CITY COUNCIL AGENDA
THURSDAY, August 17,2023
7:00 P.M. Regular Session
14531 E School St, Amador City, CA 95601
The Agenda can be found on the Cit/s Website: https://amador-city.com/government-agendasminutes/
THE CITY OF AMADOR CITY COUNCIL MEETING WILL BE AVAILABLE VIA ZOOM AND IN PERSON.
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Unless stated otherwise on the agenda, every item on the agenda is exempt from review under the California Environmental Quality Act ("CEQA") per CEQA Guidelines Sections 15060(c), 15061(b)(3), 15273,15378,15301,15323 and/or Public Resources Code Section 21065.
1. CLOSED SESSION - No Scheduled Session
2. CALL TO ORDER AND ESTABLISH A QUORUM FOR REGULAR MEETING
3. PLEDGE OF ALLEGIANCE TO THE FLAG
4. REPORT FROM CLOSED SESSION - Pending discussion
5. PUBLIC FORUM
At this time, the public is permitted to address the City Council on items not appearing on the agenda.
Comments may not exceed 5 minutes. In accordance with State Law, however, no action or discussion may take place on any item not appearing on the posted agenda. The City Council may respond to statements made or questions asked or may request Staff to report back at a future meeting on the matter. The exceptions under which the City Council may discuss and/or take action on items not appearing on the agenda are contained in Government Code §54954.2. Public comment on any item listed below shall be limited to five minutes, unless additional time is permitted by the Mayor/Council.
6. CONSENT AGENDA
Items listed on the consent agenda are considered routine and may be enacted in one motion.
Any item may be removed for discussion at the request of Council or the Public.
A. City Council Minutes of July 20, 2023.
Recommendation: By motion approve minutes as presented.
B. Financials - Fiscal Statement
Recommendation: By motion approve financials as presented.
C. City Council Agenda of August 17, 2023.
Recommendation: By motion approve agenda as presented.
7. INFORMATION/CORRESPONDENSE
A. Committee Reports.
1. ARSA; CIRA; RTMF-ACTC; LAFCO; ACRA; AAD (Air); Homeless task force; Fire; Museum; Short-term Rental; Parks; Design Review; Maintenance; Cemetery; ACBCA
Recommendation: For discussion and staff direction.
8. ORDINANCES & PUBLIC HEARING
A. Outdoor Patio - Dinning Permit (Review of Dining vs. Outdoor Cooking) Recommendation: Discussion for Future Agendo Action Item.
B. Cooking Oil Spill (Main Street Bridge & Patio)
Recommendation: Discussion for Future Agenda Action Item.
9. ADMINISTRATIVE AGENDA
A. ACBCA - Request for Financial Assistance (Dancing in the Streets/Main Street Magic) Recommendation: By motion approve request as presented.
B. Amador County Animal Services Contract.
Recommendation: Discussion for Future Agenda Action Item.
C. Acquiring a CPA Firm.
Recommendation: Discussion for Future Agenda Action Item.
D. ACTC Roads Funding Grant Matching Funds
Recommendation: Discussion for Future Agendo Action Item.
E. Amador County Self-Help Road Tax
Recommendation: Discussion for Future Agenda Action Item.
F. City Manager Salary
Recommendation: Discussion for Future Agenda Action Item.
G. Air BnB / Short Term Rental (STR)
Recommendation: Additional Discussion beyond Committee Reports for Future Agenda Action Item.
H. City Hall Fire Update
Recommendation: Discussion for Future Agenda Action Item.
I. Speed Study on Highway 49 {Amador City to Sutter Creek) Recommendation: Discussion for Future Agenda Action Item.
10. MAYOR AND COUNCIL MEMBER REPORTS
This section is to provide Council members an opportunity to present updates on their activities and to request items be placed on future agendas.
11. CITY MANAGER'S REPORT
This section is an opportunity to provide Council members with a brief status update on staff activities. No action is expected to be taken by the Council.
12. CITY ATTORNEY'S REPORT
This section provides on opportunity for the City Attorney to report on any activities or upcoming legislation of importance to the City. No action is expected to be taken by the Council.
13. STAFF REPORT
A. Permit Log.
B. Transit Occupancy Tax Update
14. FUTURE AGENDA ITEMS
This section provides an opportunity for Council members to request items to be added to the agenda in the future with a majority Council vote.
15. ADJOURNMENT
The next regularly scheduled meeting is September 21, 2023.
AMADOR CITY COUNCIL
MINUTES OF REGULAR MEETING JULY 20, 2023
1. CLOSED SESSION - Amador City Involvement In pending ARSA lawsuit with Sutter Creek and lone - Tabled for now-no material.
