1        TERMS OF REFERENCE (TOR) FOR PERFORMING AUDITS OF FINCNCIAL REPORTS OF PROJECTS THAT ARE GRANT-FUNDED BY THE GERMAN FEDERAL MINISTRY FOR ECONOMIC COOPERATION AND DEVELOPMENT (BMZ)

The following are the Terms of Reference on which The Engaging Party (hereinafter referred to as “The Beneficiary”) agrees to engage The Contractor (hereinafter referred to as “The Auditor”) to perform the contractually agreed audit(s) of financial reports of a BMZ grant-funded project with the associated reporting.

The TOR are an integral part of the Audit Contract concluded between The Engaging Party and The Contractor for the purpose of this/these audit/s.

1. PARTIES INVOLVED

The German Federal Ministry for Economic Cooperation and Development (BMZ) is the major funder of the project whose financial reports are to be audited. It provides 75% of total project funding. The BMZ has commissioned an administrative authority – Bengo – to handle the reporting and financial management of its approved projects on its behalf. The funding guidelines underlying this grant are laid down in a grant contract that was concluded between Bengo and Kindernothilfe e.V. (see below). Among other conditions, these guidelines also require audits of project financial reports and corresponding audit reports that comply with the specific requirements set forth in these TOR.

German-based NGO Kindernothilfe e.V. (KNH) is the direct contractual partner of the BMZ/Bengo for this project. KNH is the partner of The Beneficiary for the realization of the project and for ensuring accountability to the BMZ/Bengo. KNH provides 25% of the project funds and forwards the BMZ funds together with its own funding share to The Beneficiary for the implementation of the project. For this purpose, KNH has concluded a Project Agreement with The Beneficiary. This Project Agreement and its annexes set out the funding guidelines that KNH and The Beneficiary must comply with for implementation and financial accountability. The Project Agreement and its annexes are the key documents of reference for The Auditor in the performance of the audit.

The Beneficiary is the implementing organisation for the project in the project country. It is the final recipient of the grant that was approved by the BMZ and KNH for this project. The Beneficiary is responsible for providing a financial report with an associated voucher list for the project and for ensuring that this financial report and voucher list can be properly reconciled to The Beneficiary’s accounting and bookkeeping system and to the underlying accounts and records.

The Auditor is responsible for performing the project audit(s) as specified in these TOR, and for submitting a report of factual findings to The Beneficiary and KNH. The Auditor is a member of the national accounting or auditing association in its country of residence.

2. ENGAGEMENT TYPE AND OBJECTIVE

These TOR describe the requirements for an engagement to perform specific agreed-upon procedures regarding the audit(s) of financial reports of the BMZ/KNH-grant-funded project that is referred to in the “Contract for Performing audits of project financial reports” concluded between The Engaging Party and The Auditor. The objective is to verify that the expenditure claimed by The Beneficiary in the financial report has occurred (“reality”), is accurate (“exact”) and eligible and to submit to The Beneficiary and KNH a report of factual findings with regard to the procedures performed. Eligibility means that the funds provided for the project have been spent in accordance with the terms and conditions of the Project Agreement and its associated annexes.

3. SOURCES OF INFORMATION

The following sources of information shall be consulted by The Auditor in the auditing process and are to be made available to the Auditor by The Beneficiary. As available and relevant information sources may vary from project to project, the following list shall be adapted according to the project characteristics and audit requirements:

• Bylaws & Standing rules of The Beneficiary
• Chart of accounts and General Ledger Accounts
• Organizational policies for financial management and internal controls, organizational codes of conduct (e.g. on corruption prevention and case management), HR guidelines and internal regulations, as, for example, for the safeguarding of assets, for travel expenses or per diems.
• The Project Agreement concluded between The Beneficiary and KNH with all associated annexes (project proposal document, project Financing Plan in EUR and local currency, templates for the structure and content of the financial report and the associated voucher list, template for the project inventory list).
• All project-relevant bank statements, bank books and deposit slips, names and functions of authorized signatories
• Check book register / cancelled checks (including voids)
• Handing over and distribution lists
• If applicable, any approved project amendment document with the approved Financing Plan valid at the time of the audit.
• The financial report to be prepared by The Beneficiary for each audit with an associated voucher list.
• All project-relevant information in The Beneficiary’s accounting and bookkeeping system and its underlying accounts and records, e.g. all invoices, transfer receipts or other payment documents related to the project expenses.
• Evidence of all project income (from KNH transfers, interest income accrued to the project account, target group contributions and/or income received from third parties for the use of project outputs/services). With regard to transfers received from KNH, such evidence is, in particular, all receipts for project funds credited to The Beneficiary’s EUR or local currency bank account, all transfers of project funds from a EUR bank account to a local currency bank account, all information on the exchange rates on the respective dates of funds conversion.
• All project-related contracts (personnel and fee contracts, rental contracts, construction contracts, etc.).
• With regard to project personnel costs: The project staff and salary table on which the approved Financing Plan is based, with information on the number and positions of project staff, their project-attributable share of working hours and their approved salaries, if applicable, approved additional payments, payrolls for the period under review.
• Time sheets for the employees paid partially by the project
• A current inventory list of project assets
• Project vehicle logbooks including insurance & fuel control / maintenance and repair records
• All project-related procurement documents (tenders with order specifications (i. a.), offers received, documented offer selection and order placement).
• To answer questions that cannot be resolved by the consultation of documents, access to the appropriate organizational and/or project staff member(s) for an interview is to be sought.

4. SCOPE OF WORK – PROCEDURES TO BE PERFORMED

Obtaining a sufficient understanding of the project and of the Terms and Conditions of the Project Grant/ Project Agreement including any approved amendments

The Auditor obtains a sufficient understanding of the terms and conditions of the grant management by reviewing the Project Agreement and its annexes and other relevant information (see above), and by inquiry of The Beneficiary. If The Auditor finds that the terms and conditions are not sufficiently clear, The Auditor shall request clarification from the Beneficiary and/or KNH as the direct contractual partner of the BMZ for this project.

Grant Requirements (Compliance) and Audit Procedures

The table below sets out the BMZ’s requirements for the individual aspects of project fund management and the audit procedures to be performed. The Auditor shall report the resulting findings and shall classify any detected errors and deficiencies according to the risk and impact that they present for the financial transparency and accountability of project fund management as well as according to their probable cause.

Categorization of Audit Findings by Risk/Impact Severity

Low (all criteria apply)

• The terms and conditions of the Project Agreement and its annexes are mostly complied with.
• The use of funds is documented in a comprehensible manner on the basis of the project and payment documents, vouchers and supporting documents.
• Any errors identified can be easily corrected.
• The whereabouts of transferred project funds and their use for intended project purposes are fully verifiable.

Medium (all criteria apply)

• The terms and conditions of the Project Agreement and its annexes are partially complied with.
• Through corrections and supplementary documentation, the use of funds can be documented in a comprehensible manner on the basis of the project and payment documents, vouchers and supporting documents.
• The weaknesses identified can be remedied quickly and with simple measures.
• The whereabouts of transferred project funds and their use for intended project purposes are fully verifiable.

High (one or more criteria apply)

• The terms and conditions of the Project Agreement and its annexes are considerably disregarded.
• The use of funds is no longer clearly comprehensible.
• Addressing the identified weaknesses requires far-reaching changes to internal policies or comprehensive capacity-building measures aimed at staff qualification or technical equipment.
• The loss of project funds cannot be excluded.

Extremely high (one or more criteria apply)

• The terms and conditions of the Project Agreement and its annexes are repeatedly and/or seriously disregarded.
• The use of funds is not comprehensible.
• Identified weaknesses are multiple and require far-reaching changes to internal policies or comprehensive capacity-building measures aimed at staff qualification or technical equipment.
• A loss of project funds has been substantiated.

Categorization of Audit Findings by their probable Cause

Compliance

• Failure to comply with the terms and conditions of the Project Agreement and its annexes due to grossly negligent financial and administrative mismanagement and intentional acts, including fraud and/or corruption.

Guidelines

• Absence of written procedures to guide staff in the performance of their functions.

Guidance

• Inadequate or lack of supervision by supervisors.

