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Guidelines for Annual Audit

of Global Fund Grants
NOVEMBER 2019 GENEVA, SWITZERLAND
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Contents

GLOSSARY ....................................................................................................................................................... 5
1 INTRODUCTION ....................................................................................................................................... 7
1.1 BACKGROUND ...................................................................................................................................... 7
1.2 PURPOSE ............................................................................................................................................ 7
1.3 KEY PRINCIPLES ................................................................................................................................... 7
2 TYPES AND SCOPE OF AUDITS AND FINANCIAL ASSURANCE ENGAGEMENTS FOR GLOBAL
FUND GRANTS ................................................................................................................................................. 9
2.1 FINANCIAL AUDIT ................................................................................................................................. 9
2.1.1 The Special Purpose Grant Financial Statement (SPGFS) Audit ................................................. 9
2.1.2 Program Audit ................................................................................................................................ 9
2.1.3 Implementer statutory financial audit ........................................................................................... 10
2.2 PERFORMANCE AUDIT ........................................................................................................................ 10
2.3 SYSTEMS AUDIT ................................................................................................................................. 11
2.4 LIMITED REVIEW ................................................................................................................................ 11
2.5 ASSET SAFEGUARD ENGAGEMENT ...................................................................................................... 11
2.6 FRAUD-RELATED ENGAGEMENTS ........................................................................................................ 12
2.7 OTHER SPECIFIC SITUATIONS ............................................................................................................. 12
2.7.1 Grant Closure............................................................................................................................... 12
2.7.2 Audit of grants involving Common Funding Mechanisms (CFM) ................................................ 12
2.7.3 Audit of grants involving headquarters (HQ)-generated expenditures ........................................ 13
2.7.4 Exceptional cases of United Nations-affiliated organizations ...................................................... 13
2.7.5 Audit of grants using different funds channeling models (Innovative Financing) ........................ 13
2.7.6 Single Audit principle ................................................................................................................... 13
3 AUDIT SCOPE AND RISK-BASED DIFFERENTIATED APPROACH .................................................. 15
3.1 GRANT CONSOLIDATED AUDIT, OR GRANT-SPECIFIC AUDIT AT SR LEVEL ................................................ 15
3.2 RISK LEVEL DETERMINATION ............................................................................................................... 15
3.3 AUDIT PACKAGE (RISK-BASED MATRIX) ................................................................................................ 16
3.3.1 Standard audit package ............................................................................................................... 16
3.3.2 Tailored audit package ................................................................................................................ 16
3.4 AUDIT TERMS OF REFERENCE (TORS) ................................................................................................ 17
4 AUDITOR SELECTION AND ACCREDITATION ................................................................................... 18
4.1 TYPE OF AUDITOR FOR GLOBAL FUND GRANTS .................................................................................... 18
4.1.1 Government Supreme Audit Institutions (SAIs) ........................................................................... 18
4.1.2 Corporate or institutional auditors ................................................................................................ 18
4.1.3 Contractual auditors ..................................................................................................................... 18
4.1.4 Regional Auditor .......................................................................................................................... 19
4.2 AUDITOR SELECTION AND ACCREDITATION ........................................................................................... 19
4.2.1 Minimum requirements for grant’s auditors ................................................................................. 19
4.2.2 Approval procedures .................................................................................................................... 19
4.3 APPOINTMENT OF THE AUDITOR .......................................................................................................... 20
4.4 AUDITOR PERFORMANCE ASSESSMENT, ROTATION AND TERMINATION ................................................... 21
4.5 AUDIT FEES ....................................................................................................................................... 21
5 ACCOUNTING FRAMEWORK AND FINANCIAL STATEMENTS OF FINANCIAL AUDIT ................. 22
5.1 ACCOUNTING FRAMEWORK AND SPECIAL PURPOSE GRANT FINANCIAL STATEMENTS ............................ 22
5.1.1 Accounting Principles, Policies and Basis ................................................................................... 22
5.1.2 Preparation of the Principal Recipient’s Financial Statements .................................................... 22
5.1.3 Special Purpose Grant Financial Statements for Financial Audit ................................................ 22
5.1.4 Specific case of direct payment to a third party ........................................................................... 23
6 AUDITING AND ASSURANCE ENGAGEMENT STANDARDS ............................................................ 24
7 AUDIT REPORT AND OPINIONS .......................................................................................................... 25
7.1 GRANT SPECIFIC FINANCIAL AUDIT ...................................................................................................... 25
7.2 SYSTEMS AUDIT ................................................................................................................................. 26
7.3 PERFORMANCE AUDIT ........................................................................................................................ 26
8 SUBMISSION AND REVIEW OF THE AUDIT REPORT ....................................................................... 27
8.1 AUDIT REPORTING CYCLES ................................................................................................................. 27
8.2 DUE DATE .......................................................................................................................................... 27
8.3 FORMAT OF SUBMISSION..................................................................................................................... 27
8.4 REVIEW AND APPROVAL OF AUDITED FINANCIAL STATEMENTS ............................................................... 27
8.5 REFUNDS........................................................................................................................................... 28
9 ROLES AND RESPONSIBILITIES ......................................................................................................... 29
9.1.1 CCM ............................................................................................................................................. 29
9.2 PRINCIPAL RECIPIENTS....................................................................................................................... 29
9.3 THE LOCAL FUND AGENT.................................................................................................................... 29
9.4 THE GLOBAL FUND SECRETARIAT ....................................................................................................... 29
Glossary

Cash Accounting A method of accounting that recognizes receipts and payments in

the financial statements when cash is received, and cash is paid out,
respectively.
Accrual Accounting Under accrual accounting the revenue or income is recorded when
it is earned, and expenditure is recorded when it is incurred1
irrespective of the dates in which any associated cash flows occur.
Modified Cash Accounting It combines cash accounting with accrual accounting. Under
modified cash accounting:
• income and expenditure are recognized or accounted for using a
cash basis;
• short-term financial statement items (current assets and current
liabilities) are recognized or accounted for using a cash basis;
and
• long-term financial statement items (non-current assets and
liabilities) are recognized or accounted for using an accrual basis.

Modified Accrual Accounting It combines the accrual accounting with the cash accounting, under
modified accrual accounting:
• income/revenue is recognized/accounted for using a cash
basis;
• expense/expenditure are recognized/accounted for using
accrual basis;
• short-term financial statements items (current assets and
current liabilities) are recognized/accounted for using accrual
accounting; and
• long-term financial statements items (noncurrent asset and
liabilities) are recognized/accounted for using a cash accounting
basis.

Accounting Principles Accounting principles are a set of rules, standards and guidelines
used by an organization for the recording and reporting of financial
information. They define the bases by which the transactions, assets
and liabilities are valued and presented in the financial statements.
Accounting Policies Accounting policies are the specific principles, bases, conventions,
rules and practices applied by an organization when preparing and
presenting financial statements.

IFRS International Financial Reporting Standards issued by the

International Accounting Standards Board (IASB). This Board sets
accounting standards globally for the private sector and upon its
creation in 2001, it adopted all International Accounting Standards
(IASs) which had been previously issued by its predecessor body,
the International Accounting Standards Committee (IASC).

