SINDH WATER SECTOR IMPROVEMENT PROJECT. Request for Expression of Interest (EOI) For External Audit Firm (Re-advertisement)

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1 SINDH WATER SECTOR IMPROVEMENT PROJECT Request for Expression of Interest (EOI) For External Audit Firm (Re-advertisement) The Sindh Irrigation & Drainage Authority (SIDA) is implementing the World Bank financed Sindh Water Sector Improvement Project Phase-I (WSIP-I) under IDA Credit NO: 4358-Pak. SIDA required professional services to conduct an independent audit and express a professional opinion on the financial statements at the end of each fiscal year (June-30).The audit would be carried out for three (03) years starting from FY , and The audit should be carried out in accordance with appropriate professional standards of auditing (International Auditing Standards) and other standards as applicable in Pakistan. The SIDA invites firms of Chartered Accountants for the external audit who shall be selected amongst the list of firms having satisfactory rating under the quality control review program managed by the Institute of Chartered Accountants. Interested and eligible firms must provide information indicating profile, descriptions of similar assignments, strength of suitably qualified and experienced staff available for the assignment etc. The independent auditors would be responsible for the conduct of the audit of entity s annual financial statements. Detailed TORs may be obtained from procurement office SIDA Left Bank Barrage Colony Hyderabad during the office working hours and can also be referred from our website and The bidder / service provider offering bids must be registered with Sindh Revenue Board, prior to offering bid. The sales tax be deducted and withheld from the payment to be made the services provider and deposited in Sindh Government s head of account B02348 as per the rate as specified in the Sindh Revenue Board sales tax on services Act/Rule Selection of the Audit Firm would be made in accordance with procurement procedures set out in the World Bank s Procurement Guidelines for selection of Consultant by using CQS selection method. This selection would be made by the team of FAO (UN Agency) deployed and working under WSIP Project as Project management Consultant/Procurement Agent (PMC/A) with responsibility of selection and management of all consultancies/services under the project. Eligible and interested firms should submit their expression of interest in sealed envelopes to the below address on or before 28 February 2014, at 3:00 pm. The applicants /firms submitted their EOI against previous advertisement need to apply afresh as the application received against previous EOI will not be considered. The Team Leader FAO Project Management Consultant / Procurement Agent (PMC/A) Project Coordination and Monitoring Unit (PCMU) Water Sector Improvement Project (WSIP) 2 nd Floor Bureau of Statistics Building, 13, Block-8, Choudry Khaliquzzaman Road, Clifton Karachi.

2 CONDUCT INDEPENDENT ANNUAL AUDIT OF SINDH IRRIGATION & DRAINAGE AUTHORITY (SIDA) (TERMS OF REFERRENCES) BACKGROUND OF SINDH IRRIGATION & DRAINAGE AUTHORITY (SIDA): The Sindh Irrigation and Drainage Authority (SIDA) is a body corporate established in 1997, under the provincial legislation of Sindh Irrigation and Drainage Authority Act 1997, which was subsequently repealed through legislation of Sindh Water Management Ordinance 2002 (SWMO-02). The SIDA has been created to revitalize the provincial irrigation and drainage system by replacing the traditional system with a participatory irrigation management approach and to exercise independent judgement in the conduct of its own business with overall supervision/guidance of an independent Board. In accordance with the Section-22 of Chapter-II of the Sindh Water Management Ordinance "Annual Accounts and Balance Sheet" SIDA is required to adopt the International Accounting Standards and other standards as adopted by the Securities and Exchange Commission of Pakistan. The use of International Accounting Standards is also consistent with the World Bank s Guidelines. Not later than three months after the end of each financial year, annual accounts are to be prepared and to be audited by independent auditors within six months of the close of the financial year. As per provision of Section-23 (2) of Chapter-II of SWMO-02 the Auditors are to be appointed for a period not exceeding three financial years to conduct its entity audit. Accordingly, SIDA had appointed Audit Firms on three years periods and conducted /completed audits up to FY and the Audit for FY is under way which is the last year of present contract agreement with the Audit firm. For conducting audits for next three financial years i.e , and , SIDA has to appoint Audit Firm for next three years. As per the Financial Regulations and Powers 2003 the SIDA Funds, inter-alia, consist of: i) Grant-in-aid made by Government; ii) Loans obtained from Government; iii) Loans obtained by the SIDA with the sanction of Government; iv) Foreign assistance and loans obtained from different foreign agencies with the sanction of, and on such terms and conditions as may be approved by Government in consultation with the Federal Government; 1

