attachment 8 - pca workshop power point presentation (ppt)

Partner Contracted Audit Workshop

October 27 & 28, 2011

Start

End 2 weeks

2 weeks

8 weeks

2 weeks

2 week

1 week

5 weeks

3 weeks

1 week

3 Months

4 Months

2 weeks

1 week

1

2

67

8

12

9

10

11

3

4

5

Seven Months Timeline

Selecting the Applicable Scope of Work


• Selecting the correct SOW depends on your award / subward type:

1- Grants and Cooperative Agreements (Except FOGs)

Audit of the Fund Accountability Statement Scope of Work

(Attachment No. 4 of the USAID/WBG Audit Guidelines)

4


2- Contracts (except firm fixed price / firm unit price)

Audit of the Cost Representation Statement Scope of Work


5


3- Firm Fixed Price / Firm Unit Price Contracts and Fixed Obligation Grants (FOGs)

Examination of Compliance with Terms and Conditions of the Award


6

The SOW Sections You Need to Fill In

1.Audit Title2.Background Information3.Terms of Performance4.Payment Terms

7

Completing the Applicable Scope of Work

1- Audit Title: Use the language from the “Subject” of the Audit Notification Letter. Example1: (Prime Co.)

8

Completing the Applicable Scope of WorkExample 2: (Sub Co.)

9


2- Background Information

Expenditures incurred During the Audit Period

Project Start and End Dates

Project Objectives

Geographical locations of Operations

Beneficiaries10

Completing the Applicable Scope of Work (Background Info.)

Category of Major Costs Incurred (salaries/ Workshops / Construction / Food Supply etc.

Other Information: Period of Suspended Operations, Late Project Start Up, etc.

11

Where Can You Find the Background Information?

Quarterly Reports

Your Award &

its Amendment

s

Geo MIS /

PMP Info

12

Sample 1 of Title & Background InformationAudit of Prime’s Cost Representation Statement (see handout)Audit of the Cost Representation Statement of USAID resources managed by Prime Co. under contract number 294-C-00-08-00XXX-00 “ABC Project”, for the Period from September 26, 2008 to June 30, 2010 Background The U. S. Agency for International Development (USAID) Mission to the West Bank and Gaza provides funding to Prime Co. under Contract number 294-C-00-08-00XXX-00 “ABC Project”, for the Period from September 26, 2008 to September 25, 2011. The total estimated cost for the award is $100,000,000 of which $50,000,000 are currently obligated. The purpose of this contract is to strengthen the institutional capacities and performance of the Palestinian Authority Ministry of Health, selected nongovernmental organizations, and eligible educational and professional institutions to support a functional, democratic Palestinian health sector capable of meeting the priority public health needs of its people. In addition to the Project’s reform and construction activities, the Project includes several short-term, targeted projects and technical interventions in ……….. The Project is working in the following geographical locations ……… This audit will cover approximately $47,000,000 in expenditures incurred during the period from September 26, 2008 to June 30, 2010 by Prime Co.

13

Sample 2 of Audit Title & Background InformationClose-out audit of Sub’s Fund Accountability Statement (see handout)Close-out Audit of the Fund Accountability Statement of Sub Co. (Subco) a Sub-grantee under Prime Co. (Primeco), Contract No. 294-X-00-0Y-00ABC-00, “the HIJ Program (HIJ)” for the Period from July 27, 2009 to July 16, 2010. Background Under USAID Contract No. 294-X-00-0Y-00ABC-00, “The HIJ” program, Prime Co. sub-awarded three grants of USAID funds to Sub Co. (Subco) during the period from July 27, 2009 to July 16, 2010. The three grants are: PCWBG#25; PCWBG#35; and PCWBG#36. The total agreement amount for these three sub-grants is approximately $3,000,000. . Per the scope of work, USAID/West Bank and Gaza Mission provides funding to Prime Co. under Contract 294-X-00-0Y-00ABC-00, the “The HIJ” Program, to provide rapid response to humanitarian needs throughout the West Bank and Gaza. Under this Contract, Prime Co. sub-awarded three sub-grants to Sub Co. to provide vulnerable families with immediate and timely early disaster and early recovery relief in the Gaza Strip in the form of school uniforms and school supplies, and childhood development education support and kindergarten rehabilitation. This audit will cover approximately $2,500,000 in expenditures incurred during the period from July 27, 2009 to July 16, 2010 by Sub Co.