CALL TO ORDER AND ROLL CALL - Kel-Artinian, Bragstad, Robinson, Sherrill, Staples present,
PLEDGE OF ALLEGIANCE
REPORT FROM CLOSED SESSION - TABLED FOR NOW - NO MATERIAL PUBLIC FORUMCONSENT AGENDA-Agenda Item C to A and D to B. Kel-Artinlan moved, 2"*' by Robinson, approved unanimously.
INFORMATION/CORRESPONDENSE -
a. Committee Reports
1. ARSA-Cancelled
CIRA - Approved reimbursement for work in cemetery
3. RTMF-Nothing
4. LAFCO - New executive director
ACRA - Website completed, approve cell tower lease of $1,200 monthly
6. AIR-Nothing
7. HOMELESS-Nothing
Fire - Pine Grove Camp cannot clean Amador Creek this year
9. Museum - Roof repaired
10. STR -New ordinance not ready
PARK - Sole Source Resolution to be adopted. Work will be more piecemeal. City will act as General Contractor
12, Design Review - Nothing
13. Maintenance-Nothing
14. Cemetery-Trees trimmed
2. 5.
8. 11.
2. 3.
4. S.
6. 7.
15. ACBCA -Meeting next Thursday
8. ORDINANCES & PUBLIC HEARING
a. Budget - Robinson moved, 2"*^ by Bragstad, approved unanimous
ADMINISTRATIVE AGENDA
a. A CTC Roads Funding Grant Matching Funds -ACTC Director John Gedney to present:
$200,000 incentive to put l/2cent sales tax in place. 10-20 year sunset. A guide to the measure is available. It must be put on ballot. A sub committee to meet regularly. An advisory committee is needed. There is a 25% match for city for projects.
ACES Contract - Moved by Sandy Staples, 2"** by Sherrill, new contract approved unanimously.
Amador Hotel Sewer Rate Resolution #616 - Bragstad moved, 2"'^ by Staples, approved unanimously
City Park Sole Source Funding Resolution #617- Robinson moved, 2"*^ Bragstad approved unanimouslyAmador City Downtown Planters -Councilman Sherrill would like to solicit volunteers to help clean up planters In downtown/bridge area.
Small Town Pride Certificate received from State
City Manager Funding for 23-24 Fiscal year to be on August agenda At this time meeting was adjourned due to extreme heat
b.
c.
d.
e.
f.
9. From: Anne Kel-Artinian [email protected]
Subject: Re: Animal Services
Date: Jun 15, 2023 at 3:08:10 PM
To: [email protected], Dave Groth [email protected] Hi Dave and Pat,
I have been reviewing this also and think that $1200 for Amador City is too high.
Basically, they are telling us that we will be charged proportionally with our population.
Amador City is being charged almost double what would be proportional to our population because they round us up to 1% of the county's population, when in reality, we are .56% of the county's population.
In this chart, you will see that if we are charged proportionally (.56%), we would only pay $6875.13 rather than $12,267. Note that our overpayment is being offset by lone's, Jackson's, Plymouth's , and Sutter Creek's underpayment.
Amador City Analyil* of Animal Services Contract 06152023 I Estimated
.'Difference
I
;be tween
Iproposed and
jaclual
population
based on
proposed
percent
Actual I
Percent of jActual
Population portion
Proposed
percent of
population
Actual
Proposed billing population
59.65% S 732,382.05 i S (3,690.95) ♦ i '
county only 5 736,073-00 60% 22376.20 22264
15.11%| $ 185,463.98 j $ 1,445.98
1448% $174,082.19 1$ 2,332.19
7.46%^$ 91,646.44 1 $ 4,771.44
lone S 184,018.00 15% 5594.04 5638
jackson S 14% 5221.10 5292
Sutter creek
171,75ac»
$ 86.875.00 7% 2640.95 2786
3.04%! $_ 37,336.22 i $ __ _5^^2
0-56%! $ 6,875.13.$ (5,391.87)
Plymouth $
amadorcity
_3^,M3.00
12,267.00
3% 1118.79
372.91
1135
$ 1% 209
T
Total needed Total county
and cities
population
I
from county
and cities $ 1,227.786.00 37324 I
Another additional argument would be to confirm that the population numbers are correct. I have never seen 209 as our population. Indeed, the most recent census says we are only 200. ACTC thinks we are even less based on numbers they get from the state.
Finally, and I have not done this yet, I would like to see how many services are being used by Amador City residents.
( will share these findings tonight at the meeting.
