Attachment B_Standard Scope of Work for the Financial Services-Pre Award Survey.pdf

ATTACHMENT B

Standard Scope of Work for the Financial Services

(Covers Pre-award Surveys/Assessments and Host Country Contracting Capabilities

Assessments)

Before or after awarding a grant/contract to a recipient, USAID reserves the right to conduct a financial management assessment of the awardee. The purpose of the assessment is to determine the adequacy of the organization's financial, internal control, property management, procurement, and sub-grantee/firm administrative systems. The results of the assessment also determine the procurement mechanism and method of payment, e.g. cash advance or cost reimbursement, to be applied to the procurement agreement.

A. Control Environment

1. The existing control environment considers the overall attitude, awareness, and actions of senior management.

2. Determine whether entity has complied, in all material respects with applicable local government laws and regulations.

3. Determine if the entity has sufficient competent and experienced local staff to implement its activities including U.S. or foreign nationals.

4. Determine if the entity is financially capable to conduct its program in full, in part or not at all.

5. Determine if the entity financial sustainability is questionable

6. Determine if there are articles of incorporation and by-laws of the organization

7. Determine if there is an organizational structure, organizational charge, employees’ biographical data and employees’ position description outlining duties/responsibilities

8. Review management materials for gender considerations and denote any negative findings.

Following are the Procedures the Reviewer Must Perform

1. Obtain a copy of the entity charter and Mission statement.

2. Obtain a copy of the entity organizational chart and make the necessary review/observations.

3. Review entity organizational structure and ensure that entity is being managed by a responsible governing body that maintains effective policy and administrative control. Reports on the frequency of meetings of this governing body and whether they are compensated for that purpose or not.

4. Obtain, review and report on the entity's conflict of interest policy.

5. Review entity financial position, latest profit/loss statement, ratios, entity financial arrangements (use of own resources, use of bank credits), entity business reputation (including their bank comments, trade creditors, comments/reports of commercial financial services and credit organizations).

6. Obtain understanding about the entity’s individual departments description of the major functions and if they are operational.

7. Report on the entity’s legal status under the country local law (e.g. private, non-government entity and whether they are allowed to receive funds from private sector, international donors).

8. Report on the entity’s compliance with local government laws and other statutory requirements and regulations with greater emphasis on overall financial aspects of compliance (e.g. payment of social insurance, etc).

9. Report on the status of the entity tax status under the applicable local law. (e.g.

are they tax exempted or not, etc.)

10. Review and obtain a copy of the entity’s delegation of authority (DOA) and responsibility of a sample of key personal and departments’ heads job description.

11. Ensure that entity under its own established priorities and programs, obtains, expends and distributes its funds and resources in conformity with its bylaw and per the applicable local law requirements.

12. Report on the adequacy of the existing written bylaw (policies and procedures) for operating systems such as the financial management and accounting, procurement, personnel and travel, etc.

13. Report on the existence and implementation of the entity’s communication policy/procedure for employees.

14. Verify if the entity has methods for measuring and monitoring performance of its personnel.

15. Obtain a copy of the entity audit reports done by external party for the past two years, at least, and report summary of auditor’s opinion and if they are following the Generally Accepted Accounting Principles with emphasize on any significant disclosures and qualifications and their impact.

16. Report on the audit committee roles/responsibilities and the internal audit function.

17. Review of the entity's organization to determine:

a. if relationship among the entity's units are developed and clearly defined;

b. if procurement authority, and the delegation are clearly defined;

c. if supervisory and decision-making responsibilities and corresponding

i. authority within management levels are developed and clearly assigned;

d. if staff functions and responsibilities are clearly defined and segregated;

e. if procurement (contracting) staff are qualified;

f. if the rules governing procurement adequate to protect the rights of all parties concerned.

g. the extent of staffing changes/turnover and how it may affect activities implementation.

18. Ensure whether financial information is presented in accordance with

Generally Accepted Accounting Principles.