14

Sample 3 of Audit Title & Background InformationClose-out Examination of Sub’s Compliance (see handout)Examination (Close-out) of Sub Co.’s Compliance with Terms and Conditions of Sub-Fixed Price Contract Under Prime Co.’s Task Order No. XX under Indefinite Quantity Contract (IQC) No. 294-I-00-08-00XXX-00, “MNO Program (MNO)”, for the Period from December 5, 2009 to November 3, 2010. Background Under Task Order No. XX of USAID Contracted Indefinite Quantity Contract (IQC) No. 294-I-00-08-00XXX-00, “MNO Program (MNO)”Prime Co. subcontracted USAID funds to Sub Co. during the period from December 5, 2009 to November 3, 2010. Per the scope of work, USAID/West Bank and Gaza provided funds to Prime Co. under Indefinite Quantity Contract (IQC) No. 294-I-00-08-00XXX-00, “MNO Program”, the program is to provide infrastructure assistance to address the basic needs for the Palestinian people, in the West Bank. It has infrastructure development benefiting over 1.5 million Palestinians. The MNO programs will rehabilitate a variety of regional and municipal roads throughout the West banks and will construct and upgrade several water systems. Under this subcontract, Prime Co. provided funds to Sub Co. to pave XX km of roads in YY governorate. This close-out examination will cover approximately $500,000 in expenditures incurred during the period from December 5, 2009 to November 3, 2010 by Sub Co. 15

Completing the Applicable Scope of Work – Terms of Performance

3- Terms of Performance

The time period to be inserted by the auditee for the duration of the audit engagement which covers the period from signing the audit contract through issuance of the final draft audit report by the audit firm to the auditee.

•Per the timeline chart, it is recommended to provide the audit firm with 4 months to issue their final draft report.

Completing the Applicable Scope of Work – Payment Terms

4- Payment Terms

The auditee can choose the suitable payment terms provided that a significant amount is paid only after RIG/C approves and issues the report. Example: • 70 percent upon receiving the draft audit/exam. report.• 30 percent on the date the final report is approved and issued by the RIG/Cairo.

17


Exercise

Complete the applicable Scope of Work for ABC Co.’s first year audit

(10-15 minutes)

18

1- Scope of Work Content – Fund Accountability Statement

Illustrative Fund Accountability Statement

19

1- Scope of Work Content – Fund Accountability StatementII- Objectives: What the auditor needs to do?

•Conduct a financial audit – Express an opinion on the Fund Accountability statement. •Understand internal controls related to the award.• Assess control risk and identify reportable conditions.• Determine whether the recipient complied, in all material respects, with award terms and applicable laws and regulations.

20


III- Audit Scope: What steps and tests should auditors follow /conduct?

A- Pre-Audit StepsA- Pre-Audit Steps•Lists some applicable documents that the auditors should review such as the agreement, budget, progress reports, etc.

21


B- What auditors need to test (sample only)B- What auditors need to test (sample only)•Direct & Indirect Costs •Procedures used to control the funds•Procurement procedures•Salaries and related benefits, travel & transportation, etc.•Technical assistance and services procured.•Compliance with USAID policies and local laws and regulations•Cost sharing schedule, if applicable.

Auditors Can Definitely Go Beyond What is Listed!Auditors Can Definitely Go Beyond What is Listed!22


C- Cost-Sharing ScheduleC- Cost-Sharing ScheduleD- Internal ControlsD- Internal ControlsThis will determine the extent, timing and nature of tests to be applied. E - Compliance with Award Terms and Applicable Laws and RegulationsKey Areas Are: VAT, Vetting and Mandatory Clauses.F - F - Indirect Cost RatesIndirect Cost RatesProvisional Rate VS. Final Rates

23


G - G - Follow-Up on Prior Financial Reviews and Audit Follow-Up on Prior Financial Reviews and Audit RecommendationsRecommendationsAny findings raised in the financial reviews that were not fixed will be reported as current findings.H – H – Other Audit ResponsibilitiesOther Audit Responsibilities

24


IV- Audit Reports (attachment #1 under Partners Resources – Audit Matters)

•The auditors should submit to the auditee the draft audit report. The auditee shall submit the draft report to the USAID/WBG to prepare for the exit conference if USAID/WBG plans to attend. •Once the auditors issue the final report to the auditee, the auditee shall submit the final report to USAID/WBG for general review. USAID/WBG will then submit the final signed report via email to the RIG/C for technical review and issuance.

