Terms of Reference for the Audit of Financial Statements at Light for the World Kenya

Period of the Audit

• The audit of the Financial Statements and the Management Procedures of the Light for the World Kenya is covering all transactions within the fiscal year from January 1st to December 31st, 2023, of the respective year. A review of the predecessor auditor's report for January 1st to December 31st, 2022, and January 1st to December 31st, 2021, is also required.

Scope of the Audit

• The audit of the annual financial statements as of December 31st of the respective year shall be carried out.

The financial statements shall include:

• balance sheet / statement of financial position as of December 31st.
• profit and loss account / statement of financial activities for the respective fiscal year.
• statement of cash flows for the respective fiscal year.

The ICA report must certify the soundness of the financial statements presented by the Country Office in the following points:

• Utilization of funds according to the approved budget.
• Accounts being tabled in accordance with the budget items specified in the budget (per project/class and total).

Deposit of funds transferred by:

• Light for the World International (Vienna Office)
• Donors
• Advisory assignments to all bank accounts used for the Country Office and the project funds managed by the Country Office.
• Bank interest earned on the above-mentioned accounts as well as charges by the receiving bank of the Country Office for transfers by Light for the World International (Vienna Office).
• Balance of the reconciliation account with Light for the World International (Vienna Office) as of December 31st of the respective year.
• Proof (balance confirmations) of the positions: receivables, liabilities and bank balances as of December 31st of the respective year. In the statement of financial position, balances are to be shown only at their true value. If the face value of a receivable is higher than the true value or if the face value of a liability is lower than the true value, a value adjustment is necessary.
• Proof of currency exchange rates per exchange rate voucher for all transfers by the Vienna Office and for expenditures effected in foreign currencies.
• Proof of expenditures through genuine and original vouchers, presented in their original (no scan/copy) and used only once, bearing all the necessary information. Exceptions for the use of scanned/copied vouchers need to be documented and explained as sometimes original vouchers need to be presented to a donor. In the latter case, the copy/scan must be validated by an original signature.
• The ICA ensures the unique use of each voucher and the invalidation of used vouchers.
• Use of an adequate internal accounting system adhering to generally accepted accounting standards.
• The review of the predecessor auditor's report for January 1st to December 31st, 2022 and January 1st to December 31st, 2021 is also required.
• Evaluation of the Internal Management Procedures

The following points are to be examined in particular:

• Proof of the existence of all capital assets and investments purchased with the funds according to the inventory.
• Authorisation and recording of all financial transactions and entries according to the regulations described in the Light for the World International “Financial Policies and Procedures Manual” in the latest version.
• The compliance of the Country Office with applicable local laws and regulations.
• If applicable, compliance with the recommendations indicated in the previous audit report.
• Compliance with the Light for the World International Anti-Corruption Policy, particularly with the paragraphs 2.1 Internal Control System, 2.2 External Audits and the guidelines and principles as defined in Annex 1 – paragraph 1 “Corruption and Bribery” and paragraph 2 “Fraud and Theft”.

Contents and Format of the Auditors' Report

• The audit report shall provide Light for the World International with a report on the Financial Statements and a Letter to the Management.

The report on the Financial Statement shall include the following information:

• Overall assessment including general observations and recommendations.
• Confirmation of all money received from Light for the World International (Vienna Office) (transfers, interests and if, others).
• A financial statement according to the budget, in the form of a Profit and Loss statement/ statement of financial activities per project, showing the expenses as approved by the auditors.
• The financial report as of December 31st (balance sheet/ statement of financial position with accumulated figures of the year as well as the corresponding figures of the last year) is an integral part and basis of the financial statement and has to be confirmed by the auditor. The accumulated financial report is based on the principle of accrual accounting.
• A statement of cash-flows.
• Statements of (all) bank accounts (including bank reconciliation statements) and minutes of the petty cash account.
• Presentation of the fixed assets (inventory list), receivables and payables.
• Receivables and payables as well as liabilities have to be shown in the financial statement or in the annexes in detail and on project level. Additional explanations have to be provided where necessary.
• Additional explanations, where necessary and applicable.
• The audit has to include projects related activities of the Country Office.

The following projects are an integral part of the Country Office Audit:

Y30001: CO Kenya 2021; UEF
Y30002: Employable project 2020-2021; MD210046
Y30003: In Business 2017-2024; MD190103, MD210044 and MD210045
Y30004: EnableMe 2021; MD210047
Y Y30000_MCF_WCW_2023-2030; MD210131

• The mentioned project funds have to be audited at the same time as the Country Office due to the financial involvement/ interlinks with the finances of the Country Office. Income and expenses as well as receivables and payables related to project funds have to be shown separately for each project in the audit.
• Additional documentation to fulfil donor requirements or annexes may be requested. In such a case, the specific requests and/ or needed documentation shall be provided to the ICA by the Country Office.

The Management Letter shall include the following information:

• Comments on the accordance of the accounting system to general accepted accounting standards.
• Comments on the internal control system and recommendations for improvements.
• Comments on the compliance with local laws, rules and regulations.
• Comments on the compliance with Light for the World International’s rules and regulations, especially the “Financial Policies and Procedures Manual” and the “Anti-Corruption Policy”.
• Comments on the implementation of the audit findings of the previous year.