Request for Proposal for Auditing Services

SOS Children’s Villages is an independent, non-governmental, non-profit international development organization of which SOS Children’s Villages Zambia is a Member Association (MA). We are committed to ensuring that all children throughout the world have quality care. We commit ourselves to identifying the most suitable care options for every child according to the child’s best interests and in close partnership with the responsible authorities.

By adopting a variety of programmes that include Family Strengthening (FS) programmes and SOS Alternative Care (AC) programmes, we care for orphans and vulnerable children, strengthen families within identified communities to prevent the abandonment and neglect of children and advocate for the rights of all children without parental care or at risk of losing it and the rights of their families. All the mentioned activities are done strategically in Chipata, Kitwe, Livingstone and Lusaka where our villages (programme locations) are. However, a number of our processes such as Human Resources management, Finance, Information Communication & Technology are centralised and based at our National Office in Lusaka.

Village (Program Location) AC Children Beneficiaries Youth Care (18+) Beneficiaries FS Child Beneficiaries FS Caregiver Beneficiaries
Chipata
Kitwe
Livingstone
Lusaka
Total
Our Solicitation
We are therefore soliciting for proposals from firms of certified public accountants to audit SOS Children’s Villages Zambia’s financial statements for the fiscal year ending 31 December 2024 with the option of auditing the SOS Children’s Villages Zambia’s financial statements for the three (3) subsequent fiscal years. The audit is expected to start on 1 March 2025 and should be duly signed by 30 April 2025. For the year under review (2024), our budgeted total expenses are sixty-six million kwacha (K66,000,000).

Expected Submission
Your proposal submission should include, but not limited to the following considerations:

i) Confirmed registration with the Zambia Institute of Certified Accountants (ZICA);
ii) Business registration certificates (PACRA Incorporation certificate)
iii) Valid tax clearance certificate
iv) A list of similar NGOs or pertinent accounts served by your firm;
v) Your staff assignments and availability to complete the audit on a timely basis;

• Participation of senior audit personnel assigned to the engagement
• Frequency of contact with fiscal personnel
• Availability of staff to respond to questions within the scope of the scope of the engagement and the hourly charge, if any, for services outside the scope of the audit engagement

vi) Procedures used to transmit audit adjustments and the reasons for them along with management recommendations to the responsible personnel within the SOS Children’s Villages Zambia structures.
vii) Detailed audit plan;
viii) Your fee proposal to conduct the basic audit function, along with your fee schedule for additional services that may be required beyond the scope of the audit engagement. The proposal should also state that any increase in the audit fee will be immediately disclosed to the Financial Controller. This disclosure should include an estimation of the increased fees and the reason for the increase
ix) Estimated number of hours to complete the audit by classification of your employees, i.e. partners, senior managers, juniors, etc
x) Detail of expenses expected to be incurred, i.e., mileage, per diem, telephone, etc
xi) Audit firm to produce the financial statements and print the annual report.

Eligible vendors can obtain further information at SOS Children’s Villages, National office Plot No 23217 PHI from the National Procurement Officer. The email address for business purposes is [email protected] No telephone calls shall be accepted, as all communication will be documented.

All bids/proposals must be submitted electronically to the emails below on or before 17:00hrs on Wednesday, 18th September 2024. Late bids will be rejected.
Email: [email protected] [email protected] [email protected] and [email protected]

EXTERAL FINANCIAL AUDIT

International Policy support Document

KEY USERS

Mandatory for:

Recommended for:

For all Member Associations, GSC-run operations and GSC offices

–

RELATED POLICIES

Basic policy:

Quality standard:

SOS Children’s Villages International Statutes

Good Management and Accountability Quality Standards

RELATED DOCUMENTS, TOOLS, SYSTEMS

Internal Control System

Anti-Fraud and Anti-Corruption Guideline

International Charts of Accounts

SOS Accounting Standard

Microsoft Dynamics NAV User Manual

RESPONSIBLE FOR CONTENT

Function:

Finance and Controlling

DEVELOPMENT PROCESS

Approved by: Management Council

Original language: English

Intranet address: Finance and Controlling Services Workspace

CHANGE HISTORY

Version Date Changes

2.1 September 2019 Update PSD and supporting documents in the area of fixed assets,
sales/handover of properties, social liabilities, emergency response
programmes, IPD programmes
2.0 September 2017 Update document to GSC Service Catalogue

Include details for GSC-run operations, GSC offices, PSAs and
self-sufficient NAs
Update timelines

1.1 November 2013 Rewording of paragraph 3.1 h)

1.0 October 2013 Approved document

EXTERNAL FINANCIAL AUDIT

TABLE OF CONTENTS

Introduction 4

1 External financial audit: Mandate and relevance 4

2 External financial audit for National Associations receiving international

funds 5

2.1 Appointment of the external audit company 5

2.1.1 Choice of the external auditor 5

2.1.2 Awarding the financial audit contract 5

2.1.3 External audit programme 6

2.2 External financial annual audit (running costs) 6

2.2.1 Process and scope 6

2.2.2 Access to data 8

2.2.3 Final audit package 8

2.2.4 Forwarding the financial audit package to the International Office Region 9

2.2.5 Scrutiny of the audit package by the International Office Region 9

2.2.6 Timeline for the NA financial annual audit 10

2.3 Responsibilities and information flow 11

2.4 External financial audit of projects under construction 11

2.5 External financial audit of emergency programmes 12

3 External financial audit for GSC offices 13

4 External financial audit for PSAs and self-sufficient NAs 14

5 Extraordinary audits 14

6 Auditing of SOS-KDI bank accounts 15

6.1 KDI-bank account in the audit of SOS-Kinderdorf International 15

6.2 KDI-bank account in the audit of the NA 15

7 Attachments 15

8 Appendix – Abbreviations and legend 16

3 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

Introduction

This policy support document provides an overview of the external financial audit process and describes tasks and responsibilities for Member Associations (MAs) and various levels of the General Secretariat (GSC) at SOS ccounts

. This document is mandatory for all GSC offices and for all MAs, including National Associations (NAs) receiving international funds, self-sufficient NAs as described in the Good Management and Accountability Quality Standards and Promoting and Supporting Associations (PSAs).

Audits for NAs receiving international funds are described in detail in section 2. In general, for audits of GSC offices (International Office, International Offices Regions and International Branch Offices) the same auditing principles apply as for NA financial annual audits (running costs and construction audits). Differing regulations are described in section 3.

Furthermore, there are exceptional cases where no autonomous national legal entity has been established or an autonomous national legal entity was established but does not have a functioning local legal body to take on a supervisory role. The supervisory responsibilities that would normally be taken on by legal bodies (General Assembly, supervisory boards) must be carried out by SOS CVI/GSC. These are national operations that are de facto steered and supervised by the GSC (“GSC-run operations”). Details for these GSC-run national operations are provided within section 2. Finally, PSAs and self-sufficient NAs are described in section 4.

1 External financial audit: Mandate and relevance

In accordance with SOS Children’s Villages International Statutes and in compliance with legal requirements, all Member Associations and SOS CVI are obliged to perform an annual external financial audit conducted by an independent and recognized audit company.

The ‘Good Management and Accountability Quality Standards’ have set the quality standards in the areas of
 Management and transparency

 Integrity of the organisation

 Protection of assets

 Compliance with legal requirements, regulations, contracts and procedures

The audited financial statements of the Member Association are a crucial tool through which the board has to demonstrate good management and accountability to national stakeholders, the federation and individual financing partners (sponsors, donors, etc.). Each association has its financial statements validated by an independent, internationally recognized firm of external auditors. The audit provides a professional and independent external view of the financial system, the accuracy of financial results, the utilization of funds and compliance with organisational rules and applicable accounting standards and laws. This is essential for maintaining the confidence and trust of all internal and external stakeholders.

Pursuant to paragraph 4.5.2 & 4.6.5.2 of the statutes of SOS Children’s Villages International and in continuation of paragraph 1.5 of ‘Good Management and Accountability Quality Standards’, every Member Association and SOS CVI are obliged to present audited financial statements on a yearly basis (January 01 – December 31) which give a ‘true and fair’ view of the financial state of the organization.