19. Obtain the recipient’s annual financial plan (line item budget) and review for accuracy of preparation

20. Obtain and review the entity’s written policy and procedures for:

a. Financial Management

Accounting such as:

- Chart of accounts

- Cost Principles

- Revenues

- Expenditures

- Advances issued to others

- Assets, tangible and intangible including cash

Reporting through the financial statements

Policies on external audits

Periodic external audits for sub-recipients

Policies on audit resolution

Policies for determining reasonableness, allocability and allowability

Policies requiring accounting records to be supported by source documents

For obtaining prior approval from USAID for advance determination

b. Personnel policies

Position descriptions

Recruitments

Compensation

Benefits

Performance evaluations

Trainings

Termination of employment

Code of conduct

21. Obtain and evaluate from the recipient its communication policies for employees to follow, such as internal procedures, minutes, from staff meetings, board meetings, other etc. Confirm if it is a formal system and if there is any delegation of authority.

22. Review management materials for gender considerations and denote any negative findings.

B. Financial Management and Accounting

1. The Firm shall perform a review of the financial and internal control structure and report if they are in accordance with GAAP or any other International Standards to determine the adequacy of the existing controls related to the management of all funds received by entity.

2. Obtain sufficient understanding of entity's financial management system and provide evaluation on the management control environment, the accounting system and the control procedures in order to determine the adequacy of the system to control and account for USAID funds.

B.1. Financial Management Systems

The Firm shall:

1. Determine whether the entity meets the USAID standard for fund control and accountability required for advance payments.

2. Determine whether an adequate financial management and internal control structure exists in the organization to ensure that:

a. Accounting records are supported by documentation which will identify, segregate, accumulate, and record all costs incurred and which fully disclose:

• The amount and dispositions by source of funds received.

• The total cost of the program or undertaking in connection with assistance received.

• Such other records as will facilitate an effective audit.

b. Records that identify adequately the source and application of funds for sponsored activities. These records should contain information pertaining to awards, authorizations, obligations, un-obligated balances, assets, outlays, and income.

c. Effective control over and accountability for all funds, property, and other assets.

d. Comparison of actual outlays with budget amounts for each agreement, separately. Financial information should be related to performance and unit cost data whenever appropriate.

e. Procedures for determining the allowability, and allocability of costs in accordance with the provisions of procurement documents, applicable cost principles, and generally accepted accounting principles.

f. Accurate, current, and complete disclosure of financial information for any sponsored program.

g. Examinations in the form of independent or internal audits. Such audits shall be made by qualified individuals who are sufficiently independent of those that authorize the expenditures of funds, to produce unbiased opinions, conclusions, or judgments. The essence of the examinations is to obtain understanding and report on the effectiveness of the financial management systems and internal control procedures that have been established to meet the terms and conditions of the grant agreements.

h. A systematic method to ensure that corrective/remedial actions on audit recommendations are done timely.

B.2. Accounting System

1. Determine if entity accounting system is acceptable for the award of prospective grant (yes, no, or yes with recommendation that a follow-on review be performed after award).

2. Ensure that the following accounting records exist and evaluate the adequacy of internal control over these records.

a. General Journal

b. General Ledger (G/L)

c. Subsidiary ledgers:

- Fixed Asset Register

- Inventory

- Bank Book

- Payroll registers

- Revenue/Accounts and Accounts Receivable

- Purchasing/Accounts Payable

- Cash and Cash equivalents

- Investments

- Debts

- Equity Accounts

- Interest

- Others

- Petty cash records

d. Monthly Trial Balances (T/B)

e. Preparation and approval of Financial Statements

3. Ensure that the following accounting characteristics exist and are properly utilized in the Entity's Accounting System:

a. All accounting books are up to date (current)

b. Reference exists between general journal and supporting documents

c. Link exists between the general journal, subsidiary ledger and G/L

d. Proper summarization/analyzing of transactions to facilitate Monthly reporting

e. Transactions are recorded in ink

f. Chart of Accounts.

g. Accounting Procedures Manual

h. Use Standard Journal Forms/entries

i. Use pre-numbered forms (Journal Vouchers, Purchase Orders, forms for cash/bank receipts / disbursements, etc).

j. Journal entries used by are properly authorized and supported

k. Link between various timely postings of Journal entries in the G/L

l. Bank reconciliation statements are regularly prepared and approved

m. Sub-ledgers are reconciled to the G/L and updated on, daily, monthly and annually.

n. The system has the capability to manage separate accounts for USAID funds

o. Advances are properly managed and adequately reviewed.

