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.

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.

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.

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:
  • Correspond to time spent on the project, through reconciliation with reports from the timekeeping system, or equivalent.
  • Have been approved in line with relevant internal policies.

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.

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.

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.

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.

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.

• Validate those costs charged to the project related to positions included in the budget in the agreement.
• Verify that costs charged to the project:
  • Correspond to time spent on the project, through reconciliation with reports from the timekeeping system, or equivalent.
  • Have been approved in line with relevant internal policies.
• 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.
• 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.
• 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.
• 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.
• 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.