The audited accounts are essential for the organisation to prove to the financing partners that all funds have been used for the intended purpose. In addition, the external audit is – in most cases – a legal requirement as per local law, and any non-compliance may put the existence of the association at risk.

The auditors must report improper use of funds, any type of financial irregularity and non-compliance of local laws or federation rules and standards. For NAs receiving international funds, SOS Children’s Villages International has made a commitment to PSAs that the audited financial statements along with audit reports certifying the proper use of funds must be made available by the stipulated date (see timeline under 2.2.6).

4 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

In case of a qualified/negative audit certificate/auditor’s opinion or significant comments in the audit report or in the management letter, the MA (NA, self-sufficient NA, PSA, GSC unit) has to take immediate corrective actions and provide a memorandum including reasons of restriction and recommendations and planned measures of remediation to the International Office (see Management Letter follow-up under 2.2.5).

2 External financial audit for National Associations receiving international funds

2.1 Appointment of the external audit company

2.1.1 Choice of the external auditor

The choice of a suitable external auditor depends upon:

 Which internationally recognized audit company offers respective services in the country

 What dates are most suitable for an audit within the given schedule

 Analysis of costs involved, and timeline offered by the audit company

If no internationally recognized audit firm offers respective services in the country or due to other crucial elements, locally recognized audit companies can also be appointed. In any case, this needs to be approved by the International Director of the respective region (IDR). For this a tendering process should be followed by all MAs. Auditors should, if possible, be selected from internationally recognized audit firms (e.g. Ernst & Young, Price Waterhouse Coopers, KPMG, Deloitte & Touche). Terms of Reference should be worked out in consultation with IORs. The auditor should be changed within the period as defined in section 2.1.2.

2.1.2 Awarding the financial audit contract

The audit company is appointed by the board of the National Association. This appointment is done in close cooperation with the GSC. Thus, the NA must consult the responsible Finance and Controlling Director of the respective region before appointing/reappointing/changing the external audit company. In some cases the statutes of the NA foresee that the external auditor has to be appointed by the General Assembly. If so, this regulation needs to be considered.

The contract for auditing the financial statements of the NA including all its programme units is awarded by the NA. For programme units financed by institutional funds the donor might have additional requirements in the selection of auditor which have to be considered before signing the audit contract.

The selected external audit company receives a written assignment letter from the NA. This letter defines the scope of the audit and responsibilities of the auditor and of the NA. A sample audit assignment document for an NA financial annual audits audit can be found in section 7 Attachments (the sample includes minimum provisions for an audit assignment).

More details regarding tendering process and requirements as recommended for all National Associations can be found in the Procurement Guideline for GSC.

It is mandatory that the external audit company is changed every three to five years. If the external audit company cannot be changed, then at least the responsible partner and the composition of the audit team within the external audit company must be different. If the NA wants to continue with the same external auditors after five years, this exception needs to be agreed on with the GSC.

In case of GSC-run national operations, the designated CVI representative of the respective International Office Region (IOR) is responsible for awarding the audit contract after consulting with the Finance and Controlling Director of the respective region.

5 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

2.1.3 External audit programme

After accepting the audit assignment, the external auditor prepares the audit programme in consultation with the NA to start audit work. The audit programme explains the extent and type of the audit procedure that needs to be carried out to conclude the audit in an effective and timely manner.

Note: Programme units financed by institutional funding agencies might have special audit requirements according to Terms of Reference concluded with the respective funding agency.

2.2 External financial annual audit (running costs)

2.2.1 Process and scope

In order to be able to provide reasonable assurance that the financial statements are presented fairly in all material respects, and/or give a true and fair view, the external financial audit must include the following:

a) The accounting records and the financial statements are prepared in compliance with SOS Children’s

Villages accounting standards and local legal requirements. In case of any contradictions the local law prevails.

b) The external audit covers all programme units of the NA (which includes National Office, National Branch Offices and all programmes including emergency programmes and projects under construction). This also includes programmes which are fully financed by local income.

