Terms of Reference (TOR) for Final Audit of FY 2080-81 (2023-24)

Nepal Branch Office, DAI Global UK Ltd.

Terms of Reference

Final Audit of FY 2080-81 (2023-24)

Task: Annual Financial Audit, Labor Audit and Annual Corporate Income Tax Filing Services for year 2023 -24 (Nepali fiscal year 2080-81).

Assignment: Fixed Price Contract

Reports to: Country Representative

Service Provider: Auditing Firm

Background

DAI Global UK Ltd is a consultancy company based in the UK. DAI Global UK Ltd has registered a Branch Office in Nepal in 2017 to manage the DAI projects holds with client inside and outside the UK. Presently it has two projects under implementation:

NREP

The Nepal Renewable Energy Programme (NREP) is a Government of Nepal programme funded by the British Embassy-Kathmandu (BE-K) aiming for transformational change in Sustainable Energy development in Nepal through increased private investment resulting in low-carbon economic growth and sustainable energy access for all.  NREP operates in three Provinces: Madhesh, Lumbini, and Karnali.  The Programme is implemented by the Alternative Energy Promotion Centre (AEPC) with Technical Assistance from the DAI Global UK Consortium—including DAI, Winrock International, Policy Entrepreneurs Inc., and Samriddha Pahad.  

NREP seeks to increase private sector investment in the distributed renewable energy market, primarily in commercial, institutional, and industrial segments; attain universal energy access (UEA), and facilitate a policy, planning, legal and regulatory environment conducive to both enabling and sustaining progress in RE market development and universal energy access. 

The project has been running since February 2019 and the last year of operations concludes on 31st March 2025. It has two bank accounts i. Nepalese Rupees (NRs) Account and ii. Convertible Currency (for GBP transaction). NREP accounts are maintained with QuickBooks accounting software. The estimated annual fund for the period under audit purpose is NPR184M (GBP1.1M).

Udaya

Working with the Government of Nepal’s Koshi Province (GoKP), the project Udaya, Investment and Innovation for Economic Development, seeks to enhance the framework conditions for SMEs in Koshi Province. It directly supports enterprises’ access to pertinent business development services (BDS) in areas such as business and financial management, accounting or marketing, and to provide interested SMEs with vouchers to avail of loan applications. Further, as existing service offered by BDS providers and banks in Koshi Province are not geared towards SMEs, the project will support the GoKP in establishing a technical assistance facility for improving BDS offers and strengthening SME-lending. Similarly, as banks are reluctant to lend to SMEs (owing to the allegedly high probability of loan default), the project will support the GoKP in establishing a risk-reduction mechanism for selected banks and financial institutions, possibly in the form of a guarantee fund. Finally, the project will support the GoKP in establishing an easy-to-use and interactive digital information portal, which will act as a repository of all business-relevant information for SMEs. Udaya is planned in three phases for an overall period of 10 years. Currently, DAI implementing the first phase of Udaya from 1st December 2023 to 30th November 2027. 

It has two bank accounts i. Nepalese Rupees (NRs) Account and ii. Convertible Currency (for CHF transaction). The estimated annual fund for the period under audit is NPR92M (CHF607K).

Objective

The objective is to conduct an audit of the financial operations of DAI Global UK Ltd, Nepal Branch Office and provide an independent professional opinion with regards to compliance of project rules and regulations and the financial statements comprising of the balance sheet as at 16th July 2024 and the statements income and cash flows for the period between 17th July 2023 and 15th July 2024.

Scope of work

The statutory audit will be conducted in accordance with Nepal Standards on Auditing as applicable in Nepal. It will be conducted in such a manner as the auditors consider necessary to fulfil their responsibilities as described above and will include such tests of transactions and of the existence ownership and liabilities as considered necessary. Auditors shall obtain an understanding of the accounting system to assess its adequacy as a basis for the preparation of the financial statements and to establish whether appropriate accounting records have been maintained.

As part of audit procedures, the auditors may ask the management to confirm formally in writing certain matters affecting the financial statements, such as those which are significantly dependent on the judgement of the management. The auditors may also rely upon information or advice given by persons suitably professionally qualified (whether employed by DAI Global UK). In order to assist with the examination of financial operations, the auditors shall request sight of all documents or statements, including the projects reports, which are due to be issued with the financial statements.

