2 months ago

Job Summary

Empowering communities and civil society to demand for good governance in natural resources management is a project funded by the European Union.

  • Minimum Qualification:Bachelor
  • Experience Level:Senior level
  • Experience Length:5 years

Job Description/Requirements

Avocats Sans Frontières (ASF) IS LOOKING FOR:

An audit firm that meets international audit certification standards to conduct Expenditure Verification for the European Union project CSO-LA/2019/413-940 titled, “Empowering communities and civil society to demand good governance in natural resources management”

Assignment to be undertaken and finalized in August 2022. 

 

Project 

  • Empowering communities and civil society to demand for good governance in natural resources management is a project funded by the European Union.


Objective of the assignment

  • The objective of this assignment is to carry out expenditure verification on the books of accounts of ASF and her partner; Advocates for Natural Resources and Development (ANARDE) 


Project Budget  

  • 500,000 Euros for 26 months from 1st January 2020 to 1st March 2022


Contract and deadline

  • Please submit applications by 22nd July 2022 at 5 pm, including the following:
  • Proof of audit firm registration. 
  • CVs of key personnel demonstrating relevant skills and experience and at least 2 references, preferably from organizations with which the auditor has conducted similar types of work. 
  • Expenditure verification fees in Uganda Shillings, number of days, and daily rate. The budget must include all taxes. 
  • Expenditure verification will be done as per the procedure set out by the donor under annex I. 
  • Declare availability for the expenditure verification to start on August 1st and be finalized by end of August 2022.
  • The documents should be submitted to Moses Kinyera at, Mkinyera@asf.be copy to lfickers@asf.be under the subject line “EU Expenditure Verification 2022”.



Project Summary

The Albertine Graben is currently witnessing intensive infrastructure building in preparation for commercial production of oil in Uganda, due to start in 2023. Vast oil deposits have been discovered in the Moroto-Kadam basin where exploration is due to start in 2020. On the mining side, efforts to revise the Mining Policy and Act have been going hand in hand with intensified mineral exploration, especially in Karamoja. While earmarked in national policies as a key driver of development, EIs have so far yielded little of the promised benefits to local populations. On the contrary, our observations show that the rise of Extractive Industries (EIs) exacerbates their pre-existing state of vulnerability and tends, among others, to fuel gender inequality. The situation is worsened by violations of the human rights of the communities living in the vicinity of extractive resources, particularly women, which range from preventing their access to water, food and livelihood to gender-based violence and breaches of property rights, cultural rights, and the right to a healthy environment.


Moreover, there are consistent breaches of information and consultation rights, opacity around licensing processes, and corruption that nurture a sense of distrust, skepticism and disempowerment among local populations. The reduction of civic space has also been observed by Avocats Sans Frontières (ASF) and the Advocates for Natural Resources and Development (ANARDE) during the implementation of their projects; while freedom of expression and assembly and the defence of human rights are found to be regularly cast in opposition to economic development in official discourse. Increasingly, central and local governments perceive CSOs as antagonistic stakeholders and very rarely recognize their contribution as intermediaries between the duty-bearers and the right-holders of EI projects. 


The mandatory impact assessments, carried out by the State and companies, are limited to environmental and social issues and thus fail to inform the specific human rights impact of projects. Uganda’s adhesion to the EITI mechanism contributes to open dialogue between stakeholders, but does not directly integrate human rights issues. On the other hand, institutions (local and national authorities, justice mechanisms) struggle to provide adequate support to the local communities facing EIs development. So do ad hoc consultation and grievance mechanisms set up by companies, which tend to reproduce exclusory societal patterns through their reliance on the local leadership as interface with communities, yet marginalizing groups such as women and the youth. As a result, communities lack channels to express their human rights-related grievances, fears and expectations towards projects from their own perspective and in their own language. 


Contextual analysis

In the last two decades, Uganda has witnessed an unprecedented increase in foreign direct investment and actual economic activity by both multinational corporations and local business enterprises in its economy. Alongside the infrastructure sector, foreign investment primarily targets the country’s primary (land, forestry etc.) and strategic (oil deposits and rare minerals) natural resources. While this trend presents opportunities for development, it also carries potential harmful impacts on individuals, communities and the environment. Corporations’ activities have proved a fertile ground for human and environmental rights violations and abuses, including child labor, gender-based violence, fraudulent compulsory land acquisition, environmental degradation, workers’ rights violations, and land grabbing. In a context of widespread corruption, the investment in natural resources also fuels predatory behaviors, often with the involvement of State agents. Likewise, the development of extractive industries produces a gender-differentiated impact, whereby women tend to bear the bulk of negative consequences while economic opportunities are more accessible to men. All this adds up on the existing limitations on affected populations’ access to justice. The weakness of the State schemes (Local Councils, the Justice Law and Order Sector (JLOS)’s legal aid structures) and the often compromised role of local leadership (cultural and administrative) deprive the populations of legitimate and peaceful avenues to claim their rights or solve their conflicts. The population relies on services from Legal Aid Service Providers (LASPs) and Civil Society Organizations (CSOs), which are increasingly constrained in a context of reducing civic space and lack of consideration for human rights. While the local civil society can play a crucial role in filling existing institutional gaps, both through ensuring public participation and advocating towards policy change, there is a strong disconnect between the work carried out locally in the community and processes of national policy formulation leading to continued frustration and rights violations among the project-affected populations.