25


The report shall:A- Contain a title page, table of contents, transmittal letter and a summary which includes: (1) a background section (2) the objectives and scope (3) a brief summary of the audit results on the fund accountability statement, questioned costs, internal control, compliance with award terms and applicable laws and regulations (4) a brief summary of the results of the review of cost-sharing contributions; and (5) a brief summary of the recipient's management comments regarding their views on the audit results and findings.

26


B - Contain the auditor's report on the fund accountability statement, identifying any material questioned costs not fully supported with adequate records or not eligible under the terms of the awards. C- Contain a report on the auditor's review of the cost-sharing schedule. D- Contain the auditor's report on internal control. (Scope of auditor’s work and reportable conditions).

27


E - Contain the auditor's report on the recipient's compliance with award terms and applicable laws and regulations related to USAID-funded programs and projects. (material instances). All material questioned costs resulting from instances of noncompliance must be included as findings in the report on compliance and cross-referenced to the fund accountability statement.

28


F - If applicable, for local recipients, contain the schedule of application of indirect cost rate and the auditor's report on the schedule of application of indirect cost rate. G- Contain the auditor's comments on the status of prior audit recommendations.

29


V- Inspection & Acceptance of Audit Work and The ReportWill be covered tomorrow.

VI- Relationships and ResponsibilitiesExamples:•The audit firm will contact USAID/WBG to obtain obligations and disbursements information.•The audit firm will contact RIG/C for any audit scope limitation.•The auditee will contact USAID/WBG for any questions related to the audit process.

30


VI- Relationships and Responsibilities (Continued)•The audit firm shall immediately notify the auditee and USAID/WBG of any key/essential Personnel's departure and the reasons therefore.• The audit firm shall take steps to immediately rectify this situation and shall propose a substitute candidate for each vacated position along with an impact statement in sufficient detail to permit evaluation of the impact on the program.VII- Terms and PerformanceRefer to the audit timeline sheet.

31

2- Scope of Work - Cost Representation Statement

32

2- Scope of Work - Cost Representation Statement

Similar to the Fund Accountability Statement SOW except that it covers the audit of the Contractor/Sub Contractor’s Cost Representation Statement instead of the Recipient/Sub Recipient Fund Accountability Statement.

It also covers the other areas such as Internal Controls and Compliance with Contract Terms and Applicable Laws and Regulations.

33

3- Scope of Work – Examination of Compliance

Financial statements are not audited/presented.

The main objectives is to determine whether:1- The contractor/grantee complied with the award

terms and conditions; and 2- Had internal controls in place related to the award.

Therefore, the auditor issues a report on compliance and a report on internal controls.

34

Scope of Work – Final Remarks

The Prime should use only one scope of work if it applies to more than one award / sub award.

Example: If the partner has 5 subs who qualify for an examination audit, then use one examination SOW and provide the required info. For each of the 5 subs.

Title 1 ………………………………….Background 1………………………...Title 2…………………………………..Background 2……………………….....

35

Scope of Work – Final Remarks

Once you complete your applicable SOW, you need to send it to [email protected] for review and approval.

DO NOT DELETE / MODIFYDO NOT DELETE / MODIFY any of the applicable SOW content.

Contact USAID/WBG if you need to add other items or concerns that you like to draw the auditor’s attention to or certain areas you want the auditor to focus on based on your knowledge of the project under audit.

36

Solicitation for Proposals

Subject: Solicitation of Proposals

Main Steps for Partners:

I. Prepare the Request for Proposal (RFP) package

II. Send the RFP to RIG/Cairo approved audit firms

38


I. Preparing the Request for Proposal (RFP) package: – Scope of Work, approved by USAID– Cover letter, explaining what Partner wants in the RFP Sample of cover letter

– Sample Evaluation Criteria:◘ Past Performance ◘ Past Experience◘ Audit Team Qualifications ◘ Proposed completion schedule ◘ Proposed cost

39


Why is it important for the partner to include the evaluation criteria in the RFP?