B.3. Fixed Assets:

1. Additions and disposal of fixed assets are properly authorized:

a. Ensure that the purchase/disposal of Fixed Assets is properly authorized by appropriate Officials;

b. Ensure that appropriate pre-numbered forms are used to document the purchase process of fixed assets (Purchase Requisition, Purchase Order, Receiving Report), and that all forms are properly approved by appropriate personnel;

c. Through discussion and observations, identify the policies and procedures followed for major and small purchases;

d. Ensure assets are adequately insured;

e. Ensure that the fixed asset register is maintained per USAID Standards.

2. Accurate records are properly maintained:

a. Ensure that the Fixed Asset Register is updated and complete on a timely basis;

b. Ensure that the entity maintains a well-defined written policy to distinguish between Capital items and expendable items.

3. Safeguard of Fixed Assets:

a. Ensure that equipment is individually identified with "Asset Identification

Plates"/serial number tags;

b. Ensure that a periodical physical check is carried out by an independent individual or firm;

c. Ensure that a reconciliation between the results of physical count and the Fixed

Asset Register is performed and differences are investigated;

d. Ensure that equipment is not relocated without obtaining proper approval from an authorized individual, and that the relocation is documented in records. (Identify location).

e. Ensure there is a proper system of reporting on thefts, pilferages, wastages, obsolesce.

4. Segregation of duties:

a. Ensure that the Fixed Asset custody function is segregated from recording in the

Fixed Asset Register;

b. Ensure that the preparation of the reconciliation function is prepared by an employee separate from the record keeping function, and from the custodianship function.

B.4. Inventory valuation method and turn over:

a. Identify entity’s inventory policy and procedures manual.

b. Check inventory methodology with regard to printed publications.

c. Determine applicable and validity of inventory accounting system.

d. Determine the cost accounting method used.

e. Check the applicable inventory pricing and disposal methods.

f. Determine the valuation of purchase method and verify its implementation.

g. Ensure proper application of physical inventory procedures.

h. Determine methods used for property inventory.

i. Ensure disclosure of valuation method.

j. Sample testing of the applied inventory valuation method.

k. Test physical safeguarding.

B.5. Revenue and Cash Receipts Cycle:

1. All cash receipts are recorded and accounted for:

a. Describe the various sources of cash receipts such as:

a) Individual donations;

b) Contribution from board members;

c) Contribution from other entity/Government;

d) Revenue generated from other activities and check whether these

a. sources are being properly segregated by the entity in their records;

b. Identify the cost sharing policy. Determine any revenues set-aside for cost sharing are properly segregated, allocated and accounted for.

c. Ensure that contributions restricted by outside grantors are classified as restricted and recorded separately from the unrestricted funds;

d. Check whether the entity uses "Fund Accounting System". If not, and there are material restrictions, these restrictions should be disclosed;

e. Ensure that donated materials and investments normally are recorded at Fair

Market Value when received;

f. Verify that donated services are generally not recorded unless the services would normally be purchased by similar entities.

g. Ensure that membership dues are recognized by the entity over the period to which they relate.

2. Recording and safeguarding of cash received:

a. Ensure that pre-numbered official receipts are used, and the numbers are controlled by appropriate officials. Missing documents are investigated on a timely basis;

b. Verify that voided or cancelled official receipts must be marked "cancelled" and filed for reference;

c. Ensure that cash receipts are immediately deposited in the proper bank account by a bonded employee.

3. Reconciliation of cash with records:

A reconciliation of bank statements with the bank book is done on a monthly basis by a person other than the cashier.

4. Segregation of duties:

Confirm that the following duties are segregated among employees:

- Cash receiving function and bookkeeping.