The project action

ASF is jointly implementing this action with ANARDE funded by the Delegation of the European Union in Uganda. The action’s general objective is “to contribute to good governance in the management of extractive resources in Uganda.” 


Relying on the established nexus between local participation and good governance, the specific objective of the action is that “affected local populations demand and have their rights respected and protected at all phases of extractive resources exploitation projects.” For this objective to be reached, three steps are required: 

  1. local populations are informed about their rights; 
  2. they are able to articulate those rights in a language that can be heard by duty-bearers and formulate demands; and 
  3. the duty-bearers act upon those demands. 


In regard to the above, there are several ongoing projects working on raising the awareness of rights among the local populations, including projects led by ASF and ANARDE. However, an important link is still missing in order to ensure that the duty-bearers act upon the demands of affected local populations. This is mainly because the work done by CSOs at the grassroots remains disconnected from policy formulation processes. 


The action is therefore focused on bridging this existing gap by enhancing the capacity of local populations to articulate and voice their claims towards the duty-bearers. The inability of civil society to frame issues arising in the context of oil and mineral exploitation in the language of rights has made them unable to impact policy-making. 


Therefore, the major assumption held is that strengthening the work done by CSOs at grassroots level and linking it with the policy formulation processes at national level will foster the integration of local interests and human rights in EI-related legislation and planning, making them more fair and sustainable.


Intervention approach

The project will adopt a bottom-up process that hinges on community-based human rights monitoring to activate/strengthen the structures through which voices from the grassroots can be included in policy formulation. This is to ensure that community participation increases the positive perception of EI projects and a sense of inclusion in economic development among the local populations. Meaningful participation, however, requires going beyond mere compliance with the current Ugandan legal framework, which asks very little from project developers to ensure locals’ involvement and respect for human rights in general. 


Expected results 

Result 1: Local populations are able to monitor and frame violations resulting from EIs projects through harmonised community-based human rights impact assessment;

Result 2: The interests of communities affected by EI projects are reflected in policy formulation at national level 

 

Type of activities

  • Development and capacity building of networks of human rights monitors;
  • Monitoring of human rights violations and abuses; 
  • Transnational exchange of experience between CSOs;
  • Dialogues between affected populations, CSOs, and duty-bearers;
  • Publication of policy papers and research reports
  • National conference on Business and Human Rights in Uganda. 

 

Final beneficiaries, target groups, and stakeholders 

1. The project’s final beneficiaries are the populations affected by oil and mining industries in the Albertine Graben and the Karamoja Sub-region, who lack knowledge of their own rights in natural resources governance and are often unable to meaningfully participate in the consultation mechanisms;

2. The project’s target group are the Civil Society Organisations (CSOs) at the local level comprising of Community-Based Organisations (CBOs), Local Interest Groups (in particular women, youth and miners’ groups), and grassroots networks of monitors and volunteers;

3. The project works with two types of stakeholders: 

  • Coalitions (esp. the Civil Society Coalition on Oil (CSCO), the Albertine Region Land Platform (ARLP) the Uganda Consortium on Corporate Accountability (UCCA) and the KAMIG);
  • The duty-bearers, i.e. State actors – who have the duty to protect human rights in the context of economic development projects, and corporate actors – who have the responsibility to respect human rights. 


Project partners

The project is implemented under the leadership of Avocats Sans Frontières and in partnership with Advocates for Natural Resources Governance and Development (ANARDE). ANARDE is a Ugandan CSO that is active in litigation and legal representation for communities affected by extractive industries. ANARDE works to promote understanding of effective management of natural resources and knowledge about the sustainable use of natural resources within marginalized communities. 


General Overview of ASF

ASF is an independent international non-governmental organization founded in Belgium in 1992, whose mission is to contribute to the establishment of institutions and mechanisms that allow for access to independent and impartial justice, and which are capable of guaranteeing the protection of fundamental rights (civil and political, economic and social), including the right to a fair trial. For more than 20 years, ASF has been implementing programs with the aim of facilitating access to justice for the most vulnerable population in fragile states or transition contexts.

ASF’s strategy rests primarily on:

1)  The affirmation of law as a vehicle of change (protection and development); and

2)  The promotion of the social role of the lawyer as an agent of change (lawyers are both guaranteeing legal security, and access to human rights via the access to justice and a quality defence).

ASF places lawyers, bar associations and other civil society organisations promoting human rights at the core of this strategy. ASF's intervention strategy includes recognizing access to justice as a fundamental right and an indispensable precondition for realizing and defending other human rights; and building advocates and lawyers' capacity to achieve the above objectives: ensure access to justice and support human rights realisation.


