TERMS OF REFERENCE (ToR)

FOR AN EXTERNAL, INDEPENDENT AUDIT OF PROJECT ACCOUNTS

(Funded under the BMZ “Private Executing Agencies” Funding Title, administered by Engagement Global – bengo)

Prepared by: Finance Department

Reference: BMZ Funding Guidelines, Section 6.2 and Attachment IV; Engagement Global – bengo Audit Guide (v. 01.02.2020)

These Terms of Reference (“ToR”) define the objectives, scope, methodology, deliverables and administrative arrangements for the engagement of an external, independent auditor (“the Auditor”) to audit the accounts of the project referenced on the cover page (“the Project”).

The Project is funded under the German Federal Ministry for Economic Cooperation and Development (BMZ) funding title for private executing agencies, and is administered on behalf of BMZ by Engagement Global – bengo. The funding guidelines (in particular Section 6.2, Special Provision No. 1 re Section 6.2, and Attachment IV) permit the utilization of project funds to be substantiated either through submission of original receipts, or through submission of a financial report accompanied by an original audit certificate issued following an independent, officially recognized external audit, together with a receipt list. This audit is being commissioned to satisfy the latter option.

This ToR is issued jointly by Humedica International (the German private executing agency) and Pak Mission Society (the local project partner) in accordance with Section 2 of the Engagement Global – bengo audit guide, which requires the auditor to be jointly selected by both parties.

• Auditor: the external, independent Chartered Accountant / auditing firm engaged to conduct this audit.
• Audit: the examination of the Project’s processes, activities, financial results and internal control systems for compliance with defined requirements and standards.
• Audit Report / Audit Certificate: the formal report prepared and signed by the Auditor documenting the audit findings and opinion.
• Humedica International: the not-for-profit organization based in Germany that has been provided with project financing by BMZ under the budget item “private executing agencies” (referred to in the BMZ/Engagement Global guidelines as the “German Private Executing Agency”).
• Pak Mission Society (PMS): the organization based in Pakistan that is responsible for implementing the Project in the project region (referred to in the BMZ/Engagement Global guidelines as the “Local Project Partner”).

The overall objective of the audit is to provide Humedica International, Engagement Global and BMZ with an independent, professional opinion on whether project funds have been used properly, economically and in accordance with the project agreement, the approved budget and applicable funding conditions. Specifically, the audit shall enable the Auditor to confirm:

1. that all project income and expenditure has been properly documented by means of receipts and is supported by an impeccable accounting system maintained by PMS;
2. that documented expenditure complies with the project application, project approval, the appointed purpose of the funds and the most recent approved budget, with any deviations explained separately;
3. that documented income accounted for as counterpart contributions from PMS, the target group and/or other agencies in the project country has been correctly specified and its origin explained;
4. the extent to which the donor’s conditions set out in the project agreement have been met, including identification of any conditions that were not adhered to and the reasons therefore; and
5. any special aspects – positive or negative – that should be brought to the attention of Humedica International, Engagement Global and BMZ.

The audit shall be conducted with reference to, and in compliance with:

• the BMZ funding guidelines for private executing agencies, in particular Section 6.2, Special Provision No. 1 re Section 6.2, and Attachment IV;
• the General Terms and Conditions for Grants to Private Bodies for Projects Abroad (BNBest-P/ANBest/private executing agencies) and the BMZ contract award guidelines;
• the “Guide for an External, Independent Audit within the Scope of the BMZ Funding Title for Private Executing Agencies” issued by Engagement Global – bengo (version of 1 February 2020);
• internationally recognized auditing standards (e.g. International Standards on Auditing – ISA, or an equivalent nationally recognized standard applicable in the project country);
• the Project Agreement (PCA), including the approved budget and any subsequent amendments thereto.

The Auditor shall perform, at a minimum, the following auditing and control procedures:

• Verify the accounting records maintained by PMS for correctness and completeness. Asses the adequacy of internal controls and adherence to financial policies and procedures.
• Verify the financial report in which all project-related revenues and expenditure are shown and confirm that receipts/vouchers are available for all revenues and expenditure.
• Verify how the project funds provided have been managed, including: (i) project funds transferred to PMS during the audit period or project term; (ii) interest earned on transferred project funds during the audit period or project term; and (iii) other revenues arising from project activity.
• Verify the extent to which funds have been used appropriately to carry out the planned project objectives and activities. The auditor shall conduct testing and sampling of financial data to ensure completeness and accuracy.
• Verify the cost-effectiveness of expenditure, i.e. whether financial resources were used economically and as effectively as possible.
• Verify personnel costs and social security contributions for compliance with local legal standards, employment contracts, and confirm that legally required contributions have been withheld and remitted.
• Verify adherence to the approved cost plan by comparing budgeted and actual figures (objectives-and-effects comparison), based on the most recent approved budget.
• Verify the list of explanations of deviations of over 30% in each budget line.
• Verify the economic use of project equipment.
• Verify procured inventory – its location, custody, and whether it is being used appropriately for the planned project objectives and activities.
• Verify and confirm the completeness and correctness of all project-relevant documentation.
• Identify any instances of non-compliance, fraud or irregularities.
• Verify adherence to all agreements fundamental to the Project, including the Project Agreement, Humedica International guidelines, BMZ funding requirements, BNBest-P/private executing agencies and BMZ contract award guidelines.
• All funds sent from Germany should be included in the Audit
• All payments done in Germany but related to project costs need to be included in the Audit

