Terms of Reference (ToR)

Terms of Reference (ToR)

Appointment of External Auditor for FY 82/83

Background:

Action for Nepal (AF Nepal), a non-profit organization dedicated to fostering development in Nepal’s remote communities, has partnered with the Australian Himalayan Foundation (AHF) to promote health, education, and local empowerment in the Solukhumbu and Bajhang districts. Over the past nine years, AF Nepal has focused on improving maternal and child health by enhancing access to and utilization of healthcare resources. These efforts align with Sustainable Development Goal (SDG) 3, which seeks to ensure healthy lives and promote well-being for all at all ages.

The regions where AF Nepal operates are prone to disasters. To address these risks, incorporating Disaster Risk Reduction (DRR) training into ward-level activities is critical. Such training is also a requirement of the Minimum Service Standards (MSS) for health posts, which mandate disaster reduction orientation for health workers every six months. To ensure sustainability, AF Nepal plans to develop local-level trainers, including ward chairs, health post in-charges, health section, and DRR focal persons at the municipal and rural municipal levels. These trainers will facilitate ongoing orientations and establish ward-level DRR committees to strengthen local capacity for disaster preparedness and risk reduction.

1. Scope of Audit

The audit shall cover all aspects of Action for Nepal’s projects, including Finance, Procurement, Asset Management, Cash Management, Human Resources, and General Administration, and identify key issues and areas for improvement.

2. Process

2.1. The auditor shall consider the directives issued generally accepted accounting principles (GAAP) to the extent applicable and the Nepal Accounting Standards for NPOs (NAS for NPOs) issued by Accounting Standard Board of Nepal.

2.2. The auditor shall visit the Action for Nepal Central Office, Boudha, Kathmandu, for conducting the audit.

2.3. Action for Nepal will provide project/donor-wise, Income and Expenditure Statements, Trial Balances, Bank Reconciliation Statements, Bills and Vouchers, Books of Accounts, and all other necessary documents and information during the audit.

2.4. Prior to the commencement of the audit, the auditors shall consult with Action for Nepal’s Executive Committee (EC) representatives and management to share the audit plan and other related matters.

A meeting shall be held between the auditors and management before starting the Project Statutory/External Audit, followed by another meeting before submission of the report.

2.5. The auditor must submit the CV and Company Profile with legal documents of the principal auditor (who will sign the report), along with CVs of the Managers, Supervisors, and key personnel proposed for the audit team. The CVs should include relevant audit experience and ongoing assignments, demonstrating capability and capacity to undertake the audit of Action for Nepal.

Mandatory Requirements

• Technical Proposal including:
  • Description of how the firm’s experience and expertise meet the ToR requirements
  • Proposed audit methodology
• Financial Proposal, including a detailed budget breakdown
• CVs of the Principal Auditor and key team members
• Profile of the Consultancy Firm
• Certificate of Practice (COP) with current renewal
• Firm Registration Certificate (ICAN)
• Company Registration and VAT Registration Certificates
• Latest Tax Clearance Certificate
• Minimum 10 years of firm establishment and at least 5 years of experience in the development sector

3. Examination

3.1. The auditor shall perform detailed checks of bills, vouchers, and related procedures to assess and recommend improvements for internal control, procurement, financial management, and personnel policies.

3.2. The auditor shall conduct a general assessment of controls, ensuring:

• Costs are actually incurred, identifiable, and verifiable
• Expenses comply with applicable laws, donor requirements, accounting standards, and organizational policies
• Costs are incurred within the respective fiscal year for statutory and tax purposes
• All expenses are appropriately recorded in Action for Nepal’s books of accounts and those of implementing partners
• Accounting records are accurate and adequate

3.3. The auditor shall perform a physical verification of materials, inventories, and fixed assets. Where required, Action for Nepal staff may assist with the count.

3.4. The auditor shall test whether Action for Nepal’s operations comply with applicable national laws and donor conditions.

4. Confidentiality

4.1. The auditor shall not, directly or indirectly, divulge or use any confidential information of Action for Nepal without prior written consent.

4.2. Auditors must maintain strict confidentiality of all information obtained during and after the audit to protect Action for Nepal from any potential harm caused by disclosure.

4.3. The auditor shall have full access to all records, including books of accounts, legal agreements, meeting minutes, bank statements, invoices, and employee contracts, and may contact relevant banks, consultants, contractors, or firms as required.

5. Liability and Independence

5.1. The auditor must be impartial and completely independent of Action for Nepal’s management or financial interests. Auditors must not be employed by, or have any financial or business relationship with, Action for Nepal or its senior staff during the audit period.

5.2. Action for Nepal shall have no control over the methods used by the auditor in performing the audit.

5.3. The auditor shall bear all legal and financial liabilities arising from claims of personal injury, economic harm, or other issues before, during, or after the audit

6. Audit Working Papers

6.1. The auditor shall retain audit working papers for seven years after the audit’s completion or longer if requested in writing by Action for Nepal.

6.2. Action for Nepal may request access to audit programs and working papers, which the auditor must provide upon request.

7. Audit Timeframe

8. Execution and Reporting

8.1. Audit findings shall be presented and shared immediately after completion for management responses.

8.2. The auditor shall present audit observations before finalizing the report and management letter at the Action for Nepal Central Office.

• Draft Consolidated Report:
• Final Report and Financials:

8.3. The Management Letter should include recommendations for improving internal controls, safeguarding assets, ensuring adequate documentation, reducing cash payments, managing advances, and enhancing authorization and stock control procedures.

8.4. The auditor may also highlight good practices observed within Action for Nepal and its implementing partners.

8.5. Financial Scope (approximate):

9. Payment Modality

100% payment will be made after submission and approval of the final audit report by the audit firm.

10. Consequences of Non-Compliance and Termination

The selected audit firm is expected to strictly adhere to the agreed Terms of Reference, professional auditing standards, and the timeline specified in the contract. Failure to comply with these requirements may result in the following actions:

• Written Warning: In case of minor non-compliance or delays, the organization may issue a formal notice requesting immediate corrective action.
• Termination of Contract: If the auditor fails to address issues within the stipulated time, or if there is serious negligence, misconduct, conflict of interest, breach of confidentiality, or violation of professional standards, the organization reserves the right to terminate the contract immediately.
• Withholding of Payment: The organization may withhold all or part of the agreed payment if deliverables are not completed as per the agreed scope, quality, and timeline.

Action for Nepal reserves the right to reject any submission without providing specific reasons.

11. Submission of Proposal

Interested audit firms are requested to submit their Technical and Financial Proposals (with all required documents) either via email or sealed hard copy by 19th October 2025 (Sunday), 17:00 Hrs to the address below:

The Executive Director

Action for Nepal

Boudha, Kathmandu

Email: actionfnepal@gmail.com