General Overview of ANARDE

ANARDE is a non-profit group of researcher’s activists, organizers, and lawyers with expertise in human rights advocacy, environmental governance, corporate and government accountability. It is a Ugandan CSO that is active in litigation and legal representation for communities affected by extractive industries. ANARDE works to promote understanding of effective management of natural resources and knowledge about the sustainable use of natural resources within marginalised communities. ANARDE also provides legal assistance for the most vulnerable, organises training on human rights in the context of oil extraction, and represents members of affected communities before the courts


Goal/Objective of the Expenditure Verification

The goal of this expenditure verification is to ascertain the eligibility of expenditures and conformity of financial reporting of the project to the Grant Agreement and the General Terms and Conditions of the project grant agreement. 


Deliverables/ Expected Results

The expenditure verification is to be conducted in accordance with the detailed terms of reference provided by the donor under annex I. 

Meet the reporting deadline to the donor as shown below:


Reporting period 

1st January 2020 to 1st March 2022


Deadline for issuing expenditure verification report

29th August 2022



Conditions of the mission

Budget 

The budget available for expenditure verification for the reporting period is 5,000 euros.


Fees and Payment 

Payment shall be made in two separate installments as per the agreed expenditure verification fees. 30% initial payment and the balance upon delivery of the final expenditure verification report. 

Submission of invoices to ASF before effecting payments. 


NOTE: Due to the current Covid-19 pandemic, the audit team will be required to follow all the Standard Operating Procedures (SoPs) issued by ASF and the Ministry of Health of Uganda. 



TERMS OF REFERENCE FOR AN EXPENDITURE VERIFICATION


The present terms of reference apply to the verification of expenditure declared in financial reports under the following contracts:


1) Contract number / IT system: CSO-LA/2019/413-940


Detailed information is provided at the cover page of Annex 1 



Table of Contents


1 Introduction 3

2 Objectives and context 3

3 Standards and Ethics 3

4 Requirements for the Expenditure Verifier 3

4.1 General Principles 3

4.2 Qualifications, Experience and Team Composition 4

4.2.1 Qualifications and Experience 4

4.2.2 Team Composition 5

4.2.3 Categories of staff/experts 5

4.2.4 Curricula Vitae (CVs) 5

5 Scope 6

5.1 Contracts and Financial Reports covered by these ToR 6

5.2 Conditions for Eligibility of Expenditure 6

6 Verification Process and Methodology 6

6.1 Preparation of the Verification 6

6.2 Preparatory Meeting, Fieldwork, Desk Review 6

6.2.1 Engagement Context, Materiality, Risk Analysis, Sampling 6

6.2.2 Fieldwork / Desk Review 7

6.2.3 Debriefing Memo and Closing Meeting 7

6.2.4 Complementary Letter 8

6.2.5 Documentation and Verification Evidence 8

6.3 Reporting 8

6.3.1 Structure and Content of the Report 8

6.3.2 Expenditure Verification Findings and Recommendations 9

6.3.3 [Debriefing Meeting with the Contracting Authority 9

6.3.4 Access to supporting documents 9

7 Other Matters 9

7.1 Contradictory Procedure and Follow-Up 9

7.2 Subcontracting 10

8 Annexes 10



Introduction

The present document and the Annexes listed in Section 8 are the terms of reference (‘ToR’) on which the Contracting Authority agrees to engage ‘the Expenditure Verifier’ to perform a verification of expenditure reported by Reporting Entities.

These ToR will become an integral part of the contract concluded between the Contracting Authority and the Expenditure Verifier.

They apply to expenditure verifications contracted by the Commission or by the Reporting Entity and cover the verification of expenditure incurred under the EU financed contracts on the cover sheet.


Objectives and context

The Expenditure Verifier is expected 

- to carry out the agreed-upon procedures listed in Annex 2, and

- to issue reports based on the template in Annex 3 which will support the Contracting Authority's conclusions on the eligibility of the reported expenditure and the related follow-up.

The expenditure verification will be performed as a desk review.

The Expenditure Verifier is not expected to provide an audit opinion. 

Standards and Ethics

The Expenditure Verifier shall undertake this engagement in accordance with:

the International Standard on Related Services (‘ISRS’) 4400 Engagements to perform Agreed-upon Procedures regarding Financial Information as promulgated by the IFAC;

the IFAC Code of Ethics for Professional Accountants, developed and issued by IFAC’s International Ethics Standards Board for Accountants (IESBA), which establishes fundamental ethical principles for Auditors with regard to integrity, objectivity, independence, professional competence and due care, confidentiality, professional behaviour and technical standards. 

Although ISRS 4400 provides that independence is not a requirement for agreed-upon procedures engagements, the Contracting Authority requires that the Expenditure Verifier is independent from the Reporting Entity and complies with the independence requirements of the IFAC Code of Ethics for Professional Accountants.


Requirements for the Expenditure Verifier

General Principles

By agreeing these ToR, the Expenditure Verifier confirms meeting at least one of the following conditions:

The Expenditure Verifier is a member of a national accounting or auditing body or institution which in turn is a member of the International Federation of Accountants (IFAC).

The Expenditure Verifier is a member of a national accounting or auditing body or institution. Although this organisation is not member of the IFAC, the Expenditure Verifier commits to undertake this expenditure verification in accordance with the IFAC standards and ethics set out in these ToR.