•Basis for evaluation – objectiveness•Transparency – so that all audit firms receive the same treatment •Consistency – compare apples with apples •Equity – to fairly evaluate the proposals •So that the Audit Firms address them in their proposals

40


II. Sending the RFP.

Partner issues the solicitation package to all RIG/Cairo approved audit firms by e-mail. Audit Firms List

In case of audit request for prime and sub/s, it is preferable for the partner to issue one RFP. Time Frame: not more than 5 weeks for the entire RFP / Evaluation / Selection process.

41


Questions

42

Evaluation and Selection of Audit Firms

43

Evaluation & Selection of Audit Firm - Overview

• Procurement Officer receives proposals from audit firms.

• Requesting Office(r) forms a Technical Evaluation Committee (TEC) at request of Procurement Officer

[Sample detailed technical guidance (optional – not PCA specific) to the TEC members for

evaluating proposals included in the binder].

Sample Technical Guidance for TEC Members.doc

44

Evaluation & Selection of Audit Firm - Overview

• TEC Reviews and evaluates proposals based on evaluation criteria in the RFP.

• TEC prepares selection memorandum and draft audit contract.

• Procurement Officer approves and submits selection memo and draft audit contract to USAID/WBG for review and approval.

45

TEC Reviews and Evaluates Proposals

• The TEC must use the same selection criteria in the RFP to ensure transparency, equity, and consistency.

• The TEC assigns a weight or score for each criteria.• Weight and score allocated to cost cannot be

controlling factor.• The TEC reviews and evaluates the proposals and

selects the audit firm.• The TEC documents the evaluation and selection

process in a selection memorandum.

46

Sample Evaluation Criteria

1. Firm’s past performance in terms of: a) quality of work conducted b) quality of the audit reports c) timeliness, and d) backlog of pending RIG/C audits. Where to get information about audit firms’ past

performance?a) Partner’s own experience with the audit firm.b) Other partners (reference checks).c) USAID/WBG, Financial Management Office.

Evaluation Criteria of Audit Firms 2.docx 47

Sample Evaluation Criteria

2. Firm’s past experience in terms of conducting similar engagements,

3. Experience and credentials of the firm’s proposed team to participate in the audit,a) Appropriate mix of the audit team, and b) Level of involvement of each audit team member in conducting the engagement.

Evaluation Criteria of Audit Firms 2.docx

48

Sample Evaluation Criteria - Continued

4. Proposed completion schedule, and 5. Cost.

However, audit cost cannot be the only or controlling factor in the selection criteria.

Please see sample evaluation criteria in the provided binder.

Evaluation Criteria of Audit Firms 2.docx

49

Sample TEC Final Scoring Sheet

Firm: Past Performance Weight/Score

Past Experience

Weight/Score

Proposed Audit Team

Weight/Score

Proposed Completion Schedule Weight/Score

CostWeight/Score

Total Score

ABC Firm

XYZ Firm

DEF Firm

Etc.

50

Questions

51

Content of TEC Memorandum(Selection Memo)

Please see sample selection memo in your binder.Name/Title of engagement being evaluated DateNames/titles of TEC membersRecipient of memoBackground information

52

Content of TEC Memorandum(Selection Memo)

Evaluation criteria and assigned weight/score to each criteria

Summary of Results for each proposal (technical & cost)

Recommendation and justification (if needed)

Sample Technical Evaluation Committee Selection Memorandum.docx

Sample Rejection Letter.docx 53

Let’s Evaluate a proposal!