The scope of the external audit should include the following items:

All types of income for all programmes, including:

– International funds (PSA subsidies, Intl. sponsorships, Intl. grants)

– Local fundraising income

– Operational income (e.g. school fees)

– Governmental subsidies

– Institutional income

– Income from sale of tangible and intangible assets

– Any other income (bank interests, donations in kind etc.).

All kinds of expenditures including running costs and investments for all programme units as well as expenditures for emergency programmes and projects under construction. More details regarding emergency programmes and projects under construction can be found in section 2.4 and 2.5.

Note:

 In case a programme unit is financed by institutional funding agencies (= grant from an institutional donor)

– the donor might require a separate financial project audit covering the whole project duration and not only one fiscal year.

– the respective grant agreement might include procedures to deal with remaining project funds and assets and to follow the rules as outlined. If a PSA is the grant holder, this PSA has to be contacted to agree on rules which have to be followed.

All assets and liabilities of the National Association. The NA has to also ensure the correct and complete inclusion of all transactions in the balance sheet and P/L according to the principle of liability and accrual accounting.

Note:

 A fixed assets register report about land/buildings has to be included. The fixed assets register report includes acquisition values, total depreciation values and book values.

6 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

For fixed assets (land and buildings only) which are not in use, a separate report is required. (Reports to be generated out of accounting software.)
 It is not necessary to re-evaluate the current book values.

Social liabilities:

All long-term financial obligations, resulting from employer-sponsored social benefits for employees, which are based on mandatory state rules, locally implemented SOS Federation Guidelines or individually agreed benefits in work contracts, have to be included as social liabilities in the accounting records according to the SOS Accounting Standard – which is based on the International Accounting Standards (IFRS) – and have to be audited by the external auditor.

The auditor should check and may challenge the assumptions and should confirm that the data are comprehensive and the plan rules are correct. The auditor should check as well whether the DBO (Defined benefit obligation), the Service Cost and Interest Cost are in line with IAS19 regulations. Details on the handling of social liabilities can be found in the “social liabilities user guide” under this link.

For those NAs, which cannot include provisions in their balance sheet without cash transfer, as recommended by the Finance and Audit Committee, the Annex to the accounting standard still remains in place, which can be presented to the auditors in these exceptional cases. Each of these exceptional cases needs to be aligned with IOR and IO HR as well as IOR and IO FC.

The Child Money Gifts, which means:

– Balance brought forward from previous financial year-end

– Income from Child Money Gifts

– Its disbursement to children/young people during the year and

– Balance of Child Money Gifts at the end of the year including proportional bank interest and bank charges

The statistical data of beneficiaries and employees and spot checking of this data

All relevant documents to ensure the correctness and completeness of accounting records. The auditors may also seek third-party evidence (confirmation from suppliers and banks) as appropriate. It is mandatory that the auditors obtain the bank balance confirmations from all banks and a list of signatories for all KDI-bank accounts.

Physical verification of the assets by the auditors.

 Obtaining reasonable assurance about whether the financial statements are free from material misstatements. Any deficiencies must be reported, e.g. deficiencies in internal controls

c) Closing of books (close income statement in Dynamics NAV) must be done prior to the start of audit process in NAs. No entry should be booked afterwards; however, the recommendations made by the auditor and accepted by the NA must be incorporated and closing of books must be repeated.

d) Figures of the previous year are mentioned in the financial statements for comparison purpose and must match the previous year’s audited figures.

e) The auditor maintains the audit working papers and they shall remain in the custody of the audit company for the period as defined by local law.

f) A draft of the audit report, the management letter and the report’s findings has to be discussed in a proper debriefing session between the NA, SOS CVI (the GSC) and the auditor. The final audit talk/discussion with the auditor must clarify any unresolved queries and discuss suggestions for improvement.

g) On completion of the audit, the auditor signs and stamps the financial statements of the entire NA for the financial year on a national level. These financial statements must include all programme units of the NA. These financial statements are:

7 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

 Statement of financial activities (Income & expenditure statement)

 Cash flow statement (Statement of receipts and payments)

 Balance sheet (Statement of financial positions)

 Statement of changes in accumulated funds (it can be mentioned as annexure of the balance sheet or can be a separate statement).