Anne
On Thu, Jun 15, 2023 at 12:16 PM <lawver(a)Datkeene.com> wrote:
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CITTT OB’ AMADOR OITY
INCORPORATeO JUNK a. IBIS
Oa,lif omisi
Sidewalk Dining/Serving Permit
● Address: Applicant Name:,
Business Name:
Welcome to the City of Amador City! To expedite the processing of your application, use this form to verify compliance with City of Amador City requirements for sideLlk dining/service.
A£f UCATION REOUIRRivirNTS
I!d an S300 that must be submitted with this application, Md an annual non-refundable continuation fee of JI300 that must be paid on the first of the ye^on eacli year after the permit is issued. The fees aie non-prorated, and by executing below the appIlLit agrees to ap^fcation fee^^"'“^ '^c following attachments with the applicrUon and the $300 ● Attachment A: Dimensioned site plan showing location of tables and chairs (portable heaters applicable) on the sidewalk or city property;
● Attachment B: Photographs of the proposed area for sidewalk dining/service; ● Attachment C: Catalogue/brochure sheets of furniture, portable heaters, and barrier materials (if applicable); ^
if
Att^hmem D: Copy of insurance certification (a minimum coverage of $1,000,000.00 listing the City of Amador City as an additional insured. A 30-day cancellation notification shall be included).
verify the project would comnly with the following conditions of approval; Yes
The proposed sidewalk dining/serving area will leave a minimum of three feet of unobstructed sidewalk and will not prevent access to buildings, parked cars, or bus stop areas, proposed umbrellas, heaters, or similar accessories shall be rated for outdoor secured, and removable.
use, safely
sidewalk dining area (including adjacent street, curbs, gutters, and sidewalk) shall be kept dean and orderly and the outdoor furniture must be maintained. □
□
Proposed outdoor dining/serving hours of operation shall fall between 7:00 a.m. and 10:00 p.m.
Free-standing canopy shade structures and signage in connection with the business’s ~ sidewalk dining must be approved.
Alcoholic beverage services within the business's sidewalk dining area is in compliance with ABC licensing regulations (Shaded conditions below only apply if an ABC license is acquired.) A barrier between 2 to 3 feet tall consisting of planters, removable bollards, or similar features tl^t will not alter or damage the sidewalk shall be maintained to differentiate the serving area.
Al coholic beverages shall be served in non-disposable containers, and signs must be posted at the access points notifying patrons that no outside alcoholic beverages are allowed and that any alcoholic beverages served in the designated area may not be removed from the area. □
□
REypCATION
he sidewalk twining permit may be amended to include special conditions, and may be suspended or revoked m any re^on. It there is non-compliance with any conditions of the permit or s^dard requirements for sidewalkdming the permit will be revoked. Any amendments, suspension or reVqcation of the permit is at the sole discretion of the Building Inspector and/or City Council. Please refer to iAmador Cily Municipal Code Section 12.08.030, e/ seej, tor more detail on the terms and conditions of the sidewalk permit AfPlPAYIT IT? bg complftgd bv both pronertv nwner and annlipa^^) I have received, read, accept and understand the conditions listed Property Owner Name (Print)_
Property Owner Signature.
on page one of this application.
Date Phone E-mail address
NOTICE, THE FOLLOWING IMPACTS YOUR RIGHTS AND OBLIGATIONS- The apolicant and Its pnncipals, agends. employees, licensees, and patrons, hereby agree there shall be no liabilky If the nemZ? “f‘th demand, or liability arising out of the permittees use of the permit applied for m this appli n
cation, including for property damage or
‘ permittee, or its agents, employees, licensees, and patrons from any cause wising wt of the permittee s use of the permit applied for by this application and under City Code 12.08,030 ll sea itrofficeTa hold harmless the City of Amador City and
f rif employees from any liability arising out of permitted activities. Should a claim Unse peimittee s use of the permitted area, the City may plead this agreement as a complete defense to any such claim. Knowledge and consent to this provision shall be conclusively established by executing below, and by use of the permitted area for purposes expressed in Chapter 12.08.030 se^ ( o
, et
Applicant Name (Print).
Applicant Signature
Dale Phone .E-MAIL ADDRESS
For Official Use Only
□ Approved □ Approved w/Conditions D Denied
Approved by Date
PERMIT NO.
Project Specific Conditions of Approval:
sidewalk Oining/Serving Applicalion 8/2021 Page 2
8/11/23, 8:41 AM Audit Procurement
BEST PRACTICES
Audit Procurement
Select services that include a broad scope of financial presentations and perform their audits in accordance with the Generally Accepted Government Auditing Standards. Governments should enter into multiyear agreements and undertake a full-scale competitive selection process.