1
The amount an organization or person has paid or has committed to pay for goods or services received from another
organization or person.

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 Internal Controls Internal Controls include policies and procedures, geared towards
managing key operational risks, financial and non-financial,
associated with various Global Fund grant funded activities at
Principal Recipient and Sub-recipient levels.
INTOSAI The International Organization of Supreme Audit Institutions
(INTOSAI) is a global body comprising Supreme Audit Institutions (or
national audit offices) which issues public sector/government
auditing standards to be applied by its members.
IPSAS International Public Sector Accounting Standards (IPSAS) are those
applicable to public sector/government entities. They are issued by
the International Public Sector Accounting Standards Board of IFAC
(the International Federation of Accountants).
ISAs International Standards on Auditing (ISAs) are developed by the
International Auditing and Assurance Standards Board (IAASB) and
contain basic principles and essential procedures together with
related guidance in the form of explanatory and other material.
ISSAI The International Standards of Supreme Audit Institutions
(ISSAI) are the professional standards and best practice guidelines
for public sector auditors.
Management Letter A document prepared by the auditor for the management of an
audited entity highlighting all key findings as a direct consequence
of the audit work performed to form an opinion on the financial
statements. It also sets out findings (such as weaknesses in internal
controls), implications and recommendations and solicits the
response of the audited entity’s management to the audit findings
and recommendations.
Sub-recipients and Sub-Sub- A Sub-recipient receives grant funds directly from the Principal
recipients Recipient of a Global Fund grant and implements certain program
activities. The Principal Recipient enters into a written agreement
with a Sub-recipient to formalize the terms and conditions and
includes the name of the Sub-recipient in the Detailed and Summary
Budget of the relevant grant agreement. A Sub-sub-recipient
receives grant funds indirectly from the Principal Recipient through a
Sub-recipient under similar arrangements. These guidelines refer to
Sub-recipients, which includes Sub-Sub-recipients. In certain cases,
for effective risk management and with the agreement of the
Principal Recipient, the Global Fund may make direct cash
disbursements to a Sub-recipient and Sub-Sub-recipients under the
main grant agreement.

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1 Introduction

1.1 Background

1. The implementation of these guidelines is mandatory for reporting periods ending 31

December 2019 and onwards.
2. A core component of the Global Fund’s risk and assurance framework is the audit of the grant.
Revenues and expenditures of Principal Recipients and Sub-recipients are to be audited
annually in accordance with the Global Fund Grant Regulations (2014)..
3. Audits are primarily intended to provide the Global Fund with assurance that disbursed funds
were used for the intended purposes in accordance with the relevant grant agreement,
including the approved budget and the Performance Framework, and that the financial
statements fairly represent the financial transactions and balances of the grant.

1.2 Purpose

4. The purpose of these guidelines is to outline Global Fund requirements for audit arrangements,
as follows:

(1) Different types of audits for Global Fund grants and their corresponding terms of
reference;
(2) Scope of work of the respective audits;
(3) Selection and accreditation requirements for external auditors;
(4) The Global Fund financial reporting framework for grants;
(5) Content of audit reports; and
(6) Roles and responsibilities of the relevant parties to the audit process, including the Global
Fund Secretariat, Country Coordinating Mechanisms, Principal Recipients, Sub-
recipients, Local Fund Agents and external auditors.
5. The guidelines will be updated based on best practices on an ongoing basis.
6. According to Global Fund Grant Regulations (2014), the Global Fund will act when audit
arrangements and reports do not follow the requirements as outlined on this document. Actions
involve withholding disbursements, terminating grant agreements or taking other relevant
measures.

1.3 Key principles

7. These guidelines follow these key principles:

- Flexibility: adapt audit type based on the financial risk profile of the grant and the country
categorization. The guidelines introduce other assurance engagements including
performance audit, system audit, asset safeguard engagement, and fraud-related
engagements. They also define the conditions under which each audit type can be used.

- Risk-based scope: audit scope will be based on the risk level of the grant. The financial risk
level will be directly taken from the Global Fund Integrated Risk Management tool for
consistency purposes.
- Reliance on Principal Recipient audit mechanisms: the Principal Recipient’s statutory
auditor (including Supreme Audit Institutions for government entities) is the preferred option
for auditing purposes, if deemed efficient and effective. This is in line with the Global Fund’s
strategic objective to build Resilient and Sustainable Systems for Health (RSSH) and more

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 specifically, facilitate the use of country or donor harmonized financial management systems.
Otherwise, a grant-specific auditor should be contracted, who will provide an opinion on the
Financial Statements
- Consistency: In the case of financial and systems audits, these guidelines establish
minimum requirements of format and scope of financial statements and audit report to drive
consistency in reporting.

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2 Types and scope of audits and financial assurance
engagements for Global Fund grants

8. Different types of audits of grants have been introduced by the Global fund to ensure that there
is a link between the financial risks that grants are exposed to with the assurance needs. These
range from a standard financial audit to targeted assurance engagements following a
recognized standard.
9. The Global Fund’s Regional Finance Manager, based on the recommendations of the Finance
Specialist within the Country Team, determines the best audit option based on risk, materiality
of the funding at risk and their knowledge of the grant implementation arrangements.

2.1 Financial Audit

10. The financial audit is the standard and main type of audit performed in Global Fund grants and
is chosen by default. Based on risk considerations, the financial audit could have several
variants including the audit of Special Purpose Grant Financial Statements, a program audit or
the Principal Recipient statutory audit.
11. Other types of audit include performance audit, systems audit, fraud-related engagements and
assets safeguard audit .

2.1.1 The Special Purpose Grant Financial Statement (SPGFS) Audit

12. The objective of the SPGFS audit is to:

12.1. enable the auditor to express an independent professional opinion on each of the
following:
(1) the Special Purpose Grant Financial Statements prepared by the Principal Recipients;
(2) the Principal Recipient’s compliance with having used grant funds in conformity with the
provisions of the relevant grant agreement and applicable local laws and regulations.
12.2. comment on adequacy of the implementers’ internal control framework, and report on the
weaknesses identified. This review will also include, if applicable:
(1) internal controls including Information Technology General Controls (ITGCs);
(2) controls related to Principal Recipient or Global Fund hired third party agents2 including
review of the terms and conditions of their engagement and adherence thereof.

2.1.2 Program Audit

13. In some circumstances, a wider program (or entity) audit, such as a national program report or
the annual report of the Principal Recipient or its parent company or other principal legal entity,
may be acceptable as an annual financial audit, provided that:
a) it clearly distinguishes Global Fund grants’ income, expenditure and balances;
b) the auditor expresses an opinion on Global Fund-related income and expenditure by
grant separately;
c) the auditor expresses an opinion on compliance of expenditures against the provisions
of the relevant Global Fund grant agreement and applicable local laws and regulations;

2
Such as Fiscal Agents, Fiduciary Agents or any other third party used by the Principal Recipient as a risk mitigation
measure.

