Request for Proposal
For Appointment of Statutory Auditor for State Health Society (SHS) and District Health Society (DHS) for Audit of all programmes under NHM including flexible pools of NRHM-RCH, NUHM, NDCP and NCD.
REQUEST FOR PROPOSAL (RFP)
State Health Society, .(Name of State), seeks to invite Proposal from C&AG empanelled
Chartered Accountant firms those are eligible for major PSU audits for the year 2016-17 for conducting the statutory audit of State and District Health Societies under the National Health Mission for the FY 2016-17.
The details about the background of the auditee, the units to be covered in the audit, scope of work, terms of reference, and the eligibility criteria for selection of the CA firms are given in the following paragraphs.
Terms of Reference (ToR)
National Rural Health Mission (NRHM) of the Ministry of Health & Family Welfare was launched on 12th April, 2005 by the Government of India to improve medical facilities in the country. From 2013-14 onwards the NRHM programme has been subsumed under the umbrella programme of National Health Mission. NHM is overarching NUHM and also includes Communicable and Non-Communicable Diseases (NCD) as well. The NHM seeks to provide accessible, affordable and quality health care to the population, especially the vulnerable sections. It also seeks to reduce the Maternal Mortality Ratio (MMR) in the country from 167 to 100 per 1,00,000 live births, Infant Mortality Rate (IMR) from 40 to 30 per 1000 live births and the Total Fertility Rate (TFR) from 3.0 to 2.1.
2. One of the visions of the Mission is to increase public spending on health from 1.3% to 2-3% of GDP, with the improved arrangement for community financing and risk pooling. The NHM has provided an umbrella under which the existing Reproductive and Child Health Programme (RCH), various National Disease Control Programmes (NDCPs) and Non-Communicable Disease Programme (NCDs) have been repositioned. National Urban Health Mission (NUHM) has also been added as Submission of National Health Mission.
3. At present the following Programmes/Schemes fall under the National Health Mission:
A. NHM-RCH Flexible Pool:
B. National Urban Health Mission (NUHM) Flexible Pool.
C. Flexible Pool for Communicable Diseases:
D. Flexible Pool for Non-Communicable Diseases:
4. Institutional and Funding Arrangements:
For the implementation of the above programmes, MOHFW has required the creation of an Integrated Health Society at State and District levels (registered as a legal entity at the State and District under Societies Registration Act, 1860). Such integrated State Health Society (SHS) works in close coordination with the Directorate of Health & Family Welfare and District Health Societies (DHSs) work in coordination with the District Collector and District Chief Medical Officer (CMO). Program implementation is done through its District Chief Medical Officer’s office, Blocks, Community Health Centres (CHCs), Primary Health Centres (PHCs), Sub- Centres (SCs), Rogi Kalyan Samities (RKS) and Village Health Sanitation & Nutrition Committees (VHSNC). Certain activities may be managed at the State level such as drug procurement, IEC, civil works, training using specialized entities such as SIHFW, IEC Bureau, PWD, the Directorate of Health and Municipal Corporations for the urban health components. In addition funds are also released from SHS/ DHS to NGOs and private entities under public private participation (PPP) arrangements.
Funding & Accounting Arrangements:
Funds for the various programs are transferred from Pay & Accounts Office of MoHFW to the State Treasuries and then from Treasuries to the SHS functioning in the State. Government of India transfer funds in the form of Grants-in-Aid to SHS on the basis of respective State Programme Implementation Plan (SPIPs) and approved Annual Work Plans which are prepared on the basis of District Health Action Plans (DHAP) of each of the districts in the State. Under the umbrella of the integrated SHS/DHS each program has separate bank accounts, maintains separate books of accounts and other financial records as per the requirements of each program and also submit separate financial activity reports at varying frequencies to the respective monitoring unit in MOHFW (GOI).
5. Financing by Development Partners/ Donors:
Some of the programs of NHM are also supported by development partners such as the Asian Development Bank (ADB), GFATM/World Bank etc. for which credit agreements have been entered into by GoI with the respective development partners. Compliance with specific fiduciary requirements of the development partners will additionally need to be reported by the auditors. Copies of the legal agreements and other project documents will be provided to the auditors, if needed, by SHS/ concerned Programme Division in the State.
6. Objective of audit services:
The objective of the audit is to ensure that MoHFW receives adequate, independent, professional audit assurance that the grant proceeds provided by MOHFW are used for purposes intended in line with approved PIPs and Annual Work Plan (AWP) of individual programs and that the annual financial statements are free from material mis-statements and the terms of the credit/ loan agreements of the development partners are complied with in all material respects.
