Non-governmental organizations (NGOs) have an important role to play in helping communities in Uganda. To ensure that these organizations can provide aid and support effectively, conducting regular project audits is essential. These audits help to identify and address any issues in the project’s management and implementation, ensuring that the funds are being used effectively and transparently.
Auditing an NGO project in Uganda requires careful planning and execution to ensure that the audit is thorough, accurate, and meets the required standards and compliance to all the provisions in the project funding agreements. A project audit is specifically designed for one donor unlike the institutional audit that reviews the entire organization commonly referred to as the statutory audit.
Common Shortfalls Surrounding NGO Project Audits:
In my experience of conducting project audits, I have encountered a number of loopholes that are consistently existent with such organizations that I would like to discuss here to help the readers improve in one way or another as they interface with similar circumstances.
Issues relating to Financial Management
Some of the NGOs Audited in the past have demonstrated a lack of proper Financial Management systems and controls to ensure that funds received are properly utilized. Some of the issues include no budgets / poor and substandard budgets, poor record keeping and lack of and /or insufficient internal controls. These have resulted into fraud and misappropriation of project funds.
Poor strategy implementation measures
Some of the NGOs have in the past had good strategies well documented on paper but they lack proper implementation systems and techniques hence leading to failure of the strategies leading to overall poor performance of such NGOs. This has led to NGOs failing to renew their operational permits and licenses to operate in the Country.
Issues related to Governance
Some of the NGOs I have dealt with and audited in the past do not have proper governance structures in place, which leads to lack of oversight and accountability in these organizations. In such organizations, it is hard to draw a line between the Board and Management, so you can’t easily tell who is supervising who.
Non-Compliance with statutory laws and regulations
A number of NGOs do not comply with a number of regulations including, tax laws, donor fund regulations, and stipulated reporting standards on matters concerning incomes, expenses and their activities as a whole.
Here are some tips to help you get it right for a successful NGO project audit:
I will base this conversation to the confines of the standard audit process which is the step by step procedure to achieve a complete audit exercise evidenced with a complete audit file. These processes are broadly categorized under; Pre-engagement processes, Planning processes, Audit Execution processes and finally, Completion and reporting processes. In the following paragraphs, I will give a snapshot of each of the above processes to enable us understand the key areas in each process.
The main purpose of the pre-engagement processes is to guide and help the auditors understand the scope of work and client expectations and therefore determine whether to accept, reject or discontinue the engagement. These processes emanate from the receipt of the appointment letter to the issuance of client acceptance letter, and letter of engagement or non-acceptance letter. The key activities among others performed by the auditor are risk assessment and client background checks that lead to the completion of the client acceptance questionnaire that determines the way forward. The below listed references will enable the auditor well achieve the foregoing procedures, namely Appointment letter, ISQM, Project Proposal, Project Terms of reference (TOR), Donor guidelines, Any correspondence from client, Previous audited accounts and Management letter. Next to this is;
Audit Planning Process
Any successful project audit must have a well-formulated audit work plan and audit programs. The main purpose is to guide and enable the team understand the scope of work and the project audit engagement is performed effectively and efficiently to achieve profitability and more importantly audit quality. You will appreciate that this component is wide and requires vivid attention from the auditor to achieve. The auditor must be equipped with the following non-exhaustive list as his / her reference material for an effective planning exercise. These include;
- The Acceptance letter and or Letter of engagement / Contract
- Clearance letter from the previous Auditor where applicable,
- ISQM handbook
- Project proposal and TORs
- Pre-engagement Minutes
A successful audit plan will result in the engagement Partner evaluating the ethical requirements of the team, independence/conflict of interest declarations, sharing a list of audit requirements with the client, and getting ready for the entry meeting.
Audit Execution Procedures;
In this process, the main objective is to obtain audit evidence to be used in forming an opinion. This process begins from receiving the overall audit strategy to its execution to timely issuance of a quality audit file. At this point, the audit team will be availed with the below information for their reference during the execution of the audit These include;
- Audit programs
- Letter of Engagement
- Work Plan (Overall audit strategy), budgets, job costing.
- Risk Assessment
- Materiality thresholds
- Entry meeting minutes
- Project documents
- Terms of reference
This section will end with the auditor preparing a draft report on audit findings, conclusions and recommendations together with the status of any pending information. This process ends with the auditor documenting all his/her working papers and sharing the draft report to client.
Audit Completion and reporting
At this stage, the auditor is carrying out reviews and procedures aimed at finalizing the audit, it stretches right from the point of receiving the audit file with the opinion through to final issuance of the audit report and attendance of the Annual General Meeting. The main purpose of the stage is to achieve the following;
- Ensure the opinion is adequately supported.
- Ensure that the audit process complies with the applicable standards and regulatory framework.
- Ensure expectations have been sufficiently met and that the quality of Financial Statements and Management Letter are acceptable.
- Successful client and the engagement partner Sign off on FS.
In conclusion, conducting an NGO project audit in Uganda requires careful planning and execution to ensure that the audit is thorough, accurate, and meets the required standards. By following the above steps, the audit can provide valuable insights into the project’s operations and help improve its outcomes.
For any further discussions and or suggestions regarding the above, kindly Contact the writer CPA Godfrey Mpaulo. Audit | Partner @ Ronalds Uganda Certified Public Accountants