Scope of Work for Annual Audit

Deloitte Consulting Overseas Projects LLC

USAID Urja Nepal, USAID Trade and Competitiveness Activity, and USAID Public Financial Management Activity

Scope of Work for Annual Audit

Nepal Fiscal Year: 2022-23

Background

Urja Nepal Project

Deloitte Consulting Overseas Projects LLC (wholly owned subsidiary of Deloitte Consulting LLP) is implementing a five-year USAID-funded Urja Nepal under the USAID’s Task Order - 72036720F00001 for the period of Aug 12, 2020, to August 11, 2025.  The purpose of Urja Nepal is to create a financially viable electricity sector that provides affordable, reliable, and secure power and enables the entry of private investment into the Nepali market. The project offers consulting, analytical and other advisory services to Ministry of Energy, Water Resources, and Irrigation (MoEWRI), Department of Electricity Development (DoED), Alternative Energy Promotion Centre (AEPC), the National Electricity Authority (NEA), the Electricity Regulatory Commission (ERC), and the Office of the Investment Board of Nepal (OIBN). and technical assistance on the behalf of USAID.

The total estimated ceiling of the Urja project is USD 18,749,791 for five years, starting in Aug 2020.The average monthly expenditure of the project is total around NPR 5,000,000 (approximately USD 40,983), with 60-100 transactions (maximum) per month. Our project office is located at Charkhal, Kamalpokhari Road-30, Kathmandu, Nepal, and we have no field offices outside Kathmandu valley.  

USAID Trade and Competitiveness Activity (Udhyam Nepal)

The USAID Trade and Competitiveness Activity (USAID Udhyam Nepal) is a five-year program under task order 72036722C00001 – for the period of 26 Jan 2022 to 25 Jan 2027. The purpose of project is to increase Nepali private sector participation in targeted global value chains by supporting broad-based, market-led growth and competitiveness. This will be achieved through an integrated, and sustainable, market-systems approach to address both private sector and public sector constraints to micro, small and medium enterprise (MSME) development and competitiveness. The Activity will address three objectives and measure progress across two outcomes, increased competitiveness in target sectors, and increased sales.

The total estimated ceiling of the Trade and Competitiveness project is USD 18,911,931 for five years. The average monthly expenditures of the project were around NPR 4,500,000 (approximately USD 36,885), with 50 transactions (maximum) per month. Our project office was located at Lazimpat-2, Kathmandu, Nepal and we have no field offices outside Kathmandu valley.

Public Financial Management Program (USAID PFM)

Deloitte Consulting and WSP, together with Georgia State University and the Niti Foundation are implementing a five-year USAID funded Public Financial Management Program (USAID PFM) whose purpose is to provide technical assistance and strengthen Public Financial Management (PFM) functions, performance, and accountability of targeted agencies at the federal, provincial, and local levels of government, and to provide targeted assistance to the Government of Nepal (GON) aimed at strengthening national PFM institutions and systems to sustainably advance PFM.

The project commenced in October 2022 and will run for a five-year period to October 2027. The objectives of the Project are to provide technical assistance and strengthen PFM functions, performance, and transparency and accountability of targeted agencies at the federal, provincial, and local levels of government, and to provide targeted assistance to the GON aimed at strengthening national PFM institutions and systems to sustainably advance PFM.

Our project office has been located at Maharajgunj road, Kathmandu, Nepal and we have two field offices outside Kathmandu valley which are at Madhesh Province and Lumbini Province.

We have been registered in PAN with the Inland Revenue Department of Nepal Government. All three  projects use the same PAN number.

Objective of the Audit 

The objective of the audit is to give the reasonable assurance of all transaction incurred in the current fiscal year are in accordance with the relevant policies of Deloitte Nepal, partner organizations, compliance with Government of Nepal's laws, rules and regulations and to produce a report as per Nepal Accounting standard (NAS).

• To conduct full annual financial audit of Deloitte Consulting Overseas Projects LLC Branch Office, i.e located at Dillibazar, Lazimpat and Maharajgunj road comprising of the Balance Sheet of and the Statement of Income and Cash Flows for the FY 2022/23, (and produce Audit Report with an independent professional audit opinion.
• Filing the tax returns including e-filing to Inland Revenue Department after the completion of audit of the financial statements.
• File the audited financial statements and other reports (if any) of Deloitte Consulting Overseas Projects LLC, project office with the Office of Company Registrar as per the requirement of the Company Act 2006 of Nepal.
• To obtain Deloitte Consulting Overseas Projects LLC Tax Clearance Certification from the Inland Revenue Department for the audited period.
• To review labor audit and fillings as Labor Act, 2017.

Period of Performance

The audit should cover locally incurred costs related to the timeframe of July 17, 2022 – July 16, 2023.  The audit should be performed starting on or about Monday August 14, 2023, and completed within approx. 15 calendar days, before the annual filing deadline of 17 October 2023.  