54

Exercise

Questions

55

Contracting the Audit Firm

CONTRACTING AUDITORS:OVERVIEW

In this section we shall Review the audit contracting stepsReview the content of the audit contractLook at a sample of an audit contractSummarize the contracting process through

a quiz

57

SEVEN KEY CONTRACTING STEPS1. Partner prepares draft audit contract 2. Partner forwards draft audit contract and name of selected auditors to USAID/WBG for approval The partner’s package for approval should include: Forwarding letter from authorized representative TEC Memo (Selection Memo), addressed to partner’s

authorized representative must have the following attachments:

Each TEC member’s individual rating Summary rating for all TEC members

58

SEVEN KEY CONTRACTING STEPS (Cont’d)

Draft audit contract USAID approved SOW USAID’s rights, including approval of this

contract USAID Mandatory Provisions

59


Step 3. USAID/WBG approves audit contract and name of selected auditors and forwards approval to partner

Preference, prepare one audit contract including all sub-partners, and / or for all sub-partners

Note: In general USAID will provide approval for the selection of auditors and the audit contract within three weeks

60


Step 4. Partner forwards USAID/WBG approved audit contract to auditors for signature, as acceptance to provide audit servicesStep 5. Authorized audit firm representative signs approved

contract, and returns to the partner Step 6. Authorized partner representative signs approved audit contractStep7. Partner forwards copies of signed approved audit contract to the audit firm and USAID/WBG

61

SECTIONS OF AUDIT CONTRACT

In general, audit contract must have four important sections The cover page USAID’s right to approve the contract USAID mandatory provisions The signature page

62

SECTIONS OF AUDIT CONTRACT:THE COVER PAGE

The cover page should indicate [link]The partner’s address, including physical locationThe auditors’ address, including physical locationThe purpose of audit, same as title in SOWA list of documents that are part & parcel of contract, including the SOW

63

SECTIONS OF AUDIT CONTRACT:USAID’s RIGHTS

USAID as the financing entity has rights which include, but not limited to,

Approving the terms of this contract Approving the auditors Approving report specifications Approving any other documents related to this contract Right to assure proper use of USG funds

64

SECTIONS OF AUDIT CONTRACT:USAID MANDATORY PROVISIONS

The key mandatory provisions included in audit contract are:Prohibition against support for antiterrorism &

Restriction on Facility Names (Mission Order 21) Value-added Tax and Customs DutiesSource, Origin and Nationality Settlement of Disputes Audit and RecordsPayment terms All other Mandatory Provisions in partner’s award(s) not

listed above. 65

SECTIONS OF AUDIT CONTRACT:SIGNATURE PAGE

The signature page should have Partner’s official stamp Auditors’ authorized representative’s name, title,

signature, and date of signature Partner’s authorized representative’s name, title,

signature, and date of signature

66

SAMPLE AUDIT CONTRACT

A hard copy of a sample of an audit contract is provided in the binder [insert link]

67

QUIZWho does what???

Who must approve audit contract before it is signed between the partner and the auditors?

Who provides the list of eligible audit firms to the partners?

Who prepares the audit contract under the PCA program?

What are the examples of the USAID Mandatory Provisions that should be included in the Audit Contract?

What are the basic four sections of a USAID audit contract?

68

ANSWERS TO THE QUIZ

Who does what???

Who must approve audit contract before it is signed between the partner and the auditors? [USAID/WBG]Who provides the list of eligible audit firms to the partners? [USAID/WBG]Who prepares the audit contract under the PCA program? [The partner]

69

ANSWERS TO THE QUIZ

Who does what???

What are the examples of the USAID Mandatory Provisions that should be included in the Audit Contract? [Antiterrorism, Restriction on Facility Names, Host Country Taxes and Custom Duties, Audit and Records etc]

What are the four sections of an audit contract? [Cover Page, USAID Rights, USAID Mandatory Provisions, Signature]

70

Q & A ON CONTRACTING AUDITORS

71

Partner Contracted Audit WorkshopDay 2

72

Audit Firm - Partner Communications

73

Engagement Letter (Optional for the CPA Firm)

• The letter is written by the CPA firm and is sent to the client, who indicates approval through returning a signed copy to the CPA firm.

• The understanding must include four general topics: (1) objectives of the engagement, (2) management’s responsibilities, (3) auditor’s responsibilities, and (4) limitations of the audit.

See Sample Engagement Letter in the binder.

Management Representation Letter

• A formal, written statement drafted by auditors and addressed to the external auditor.

• Through this letter, the auditee confirms that statements made to the auditor are accurate and complete.

• Put on the auditee’s letterhead and dated on the last day of audit field work, the letter is to be signed by the partner on the last day of field work or a date after.

