Multiple Framework-Contract in the field of external audit of programs and projects of external aid
Description
CC AUDIT JO 2010/S1-000108 Annex I Framework Contract in the field of external audits of programmes and projects of external aid financed by the European Commission from the European Development Fund (EDF) and the general budget of the European Union (EU budget) Global Terms of Reference Lot 1: financial audits and systems audits TABLE OF CONTENTS 1 Introduction............................................................................................................2 2 Objective................................................................................................................2 3 Scope: Financial Audits and Systems Audits ........................................................3 3.1 Financial Audits.............................................................................................3 3.2 Systems Audits...............................................................................................4 3.3 Systems Audits in conjunction with a Financial Audit..................................4 3.4 Common aspects of Financial and Systems Audits .......................................5 3.4.1 Engagement context...............................................................................5 3.4.2 Audit process and methodology.............................................................3.5 Expenditure Verifications of Programme Estimates......................................6 4 Requirements for the Auditor ..................... ...
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| Langue | English |
Extrait
CC AUDIT JO 2010/S1-000108
Annex I
Framework Contract in the field of external audits of programmes and projects of external aid financed by the European Commission from the European Development Fund (EDF) and the general budget of the European Union (EU budget) Global Terms of Reference Lot 1: financial audits and systems audits
TABLE OF CONTENTS 1 Introduction............................................................................................................2 2 Objective ................................................................................................................2 3 Scope: Financial Audits and Systems Audits ........................................................3 3.1 Financial Audits .............................................................................................3 3.2 Systems Audits...............................................................................................4 3.3 Systems Audits in conjunction with a Financial Audit..................................4 3.4 Common aspects of Financial and Systems Audits .......................................5 3.4.1 Engagement context...............................................................................5 3.4.2 Audit process and methodology.............................................................5 3.5 Expenditure Verifications of Programme Estimates......................................6 4 Requirements for the Auditor ................................................................................8 5 Standards and Ethics ..............................................................................................9 6 Annual Summary Report .....................................................................................10 7 Modalities of contract execution..........................................................................10 7.1 Procedure .....................................................................................................10 7.2 Request for services .....................................................................................10 7.3 Offers ...........................................................................................................10 7.4 Offer’s evaluation ........................................................................................11 7.5 Specific contract...........................................................................................12 7.6 Conflict of interest .......................................................................................14 8 Miscellaneous ......................................................................................................14
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1 Introduction EuropeAid's mission is to implement the external aid instruments of the European Commission 1 which are funded by the General Budget of the European Union (‘Budget’) and the European Development Fund (‘EDF’). EuropeAid is responsible for all phases of the Project Management Cycle which ensures the operational translation and implementation of the programming documents and overall objectives established under the responsibility of the Directorates-General for External Relations and Development. Commission services at EuropeAid and in Delegations must ensure the legality, regularity and sound financial management of external aid operations. Audits of external actions are an important component of EuropeAid's overall control framework. The term ‘audits of external operations’ means audits of external aid projects and programmes carried out by or on behalf of Commission services at the level of beneficiaries, contractors and intermediaries. Audits used by EuropeAid are assurance engagements and their main purpose is to provide assurance on the legality and regularity of external aid actions. Assurance is primarily related to compliance with the applicable regulations and rules. Compliance with criteria for legality and regularity is essential for all external aid projects. Compliance can be defined as the ability to reasonably ensure conformity and adherence to the applicable legislation and rules. Compliance criteria which the auditor will measure are determined by the engagement type and the documents that constitute the legal and regulatory basis for a project. The latter are typically Financing Agreements, external aid contracts and programme estimates. These criteria in these documents are referred to as 'agreement terms and conditions'. The term 'audits of external operations' also covers related services engagements. Related services engagements are not assurance engagements - they are not audits and they include certain specific types of verifications and compliance assessments. Auditors contracted by EuropeAid are expected to have a good understanding of and to comply with the principles of the IFAC Code of Ethics and the International Framework for Assurance Engagements. They should comply with International Standards on Auditing (ISAs), the International Standard on Assurance Engagements (ISAE) or International Standards on Related Services (ISSR) where this is specified by the terms of reference. 2 Objective The purpose of these global terms of reference is to explain the general context of the assignments and to describe the principles and main features of the services envisaged under lot 1 of the framework contract.