The objective of the audit of the financial statements – individual financial Statements of State and District Health Society as well as the Consolidated Financial Statements of the State and District as a whole i.e. (Balance Sheet, Income & Expenditure, Receipt & Payment, together with relevant accounting policies, notes to accounts and schedules (Bank Reconciliation Statements, Statement of Funds Position, Reconciliation of Expenditures as per Audited financial statements with the expenditure reported as per the Financial Monitoring Report (FMR) is to enable the auditor to express a professional opinion as to whether:-
(1) the financial statements give a true and fair view of the Financial Position of the individual DHS,SHS and Consolidated District and State Health Societies at the end of each fiscal year and of the funds received and expenditure incurred for the accounting period ended March 31, 20017
(2) the funds were utilized for the purposes for which they were provided, and
(3) where programs are financed by development partners, the respective program expenditures are eligible for financing under the relevant grant/ credit agreement.
The books of accounts as maintained by the State Health Societies, District Health Societies and other participating implementing units such as Blocks, CHC, PHCs, Sub Centers, Village Health Nutrition and Sanitation Committees (VHNSCs) etc. shall form the basis for preparation of the individual DHS and SHS financial statements as well as the consolidated financial statements for the State as a whole.
7. Standards: The audit will be carried out in accordance with Engagement & Quality Control Standards (Audit & Assurance Standards) issued by the Institute of Chartered Accountants of India in this regard. The auditor should accordingly consider materiality when planning and performing (except where a certain minimum coverage of implementing units is specified) the audit to reduce the risk to an acceptable level that is consistent with the objective of the audit. In addition the auditor should specifically consider the risk of material misstatements in the financial statements resulting from fraud.
8. Criteria for Selection of Auditors
(i) Past Experience in handling Government Contracts & Conduct of the firm and
(ii) Turnover of the firm
a. To ensure timely completion of audit, State should ensure that the books of accounts are ready at all places before the start of audit. Further, timely availability of information to the auditors should be ensured for completion of audit on time.
b. In the pre-bid conference to be held, the participant firms should clearly be explained about the requirements of audit as regards to number of districts, blocks, physical visit of the team at each location, number of implementing agencies from whom UCs / SOEs received and incorporated in Annual Financial Statements sothat a quality audit is not compromised.
c. It should be clearly ensured that a Standing Committee headed by Mission Director (NHM) is constituted in the State for the selection of auditor and for follow up and issue of compliance to the audit observations of the previous years.
d. After the completion of audit, State should organize an exit conference of the auditors to discuss the audit observations.
e. A copy of the working papers of the auditors shall be retained by the Director (Finance)/SFM in the State.
f. The process of appointment of auditor has to be completed by 31stMarch 2017 and intimation of the auditor appointed along with the fees fixed and evaluation sheet for the appointment has to be submitted to the Ministry latest by 10th April 2017.
g. The State should get the audit of all the District Health Societies completed by 31stMay 2017 and the Audit Report issued before 30th June 2017.
h. The consolidation of audit reports of all the districts with State along with all the necessary requirements such as, Accounting Policies, Notes on Accounts and Management Letter is to be completed by the State in time and final report submitted by 31st July 2017.
i. Audit Report as per Appendices of the RFP has to be submitted in triplicate with spiral binding along with the soft copy(PDF/Scanned)mailed to firstname.lastname@example.org in a C.D. also by 31stJuly 2017.
10. Scope & Coverage of audit: In conducting the audit special attention should be paid to the following:
a) An assessment of adequacy of the project financial systems, including financial controls. This should include aspects such as adequacy and effectiveness of accounting, financial and operational controls; level of compliance with established policies, plans and procedures; reliability of accounting systems, data and financial reports; methods of remedying weak controls ; verification of assets and liabilities and a specific report on this aspect would be provided by the auditor annually as part of the management letter;
b) Funds have been spent in accordance with the condition laid down by the Department of Health & Family Welfare, Government of India from time to time with due attention to economy and efficiency, and only for the purpose for which the financing was provided. Counterpart contribution from State Government, where required has been provided.
c) Goods and services financed have been procured in accordance with the relevant procurement guidelines issued by the GoI/ State Government. However, for various programmes, special attention must be paid to the requirements of the agreement between GoI and Development partners (RNTCP, IDSP and NVBDCP etc.). Such requirements are available within the State/ District’s concerned Program Officers. For such externally funded programmes, auditor must satisfy that all expenditure, including procurement of goods and services have been carried out as per the procurement manual of the individual programmes and guidelines issued by the Programme Divisions of GoI and have all the necessary supporting documentation.