Auditor’s Responsibility

The audit should cover the funds remitted by DAI Global UK Ltd, for both projects, to the branch office in Nepal to meet the local costs incurred during project implementation."

The audit should be carried out in accordance with the Nepal Standards on Auditing (NSA) and will include such tests and controls as the auditors may consider necessary. In conducting the audit, special attention should be paid on the following:

• Whether the Branch Office, including projects, has kept proper accounting records as required in a manner to reflect the real affairs of the Branch Office;
• Whether the Branch Office’s balance sheet and statements of income and cash flows have been prepared in compliance with the accounting standards of DAI Global UK Ltd;
• Whether all the information and explanations have been obtained that the auditors deem necessary for audit;
• Whether the auditors have come across cases where any representative or any employees of the Branch Office and projects have acted contrary to the provisions of law relating to the accounts or committed any misappropriation or caused loss or damage relating to the accounts; and
• Whether any accounting fraud has been committed.

Access to Facilities and Documents:

The financial systems are automated in QuickBooks and Microsoft Excel.

The responsibility of preparing the financial statements rests with the Branch Office. The auditors will express a professional opinion on the true and fair view of the financial position of the branch office as at 15th July 2024 and the financial performance and cash flows for the period ending on that date. The financial statement should include:

• Balance sheet (Trial Balance);
• Income statement; and
• Cash flow statement.

The auditors will have full and complete access to all records and documents (including books of account, legal agreements, minutes of committee meetings, bank records, invoices and contracts etc.) and all employees of the entity. Also, the auditors should be given access to any information relevant for the purposes of conducting the audit. This would normally include all legal documents, correspondence, and any other information associated with the project and deemed necessary by the auditors including copies of the relevant agreements. The auditors will maintain working papers in a systematic manner and make them available to DAI Global UK, if required.

Management Letter 

In addition, to the audit report, the auditors will also provide a management letter summarizing the observations on the accountability and internal control issues for each project separately. These would include the following:

• Comments and observations on the accounting records, systems and controls that were examined during audit;
• Specific deficiencies and areas of weakness in systems and controls and recommendation for improvement;
• Matters that have come to the attention during the audit which might have significant impact on the compliance with agreement terms and laws and regulations; and
• Any other matter that the auditors consider significant to report to the management.

The observations in the management letter must be accompanied by the implications, suggested recommendations from the auditors and the management comments on the observations/ recommendations.

Debriefing Meeting:

The Auditors/Audit Team should conduct debriefing meetings with relevant program and finance staff and Management Committee Members regarding the audit in overall, response on the final audit report with financial statements and management letter.

Deliverables

• The auditors should produce an audit report and audited financial statements of three copies to i) DAI Global UK Ltd Branch Office, ii) Inland Revenue Office iii) Company Registrar Office;
• Prepare the tax audit report and tax returns for IRO obtaining tax clearance certificate;
• Submission of audit report and tax clearance certificate to CRO for updating (renewal) of Branch Office; and
• Management Letter as mentioned above.

Timing

The auditing company will start the auditing for above four activities of Branch Office from 1st August 2024 and complete by end of September 2024. The final audit report will be submitted to IRO by 10th of October to comply the due date of 30th Ashwin 2081 (16th October 2024). The given time (date) can be extended if the auditing assessment is not completed in exceptional case. DAI will approach the IRO for limited time extension based upon a valid justification.

Proposals Submission

1. A technical proposal limit to 4 pages (max) and 1 page (max) of financial proposal with a maximum 3 pages of CVs
2. Financial proposal – Suggested to structure the financial proposals on a milestone payment (subject to DAI approval). These milestones must be back-end loaded (i.e. 50% upon audit completion and DAI acceptance of the final report, 25% on tax clearance and 25% on update of branch office etc.).

Interested suppliers (auditing company) will submit the technical and financial proposal along with a company profile including team composition along their CVs and the latest tax clearance certificate in procurementnrep@dai.com 

The deadline for the submission of the proposal is no later than 11th July 2024, 5 pm.