Water.org Indonesia Office
Terms of Reference for Partner Financial Audit
These Terms of Reference (TOR) have been prepared with the aim of engaging a third party consultant or firm for the purposes of a financial audit of a Water.org Indonesian microfinance organization partners.
Water.org plans to conduct a financial audit of one of its partners who receive financial assistance for water and sanitation financing activities. The programs to be audited began in March 2015 and the audit should be comprehensive covering the first 18 months of the program that runs.
Rationale for the Engaging External Consultant Firms:
As part of internal monitoring processes and requirements, and for transparent reporting to our stakeholders, Water.org engages third party consultants to review financial transactions of our partner organizations to confirm that funds granted by Water.org are being spent according to the funding agreement between Water.org and the partner organization.
Water.org is a U.S.‐based non‐profit organization working to increase access to water and sanitation through collaboration with a variety of local partners. Water.org’s WaterCredit initiative leverages the existing relationships, infrastructure and expertise of financial institutions to increase access to capital for water and sanitation, and to educate and empower low‐income households to invest in water and sanitation facilities. Water.org launched WaterCredit globally in 2003 to provide financial institutions with targeted subsidies and technical assistance to build their capacity to offer water and sanitation financial products to those living at the base of the economic pyramid (BOP). WaterCredit supports a range of financial institution activities related to the development of sustainable water and sanitation loan portfolios, including:
- Market research;
- Water and sanitation financial product development and marketing;
- Community mobilization;
- Water and sanitation education/training; and
- Institutional capacity building.
Under WaterCredit, financial institutions have flexibility to use their existing lending methodologies and develop products that finance locally appropriate water and sanitation facilities. Loan product design is based on market research analyzing key variables such as local needs and preferences, existing water and sanitation infrastructure and services, and product affordability. By program end, financial institutions should have sustainable water and sanitation microfinance products integrated into their on‐going product offerings.
About Microfinance Partner
The microfinance partner is a rural bank based in Central Java Province on the island of Java in Indonesia provides financing services across 18 branch offices in all sub-districts. The microfinance partner offers a wide range of loan and savings products, including small business (UMKM), agricultural, water and sanitation, and educational loans. The microfinance partner uses a system of individual loans.
Overview of Existing Financial Monitoring Activities:
Water.org has a regular financial monitoring process for each partner that includes the submission of a monthly financial expenditure report. This report and access to Water.org staff, partner staff, and partner financial and accounting records will be available to the 3rd party consultant. Additional background materials such as a project narrative summary will be made available to the consultant if requested.
Scope of Evaluation:
- Audit Time Period: The period of evaluation should cover from March 1st, 2015 through August 31, 2016.
- Inclusion: All Water.org funds spent should be accounted for by reviewing financial records and confirming that actual spending aligns with the amounts reported to Water.org in the most recent comprehensive financial expenditure report.
- Geography: This project will be based in partners’ head offices Grobogan, Central Java. The auditor will not need to visit the branch offices as part of the audit.
- Work Completion Time Period: The draft financial audit report should be submitted to Water.org within 30 days from the start of the contract, and the final report should be submitted within 10 days from receipt of feedback from Water.org.
Approach and Methodology:
- Previous Experience: Water.org will engage an auditor with previous experience of working with retail financial institutions and preferably NGO‐funded grant programs.
- Code of Conduct: Consultants will maintain independence and the highest professional ethical standards in collecting and reviewing information and presenting the assessment results. Consultants will not share audit findings with the audited parties without the permission of Water.org. Consultants will sign a non‐disclosure agreement committing to keep private all information gathered during the audit process.
- Methodological Framework: The consultant will familiarize themselves with the current Water.org partner grant budget including the main categories and line‐item activities. Using a cash basis (non‐accrual), the consultant will compare funds reported spent by the partner with actual accounting records within the partner organization. Consultant will have access to the most recent financial expenditure report, partner bank statements, accounting practices/guidelines, staff timesheets, meeting attendance lists, partner general ledger, purchase receipts, invoices and other sources as needed.
- Data Collection and Analysis: General points to be covered will include, but are not limited to the following:
- Audit 100% of partner expenses charged to Water.org grant Identification of any discrepancies in actual expenses charged to Water.org from financial report sent to Water.org by partner.
- Calculation of total amount of new investments into the financial institution by third parties (e.g. banks, concessionary lenders, etc.) to fund the water and sanitation loan portfolio, if any.
- Review and assessment of partner program financial procedures related to the program including, but not limited to internal controls, asset control, record keeping, document signature requirements, and financial reporting.
- Recommendations for improving partner program internal controls, asset control, record keeping, document signature requirements, and financial reporting.
- Deliverables: The consultant will develop an audit report which should include the items mentioned under the Data Collection and Analysis section. A draft version of the report should be submitted to Water.org. After which, Water.org will have two weeks to provide feedback, at which point the consultant will have an addition 10 days to submit a final version of the audit report.
All the documents/reports pertaining to the audit will be kept confidential and submitted to Water.org after the assignment is over.
Fees and Other Expenses:
The consultant will be paid on fixed‐schedule basis and all indirect expenses such as travel expenses should be included in the proposed budget.
Proposal Contents and Deadline:
Proposals must include at a minimum the following sections:
- Discussion of tasks to be undertaken by auditor and proposed methodology for collecting information
- Project staffing plan and brief staff bios
- Firm qualifications and relevant work experience
- Budget following the template below and estimated number of days (from start to finish) to complete work
Proposals should be submitted to Catur Nugroho, WaterCredit Officer firstname.lastname@example.org (cc: email@example.com), no later than October 24th, 2016 noting “Financial Audit Services - Grobogan” in the subject line. Proposals submitted after this date will not be considered. Water.org will prioritize proposals for the audit to be completed before December 2016.
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