The Expenditure Verifier is registered as a statutory auditor in the public register of a public oversight body in an EU member state in accordance with the principles of public oversight set out in Directive 2006/43/EC of the European Parliament and of the Council (this applies to auditors and audit firms based in an EU member state). 

The Expenditure Verifier is registered as a statutory auditor in the public register of a public oversight body in a third country and this register is subject to principles of public oversight as set out in the legislation of the country concerned (this applies to auditors and audit firms based in a third country).


Qualifications, Experience and Team Composition

Qualifications and Experience

  • The Expenditure Verifier will employ staff with appropriate professional qualifications and suitable experience with IFAC standards and with experience in verifying financial information of entities comparable in size and complexity to the Reporting Entity. In addition, the verification team as whole should have:
  • Experience with programmes and projects related to External Relations funded by national and/or international donors and institutions. It is desirable that the team leader and, where applicable, the fieldwork team, i.e. either the audit manager (category 2) or the senior auditor (category 3) has experience with audits of EU funded External Relations actions.
  • Experience with audits/verifications in Uganda
  • Experience with audits/verifications of International Non-Governmental Organizations (INGOs).
  • Sufficient knowledge of relevant laws, regulations and rules in the country concerned. This includes but is not limited to taxation, social security, NGO regulations, labour regulations, accounting and reporting. 
  • Fluency in English


Team Composition

The team of auditors required for this engagement will be composed of a category 1 auditor who has the ultimate responsibility for the expenditure verification and a team which is composed of an appropriate mix of category 2 – 4 auditors.


Categories of staff/experts

Category 1 – (Audit Partner)

A Category 1 expert (audit partner) should be a partner or another person in a position similar to that of a partner and be a highly qualified expert with relevant professional qualifications who assumes or has assumed senior and managerial responsibilities in public audit practice.

He/she should be a member of a national or international accounting or auditing body or institution. He/she must have at least 12 years of professional experience as a professional auditor or accountant in public audit practice. Experience with audit related services in beneficiary countries of EU External Action Programmes will particularly be taken into account for the evaluation at the level of specific contracts.

The audit partner will be the person who will be responsible for the specific contract and its performance as well as for the report that is issued on behalf of the firm. He/she has the appropriate authority from a professional, legal or regulatory body and is authorized to certify accounts by the laws of the country in which the audit firm is registered.

Category 2 – (e.g. Audit Manager)

Audit managers should be qualified experts with a relevant university degree or professional qualification. They should have at least 6 years of experience as a professional auditor or accountant in public audit practice including relevant managerial experience of leading audit teams.

He/she should be a member of a national or international accounting or auditing body or institution.

Category 3 – (e.g. Senior Auditor)

Senior auditors should be qualified experts with a relevant university degree or professional qualification and at least 3 years professional experience as a professional auditor or accountant in public audit practice.

Category 4 – (e.g. Assistant Auditor)

Assistant auditors should have a relevant university degree and at least 6 months professional experience in public audit practice.


Curricula Vitae (CVs)

The Expenditure Verifier will provide the Contracting Authority with CVs of the staff/experts involved in the expenditure verification. The CVs will include appropriate details for the purpose of the evaluation of the offer on the relevant specific experience for this expenditure verification and the qualifying work carried out in the past.


Scope

Contracts and Financial Reports covered by these ToR

The Contract(s) and Financial Reports subject to this expenditure verification are indicated on the cover sheet and in Annex 1.


Conditions for Eligibility of Expenditure

The conditions for eligibility are stipulated in the Contracts which are provided in Annex 1 (including riders).

Further documents (e.g. Financing Decisions, Financing Agreements, Framework Agreements) that the Expenditure Verifier might deem to be required for the purposes of this expenditure verification will be provided by the Contracting Authority on request.

Expenditure Verifiers will inform the Contracting Authority as soon as possible about any limitations in the scope of work they may find prior to or during the verification. 

The Expenditure Verifier will report any attempt by the Reporting Entity or its staff to restrict the scope of the verification, or any lack of co-operation on the part of the Reporting Entity or its staff. The Expenditure Verifier will consult the Contracting Authority on what action may be required, whether or how the expenditure verification can be continued and whether changes in the verification scope or the timetable are necessary.


Verification Process and Methodology

Preparation of the Verification

The Expenditure Verifier shall contact the Reporting Entity as soon as possible (and no later than 7 calendar days) after the formal announcement by the Contracting Authority of the expenditure verification to the Reporting Entity, so as to prepare the verification and to agree on the timing for carrying out the expenditure verification, notably with regard to fieldwork (if any) (see Section 6.2. for applicable maximum time lags). The Expenditure Verifier will then also confirm with the Reporting Entity the location(s) indicated in Annex 1 and ensure that relevant supporting documents as well as key staff will be available during the verification.

Preparatory Meeting, Fieldwork, Desk Review

The Contracting Authority foresees a preparatory meeting with the Expenditure Verifier which will be held by conference call or at ASF office located on plot 16 Naguru Vale Road Kampala.