1 Except for the pre-adhesion instrument, cooperation with occidental Balkans, humanitarian activities, macro-financial aid, CFSP and rapid reaction mechanism.
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In the interest of transparency and independence and in order to strengthen its supervisory and audit capability, the Commission intends to conclude the framework contract (lot 1) with a maximum of four professional firms for the purpose of auditing external aid actions financed from the EC Budget and the EDF. The framework contract enables the Commission to set out, in advance, the terms and conditions for performing the services described at 3 below. The framework contract is used for the financing of audits launched by the Commission. The general modalities of the framework contract are described at 4 below. 3 Scope: Financial Audits and Systems Audits The Commission requires services for financial and systems audits of external aid actions financed from the EC Budget or the EDF (including, where applicable, expenditure verifications of programme estimates). Tenderers for this framework contract are advised to refer to the Guidelines for Auditors . These guidelines provide written guidance and background information to auditors performing audits and related services engagements with regard to external aid actions. Annex 1 of the Guidelines describes the external aid activities in the geographic and thematic areas, management modes and the legal and regulatory instruments by which activities are implemented. These guidelines are available at: http://ec.europa.eu/europeaid/work/framework-contract/audit2006/terms of reference en.htm _ _ _ Standard terms of reference ('ToR') for financial and systems audits and for expenditure verifications of programme estimates can also be found at the above website. These ToR are usually composed of a standard model ToR and three annexes. Annex 1 includes key information about the engagement context; annex 2 provides a detailed description of the audit process and methodology and annex 3 is a (compulsory) audit report model. The specific aspects and other terms and conditions for audit assignments will be set out in the specific ToR to the request for services for each assignment. 3.1 Financial Audits Context Financial audits of external aid actions have some characteristics of audits of financial statements but they are not the same. The objective of a financial statements audit is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework. The phrases used to express the Auditor’s opinion are ‘give a true and fair view’ or ‘present fairly, in all material respects’, which are equivalent terms. Financial audits of external aid operations focus on historical financial information and on compliance with agreement terms and conditions. Many of the principles which apply to audits of financial statements also apply to financial audits of external aid actions. The fundamental difference between these two audit types is in the objectives and hence in the formulation of the audit opinion. Objectives The objectives of a financial audit are to enable the auditor to express an opinion on whether: • the financial report of a project for a specified period presents, in all material respects, accurately, the expenditure actually incurred and the revenue received for the project in conformity with the applicable agreement terms and conditions; and
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• the funds of the project have, in all material respects, been used in conformity with the applicable agreement terms and conditions. Scope The project subject to audit usually covers activities/actions which are set out in one or more external aid contracts or agreements. The subject of the audit is normally a financial report. The period to be covered by the audit is specified in the ToR. Compliance with agreement terms and conditions is essential. 3.2 Systems Audits Context Systems audits focus on the design and the effective operation of an entity's internal control system ('ICS'). Systems audits can be useful before a project is started, at the early stages of project implementation and sometimes at mid-term. In these cases system audits can make an impact through the auditor's analysis of the ICS and through subsequent recommendations for improvements. Objectives The objective of a systems audit is to enable the Auditor to express an opinion on: • the design of the ICS of an entity for a project existed at a specific point in time; or • the design and operating effectiveness of the ICS of an entity for a project and which existed during a specified period. Scope The project subject to audit usually covers activities/actions which are set out in one or more external aid contracts or agreements. The subject of the audit is normally the ICS of an entity. Timing aspects of the systems audit are specified in the ToR. The work of the Auditor includes assessing the Entity's compliance with requirements for internal control as specified in the agreement terms and conditions insofar as these are appropriate for the entity's project activities. The auditor will identify and assess internal controls which are relevant to the audit and the internal control areas of the project. 3.3 Systems Audits in conjunction with a Financial Audit A financial audit which is performed in conjunction with a systems audit has essentially the same features as the individual audit types. However, in a financial audit the Auditor may examine and use an entity's ICS with a view to limiting the amount of substantive testing. The auditor does not express an opinion on the ICS as this is not an objective of a financial audit. In a combined financial and systems audit, the auditor is to express two opinions, one on the financial information and one on the design and operating effectiveness of the ICS.