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 d) the auditor comments separately on other aspects of the terms of reference for a financial
audit annexed to these auditing guidelines; and
e) the report is submitted to the Global Fund within six months from the end of the reporting
period.
14. For such cases, the terms of reference for the program audit should be reviewed by the Finance
Specialist within the Global Fund Country Team to confirm that they meet Global Fund’s
standard requirements.

2.1.3 Implementer statutory financial audit

15. In some instances, the Global Fund will rely on the implementer’s annual statutory audit,
without separating Global Fund grant-funded financial statements, based on the
implementers’ risk rating and on whether the minimum requirements for the external auditor
eligibility (section 4.2.1) have been fulfilled.
16. In this case, no audit cost would be expected to be covered by the respective Global Fund
grant unless:
(1) the Global Fund Country Team requires the auditor to look at specific internal control
related matters; or
(2) the audit of the respective Global Fund grants was not included in the scope of the
statutory audit.
17. In the case where the Global Fund uses the annual statutory audit of the Principal Recipient, a
Special Purpose Grant Financial Statements Audit will be performed once during the
implementation period to cover the entire implementation period of the respective grant.

2.2 Performance Audit

18. The performance audit is an objective examination of systems, programs or organizations from
the point of view of three of the dimensions of value for money: economy, efficiency and
effectiveness3. Its purpose is to provide an objective analysis to assist implementer’s
management and the Global Fund Country Team to use the information to improve program
performance and operations, reduce costs, and facilitate decision making by parties with
responsibility to oversee or initiate corrective action. It aims to provide a linkage between
financial and programmatic performance with an enhanced focus on the cost incurred in
relation with the results achieved.

19. The performance audit includes three main approaches:

(1) Result-oriented approach, when the auditor verifies that the initial objectives have been
achieved as intended. In this case, the auditor will be requested to use the verified
programmatic achievement and assess whether they have been reached with due
consideration of economy, efficiency and effectiveness;
(2) Problem-oriented approach, in which the auditor analyses the root causes of a problem.
This could include examining the shortcomings in program implementation design or
processes that prevented the achievement of objectives. It could also relate to a process
or a particular activity; and/or
(3) System-oriented approach, which examines the adequate functioning of management
systems.

3
Definition from ISSAI 3100- Performance audit guidelines - Key Principles

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 20. The performance audit would be particularly beneficial for grants presenting performance
challenges at program or activity level, or when the Global Fund would like to have a deeper
understanding of systems functioning and/or grant implementation.

2.3 Systems Audit

21. Systems audit focuses on the design and/or operating effectiveness of an implementer's
internal control system. The objective of the systems audit is to enable the auditor to express
an opinion on whether:
(1) the internal control system set up by the implementer was suitable designed, whether
automated or not. to ensure that risks to achieving program objectives are adequately
managed.
(2) whether processes are properly documented, and key controls formalized; and
(3) the system operates effectively during the reporting period, when the audit is extended to
its operating effectiveness.
22. The auditor should test the existence of internal controls during the reporting period and
whether the control system is operating effectively as designed.
23. Systems audits will be performed when Global Fund’s assurance providers have identified
weaknesses in an implementers’ control environment or to reassure the Global Fund that the
systems that an implementer uses are the appropriate ones to effectively manage grant funds
to support achievement of grant objectives
24. A system audit will be performed at a Principal Recipient or sub-recipient on the basis of the
financial risk level of the grant as well as the materiality of grant funds involved.

2.4 Limited Review

25. Based on the financial risk level of the grant, a limited review may also be performed. The
objective of a limited review is to enable the auditor to issue an opinion on the (1) Income and
Expenditure Statement (IES) showing Global Fund funds received, any other income received
and all grant expenditures4 and (2) a statement of cash balance. To do so, the auditor will
comply with the International Standard on Review Engagement 2400/2410 (ISRE 2400 or
2410) and perform inquiries and analytical procedures to obtain sufficient evidence to form a
conclusion on the above-mentioned financial statements.

2.5 Asset Safeguard Engagement

26. The objective of the asset safeguard engagement is to enable the auditor to perform audit
procedures to provide reasonable assurance regarding prevention, timely detection of
unauthorized acquisition, disposal, misuse, loss or theft of program assets5 that could have a
material effect on the financial statements or the program’s outcome.
27. The asset safeguard engagement will be recommended on grants with material assets
(whether inherited from previous grants or acquired with ongoing grants) and/or where red flags
on asset management or asset diversions have been identified by the assurance providers
(e.g. External Auditors, LFA, or others).

4 Grant expenditures should be reported against the budget in the same format of the Annual Financial Reporting (AFR)
with all three tables
5 in respect of a Program, means collectively all goods or other tangible or intangible property acquired wholly or partly

using Grant Funds, including, but not limited to, any asset not fully paid for, under such Program;

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2.6 Fraud-related Engagements

28. Fraud-related engagements will be conducted periodically and will be based on prevention and
detection controls around fraud. Forensic audits may be conducted in cases of suspected
fraud, to substantiate indications of suspected fraud and gather evidence that would be
presented in a court of law . It must be undertaken by a specialized forensic auditor or
investigator.
29. Fraud-related engagements would be recommended in instances where:
(1) the Principal Recipients and/ or key sub-recipients would not have been assessed on fraud
management for more than five years;
(2) activities susceptible to fraud and fraud-related red-flag activities constitute a significant
amount of the budget;
(3) minor instances of fraud or inadequate controls on fraud management have been detected
by an assurance provider;
(4) the Global Fund Country Team and/or management of the Principal Recipient requires
assurance of the anti-fraud and corruption control environment; and/or
(5) suspected fraud has been reported to the Global Fund.

2.7 Other Specific Situations

2.7.1 Grant Closure

30. When a grant reaches the end of an implementation period or ends following a decision
by the Country Coordinating Mechanism (CCM) and/or the Global Fund Secretariat, the
grant needs to be closed. The closure period lasts for six months after the implementation
period ends and closure activities should be completed during this time6. This is
specifically relevant to Principal Recipients who will not continue in this role for Global
Fund grants. Generally, the external audit for the closure period is not required except
under certain specific circumstances. Unless waived by the relevant authority7 in writing,
an audit is required when one of the following conditions is met:
(1) The financial risk level as documented and validated (by the Global Fund’s Regional
Finance Manager or Senior Manager, Program Finance and Controlling) in the Integrated
Risk Module is high or very high;
(2) The closure budget is more than 10% of the grant budget or more than US$1 million
whichever is lower; and/or
(3) The previous audit report (the audit of the year before the last year of the implementation
period) has a qualified, adverse or disclaimer audit opinion.
31. If an audit is not required, the Local Fund Agent should be used to provide assurance on the
Financial Closure Report over the grant Closure Period.

2.7.2 Audit of grants involving Common Funding Mechanisms (CFM)

32. When the Global Fund jointly finances a program along with other donors and/or partners which
involves the common pooling of funds and/or a common budget (e.g. as part of a sector-wide
approach (SWAp)), a single financial statement and audit report covering all receipts and
expenditures is acceptable as long as the Global Fund disbursements to the program are
clearly indicated in the notes to the financial statements.