In addition these documents have to be signed and stamped by the auditors as well:
 Fixed assets register reports

 Management letter (one consolidated for every NA) which includes deficiencies noted by the auditor and recommendations for remediation measures given by the auditor to the NA especially in case of qualified or denial of opinion.

 Notes to the financial statements

2.2.2 Access to data

The respective National Association is responsible for providing access to the accounting software, documents and any other information/explanation to support the auditor in completing his work. These documents and information basically include:

 Cash and bank vouchers

 Calculation of reserves

 Calculation of depreciation

 Bills and invoices

 Contracts and minutes of board meetings

 Copies of any internal regulation which may have an impact on the audit

All explanations must be provided to the auditor to allow him to issue his opinion on the financial statements in the auditor’s report. Our overall goal is to achieve an unqualified audit opinion.

In addition to this, the external auditor has the right to seek information from any employee of the association and visit any location to verify expenditure, income and statistics. The auditor must visit the programmes which are under audit. If the number of programmes is large, such visits can be planned on a sampling and yearly rotational basis.

In case of programmes financed by institutional funds, the donor (or its auditor) might require additional data access, namely original documentation (bills etc.). If this is not possible, it has to be negotiated why the provision of originals is not possible and if certified copies/scans might be accepted in these cases.

2.2.3 Final audit package

On completion of the audit programme, the auditor should submit to the NA the following documents, properly signed and stamped, as the audit package:

 Audit report and auditors’ independent opinion, including reasons for negative (or denial of auditor’s opinion) or qualified (positive audit opinion with restrictions) audit certificate, if any.

 Audited financial statements.

 Audit questionnaire (one consolidated for every NA, as per prescribed format). The document aims to summarise significant key points of the respective audit and thus to give a standardised overview of the key findings.

 Trial balance (one consolidated for every NA), generated from prescribed accounting software. Consolidated trial balance must include the full range of account codes for all programme units (facilities) and projects under construction.

 Management letter (one consolidated for every NA), which indicates the recommendations for remediation measures given by the auditor to the NA, especially in case of qualified or denial of opinion. Response from management and follow-up of previous year’s points of restriction and recommendations also forms an integral part of the management letter.

8 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

The management letter follow-up Excel template has to be used to follow-up every reason for restriction.
 List of board members and the address of the board chairperson.

In case of a qualified / negative audit certificate or significant comments in the audit report or in the management letter, the NA takes immediate corrective actions which are supervised by the national board and the GSC. For this, a memorandum from the NA (“memo”) has to be submitted together with the audit including explanation of reasons for restriction, recommendations of the NA’s auditor about suggested remediation measures, planned measures to resolve restrictions with a time frame and responsibilities as well as IOR comments on reasons of restrictions and planned measures. This memo with the corrective measures has to be properly signed by the national director and is also to be forwarded to the GSC. The IOR must closely follow up the implementation of the mitigation steps to ensure that the deficiencies detected do not incur in the following year.

The NA must check the documents submitted by the auditor to ensure that they are complete and accurate in terms of the audit assignment. Financial statements are to be signed by the national board chairperson or by the national director as specified by local law. In case financial statements of each programme location (SOS Children’s Village programme) are prepared separately, they need to be signed by the location manager. The signature by the location manager on the financial statements of a respective location is important to demonstrate that accountability of financial affairs lies with the location manager.

In case of GSC-run operations, for which the auditor was assigned by the GSC, the financial statements are signed by the International Director Region, as well as by the Finance and Controlling Director Region.