The field work or desk review shall commence as soon as possible and not later than five days after the signature of the verification contract or the date of availability of the Financial Report (i.e. financial report, supporting documents and other relevant information).

Engagement Context, Materiality, Risk Analysis, Sampling

The Expenditure Verifier's procedures should include:

obtaining a sufficient understanding of the engagement context including the contractual conditions, the Reporting Entity and the applicable EC laws and regulations which are set out in Section 5 above (Scope). The Expenditure Verifier should pay specific attention to the contractual provisions relevant for the following aspects:

documentation, filing and record keeping for expenditure and income;

eligibility of expenditure and income;

procurement and origin rules insofar as these conditions are relevant to determine the eligibility of expenditure;

asset management (management and control of fixed assets; e.g. equipment).

cash and bank management (treasury);

payroll and time management;

accounting (including the use of exchange rates) and financial reporting of expenditure and income; and

internal controls and notably financial internal controls. 


The understanding should be sufficient to identify and assess the risks of material errors or misstatements in the expenditure and revenue stated in the Financial Report in order to determine the size and structure of the expenditure sample to be tested, whether caused by error or fraud, and sufficient to design and perform further verification procedures.  

performing a risk analysis (Annex 2).

The outcome of the risk analysis has to be clearly described in the Verification Report (Annex 3, Section 2.1);

determining the sample size;

For the purpose of determining what the overall material misstatement or error is, the Expenditure Verifier will apply a materiality threshold of 2% of the total amount of the gross reported expenditure with a confidence level of 95%.

establishing the sample and selecting the individual items for testing (Annex 2).

The link between the risk assessment and the size and composition of the sample, as well as the sampling method (statistical/non-statistical) must be clearly described in the Verification Report (Annex 3, Section 2.2);

Fieldwork / Desk Review

The main task during the fieldwork or desk review will be to perform the substantive tests (Annex 2, Section 2). Key information about the testing process must be provided in the Verification Report (Annex 3, Section 4.1).

Debriefing Memo and Closing Meeting

At the end of the fieldwork or desk review, the Expenditure Verifier should prepare a debriefing memo, organize a closing meeting with the Reporting Entity in order to discuss the findings, obtain its initial comments and agree on additional information to be provided at a later date. If the Reporting Entity is not the Contracting Authority for the expenditure verification, the representative of the Commission in charge of the audit will be invited to attend the closing meeting.

Complementary Letter

The Expenditure Verifier may at any time during the expenditure verification process draw up a complementary letter to inform the Commission about facts and issues that are considered of particular interest and importance. Suspicions of fraud or irregularity should be reported immediately.

Documentation and Verification Evidence 

The evidence to be used for performing the procedures in Annex 2 is all financial and non-financial information which makes it possible to examine the expenditure declared in the Financial Report. 

The Expenditure Verifier documents matters which are important in providing evidence to support the report of factual findings, and evidence that the work was carried out in accordance with ISRS 4400 and these ToR.


Reporting

Structure and Content of the Report

The use of the Expenditure Verification Report template in Annex 3 of these ToR, including the annexed tables, is compulsory.

If the verification scope covers Financial Reports related to different Contracts, a separate and specific report should be issued for each Contract.

The report should provide basic information about the Contract and should describe the outcome of the risk analysis and its implications on the sampling. The report should also give an overview of the substantive testing and fully disclose the information regarding the items included in the expenditure population and in the sample. The report should finally detail the findings identified through the performance of the agreed-upon procedures.

The report should be presented in English. An executive summary of the report in English should be provided along with the report.

The Expenditure Verifier will submit within 21 working days of the conclusion of the field work a draft report to the Reporting Entity for comments to be received within 21 working days. This delay expired, the Expenditure Verifier will provide the final report to the Reporting Entity within 7 working days from the receipt of the comments (if any).]

Expenditure Verification Findings and Recommendations

The factual findings shall be reported in accordance with the formats and criteria specified in the Expenditure Verification Report template (Annex 3). The description of findings will include the standard applied (e.g. art. xx of the General Conditions of the Contract), the facts and the analysis of the Expenditure Verifier. 

The verification report should include all financial findings made by the Expenditure Verifier, regardless of the amount involved. Changes in the financial findings occurring between the draft and the pre-final or final report as a result of the consultation procedure should be clearly and sequentially reported.

Debriefing Meeting with the Contracting Authority

The Contracting Authority foresees a meeting with the Expenditure Verifier following receipt of the pre-final report. This meeting will be held by conference call or at ASF office located on plot 16 Naguru Vale Road Kampala.

Access to supporting documents

The Expenditure Verifier shall retain electronic copies of the supporting documents reviewed for all expenditure items included in the sample and provide them to the Contracting Authority upon request for a period of 5 years after the approval of the Final Verification Report.

Other Matters

Contradictory Procedure and Follow-Up

After receipt of the final expenditure verification report the Commission will begin a formal contradictory procedure with the Reporting Entity. The purpose of this procedure is for the Commission to discuss and agree with the Reporting Entity the corrective measures and actions which arise from the findings in the final report. The Expenditure Verifier may, where appropriate, be requested to provide clarifications or additional information with regard to the final report.

