Sub-recipient Audit Criteria

The UNDP Office of Audit and Investigations (OAI) applies a risk-based methodology for audits of Sub-recipients (SRs), using the basic premise of the risk-based approach to Harmonized Approach to Cash Transfers (HACT) financial audits. The lower the risk category for HACT financial audits that is assigned by OAI to a Country Office (CO), the higher the audit threshold above which the project is required to be audited.  For example, if for a given year the threshold for a country in the high risk category is USD 300,000, then any SR with eligible expenditure totalling USD 300,000 or more in that year has to be audited. 

On an annual basis, OAI can amend the audit criteria and timelines for the HACT financial audits, therefore COs should carefully review the OAI Call Letter for HACT Audit Plans and not rely on the previous year’s Call. 

The once in a lifetime (OIL) audit criterion detailed in the annual OAI Call Letter for HACT Audit Plans applies to cumulative SR expenditure per project, not per country. SRs must be audited at least once in their respective project’s life cycle, in the year subsequent to the year in which the SR’s cumulative expenses (since project start date) reaches the amount detailed in the OAI Call Letter.

The information below helps illustrate the concept:

Country Risk Rating:        Medium (threshold:  $450,000)

Project Number:                                   0000xxxx       

Project start date:                           1 January 2013

Project end date:                            31 December 2018

Sub Recipient FY2013 Expenses Included in FY2013 audit plan FY2014 Expenses Included in FY2014 audit plan FY2015 Expenses Included in FY2015 audit plan FY2016 Expenses Should be included in FY2016 audit plan Amount to be audited for FY2016
1 $50,000 No $50,500 No $40,000 No $160,000 No* $0
2 $40,000 No $160,000 No $130,000 No** $170,000 Yes*** $500,000

 

* Expenses reached $300,000 for FY2016.  SR will be audited under OIL during the year 2017 HACT financial audit exercise.

** Cumulative expenses from FY2013 to FY2015 reached over $300,000.  The CO is allowed to postpone the OIL audit to the year 2016 HACT financial audit exercise.

***  FY2016 expenses did not meet the $450K threshold but because total expenses for FY2013 to FY2015 exceeded $300,000, SR must be audited under OIL.

 

UN entities acting as UNDP SRs are audited under their own audit arrangement, in accordance with the ‘single audit’ principle, and are not covered by UNDP’s audit regime.