6 For further details refer to OPN on Implementation Period Reconciliation and Grant Closure.
7 The Regional Finance Manager or Senior Manager, Program Finance & Controlling in this case.

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 33. The common distinguishing feature of the CFM is that expenditures cannot always be directly
attributable to the Global Fund. However, provided that Global Fund disbursements can be
reconciled with the overall CFM expenditures, the Global Fund will accept a single financial
statement and audit report which meets the requirements of both the country authorities and
development partners. The Global Fund will determine if the report meets its quality standards.
When the audit arrangements deviate materially from Global Fund requirements (such as a
delayed submission of audit reports), the Global Fund may finance an independent audit to
seek compliance with its requirement for timely assurance.

2.7.3 Audit of grants involving headquarters (HQ)-generated expenditures

34. Expenditure transactions from Principal Recipients or sub-recipients generated in their

headquarters located in a different country to the grant implementation, do not change the
scope of the audit and the relevant offices are responsible to provide the auditors with sufficient
and appropriate evidence of headquarters’ generated expenditures. This is generally the case
for International Non-Governmental Organizations.
35. The Global Fund could agree to have a special arrangement to audit headquarters generated
expenditures centrally. In this case, the Global Fund will advise the in-country auditor (in
writing) to restrict their scope and audit plan to local expenditures only.

2.7.4 Exceptional cases of United Nations-affiliated organizations

36. The Global Fund routinely enters into grant agreements, that may include a Framework
Agreement, with United Nations-affiliated organizations and other non-governmental
organizations. These framework Agreements may include provisions that provide guidance in
relation to audits. Where such organizations (such as UNDP, UNICEF) are appointed as
Principal Recipients or sub-recipients, their policies on accounting, preparing financial
statements, and auditing will apply, as governed by the provisions of the relevant grant
agreement signed with these entities.

2.7.5 Audit of grants using different funds channeling models (Innovative Financing)

37. For effectiveness and sustainability purposes, the Global Fund may be involved in different
models of channeling funds into countries, also known as innovative financing mechanisms.
To date, the Global Fund has mainly been involved in Payment for Results and on Blended
Finance funding models.
38. The audit and assurance approach for countries or implementers willing to use one or more of
these innovative finance mechanisms might be differentiated taking into account the
peculiarities of the arrangement. This could include one or more of the following:
(1) Reliance on statutory audit of the beneficiary;
(2) Grant-specific financial audit;
(3) Any other audit type included in these guidelines;
39. Whichever the case, the audit approach is to be agreed with the Financial Risk and Assurance
Team at the Global Fund.

2.7.6 Single Audit principle

40. In order to gain efficiencies in the audit process and improve the quality of audit deliverables,
the Global Fund initiated an audit approach with certain INGOs regarding the engagement of
corporate auditors of the relevant INGO, or a selected audit firm. These organizations would
annually perform a single audit of all grants implemented by the INGO on behalf of the Global
Fund. Upon completion of the audit, the auditor should issue grant-specific audit reports and

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 opinions, including the grant-specific management letters as required by the terms of the
agreement with the Global Fund.

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3 Audit scope and risk-based differentiated approach

3.1 Grant consolidated audit, or grant-specific audit at SR level

41. As a general standard, the Global Fund requires a consolidated grant-specific audit. This
implies obtaining one overall audit opinion combining the balances and transactions of the
Principal Recipient and sub-recipients funded by the Global Fund grant as well as all other
service providers stated under the grant agreement. Differentiated fiscal periods for Principal
Recipient and sub-recipient should not prevent the consolidation of financial statements. If the
accounting framework (policies) used by the sub-recipient differs from the one used by the
Principal Recipient, the sub-recipient should report using the Principal Recipient’s accounting
framework to enable the grant level consolidation and reporting of grant expenditures to the
Global Fund by the Principal Recipient. Principal Recipients should coordinate with the Sub-
recipients to receive the necessary financial reports to enable the timely consolidation of the
financial statements.
42. In exceptional circumstances, separate sub-recipient audits may be acceptable where:
(1) The time taken to perform a consolidated audit of expenditures and submit the audit
report would extend beyond the required deadline, which is within six months from the
audited period end-date; or
(2) The level of fiduciary risk is considered high, a full scope audit of some sub-recipients
may be required by the Global Fund.
43. When a sub-recipient is being audited separately, these auditing guidelines would fully apply.
The decision to audit a sub-recipient separately as a standalone audit must be validated in
writing by the Global Fund Regional Finance Manager, based on the recommendations of the
Finance Specialist within the Country Team, in consultation with the Financial Risk and
Assurance team.

3.2 Risk level determination

44. The Global Fund Board-approved risk management framework contemplates risk
differentiation, permitting the use of different assurance models based on the levels of risk), A
risk-based approach has been developed to inform the decision on the type of audit to be
undertaken:
(1) The Global Fund country classification (e.g. High Impact, Core and Focused) aligned
to the Global Fund differentiation process;
(2) The Global Fund grant financial risk rating based on the Integrated Risk Management
(IRM) module which determines the financial risk level of the grant, where risks are
mapped into nine grant-facing corporate risk categories (Program Quality, Strategic
Data Quality and Availability, Human Rights & Gender Inequality, Grant-Related Fraud
& Fiduciary, Accounting and Financial Reporting by Countries, Quality of Health
Products, Procurement, In-Country Supply Chain and National Program Governance
and Grant Oversight); and
(3) The total amount of grant funds for the Implementation Period.
45. Upon determination of the grant profile based on the criteria described previously, the
corresponding type of audit engagement will be determined and approved by the Regional
Finance Manager8.

8 Or the senior manager, Program Finance and Controlling mainly in the focused countries

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3.3 Audit package (risk-based matrix)
Figure 1: Audit package

46. Two audit packages are available based on risk approach (Figure 1).

3.3.1 Standard audit package

47. The standard audit comprises a grant-specific financial audit and could be coupled with one of
the other types of audit to review other possible risk areas. The financial audit could be
preceded by an interim audit providing an early warning report.
48. When the Global Fund Country Team opts for a performance audit in a given year, the financial
audit might not be required for that year. In such cases, the financial audit of the subsequent
year will cover the previous and the current year.
49. The statutory auditor of the Principal Recipient or a private audit firm selected by the Principal
Recipient can perform the audit work. The Global Fund can select an auditor if the statutory
auditor of the Principal Recipient does not meet the minimum criteria as per section 4.2.1. of
these guidelines.
50. Standard audit packages will be systematically performed when grants are rated with medium
to very high financial risk levels.