The audit report must be in one of SOS Children’s Villages’ four working languages (English, French, Spanish or German). However, the following must be translated into English and signed by the auditor:
the audit questionnaire

the auditor’s opinion including reasons for qualified (positive audit opinion with restrictions) or negative (or denial of auditor’s opinion) audit certificate

the management letter

2.2.4 Forwarding the financial audit package to the International Office Region

After due scrutiny, the audit package is sent by the NA to the IOR together with the NA’s comments, if any. In case of a negative audit report or a qualified report with restriction, a proper explanation from the NA regarding restrictions and all planned measures in regards to these restrictions (follow-up on the opinion) is obligatory. This explanation must include the root causes of the negative/qualified auditor’s opinion, accompanied by exact mitigation measures and time plan for implementation, including local responsibilities for implementation. This explanation must be documented in the template management letter follow-up.

The National Association submits a copy of these documents, in hard copy and digitally, to the IOR. These documents need to be stored for 10 years. The deadline for submission of these documents from NA to IOR is the 30th of June of the year following the audit period. An earlier date can be fixed by IOR for its region.

2.2.5 Scrutiny of the audit package by the International Office Region

The International Office Region is responsible for checking the audit package received from National Associations on the basis of the following criteria:

 Audit certificate: Unqualified (positive without restrictions), Qualified with restrictions (positive with restrictions) or Negative (denial of auditor’s opinion)

 Complete set of audited financial statements

 Management letter with NA’s response and follow-up of previous year’s recommendations

9 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

 Matching of closing bank balances in the accounts and the corresponding bank statements. Also verify that trial balance generated from accounting software matches with audited financial statement
 Performing additional checks as per the IOR Audit Checklist

If the auditor does not give an unqualified audit certificate, the IOR must ensure that appropriate corrective measures are implemented in order to overcome these restrictions by adequately following up on measures and actions taken. The IOR must discuss the actual status of the remediation measures with the NA on a bi-annual basis as minimum requirement (if possible on a quarterly basis). The management letter follow-up document, where these measures need to be documented, serves as a reference.

In case that the IOR detects shortcomings/errors during its checks, the IOR might come back to the NA and require changes of audit documents at NA level.

After scrutiny, the IOR must upload a scanned version of the audit package together with the IOR audit checklist and further necessary documents to the respective PSA section on the Virtual Collaboration Platform, including the necessary comments if the audit report has a negative or restricted opinion using the management letter follow-up template. The deadline for the submission of these documents is 30th September of the year following the audit period.

More details regarding scrutiny of the audit package by the IOR are provided in the User Guide.

2.2.6 Timeline for the NA financial annual audit

10 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

2.3 Responsibilities and information flow

2.4 External financial audit of projects under construction

The external financial audit of construction project is subject to the same rules and procedures as running costs audits with regard to the:

 Appointment of auditors

 Access to data

 Final audit meeting and

 Checking and forwarding of the audit reports

Special provisions for the construction audit are set out below:

Projects under construction are audited annually along with the regular annual external audit of running costs. Figures of income and expenditures will be audited on a yearly basis. However, the audit in the final year of the construction period must include balances from the start of the construction project until the end of the project. Furthermore, the audit report has to clearly mention that the construction project is completed. The final consolidated construction audit has to be done within 12 months after construction completion and handing over of the project within the next financial annual audit for running costs. The final financial statement for construction projects provide a consolidated overview of all years of the project.

Only in exceptional cases or upon request from a donor (e.g. public donor), the NA can decide to conduct the audit immediately after completion of the construction project.

a) There is a separate audit questionnaire for construction projects which will be signed and stamped by the auditor at the end of the audit of the construction project.

11 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

b) The construction trial balance has to be generated from prescribed accounting software. The trial balance will be signed and stamped by the auditor.

c) Initial costs incurred before the start of the construction work will be part of the construction costs.

d) Running costs of the programme unit that incurred during the construction period will be considered as running costs and not as construction costs.

e) The auditor must visit the construction site to physically verify it and describe the extent of the construction project.

f) Once the construction is completed and the external financial audit is finalised, closing entries in the construction facility will be posted and subsequently capitalisation entries must be made in the running costs facility. This includes the capitalisation of land, building, vehicle, equipment and furniture. For any liability (for example: retention money) the amount has to be transferred to the running costs facility.