Human error

• Mistakes committed by staff entrusted to perform assigned functions.

Resources

• Lack of or inadequate resources (funds, skills, staff, etc.) to carry out an activity or function.

Financial Statement as at

In local currency

Total Receipts

Total expenditure

Balance

Overspending

Required wording: “It is confirmed that no funds were available for the financing of the project other than the receipts detailed above. It is also confirmed that all expenditure was necessary, that funds were utilised efficiently and economically and that the information given conforms with the books and vouchers.”

3.4         (If applicable): Presentation of budget line overspending and of explanations and justifications for deviations of at least 30% as compared to the cost estimates in the financing plan (for both main and sub-budget items).

If there hasn’t been any major deviation per budget line, this needs to be stated.

3.5         (If applicable): Presentation of material findings

Information is material, if omitting, misstating or obscuring it could reasonably be expected to influence the decisions of the BMZ and KNH as project donors with regard to the continuation and further financial support of the project. When filling in this section, the results/classifications/ causes of point 5.2.2 are to be considered.

3.6         Final Audit Certificate

The final audit certificate must have the following content (minimum requirement), which must be clearly formulated by the auditor and adjusted if necessary:

Required wording: “We hereby certify that we have audited the statement of accounts of Zambia Civic Education Association in respect of the financing of the project ‘Participation first, children’s voices matter!’ (P7467 / KNH 61567) on the basis of the documents/sources of information listed under 5.2.1.  To this end, we have inspected the books and vouchers and report that:

[The auditor is obliged to provide concrete information on the following questions:]

1. To what extent is project income and expenditure properly evidenced in the form of payment vouchers and receipts?
2. To what extent is the expenditure, for which evidence has been supplied, in keeping with the project document and the appointed purpose as set out in the currently valid Financing plan? Are any deviations from the currently valid Financing plan described and explained separately?
3. To what extent is the amount and origin of documented income, which is accounted for as counterpart contributions made by The Beneficiary, the target group and/or other agencies in the project country, correctly presented and explained in accordance with the specifications?
4. To what extent were the terms and conditions of the BMZ as stated in the Project Agreement and its associated attachments observed? Have any additional requirements that are linked to this project grant approval been observed? In which points were the BMZ funding conditions possibly not observed and are the reasons/causes provided for non-compliance in these cases?
5. Special notes: What are the positive or negative peculiarities of the project to be mentioned?

[With the Final Audit Certificate, the Auditor is to draw a clear conclusion regarding The Beneficiary’s overall compliance with the binding terms and conditions of the grant as laid down in the Project Agreement.]

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(Place)                                                                                    (Date)

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(Signature and Stamp)

[Signature can only be done by a duly authorized representative of The Contractor]

4        ANNEXES

• Audit TOR
• Financial Report
• Voucher List
• Staff & Salary Table
• Inventory List

5        MANAGEMENT LETTER AND MANAGEMENT RESPONSE

Management Letter:

• Statement of immaterial audit findings
• Recommendations for improving internal controls, project accounting, or financial reporting
• Starting with the 2^nd project audit: Presentation of the audit findings on the status of the implementation of recommendations from previous reports.

Management Response:

• The Beneficiary’s Management’s response to the statements and recommendations in the Management Letter.

6. SUBMISSION REQUIREMENTS

6.1 Technical Proposal

6.2 Financial Proposal

6.3 Tax Clearance Certificate

6.4 Registration and Latest Affiliation ZICA Certificate

7. SUBMISSION DEADLINE

7.1 Deadline for submitting proposals is 4th September 2024, at 23:59hrs. Late submissions will not be considered.

To apply, kindly send your completed applications form to info@zamcivic.com.zm Cc: nzila.siabalima@zambiacivic.onmicrosoft.com and accounts@zamcivic.com.zm

For inquiries, please contact us at the following numbers during business hours, from 08:00 to 17:00hours.

• Airtel: +260 977613167

[1] Budget line reserved for KNH – no expenditure may be entered

[2] For budget only – all expenditure must be allocated to the applicable budget line

[3] Budget line reserved for KNH – no expenditure may be entered