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3.4 Common aspects of Financial and Systems Audits
Annex I
3.4.1 Engagement context The ToR for financial and systems audits include information about the engagement context. The purpose is to enable the auditor to obtain sufficient preliminary knowledge of key elements of the engagement context such as: reason for the engagement, logistical information, agreement terms and conditions for the project, information about the entity and the project subject to audit, the subject of the audit ( e.g. a financial report or the ICS).
3.4.2 Audit process and methodology The ToR provide information and guidance with regard to the audit process and methodology. The auditor is expected to perform the audit in accordance with the standard terms and conditions for the audit process and methodology. Annex 2 of the ToR for financial and systems audits describes the procedures and methodology for, planning, conduct, documentation and audit evidence and reporting for financial and systems audits. The auditor is advised to refer to the 'Guidelines for Auditors' which provide guidance and support for the audit process including and in particular the levels of assurance provided by the opinion types and the classification of audit findings. These guidelines are not all inclusive or restrictive in nature and they do not relieve the auditor from exercising due professional care and judgment. The auditor should determine the type, nature and extent of audit tests and procedures to fit the objectives, scope and context of the audit engagement. Reporting General requirements The reporting requirements for each Specific Contract will be detailed in the specific Terms of Reference for the individual assignments. Without prejudice to what is set out in the specific Terms of Reference, the reporting requirements for financial and systems audit reports are briefly described below. The Auditor should report the results of the audit in accordance with the International Standards on Auditing for reporting, the practices of his/her audit firm and the requirements set out by the specific Terms of Reference for the assignment. Generally speaking the audit report should be objective, clear, concise, timely and constructive. It should include an independent assurance report for the audit (i.e. an audit opinion), a summary of findings, a description of the engagement context and of the audit, the auditor's findings and recommendations and specific matters where applicable. The auditor should use the format, style, structure and content of the model audit reports which are annexed to the specific Terms of Reference for the assignment. Audit reports should be submitted to the Commission in paper and electronic version using MS Word or MS Excel formats. Audit findings and opinions should be presented in accordance with the principles and criteria for classification as set the 'Guidelines for Auditors' . Audit reports should be presented in the language(s) as indicated in specific Terms of Reference.