The Government Finance Officers Association (GFOA) has long recommended that state and local governmental entities obtain independent audits of their financial statements, and single audits, if required based on the entity’s use of federal or state grant funds, performed in accordance with the appropriate professional auditing standards. Properly performed audits play a vital role in the public sector by helping to preserve the integrity of the public finance functions, and by maintaining citizens’ confidence in their elected leaders.
GFOA makes the following recommendations regarding the selection of auditing services:
● The scope of the independent audit should encompass not only the fair presentation of the basic financial statements, but also the fair presentation of the financial statements of individual funds and component units. Nevertheless, the selection of the appropriate scope of the independent audit ultimately remains a matter of professional judgment.
Accordingly, those responsible for securing independent audits should make their decision concerning the appropriate scope of the audit engagement based upon their https://www.gfoa.org/materjals/audit-pro(XI rement 1/3
8/11/23,8:41 AM
particular government's specific needs and circumstances, consistent with applicable legal requirements.
Audit Procurement
● Governmental entities should require in their audit contracts that the auditors of their financial statements perform their audits in accordance with the audit standards promulgated in the U.S. Government Accountability Officers Government Auditing Standards. Government Auditing Standards, also known as Generally Accepted Government Auditing Standards (GAGAS), provide a higher level of assurance with regard to internal control than Generally Accepted Audit Standards (GAAS), which are fully incorporated into GAGAS.
● Governmental entities should enter into multiyear agreements of at least five years in duration when obtaining the services of independent auditors. Such multiyear agreements can take a variety of different forms (e.g., a series of single-year contracts), consistent with applicable legal requirements. Such agreements allow for greater continuity and help to minimize the potential for disruption in connection with the independent audit Multiyear agreements can also help to reduce audit costs by allowing auditors to recover certain "startup" costs over several years, rather than over a single year.
● Governmental entities should undertake a full-scale competitive process for the selection of independent auditors at the end of the term of each audit contract, consistent with applicable legal requirements. While there is some belief that auditor independence is enhanced by a policy requiring that the independent audit firm be replaced at the end of each multiyear agreement, unfortunately, the frequent lack of competition among audit firms fully qualified to perform public-sector audits could make a policy of mandatory audit firm rotation counterproductive. In such cases, it is recommended that a governmental entity actively seek the participation of all qualified firms, including the current auditors, assuming that the past performance of the current auditors has proven satisfactory. Where audit firm rotation does not result from this process, governments may consider requesting that senior engagement staff, such as engagement partners and senior managers, be rotated to provide a fresh perspective. Except in cases where a multiyear agreement has taken the form of a series of single-year contracts, a contractual https://www.gfoa.org/materials/audit-procurement 2/3
8/11/23,8:41 AM
provision for the automatic renewal of the audit contract (e.g., an automatic second term for the auditor upon satisfactory performance) is inconsistent with this recommendation.
Audit Procurement
● Professional standards allow independent auditors to perform certain types of nonaudit services for their audit clients. Any significant nonaudit services should always be approved in advance by a governmental entity^s audit committee. Furthermore, governmental entities should routinely explore the possibility of alternative service providers before making a decision to engage their independent auditors to perform significant nonaudit services.
● The audit procurement process should be structured so that the principal factor in the selection of an independent auditor is the auditor’s ability to perform a quality audit.
Price should not be allowed to serve as the sole criterion for the selection of an independent auditor, rather an independent auditor should have a demonstrated commitment to the state and local government audit practice.
Notes:
Contract Issues for Governmental Audits - The AICPA State and Local Government Expert Panel and GFOA worked together to develop this joint article intended to educate both governments and their auditors about clauses in contracts and engagement letters in the governmental environment that may not meet AICPA professional standards and that may create uncertainty about the auditor’s independence.
References:
● CPAAuditQuality: A Framework for Procuring Audit Servicesf U.S. Government Accountability Office, August 1987.
● Governmental Accounting, Auditing and Financial Reporting (GAAFR), Stephen).
Gauthier, GFOA, 2012.
Board approval date: Friday, March 8,2019
https://www.gfoa.or9/materiais/audit-procur0ment 3/3
V Private Companies
Practice Section
AICPA
Q a
c a
Your quide to the selection process
Disclaimer: The contents of this publication do not necessarily reflect the position or opinion of the American Institute of CPAs, its divisions and its committees. This publication is designed to provide accurate and authoritative information on the subject covered. It is distributed with the understanding that the authors are not engaged In rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
For more information about the procedure for requesting permission to make copies of any part of this work, please email [email protected] with your request. Otherwise, requests should be written and mailed to the Permissions Department, AlCPA, 220 Leigh Farm Road, Durham, NC 27707-8110.
