ICV (In-Country Value) audit
An ICV (In-Country Value) audit is an evaluation conducted by a certified ICV auditor that seeks to establish whether a specific company has adhered to the provisions of the ADNOC (Abu Dhabi National Oil Company) ICV Certification Program. The ICV Program was launched in January 2018, and it seeks to improve the participation of local firms and UAE citizens in the economy of the country.
Under the ICV Program, businesses are rewarded for having a high level of in-country value (ICV) or value-added in the region of goods and services, which means the share of total expenditure that remains within the UAE and helps sustain the local economy. The In-Country Value (ICV) Program implemented in the UAE is focused on developing the economy by promoting higher expenditure on local goods and services, UAE nationals employment, and knowledge and technology transfer. To prove adherence to these criteria, companies need to undergo an ICV audit.
Who performs ICV Audits?
ICV Audit is mandatory for companies conducting business with ADNOC, subsidiaries, and other government entities in the UAE that have adopted the ICV Program. A high ICV score is vital for companies with a desire to win new contracts or renew existing ones with these entities. ICV Audit helps companies to identify gaps and errors in systems. All the suppliers of ADNOC are obliged to undergo this ICV audit. The In-Country Value (ICV) program of ADNOC assists in localization and employment creation.
At Al Mushthary, a recognized and approved audit firm in ICV audit, we are here to ensure that you can take on the complexities associated with the ICV audit process even as we help you get to understand your ICV audit scores and enhance your ICV score strategically in the UAE.
The main consideration of ICV Certification
- Financial Statement: The ICV certification is based on the most recently audited IFRS and should not be older than two years ago in the certification year.
- New company: New businesses (that is, those less than 10 months old) can rely on management accounts for up to 10 months for ICV calculation.
- Validity: The ICV certificate remains valid for a period of 14 months from the date of the audited financial statements.
- License: Every license assigned to a company must follow its approval by an ICV certificate. However, if a company has more than one branch in the same Emirate with identical activities and ownership, it will receive only one combined ICV certificate for the entire company.
- ICV Score calculation: The calculation of ICV Scores is done through a defined technique to deduct the economic value added in the country concerning the goods or services offered by the company.
- ICV certificate guidelines: All accounting must separate manufacturing and commercial accounts, while a separate ICV certificate is issued for each license that has manufacturing and commercial licenses.
- Bid Evaluation: The ICV score serves as a main source in the bid evaluation process and adds more weight to suppliers and vendors for awarding the contracts.
- Indirect Benefits: The ICV certification program entertains indirect benefits for companies that are involved with tenders because spending by the ICV-certified suppliers is included in the calculation of ICV.
- Certification process: An ICV Certification is awarded to companies that pass the ICV Audit and score high ICV. This certification remains valid for a period of one year and can be renewed after a successful subsequent ICV Audit.
Key Factors for determining ICV Score
Accredited auditors would assign ICV scores to several suppliers of goods and services. ICV score evaluates the contribution of the economy in terms of that company's products considering them over the lifetime of the company's existence.
The government determines the ICV score using a standardized method that incorporates the following parameters:
- Manufactured goods: suppliers with an Industry license
- Third-party spend: Suppliers without industry license
- Bonus
- Revenue from outside the UAE
- Emirati head Count
- Investment Growth
- Investment
- Emiratization
- Contribution from expatriates
Understanding ICV Audit in UAE
An ICV Audit in the UAE refers to the process through which a company undergoes to prove its compliance with the In-Country Value program. This audit is carried on by a certified ICV auditor, who examines a company’s operations concerning the program that aims at the development of the local economy.
The auditor assesses several key documents such as financial records, procurement information, a list of employees, and others to establish how much of the company’s spending is local, employment of UAE nationals, and what level or type of knowledge or technology was transferred. After this process, the auditor determines an ICV score for the entity which represents the portion of expenditure that an entity can retain in the UAE.
ICV Requirement in the UAE
All companies wishing to work with ADNOC or any of its subsidiaries, as well as with certain governmental bodies in the UAE that implement the ICV Program, have to undergo the ICV Audit and certification process.
Maintaining a high ICV score is very important since it can influence a company’s chances of winning new contracts or renewing old ones with these government organizations.
An ICV audit assists organizations in identifying any gaps or errors present in their internal processes and rectifying them. As a part of the In-Country Value (ICV) Program policy of ADNOC, all its vendors are required to undergo an ICV audit. The In-Country Value Programme aims to increase localization efforts, offer more job opportunities for citizens of the UAE, and enhance the local economy, especially within the oil and gas industries, by fostering the growth of certain essential capabilities within the borders of the nation.
Understanding ICV Improvement Plan in UAE
An ICV Improvement Plan describes a business's plan to raise its In-Country Value (ICV) score in a given amount of time. The goal is to increase the ICV score so that the company can continue to operate and generate revenue.
The ICV Improvement Plan is centered on assisting businesses in putting strategies into place that will raise their ICV score by coordinating their operations with the objectives of the UAE's economic development.
An ICV program focuses on some main areas such as:-
- Boosting domestic investment to support the UAE's economy.
- Acquiring raw materials locally to help domestic vendors.
- Increasing local workforce development and employment by hiring more Emiratis.
- Collaborating with suppliers who have earned ICV certification to increase value-added contributions domestically.
- Creating training courses to help UAE citizens advance their careers and skill sets.
- Encouraging cooperation with regional SMEs to advance the business ecosystem's sustainable growth.
By following these measures, companies can increase their ICV score and hence contribute to the UAE's economic development.
Highlighting the importance of the ICV Improvement Plan
- Increases the global competitiveness and productivity of Emirati businesses.
- Job creation of UAE nationals
- Strengthen the exports and boost economic growth.
- High ICV-scoring businesses are given preference for government contracts.
The nation's vision for economic resilience is strengthened by the ICV Improvement Plan, which keeps the nation at the forefront of the global economy while fostering opportunities for regional companies and industries.
To increase the value of locally produced goods and services, the in-country value improvement plan (ICV) is a framework for a strategy that unites stakeholders from government agencies, businesses, academia, and civil society.
When it comes to helping companies align with the ICV framework, Al Mushthary is a key partner. This reputable accounting and auditing partner helps companies by offering precise ICV certifications, and tactical guidance to raise their ICV scores and regulatory compliance.
By offering professional advice, Al Mushthary helps companies fully capitalize on the ICV plan's opportunities and support the UAE's long-term economic development. Al Mushthary, a top ICV consultant with a proven track record, guides in raising ICV scores and plans to optimize ICV spending.
The 4 Key Objectives of the ICV Audit in the UAE
- Compliance Assessment: The audit assesses whether the entity adheres to the ICV framework and checks effectiveness in hiring Emirates, sourcing locally, investing in UAE businesses, and fostering activities that support economic development.
- Documents Assessments: The auditor will evaluate the company ICV reports and all relevant supporting documents, and test the accuracy of the documents, checking the records of recruiting Emirati employees, local purchasing, and investment in domestic businesses, the statistical reports showing the company’s contribution to the Gross Domestic Product (GDP) of the UAE.
- Data validation: To ensure the correctness of the company’s data, an auditor employs various methods such as interviewing, performing visits, and checking external sources. This gives certainty that the data involved is credible, factual, and consistent with the respective figures of the company.
- Evaluation of the ICV Score: The auditor shall compute the ICV scores of the company in line with the applicable procedures and guidelines. This includes analysis of the ICV targets set for the company and determining the level of such expenditure towards the local economic growth.
The Path to ICV Certification: Ensuring Compliance with UAE Standards
In the UAE, the ICV certificate is awarded to enterprises processing all formalities of ICV audit and adhering to the ICV requirements of the country. To be able to obtain this certification, a company has to be audited by a certified ICV auditor, who assesses various components such as local sourcing of materials, recruitment of UAE citizens, and transferring of skills and technology.