Subcontracting

The Expenditure Verifier will not subcontract without prior written authorisation from the Contracting Authority.

Annexes

Annex 1 - Engagement Context / Key Information

Annex 2 – Guidelines for Risk Analysis and Verification Procedures

Annex 3 - Model for Expenditure Verification Report


TERMS OF REFERENCE FOR AN 

EXPENDITURE VERIFICATION

Annex 1/ CSO-LA/2019/413-940: Engagement Context / Key Information 


Contract and report summary 


Contract number / IT system: CSO-LA/2019/413-940

Contract title: Empowering communities and civil society to demand for good governance in natural management

Contract type: Grant Contract


Financial Report(s) subject to verification: 1st January, 2020 to 1st March 2022


Reporting Entity: Avocats Sans Frontières (ASF)

Other Spending Entities Advocates for Natural Resources and Development (ANARDE)


Country: Uganda 


Commission Service in charge of the Contract: European Union


Contracting Authority for the expenditure verification: European Commission 


A Logistics

Issue

Question

Reply


Locations

1. Where do the Reporting Entity and Other Spending Entities retain the accounting records?

On a  server called “egnyte” (an online storage that has all the scans of the original supporting documents)

ASF Kampala office located at plot 16, Naguru Vale Road, Kampala, Uganda 


ASF Brussels office located at 140 avenue de la chasse, 1040 Brussels, Belgium 


ANARDE office located at Lilliesleaf Chambers, plot 2B3, Kyambogo Drive, Off Martyrs’ Way, Ministers Village Ntinda. 

2. Where do the Reporting Entity and Other Spending Entities retain the original supporting documents?

At the office premises stated above 

3. Where were contractual activities carried out?

Albertine Graben and Karamoja Sub-region

4. Where are key project staff available to provide information and explanations?

At ASF and ANARDE offices 


Languages

5. Which is the contractual language?

English 

6. Which is the language of the accounting records?

English 

7. Which are the languages of supporting documents?

English 

8. Which languages are spoken by key project staff?

English 



B Contractual Conditions

Contract amount

9. What is the total amount of the contract?

500,000 Euros

EC contribution

10. What is the amount of the EC contribution?

450,000 Euros 

Other contributions

11. Which are the other sources of funding (including the Reporting Entity)?

ASF’s own funds



C Financial Report (enclosed as Annex 1.1)

Financial report

12. Approximately how many expense transactions have been reported / are expected to be reported in the Financial Report?

About 2,800 expense transactions

13. What is the distribution of these transactions (e.g. capital expenditure, operating expenditure, fees, simplified costs, per diem, etc.), Are the transactions few/many of large/small value?

Human resources, travel, equipment and supplies, local office and other costs or services 

The transactions are many comprising of mostly small amounts 

14. To what extent have Project transactions been carried out in cash?  

Low

15. In which currencies has expenditure been incurred? 

Euros and Uganda Shillings 

16. What is the reporting currency? 

Euros 



17. How many other Financial Reports have already been presented by the Reporting Entity under this contract?

One 



D Procurement Procurement


18. How many procurement procedures have been undertaken during the period covered by the Financial Report?

Many 

19. Was the EC involved in any of the procurement procedures referred to in question 18 (e.g. ex-ante verifications or derogations to the rule of origin)?

No 

20. Are works done and supplies delivered under the contract located centrally or are they dispersed?

Located centrally 



E Previous contracts verifications, audits or monitoring

Previous verifications, audits or monitoring

21. Which previous experience did the Entity have with EC contracts and associated regulations? 

ASF had a high number of contracts with the EU in the past. 

22. How many of the previously presented Financial Reports (if any) have been subject to audit/verification by external consultants contracted by the Contracting Authority?

13

23. Have any verification, audit or monitoring exercises other than those referred to under numeral 22 been carried out with regard to the contract or the Reporting Entity that are relevant for the scope of the current verification?

no

24. Have any significant findings been raised under the exercises referred to in questions 22 and 23? If so, what are they?

no

25. Have any instances of fraud or irregularities been previously identified in dealings with the particular Entity?

no

F Contact Details

Reporting Entity:  Avocats Sans Frontières

Address

140 avenue de la chasse, 1040 Brussels, Belgium

Country

Belgium 

Phone

+3222233654

Fax



Website

www.asf.be

Key contact  :   Chantal van Cutsem

Executive Director

Avocats Sans Frontières

Tel. + 32 2 223 36 54

cvancutsem@asf.be



Annex 1/ CSO-LA/2019/413-940.1: Financial Report(s) to be verified

Annex 1/ CSO-LA/2019/413-940.2: Contract and riders

Other documents to be sent to the auditor, (e.g narrative reports, previous financial report)