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Other reporting requirements which apply or may apply (depending on the case) include: - Complementary letter: the auditor may at any time during the audit process draw up a complementary letter if he/she considers that the Commission should be informed about facts and issues that are or may be of particular interest and importance to the Commission. -Debriefing Memorandum (or 'Aide Mémoire'). At the end of the fieldwork, the auditor will prepare a Debriefing Memo for discussion at the closing meeting. This Memo should outline the main audit findings and recommendations. A copy of the Memo should be forwarded to the Commission as soon as possible after the closing meeting. All required reports and/or documents will be under the responsibility of the contractor. In the case of a consortium, this responsibility lies with the leader. Reporting - Procedures and timetable for the submission of draft and final audit reports Auditors are expected to comply with the requirements, procedures and the timetable for the consultation and submission of the draft and final audit report in the ToR and notably in Annex 2 of the ToR. Auditors should pay particular attention to the deadlines for the submission of draft and final reports which are set out below. The Auditor is expected to submit a draft report to the Commission (i.e. to the attention of the ATM) within 21 calendar days after the day of the closing meeting (i.e. end of fieldwork). The Commission should provide comments to the auditor within 21 calendar days from receipt of the draft report. The auditor should submit a draft report which takes into account the Commission's comments to the entity subject to audit within 7 calendar days from receipt of the Commission's comments. Entities subject to audit must submit comments to the auditor within 21 calendar days from receipt of the draft report. If no additional audit fieldwork is required, the auditor should submit a pre-final report to the Commission within 7 calendar days from the receipt of the entity's comments on the draft report. The Commission informs the auditor in writing whether it accepts the pre-final report within 14 calendar days from the receipt of the pre-final report. The auditor should then submit a final report within 7 calendar days from receipt of the Commission pre-final report's acceptance. Note : the above deadlines are different from the ones set out in the current ToR which will be adapted and become effective when the Audit Framework Contract 2010 comes into force.
3.5 Expenditure Verifications of Programme Estimates Context In accordance with the Practical Guide of the procedures applicable to programme estimates ('PE's) financed by the EDF and the BUDGET, an expenditure verification is mandatory before submission of a request for closure of a PE: 'when the total expenditure incurred by the imprest component of the budget of a programme estimate amounts to the equivalent of EUR 200.000'.
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Expenditure verifications of PE's are based on the concept of agreed-upon procedures (IFAC International Standard on Related Services (ISRS) 4400: ‘Engagements to perform agreed-upon procedures regarding financial information’. The requirements for expenditure verifications are specific and certain aspects are fundamentally different from audits. Objectives An expenditure verification is an engagement to perform certain agreed-upon procedures with regard to the Record of Expenditure for a PE. The objective of this expenditure verification is for the auditor to carry out specific procedures and to submit to the contracting authority a report of factual findings with regard to the specific verification procedures performed. Verification means that the auditor examines the factual information in the Record of Expenditure of a PE and compares it with the terms and conditions of the PE. This expenditure verification is not an assurance engagement and the auditor does not provide an audit opinion but a report of factual findings. Scope The PE subject to verification covers the activities/actions which are set out in one or more PEs. More particularly the subject of the verification is normally a Record of Expenditure for a specified period. The auditor verifies compliance with the terms and conditions that apply and which are set out in the PEs which include a Work Programme, a Budget, a Financing Plan and Technical and Administrative implementing Arrangements. Moreover, applicable terms and conditions are set out in Financing Agreements concluded between the Commission and the beneficiary as well as in the Practical Guide. The work of the Auditor involves performing specific procedures which are listed and described in detail in an annex to the ToR for PEs. Verification process and methodology The ToR provide information and guidance for the verification process and methodology. The auditor should perform the verification in accordance with the ToR and the listing of specific procedures to be performed and the guidelines annexed to the ToR. Reporting The expenditure verification report should describe the purpose, the agreed-upon procedures and the factual findings of the engagement in sufficient detail in order to enable the management of the entity which manages the PE and the contracting authority to understand the nature and extent of the procedures performed by the auditor and the factual findings reported by the auditor. The ToR for PEs provide a Model Report of factual findings for an expenditure verification of an EC Programme Estimate and the use of this model is compulsory. The deadline for submission of the expenditure verification report is specified in the ToR on a case-by-case basis.