3.3.2 Tailored audit package

51. The tailored audit is characterized by placing reliance on the statutory audit of the Principal
Recipient for year 1 and year 2 of the respective implementation period, if the established
criteria9 to use the statutory auditor is satisfied.
52. When the criteria are not satisfied, the statutory audit of the Principal Recipient cannot be used
for financial assurance on Global Fund grants, and a limited review engagement will be
performed by an audit firm meeting the criteria instead.
53. In the third year of the respective implementation period (or earlier if required), a grant-specific
financial audit of the grant covering the entire implementation period is requested. The tailored

9 detailed in the section 4.2.1 below

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 audit package will be systematically performed when grants are rated with low to medium
financial risk levels.
Table 1: Risk based audit package

Financial Risk Very High High Moderate Low

level
Country Grant Total
classification Budget (TBg)
High Impact/ Standard Standard Tailored Tailored TBg<=10m$
Core Standard Standard Standard Tailored 50m$<TBg<10m$
Standard Standard Standard Standard TBg>= 50m$
Focused Standard Standard Tailored Tailored TBg<=10m$
Standard Standard Tailored Tailored 50m$<TBg<10m$
Standard Standard Standard Tailored TBg>= 50m$

(1) The grant total budget is the Board-approved budget for a given implementation period.
Table 1 provides the main scenarios based on which the different audit packages
should be allocated.
(2) Any modification to the audit package as proposed in this matrix will require approval
by the Global Fund Regional Finance Manager. For High Impact and Core countries,
the audit package should systematically follow the categories in Table 1. With approval
of the Global Fund Regional Finance Manager, the Finance Specialist in the Country
Team may opt for a Standard approach even when a tailored approach is proposed.
This will not be the case in Focused countries where a more flexible risk-based
approach could be used.

3.4 Audit Terms of Reference (ToRs)

54. Principal Recipients must apply the standard ToRs for all types of audits, unless existing audit
ToRs incorporate Global Fund standard requirements outlined in these guidelines, in which
case these can be retained. Those ToRs will be reviewed by the relevant Global Fund Country
Team (or the Local Fund Agent) to confirm that they meet Global Fund standard requirements
(auditing standards, accounting standards, financial statements, and others) as outlined in
these guidelines and should be approved by the Global Fund Regional Finance Manager.
55. In addition to the standard audit ToRs, the Global Fund may require additional procedures to
be planned and carried out by the auditors. The nature, timing and extent of these procedures
and the form of reporting will be agreed between the Global Fund and the auditors prior to the
commencement of the assignment and the additional costs, if any, will be covered by the grant.
56. In the case of Focused Portfolios, the Global Fund will review and approve the relevant terms
of reference once during an implementation period. However, the relevant terms of reference
may be reassessed in certain exceptional situations, such as:
• material changes in implementation arrangements;
• heightened risks flagged as part of the capacity assessment and/or the annual
Integrated Risk Module (IRM) review of the Principal Recipient. It can also be emerging
risks trends from routine oversight and monitoring of key deliverables by an assurance
provider during implementation; and
• changes in the scope of the audit as required by the auditing guidelines.

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4 Auditor selection and accreditation

4.1 Type of auditor for Global Fund grants

4.1.1 Government Supreme Audit Institutions (SAIs)

57. For Global Fund grants managed by a governmental Principal Recipient (e.g. state-owned
entity or statutory authority), the SAIs are the preferred auditors, provided they comply with
minimum requirements established in these guidelines (section 4.2.1).
58. The host country’s principal government audit agency, often referred to as the ‘Supreme Audit
Institution’ (SAI), may be required by national legislation to audit Global Fund grants being
implemented by government agencies.
59. The Global Fund may either seek the independent advice of any regulatory or representative10
body charged with overseeing the quality of work of its members, perform a due diligence
review or inquire with donors working locally to provide a reference as to the SAI’s suitability.
60. When the Global Fund determines that the SAI does not meet the required standards, the SAI
may propose sub-contracting the audit work to an independent firm under the overall
responsibility of the SAI. If such an arrangement would infringe the local legislative
requirements, the Global Fund will decide the most appropriate grant audit arrangements in
consultation with the Principal Recipient.
61. When the audit field work and/or preparation of the audit report is contracted to another party
by the SAI the same list of minimum requirements applies as in the section 4.2.1.

4.1.2 Corporate or institutional auditors

62. Whenever possible, the Global Fund will use corporate or institutional auditors of Principal
Recipients to leverage their knowledge and to reduce the workload on the Principal Recipient.
This can be done when the auditors meet Global Fund requirements and when the Principal
Recipient is willing to share its audit report. The corporate or institutional auditor refers to the
audit firm engaged by the Board of Directors to provide an independent audit opinion on the
organization’s consolidated financial statements.

4.1.3 Contractual auditors

63. Contractual auditors will be selected in instances where the SAI or the corporate auditors do
not comply with minimum Global Fund requirements as described in section 4.21. Private audit
firms would provide this service and be appointed following a competitive tender process. It is
advisable that the contract covers the entire implementation period, with annual renewal to be
subject to satisfactory performance.
64. When Global Fund grants are managed by the same implementing entity as another donor,
the Global Fund may, in accordance with the Global Fund Procurement Regulations, decide to
use the auditor selected by this donor provided:
(1) The selection process was open and competitive11; and
(2) The auditor meets the minimum requirements as described in section 4.2.

10 An example body would be the AFROSAI-E and CREFIAF (Anglophone and Francophone Africa SAIs respectively).
11 This would not apply in the case of a Supreme Audit Institution.

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4.1.4 Regional Auditor

65. The regional audit approach consists of using one auditor for several grants across different
countries in one or more regions as per Global Fund country classification. Having one auditor
across different countries enhances the interaction, the consistency of the process and the
quality of the deliverables.
66. The relevant Global Fund Country Teams can opt to include their grants as part of the regional
audit. In this case the Global Fund will select the regional auditor. The audit costs will be
charged to the relevant grant(s).

4.2 Auditor selection and accreditation

4.2.1 Minimum requirements for grant’s auditors

67. The following are the minimum requirements for an auditor of a Global Fund grant. The auditor
must:
(1) Included on an accredited list of auditors of a recognized donor12 with operations in
the relevant host country13. In the case of SAIs the auditor should be accredited as
meeting required standards by any relevant authority which is qualified to assess work
standards14. If in doubt about the issue of accreditation, the Global Fund should be
consulted;
(2) An independent firm, free from conflicts of interest with the implementing partner,
CCM, LFA, and other assurance providers for the grant, and the respective Global
Fund country team;
(3) Professionally competent and have experience in planning and conducting audits of
this nature;
(4) Eligible to practice as an external auditor and express audit opinions pursuant to the
laws, rules and other requirements of the country where the grant is implemented;
(5) Aware of the Global Fund’s Code of Conduct for Suppliers and compliant of its
provisions. The relevant implementer will ensure its compliance or take corrective
measures if not, including dismissal.
68. The Global Fund reserves the right to provide its own pre-qualified shortlist of acceptable
audit firms under certain circumstances.

4.2.2 Approval procedures

69. The selected auditor, including existing PR auditors, must be approved by the Global Fund.
Apart from the Supreme Audit Institutions, the auditor must be selected based on a competitive
process. The following are indicative processes to follow:
i. The Principal Recipient administers the tender for the audit, but the Global Fund must
approve the final selection of the auditor (through the Global Fund’s Finance Specialist).