• Should be signed by the highest management level. • Management refusal to furnish this letter ordinarily results in

a disclaimer of opinion.See Sample Management Rep. Letter in the binder.

Management Letter

Issued in conjunction with the audit report It identifies issues not required to be disclosed in the engagement report but represents the auditors concerns and suggestions noted during the engagement.It includes suggestions for improving operational or administrative efficiency or internal control, control deficiencies that are not significant deficiencies or material weaknesses, and nonmaterial instances of noncompliance.See Sample Management Letter in the binder.

Quiz

• Management refusal to furnish the Management Rep. Letter ordinarily results in a qualified opinion.

• The Management Rep. Letter covers the responsibilities of the auditee and the auditor.

• The Management Rep. Letter needs to be signed before field work starts.

True False

True False

True False

Audit Field Work

Entrance Conference The audit firm coordinates and schedules the audit

entrance meeting.

The audit firm or the Partner notifies USAID/WBG of the date, time and place of the entrance conference. Preferable if the auditor is held responsible for notifying USAID/WBG

Typically held at the auditee’s premises.

USAID/WBG may or may not attend the entrance conference.

79

Entrance Conference The entrance conference marks the official start of

the audit engagement. The audit could start before the entrance conference Partner provides documents to auditors.

IF USAID/WBG plans to attend, USAID/WBG will notify the audit firm and the partner and how they will attend; in person, via teleconference, etc.

The audit firm writes minutes of the meetings and send to the partner and USAID/WBG.

Prime partner must attend the entrance conference(s) of the audit(s) of its sub-awardee(s).

80

Entrance Conference – Purpose Introductions Background on the program/project Discuss audit scope and methodology Agree on audit timetable Request for documents to be provided to audit firm

before start of field work Very important to be timely.

Logistics – office space, equipment, etc.

Sample Guidance on Entrance Conference.doc

81

Closing Meeting

Between auditors and partner’s management. At end of field work and before issuing draft audit

report. Review and discuss all findings; material and

immaterial findings. Audit firm might prepare and hand in to the partner

a management letter which would include all findings, in most cases this letter is issued with independent auditors’ final audit report.

82

Managing the Audit during the Field Work

Assign one senior employee in your entity to work and liaise with the auditors to facilitate the audit process.

Understand what the auditors want. Meet regularly with the auditors to discuss

findings. Be clear and responsive to the auditors' inquiries

and do not hide any information related to their questions.

83

Managing the Audit during the Field Work

On the other hand, be concise and do not voluntarily and unnecessarily expand the discussion to other areas when not asked by the auditors.

Prepare all documents/reports required for the review and arrange them in a way that can facilitate the audit process.

Note:Lack of cooperation or non-responsiveness (not

providing documents on a timely manner) has led to questioning the entire cost of the award.

84

Draft Audit Report

Upon completing the field work and the closing meeting, the audit firm issues a draft audit report to the partner who in turn will forward it to the USAID/WBG

The audit firm will then schedule an exit conference, but no sooner than five business days from the date the audit firm transmitted the draft audit report to the auditee and USAID/WBG allowing them time to review the report and prepare for the exit meeting.

85

Exit Conference The audit firm coordinates and schedules the exit

conference, and prepares the agenda. The audit firm or the partner notifies USAID/WBG of

the date, time and place of the exit conference. USAID/WBG will attend the exit conference when

there are findings. The auditee has the right to waive the exit

conference (recommended when there are no findings) – in writing to the audit firm copying USAID/WBG.

The audit firm must write the minutes of the meeting and send to the partner and USAID/WBG. 86

Exit Conference - Purpose Go over the report and the findings in the draft

audit report. Discuss the audit process from the date of the exit

conference to date of submission of the independent auditors’ final audit report to the RIG/C.

If auditee has additional comments and documents to submit to the audit firm to respond to findings, the audit firm must provide the auditee with reasonable time to do, as agreed upon by the two parties.Normally, two weeks. 87

Exit Conference – Best Practices Last chance to bring up and correct errors,

inaccuracies, misrepresentations, and resolve findings and recommendations that are not clear or do not match, so use it wisely.

The partner should get clear understanding of each finding, and should make sure that the ensuing recommendation addresses the finding.

