TERMS OF REFERENCE FOR REVIEW OF INTERNAL CONTROL SYSTEMS IN AREAS OF FINANCIAL MANAGEMENT AND GOVERNANCE
Background
Never Again Rwanda (NAR) is a peacebuilding and social justice non-governmental organization that was established in 2002, in response to the 1994 Genocide against the Tutsi. We aim to empower youth, women, and other citizens from Rwanda and the Great Lakes region with opportunities to become active citizens for a peaceful society. NAR has five core pillars: Peacebuilding, Governance & Human Rights, Youth engagement, Research, and Strategic partnerships.
NAR is implementing its 5-year Strategic Plan (2021-2025), through which several programs and projects are being implemented and other programs are expected throughout the period of the strategic plan. To implement the plan, NAR has widened its scope and team with many offices operating in different districts. Also, NAR is working with several community-based organizations, a wide range of beneficiaries, and stakeholders with different needs and priorities.
With this, NAR aims to strengthen its internal management and administrative systems to contribute to the realization of its mandate.
Objective of the assignment
This assignment will primarily focus on an analysis of the adequacy and effectiveness of organizations internal control systems in areas of financial management and governance in order to determine whether these can guarantee quality and accuracy in the entire organizational chain. The assignment includes a review in which routines and systems for operational and financial control are described and analysed.In addition, the consultant is expected to identify eventual gaps and provide recommendations in respect of improvements deemed necessary.
1. Organisational structure, governance, and legal status
Together with an overall presentation of the organisational structure of ORG, the following areas shall be assessed:
1.1. Legal status
- Proof of legal registration with the competent authority
- Are there the constitution /by laws in place
- Is the organization an entity that has legal capacity to enter into an agreement with rights and obligations? Verify for each entity of the organizational chain.
- Is the organization in compliance with required filings with relavant regulators authories such as RGB &Rwanda Revenue Authority
1.2. Organisational structure
- Describe in an organogram the organizational structure, the relationship between headquarters and field offices; legal status of regional/country offices, division of roles and responsibilities for financial management, monitoring, and reporting.
- Does the management structure have clearly defined roles, authorizations, and authorities?
- Are there bylaws/statues that clearly stipulate the mandate of the board and the organization?
- Review the adequacy of the organization structure
1.3.Governance
- Verify the presence of the board and its functioning, and if Board has been meeting on the frequency required
- Describe the Board Composition and whether its is organized in focus-commitees, Qualifications, and Engagement
- Present the composition of the board; its members different competence’s, the election process, and the formal mechanisms in place to ensure the board´s insight in the operation of the organization
- Review adequacy and compliance of the authorizations that the Executive Management is required to obtain from the Board in areas of financial management.Does the organization have an internal audit function independent from the Executive Management and reporting to the Board?
- Based on above, does the board have relevant competence, including competence in oversight of financial matters for an organization of this size? Are there any indications of conflict of interest for any board member? Is there a routine for listing the board members secondary occupation ( sideline occupation)? If so, has any of the board members done so?
- Describe the decision-making mandate and delegation procedures through the whole organizational chain. Assess how formal decision-making mandates and delegation of funds and responsibilities work in practice. Is segregation of duties documented in an office manual or equivalent? Check compliance based on professional judgement.
- Verify the organ that runs the day to day management of the organisation
- Review the adequacy of the organization governance structure
2. Funds flow management
- Describe the financial flow within the organization.
- Assess the financial situation of the organization by reviewing the audited Financial Statements and auditors’ management letters. Are there any red flags related to the Cash & Bank-, Liability- and equity-posts, based on your professional judgement? Are there unrestricted funds available within the organization
- Are there financial support from other donors available? If so, describe the extent and nature of these funds.
- Describe the budgetary routines for the whole organization including regional and country offices as applicable and describe how project/programmes are prepared, approved, and monitored.
3. Accounting policies, procedures, and practice
- Does organization have an accounting software that allows for adequate accounting records for an organization of its size and operation? Does the accounting software allow for project accounting? Is it used?
