Audit of Global Fund Grants. Agenda. Why the increased importance of audits? Audit guidelines and changes in the pipeline

Transcription

1 Audit of Global Fund Grants 12 October 2016 Geneva, Switzerland 01 November 2016 Siem Reap, Cambodia LFA Finance Training Agenda Why the increased importance of audits? Audit guidelines and changes in the pipeline Expectations of the audit process Key focus areas for LFA review Questions 1

2 At the Global Fund, annual audits are: Important parts of the assurance process regarding the proper use of GF funds A key component for decision-making on the disbursement of funds & the renewal of grants within the framework of the GF s performancebased funding principles A key part of the GF s grant risk management framework Primarily intended to provide the GF with assurance that disbursed funds were used in accordance with the grant agreement and that the financial statements fairly represent the financial transactions and balances of the grant 2 Agenda Why the increased importance of audits? Audit guidelines and changes in the pipeline Expectations of the audit process Key focus areas for LFA review Questions 3

3 Audit Guidelines Key Points The Global Fund requires a consolidated grant-specific audit this involves one overall audit opinion combining the balances and transactions of the PR and SRs. The Financial Statements should be prepared by the PR in accordance with internationally recognized accounting standards. Audit Terms of Reference largely standardized. Higher accreditation and compliance with GF guidelines expected from auditors. The audited Financial Statements, respective Audit Report and the Management Letter, should be submitted to the Global Fund within three months after the PR s financial year end. 4 Audit Guidelines Key Points, cont d Audit arrangements, including overall approach to selection and approval of auditor, to be finalized between GF and PR during grant making. The auditor should be selected within three months from signing the grant agreement. GF s direct, rigorous involvement in auditor selection process. 5

4 Changes in the pipeline Objectives Requirement for auditor to review the internal controls of the PR and provide recommendations Audit Opinion Separate opinions for Income and Expenditure Statement and Supplemental Statements Consolidated Financial Statements Consolidated Financial Statements (IES and Supplemental Statements) Statement of Net Assets Removed Statement of Financial Position Removed Supplemental Statements To include AFR, Statement of Stock of Health Products, Statement of Assets, Statement of SR Advances and Reconciliation 6 Changes in the pipeline, cont d Regional Auditor Regional audit: one audit firm auditing several grants in a region Management Letter Focus on internal control weaknesses at PR level, with a dedicated section in the Management Letter Scope Optional interim audit for High Impact and Core countries focused on Internal Control Environment Review of CCM expenditures Review of compliance with Counterpart Financing Audit Procedures LFA may be requested to participate in the audit Kickoff and Exit meetings, especially for Focused countries 7

5 Agenda Why the increased importance of audits? Audit guidelines and changes in the pipeline Expectations of the audit process Key focus areas for LFA review Questions 8 Do the audits achieve their intended objectives? Appointment Issues with appointment of external auditor, including selection process. Communication LFA interaction with external auditors throughout the audit. Risk coverage External audits do not consistently cover the key risks relating to the use of grant funds, especially at SR level. Reporting Extensive delays exist in the submission of reports. 9

6 So, what changes in LFA reviews can contribute towards an improved process? 10 Things to watch out for! Scenario Auditor Selection Audit Execution Audit Report LFA focus for improvement Identifying gaps in selection process on a timely basis based on country context and risk considerations at PR level Recommend practical solutions/options to CT Active participation in audit kickoff meeting Discussions with external auditors as necessary Active participation in exit meeting Comment on whether the audit and audit deliverables are in line with the approved terms of reference Analyze information and highlight inconsistencies in figures reported in PUDRs, AFRs vs the audited financial statements Comment on the quality of the audit report and make a recommendation to the CT to accept or reject the audit deliverables 12

7 Agenda Why the increased importance of audits? Audit guidelines and changes in the pipeline Expectations of the audit process Key focus areas for LFA review Questions 12 Financial Statements (FS) review LFA should ensure the following: FS Review Inclusion of basic contents of Financial Statements Financial Statements have been signed by the PR Inclusion of the statement of PR responsibility for preparation of FS usually signed by the PR Check disclosure of the financial reporting framework used (International Financial Reporting Standards /International Public Sector Accounting Standards) Check the Auditor s reconciliation with AFR and FS for accuracy and completeness Ensure that financial statements are appropriately consolidated grant level (PR/SRs) Check for existence of adequate disclosures for material account balances Check that the FS are in the currency of the grant agreement Check that the FS have been prepared for the correct period Perform arithmetic check especially when in doubt

8 Supplemental Statements review LFA should ensure that the Auditor covered the following in their work: Expenditure Check amount reported in FS to the AFR for the period under review Check compliance with adopted accounting policy Analyze any material expenditure account balances FS Review Fixed Assets Check additions to the budget for completeness and accuracy For disposals check approval and effect on other income Inventory Check for compliance with accounting policy Check recognition and measurement criteria Advances to SRs Review movement in advances for reasonableness Assess recoverability of advances Check materiality of amounts and aged analysis Audit Report review Ensure inclusion of basic contents of the audit report (title, addressee, specify period covered, statement on managements responsibility, auditors responsibility, entity under audit, audit opinion) FS Review Ensure audit report mentions the auditing standards used by the auditor (ISAs or ISSAIs) Ensure audit report mentions the applicable financial reporting framework used and compare with that used for preparation of the FS (IFRS/IPSAS) Check audit report for signature Check date of the auditor s report Ensure audit report is on audit firm letterhead Comment on the type of audit opinion

9 Management Letter review Check format of the Management Letter (ML) per TORs - Grading system I,II and III FS Review Ensure that Management Letter is addressed to the implementer Analyze any key findings that in LFA s opinion could result in a modified opinion Ensure ML is signed by the auditors and is for the right period Ensure ML introductory letter is on audit firm letterhead Check for reporting on follow up on prior year recommendations Review for reasonableness the PR responses to issues identified Case study Introduction to Case Study and Instructions 2 min Group Work Each table to read case study presented in handout and prepare answers 10 min Presentation of Answers and Takeaways 10 min 14

10 Key Takeaway Messages External auditor compliance with all the provisions of the terms of reference. The audit opinion and the reasons for the qualified opinion. Figures presented in audit deliverable have been reconciled with other financial information (AFR) Clear recommendation to the country team to accept or reject the audit report 18 19