partner contracted audit workshop october 27 & 28, 2011
TRANSCRIPT
Partner Contracted Audit Workshop
October 27 & 28, 2011
Start
End2 weeks
2 weeks
8 weeks
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1 week
5 weeks
3 weeks
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3 Months
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Seven Months Timeline
Selecting the Applicable Scope of Work
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)
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Selecting the Applicable Scope of Work
2- Contracts (except firm fixed price / firm unit price)
Audit of the Cost Representation Statement Scope of Work
(Attachment No. 5 of the USAID/WBG Audit Guidelines)
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Selecting the Applicable Scope of Work
3- Firm Fixed Price / Firm Unit Price Contracts and Fixed Obligation Grants (FOGs)
Examination of Compliance with Terms and Conditions of the Award
(Attachment No. 6 of the USAID/WBG Audit Guidelines)
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The SOW Sections You Need to Fill In
1.Audit Title
2.Background Information
3.Terms of Performance
4.Payment Terms
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Completing the Applicable Scope of Work
1- Audit Title: Use the language from the “Subject” of the Audit Notification Letter.
Example1: (Prime Co.)
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Completing the Applicable Scope of Work
Example 2: (Sub Co.)
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Completing the Applicable Scope of Work
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.
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Where Can You Find the Background Information?
Quarterly Reports
Your Award &
its Amendment
s
Geo MIS /
PMP Info
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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.
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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.
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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.
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Completing the Applicable Scope of Work
Exercise
Complete the applicable Scope of Work for ABC Co.’s first year audit
(10-15 minutes)
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1- Scope of Work Content – Fund Accountability Statement
Illustrative Fund Accountability Statement
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1- Scope of Work Content – Fund Accountability Statement
II- 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.
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1- Scope of Work Content – Fund Accountability Statement
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.
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1- Scope of Work Content – Fund Accountability Statement
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
1- Scope of Work Content – Fund Accountability Statement
C- Cost-Sharing ScheduleC- Cost-Sharing Schedule
D- Internal ControlsD- Internal Controls
This will determine the extent, timing and nature of tests to be applied.
E - Compliance with Award Terms and Applicable Laws and Regulations
Key Areas Are: VAT, Vetting and Mandatory Clauses.
F - F - Indirect Cost RatesIndirect Cost Rates
Provisional Rate VS. Final Rates
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1- Scope of Work Content – Fund Accountability Statement
G - G - Follow-Up on Prior Financial Reviews and Audit Follow-Up on Prior Financial Reviews and Audit RecommendationsRecommendations
Any findings raised in the financial reviews that were not fixed will be reported as current findings.
H – H – Other Audit ResponsibilitiesOther Audit Responsibilities
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1- Scope of Work Content – Fund Accountability Statement
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.
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1- Scope of Work Content – Fund Accountability Statement
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.
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1- Scope of Work Content – Fund Accountability Statement
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).
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1- Scope of Work Content – Fund Accountability Statement
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.
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1- Scope of Work Content – Fund Accountability Statement
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.
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1- Scope of Work Content – Fund Accountability Statement
V- Inspection & Acceptance of Audit Work and The Report
Will be covered tomorrow.
VI- Relationships and Responsibilities
Examples:
•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.
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1- Scope of Work Content – Fund Accountability Statement
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 Performance
Refer to the audit timeline sheet.
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2- Scope of Work - Cost Representation Statement
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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.
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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.
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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……………………….....
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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.
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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
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Subject: Solicitation of Proposals
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
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Subject: Solicitation of Proposals
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
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Subject: Solicitation of Proposals
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.
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Subject: Solicitation of Proposals
Questions
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Evaluation and Selection of Audit Firms
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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
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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.
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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.
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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
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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
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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.
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Questions
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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
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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!
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Exercise
Questions
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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
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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
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SEVEN KEY CONTRACTING STEPS (Cont’d)
Draft audit contract USAID approved SOW USAID’s rights, including approval of this
contract USAID Mandatory Provisions
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SEVEN KEY CONTRACTING STEPS (Cont’d)
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
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SEVEN KEY CONTRACTING STEPS (Cont’d)
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
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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
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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
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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
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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
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SAMPLE AUDIT CONTRACT
A hard copy of a sample of an audit contract is provided in the binder [insert link]
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QUIZ
Who 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?
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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]
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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]
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Q & A ON CONTRACTING AUDITORS
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Partner Contracted Audit WorkshopDay 2
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Audit Firm - Partner Communications
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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.
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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).
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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Findings &
Recommendations
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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.
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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.
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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
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Subject: Findings and Recommendations
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.
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Subject: Findings and Recommendations
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!
Subject: Findings and Recommendations
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
Subject: Findings and Recommendations
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