- Is there an office manual or equivalent stipulating rules and policies regarding (i) travel advances and other types of (ii) advances (iii) petty cash; (iv) inventories; (v) per diem level; (vi) routines for credit cards and (vii) payments, etc.? Are regulations as well as rate-levels used to support these items deemed reasonable? Check compliance based on professional judgement.
- Are travels with business class allowed? Is it stipulated what standard of accommodation that is used for workshops and travels?
- Review whether there are systems in place to record salary costs in a systemized way.
- Review salary levels, allowances, and benefits (including any bonus schemes, benefit packages both monetary and non-monetary) offered to staff. Are the levels assessed to be competitive and reasonable (Does the organization benchmark with similar organisations)?
- Review how salary, allowances, and benefits structure is revised. Is a board approval necessary for raises and any changes related to top management?
- Review how overhead costs are calculated. Is there a cost recovery model in place? What is included? Does the organization follow up and update the model on a regular basis? If so, please describe.
- Describe how the organization handles foreign exchange gains/losses and review whether the principle for handling and reporting exchange gains/losses is in accordance with good practice.
- Review the adequacy of accounting policies, procedures, and processes.
- An assessment of the adequacy of financial and administrative delegation and segregation of duties and controls. And, assessing expenditures incurred/ advances provided are duly authorized as per the financial and administrative delegation approved by the management.
- Expenditure incurred with reference to the budget allocation approved. In case the budget allocation is exceeded, proper re-appropriation duly approved by the competent authority has been obtained.
- Adequate and proper supporting documents, namely, purchase orders, tender documents, invoices, vouchers, receipts, pay bills, etc. are maintained and linked to the transactions.
4. Risk management
- Describe and verify the system for risk analysis. Is there a systematic and regular follow-up of risks? Are there routines for risk reducing measures?
- Does the organization have sufficient staffing regarding resources, competence, and professional knowledge to ensure preventive and proactive work with different types of risks?
- Is there any plans for how to maintain service in the event of a financial /funding challenges
- Does the organization conduct an annual environmental scan considering the potential benefits and threats
5. Oversight from headquarters vis-à-vis the field offices
- Are the roles and responsibilities for financial management between the headquarters and the field offices clear?
- Are there Financial Manuals in the field offices that are adapted to the context? Are these manuals reviewed and approved by headquarters to ensure that they include all necessary routines and controls?
- Describe what kind of financial monitoring that is in place from headquarters vis-à-vis the field offices, e.g. an internal audit function, requirement for monthly financial reporting from the field offices to be consolidated at headquarter, requirement for the field offices to submit monthly reconciliations of the accounting to HQ, spot checks/visits from headquarters, etc. Is the financial monitoring considered adequate to ensure that the accounting at the field office is correct, up to date and that the internal control is sufficient? Check compliance on the above based on professional judgement.
6. Audit
- Is the organization audited according to national rules and regulations applicable to its legal form. Describe the type of audit (ISA, USGAAS, national standard, assurance engagement, agreed upon procedures)?
- When there are regional and/or country offices: are those offices audited according to the statutory requirements of the country in question? If so, how does the auditor of the overall financial statements of the organization, ensure that these audits are conducted according to applicable standards on auditing (taking ISA 600 into account). How are the costs incurred at the country offices included in the statutory audit?
- Does the organization follow-up and act on weaknesses identified in the audits in a systemized way?
- Verify if the auditor is external, independent, and qualified?
- During how many years have the audit firm/signing auditor been auditing the organization and what is the maximum term for retaining audit firm?
- Verify whether Audit evaluated the decisions taken by the executives
- Verify whether the accounts for grants is adequately maintained or not for proper recording the grants.
7. Reporting and monitoring
- Describe the organization financial reporting structure (type of reports, budget follow-up, reporting, and follow-up frequency). Is the structure relevant for the organization
- Does the organization have a modern and adequate IT-system which is appropriate and includes clear routines for segregations of duties?
- Verify the existence of Monitoring and evaluation system of an organization
- Does the organization consolidate departmental reports and prepare consolidated reports
8. Procurement policies, procedures, and practice
- Is there a procurement policy that includes adequate rules and regulations to manage planned procurement in compliance with applicable regulations? Sidas procurement rules for NGOs can be used for comparison purposes.
