External audit of 2022 financial statements of ANH-CHI-EM Program

TERM OF REFERENCE (TOR) FOR

EXTERNAL AUDIT OF 2022 FINANCIAL STATEMENTS OF ANH-CHI-EM PROGRAM

ANH CHI EM ACTIVITIES

Entrepreneurs du Monde (EDM), a French NGO, launched late 2007 the Anh-Chi-Em (ACE) microfinance program in the province of Dien Bien, North West of Vietnam. The main objectives are to provide loans and non-financial services to ethnic minorities living in remote mountainous areas. Anh-Chi-Em works in close collaboration with the local Women’s Union and People’s Committee.

The strategic guidance is defined at 2 levels:

1. The first level involves Entrepreneurs du Monde, through a Supervisory Committee, that defines the strategy of the Program and monitor the Program’s operations;
2. The second one involves the Management Committee of Anh Chi Em (Program Manager; Operational Risk Manager; Human Resource, Administrave and MIS Manager and Finance Admin Manager) and representatives People’s Committees of the province, districts and city where the Program open its branches. The Management Committee mainly negotiate areas of operations and collaboration with district representatives of the Women’s Union.

The Operational Risk Manager supervise two Operations Assistants (OA), each OA supervise 2 Branch Managers who are located in Dien Bien, Muong Ang Districts and Dien Bien Phu City. Each Branch Manager supervises 4-5 Commune Credit Officers (CCOs) who supervises one commune with 10 to 20 villages. At the village level, Cluster Heads or Group Leaders are selected to support the CCO and serve the end clients (referred to as “partners”).

Program operations include Financial Services (FS) and Non-Financial Services (NFS). The Financial Service Unit provides small loans adapted to local family-scale income generated activities. The majority of program’s partners includes animal husbandry, rice cultivation, coffee, trade and improvement of equipment for agriculture activities. The Program offers its partners 3 types of loan:

Program provides 2 types of savings as below:

-        Compulsary saving:

• 1% of loan amount approved for Degressive loan and         2% of loan amount approved for Bullet loan.
• Compulsary saving is non-withdrawable directly in cash. It can be withdrawn in 2 following cases:
  
  • Transferred to the voluntary savings when partners fully repay their loans. 
  • In case of late repayment, ACE will automatically use the balance to repay the loan.
• Compulsary is not remunerated

-       Voluntary saving:

• A mount deposit:
  
  • For Doan Ket methodology 2012: At least 30,000 VND per month.
  • For Doan Ket methodology 2019: At least 30,000 VND per 4 weeks
  • For cluster: At least 60,000 VND per month.

  The partner may deposit more than the above minimum as long as the total voluntary savings balance does not exceed 50,000,000 VND. At the same time, ACE needs to ensure the compliance with Decision 20 (article 13.1.b), whereby the balance of the VS does not exceed 30% of the ACE total equity. This ratio is controlled on the Financial Services report.

• The partner could withdraw voluntary saving whenever they are in need by either following ways:
  
  • To receive cash: partners must complete a Savings withdrawal form to submit to CCO at least 3 working days in advance
  • To pay loan by offsetting: ACE is only allowed to use partners’ Voluntary saving account to pay their loans when receiving their permission by signature on Group Register or Individual Receipt.
• VS is remunerated 6%/year. The interest is computed twice per year:
  
  • 1st time: interest is computed for the period from 1/10/N-1 to 31/3/N
  • 2nd time: interest is computed for the period from 01/04/N to 30/09/N

  The Socio-economic team provides a  wide range of trainings to help partners effectively implement their investment and therefore safeguard the program’s loans. The socio-economic services include trainings, client individual monitoring and various pilot projects (farmer interest groups …).
  From 2019, we have applied new methodology in some communes. Following is the most remarkable changes in new methodology:

• Group of partners is the heart of the methodology, by which, strict compliance with group meeting and rules is required
• Frequency of every 4 weeks is applied for group meeting instead of every month to avoid falling into weekend
• Identification of partners is done one time thoroughly once they join group even though they don’t take loan.
• Financial literacy training is compulsory and held every week before the first group meeting and before first disbursement.
• Voluntary savings service is easier to access: small minimum amount, can transact at group meeting or branch office, waiting time for withdrawal is determined and short but still with more strict management (new passbook and receipt designed, strict procedure for withdrawal)
• Disbursement is at branch office to avoid risk of embezzlement and robbery with clear segregation
• Training delivered by CCOs is must-have in all group meetings. CCOs receive TOT training from SES staffs to have basic competence
• Branch team dynamics increased with decentralization to branch and CCO going to branch office at least twice per day: beginning and ending of the day.
  From Oct 2022, ACE has replicated new method to all branches.

ANH CHI EM KEY INDICATORS

Anh Chi Em use Loan Performer (LPF) software and BIJLI (BIJLI from april 2022) to manage the microfinance activities and the accounting.

AUDIT REQUIREMENTS

1. OVERALL PURPOSE OF THE ASSIGNMENT

The overall purpose of the external audit is to give audit opinion on Program’s 2022 financial statements. The audit work includes a review the effectiveness of the operations and of the accounting process of the Program, as well as the correct use of funds received from donors - including recommendations to insure legal capacity to reimburse its debts - and the transparency of the disclosed accounting and financial information.

2. SCOPE OF THE ASSIGNMENT

The audit is expected to cover all aspects related to finance, accounting and operation,   including – but not limited to – the following aspects:

• Cash and Bank accounts management and reconciliations; cash management procedures and their validity in terms of control
• Client loans and savings accounting processes, daily reconciliation procedures;
• Control over late payments, loan loss provisioning, loan write offs
• Staff payroll preparation, accounting and control
• Fixed assets management and control
• Booking of funds received from donors, and compliance of fund use with the terms agreed by the donors
• ACE legal capacity the reimburse its debts 
• The accounting ledgers, vouchers and other supporting documents
• The financial statements (balance sheet, profit and loss statement)
• Budget control
• The legality Human resource manual, Labor contracts and accounting manual
• And more generally speaking, the audit will aim at controlling the compliance of the Program’s practices with the procedure manuals, as well as the quality of these manuals.

3. EXPECTED OUTPUT

A comprehensive financial audit report comprising of detailed financial statements, all notes to the statements and a proper management letter, has to be submitted to Entrepreneurs du Monde in English and in Vietnamese.

The report has to be well-structured, including an in-depth analysis on all the aspects of accounting and financial management as listed above  and  evidence-based recommendations  for  consolidation  and  improvement of Program’s financial  management. The  final version of  the  management letter  will  include  the  response of the Program management to the listed findings and to the recommendations.

4. METHODOLOGY

Desk study and field visits in Dien Bien district, Muong Ang district, and Dien Bien Ph? city. The audit is expected to take a risk-based approach.

5. TIMING

The mission is expected to be carried out from 20th March 2022, and completed within 3 weeks.

HOW TO APPLY

Proposals should be submitted no later than Feb 27, 2023 to [email protected] [1]

For any questions please contact Ms. Luong Thi Tam at 0981 053 863