Within the framework of ADNOC’s ICV Program, every supplier must procure and submit an ICV Certification. Furthermore, ADNOC insists that there should be an annual independent verification of the ICV Certificate to validate the accuracy of the ICV figures provided.
- Enhancing Emiratization and Expanding Opportunities for the National Workforce
- Boosting Local Spending on Goods and Services
- Risk Evaluation and Asset Protection
The assessment of the In-Country Value (ICV) has gained prominence in the tender evaluation and award process of ADNOC. ADNOC insists on annual verification of the figures given in the ICV certificate by an external certifying agency.
Al Mushthary, a prominent ICV certification body in the UAE, offers ICV Certification Services to a range of enterprises. They evaluate the ICV-related processes within the businesses, carry out the ICV audit, and assist in controlling the ICV scoring so that the company’s activities comply with the legislation of the UAE, thus enabling the companies to increase their localization and get more public tenders.
Important Points on ICV Certification
- Audit Dimensions: The ICV certification is reliant on the latest available audited IFRS financial reports of the entity, which should not be older than two years from the year of the certification.
- New undertakings: In the absence of audited books of accounts for newly established ventures (less than 10 months old), management accounts covering a period of up to 10 months will be acceptable for ICV score determination.
- Period of Validity: The ICV certificate is valid for 14 months from the date of issue of audited financial statements.
- ICV Score Calculation: The calculation of ICV Score is done through a set methodology, which quantifies the economic value of the goods or services that the company does within the UAE.
- Impact on the Assessment of Tenders: The ICV score has great significance in tender evaluation, giving preference to suppliers, vendors, and contractors with higher ICV scores, therefore affecting the awarding decisions.
- Secondary Advantages: The ICV certification program has advantages even for organizations that are not directly at the center of the tenders, as the domestic expenditure on ICV-certified suppliers is included in the overall ICV measure for a country.
- Eligibility and Renewal: Companies that complete the ICV audit and attain a considerable ICV score qualify for ICV Certification which is issued for one year and may be extended upon passing another ICV audit.
The Steps Involved in ICV Audit
In the UAE, the ICV Audit process is the official evaluation of a company, which an accredited ICV auditor carries out to ascertain a company’s compliance with the ICV Program. The procedure comprises the following main steps:
- Defining the Scope
- Data Collection
- Data Review
- ICV Score Calculation
- Audit Report Preparation
- ICV Certification Issuance
The ICV Program requires the companies to comply with its requirements continuously. Therefore, ICV auditors may carry out subsequent audits and evaluations to guarantee that the companies still conform to the requirements of the program and remain compliant over some time.
In a nutshell, ICV Audit and Certification are a must-have for any organization working with ADNOC, its subsidiaries, or indeed any government organizations that are part of the ICV Programme in the UAE. Obtaining ICV certification reflects not only the organization's willingness to support the local market but also increases its probability of obtaining new contracts or extending existing ones.
Trusted ICV Certification Providers in the UAE
Approved ICV Auditors in the UAE are specialized professionals who have been granted the power by the Abu Dhabi National Oil Company (ADNOC) to perform ICV audits for companies registered in the United Arab Emirates. These auditors are completely autonomous and impartial, and their involvement is instrumental in assessing whether a company has met the requirements of the ICV Program.
ICV auditors employ a systematic and comprehensive methodology in evaluating a company’s local spending and its impact on the economy of the UAE. For this purpose, they gather, evaluate as well and interpret relevant financial figures and records to determine and improve the ICV score of the firm, which indicates the percentage of the firm’s expenditure retained within the UAE.
An approved ICV certifying body or audit firm is the only one who can issue an ICV Certificate.
Al Mushthary takes pride in having qualified and certified ICV auditors who are ready to provide ICV audit services for your company within the UAE.
If you have queries or need assistance, please don't hesitate. We are here to guide you.
Call Al Mushthary now and grow from our top-class ICV services!
Get in Touch with us now or book a Free Consultation.