3 v) All sums received by the SIDA in respect of water charges, sale proceeds and drainage cess; and vi) All other sums receivable by the SIDA. Presently, SIDA is dealing with the World Bank financed Sindh Water Sector Improvement Project (SWSIP) and Grant-in-Aid from the Government of Sindh for salaries and establishment expenditure of SIDA BACKGROUND OF WSIP PROJECT The Government of Pakistan and International Development Association (IDA) has signed an agreement to implement Sindh Water Sector improvement Project (WSIP). Sindh Irrigation & Drainage Authority (SIDA) is key implementation agency for the project. The project expenditures as per original approved PC-I are US$ 175 Million over a period of five years i.e. up to 30 th April, 2013, which has now been extended up to 28 th February, 2015 with the same project cost. However, revised PC-I of SWSIP has been submitted and is likely to get administrative approval from respective competent authorities with estimated project expenditures US$ 327 Million with closing date of 31 st Dec The overarching project objective is to improve the efficiency and effectiveness of Irrigation and Water distribution in three AWBs (Ghotki, Nara and Left Bank), particularly with respect to measures of reliability, equity and user satisfaction. This would be achieved by: (a) Deepening and broadening the institutional reforms that are already underway in Sindh: (b) improving the irrigation system in a systematic way covering key hydraulic infrastructure, main and branch canals, and distributaries and minors; and (c) enhancing long-term sustainability of irrigation system through participatory Irrigation Management and Developing institutions for improving operation and maintenance of the system and cost recovery. The improved water management would lead to increased agricultural production, employment and incomes over some about 1.8 million ha or more than 30 percent of the irrigated area in Sindh, one of the poorest regions of the country. The following are the major components of the project: A. Community Development and Capacity Building. B. Improvements of the Irrigation and Drainage System C. Management Plan for major Irrigation and Drainage infrastructure. D. Project Monitoring, Evaluation and Supervision of Environmental Management Plan E. Project Coordination, Monitoring, Technical Assistance and Training. 2

4 Background of Grant-in-Aid The Sindh Irrigation and Drainage Authority (SIDA) is a body Corporate established on August 11, 1997, under the provincial legislation namely The Sindh Irrigation and Drainage Authority Act 1997, which was subsequently repealed and substituted with the Sindh Water Management Ordinance At the time of establishment of SIDA, the employees of the Irrigation Wing of the Provincial Irrigation and Power Department, presently named as Irrigation Department, were transferred into the SIDA to run the business of the Authority and Government of Sindh and to contribute towards salaries and other operational cost. Resultantly, the Government of Sindh is contributing under the Grant-in-Aid budget head, every financial year to SIDA for salaries and other operational expenses of employees working on regular basis. OBJECTIVE OF THE AUDIT: Responsibility for preparation of financial statements: The responsibility for the preparation of financial statements including adequate disclosure is that of the entity s management. This includes the maintenance of adequate accounting records and internal controls, the selection and application of accounting policies, and the safeguarding of the assets of the project. As part of the audit process, the auditor will request from management written confirmation concerning representations made to us in connection with the audit. The primary responsibility of the Chartered Accountant Firm is to conduct audit of entity s annual financial statements and compliance with the agreed upon procurement procedures to ensure transparency and accountability in SIDA s overall operations as well as specifically on the use of IDA Finance under Sindh Water Sector Improvement Project (WSIP). The auditors would be required to submit their opinion on the annual financial statements. SCOPE OF WORK: Keeping in view the overall objective of the audit, the auditors would mainly be responsible to: Carry out the statutory audit of the annual financial statements prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as are notified under the provision of the Companies Ordinance, 1984 and express an opinion on the financial statements. The exact scope of work in respect of the annual audit of the financial statements as determined by the International Standards on Auditing and with the requirements of Accounting and 3