Contents
2 Introduction: Commitment to quality
3 Why a financial statement audit is important
4 Evaluating auditor qualifications
6 The proposal process
10 Documenting the agreement
11 Additional resources
1 traduction: Commitment to a a
CPAs provide a wide range of services to the public, and auditing is at the core of those services. Since the founding of the American Institute of CPAs (AlCPA) in 1887, the Institute and the profession have been committed to achieving the highest level of performance for financial statement audits.
As part of the AlCPA's commitment to quality, we are providing this resource to assist your organization in:
● Understanding the importance of hiring a quality auditor to perform your f nancial statement audit
● Evaluating auditor qualifications
● Implementing the proposal process, including the request for proposal, proposal evaluation and auditor selection
● Documenting the agreement
2 Hiring a quality auditor: Your guide to the selection process d d c d statement auait is important
A financial statement audit provides an independent,
third-party report to management, shareholders and
other interested parties that indicates whether an entity's financial statements provide reliable information.
Audits of employee benefit plans,
not-for-profits, governmental entities and
publicly traded companies are highly
specialized. Refer to the Additional resources
section of this guide for information specific
to these types of audit engagements. We
may refer to some unique considerations
relative to these engagements in this guide,
but recommend you obtain additional
information if you are considering hiring an
auditor for such an engagement.
Organizations need audited financial statements for a
variety of reasons, depending on their size, ownership
structure, industry, etc. For example, an entity's lending institution may require audited financial statements to extend financing, or shareholders may request audited
financial statements if they aren’t actively involved in running the company.
There may be additional legal requirements or fiduciary responsibilities particular to your organization that
govern the need for an audit. For example, organizations with employee benefit plans may have an obligation to
obtain an audit of the plan. Or entities that receive grants may have specific reporting requirements required under the terms of the grants.
The audit also may help management improve and
streamline operations by evaluating the strength of
internal control over financial reporting and identifying control weaknesses.
Hiring a firm to provide audit services to your
organization can be the first step in developing a
relationship with trusted professionals who have the
training and knowledge to help your organization in
many ways.
3 _V3 U3. Q auQitor Qua iTications
Reviewing the auditor's qualifications is a critical step in selecting your auditor. This will require the consideration of licensing and independence rules, as well as the
auditor’s experience and professional development,
including specific audit experience in your industry
and continuing professional education.
Experience and professional development
A firm equipped to provide a high-quality audit to
your organization should be able to demonstrate its
qualifications in response to your request for proposal.
Evaluate whether the firm has experienced, qualified
staff Not only is overall experience important, but also experience relevant to your organization (retail, banking, construction, manufacturing, not-for-profit, etc.) is a component of the firm's qualifications. Experience
and
In some instances, a less-experienced auditor may be
assigned to perform routine audit procedures to reduce
audit costs. When this happens, you should confirm that an experienced auditor will review his/her work, as well as perform the more complicated audit procedures.
Identifying quality audit firms
The size of a firm doesn't dictate the level of audit quality — it's their commitment to quality. The AlCPA established the profession's Peer Review Program to enhance the
quality of accounting, auditing and attestation services performed by its members in public practice. The results of a firm's peer review provide a look at quality control systems and adherence to the profession's standards. If a firm doesn't provide the results of its latest peer review with its proposal, ask for it. You'll also find information on accessing a firm's peer review information in the
Additional Resources section of this guide.
professional
development
Identifying
quality
audit firms
I Independence ■
A commitment to quality can also be shown by a firm's
additional membership in AlCPA resource centers,
including the:
● Governmental Audit Quality Center (GAQC) — Includes
resources relating to financial statement audits of both governments and not-for-profits and single audits
● Employee Benefit Plan Audit Quality Center (EBPAQC)
— Offers tools and resources to promote the quality of
employee benefit plan audits Q ● Center for Audit Quality (CAQ) - Provides resources for auditors of public companies
4 Hiring a quality auditor: Your guide to the selection process ♦ Private Companies Practice Section — Includes
resources relating to quality control
Independence
CPA professional standards require that the auditor
be independent for purposes of auditing financial
information and issuing an auditor's report on the
financial statements. The auditor’s independence is
essential for a successful audit because it enables
him or her to approach the audit with the necessary
professional skepticism. Independent auditors must
adhere to rules of auditor independence established
by the AlCPA (and the SEC and the Public Company
Accounting Oversight Board, if applicable).