The Auditor engaged under this ToR shall satisfy the following minimum requirements:

• Independence: the Auditor must be independent of both PMS and Humedica International, and must work to an internationally recognized auditing standard.
• Joint selection: the Auditor is to be selected jointly by Humedica International and PMS on a competitive basis, in compliance with applicable contract award (procurement) regulations.
• Recognized qualification: the Auditor’s valid qualification as a recognized, independent auditor (current as at the date the audit certificate is issued) must be confirmed by the German embassy or a relevant recognized institution in the project country (e.g. a chamber of commerce or national association of auditors). Evidence of this confirmation – an embassy confirmation letter, qualification certificate, or registry print-out – must be submitted together with the audit certificate.
• Rotation: to counter the risk of undue familiarity and corruption, the same audit firm may not be engaged for this Project for more than five to six consecutive years.

Following consultation with Humedica International, PMS shall enter into a written contract with the selected Auditor. As a minimum, the contract shall specify:

• the subject of the audit (the Project);
• the period to be audited;
• the place of the audit;
• the audit costs and fee basis;
• a timeline that allows Humedica International to submit supporting documentation to Engagement Global on schedule;
• the respective duties of the Auditor and PMS; and
• the scope of the audit, consistent with Section 6 of this ToR.

The audit contract should be concluded within the Project term. As a rule, the audit and issuance of the audit certificate should take place after Project completion, once all relevant documents can be accessed.

Once the engagement commences, PMS, with support from Humedica International, shall make the following documentation available to the Auditor:

• the Project application;
• the Project Agreement, including the approved budget;
• any changes/amendments to the budget;
• the BMZ funding guidelines, including the BNBest-P/ANBest/private executing agencies and BMZ contract award guidelines;
• this ToR / Engagement Global – bengo guidelines for external audits of projects;
• all project-relevant receipts and vouchers (revenues, expenditure, fund transfers, exchange transactions, etc.);
• all project-relevant contracts (personnel and service contracts, rental agreements, construction contracts, etc.);
• all project-relevant procurement / contract award documentation, including notes on contracts awarded to service providers; and
• any further project-relevant documents requested by the Auditor in the course of the audit.

9.1 Audit Certificate – Required Content

The Auditor shall prepare an audit certificate using the template at Attachment IV of the BMZ funding guidelines. The audit certificate (audit report) must, at a minimum, include:

• a presentation of the audit assignment and scope, with detailed comments on the audit findings, and a statement of which documents were used to audit the appropriate use of funds and compliance during the Project term;
• recommendations in respect of any complaints or findings;
• the most recent approved budget, presented in the structure used for the financial report / fund utilization report (see Annex A – Quantitative Documentary Proof), comparing planned and actual expenditure in the currency in which expenditure was incurred (no conversion into EUR);
• an explanation and justification of any deviation of actual from planned expenditure exceeding 30% of an individual main budget item;
• an explanation and justification of any deviation of actual from planned expenditure exceeding 30% of an individual budget sub-category;
• a clear conclusion on adherence to the binding arrangements made in the Project Agreement.

The minimum requirements for the audit certificate may not be reproduced pro forma; the Auditor is required to provide substantive, project-specific commentary on the revenues and expenditure examined, whether planned activities were implemented, and the individual audit findings. Where there are no findings, this must be explicitly stated.

9.2 Mandatory Audit Opinion Wording

The audit certificate must include a final audit opinion, worded clearly by the Auditor (and adapted as appropriate to the Project), reading as follows at a minimum:

Following this statement, the Auditor shall provide specific findings on each of the following:

1. The extent to which all income and expenditure has been properly documented by means of receipts.
2. The extent to which documented expenditure complied with the application and project approval, and is in keeping with the appointed purpose and the most recent budget, including whether deviations from the most recent budget have been separately explained.
3. The extent to which documented income accounted for as contributions by PMS, the target group and/or other agencies in the project country has been correctly specified, with its origin explained in accordance with the specifications.
4. The extent to which the donor’s conditions specified in the Project Agreement were met; which of these conditions were not adhered to, and the reasons given.
5. Any special aspects – positive or negative – that should be mentioned with regard to the Project.