For more information on the procedure of closing a construction facility, please refer to the FAQ section of Dynamics NAV User Manual.

g) If, after paying-off all the liabilities, the construction account shows a positive bank balance which does not exceed the limit of EUR 25,000, it must be transferred to the running cost bank account and used for the running costs of the respective programme unit.

However, if the amount exceeds the limit of EUR 25,000 PSA consent has to be obtained for the utilisation of this amount.

2.5 External financial audit of emergency programmes

The external Financial Audit process is also applicable on emergency programmes (ERs). The audit will be carried out on an annual basis along with the regular annual external audit of running costs. If the project runs for more than one year, the consolidated financial statements (for the entire period of the ER) will be audited in the last year of the emergency programme.

Use of remaining funds and assets after closure of an ER programme:

The use of remaining assets from emergency projects shall already be discussed before the end of the project (to ensure donor requirements are taken into account) in coordination with regional office finance, regional office emergency response and if applicable, regional office institutional partnership development and/or grant holding PSA.

After the closure of an emergency programme, once final accounting figures are available, the MA needs to clarify in coordination with regional office finance, regional office emergency response and global emergency response what to do with the remaining funds. In case of non-earmarked private funds from PSAs below EUR 25.000 no approval from PSA side is required. For funds above this limit an agreement with the financing PSAs has to be negotiated by the global emergency response team.

The handling of remaining funds and assets needs to be in line with donor requirements (especially if activities are funded by institutional donors).

All the prescribed procedures and policies must be followed for the maintenance of accounting records and for conducting the external financial audit of emergency programmes.

12 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

3 External financial Audit for GSC offices

The GSC comprises the International Office with its competence centres and departments in Innsbruck and Vienna and all International Offices Regions.

The following audits for GSC offices are created separately:

 The Audit of SOS-Kinderdorf International in Austria (SOS KDI) which includes the International Office, and the International Office Region EUCB located in Vienna

 the audits of the International Office Regions – IORs (except IOR EUCB Vienna which is included in the KDI audit)

 the audits for International Branch Offices (IBs)

Starting with the audit of fiscal year 2018, all of the above-mentioned entities will also be consolidated under KDI. This consolidated KDI entity will also be audited by the same auditor responsible for the audit of the KDI Austria entity, using the individual audits as a basis for the consolidated audit. The process and guidelines for the consolidated audit will be defined separately.

For the external financial audits of GSC offices, in general the same auditing principles apply as for NA running costs audits.

Special requirements concern the following items:

Appointment of external auditor in GSC offices

As mentioned in the Rules of Procedures point 6.6:

 For the legal entity SOS-Kinderdorf International in Austria (i.e. all GSC offices located in Austria, incl. Shared Treasury Services), the Senate shall, at the recommendation of the Finance & Audit Committee, authorise the President to appoint the auditors, who can also be instructed at any time to conduct audits at irregular intervals and may also be given further assignments.

 The annual appointment of external auditors for the IORs and IOR International Branch Offices (except IOR offices located in Austria) is subject to the prior approval of CFO and COO.

It is mandatory that the audit company is changed every three to five years.

Scope of the Audit

The scope of the external financial audit of GSC offices audit includes all the following items:

 The accounting records and the financial statements are prepared in compliance with SOS Children’s Villages accounting standards and local legal requirements and present a true and fair view of the association.

 All types of income and expenditures as well as all assets and liabilities of the respective GSC office.

 The notes to the financial statements include all information as required by local laws or internal accounting standards.

 The statistical data of employees are in line with underlying detailed records.

 All relevant documents are provided to substantiate the correctness and completeness of the accounting records. The auditors may also seek third-party evidence (e.g. confirmation from suppliers or banks) as appropriate.

 It is mandatory that the auditors obtain the bank balance confirmations from the banks and a list of signatories for all KDI bank accounts.

 An overview of balances on KDI bank accounts based on year end bank confirmation.

 Obtaining reasonable assurance about whether the financial statements are free from material misstatements. Any deficiencies must be reported, e.g. deficiencies in internal controls

On completion of the audit, the auditor signs and stamps the audited financial statements of the GSC office for the financial year.