Licensing
CPA firms are required to meet the licensing
requirements of the state(s) in which they practice. You may wish to verify with the appropriate state regulatory authority that the audit firm holds a valid, up-to-date license or certificate to perform auditing services (most states make this information available online).
● Center for Plain English Accounting — Provides
technical assistance to CPA firms
Firms that are members of the GAQC and EBPAQC
are required to establish higher standards of audit
quality in their policies and procedures specific to the practice area. These quality centers also offer additional resources to help firms provide quality services to their clients.
If these practice areas are relevant to your organization, as you consider firm proposals, ask representatives of
the firms if they are members of these centers.
When engaging an auditor, you should obtain references
and discuss the auditor's work for other clients. You may want to obtain the continuing professional education
records of the proposed audit team and determine that
team members have recent training that addresses
unique issues related to your industry, if applicable.
5 e oroDosa process
Request for
proposal
Proposal
evaluation
Auditor
selection
The first step in hiring a quality auditor is preparing a comprehensive request for proposal (RFP) that will allow you to obtain the information you need to decide about
the qualifications of the firms and the value they can
bring to your organization.
The request for proposal (RFP)
The preparation of a sound RFP is an important part of
the proposal process. A quality RFP will determine the
quality of the respondents and will help reduce the time and effort expended in the overall RFP and selection
process. It is critical that you ask informed questions during the proposal process to obtain adequate
information on which to base your fi nal decision to hire an audit firm. In addition, it is important that you provide audit firms with sufficient information about the nature of the entity and the engagement to allow them to make a
meaningful and comprehensive proposal that addresses
your specific needs. The RFP should outline the proposal and selection process, as well as summarize the
background, objectives, expectations and requirements
of the engagement to be undertaken. Therefore, the
following should be remembered when preparing
the RFP;
Introduction
The introduction section of the RFP should provide
a general description of the nature and scope of the
engagement to be performed. It should;
* Describe why the RFP is being released. Discuss in
general terms the objective to be achieved and the
reason professional CPA services are being sought
● Discuss the term of the engagement, such as the length of time the contemplated contract covers (for example,
an annual or a multi-year engagement), along with
renewal options
* Provide an overview of how the RFP is structured and
describe what information or supporting documents are
contained in the appendixes, attachments, or the body
of the RFP document
The introduction section also should include the
following procedural information:
● Whether there will be a pre-proposal conference
for firms interested in responding to the RFP
● Name of the contact person if further information
is needed to respond to the RFP ● Communicate the facts and conditions surrounding the engagement to be completed ● Number of copies of the proposal that must be provided ● State your objectives and requirements clearly and thoroughly
● Be specific about the information needed to properly
evaluate the proposal
● Due date of the proposal
♦ Timeline for each stage of the process, including
selection of finalists, firm interviews and award of
engagement (this information is often presented in
a table format for easy reference)
● Require the proposal to be presented in a common
format to allow for efficient and effective evaluation
and comparison
6 Hiring a quality auditor: Your guide to the selection process Administrative matters
The RFP should provide a description of the nature of the entity. The following information should be included in this section:
Scope of the engagement
The RFP should describe the services to be provided.
It should describe the scope of the work and any
special considerations, including a discussion of
specific requirements and parameters to ensure the
auditor's proposal is submitted successfully. From
this information, the respondent should have a clear
understanding of what should be included in the
proposal, and what steps and timelines must be met for
proposal consideration. Include the following information in this section:
● Type of entity (corporation, not-for-profit, etc.)