- Verify compliance to the procurement policy by reviewing a minimum of three to five different type of procurement actions.
- Ascertain whether procurement done observed the principle for value for money
- Review adequacy of the procurement policies, procedures, and processes
- Goods, works, and services financed have been procured in accordance with the procurement manual
- The review of procurement process should also cover the progress on establishing grievance redressal mechanism and feedback provided to unsuccessful bidders.
9. Anti-corruption
Describe the organization system for anti-corruption. Verify the following:
- Is there an anti-corruption policy or has the organization in other ways described that they work proactive against corruption and/or other irregularities? Does the organization have documented ethical guidelines/code of conduct policy? Does the organization have routines for reporting “secondary occupation” (bisyssla)? Verify if the policies and guidelines are being implemented in a systemized manner?
- Does the partner have clear reporting channels for handling suspicions of corruption and/or other irregularities?
- According to the organization, has any corruption cases occurred, and if so, how has it been handled?
- What eventual corruption risks have been identified during the assignment by the consultant?
- Does the organization’s staff participate in anti-corruption trainings? Are the anti-corruption trainings recurrent and does organization keep records of the staff that have participated?
10. Forwarding of funds/sub-granting
- Does the organization assess the implementing partner organisation’s capacity regarding competence, resources, internal control, and work on anti-corruption, and if so, in what way? Are these assessments documented?
- Is the process for selecting partners transparent and clear?
- Are there signed agreements between the organization and its implementing partner organisations in subsequent link? Are the rights and obligations of the implementing partner organisations stipulated in the agreements? Are the agreement requirements in accordance with what is stipulated in the agreement between Sida and organization?
- What reporting requirements; financial and results; including audits, does the organization place on its implementing partner organisations?
- Are eventual findings and weaknesses in the audit reporting from implementing partner organisations followed-up upon by the organization in a systematic and documented way?
- Review whether there are routines for ongoing follow-up and monitoring of implementing partner organisations (for example field visits).
- How are implementing partner organisations in hard-to-reach areas followed up?
- Does the organization provide anti-corruption trainings to its implementing partner organisations?
11. Human resource management
- Review the existence and adequacy of the human resource management policies.
- Review the management and processing of staff payroll costs as per the established procedures.
- Check whether time resource for project(S) is aligned to approved timesheets.
- Check whether the orgnazation complies with the employment taxes and any related tax risk / exposure.
12. Treasury and cash control
- Check whether there is an established treasury management controls and their effectiveness
- Check whether controls over the treasury such as approvals operated effectively during the period under review
- Check whether the monthly bank reconciliation control is in operation and whether it was performed effectively during the period under review.
- Review the payments made in cash (directly or through staff) and advise if the operational guidelines/rules in this regard are being followed on consistent basis.
- Review the record keeping for recording the purchases made against cash and advice if this is sufficient to ensure that the orgnazation’s fiduciary interest is fully safeguarded.
- Provide an opinion on adequacy of the limit on cash payments as per operational guidelines/rules.
13. Asset management
- Check whether the organization maintains an asset register
- Check whether the asset register is complete in terms having all assets included and containing all desired attributes of an asset
- Check whether the asset register is reconciled to the general ledger
- On as sample basis verify the existence and condition of the assets
- Check whether the assets are appropriately targged with unique serial numbers
Deliverables
- International Systems audit report with recommendations of areas to improve.
- Timeframe for addressing the recommendations.
Timeframe of the assignment
The work is expected to be performed from 17/12/2021 to 30/12/2021
The reporting deadline is expected to 5 January,2022. The interested auditing firms are requested to submit a technical proposal and a financial proposal to info@neveragainrwanda.org by the 15th December, 2021, Your proposal should be accompanied by the following: 1. Company Registration Certificate 2. Operating license 3. VAT registration certificate 4. Valid Tax Clearance Certificate 5. Provide at least two references for similar delivery in the recent three years. 6. Dully signed, dated, and stamped proposal
The systems audit should not take more than 10 workdays.