12 For example: World Bank, EBRD, OIG/RIG (USAID), European Commission (Court of Auditors).
13 Where the list of accredited auditors does not exist, the Finance specialist should consult with the partners in-country,
consult with the LFA or select through an open process one of the audit firms in the relevant Host Country that have
satisfactorily audited the grants in the past.
14
In determining the suitability of the SAI, the Global Fund will also consider factors such as the SAI’s ability to
incorporate the elements of the Global Fund’s standard terms of reference and scope of work as well as adherence to
reporting timeliness as described in these guidelines.

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 When a list of approved auditors exists, the Principal Recipient will only provide a tender
for the auditors on this list, exclusively;
ii. The Principal Recipient submits the tender file to the Global Fund Country Team, together
with all documents related to the audit tender for approval. The Principal Recipient makes
a report of its recommendations to the Global Fund Country Team in a timely manner so
that the audit and other deliverables are not delayed.
iii. The Finance Specialist in the Global Fund Country Team will, in some cases, request the
LFA to review the recommendations and supporting documentation to confirm that the
Principal Recipient’s procedures and the tender process were followed. The Global Fund
Country Team endorses the selection of auditor or refers to the Principal Recipient if not
in agreement.
iv. The auditor must confirm in writing any conflicts of interest prior to engagement. Conflicts
can only be waived in agreement with the Global Fund Country Team and the Regional
Finance Manager or the Senior Manager, Program Finance & Controlling for focused
portfolios. The Global Fund country team will seek guidance on any special COI matters
with the Global Fund Ethics Office.
v. In exceptional circumstances, the Global Fund may decide to procure the external audit
on behalf of the implementer. This will be communicated by including this aspect in the
grant confirmation or through an official letter. The Global Fund will administer the tender
and the selection process and the fees will be paid through the grant. The auditor
selection will be approved by the Global Fund15. This practice will occur when there are,
for example: capacity issues at implementer level, historic delayed procurement at
implementer level, poor performance by previous external auditors, high risk
environments, delayed submission of external audit reports, and others.
70. The Global Fund may approve the use of an existing or incumbent auditor provided they meet
the standards required in section 4.2. For grant-specific financial audits, the Global Fund
reserves the right to require a retendering when auditor has already been appointed.
71. In the case of Focused portfolios, the LFA will conduct the review of the auditor selection
process and the selected auditor will be retained by the Principal Recipient for the entire
implementation period, subject to satisfactory performance as per section 4.4 and the
requirements in section 4.2.1.

4.3 Appointment of the auditor

72. Audit arrangements should be agreed between the Global Fund and the Principal Recipient
prior to signing the grant agreement, specifically during grant making. This includes such
issues as the overall approach to selection and approval of the auditor. The main features of
the auditor’s proposal, including staffing and coverage, described during the tender process
will be compared to the final contract with the auditor.
73. The auditor should be selected within three months from signing the grant agreement and the
engagement will run for no longer than the end of the implementation period of the ongoing
grant or three years in total16.

15
Selection must be approved by the Global Fund Regional Finance Manager and Head of Department for Program Finance &
Controlling and validated by the Financial Risk and Assurance team.
16
For instance, for an implementation period of 3 years, the auditor could be appointed for up to 3 years. However, if an
auditor is appointed after the 2nd year of the implementation period, the Principal Recipient will have the choice to appoint
the auditor for either a period of up to the end of implementation period of the grant or 3 financial years maximum. The
annual renewal of the auditor will be based on its performance. Refer to 4.4

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4.4 Auditor performance assessment, rotation and termination

74. The auditor’s performance will be assessed by the Global Fund and by the CCM, when capacity
allows. The Global Fund may request the auditor to explain its quality assurance and internal
compliance procedures and how they apply to the Global Fund assignment. The auditor is
required to make its audit working papers available to the Global Fund if requested.
75. The Global Fund has no specific policy of auditor rotation. The Global Fund respects best
practices promulgated by the relevant professional body to which the audit firm belongs.
However, if there is any evidence that the auditor is not performing its duties in a fully
independent and professional way, the Global Fund may require a retendering of the audit.
Good performance will be evaluated based on: (i) timeliness of the audit report, (ii) compliance
of the audit with the agreed terms of reference, (iii) technical soundness of the audit report,
and other criteria that the Global Fund would deem appropriate.
76. Principal Recipients must notify the Global Fund Country Team and seek the Global Fund’s
non-objection in writing, prior to terminating a contract with an existing auditor. Notification must
include detailed reasons for termination and plans to enter into another audit arrangement. Any
alternative arrangements must meet Global Fund’s minimum requirements. The Global Fund
may decide not to object to the termination of an audit contract where this is in the interest of
auditor independence and would be in compliance with international best practice.

4.5 Audit Fees

77. The Global Fund grant audit fees may be financed from the Global Fund grant budget.
Similarly, separate sub-recipient audits agreed with the Global Fund should be financed
through the grant. However, the fees normally associated with the annual audit of the program
or institutional financial statements of a Principal Recipient, which would otherwise have been
incurred regardless of the Global Fund grant, will not be financed by the Global Fund. Actual
incremental audit fees associated with fulfilling the Global Fund audit requirements may be
financed through the grant.
78. The Principal Recipient must demonstrate that the audit fee has been agreed in a fair and
transparent manner and its payment based on an agreed schedule. The Global Fund reserves
the right to be directly involved in the negotiations or to request the LFA to represent the Global
Fund. The Global Fund may also require that the audit fees be paid by direct disbursement to
the auditor rather than through funds disbursed to the Principal Recipient, in accordance with
the Operational Policy Note on Annual Funding Decisions and Disbursements.
79. In exceptional circumstances as described in 4.2.2, the Global Fund may decide to procure the
external audit on behalf of the implementer. In such cases, the Global Fund would determine
that the work has been performed to the required standard and approve the payment to the
auditor.

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5 Accounting Framework and financial statements of
financial audit

5.1 Accounting Framework and Special Purpose Grant Financial Statements

5.1.1 Accounting Principles, Policies and Basis

80. The Global Fund encourages implementers to follow applicable accounting standards and
applicable laws and regulations for selecting the basis of accounting (such as cash, accrual,
modified cash or modified accrual basis). The selected accounting basis should be clearly
defined and described in the accounting and financial manual and applied consistently. This
includes the recognition and measurement of income, expenses, assets and liabilities.
81. Accounting principles are a set of rules, standards and guidelines used by an organization for
the recording and reporting of financial information. The implementer must identify and follow
the applicable accounting standards, which may include:
• International Financial Reporting Standards (IFRS);
• International Public Sector Accounting Standards (IPSAS);
• National accounting standards; and
• Any other Generally Acceptable Accounting Principles (GAAP)17.
82. Accounting policies are the specific principles, bases, conventions, rules and practices applied
by an organization when preparing and presenting financial statements. The implementer must
select and apply the appropriate accounting policies consistently for similar transactions as
well as for other events and in other conditions.

5.1.2 Preparation of the Principal Recipient’s Financial Statements

83. There are two types of financial statements that can be accepted for the financial audit: the
implementer’s own financial statements or grant-specific ones. In both cases, the responsibility
for the preparation of consolidated grant financial statements lies with the Principal Recipient.
84. When the Global Fund accepts to rely on the implementer’s own financial statements (e.g.
tailored audit package), the implementer must follow its own accounting framework. The
implementer will indicate whether their financial statements have been prepared following the
National Accounting Framework or any internationally recognized accounting framework.
85. The financial statements should be directly derived from the accounting or reporting systems
of the relevant Principal Recipient or sub-recipient. If a local reporting framework is used, it
should be in line with the internationally accepted standard. Any material deviations should be
brought to the Global Fund’s attention before the audit and in the notes to the financial
statements. The auditor will be requested to draw the reader’s attention to any deviation from
the accounting standard used by the Principal Recipient.
86. Changes (if any) in the accounting basis should be dealt with according to the applicable
accounting standard. Impact of changes in accounting policy, management judgements and
estimates should be clearly identified and reported in the financial statements of the reporting
entity.

5.1.3 Special Purpose Grant Financial Statements for Financial Audit

87. The Special Purpose Grant Financial Statements shall be presented in the following order:

17
This may include US GAAP and UK GAAP etc.

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 i. In the currency of the grant agreement18, an Income and Expenditure Report showing
Global Fund funds received, any other grant related income received, and all grant
expenditures for both current and cumulative periods. Grant expenditures and variances
should be reported against the budget as defined in the grant agreement for the
respective period;
ii. Any other notes or footnotes applicable;
iii. Supplemental statements of advances and fixed assets, including:
(1) A statement showing sub-recipient advances and reconciliation of the total amount of
grant funds advanced by the Principal Recipient to sub-recipients and total grant cash
balance with sub-recipient recorded expenditure and Principal Recipient /sub-recipient
cash balances at the end of the reporting period;
(2) Summary statement of assets showing program assets purchased with grant funds.
This summary statement should show the assets brought forward from previous
periods (opening balances) as well as the additions, disposals, write-offs of the period
being audited and the closing balance19; and
(3) The notes to the supplemental statements. These notes include information that would
enhance a user’s understanding of the supplemental statements (significant
assumptions, accounting estimates and related disclosures) as well as the necessary
tax information20.
88. See annex 1 and 2 for the formats of the various components of the financial statements.

5.1.4 Specific case of direct payment to a third party

89. At its own discretion, the Global Fund may decide to contract third party entities directly. This
relates to fiscal agents, fiduciary agents, or auditors. Similarly, the Principal Recipient may opt
to use the Pooled Procurement Mechanism in which the Sourcing Team at the Global Fund
would procure commodities for the Principal Recipients.
90. In these cases, the Global Fund will make direct payments to these organizations. In the case
of the Special Purpose Grant Financial Statements, the Global Fund requires Principal
Recipients to include the disbursement made and the related expenditure in the financial
statements. Actual expenses should be booked based on the final invoices.
91. The auditor should contact the relevant Global Fund Country Team to confirm amounts and
status of delivery of goods of services.

18
The statements may be presented in local currency, but the grant reporting currency equivalents must be shown
19
The Principal Recipient must maintain a fixed asset register which could be required when needs by the Global Fund
Country Team and the different assurance providers.
20
Refer to the Principal Recipient tax information described in the Core PUDR guidelines for relevant details.

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6 Auditing and Assurance Engagement Standards

92. Audits described in these guidelines should be conducted in accordance with the International
Standard on Auditing (ISA) or, for governmental auditors, the International Standards of
Supreme Audit Institutions (ISSAI).
93. More specifically,
• The Financial Audit should be conducted in accordance with International Standards
on Auditing (ISAs), specifically, in accordance with ISA 800 Audits of financial
statements prepared in accordance with special purpose frameworks and the relevant
standard for government auditees or International Standards of Supreme Audit
Institutions (ISSAI). It is also recommended that auditors should follow local standards
that were issued to compliment ISA 800. Reporting on donor funding engagements,
should also be observed.
• Systems Audit and Performance Audit will be conducted in accordance with the
International Standard on Assurance Engagement (ISAE 3000 for Assurance
Engagements other than Audits or Reviews of Historical Financial Information), or the
International Standards of Supreme Audit Institutions (ISSAI), or any other relevant
international standards.

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7 Audit Report and Opinions

7.1 Grant specific Financial audit

94. The format and content of grant specific audit reports will closely follow the International
Standard on Auditing 700 (Revised) as shown in the illustrative comprehensive auditor’s report
in Annex 3 of these guidelines. The auditor should provide:
(1) A table of contents and a summary;
(2) The auditor's report on the Special Purpose Grant Financial Statements;
(3) The auditor’s report on compliance with the grant agreement21; and
(4) The Management Letter.
95. The Management Letter shall make specific reference to any findings on internal controls
weaknesses on the following key functional areas:
(1) Financial management22;
(2) Sub-recipient management;
(3) Program management;
(4) Stock management;
(5) Procurement management;
(6) Compliance with grant agreement23 and applicable law; and
(7) Follow-up on previous audit report.
96. The auditor will categorize each finding into one of the six sub-categories of Global Fund
defined financial risks and provide a summary table showing the findings per sub-risk category
and grading. The six categories are:
(1) Inadequate Flow of Funds Arrangements;
(2) Inadequate Internal Controls;
(3) Financial Fraud, Corruption and theft;
(4) Inadequate Accounting and Financial Reporting;
(5) Limited Value for Money; and
(6) Inadequate Auditing Arrangements.
The definitions of each of these categories is provided in the Global Fund Guidelines on
Financial Risk Management.
97. The auditor is also required to populate the schedule of non-compliant expenditures per the
template included in the terms of reference for external financial audit of Global Fund supported
programs.

21
The definition of compliance for the Global Fund is framed, among others, by the provisions of the relevant grant
agreement specifying that the Grantee shall implement the Program in accordance with the detailed Program budget
agreed with the Global Fund and shall take all appropriate and necessary actions to comply with (1) the Global Fund
Guidelines for Grant Budgeting (2017, as amended from time to time), (2) the Health Products Guide (2017, as amended
from time to time), and (3) any other policies, procedures, regulations and guidelines, which the Global Fund may
communicate in writing to the Grantee, from time to time .
22
Includes all other key processes not listed in this paragraph.
23 Non-material instances of non-compliance should be communicated through the Management Letter.

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7.2 Systems Audit

98. The format and content of the audit reports should closely follow the illustrative report shown in
Annex 4 and 5 of these guidelines. The auditor should confirm the existence of internal controls
and provide an opinion on the design of the controls as a first step. Should this opinion be
qualified or adverse, the necessity to test the control for operating effectiveness must be
discussed and agreed with the relevant Global Fund Country Team.

7.3 Performance Audit

99. Unlike the previous type of reports, the format and content of the Performance Audit report is
specific to each assignment. The content of the terms of reference must be agreed by the
relevant Global Fund Country Team and may influence the reports structures.

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8 Submission and review of the audit report

8.1 Audit reporting cycles

100. The annual period to be audited should be aligned to the grant annual reporting cycle shown
in the summary budget and Performance Framework included in the grant agreement. Any
deviations should be agreed in advance in written form with the Global Fund. When the first
period to be audited is less than six months from the grant start date, that period may be
extended to cover the period from the grant start date until the end of the second year of the
implementation period 24 provided that the maximum length of audit period is not more than
eighteen months.
101. When the grant’s implementation period is extended, the last financial statements period and
audit report cycle should be aligned to the cycle in the updated summary budget reflecting that
extension. In this case, the audit period will most likely overlap two Allocation Utilization
Periods (AUP). The Financial Statements prepared by the Principal Recipient must distinguish
Revenues and Expenditures for each AUP.
102. An audit period should not overlap two implementation periods. This could only be the case
when relying on statutory audit as presented for the tailored audit package (section 3.3.2.).
103. When the tailored audit package is selected, the grant specific financial audit at the end of the
grant, should cover the entire Allocation Utilization Period. In those cases, the Global Fund can
request the auditors to produce an interim audit report focusing on the controls prior to the end
of the grant.

8.2 Due date

104. The audit report and the Management Letter (where applicable), should be submitted to the
Global Fund within six months after the end of the audited period. The reports would be
considered as received only when both documents, duly signed by the auditors, are provided
to the Principal Recipient and to the Global Fund. Successful reception of the audit report and
Management Letter also implies that all reiterations between the Principal Recipient and the
auditors including review by the Global Fund or any of its agents must be completed and
finalized before the six-month submission deadline. The Principal Recipient should ensure the
auditor sends an electronic copy of the reports25 directly to the Global Fund.

8.3 Format of submission

105. All submitted audited financial statements submitted must be in a format that cannot be
altered or changed (such as .PDF), with all pages in sequence. The Global Fund will not accept
audited financial statements that are incomplete, unsigned or have been altered.

8.4 Review and approval of audited financial statements

106. The Finance Specialist in the Global Fund Country Team reviews the submitted report(s) and
Management Letter(s) and may request the LFA to equally review them. The Finance
Specialist and/or the LFA shall follow up on specific aspects such as compliance with the terms
of reference and progress towards implementation of past recommendations.

24 For example, assuming a Principal Recipient has a fiscal year end date of 31 December with an implementation period
start date of 1 August 2019, the first audit period coverage will be from 1 August 2019 to 31 December 2020 instead of
the 5-month period ending 31 December 2019.
25
This is the responsibility of the auditor and should be mentioned in the contract between the Principal Recipient and
the auditor.

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 107. The review will flag critical issues per key area of risks that must be addressed as part of the
management action plan. This will be communicated to the Principal Recipient. The
implementation status of previous audit findings will also be reviewed. The Global Fund
reserves the right to request the Local Fund Agent to attend the audit clearance meeting
involving the auditee and auditor.

8.5 Refunds

108. Under the terms of the relevant grant agreement the Global Fund may require a refund from
the Principal Recipient in instances when the audit has identified ineligible or unsupported
expenditures financed by the Global Fund resources. The recovery process will be done in
accordance with the Operational Policy Note on Recoveries.

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9 Roles and Responsibilities

9.1.1 CCM

109. When the CCM has set up an Audit and/or Ethics, or equivalent Committee, the Committee
should have the right of objection to the proposed auditor on grounds of independence or other
substantive reasons. While most CCMs are not equipped to deal with the technical aspects of
auditor selection, a CCM could perform this duty if it has a finance sub-committee or members
with experience in auditor selection and management. The CCM may oversee the auditor
selection process if performed by the Principal Recipient.
110. The CCM or the relevant Finance sub-committee should receive a debriefing from the
auditors on the main outcome of the audit.

9.2 Principal Recipients

111. Principal Recipients, in accordance with the terms of the relevant grant agreement, must
ensure that all books and records and details of the consolidation work done with the sub-
recipients reporting, is available to the independent auditors, all accounting entries and
adjustments are made, and all other necessary steps are taken to enable the auditors to
complete their work.
112. The Principal Recipient shall maintain proper accounting books, records, documents and
other evidence, adequate to show, without limitation, all balances, cash flows, costs incurred,
and revenues earned by the Principal Recipient and sub-recipients for the program included in
the grant agreement and the overall progress toward completion of the program. The grant’s
financial records must be kept in the possession of the Principal Recipient and sub-recipients
for the period stipulated in the relevant grant agreement, generally seven years from the date
of last disbursement of the grant or for any additional period as may be required under the
country’s legislation.
113. The recipient must engage an auditor based on the minimum requirements set out in these
guidelines, facilitate the conduct of the audit, and submit the audit report to the Global Fund
and respond to queries from the Global Fund or the LFA. The Principal Recipient must ensure
compliance of the audit reports with the term of reference as part of the review of the draft
report. The Principal Recipient must respond to and implement audit recommendations, as
necessary.

9.3 The Local Fund Agent

114. The LFA, as another control function used by the Global Fund for assurance purposes, may
be requested by the relevant Global Fund Country Team to attend the audit planning and
debrief meetings. In these meetings, the role of the LFA is to understand and provide feedback
to the auditor where gaps are identified. The LFA should inform the Global Fund whenever
they note an important gap or technical issues.
115. As part of the auditor risk assessment and understanding of the Principal Recipient risk
profile, the auditor should contact the LFA. This should be done in coordination with the
relevant Global Fund Country Team. The Global Fund expects full cooperation of the LFA
whenever they receive such request from the Global Fund Country Team or the auditor.

9.4 The Global Fund Secretariat

116. The auditor must be acceptable to the Global Fund, who is responsible for approving the
audit arrangements using the advice of the LFA or other partner(s) as applicable.

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 117. The Global Fund will approve the short list of possible auditors and the audit tender
documents prior to publication, and the final selection of the auditor of the Principal Recipient.
In exceptional cases, the Global Fund will manage the entire selection and contracting process.
When separate standalone sub-recipient audits are being conducted, the same rules shall may
apply to these sub-recipients.
118. The Global Fund, through the relevant Country Team, monitors the receipt of audit reports,
reviews and accepts the reports and seeks an understanding of the actions to be taken. The
Global Fund Country Team closely monitors the implementation of audit recommendations and
assesses performance of the Principal Recipient in acting on and clearing recommendations.
The Global Fund may decide to take certain actions regarding delayed or problematic audit
reports, for example: revision of disbursed amounts, setting deadlines for completion of certain
tasks, change of implementation arrangements, terminate the auditor contract.
119. The Global Fund requires a high standard in the quality of an audit. In situations when the
Global Fund does not accept the report, the auditor and the Principal Recipient should
complete the necessary actions in order to submit an acceptable version. The final payment of
the audit will be made upon acceptance of the audit report by the Global Fund. During this
period, the audit fees should be reported by the Principal Recipient as accrued expense or
committed funds as appropriate under their respective accounting policy.

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