- Bank reconciliation and bookkeeping.

B.6. Cash/Bank Disbursement Cycle:

a. Ensure that cash/check vouchers are pre-numbered;

b. Ensure that pre-numbered checks are used;

c. Check that disbursements are not made from deposited collections or cash received from other activities;

d. Ensure that all checks are made payable to a specific payee and no drawing of checks payable to "cash" or "bearer";

e. Ensure that all disbursements, other than those from petty cash funds, are made by check or electronic funds transfer;

f. Check that there are two check signatories;

g. Check that checks are not signed without the review of all supporting documentation by signing officials (blank checks should never be signed);

h. Check that all cash/check vouchers are verified by the accounting staff and approved by a responsible official;

i. Check that cash/check vouchers including supporting documentation, are stamped "PAID" with the date of payment indicated thereon, to prevent duplicate payments;

j. Check that payees or persons receiving checks sign on the corresponding cash/check voucher;

k. Verify that cash on hand is maintained in safes or vaults, which can be locked when not in use;

l. Ensure that voided or damaged checks are properly marked as cancelled;

m. Obtain reconciliation of bank statements. Ensure that reconciliations of bank statements are prepared on a monthly basis and are reviewed and approved by an appropriate official. Also, check the old outstanding reconciling items;

n. Obtain evidence to confirm that the following segregation of duties is in effect:

o. The person who is responsible for the preparation and release of checks should be independent from the record keeping functions.

p. Bank reconciliations are prepared by individuals independent of those responsible for the issuance, safekeeping and signing of checks.

q. The person who authorizes checks should be independent of custody of checkbook and recording responsibilities.

r. Determine whether bonding of the cashier/custodian exists. This analysis should be based on the amount of cash on hand, internal controls in place, cost of bonding and any other relevant factors.

s. Make sure that value added taxes reimbursed by USAID are reported on time.

C. Procurement Systems:

a. Determine if entity has procurement systems with written policies and manuals for purchasing. Determine whether policies are in accordance with local government procurement Law and USAID procurement regulations.

b. Determine if the entity complies with source, origin and nationality requirements referred to in 22CFR228 Source, Origin and Nationality for

USAID funded commodities.

The firm shall:

1. Review the entity’s contracting and assistance (grants, cooperative agreements) policies and procedures for:

i. Procurement planning

a) Adequacy of statements of work and budget estimates

b) Clear prescription of planning responsibilities

c) Clear prescription of planning approval authorities

ii. Avoidance of improper business practices and personal conflicts of interest

iii. Safeguarding procurement and information

a) Planning information

b) Nondisclosure of bidders/offerors proposals, number of proposals received

iv. Prequalification of bidders/offerors

v. Competitive procurement

vi. Advertising

a) Commerce business daily

b) Other

vii. Preparation, receipt and evaluation of Request for Proposals ((RFPs), Request for Technical Proposal (RFTPs) or Invitation for Bids

(IFBs)

a) Statements of work

b) Terms and conditions, including standard provisions, clauses and cost principles. Policy for setting forth the reasonableness, allowability, and allocability of costs in accordance with the provisions of procurement documents, applicable cost principles, and generally accepted accounting principles and the terms of the agreement.

c) Review and analysis of technical and cost proposals

d) Determination of contract type and method of payment

e) Incorporation of USAID source, origin and nationality requirements

viii. Negotiations and preparation of draft and final contracts;

documenting actions, decisions made during discussions justifying these actions

ix. Securing USAID approval of USAID contract;

x. Protests

xi. Contract administration functions such as inspection and acceptance, agreement modifications, disputes, property accounting and termination

xii. Ensure existence of adequate contracting procedures to evaluate sub-contracting for services and/or services.

2. Proper ordering procedures:

a. Ensure that all purchases are supported by purchase requisition or purchase order and included in the procurement plan;

b. Examine that purchase orders and purchase requisitions are signed by authorized official;

c. Test numerical sequence of the processed purchase orders.