13 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

These financial statements must include:
 Statement of income & expenditures

 Cash flow statement (Statement of receipts and payments)

 Balance sheet (Statement of financial positions)

 Statement of changes in accumulated funds (it can be either be mentioned as annexure of the balance sheet or can be a separate statement).

Mandatory signatories of financial statements in GSC offices

Financial statements for KDI (including STS) must be signed by two members of the Management Team:

the CEO as well as the CFO.

Financial Statements for International Offices Regions and International Branch Offices must be signed by the IDR and the Finance and Controlling Director of the respective region. In case of Branch Offices, financial statements must additionally be signed by a legal representative of the entity.

Deadlines

The deadlines for the finalisation of the external financial audit package of GSC offices are as following:

 For the KDI audit as well as audits for IORs and IBs the 30th of June of the year following the audit period. By this date, IORs (except IOR EUCB Vienna) and IBs must send a digital copy of the audit package to the IO.

In addition to these audits of the GSC units, the following reports concerning Shared Treasury Services are prepared by an auditor:

1. Report on financial transactions by STS

2. ISAE 3402 Report on internal controls for STS processes

The above reports which provide audited evidence of all transactions that are executed by Shared Treasury Services (STS) in the International Office are made available to PSAs until the end of February of the following year. More details regarding these reports can be found in the Treasury Information Policy Support Document.

The main findings of the external financial audits of the previous year of all GSC units are summarized and presented to the Senate in the second half of the year following the audit period.

3 External financial audit for PSAs and self-sufficient Nas

Also PSAs and financially self-sufficient National Associations as described in the ‘Good Management and Accountability Quality Standards’ have the obligation to present audited financial information on an annual basis. In addition, PSAs and self-sufficient NAs are asked to provide the audit accompanying table as a consolidation base needed to be able to reflect all expenditures and income categories for all SOS Children’s Village Member Associations worldwide. The deadline for submission of the audit package and the audit accompanying table is the 1st of September of the year following the audit period.

4 Extraordinary audits

At times, special situations may require an extraordinary audit in a Member Association or the GSC. The request for such an audit may come from various sources, e.g. institutional donors, funding PSAs, the GSC or the legal bodies of SOS Children’s Villages International. The terms of reference for such extraordinary audits need to be agreed on separately (e.g. in the partnership agreements). These audits may include an NA, various GSC levels and the funding PSA.

14 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

6 Auditing of SOS-KDI bank accounts

6.1 KDI-bank accounts in the audit of SOS-Kinderdorf International

SOS-KDI bank accounts are included in the external financial audit of SOS-Kinderdorf International. Therefore the following documents for all KDI-bank accounts have to be forwarded to [email protected]

by the 28th of February of the following year at the latest:

Year-end bank account statement List of signatories

6.2 KDI-bank accounts in the audit of National Associations and GSC-run operations

SOS-KDI bank accounts are audited in the course of the external financial audit of National Associations or GSC-run operations. The auditor is requested to check the completeness and the signatories of the KDI-bank account information which was forwarded to the IO. In case of discrepancies this has to be mentioned in the management letter.

7 Attachments

Audit questionnaire for running costs Audit questionnaire for construction Management letter follow-up
Audit checklist for running costs Audit checklist for construction

Audit Accompanying Table for PSAs Sample of audit assignment letter
Sample of fixed assets register

Sample of letter to the bank for KDI bank account confirmations Sample PSA information of audit package upload

15 / 16 A loving home for every child

EXTERNAL FINANCIAL AUDIT

8 Appendix – Abbreviations and legend

CEO Chief Executive Officer

CFO Chief Financial Officer

ER Emergency Response Programme

GSC General Secretariat

IO International Office

IOR International Office Region

IB International Branch Office

MA Member Association – including PSAs, NAs and financially self-sufficient

association

NA National Association – receiving international funds

PSA Promoting and Supporting Associations

KDI SOS-Kinderdorf International

CVI representative SOS Children’s Villages International representative

Financial Year starting from January 1st and ending on December 31st

STS Shared Treasury Services

IPD Institutional Partnership Development