EUROPEAN COMMISSION



TERMS OF REFERENCE FOR AN EXPENDITURE VERIFICATION

Annex 2: Guidelines for risk analysis and 

verification procedures 


Table of Contents

1. RISK ANALYSIS AND DETERMINATION OF THE SAMPLE 2

2. EXPENDITURE VERIFICATION PROCEDURES 2

2.1 The expenditure was incurred by and pertains to the Entity. 2

2.2 The expenditure is recorded in the accounting system of the Reporting Entity or of the Other Spending Entities. 2

2.3 Expenditure incurred during the contractual eligibility period 2

2.4 Expenditure indicated in the contractual estimated budget 3

2.5 Expenditure necessary for the implementation of the contractual activities, reasonable and justified 3

2.6 Expenditure identifiable and verifiable 3

2.7 Compliance with Procurement Principles and Nationality and Origin Rules 3

2.8 Expenditure complies with the requirements of applicable tax and social legislation 3

2.9 Financial support to third parties (sub-granting) 3

2.10 Other eligibility requirements 4

2.11 Additional checks not included in the standard verification procedure 4




1. RISK ANALYSIS AND DETERMINATION OF THE SAMPLE


The Expenditure Verifier should assess the risks of material errors or misstatements in the expenditure and revenue declared in the Financial Report in order to determine the size and structure of the expenditure sample to be tested according to the procedures described in Section 2.


This work involves an assessment of the inherent risks that:

• The Financial Report is not reliable, i.e. that it does not present, in all material aspects, the actual expenditure incurred and the revenue received in conformity with applicable conditions.

• Expenditure declared in the financial report has not, in all material aspects, been incurred in conformity with applicable contractual conditions.

• Revenues generated by the Reporting Entity in the execution of the contract are not deducted from the declared expenditure in conformity with applicable conditions. 

• Fraud and irregularities have occurred which could have had an impact on expenditure and/or revenue reported under the contract.


The Expenditure Verifier should assess the inherent risk based, inter alia, on the number and complexity of the transactions, the complexity of the activities provided for by the Contract, the number of implementing Entities involved and the environment where the Contract is implemented. In addition the Expenditure Verifier, based inter alia on the information provided in annex 1 to the Terms of Reference (Engagement Context / Key Information) will consider the control risk, i.e. whether the design of the Internal Control System sufficiently mitigates the identified inherent risks and whether it is plausible that it is operating effectively.


2. EXPENDITURE VERIFICATION PROCEDURES 


The following checks must be performed by the Expenditure Verifier unless they are irrelevant in relation to the eligibility criteria applicable to the contract type. Therefore the Expenditure Verifier is required to gain appropriate understanding of such requirements in order to carry out only the relevant checks and properly apply the relevant eligibility requirements. 


2.1 The expenditure was incurred by and pertains to the Entity.

2.2 The expenditure is recorded in the accounting system of the Reporting Entity or of the Other Spending Entities.

The expenditure is recorded in the accounting system of the Reporting Entity or of the Other Spending Entities in accordance with the applicable accounting standards and the Reporting Entity’s usual cost accounting practices.

2.3 Expenditure incurred during the contractual eligibility period 

The expenditure declared in the financial report was incurred during the contractual implementation period of the Action, except for expenditure relating to final reports, expenditure verification, audit and evaluation. Expenditure paid after the submission of the financial report, is listed in the final report along with the estimated date of payment.

2.4 Expenditure indicated in the contractual estimated budget

The expenditure included in the financial report was indicated in the contractual budget.

The applicable budget ceilings were not exceeded.

The expenditure has been allocated to the correct heading of the Financial Report.

2.5 Expenditure necessary for the implementation of the contractual activities, reasonable and justified


It is plausible that the direct and indirect expenditures included in the financial report were necessary for the implementation of the contractual activities.


The amount of the expenditure items included in the financial report is reasonable and justified and respects the principle of sound financial management.

2.6 Expenditure identifiable and verifiable

The expenditure is backed up by sufficient supporting documentation (e.g. invoices, contracts, order forms, pay slips, time sheets) and proof of payment. 


Where expenditure was apportioned, the applied allocation key was based on sufficient, appropriate and verifiable underlying information.


The expenditure is backed up by evidence of works done, goods received or services rendered. The existence of assets is verifiable.

2.7 Compliance with Procurement Principles and Nationality and Origin Rules

For the expenditure items concerned, the Reporting Entity has complied with the contractual requirements for procurement. Contractual nationality and origin rules have been applied, including those on derogations to be awarded by the Commission.

2.8 Expenditure complies with the requirements of applicable tax and social legislation

For the expenditure items concerned the Reporting Entity complies with the requirements of tax and social security legislation (for example: employer’s part of taxes, pension premiums and social security charges).

2.9 Financial support to third parties (sub-granting)

Financial support to third parties is provided for by the contractual conditions and its amount does not exceed the contractual limits.

The expenditure incurred by the third parties meets the relevant eligibility requirements. In particular it was incurred by and pertains to the third party, during the contractual eligibility period, is necessary for the implementation of the contractual activities and is identifiable and verifiable (see definition at point 2.6).

2.10 Other eligibility requirements

Duties, taxes and charges, (e.g. VAT) included in the financial report cannot be recovered by the Entity unless otherwise provided for in the contractual conditions (accepted costs system). In the latter case these expenses are reported separately and relate to eligible direct expenditure.

The correct exchange rates are used where applicable.

The contingency reserve has been established in accordance to the contractual conditions and its use authorised by the Contracting Authority.