c) All necessary supporting documents, records and accounts have been kept in respect of the project.
f) Sample Coverage of sub district Implementing Units: Audit will cover 100% District Health Societies (DHSs) each being a legally registered society and at least 40% of the Block Level CHC/PHC (at least 50% of such blocks should be new and remaining may be those covered in the audit of last year). The sample shall be selected in a manner that Block level PHC/CHC in each district is included in the sample coverage. All the vouchers pertaining to the health facilities will be available at the respective health facility (DH, CHC/PHCs) for the purpose of audit. Audit shall also cover audit of expenses related to NHM incurred through Rogi Kalyan Samities (RKS) at each level i.e. PHC/ CHC/ DH.
g) The Statutory Auditor may review the concurrent audit reports / quarterly executive summaries and may consider material observations / findings while forming his opinion on overall internal control and truth & fairness of accounts/financial statements.
11. Project Financial Statements
A format of such financial statements and relevant schedules showing the consolidation of all the programmes is given at (APPENDIX A – FORMAT of FINANCIAL STATEMENTS) and also on the website of MoHFW at www.nhm.gov.in.
Project Financial Statement (SHS, DHS and Consolidated) shall include the following:
i. Audit Opinion as per APPENDIX-C.
ii. Balance sheet showing accumulated funds of the project balances other assets of the project, and liabilities, if any.
iii. Income & Expenditure account for the year ending on 31stMarch 2017.
iv. Receipt and Payment Account for the year ending on 31stMarch 2017.
v. Other Schedules to the Balance sheet as appropriate, but which shall include
v. Notes on Accounts showing the accounting policies followed in the preparation of accounts in the State Health Society and District Health Societies and any other significant observation of the auditor.
vi. Auditor shall have to specify the significant observations, including internal control weaknesses for each program and also specify the institution to which these relates to enable/ facilitate appropriate follow up action.
vii. Sanction wise Utilization Certificates (UCs) as per Form 19-A of GFR 2005; duly tallied with the Income & Expenditure and expenditure on Fixed Asset during the financial year (which have been shown as capitalized) [Attach a statement showing the details of expenditures clubbed in the Utilization Certificate tallying with the Income & Expenditure Account and Schedules forming part of it].
A separate utilization certificate for state share contribution has to be issued.
viii. Action Taken Report on the previous year’s audit observations.
ix. Reconciliation of the FMR Expenditures of the last quarter i.e 31stMarch 2017 with expenditure as per the Annual Audited Financial Statements in the FMR format only for the financial year covered by audit period identifying the variance and the reasons for the same. This has to be certified by the auditor.
x. Representation by Management: The DHS and SHS management should sign the financial statements and provide a written acknowledgement of its responsibility for the preparation and fair presentation of the financial statements and an assertion that the project funds have been expended in accordance with the intended purposes as reflected in the financial statements.
12. Financial Monitoring Reports (FMR)
In addition to the primary opinion on the financial statements, the auditor is required to audit last quarter FMR (quarter ending March) submitted to MOHFW. The auditor should apply such tests as the auditor considers necessary under the circumstances to satisfy the audit objective. Where ineligible expenditures are identified as having been included in the financial reports, these should be separately noted by the auditors. The audit report should include a separate paragraph commenting on the accuracy and propriety of expenditures included in the financial statements and FMRs including whether procurement procedures have been followed, and the extent to which the GoI can rely on Quarterly FMRs.
In addition to the audit reports, the auditor will prepare a “Management Letter” as per Appendix-D, in which the auditor should summaries the observation on the internal control issues (other than those which materially affect his opinion on the financial statements) as under:
The observations in the management letter must be accompanied by the implications, suggested recommendations from the auditors and management comments/ response on the Observations/ recommendations have to be obtained and reported along with the Audit report.
13. Reporting and Timing
The final Audit Report should be submitted by 31st July 2017, (i.e. within four months of the end of the financial year) to the State Health Society and the State Health Society should then promptly forward 3 copies (Spiral Bound) and also soft copy in MS Excel / MS Word and Scanned (Both) is also to be submitted in mail or CD of the audited financial statements and audit report along with the final Utilisation Certificates signed by the State and Auditor both, to GoI with their comments, if any.