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4 Requirements for the Auditor General Generally speaking auditors and/or their firms who perform audits and expenditure verifications of programme estimates for EuropeAid are expected to be a member of a national accounting or auditing body or institution which in turn is member of the International Federation of Accountants (IFAC). Other conditions may also be acceptable and will be assessed by the Commission on a case-by-case basis. Qualifications and experience The auditor is expected to employ adequate staff with appropriate professional qualifications and suitable experience with IFAC standards, in particular ISAs and with experience in auditing the accounts of entities comparable in size and complexity to the entity subject to audit. Other specific conditions can be set out in the ToR depending on the case. Team composition and categories of auditors A team of auditors will normally be composed of a category 1 auditor who has the ultimate responsibility for the audit and an audit team which is composed of an appropriate mix of category 2 4 auditors. For each category the auditors must have the qualifications and experience as set out hereafter. It is the responsibility of the auditor to propose and use an audit team which is composed of an appropriate mix of auditors for this engagement Category 1 Audit Partner An audit partner must be a highly qualified expert with a relevant university or professional qualification and assuming or having assumed senior and managerial responsibilities in public audit practice. He/she should be a member of a national accounting or auditing body or institution. He/she must have at least 12 years of professional experience as a professional Auditor or accountant in public audit practice. Experience with working with the recipient countries of Community external aid will also be taken into account. An audit partner, or another person in a position similar to that of a partner, is the person of the audit firm who is responsible for the audit and its performance, and for the report that is issued on behalf of the firm. He/she has the appropriate authority from a professional, legal or regulatory body and is authorized to certify accounts by the laws of the country in which the audit firm is registered. Category 2 - Audit Manager An audit manager must be a qualified expert with a relevant university or professional qualification. He/she must have at least 6 years experience as a professional auditor or accountant in public audit practice including relevant managerial experience of leading audit teams. Category 3 Senior Auditor A senior auditor must be a qualified expert with a relevant university or professional qualification and at least 3 years professional experience in public audit practice.
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Category 4 Assistant Auditor An assistant auditor must be a qualified expert with a relevant university or professional qualification and between 6 months and 3 years professional experience in public audit practice. The auditor will provide the Commission with CV's of the partner or other person in the audit firm who is responsible for the audit and for signing the report together with the CVs of the audit managers, supervisors and staff proposed as part of the audit team. 5 Standards and Ethics Auditors are expected to comply with the Code of Ethics for Professional Accountants issued by the IFAC and notably the principles of integrity, objectivity, independence, professional competence and due care, confidentiality, professional behaviour and technical standards. They are further expected to comply with IFAC standards and guidance which are relevant for the type of audit concerned. For a financial audit: • the IFAC International Framework for Assurance Engagements and more specifically the standards relating to Audits and Reviews of Historical Financial Information applied in the context of a compliance audit; and • International Standards on Auditing (ISA's) 100 999 (including ISA 800 The Auditor's Report on Special Purpose Audit Engagements) insofar these standards can be usefully applied in the financial audit and in its specific compliance context. For a systems audit: • the IFAC International Framework for Assurance Engagements and more specifically by the standards relating to Assurance Engagements other than Audits or Reviews of Historical Financial Information ; • International Standard on Assurance Engagements ('ISAE') 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information insofar this standard can be usefully applied in the systems audit and in its specific compliance context. The auditor may also find useful guidance in International Standard on Auditing ('ISA') 315 -Understanding the Entity and its Environment and assessing the risks of material misstatement, and particularly in the paragraphs 41 99 on Internal Control. For expenditure verifications of Programme Estimates Auditors are expected to comply with the IFAC International Standard on Related Services (ISRS) 4400 Engagements to perform Agreed-upon Procedures regarding Financial Information as promulgated by the IFAC. Auditors are also expected to comply with the IFAC Code of Ethics for Professional Accountants . Although ISRS 4400 provides that independence is not a requirement for agreed-upon procedures engagements, the contracting authority requires that the auditor is independent from the beneficiary and complies with the independence requirements of the Code of Ethics for Professional Accountants .
