Sub-recipient Audit Process

The UNDP Global Fund Partnership and Health Systems Team has developed a Supplemental Guidance on SR Audits for UNDP projects funded by the Global Fund , detailing SR audit terms of reference and the step-by-step process for audit planning, field work and audit follow-up. The Information Note is updated annually, as audit timelines, terms of reference and criteria are subject to annual change per the annual UNDP OAI Call Letter for HACT Audit Plans .

The success of the SR audit exercise depends on the close collaboration of the Project Management Unit (PMU) and Country Office (CO), as well as strict adherence to audit timelines, which are non-negotiable.

The key steps of the SR audit process are as follows:

1. An annotated SR audit plan template has been developed by the UNDP Global Fund Partnership and Health Systems Team. As a first step in the audit-planning process, COs populate the template by listing all SRs engaged with UNDP for all Global Fund-financed projects during the audit year, regardless of whether they will be audited or not. For record-keeping purposes, even UN agency SRs should be included in the template.

Practice Pointer

When populating the SR audit plan template , COs should be mindful of the following:

• As instructed in the template annotations, SR expenditure should be reflected in the appropriate column, based on the disbursement modality used by UNDP for payment to each of the SRs (i.e. advances or direct cash transfers; direct payment by UNDP behalf of SRs; reimbursement; or direct implementation by UNDP).

Each SR should have a Responsible Party code which should be used to establish the budget in Quantum and incur expenses for activities they are responsible for implementing. To differentiate between disbursement modalities (i.e. cash transfers, reimbursement, direct cash transfers on behalf of sub-recipients), it is recommended:

1. to create a pivot from the AAA report and to bring to pivot rows Responsible Party, Supplier and Transaction number;
2. if other suppliers (in addition to Responsible Party) are indicated among suppliers, there should be a check if payments to other suppliers actually relate to direct payments on behalf of SRs or such payments have been posted under an incorrect task. If incorrect tasks were used, then the task should be corrected in line with the Step by Step Guide for AP invoice Creation and Approval. This will help to identify direct payments on behalf of SRs.
3. To identify reimbursements, Invoice/Transaction numbers should be checked under the Supplier related to Responsible Party
4. Expenditures from Invoices related to reimbursements and to direct payments on behalf of SRs should be presented in the SR audit plan under column "UNDP". Expenditures from Invoices related to liquidation of SR advances should be presented in the SR audit plan under column "GOVT".
* As the audit planning process begins several months before year-end closure is completed, COs should provide the best possible estimates of what SR expenditures are expected to be at year-end. This will ensure that the most accurate cost estimate possible is received from the firm selected to complete the audit.
* When detailing SR location, COs should include the location of all financial records and SR assets, fully reflecting sites that the auditors will need to visit. This will facilitate audit planning and ensure that the most accurate cost estimate possible is received from the firm selected to complete the audit.

2. As per corporate agreement, the Global Fund Partnership and Health Systems Team also submits the audit plans to the Global Fund in one lot for all UNDP PR countries for input prior to finalization; there is no need for COs to submit their individual audit plans to the Global Fund. This approach has substantially enhanced the efficiency of the Global Fund review process. The Global Fund can only request inclusion or removal of an SR from the plan where there is deviation from the SR audit criteria detailed in OAI’s annual Call Letter for HACT Audit Plans. The Global Fund can, however, be a good resource for identifying areas of risk for certain SRs. This is the case, for example, when UNDP has recently transitioned to the PR role or where UNDP is not the sole PR in country. COs should therefore be open to receiving Global Fund input on the plans, which may, in certain cases, result in the audit of additional SRs, due to risk.

3. The Global Fund Partnership and Health Systems Team submits each audit plan to two of the audit firms under long-term agreement (LTA) with UNDP, based on the geographic location and language of the CO. The two firms provide cost estimates, which the Team shares with the CO for review and firm selection. The selection of the audit firm should be done by the CO, based on the proposed costs, audit arrangements, composition of the team and the past performance of the firms.

Practice Pointer

The Global Fund Partnership and Health Systems Team conducts an annual performance review of the audit firms, which takes into consideration assessment of the scope of the SR audit by OAI, CO feedback collected through the annual post-SR audit questionnaires, and the overall quality of coordination demonstrated by the audit firm HQ. The Global Fund Partnership and Health Systems Team should be consulted if there any questions regarding the past performance of an audit firm.

4. Audit field work planning should begin as soon as agreement is reached between the CO and selected audit firm. It is important to note that the CO is responsible for the costs and arrangement of in-country travel for the auditors.

Practice Pointer

Though audit field work planning should begin as soon as agreement is reached between the CO and selected audit firm, the actual field work can only commence after year-end closure is completed.

5. Once the CO has finalised the audit arrangements with the selected audit firm, the next step is to issue the purchase order (PO). It is best practice for the CO to issue the PO before the start of the field work in order to correctly reflect obligations In Quantum.

6. COs should ensure that the invoices are submitted and paid according to the payment terms of the selected audit firm, as detailed in the existing LTA. Further guidance will be disseminated by the Global Fund Partnership and Health Systems Team as part of every audit-planning process.

Practice Pointer

Since contract management is the responsibility of the CO, final payment should be released to audit firm only after the CO review of the deliverables produced by the firm shows full compliance with the audit terms of reference. Should any clarification be required, please refer the matter to the Global Fund Partnership and Health Systems Team.

7. Upon submission of the final reports by the audit firms, COs must upload the reports to CARDS on or before the deadline as advised in the UNDP OAI Call Letter for HACT Audit Plans. If the audit reports cannot be submitted within the deadline, the CO is required to alert the Global Fund Partnership and Health Systems Team and OAI promptly and provide a detailed explanation for such delays in CARDS. The delayed reports are listed under the Missing Audit Report tab. The comments should be updated by the CO at least on monthly basis until the missing report is submitted.
8. Pursuant to Article 7(d) of the Grant Regulations, UNDP shares the SR audit reports with the Global Fund upon request. As a best practice, COs may wish to submit copies of the reports to the Global Fund, even if not requested to do so.
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