Scope

• The audit will include limited tests and controls as the auditor considers necessary under the circumstances as related to locally incurred costs only. 
• The audit will include the verification of all locally incurred vouchers related with Tax Deducted at Source (TDS) and Value Added Tax (VAT) as per Nepal government tax and VAT rules with reference to the contractual agreement with USAID, the Nepal Government and Deloitte. 
• The audit report shall contain details regarding the audit methodology used and the scope of the audit. It shall contain an assurance that the audit was performed in accordance with generally accepted accounting principles and by a qualified auditor.  
• Review of banking transactions and procedures
• The report shall contain the engagement partner´s signature and title, and audit firm name and address. 
• The auditor will review the annual financial statement and make recommendations on how to best present the combined report this year (3 projects). 
• The auditor may be requested to provide ad-hoc answers or opinions on compliance matters as related the project(s) and their registration, tax and other reporting requirements, as needed.

The project audit steps include the following: 

1. Review and verify all the necessary documents and vouchers of locally incurred costs to ascertain that the accounting records have been completed in accordance with Deloitte standard guidelines and as per generally accepted accounting practices.
2. Verify that that the expenditures incurred locally are accurate and eligible.
3. Verify that accounts have been maintained in accordance with Field Finance Procedures and provide an accurate representation of the financial position of the project.
4. Perform limited review of procurement process to confirm that firm procurement policy and procedures were followed.  Assess whether Deloitte procurements were in compliance with FAR and AIDAR requirements.
5. Preparation of one consolidated financial statement and individual financial statement as per GAAP and Nepal Accounting Standards for the period of 17 July 2022 to 16 July 2023 for USAID Urja project, USAID Trade and Competitiveness Activity and USAID Public Financial Management. 
6. Perform annual income tax return filing in Inland Revenue Department (IRD) within the deadline set by Nepal Income tax act 2058.
7. Consultation and recommended steps on local procedures and timelines for project and local registration close-out, including minimal ad-hoc consultations during and after the audit period.
8. Any findings identified as a result of the audit will be drafted and shared with the management personnel of the relevant projects prior to issuing the final report.
9. A response from the Deloitte representation will be considered and included in the final report results.
10. Conduct withholding tax audit based on Section 157 of the Company Act, and facilitate and obtain tax clearance from the Inland Revenue Department
11. Obtain tax clearance certificate  for Deloitte Consulting Overseas Projects LLC of Nepal.

Close out Final Audit Report (Deliverables):

The audit report will be comprised. 

• Preparation of Annual Financial Statement of individual three projects. And consolidated financial statement of these 3 projects.
• The auditors’ opinion on the project financial statement.
• Separate Management Letters for three projects which includes:
  • Outline comments and observations on the accounting records, systems, and controls that were examined during the audit.
  • Identify specific deficiencies and areas of weakness in systems and controls and make recommendations for their improvement. 
  • Communicate matters that have come to their attention during the audit which might have a significant impact on the implementation of the project; and 
  • Bring to into attention any other matters that the auditor considers pertinent.

Conditions and Requirements

The auditor will be given access to all relevant documents, including the Specific Agreement between Deloitte and USAID, Vouchers, the project specific legal agreements and any other information associated with the Project and deemed necessary by the auditor to complete the steps outlined above. Personnel from Deloitte will cooperate fully with the auditor and will make available to the auditor project specific records, documentation and other information as requested by the auditor in connection with the project audit.

The audit shall be carried out by an external, independent and qualified auditor in accordance with international standards. Auditors should themselves bear any cost of meals and refreshments during their work in the audit period. The project will provide all the necessary documents as requested for the audit purpose. The selected auditor is required to protect and maintain close hold on all information and documentation received from Deloitte. Business proprietary information will only be used for this audit purpose. Once the audit is concluded all proprietary data must be removed and properly destroyed.

Criteria for Auditor selection:

• The Audit firm/engagement partner must be a Chartered Accountant and registered member with the Institute of Chartered Accountant of Nepal (ICAN). 
• Auditors should have 7 years of audit experience of donor funded projects specially in the development sector, with NGOs and INGOs and priority will be given to those having audit experience of USAID funded projects.
• Provide evidence of the required business licenses (VAT certificate, Tax clearance) to operate in the host country.
• Having adequate financial resources to finance and perform the work or the ability to obtain financial resources without receiving advance funds.
• Ability to comply with required or proposed delivery or performance schedules.
• Have a satisfactory past performance record.
• Have a satisfactory record of integrity and business ethics.
• Have the necessary organization, experience, accounting and operational controls and technical skills.
• Be qualified and eligible to perform work under applicable laws and regulations.

The interested and qualified auditing firm must submit their technical and financial proposal (The technical proposal and cost proposal must be kept separate from each other), including all the documents mentioned above in Criteria for Auditor Selection by 17:00 hours (COB) 4 July 2023 via email address given below:

Email: info@tc-udhyamnepal.com