“Cocoa Revolution Project: High Yielding Climate-Smart Cocoa Farms” is the project funded by matching funds with the Millennium Challenge Account Indonesia (MCA-Indonesia) and the private sector consortium. The project is led by PT. Rainforest Alliance in partnership with PT Olam Indonesia, Grow Cocoa, The Indonesia Coffee and Cocoa Research Institute (ICCRI), local government, and cocoa smallholders. PT. Rainforest Alliance (RA) is leading a consortium group is about to implement an initiative to contribute to promote sustainable cocoa industry and improve smallholder’s livelihood in Indonesia.
PT. Rainforest Alliance is seeking services from independent auditor firm to conduct audit works as detailed in this Scope of Work. An auditor firm should have a legal audit license and have experience in audit international donor project
The interested audit firm may send an audit proposal, indicating work schedule, audit scope, audit fee and the number of auditors to be deployed to Bali and Makassar. Please send the proposal to Procurement Department – email@example.com cc Hasrun Hafid – firstname.lastname@example.org and Jose Ochoa – email@example.com indicating in the email subject: “Audit proposal-(name of Firm)” no later than August 31st, 2017.
2. Objective of the project:
The project aims to contribute to poverty reduction and promote climate adaptation of 8,000 cocoa smallholders in North Kolaka and North Luwu districts in Southeast Sulawesi and South Sulawesi, respectively, by supporting farmers with technical and training as well as incentivizing them to apply on-farm techniques and post-harvest handling that will:
a. Optimize sustainable yields;
b. Improve cocoa bean quality;
c. Provide access to national and global long-term marketing channels; and
d. Introduce state-of-the-art climate-smart agriculture. In so doing, the project will also have contributed to mitigating climate change. A key underlying assumption is that farmer families in the project´s target locations still lack adoption of good agricultural practices and business skills, climate knowledge, incentives for farm rehabilitation, and replanting or access to planting materials and fertilizer being offered by this project.
The project’s tenet is that achieving the project’s medium-term outcomes will deliver both mitigation and adaptation benefits over time and beyond the project timeframe. Technical assistance on climate-smart and yield intensification practices should dis-incentivize encroachment on nearby forests and reduce on-farm emissions, thereby mitigating climate change, as well as improve the economic resilience of producers, mitigate the risk and presenting opportunity for smallholders to respond to climate change through planting and maintenance of new shade, fruit, and timber trees. Success will depend on increased household incomes, combined with income diversification, and climate education sufficiently deterring farmer families from converting forests to cocoa fields despite potential short-term economic gains.
3. The objective of Audit:
An independent audit firm will conduct audit on project documents and administrative documents implemented by PT. Rainforest Alliance and PT. Olam Indonesia under grant partnership matching funding with Millennium Challenge Account-Indonesia (MCA Indonesia) with Contract Number: 2015/Grant/002
4. The scope of audit works:
The audit of the project will be carried out in accordance with Indonesia Accounting Standard and will include such tests and auditing procedures as the auditor will consider necessary under the circumstances. Special attention should be paid by the auditor as to whether the:
MCA-Indonesia financing (and all external financing where the MCA-Indonesia is not the only financier) has been used in accordance with the conditions of the relevant financing agreement, with due attention to economy and efficiency, and only for the purposes for which the financing was provided.
Proponent contribution funds have been provided and used in accordance with the relevant grant agreement and MCA-Indonesia Procurement Guideline.
Goods, works, and services financed have been procured in accordance with the relevant grant agreement and MCA-Indonesia Procurement Guideline.
All necessary supporting documents, records, and accounts have been maintained in respect of all project activities, including in financial reports. The auditor is expected to verify that respective reports have been issued during the period.
Designated accounts (if used) have been maintained in accordance with the provisions of the relevant financing agreements and funds disbursed out of the accounts were used only for the purpose intended in the financing agreement;
Ineligible expenditures included in withdrawal applications are identified and reimbursed to the Designated Accounts. These should be separately noted in the audit report.
In complying with International Standards on Auditing, the auditor is expected to pay attention to the following matters:
· Fraud and corruption
· Laws and regulations
5. Period of Audit
Audit will cover the period of audit from July 2015 to 30 September 2017
6. Project Financial Reports
The auditor should verify that the project reports have been prepared in accordance with the agreed accounting standards and give a true and fair view of the financial position of the project at the relevant date and of resources and expenditure for the financial year ended on that date
The project financial reports that need to be verified should include the following components:
a. Bank Activity (USD and IDR)
b. Budget vs Actual
c. Expenditure Detail
d. Expenditure Proponent
e. Financial Report
f. Asset Management Plan
6. Designated Account (DA)
In conjunction with the audit of the Project MCA-Indonesia’s, the auditor is also required to review the activities of the Designated Account (DA) associated with the project.
The auditor should examine the eligibility of financial transactions during the period under examination and fund balances at the end of such a period, the operation and use of the DA in accordance with the relevant general conditions, relevant to MCA-Indonesia Financial Management Guideline, and the adequacy of internal controls for this type of disbursement mechanism.
The auditor should also examine eligibility and correctness of:
· Financial transactions during the period under review;
· Account balances at the end of such a period;
The operation and use of the Designated Account in accordance with the financing agreement; and
The adequacy of internal controls for the type of disbursement mechanism.
7. Audit Report
The auditor will issue an opinion on the project financial reports. The audit report of the project accounts should include a separate paragraph highlighting key internal controls, compliance with the grant agreement, and proponent contribution commitment.
The financial reports should consist the following:
A statement of financial position;
A statement of financial performance (income and expenditure statement (IES) showing MCA-Indonesia funds received, any other grant related income received and MCA-Indonesia fund expenditures.
Grant expenditures should be reported against the budget as defined in the grant agreement for the period of the audit.
A listing of assets purchased with grant funds
A statement of expenditure from proponent contribution.
8. Management Letter
In addition to the audit report, the auditor will prepare a management letter, in which the auditor will:
Give comments and observations on the accounting records, systems and controls, and make recommendations for their improvement;
Identify specific deficiencies or areas of weakness in systems and controls, and make recommendations for their improvement.
Report on the degree of compliance of each of the financial covenants in the financing agreement and give comments, if any, on internal and external matters affecting such compliance;
Communicate matters that have come to his/her attention during the audit which might have a significant impact on the implementation of the project.
Give comments on the extent to which outstanding issues/qualifications issues have been addressed.
Give comments on previous audits’ recommendations that have not been satisfactorily implemented; and
Bring to the grantee/implementer’s attention any other matters that the auditor considers pertinent, including ineligible expenditures.
The management letter should also include responses from the implementing agency to the issues highlighted by the auditor.
9. Time and Venue of the audit:
Denpasar, Bali and Makassar, 13-17 November 2017
10. Auditor Criterion
a. Audit firm with relevant legal identity under Indonesian’s law.
b. Have experience doing an audit of non-profit organization or government-funded projects for at least 5 years.
11. Audit Report
The audit report will be made according to the report requirements as detailed in section 7 and 8 of this Scope of Work.