The indirect costs do not exceed the maximum contractual percentage of the eligible direct costs and do not include ineligible expenses or expenses already declared as direct ones.

Contributions in kind are not included in the financial report, unless otherwise provided for in the contractual conditions.

Expenditure specifically considered ineligible by the contractual conditions is not included in the financial report.

Expenditure declared under the simplified cost options respects the contractual requirements.

The revenues generated by the Reporting Entity in the execution of the contract are disclosed in the financial report and deducted from the declared expenditure, unless otherwise provided for in the contractual conditions.



TERMS OF REFERENCE FOR AN 

EXPENDITURE VERIFICATION 



Annex 3: Model for Expenditure verification Report



How this model should be completed by the Expenditure Verifier 

 

insert the information requested between the <…> 

choose the optional text between […] highlighted in grey when applicable or delete

delete all yellow instructions and the present text box 

replace footer by "EVR – Contract <…> - Page …/…"

Apart from the addition of information and statements that reports on factual findings should contain in accordance with ISRS 4400, the standard wording can only be modified in exceptional cases and after prior consultation of DEVCO R2, Audit & Control Unit.


1. Background information 

1.1. Short description of the action subject to verification


Contract number and title:



Contract type

< e.g. grant contract, programme estimate, service contract…>

Financial Report(s) subject to verification

Reporting Entity and Other Spending Entities

< Identify the Reporting Entity and Other Spending Entities and provide key information about their legal form, nationality, size, main field(s) of activity and other elements deemed relevant – max 200 words>

Location(s) where the Contract is implemented



Contract execution period


Contract implementation status

< indicate on-going or completed >

General and specific objectives of the Contract


Synthetic description of the activities, outputs and target group 



1.2. Basic financial information of the Contract (at the time of the verification)

Expenditure

Budget Headings

Budgeted Expenditure (amount)

Reported Expenditure (amount)

Budget Heading "…"

  

Total

 

 


Contributions 

Source of Contribution

Budgeted Contribution (amount)

Actual Contribution 

(amount)

EU

 

Reporting Entity


 

Spending Entity 1

 

 

 

Other Donor 1

 

 

 

Total


Revenues

Revenue Types

Budgeted Revenues 

(amount)

Actual Revenues 

(amount)

Type "…"

 

 

Type "…"

 

 

 

 

Total

 


1.3.Verified Financial Reports/Invoices


See annex 3.1

2. Risk analysis

2.1. Outcome of risk analysis


Based on the risk analysis performed according to the Terms of Reference, provide succinct information about the identified risks possibly affecting the verified report, regarding the action, the context in which the latter is implemented, the beneficiaries and the target group.

In addition, please identify possible mitigating factors.

< E.g. previous audit or verification work, evidence of close follow up by the contracting authority, good results yielded in the past by the implementing partner, etc. (max. 150 words)>


2.2 Implications on the sampling


Explain how the identified risk factors are reflected in the structure and size of the sample.

3. Transaction population and sample

3.1 Sampling Highlights/Overview


The sample size was determined based on a materiality threshold of 2% of the total amount of reported expenditure with a confidence level of 95% and considering the risk analysis presented above.

Report/invoice:



Population

Audited sample

Number of transactions



Value of transactions EUR


[If more than one financial report/invoice is verified, repeat as applicable]

A complete list of the transactions included in the population is to be included in Annex 3.2. The Contracting Authority may request the Expenditure Verifier to exclude from the population the transactions included in the financial report but already rejected during the ex-ante verifications.

Section 3.2 applies only if the Reporting Entity is not the Contracting Authority for the expenditure verification. If this is not the case the entire section 3.2 should be removed.

3.2 Reconciliation of the reports/invoices with the Commission accounting records


In case the report/invoice amount is different from that of the relevant accounting record (invoice, clearing, payment), fill in this table

Report/invoice:

Total amount of the verified report

)

+/- corrections following external ex ante verifications



+/- corrections following internal ex ante verifications



Amount of the Commission's accounting record




If more than one financial report/invoice is verified, repeat as applicable. If financial reports under different Contracts are verified, include the contracts reference

4. Substantive testing 

4.1. Short description of the testing process


Compliance with the Terms of Reference and with the International Standard on Related Services (ISRS) 4400.

Provide the key information about the testing process.

5. Summary of findings

5.1. Summary of errors detected


5.2. Classification of errors by compliance issue


No

Compliance issue / reason for ineligible expenditure      No of findings            Amount €

1 Missing / inadequate documentation

2 Incorrect procurement procedure applied

3 Expenditure outside contractual period

4 Expenditure includes VAT / other taxes

5 Incorrect exchange rate used

6 Budget exceeded

7 Expenditure not for project purposes

8 Fraud and irregularities

9 Income not declared / not reported

10 Other financial findings

 

Total financial findings

 

 

5.3 Audit team


 [for final reports the date when the final report is signed]



Annex 3.1: Financial reports/invoices provided by the auditee

Annex 3.2: Procedures performed

Annex 3.3: Table of transactions - provided as Excel file

Annex 3.4: Table of errors - provided as Excel file 









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