Guidelines for Annual Audit of Global Fund Grants

Geneva Switzerland

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Guidelines for Annual Audit of Global Fund Grants

NOVEMBER 2019

GENEVA, SWITZERLAND

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Contents

GLOSSARY....................................................................................................................................................... 5

1 INTRODUCTION ....................................................................................................................................... 7

1.1 BACKGROUND...................................................................................................................................... 7 1.2 PURPOSE ............................................................................................................................................ 7 1.3 KEY PRINCIPLES................................................................................................................................... 7

2 TYPES AND SCOPE OF AUDITS AND FINANCIAL ASSURANCE ENGAGEMENTS FOR GLOBAL FUND GRANTS................................................................................................................................................. 9

2.1 FINANCIAL AUDIT ................................................................................................................................. 9 2.1.1 The Special Purpose Grant Financial Statement (SPGFS) Audit ................................................. 9 2.1.2 Program Audit ................................................................................................................................ 9 2.1.3 Implementer statutory financial audit ........................................................................................... 10

2.2 PERFORMANCE AUDIT ........................................................................................................................ 10 2.3 SYSTEMS AUDIT................................................................................................................................. 11 2.4 LIMITED REVIEW ................................................................................................................................ 11 2.5 ASSET SAFEGUARD ENGAGEMENT ...................................................................................................... 11 2.6 FRAUD-RELATED ENGAGEMENTS ........................................................................................................ 12 2.7 OTHER SPECIFIC SITUATIONS ............................................................................................................. 12

2.7.1 Grant Closure............................................................................................................................... 12 2.7.2 Audit of grants involving Common Funding Mechanisms (CFM) ................................................ 12 2.7.3 Audit of grants involving headquarters (HQ)-generated expenditures ........................................ 13 2.7.4 Exceptional cases of United Nations-affiliated organizations ...................................................... 13 2.7.5 Audit of grants using different funds channeling models (Innovative Financing) ........................ 13 2.7.6 Single Audit principle ................................................................................................................... 13

3 AUDIT SCOPE AND RISK-BASED DIFFERENTIATED APPROACH .................................................. 15

3.1 GRANT CONSOLIDATED AUDIT, OR GRANT-SPECIFIC AUDIT AT SR LEVEL ................................................ 15 3.2 RISK LEVEL DETERMINATION ............................................................................................................... 15 3.3 AUDIT PACKAGE (RISK-BASED MATRIX) ................................................................................................ 16

3.3.1 Standard audit package ............................................................................................................... 16 3.3.2 Tailored audit package ................................................................................................................ 16 3.4 AUDIT TERMS OF REFERENCE (TORS) ................................................................................................ 17

4 AUDITOR SELECTION AND ACCREDITATION ................................................................................... 18

4.1 TYPE OF AUDITOR FOR GLOBAL FUND GRANTS .................................................................................... 18 4.1.1 Government Supreme Audit Institutions (SAIs) ........................................................................... 18 4.1.2 Corporate or institutional auditors ................................................................................................ 18 4.1.3 Contractual auditors..................................................................................................................... 18 4.1.4 Regional Auditor .......................................................................................................................... 19

4.2 AUDITOR SELECTION AND ACCREDITATION ........................................................................................... 19 4.2.1 Minimum requirements for grant's auditors ................................................................................. 19 4.2.2 Approval procedures.................................................................................................................... 19

4.3 APPOINTMENT OF THE AUDITOR .......................................................................................................... 20 4.4 AUDITOR PERFORMANCE ASSESSMENT, ROTATION AND TERMINATION ................................................... 21 4.5 AUDIT FEES ....................................................................................................................................... 21

5 ACCOUNTING FRAMEWORK AND FINANCIAL STATEMENTS OF FINANCIAL AUDIT ................. 22

5.1 ACCOUNTING FRAMEWORK AND SPECIAL PURPOSE GRANT FINANCIAL STATEMENTS ............................ 22 5.1.1 Accounting Principles, Policies and Basis ................................................................................... 22 5.1.2 Preparation of the Principal Recipient's Financial Statements .................................................... 22 5.1.3 Special Purpose Grant Financial Statements for Financial Audit ................................................ 22 5.1.4 Specific case of direct payment to a third party........................................................................... 23

6 AUDITING AND ASSURANCE ENGAGEMENT STANDARDS ............................................................ 24

7 AUDIT REPORT AND OPINIONS .......................................................................................................... 25

7.1 GRANT SPECIFIC FINANCIAL AUDIT ...................................................................................................... 25 7.2 SYSTEMS AUDIT................................................................................................................................. 26 7.3 PERFORMANCE AUDIT ........................................................................................................................ 26

8 SUBMISSION AND REVIEW OF THE AUDIT REPORT ....................................................................... 27

8.1 AUDIT REPORTING CYCLES ................................................................................................................. 27 8.2 DUE DATE .......................................................................................................................................... 27 8.3 FORMAT OF SUBMISSION..................................................................................................................... 27 8.4 REVIEW AND APPROVAL OF AUDITED FINANCIAL STATEMENTS ............................................................... 27 8.5 REFUNDS........................................................................................................................................... 28

9 ROLES AND RESPONSIBILITIES ......................................................................................................... 29

9.1.1 CCM ............................................................................................................................................. 29 9.2 PRINCIPAL RECIPIENTS....................................................................................................................... 29 9.3 THE LOCAL FUND AGENT.................................................................................................................... 29 9.4 THE GLOBAL FUND SECRETARIAT ....................................................................................................... 29

Glossary

Cash Accounting Accrual Accounting Modified Cash Accounting

A method of accounting that recognizes receipts and payments in the financial statements when cash is received, and cash is paid out, respectively.

Under accrual accounting the revenue or income is recorded when it is earned, and expenditure is recorded when it is incurred1 irrespective of the dates in which any associated cash flows occur.

It combines cash accounting with accrual accounting. Under modified cash accounting:

? income and expenditure are recognized or accounted for using a cash basis;

? short-term financial statement items (current assets and current liabilities) are recognized or accounted for using a cash basis; and

? long-term financial statement items (non-current assets and liabilities) are recognized or accounted for using an accrual basis.

Modified Accrual Accounting

It combines the accrual accounting with the cash accounting, under modified accrual accounting:

? income/revenue is recognized/accounted for using a cash basis;

? expense/expenditure are recognized/accounted for using accrual basis;

? short-term financial statements items (current assets and current liabilities) are recognized/accounted for using accrual accounting; and

? long-term financial statements items (noncurrent asset and liabilities) are recognized/accounted for using a cash accounting basis.

Accounting Principles Accounting Policies

Accounting principles are a set of rules, standards and guidelines used by an organization for the recording and reporting of financial information. They define the bases by which the transactions, assets and liabilities are valued and presented in the financial statements.

Accounting policies are the specific principles, bases, conventions, rules and practices applied by an organization when preparing and presenting financial statements.

IFRS

International Financial Reporting Standards issued by the International Accounting Standards Board (IASB). This Board sets accounting standards globally for the private sector and upon its creation in 2001, it adopted all International Accounting Standards (IASs) which had been previously issued by its predecessor body, the International Accounting Standards Committee (IASC).

1 The amount an organization or person has paid or has committed to pay for goods or services received from another organization or person.

November 2019 Geneva, Switzerland

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