5 Financial Reporting Standards (AFRSs) as notified by the Securities and Exchange Commission of Pakistan. However, it is highly desirable that auditors become familiar with the relevant World Bank Guidelines: Annual Financial Reporting and Auditing for World Bank-Financed Activities, which explain the Banks financial reporting and auditing requirements. Deliverables: The auditor will issue an audit opinion on the SIDA Financial Statements within 4 months after close of the fiscal year (i.e. Oct-31, every year), indicating whether these financial statements present fairly the financial position at the end of the financial year and the results of its operations during the year ended June 30, in accordance with approved accounting standards as applicable in Pakistan. In addition to the audit opinion on the entity financial statements, covering Letter to the SIDA Board and a "management letter" in which the auditor will: a) provide comments and observations on the accounting records, systems, and controls that were examined during the course of the audit; b) identify specific deficiencies and areas of weakness in systems and controls and make recommendation for their improvement; c) report on instances of non-compliance with the terms of the financial agreement(s); d) communicate matters that have come to their attention during the audit which might have a significant impact on the implementation of the project; e) bring to the SIDA attention any other matters that the auditor considers pertinent; and f) include management's comments in the final management letter. Qualifications and experience of the firm: - The accounting firm for the external audit shall be selected from amongst the list of firms having satisfactory rating under the Quality Control Review program managed by the Institute of Chartered Accountants. Key personnel and level of effort required: - Sr.# Indicative Position 1. Team Leader/ Lead Auditor 2. Internal Controls Specialist 3. Procurement and Contracting Specialist 4. Audit Seniors / Staff 4

6 A brief description of the personnel qualification and experience is given below: - Team Leader/ Lead Auditor: The incumbent should be a Chartered Accountant with at least 10 years of post qualification experience. The experience should include experience of both statuary audits as well as special purpose assurance assignments. Internal Controls Specialist: - The incumbent should be a Chartered Accountant with at least 10 years of post qualification experience. Having an additional qualification in internal auditing e.g. Certified Internal Auditor would be a plus. The relevant experience should include assurance assignments including fiduciary reviews, due-diligence, business process reengineering/ improvement, information systems design/ evaluation, internal controls assessment, risk management etc. Procurement and Contracting Specialist: - The incumbent should have a post-graduation degree in a relevant discipline with at least 10 years experience of monitoring and/ or managing contracts. The experience in the procurement of goods, civil works, engineering and management consultancy would be relevant to the position. Audit Seniors/ Staff: - It is expected that Audit Seniors/ Staff would include a balanced composition of qualified and part-qualified accountants/ Auditors trained in the specific audit methodology and documentation standards used by the firm. Code of Ethics: - Following the IFAC- Code of Ethics, the Auditing firm is expected to maintain the highest standards of: Integrity: The integrity of auditors establishes trust and thus provides the basis for reliance on their judgment. Objectivity: The auditors exhibit the highest level of professional objectively in gathering, evaluating and communicating information about the activity or process being examined. External auditors make a balanced assessment of all the relevant circumstances and are not unduly influenced by their own interests or by other in forming judgments. Confidentiality: External Auditors respect the value and the ownership of information they received and do not disclose information without appropriate authority unless there is a legal or professional obligation to do so. 5

7 Competency: The auditors apply the knowledge, skills and experience needed in the performance of auditing services. Method of Selection of firm: The selection of firm is to be made through CQS process as per World Bank s procurement guideline to be done by team of FAO working under WSIP Project as Project Management Consultants/Agent (PMC/A) responsible for selection of all project consultancies/services. The firm must be registered with Sindh Revenue Board prior to apply for the service. The sales tax be withheld and deducted from the payment to be made to the services provider and deposited in Sindh Government's head of account B02348 as per the rate as specified in the Sindh Revenue Board Sales Tax on Services Act/Rule