In case State has opted to appoint multiple auditors for a group of districts and State, in such cases the Auditor appointed for a group of districts, shall have to issue a separate audit report for each district and provide a soft copy of also (Word/ Excell). Audit Reports for all districts in such cases shall have to be issued by 30th June, 2017 so that consolidated report of the State is not delayed and issued by 31st July, 2017.
Submission of the Statutory Audit Report by the prescribed date is a ROP conditionality for release of second tranche of funds to the State which ultimately ensures smooth implementation of the Mission and leads to better outcomes as funds are expended when needed by the State. In view of the above following measures need to be taken by the State:
The duty of the State is to ensure that the process for appointment of the auditor is completed by 31st March and intimation of the auditor appointed along with the fees fixed & evaluation sheet for the appointment has to be submitted to the Ministry latest by 10th April, 2017. Also timely availability of information to the auditor needs to be ensured. The same needs strict compliance.
The State should make sure that complete cash book, ledgers, vouchers and other financial statements are ready at the time of visit of auditors.
Penal provision on failure to complete the Audit on time: In order to ensure timeliness on the part of the Auditor, if the State feels that in spite of providing all information, documents, and updated books of accounts, there was delay in submission of Audit Report from the auditor, the State may deduct the audit fees @ 5% per month from the due date of completion of audit. A clause in this regard should be incorporated by the State in the agreement. However in case of delay in submitting the audit report due to unforeseen circumstances like flood, earthquake, election, etc.., the Mission Director(NHM) of the State has the right to waive off the penalty. Further, before imposing penalty, the firm may be given an opportunity to be heard.
14. Additional Instructions to Auditors
a. Audit Report of the State Health Society (SHS) shall include audit of all the transactions at the State level as well as all the transactions in the District Health Societies (DHSs) within the State.
b. Audit for the financial year will include all the components under NHM.
c. The auditor appointed shall be required to issue separate Consolidated Audit Report for the State and each District, comprising all programmes under NHM (RCH, Mision (HSS), RI, PPIP, NUHM, NDCPs & NCDs). Auditor appointed for the State, in case of multiple auditor, shall prepare a consolidated Report for the State. However, in case of RNTCP and IDSP, a separate audit report with required annexures and schedules shall also have to be issued by the State / District Level Auditor. The relevant formats for Audit Report as issued by RNTCP Division are given as Appendix-C)
d. All State level report shall have to be issued in three sets (Two sets to MoHFW and one set for State). Consolidated Report is to be sent to NHM-Finance Division and individual reports of individual programmes along with UCs to the respective programme divisions of the Ministry).
e. Financial Statements and relevant schedules shall be prepared in accordance with the format provided by Ministry of Health and Family Welfare, GoI (APPENDIX-A – FORMAT of FINANCIAL STATEMENTS). However, specific programme requirements (in accordance with the agreement with the GoI and Development Partners) may also be incorporated in the separate schedule of the programme.
f. Auditor shall certify all the Utilization Certificates in the prescribed format (Form 1 9A of GFR, 2005) of GOI for all programmes of NHM. The Utilisation Certificate shall be furnished sanction wise and Utilisation Certificate shall be issued for each sanction issued during the respective financial year. The Utilization Certificates should be jointly signed by the Mission Director, State Programme Officers in charge of concerned Programme and the Auditor.
g. The auditor shall also append the Checklist (APPENDIX-B – CHECKLIST FOR AUDITOR)
h. The auditor shall certify the FMR on the basis of audited expenditures with all the line activities for the last quarter (quarter ending March 2017 showing cumulative and
head wise expenditure for the complete financial year) along with the Audited Statement of Accounts. Auditor shall certify a comparative statement showing expenditure as per FMR and as per Audit Report. Auditor must also document the reason for variances between the FMR figures and audited figures in cases where the variances are significant g. more than 15% from the audited figures at each component level.
i. Audit Opinion as per the Model Format provided at APPENDIX– C.
j. Management Letter as per APPENDIX – D along with the comments/reply of the Mission Director, State Health Society.
15. Re-appointment of Auditor: As the auditor once appointed can continue for two more years, subject to the satisfaction of the performance by the State. The State which wishes to re-appoint the same auditor shall have to seek the approval of the Executive Committee after obtaining the consent of the auditor and confirming that the said firm is in the panel of C&AG and eligible for conducting audit of major PSUs for the year for which the firm is being re-appointed. Further, any comments/remarks/observation of the Ministry in this regard shall have to be taken into account while re-appointing the same auditor.