* Fiscal year end
● Name of the auditor's principal contact with the
organization
● Name of the individual (or firm) who prepares the
entity's financial statements, including interim financial statements, if applicable
● Number of years that should be covered by the
proposal
● The various locations of the organization and the
location of personnel files and payroll information
related to each location
● First year covered by the proposal
* Whether any work is performed by an internal
audit function
● Locations of key company contacts assisting with
the audit ● State that the audit must be performed in accordance with generally accepted auditing standards
● Whether SOC 1* reports are available from service
organizations (SOC 1 reports examine the internal
controls likely to be relevant in an audit)
● Whether any other services are expected of the CPA
firm (such as preparation of tax returns)
● Whether the financial statements and auditor's report will be part of SEC filings
● Type(s) of SOC 1 reports issued
● Date(s) when SOC 1 reports are available
● Name of party that performs SOC 1 engagement,
if known
● Whether the CPA is expected to attend regular or
special meetings with management, governance
committees or other interested parties
● Information regarding the availability of prior year
auditor's working papers, including where they are
located, how access will be provided, and when during
the process the predecessor auditor may be contacted
● Expected due dates for completion of each service to
be rendered
● Description of any significant issues not described
above (for example, unique accounting circumstances,
consolidations needed, and known areas of difficulty,
such as hard-to-value investments and discovery
of fraud)
● Whether the proposed fee should be determined on a
flat fee, flat fee plus expenses, hourly fee or hourly fee plus expenses basis
7 Proposal content and other submission requirements
Firm information
● Size, location and history of the CPA firm
● Prior industry experience and training of the partner in charge of the engagement and other key firm personnel
pertinent to the engagement, including continuing
professional education specific to your industry in the past three years ● Whether the firm is a member of the AlCPA Employee Benefit Plan Audit Quality Center, Governmental Audit
Quality Center or Center for Audit Quality
Engagement information
● Audit approach
● Number of clients in your industry
● A detailed fee schedule for each service to be rendered ● States in which the firm is licensed to practice
● Reports to be issued
● Firm references — especially from similar type entities — and specific contact information ● Expected completion dates for each portion of the engagement
● Expected level of assistance your staff will provide
to the audit firm
● The firm’s latest Peer Review Report and firm's
response, if any
● Whether the firm is subject to any current litigation ● Information that is expected to be provided to the CPA ● Whether the firm has been the subject of any AlCPA or state CPA society ethics referrals ● Work space requirements of the firm ● Tax or other professional services the firm can provide ● Whether the firm meets the independence standards of the AlCPA (and SEC if applicable)
● The firm’s working paper retention and access policies and requirements
● If the financial statements will be included as part of an SEC filing, whether the audit firm is registered with the PCAOB
Proposal evaluation
The RFP document can clearly outline the proposal
evaluation process. A properly defined evaluation
process promotes consistency and fairness in the
selection process and will reduce the time spent
assessing the respondents' qualifications and
experience. This section should describe:
● Whether the firm has insurance coverage (errors and
omissions, workers’ compensation, etc.)
● Elements of the proposal that will be specifically
evaluated (for example, whether the firm is a member
of an AlCPA quality center, technical experience,
industry expertise, etc.)
● Methodology for scoring the proposal
Personnel information
● Managing partner of the CPA firm
● Partner in charge of the CPA firm’s audit practice for your industry, if applicable
♦ Partner in charge of the audit
● Expected levels of staffing and supervision
● Steps involved in the selection process
● A right-to-reject clause
8 Hiring a quality auditor; Your guide to the selection process Appendixes and attachments
Appendixes and attachments can be used to accompany
the body of the RFP to provide relevant information
to prospective respondents. The following is a list
of information that you may want to provide to all
respondents as appendixes or attachments to the RFP:
● Copy of last audited financial statements, including
the auditor’s report
It is recommended that you perform separate
evaluations of the proposals based on technical criteria and price. While the price for the work to be performed is a factor in the selection process, your organization is likely to get a high-quality audit at a fair price if both price and technical ability are taken into consideration in selecting a successful respondent. Remember, the
lowest price does not guarantee a quality audit. As
mentioned previously, only after the technical evaluation is complete and the qualified respondents have been
identified should you review the prices offered by the
qualified respondents.
● Copies of interim financial statements, if applicable Proposal evaluation and auditor selection
Consider the following information during the proposal
evaluation and selection process:
Once you have selected the finalists, invite each firm
to present and discuss its proposal letter. An oral
presentation allows for questions to be asked and
answered, which promotes a better understanding of the
proposal. This is your opportunity to see the proposal
team demonstrate insight into your industry and its
ability to work well with you and others involved in the audit. Should you feel you need more information or
explanations from certain respondents before a decision can be made, you should contact those respondents that
are contenders to obtain the necessary information (be
careful during this phase of the process to not discuss or reveal proprietary information submitted by other
respondents).
● Licensure by the appropriate state regulatory authority ● Independence of the firm
● Experience and professional development
After the due date for proposal submission has passed,
you can begin the technical evaluation process. The
technical evaluation is important because it provides a systematic framework for selecting an auditor based
on the requirements contained in the RFP. The review
of the auditors' proposals and qualifications should be thorough, uniform and well-documented.
Before beginning your technical review of the document, check to see that the firm has addressed all items
mentioned in your RFP. For those proposals that are
complete and have addressed all relevant areas, you
should determine a level of minimum standards for
evaluating the information provided by the respondent.
Using minimum standards is an effective and efficient
tool to limit the number of proposals that will be
reviewed. If certain respondents do not address
all relevant issues or do not possess the minimum
standards, you may wish to eliminate their proposals
from the evaluation process.