9.3 Quantitative Documentary Proof (Financial Statement)

The audit certificate shall be accompanied by the completed “Quantitative Documentary Proof” financial statement, comprising:

1. Statement of Expenditure by budget category (investments, operating expenditure, personnel, evaluation/study, reserve funds), showing appropriation per the financing plan, actual expenditure and percentage deviation;
2. Statement of Receipts (BMZ grant/financial contribution, counterpart contributions, additional resources), showing budgeted versus actual receipts and percentage deviation; and
3. a Financial Statement summarizing total receipts, total expenditure, balance and any overspending. The template for this statement is attached as Annex A to this ToR.

9.4 Materiality / Deviation Reporting

Any deviation of actual expenditure from the planned expenditure in the most recent approved budget exceeding 30% of an individual main budget item, or 30% of an individual budget sub-category, must be separately explained and justified in the audit certificate, unless prior written authorization for the deviation was obtained from BMZ.

9.5 Language

The audit language for this engagement shall be English. The audit certificate and all accompanying deliverables (including the completed Quantitative Documentary Proof, receipt list and supporting schedules) shall be prepared and submitted in English; no further translation is required.

The audit should be scheduled to allow Humedica International sufficient time to compile and submit supporting documentation to Engagement Global within the applicable reporting deadline.

The costs of the external audit may be charged to the Project, provided that these costs were included in the approved budget/application and approved in advance by the donor (Engagement Global).

Auditors invited to bid for this engagement shall submit a fixed-price, all-inclusive quotation. The following conditions apply:

• The quotation submitted by the Auditor shall be a single, all-inclusive lump-sum amount covering the entire audit engagement.
• The quoted amount must be inclusive of all applicable taxes, duties and levies, as well as all out-of-pocket expenses (including but not limited to travel, accommodation, communication, printing and any other incidental costs).
• PMS shall pay only the amount stated in the accepted quotation. No amount over and above the quoted price – whether for taxes, expenses, additional field visits, or any other cause – shall be paid by PMS.
• The Auditor is required to factor all anticipated costs of the engagement into the quotation at the time of bidding; no supplementary claims, cost escalations or reimbursements will be entertained after the quotation has been accepted.
• Payment shall be made against the agreed quotation following satisfactory delivery of the audit certificate and accompanying deliverables specified in Section 12 of this ToR, in accordance with the payment terms set out in the audit contract.

Irrespective of the form of substantiation chosen (original receipts or audit certificate), Humedica International, Engagement Global, BMZ and the Federal Audit Office (Bundesrechnungshof) retain the right to conduct an unlimited on-site audit of the Project at any time.

All original receipts, documents and statements of account, whether in paper or electronic form, must be retained in a safe place for at least five years following submission of the fund utilization report, or for a longer period if required by local retention regulations.

• Provide the Auditor with all necessary documents and information required to conduct an adequate audit.
• Organize project management, financial accounting and the commissioning of the external audit so that the deadline for submitting the fund utilization report to Engagement Global can be met.

Non-compliance with these obligations, or failure to meet the applicable deadlines, may result in the cancellation of ongoing project agreements or, at minimum, considerable delays in the disbursement of project funds.

The Auditor shall submit the following to Humedica International and PMS:

• one (1) original, dated and signed (and, where applicable, stamped) audit certificate, prepared in accordance with Sections 9.1 to 9.5 above;
• the completed Quantitative Documentary Proof financial statement (Annex A);
• evidence of the Auditor’s recognized, independent qualification as described in Section 7;
• an inception report outlining the audit approach, methodology and timeline;
• a duly completed and chronologically ordered receipt list, cross-referenced to the budget line items.
• Annex A: Quantitative Documentary Proof – Statement of Application of Funds (Financial Statement Template).
• Annex B: Approved Project Budget / Financing Plan (most recent version).
• Annex C: Project Agreement (including any amendments).
• Annex D: Evidence of Auditor’s recognized, independent qualification.

Statement of Application of Funds

BMZ / Engagement Global Project Number: 6835

Statement of Accounts for the period: 01.01.2023-30.06.2026

Financial Statement as at: 30.06.2026

I. Expenditure

II. Receipts

III. Financial Statement

* Overspending = Actual total expenditure less Appropriation total expenditure according to the Financing Plan.

It is confirmed that no funds were available for the financing of the Project other than the receipts detailed above. It is also confirmed that all expenditure was necessary, that funds were utilized efficiently and economically, and that the information given conforms with the books and vouchers.

_____________________________                                            _____________________________

(Place)                                                                               (Date)

_____________________________

(Signature and Stamp of Auditor)

Interested and qualified firms must submit a Technical and Financial Proposal, inclusive of out-of-pocket expenses and applicable taxes. PMS will not pay any expense other than the quoted amount. Proposals must be submitted by 18th August 2026, 5:00 PM, in a sealed envelope, outlining availability in line with the approximate timeline.

The cover letter should be addressed to:

Pak Mission Society (PMS)

Operations Department

House No. 333, Street 29, G-14/4

Islamabad