The partner should be clear on what corrective action would address the recommendation.

88

Final Draft Audit Report

Audit firm incorporates the partner’s comments verbatim in the findings and as an appendix.

Audit firm responds to partner’s comments in the findings section of the report.

Audit firm issues the final draft audit report to the partner who submits it to the USAID/WBG.

USAID/WBG generally reviews, and if complete and accurate, USAID/WBG forwards the independent auditors’ final audit report to RIG/C.

89

Final Draft Audit Report

Once USAID/WBG forwards the independent auditors’ final draft audit report to the RIG/C, the desk review process by RIG/C may take several weeks or months.

RIG/C may get back to the auditors one or more times with questions and comments on the content and quality of the report.

AUDIT GUIDANCE.docx

90

Managing the Subs’ Audit Field Work

Whether the prime partner contracts the audit of its sub-awardee(s) or the sub-awardee(s) contract their own audit, the prime partner is responsible for:1)Ensuring that the sub-awardee(s) comply with the USAID/WBG PCA guidelines, process, and timeline. 2)Attending the entrance, closing and exit meetings for the sub-awardee(s)’ audits.3)Liaising and channeling all communications and submissions between the sub-awardee(s) and the USAID/WBG.

91

Findings &

Recommendations92

Final Audit Report

Issued by the RIG/C and includes the following:i. A transmittal letter from the RIG/Cairo to the

USAID Director, including recommendations, if any.

ii. The body of the CPA audit report, containing questioned costs, internal control weaknesses, and non-compliance recommendations in detail.

iii. The auditee's response to the draft report.iv. The auditor's comments on the auditee's

response.93

Final Audit Report

RIG/Cairo will issue the final report to USAID WBG who in turn will issue to the auditee.

If the final report contains recommendations for the auditee, the USAID/WBG will continue to work with the auditee to resolve and close all outstanding recommendations.

94

Subject: Findings and Recommendations

Final audit report issued with recommendations

Final recommendations are issued by RIG and not by the audit firm. Per USAID rules and regulation, there is a set time frame to follow up on the open recommendations till they are finalized and closed out. USAID Agreement/Contract Officer has the final authority on how to address and close these recommendations. I. Questioned costs II. Internal controls III. Compliance Sample of recommendation transmittal letter

95


Resolving the Audit Recommendations; USAID/Office of Contract Management (OCM) sends the

determination letter to partner. In this letter USAID asks the partner to perform a defined corrective action/s with specify timeline for each action. (sample of determination letter)

Partner must ensure that corrective actions and requested improvements are addressed and completed by the timeline, and then submit to USAID/WBG proof of the actions taken.

USAID may go back to the partner to verify the corrective action/s and/or to seek more details on a specific action.

96


Determination letter: What could be there? What the auditors found! Θ Refund USAID for the following: → Ineligible cost, unsupported cost… Θ Comply with USAID award terms & clauses. → Not including clauses in the sub-awards… Θ Utilize proper Accounting Program → Lack of appropriate accounting software, use of excel… Θ Establish Procedures. → To improve Internal control over: payments, timesheets… Θ Other matters…. 97

Most Common Findings & Recommendations:

98

Type of finding Internal ●One authorized signatory Ineligible cost Control ●No timely bank reconciliation Ineligible cost Weakness ●No time sheets unsupported cost

●Not including the mandatory clauses in the subs-awards Ineligible cost Noncompliance ●No vetting Ineligible cost

●Source and Origin Ineligible cost Limitation in the ●Noncooperation of partner with the auditors Unallowable cost*Audit scope

*questioning the entire award amount!


Please keep in mind:

You are responsible to USAID for the disallowed costs and for the corrective actions of your subs!

& There is timetable to complete these actions!

99


Questions

100

Payments

101

Subject: Payments

The Contract you have with the Audit firm must include Payment clause which lays the basis for the compensation schedule.

Make sure that the payment clauses provides you with adequate control mechanism over the audit engagement process.

Suggested payment schedule is: 70% upon partner receipt of the draft report, 30% by the issuance of the RIG/Cairo final audit report.

102

Subject: Payments

Questions

103

attachment 8 - pca workshop power point presentation (ppt)

Documents