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6 Annual Summary Report The Contractor will prepare an annual summary report for all assignments (audit and other) completed under Lot 1 of the Framework Contract. This report should provide a summary overview of the assignments completed during the year as well as a synthesis of the opinions or conclusions and the main findings and recommendations in the reports. The annual summary report is due on 15 th January of the year following the year in which the final reports were completed and send to the Commission. For this purpose the Commission will provide a model annual summary report. 7 Modalities of contract execution 7.1 Procedure The Commission proposes to conclude a framework contract for “lot 1: financial audits and systems audits with a maximum of 4 professional firms or consortia. The framework contract is used to mobilize experts within a very short delay. 7.2 Request for services Each specific assignment will be the subject of a request for services, which will be sent via e-mail (fax may be used in exceptional cases only) to all the contractors of lot 1. The specific contracts may be either global price contracts or fee-based contracts, based in both cases on a detailed offer. This will be specified in the request for services. The detailed specific Terms of Reference for each assignment will be annexed to the request for services. The specific Terms of Reference will specify the objectives of the assignments, the expertise or the expert's profile, the specific technical skills required, etc. If justified by the complexity of the assignment, a short methodology may be requested to be submitted together with the offer. The contractors must send by e-mail the next working day an acknowledgment of receipt of the request for service and their confirmation of intention to submit an offer. 7.3 Offers Contractors shall submit, for each specific request for services, an offer including: A cover note describing how the assignment will be performed in accordance with the specific Terms of Reference, if required in the specific Terms of Reference, a methodology (should not exceed 5 pages), the composition of the audit team, the experts’ curriculum vitae (maximum 3 pages) for all the experts proposed, and a financial offer / breakdown of prices in line with the financial conditions (in particular respecting the market prices of reimbursable items and the maxima of the fees fixed at the level of the FWC), within 14 calendar days from receipt of the request for services. If necessary, any of the contractors can ask, by e-mail, for clarifications during this 14 calendar days period. The Audit Task Manager will answer as rapidly as possible by sending
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the question/request for clarification and the answer to all other contractors consulted simultaneously. Regardless the Request for Services indicates that the Specific contract will be fee-based or global-price type, the offer will be detailed and follow the contractual template (annex I.3.). Each item under reimbursable must be detailed to allow the comparison of the price offered with the market price. The quantities must be specified such as "10 per-diem in country A for 195 EUR", etc. Grouping items (e.g. 5 per-diem and 50 pages of translation for 4000 EUR) or without quantities (e.g. per-diem for 2000 EUR) is not acceptable. The cost of the trips constitutes one item of the reimbursable costs. However, if there are several trips, the framework contractor should present an itemised list. On a case by case basis, the contractor shall propose experts who meet the specific criteria (e.g. linguistic) required for the assignment. For each specific offer, the proposed experts should have the nationality of one of the European Community countries or of eligible countries according to the contracts or agreements by which the audit is financed. When, in response to a request for services (annex I.1.) under this framework contract, the Contractor proposes an expert who does not correspond to the profile required by the Commission services, the proposal can be rejected. The Commission will not accept substitution of experts after approval of the original proposal of the contractor in response to a request for service, except in cases of unforeseeable delays related to the beginning of work and beyond influence of the contractor or for reasons of illness or force majeure. The contractor is responsible for: selecting the experts in line with the requirements described in the specific Terms of Reference checking the accuracy of information contained in the experts' CVs preparing the financial offer in line with the financial conditions (in particular respecting the market prices of reimbursable items and the maxima of the fees fixed at the level of the Framework contract), In the case of a Consortium, the responsibility for checking the quality and accuracy of the offer lies with the Leader of the Consortium. 7.4 Offer’s evaluation Only admissible offers will be evaluated. The admissibility criteria are: The deadline for the submission of offers has been respected The offer complies with the eligibility rules The fee rates do not exceed the contractual maxima The experts meet the minimum requirements set by the Terms of Reference When a maximum budget is fixed, it is not exceeded The selection of the most economically advantageous offer will be established by weighting quality against price on the 70/30 basis (70 technical quality / 30 price) according to the following formula (annex C.2): Score for offer X = [Cheapest price / price of offer X] * 30 + [Total quality score (out of 100) of offer X / 100] * 70
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