follow up on the audit issues at the PMU level. 

Deficiencies in internal control, if highlighted in the audit report, could have impact on the future fund disbursements.

Terms of Reference 

Accounting Standards

Under this grant both the PR and its SRs will follow cash based accounting system. This will be in accordance with the Indian Accounting Standards.  

Auditor Independence and Qualification

The auditor must be completely impartial and independent from all aspects of management or financial interests in the entity being audited or those of its implementing/supervising agency or 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 entity.   

The auditor must demonstrate appropriate professional qualifications and suitable experience with Indian Auditing standards, including experience in auditing the accounts of entities comparable in size and complexity to the entity being audited.  

The Curriculum Vitae (CVs) of the auditor(s) who will be responsible for signing the opinion, together with the CVs of managers, supervisors and key personnel proposed to be part of the audit team must be made available. The senior partner should have minimum 10 years experience in handling audits of NGOs/Hospitals. The auditor should be aware of and comply with the Global Fund Code of Conduct for suppliers. Please refer the ‘Code of conduct for suppliers’ on the GFATM website:

< http://www.theglobalfund.org/documents/corporate/Corporate_CodeOfConductForSuppliers_Policy_en.pdf >.  

Audit Methodology, Quality Control and Documentation

The Auditor must make a preliminary risk assessment, which will be followed by a planning and testing stage. The audit should be done as per audit standards in India.  

To ensure quality audit there should be a statement of professional ethics. The auditors conducting the audit should have proper skills and be competent to carry out the audit in a professional manner.  Sufficient direction, supervision and review of work at all levels should be carried out in order to provide reasonable assurance that the work performed meets appropriate standards of quality. Whenever necessary, consultation within or outside the firm should occur with those who have appropriate expertise. The continued adequacy and operational effectiveness of quality control policies and procedures be monitored. These need to be in compliance with Indian audit standards. 

The auditor must also ensure all procurements at the SR levels are consistent with the Quality Assurance Policy of The Global Fund. Any deviations should be documented. There must be well-defined timelines, methodologies and documentation procedures for all evidence gathered. The major components of audit documentation are the record of audit procedures performed, relevant audit evidence obtained and the conclusions the auditor reached. 

Audit Scope

1. The quarterly audits are intended for the SR’s

2. The audits would be carried out in accordance to the Indian Accounting Standards (for book-keeping) and Indian Audit & Assurance Standards (for auditing)

3. The audit period covered would include the current reporting period

4. Sufficient audit evidence is gathered to substantiate in all material respects the accuracy of financial statements

5. A sufficient sample of disbursements be used for audit to determine whether funds disbursed through SOE’s were used for the purpose defined by the funding agreement

6. The designated bank account used for Global Fund moneys be verified with records to determine cash in the bank account 

The selected auditors will be provided the unit-wise breakdown of the quarterly program budget for first two years. The auditor is required to provide an Audit Report. The report should state if the audit was not in conformity with any of the above and indicate the alternative standards and procedures followed. Please refer the cover letter for additional requirements regarding location and number of sites to be covered.  

Audit opinion

1. The period covered by the opinion

2. That bookkeeping was as per Indian accounting standards and indicates the effect of any deviations from those standards

3. That Indian audit and assurance standards were followed and complied with in all material respects

4. Whether the financial statements and supporting schedules fairly present the cash receipts and expenditure for the program and the funds were used for the purposes defined by the funding agreement 

Reports

The auditor would need to provide to the PR the financial statements and a management letter at the end of each audit. 

The financial statements include the following components:

i. Statement of Income & Expenditure

ii. Statement of Financial Position (Balance Sheet)

iii. Statement of Cash Flows

iv. Notes to the financial statements 

The Management Letter should at least include:

• An assessment of the program's internal control system with equal emphasis on (i) the effectiveness of the system in providing the programme management with useful and timely information for the proper management of the programme and (ii) the general effectiveness of the internal control system in protecting the assets and resources of the programme.

• A description of any specific internal control weaknesses noted in the financial management of the programme and the audit procedures followed to address or compensate for the weaknesses.  Recommendations to resolve/eliminate the internal control weaknesses noted should be included. 

Access to Information

All financial records of PR (PMU) and SR’s are located at the respective offices usually with the finance and administration staff. The PMU and SR’s use TALLY automated accounting software for doing financial entries and generating reports. 

The auditor will have full and complete access at any time to all records and documents (including books of account, legal agreements, minutes of committee meeting, bank records, invoices and contracts etc.) and all employees of the entity. The auditor has a right of access to bank and depositories, consultants, contractors and other persons or firms engaged by the program management. 

Audit Follow up

The auditor must ensure during subsequent audits that the issues arising out of previous audits both at the PR (PMU) and SR levels have been addressed. They should verify compliance and ensure that audit recommendations have been implemented.  Any pending issues need proper justification. 

Guidelines to a Management Letter 

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’s Policy on documents)

(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/Sub-recipient)  

(Name of SR) - 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 organisation, thereby aiding the achievement of broader organisational goals)

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

Grade 1 findings are those which are particularly significant 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 as regards operational activities within the PR/Sub-recipient organisation.

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

1.0 (Brief heading for finding)                                                                     (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 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 PR/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 PR/SR 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/Sub-recipients are required to unequivocally 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. 

Finally, all Management Letters 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: