ສມກຈ – ສະມາຄົມການເງິນຈຸລະພາກ

LMFA – Lao Microfinance Association

(Re-advertise) External Audit Services for the NSO at Bolikhan District, Bolikhamxay Province under LuxDev Lao/030 programme

(Re-advertise) External Audit Services for the NSO at Bolikhan District, Bolikhamxay Province under LuxDev Lao/030 programme

  1. BACKGROUND:

Over the past 15 years Lux-Development (LuxDev) has established and supported through the LAO/014 and LAO/021 Rural Development projects around 62 Village Credit Schemes (VCS) located in three Districts in Bolikhamxay Province (Bolikhan, Khamkeut, Viengthong). Also, the projects have led to the establishment of a Network Support Organization (NSO) which aims to provide ongoing support to the 17 VCS organized under LAO/14 located in Bolikan District and subsequently to the VCS that will be organized under the ongoing Lao/030-Local Development Programme for Bokeo, Bolikhamxay, Khammouane and Vientiane Provinces.

The Village Credit Scheme is a village-owned micro-finance system that provides affordable access to credit for economic activities without the need for collateral. In the future it is planned that the VCS should be able to provide additional financial services that the community demands with the support of the NSO.

ADA, in partnership with the Lao Microfinance Association (LMFA) has been mandated by LuxDev to manage the project, pursuing the VCS implementation process and establishing the organisational and technical conditions to ensure their adequate management and long-term sustainability.

This entails the setting-up of a specific organisation – the NSO, whose mission is to provide the necessary support and control to the VCS through a professional staff in order to guarantee the provision of loans in a recurring and lasting manner to the villagers. To ensure the sustainability of the NSO, it has been decided since July 2020 to structure it as a Savings and Credit Union (SCU), a microfinance institution regulated by the Bank of the Lao PDR (BoL).

Part of the intervention that ADA and LuxDev have agreed on to ensure sustainability of the NSO/SCU is the introduction of external audit as a good practice in favour of transparency, control and protection of the organization’s assets.

Thus, the purpose of this call for is to invite eligible national individuals or auditing firms to provide audit services to the NSO/SCU in Bolikhan including a selected number of its VCS members.

  • PURPOSE AND OBJECTIVE OF THE AUDIT:

The overall purposes of the assignment are:

– to conduct financial audit for the accounting period 2019-2020;

– to establish the level of its operational and financial sustainability condition at the time of the audit.

The audit will also establish the compliance in accordance of operations with the current valid version of applicable Lao PDR laws and regulations pertaining to accounting standards and reporting, labor law, and value-added tax and income tax law.

The audit should be carried out in the NSO/SCU and3 randomly selected VCS established under Lao/014. The auditor will deliver a detailed report addressing findings and recommendations to the NSO, LMFA, ADA and LuxDev Lao/030.

  • SCOPE AND RESPONSIBILITIES:

The scope of the External Audit is to check the income earned and costs incurred through the original vouchers and other related documents (books, contracts, agreements…), based on the annual business/financial plan 2019-2020. Particularly, the auditor should verify:

  • Accounting: whether the appropriate supporting documents, records and books of accounts relating to all NSOs’ activities have been kept and whether these documents clearly relate to the activities they were assigned for;
  • whether the appropriate supporting documents, records and books of accounts relating to 3 (three) village credit schemes’ activities have been kept and whether these documents clearly relate to the activities they were assigned for;
  • reconcile in VCS the money in the safe box / bank extracts, with the balance of bank accounts in the accounting system.
  • the status of the loan portfolio in terms of quality by checking loans outstanding, the level of NPL, practices relating to loan rescheduling, refinancing and write-off and whether Loan loss provision is followed based on policies set.
  • the status of members contribution, shares and including the 1% insurance premiums paid by member
  • that the audits are carried out in accordance with Lao Accounting Standards and the International Standards of Auditing;
  • that the audits missions will lead to the delivery of a final report addressing the main findings and recommendations.

If possible, it would be interesting to determine the causes of non-performing loans, at least for those above 1-year arrears.

  • METHODOLOGY:

In order to provide a reliable view on the financial statements, the auditor shall conduct accurate checks, observations, inspection of books, records and documents, interviews to the stakeholders, inquiry and analysis applying the random sample check methodology, including:

  • Visit the NSOs’ office and review vouchers, invoices and all supporting documents for all expenses and revenues (estimated time needed 5 days);
  • Visit 3 village credit schemes under Lao/014 and review books and supporting documents such as VCS bylaw (estimated time needed maximum 2 days). VCS need to be independently selected by the audit team
  • Follow up with previous audit reports, if any;
  • Review staff, rental, and other relevant contracts;
  • Review of payroll/NSSF and tax compliance;
  • Review the internal policies and procedures;
  • Review the Lao/030 funded and handed over items’ list and cross check with fixed assets list.
  • PROCEDURE:

The main phases of the audit missions should involve working closely with LMFA/ADA and the NSO:

  • Planning: familiarize with the project structure (NSO-VCS), collect required information and documentation, prepare the field work;
  • Fieldwork: meeting the NSOs’ management/staff and conduct the auditing of NSO and 2-3 related VCS;
  • Final Report: consolidate data, collect findings, draft, review and consolidate the final report with findings and recommendations.
  • FINAL REPORT AND MEETING:

The final report of every audit shall include:

  • Introduction;
  • Identification of the entities audited (NSOs, VCS);
  • Responsibilities of the auditor;
  • Scope and methodology explanation (accounting standards applied, audit standard applied);
  • Main findings supported by related evidence and documentation;
  • Summary, recommendations and management letter
  • The Report must be discussed in an official meeting with NSO management and BOD.

Besides, a copy of all reports must be summitted to ADA/LMFA/LuxDev Lao/030 in English or Lao. Finally, there should be a meeting where all the main findings are summarized and presented.

  • TIMETABLE:

The preparation of the external audit should start immediately after the auditor will be recruited. The audit missions shall take place for the NSO at Bolikhan district and their related 3 VCS within January 2021. The final report is expected within one month after the field work. 

  • ACCESS TO INFORMATION:

The auditor will have complete access to all records and documents (including accounting books, legal agreements, minutes of committee meetings, bank records, invoices and contracts etc.) of the NSO over the period under the audit review.

  • QUALIFICATIONS AND REQUIREMENTS:
  • The auditor must be completely impartial and independent from all aspects of management or financial interests in the entity being audited;
  • The auditor should not, during the period covered by the audit nor before, be employed by or have any financial or close business relationships (except audit) with any employee of the NSOs and/or VCS;
  • The auditor should disclose any relationship that might possibly compromise his/her independence;
  • The auditor must have at least five years of relevant and diversified professional experience in auditing with sizeable portfolio and experience auditing financial institutions and/or donor funded projects;
  • If the auditor must employ staff, they should have appropriate professional qualifications and suitable experience and complying with International and Lao Standard of Auditing and Accounting;
  • If proposing as a team, the curriculum vitae (CVs) of key personnel proposed as part of the audit team should be provided. CVs should include details on relevant audits carried out by the applicable staff and must have relevant qualification preferably in accounting/ auditing, banking, economics, business administration or related areas
  • Must have demonstrated experience in auditing similar organizations involved in rural and microfinance.
  • Solid microfinance/VB expertise and understanding of the Lao microfinance sector and its challenges
  • Must have good communications skills.
  1. PAYMENT:
1stUpon signing the contract20%
2ndUpon the satisfactory and timely presentation, and approval of the audit results30%
3rdUpon the satisfactory and timely delivery, and approval of the final audit report meeting the quality and requirements in the TORs50%
  1. HOW TO SUBMIT THE PROPOSAL:
  • Structure a detailed proposal addressing all the above-mentioned points;
  • In the financial part of the proposal, please provide estimates of daily rates of auditor and audit team, travel expenses, documentations expense, any other related expense.

Interested candidates must submit the proposal to the following email addresses below on or before 16:00 hour (Lao PDR time) no later than 22/01/2021 to: Email:  mfa@laomfa.local  and j.alaban@ada-microfinance.lu

Lao Microfinance Association (LMFA),

Unit 14, Hom 23 (23/3) Amone Village, Saysettha District

P.O. Box: 4030, Vientiane Capital, Lao PDR,

Office Tel: +856 30 9481265 /Fax: +856 21 226019