3. Control over purchase process & goods received:

a. Ensure that competitive bidding practice is done to the maximum extent possible to ensure purchase of the best value in the most efficient manner;

b. Ensure the existence of a receiving report or other acceptable forms;

c. Review receiving reports, and verify that the goods are inspected by only authorized personnel;

d. Trace goods received to the warehouse;

e. Check that proper control procedures are applied over the warehouse IN and OUT movements.

f. Ensure that Purchase Orders sent to the Warehouse do not contain values.

g. Check Receiving Reports for the following:

- Test for completeness against the Purchase Order

- Check partial shipments (less, or equal to quantity ordered)

- Check substitution of items ordered

- Check handling of rejected items

- Check handling of damaged items.

1. Review of the entity implementation of contract/assistance instrument policies and procedures to determine:

a. how well the entity complies with host government procurement and

USAID Host Country contracting rules and regulations

b. how well the entity enforces contract delivery schedules and specification compliance

c. the adequacy of site visits

d. the ability of the entity to respond to contract changes, handle contract disputes in a timely manner and in accordance with their rules and regulations

e. the effectiveness of the entity in monitoring contract closeout or termination processes;

f. the adequacy of contract audits by Host Country or independent audit firms

g. how effective is the entity disputes and claims settlement process

h. the adequacy of contracts, records and files documentation and maintenance especially in contract administration areas such as delivery schedule delays (are they properly documented and the reason for delay justified); property management; subcontracts;

modifications; and change orders. Are the files documented to show why an action was taken? Have all requested clearances been obtained?

i. the compliance with USAID source, origin and nationality rules

j. the effectiveness of the entity in monitoring participant training services

k. adequacy of file documentation for noncompetitive procurement

5. Review of the operating procedures to determine:

a. the effectiveness of the entity in supervising the process of procuring services, supplies and equipment

b. how well the entity functions in terms of responding to or meeting schedules and deadlines

c. the capability of the entity in providing logistical support to foreign

Firms in the areas of housing, office space, customs clearance, etc...

6. Checking and approval of invoices and related documents:

a. Select vendors' invoices, and check that they are properly recorded, supported by purchase orders, and receiving reports;

b. For the selected invoices, check the arithmetic accuracy;

c. Check that goods were received, inspected, and in acceptable condition.

7. Review the invoice examination policies and procedures to determine:

1. the effectiveness of existing procedures in carrying out the payment cycle:

a) implementing controls to prevent duplicate or erroneous payments

b) ensuring payments are made in accordance with the terms of the agreement/contracts and/or USAID stipulations in project implementation letters (ILs)

c) determining the accuracy and reasonableness of quantities, prices, and amounts shown on vouchers

d) properly matching invoices against valid commitments and receiving documents

e) ensuring payments are properly authorized and approved, and timely

f) resolving issues on USAID disallowances on vouchers recommended for payment or liquidation of advances;

2. The adequacy and effectiveness of procedures in reviewing requests for and use of cash advances.

8. Entering transactions in the accounting records:

a. Examine the posting to the G/L by persons with incompatible duties;

b. Ensure supervisors review of posting in the G/L.

D. Personnel and Payroll Systems:

Determine if the entity has adequate level of personnel and payroll systems with written policies on recruitment, retention, termination, compensation etc. Assess the adequacy of these policies in term of both substance and effective implementation from the stand point of applicable legal requirements, and the stand point of norms for well-organized, entities.

1. Review and verify the recruitment and hiring policies.

2. Review the leave policy and verify its implementation.

3. Identify and review termination and separation from duty policies including retention and compensation.

4. Computation of wages and salaries in respect of employees’ contracts and at authorized rates:

a. Check the existence of updated Personnel data records as to the annual evaluation;

b. Obtain Evidence of a written and approved contract between Employee and Employer.

c. Verify if the employees' signed contracts are filed in the employees' records;

d. Check for vacancy announcements, bid abstracts and recommendation for selection memo (minimum of three bids is recommended).

e. Verify that the contract includes a scope of work, amount, terms of payment, effective date and end date.

f. Check for service delivery report approved by the technical officer.

g. Check for the consultant's invoice

h. Check for consultant's receipt of payment

i. Ensure that compensation rates and deductions are documented and updated.

