Terms of Reference (TOR) for Annual Financial Audit

Deloitte Consulting Overseas Projects LLC (DCOP)

USAID Urja Nepal, USAID Trade and Competitiveness, and USAID Public Financial Management

Scope of Work for Annual Financial Audit

Nepal Fiscal Year: 2080-81 i.e. 2023-24

Background

USAID Urja Nepal Activity (Urja Nepal)

Deloitte Consulting Overseas Projects LLC (wholly owned subsidiary of Deloitte Consulting LLP) is implementing a five-year USAID-funded Urja Nepal Activity under the USAID’s Task Order - 72036720F00001 for the period of 12 August 2020 to 11 August 2025.  The purpose of Urja Nepal is to create a financially viable electricity sector that provides affordable, reliable, and secure power and enables the entry of private investment into the Nepali market. The project offers consulting, analytical and other advisory services and technical assistance to Ministry of Energy, Water Resources, and Irrigation (MoEWRI), Department of Electricity Development (DoED), Alternative Energy Promotion Centre (AEPC), the National Electricity Authority (NEA), the Electricity Regulatory Commission (ERC), and the Office of the Investment Board of Nepal (OIBN) on behalf of USAID.

The total estimated ceiling of the Urja project is USD 18,749,791 for five years. The average monthly expenditure of the project is total around NPR 15,840,000 (approximately USD 120,000), with 60-100 transactions (maximum) per month. Our project office is located at Charkhal, Kamalpokhari Road-30, Kathmandu, Nepal, and we have no field offices outside Kathmandu valley.  

USAID Trade and Competitiveness Activity (Udhyam Nepal)

The USAID Trade and Competitiveness Activity (USAID Udhyam Nepal) is a five-year program under USAID Task Order 72036722C00001 – for the period of 26 January 2022 to 25 January 2027. The purpose of project is to increase Nepali private sector participation in targeted global value chains by supporting broad-based, market-led growth and competitiveness. This will be achieved through an integrated, and sustainable, market-systems approach to address both private sector and public sector constraints to micro, small and medium enterprise (MSME) development and competitiveness. The Activity will address three objectives and measure progress across two outcomes, increased competitiveness in target sectors, and increased sales.

The total estimated ceiling of the Trade and Competitiveness project is USD 18,911,931 for five years. The average monthly expenditure of the project was around NPR 17,000,000 (approximately USD 130,769), with 60 transactions (maximum) per month. Our project office was located at Lazimpat-2, Kathmandu, Nepal and we have no field offices outside Kathmandu valley.

USAID Public Financial Management Program (USAID PFM)

Deloitte Consulting and WSP, together with Georgia State University and the Niti Foundation are implementing a five-year USAID-funded Public Financial Management Program (USAID PFM) whose purpose is to provide technical assistance and strengthen PFM functions, performance, and accountability of targeted agencies at the federal, provincial, and local levels of government, and to provide targeted assistance to the Government of Nepal (GON) aimed at strengthening national PFM institutions and systems to sustainably advance PFM.

The project commenced in October 2022 and will run for a five-year period to October 2027. 

The average monthly expenditure of the project was around NPR 10,000,000 (approximately USD 75,188), with 80-100 transactions (maximum) per month. Our project office is located at Maharajgunj road, Kathmandu, Nepal and we have two field offices outside Kathmandu valley in Madhesh Province and Lumbini Province, but all the payments are done from Kathmandu office only.

We have been registered in PAN with the Inland Revenue Department of Nepal Government. All three projects use the same PAN number.

Objective of the Audit

The objective of the audit is to give the reasonable assurance of all transaction incurred in the current fiscal year are in accordance with the relevant policies of Deloitte Consulting Overseas Projects LLC, partner organizations, compliance with Government of Nepal's laws, rules and regulations and to produce a report as per Nepal Accounting standard (NAS).

• To conduct full annual financial audit of Deloitte Consulting Overseas Projects LLC Branch Office, i.e located at Dillibazar, Lazimpat and Maharajgunj road comprising of the Balance Sheet of and the Statement of Income and Cash Flows for the FY 2023/24, (and produce Audit Report with an independent professional audit opinion.
• Filing the tax returns including e-filing to Inland Revenue Department after the completion of audit of the financial statements.
• File the audited financial statements and other reports (if any) of Deloitte Consulting Overseas Projects LLC, project office with the Office of Company Registrar as per the requirement of the Company Act 2006 of Nepal.
• To obtain Tax Clearance Certification of Deloitte Consulting Overseas Projects LLC from the Inland Revenue Department for the audited period.

Period of Performance

The audit should cover locally incurred costs related to the timeframe of July 17, 2023 – July 15, 2024.  The audit should be performed starting on or about Friday August 9, 2024, and completed no later than 15 calendar days before the annual filing deadline of 16 October 2024.

