Audit – Lebanon

The external audit should answer the question ‘Are the accounts a true and fair account of the financial activities.’ The audit should be completed in accordance with ISA 800.

The ToR should say that the FCDO owns the audit report and that the draft should be sent to the auditee (IP) for their comments which should be incorporated into the report. It’s important that the auditee is given the opportunity to comment on the factual accuracy of the audit report and to respond to findings.

Audit Scope 

• The terms of reference address the requirement for external audit of financial statements of [ ] for the calendar years from [duration of the project].
• A draft audit report should be submitted by [ ] and a final signed audit report with certified statements by [ ] and a management letter by [ ]. The financial statements for the financial year will be made available no later than [ ] following the end of the project.
• The audits should be carried out in accordance with either UK or national auditing standards.
• Sufficient audit evidence should be gathered to substantiate in all material respects the accuracy of financial statements.
• The audit report of the auditors should state if the audit was not in conformity with any of the above and indicate the alternative standards or procedures followed.

The Audit Report and Management Letter

Audit Report  

• The audit report should clearly indicate the auditor’s opinion. This would include at least the following:
• The title, addressees, and an opening or introductory paragraph containing
• a) identification of the financial information audited including the period covered; and
• b) statement of the responsibility of the entity’s management and the responsibility of the auditor.

A scope and methodology paragraph describing the nature of the audit referencing

• a) the accounting standards that have been applied and indicate the effect of any deviations from those standards;
• b) the audit standards that were applied; and
• c) the work the auditor performed.

An opinion paragraph disclosing  

• a) whether the financial statements and supporting schedules fairly present the cash receipts and expenditure in all material respects and that the funds were used for the purposes defined by the work programme;
• b) whether the financial transactions reflected in the statements are in accordance with financial regulations and procedures, budgetary provisions and other applicable directives; and
• c) summary assessment of the efficiency of the management and internal control system.

The auditor may expand the report to include other information and explanations not intended as a reservation. Audit reports will be provided English.

Management Letter

• The auditor should submit a letter to the management at the completion of the audit. The topics/issues to be covered in the letter should include:
• An assessment of the efficiency of the administration, management and internal control system of [].
• A description of any specific internal control weaknesses noted in the financial management. Recommendations to resolve/eliminate the internal control weaknesses noted should be included.
• Management comments/response to audit findings and recommendations.

Auditor Independence and Qualification

The auditor must be completely impartial and independent from all aspects of management or financial interests in the entity being audited. The auditor should not, during the period covered by the audit nor during the undertaking of the audit, be employed by, serve as director for, or have any financial or close business relationships with any senior participant in the management of [ ]. The auditor should disclose any relationship that might possibly compromise his/her independence.

*The auditor should be experienced in applying either UK or national audit standards, whichever is applicable for the audit

Summary

The objective of the audit of the financial report and supporting documents is to enable the auditors to express an independent professional opinion on the financial position of Search for Common Ground and to ensure that the funds utilized have been used for their intended purposes.

In addition to assess the accuracy of the documentation (classification of transactions) for selected transactions, evaluate the appropriateness of the delegated authorities of the positions which approved these payments, analyze and validate the post or pre-payment verification process for selected large transactions, and perform the analysis of the line objects created to capture capital expenditures and capital contributions.

Scope of Work:

The scope of audit will be testing of transactions and of the existence, ownership and valuation of assets and liabilities in accordance with generally accepted auditing standards and will include verifying procedures as the auditors consider necessary. 

Appropriate and sufficient evidence will be obtained to enable an understanding of the accounting and internal control systems in order to assess their adequacy as a basis for the preparation of "Civil Society Support Programme" project progress reports to the Foreign and Commonwealth Officer and to establish whether proper accounting records have been maintained

Documentation Request – Expenditure Verification:

Grant agreement and annexes:

• Amendments to the grant agreement
• Correspondence or details on any special conditions or derogations in place
• Memorandum of Understanding between your entity and potential partner (if applicable)
• Correspondence files for the project.

Financial information (for the period subject to the verification): 

• Excel version of the financial report
• Transaction list of expenditure in Excel reconciled with the financial report
• Previous reports (if any) linked to the project
• Overview of payments made by the donor (including bank statements);
• Overview of any other income received for the project
• Overview of payments made to partners (if any)

Personnel Cost:

• Staff payroll records such as employment contract covering the period of the project, job description or terms of reference.
• Original or certified copies of bank statements
• Payroll records or payslips
• Timesheets or other available evidence to support allocation of cost

Travel and related mission costs:

• Documents and evidence for the support of reimbursable travel expenses and/or allowances such as:
• Travel orders / mission forms
• Declarations of staff travel expenses and daily allowances (per diems);
• Tickets for transport (e.g. train, bus, plane) and boarding passes;
• Hotel invoices, invoices and receipts relevant to specific incidental expenses (taxi, train, bus, restaurant etc)

Equipment:

• Evidence in support of actual costs claimed (invoices, contract agreement) 
• Evidence of procurement process (tender, request for quotation, proposal evaluation report, minutes of meetings etc)
• Evidence of payment (Bank statement)

Procurement of works, supplies and service contracts:

• Procurement procedures
• Invoices
• Tender dossiers or call for proposal documents
• Confirmation of receipt of tenders/proposals
• Minutes of the tender/proposal opening session
• Tender/proposal evaluation report
• Contract/grant award proposal and notification of non-award letters
• Responses to requests for further information or complaints
• Delivery note or acknowledgement of receipt
• Final acceptance certificate for supplies
• Works progress report approved by the works inspector
• Final acceptance certificate for works

Seminars, workshops and meetings:

• Attendance list signed
• Receipts for allowances paid
• Training Agenda 

Office Running Costs:

• Contracts for the rent of office and equipment
• Invoices for utilities - water, electricity and gas

Vehicles Operating Cost:

• Vehicle logbooks
• Invoices

Grant Details:

Total Grant: 490,000 GBP

Duration: 1 April 2021 till 31-March-2022

Total transactions: 1850

Deadline for Audit report: 31-March-2022