5. Payroll preparation and controls:

a. Ensure existence of proper time and attendance records;

b. Ensure proper allocation of each employee's time to the job;

c. Ensure that supervisors review the time and attendance for accuracy;

d. Compare payroll names and calculations to the time and attendance sheet;

e. Ensure that proper deductions to the salaries are being done and that the payroll sheet is up-dated accordingly.

6. Entering transactions into the accounting records:

a. Trace posting of payroll transactions in the sub-records, and ensure that proper review is done by authorized officials prior to posting;

b. Ensure that the responsibility for recording of salaries transaction is limited to a person who doesn’t participate in the preparation of the payroll sheet;

c. Review controls over unclaimed wages, and trace posting to the sub-records.

7. Payroll deductions:

a. Review the total of payroll deductions;

b. Review the policies for remittance of payroll deductions to third parties;

c. Ensure that remittance of the payroll deductions to third parties are done on timely basis;

e. Obtain Evidence of collection due of Social Insurance on Salaries, and timely payment to the local government authority;

d. Test any outstanding balances due to third parties, and investigate any discrepancies.

E. Project and Performance Management

1. Review whether the key management personnel have the knowledge and experience needed to fulfill the award requirements.

2. Assess whether the organization possess the technical expertise to satisfy the project purpose.

3. Identify whether there is a documented project management system.

4. Ability for staff to comply with the award monitoring and evaluation plan and/or quality assurance requirements.

5. Evaluate whether the organization has an internal project monitoring team

F. Others:

1. Record Retention

-Review that there is an adequate storage and record retention policies and it is properly implemented for both documentary evidence and electronic resources.

2. General

-Review that there are daily written records maintained of vehicle trips.

3. Unallowable costs

-Review that unallowable costs are not included as charge to USAID.

4. Review of the Entity’s Information Technology Systems

- Ensure control access to computerized operations.

- Password control.

- Personnel access to classified information control

- Security:

- Safeguarding of fiscal assets

- Safeguarding access to data base

- Safeguarding Programs.

- Automated Accounting Systems.

- Testing the integrity of database/ledgers/reporting

6. Review of the staffing of the entity to assess the adequacy to support the proposed award and provide a gap analysis of how the issue can be addressed.

7. Organization Sustainability:

a. Identify whether organization has developed a funding strategy that will help them to diversify and grow there sources of funding.

b. Evaluate the organizations experience in developing, monitoring and using cash flow projections.

c. Identify whether:

i. Identify whether the organization is consistently making payments to creditors and employees when due.

ii. Identify whether the organization have any debts. If so, what is the plan to liquidate those debts.

iii. Evaluate whether the organization has the capacity to fulfill the level of effort necessary to implement the project.

iv. Review the required systems to ensure that they are place for quality growth.

General

The Firm shall develop the appropriate methodology and work plan to accomplish the above work. The staff of the USAID\West Africa Controllers' Office and Technical

Offices will be available to provide appropriate assistance in developing that plan.

Deliverables

The firms should attach the following to the report.

1. Copy of entity organization chart.

2. Copy of entity Procurement cycle.

3. Copy of entity Personnel , payroll cycle and pay scale.

4. Copy of entity audited financial statements for last 3 years by Audit firm with comments, as deemed necessary.

5. Copy of operations manual.

The key deliverables are as follows:

Deliverables Delivery Timelines

Draft Work Plan Within 10 work days after contract award

Final Work Plan

Within 5 work days of receiving final USAID comments on the draft work plan

Draft NUPAS Report

Within 20 work days from the date of USAID’s acceptance of the Final Work Plan

Final NUPAS Report

Within 10 work days after receiving USAID’s comments on the draft assessment report

If USAID does not accept the report because of deficiencies in the work or noncompliance with the scope of work, the contractor shall perform any additional work necessary as agreed with USAID/West Africa at no additional cost to USAID/West Africa.