It is also clarified that “No auditor can take the assignment of more than three (3) audits under NHM. A certification in this regard may be obtained from the auditor.”
16. General Provision: The State should ensure that the Auditor must be appointed for all the disease control programmes under NHM and Uniform Accounting system is being followed for all the disease control programmes under NHM. The State should also ensure that the auditor should follow the latest formats given in the RFP.
The auditor shall be given access to any information relevant for the purpose of conducting the audit, in addition to all financial and procurement records, SPIPs, AWPs, MOU/LOU signed between MOHFW and the State/ SHS, instructions issued by MOHFW regarding scheme guidelines (e.g. JSY etc.), administrative orders issued by the SHS/ DOHFW/ Directorate of Health including cost norms etc. Where programs are financed by Development Partners copies of the legal agreement, project appraisal document should be made available to the auditors.
Guidelines for Submitting the Proposals:
Agencies are required to submit the proposal as per the guidelines and formats detailed out in the following paras:
i. The original and all copies of the Technical Proposal shall be placed in a sealed envelope clearly marked “TECHNICAL PROPOSAL” Similarly, the original Financial Proposal shall be placed in a separate sealed envelope clearly marked “FINANCIAL PROPOSAL” followed by the name of the assignment and with a warning “DO NOT OPEN WITH THE TECHNICAL PROPOSAL.” The envelopes containing the Technical and Financial Proposals shall be placed into an outer envelope and sealed. This outer envelope shall bear the submission address, reference number and title of the Assignment, and be clearly marked “DO NOT OPEN, EXCEPT IN PRESENCE OF THE OFFICIAL APPOINTED. The Society shall not be responsible for misplacement, loss or premature opening if the outer envelope is not sealed and/or marked as stipulated. This circumstance may provide a case for Proposal’s/ bid’s rejection. If the Financial Proposal is not submitted in a separate sealed envelope duly marked as indicated above, this shall constitute grounds for declaring the Proposal non-responsive/ invalid.
ii. Single Proposal (Multiple Firms): In case State decides to appoint more than one C.A. firm as auditor, the Bidding CA firm may submit proposal for State and also for one Group of districts.
iii. All agencies must comply with the Technical Specification, General Conditions and Format/Requirements for Technical and Financial proposal.
iv. The Technical Proposal shall be marked “ORIGINAL” or “COPY” as appropriate. All required copies of the Technical Proposal are to be made from the original. If there are discrepancies between the original and the copies of the Technical Proposal, the original governs.
v. Financial proposals submitted by the firm should be valid for 6 months from the date of submission of the proposal by the firm.
vi. Each page, Form, Annexure and Appendices of the Technical and Financial Proposal
must be signed by the Authorised signatory of the firm.
vii. All blank spaces in the financial proposal must be filled in completely where indicated, either typed or written in ink.
viii. State Health Society (SHS) reserves the right to accept or reject any proposal without giving any explanation and can change the evaluation criteria as per its requirements in the interest of the organization.
ix. If the required constitution of the team is not deployed the state may take appropriate action as it deems fit (including blacklisting of the firm) against the firm, keeping the Ministry informed.
x. A firm cannot undertake the audit assignments of more than three states in a year. The audit assignment must be opted for as awarded by States chronologically i.e. on First come first served basis. If a CA Firm appointed in more than 3 state then they have to withdraw their name so as to keep it up to 3 States/ UTs only. As a state may opt to appoint multiple auditors, therefore, if a firm appoints for audited of a group of district any state then for the purpose of ceiling of 3 states, group of state shall take as a state.
xi. The firm shall give an undertaking that the team members are proficient in the State’s official language (both oral and written).Theauditors must have the H.O/ Branch Office in the allotted state.(Form U). However, in case if NE States/ UTs where availability of Auditor is scare, the States/UT may consider the proposals of audit firms from the neighboring States
xii. Firm shall have to depute appropriate no. of teams for timely submission of Audit Report and to attain quality of audit.
xiii. Each team shall have to be headed by a qualified chartered accountant.
Technical & Financial Proposal will consist:
i. Letter of Transmittal (Form T-1)
ii. Technical Proposal format (Form T-2)
iii. Financial Bid format (Form F-1)
iv. Undertaking of presence of HO/Branch offices in State (Form U)
RFP- Appointment of Statutory auditor for State Health Society & District Health Society 2016-17
|Letter to States
|Complete Panel of Major CA Firms
|Minimum fee recommended by ICAI