Scope

• The audit will include limited tests and controls as the auditor considers necessary under the circumstances as related to locally incurred costs only. 
• The audit will include the verification of all locally incurred vouchers related with Tax Deducted at Source (TDS) and Value Added Tax (VAT) as per Nepal government tax and VAT rules with reference to the Implementation Letter (IL) with USAID, the Nepal Government and Deloitte. 
• The audit report shall contain details regarding the audit methodology used and the scope of the audit. It shall contain an assurance that the audit was performed in accordance with generally accepted accounting principles and by a qualified auditor.  
• Review of banking transactions and procedures
• The report shall contain the engagement partner´s signature and title, and audit firm name and address. 
• The auditor will review the annual financial statement and make recommendations on how to best present the combined report this year (3 projects). 
• The auditor may be requested to provide ad-hoc views or opinions on compliance matters as related to the project(s) and their registration, tax and other reporting requirements, as needed.

The project audit steps include the following: 

1. Review and verify all the necessary documents and vouchers of locally incurred costs to ascertain that the accounting records have been completed in accordance with Deloitte standard guidelines and as per generally accepted accounting practices. 
2. Verify the expenditures incurred locally are accurate and eligible.
3. Verify that accounts have been maintained in accordance with Field Finance Procedures and other available policies and manuals wherever available and provide an accurate representation of the financial position of the project.
4. Perform limited review of procurement process to confirm that firm procurement policy and procedures (wherever available) were followed.
5. Preparation of one consolidated financial statement and individual financial statement as per GAAP and Nepal Accounting Standards for the period of 17 July 2023 to 15 July 2024 for USAID Urja, USAID Trade and Competitiveness and USAID Public Financial Management. 
6. Consultation and recommended steps on local rules and regulations and leading practices on various expenses like medical and life insurance premium payment as taxable income.
7. Any findings identified as a result of the audit will be drafted and shared with the management personnel of the relevant projects prior to issuing the final report.
8. A response from the Deloitte representation will be considered and included in the final report results.
9. Perform annual income tax return filing in Inland Revenue Department (IRD) within the deadline, conduct withholding tax audit and facilitate and obtain tax clearance from the Inland Revenue Department for Deloitte Consulting Overseas Projects LLC of Nepal.

Close out Final Audit Report (Deliverables):

The audit report will be comprised. 

• Preparation of separate Annual Financial Statement of individual three projects, as well as a consolidated financial statement of these 3 projects.
• The auditors’ opinion on the project financial statement.
• Separate Management Letters for three projects which includes:
  • Comments and observations on the accounting records, systems, and controls that were examined during the audit.
  • Specific deficiencies and areas of weakness in systems and controls and recommendations for their improvement. 
  • Matters that have come to their attention during the audit which might have a significant impact on the implementation of the project; and 
  • Any other matters that the auditor considers pertinent.

Conditions and Requirements

The auditor will be given access to all relevant documents, vouchers, the project-specific legal agreements and any other information associated with the Project and deemed necessary by the auditor to complete the steps outlined above. Personnel from Deloitte will cooperate fully with the auditor and will make available to the auditor project specific records, documentation and other information as requested by the auditor in connection with the project audit.

The audit shall be carried out by an external, independent and qualified auditor in accordance with international standards. Auditors should themselves bear any cost of meals and refreshments during their work in the audit period. The project will provide all the necessary documents as requested for the audit purpose. The selected auditor is required to protect and maintain a close hold on all information and documentation received from Deloitte. Business proprietary information will only be used for this audit purpose.  Once the audit is concluded all proprietary data / information must be removed and properly hand over or destroyed so that none such documents/information will be used by the auditor in future.

Criteria for Auditor selection:

• The Audit firm/engagement partner must be a Chartered Accountant and registered member with the Institute of Chartered Accountant of Nepal (ICAN). 
• Auditors should have a minimum of 7 years of audit experience of donor-funded projects, specially in the development sector, with NGOs and INGOs and priority will be given to those having audit experience of USAID-funded projects. The firm have to demonstrate that it has the capacity, capability, expertise and experience required to undertake the external audit services within required timelines.
• The firm should provide audit methodology and Curriculum Vitae for its partner/s.
• Provide evidence of the required business licenses (VAT certificate, Tax clearance) to operate in the host country.
• Having adequate financial resources to finance and perform the work or the ability to obtain financial resources without receiving advance funds.
• Ability to comply with required or proposed delivery or performance schedules.
• Have a satisfactory past performance record with record integrity and business ethics.

Application:

The interested and qualified audit firms must submit their technical and financial proposal (The technical proposal and cost proposal must be kept separate from each other), including all the documents mentioned above in Criteria for Auditor Selection by 17:00 hours (COB) 28 July 2024 via email address given below:

Email: procurement@pfm-nepal.com