External Auditor – Malawi Value Chains Project (Malawi)

External Auditor – Malawi Value Chains Project (Malawi)

1.  Programme Background

The Malawi Value Chains (MVC) Project implemented by Adam Smith International is one of three components of the Malawi Trade and Investment Programme (MTIP), a five-year Foreign, Commonwealth & Development Office (FCDO)-funded initiative which aims to break Malawi’s cycle of low growth through driving exports. The overall objective of MVC is to design and implement the value chain component of MTIP, with the goal of increasing the productivity, quality and production performance of macadamia and mango, and promoting investment in mining. The FCDO signed a Memorandum of Understanding (MoU) with ASI for the implementation of the MVC component of MTIP in May 2020. The contract is valued at £7,446,665 up to April 2028. Expenditure is incurred in various currencies and reported in Great Britain Pounds (GBP); ASI incurs expenses from its own funds and then seeks reimbursement from FCDO. These Terms of Reference set out the requirements for the Year 3 external audit of the project’s Income and Expenditure Statement for the financial period 1 April 2025 to 31 March 2026, building on the Year 2 audit for the year ended 31 March 2025.

2.  Objective

The objective of the audit is to express an independent professional opinion on the recorded income from the donor and the expenditure for the financial period 1 April 2025 – 31 March 2026. It will assess, in all material respects, whether the resources have been used in conformity with the provisions of the Memorandum of Understanding (MoU) with the FCDO, including any amendments or agreements and any applicable guidelines in force, and with due attention to value for money (economy, equity, efficiency, effectiveness and cost-effectiveness). The audit also incorporates a structured follow-up to confirm whether previous audit recommendations have been fully implemented.

3.  Scope

The audit will be conducted in accordance with International Standards on Auditing (ISA) as published by the International Federation of Accountants (IFAC), with special reference to ISA 800 (Auditor’s Report on Special-Purpose Audit Engagements). The audit will gather sufficient evidence to substantiate in all material respects the accuracy of the information contained in supporting documents and the Financial Reports.

Therefore, the auditor shall be accorded full and complete access at any reasonable time to all records and documents including but not limited to the copy of the contract between ASI and FCDO. The auditor shall perform additional Agreed-upon procedures (“AUPs”) and will issue a report of factual findings. The relevant additional procedures should be carried on MVC and the downstream partners where relevant.

1. For human resource-related expenditures and commitments:

   • Validate those costs charged to the project related to positions included in the budget in the agreement.

   • Verify that costs charged to the project:

o   Correspond to time spent on the project, through reconciliation with reports from the timekeeping system, or equivalent.

o   Have been approved in line with relevant internal policies.

2. For other related direct costs:

   • Validate that the expenditures are related to the project.

   • Expenditures are supported by a valid invoice and proper delivery documents, or other appropriate substantiating documentation.

   • Expenditures were duly authorised in compliance with internal expense policy.

   • Verify that any exchange rates used for conversion purposes are within market rates.

   • Verify adherence to procurement procedures for contracting service providers and adequacy of due diligence of downstream partners.

3. For assets:

   • Check the completeness of the asset register. 

   • Validate the existence of all the assets.

   • Review the vehicle use policy and test that it is being applied if available.

   • Check on procurement procedures.

4. For cyber security, fraud and safeguarding risks:

   • Assess awareness of the project staff about cyber-crime, fraud and safeguarding-related risks.

   • Assess if the programme has protection against known cyber-related threats e.g. ransomware and phishing.

   • Assess the management of cyber security, fraud and safeguarding risks.

5. For Daily Subsistence Allowances (DSA):

   • Establish that harmonised rates are used, and test commonly known weaknesses with DSAs. Most relevantly, assess whether the guidelines for the same are practical, functional and relevant for the environment and set-up of the programme.

6. For the Matching Grant Facility (MGF) and follow-up on prior-year findings:

   • Confirm that funds disbursed through the MGF were released within the agreed timelines, used for their intended purpose, and properly accounted for.

   • Verify that MGF disbursements were rebilled between CDEL and RDEL in line with FCDO financial reporting requirements.

   • Confirm that procurement undertaken for the MGF was in line with the ASI and FCDO contract, and that all deliverables were received by the intended beneficiaries.

   • Establish whether any ‘over-recovery funds’ were fully declared to FCDO and utilised as reported.

   • Confirm whether previous audit recommendations have been fully implemented.

The assignment will be coordinated by ASI, serving as the contracting authority, led by the Programme Manager. Technical guidance will be provided by ASI’s central Finance Team.

4.  Deliverables

The two deliverables of the audit are required as follows:

Deliverable 1: Statement of Expenditure

FCDO and MVC require that the financial audit of the programme should enable the auditor to express opinions on:

1. Whether the financial position of the project at the end of the reporting period and of the funds received and expenditures for the reporting period, are presented fairly in all material respects by the MVC in the Financial Statements.

2. Whether, in all material respects, the project funds have been used in conformity with the provisions of the contract, including the approved budget and work plan and any amendments thereto as contained in the agreements.

3. Whether the Financial Statements agree with the programme accounts (books of account), which provide the basis for the preparation of the Financial Statements and reflect the financial transactions of the program, as maintained by the program implementing entities.

4. Whether the Financial Statements agree or reconcile with other information reported to i.e., annual and quarterly progress updates.

5. Whether systems exist for a comprehensive assessment of the adequacy and effectiveness of the accounting and overall internal control system to monitor expenditures at all levels of the programme and other financial transactions including special attention to the adequacy and effectiveness of controls around cash transactions.

6.  Whether ASI has mechanisms for the tracking and safeguarding of assets purchased with project funds and that they are being used for the intended purposes. As such, the auditor will state whether a fixed assets register exists or is being developed, is maintained in accordance with the contract; that property rights or related beneficiaries’ rights are established in accordance with the project’s conditions.

7. Whether goods and services have been procured transparently, competitively and in accordance with the contract and other relevant procurement guidelines approved.

8. Whether disbursements made are in line with agreements with implementing partners, and the approved work plan and budget and further state whether MVC follows an adequate process for validating expenditure reports.

9. Whether all necessary supporting documents, records, and accounts have been retained in compliance with provisions of the contract and local legislation, procedures exist for the security and management of electronic data (backup systems, etc.)

10. Whether periodic reports such as interim quarterly reports (programmatic as well as financial) are available and are being kept securely.

11. Whether audits, spot checks and monitoring visits done on downstream partners are followed up with clearly laid down action plans which are systematically tracked.

12. Whether ASI downstream partners produce complete and accurate financial reports of programme expenditure.

Deliverable 2: Management Letter

The auditor will also prepare a Management Letter, which will:

1. Provide an assessment of the accounting system, records, and controls examined during the audit.

2. Identify specific deficiencies and weaknesses in systems and controls for MVC and that of the sub-recipients that have come to the auditor’s attention in the course of their work specifically with regard to payments, procurements and any other areas as the auditors may consider necessary for the effective execution of the program; and make improvements for their improvement.

3. Report on actions taken by Management to make improvements with respect to deficiencies and weaknesses reported.

4. Bring to the attention of FCDO and MVC any matters that the auditor considers pertinent to the success of the programme objectives.

5.  Audit Period, Timeline and Duration

Audit Period

The audit will be for the period covering 2025/26 Financial Year (1 April 2025 – 31 March 2026).

Timeline and Duration

The assignment shall commence by 13th July and conclude by 31st August 2026 and will involve no more than 30 working days.

1. Commencement assignment, kick-off meeting - By 14th August 2026

2. Inception Report - By 24th August 2026

3. Draft Report - By 15th September 2026

4. Final Report - By 30th September 2026