9 Documentinq the aqree ent
The auditor is required by professional standards to
document the agreement to provide services in writing
and, as such, will send you an engagement letter,
which documents the agreed-upon terms of the audit
engagement, A signed written agreement represents a
contract and is binding upon your organization and the
auditor. For that reason, consider seeking the advice
of legal counsel on the form and substance of the
document when reviewing the agreement. At a minimum,
the written agreement should contain the following;
● Names and parties to the contract
● A description of how the auditor should handle
situations in which the auditor does not agree with
changes and additions in work to be performed,
including how the auditor is to communicate this to
the auditee; for example, disagreements should be
in writing and communicated within a specified time
period; a description of the dispute resolution process also should be Included
♦ A statement that the auditor owns its audit
documentation and a specified period for which that
documentation must be retained by the auditor
♦ A statement that addresses access to audit
documentation and copies that may need to be
provided to regulatory reviewers
● A statement that the audit reports rendered by the
auditor to the entity are the exclusive property of
the auditee for use subject to applicable laws and
regulations
● Audit scope, objectives and purpose
● Audit schedule and deadlines for work to be performed ● Audit cost
● Reporting package and its format
● Type and timing of audit evidence to be provided
by the auditee
● Professional standards to be followed for the audit
● Management's responsibilities
In addition, you should consider including the following items about the auditor/auditee relationship, changes in the scope and quantity of work required, and access to
and ownership of audit products:
● A statement that the auditor is an independent
contractor
● A statement that the auditee has the right, by written notice, to make changes or additions to the work within the general scope of the agreement and that, in such
cases, an equitable adjustment to the price of the audit will be made using specified rates
10 Hiring a quality auditor: Your guide to the selection process Additional resources
Peer Review resources for the public
aicpa.org/peerreview
GAQC resources
aicpa.org/GAQC
The GAQC has prepared tools including; The Peer Review Public File provides a list of public accounting firms and their enrollment status in the
AlCPA Peer Review Program.
● The Auditee Resource Center
● A discussion on Procuring Governmental Audit Services Information in the public file includes the firm's most recent peer review report, letter of comments (if any)
and the firm's response (if any) for firms that are
members of the EBPAQC, GAQC or POPS, or firms that
have voluntarily requested to have their peer review
documents publicly available.
● Member listing
EBPAQC Plan Sponsor Resource Center
aicQa.org/EBPAQC/PlanSDonsorResourceCenter
The EBPAQC has compiled helpful tools and resources
for plan sponsors, administrators and trustees including:
● The Importance of Hiring a Quality Auditor to Perform Your Employee Benefit Plan Audit
♦ Employee Benefit Plans - Financial Statement Audits
● Member listing
11 12 Hiring a quality auditor: Your guide to the selection process For information about obtaining permission to use this material other than for personal use, please email [email protected]. All other rights are hereby expressly reserved. The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. Although the information provided is believed to be correct as of the publication date, be advised that this is a developing area. The Association, AlCPA, and CIMA cannot accept responsibility for the consequences of its use for other purposes or other contexts.
The information and any opinions expressed in this material do not represent official pronouncements of or on behalf of the AlCPA, CIMA. or the Association of International Certified Professional Accountants. This material is offered with the understanding that it does not constitute legal, accounting, or other professional services or advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
The information contained herein is provided to assist the reader in developing a general understanding of the topics discussed but no attempt has been made to cover the subjects or issues exhaustively. While every attempt to verify the timeliness and accuracy of the information herein as of the date of issuance has been made, no guarantee is or can be given regarding the applicability of the information found within to any given set of facts and circumstances.
AlCPA
P: 888.777.7077 i W; aicpa.org
®2018Associaiionof International Certified Professional Aacoumants. All rights rmiervecl. Association of ImernatbrtalCeitifred Professional Accooiuanis is a tiaderrark of the Association of International Oeriiiied Professional Accountants and iaregisieret) in the United Slates, The Euidoean Union and othei countries. The Globe Design is o trademark owned by the Association of interrationai Certified Professional Accountants. 1803-349
A j ^ DA \ Governmental
Audit Quality Center
Auditee Resource Center Practice Aid
aicpa.org/gaqc * [email protected] March 2014
Procuring Governmental Audit Services
Introduction
This practice aid was prepared by the AlCPA’s Governmental Audit Quality Center (GAQC) and is intended for the various stakeholders involved in the audit procurement process for states, local governments, not-for-profit organizations (NPOs), or certain forprofit organizations that receive federal or state assistance. It provides useful information in navigating through the various steps involved in the procurement of audit services and covers steps including planning the procurement, developing the Request for Proposal (RFP), evaluating proposals received, and monitoring the audit.
The primary purpose of the GAQC is to promote the importance of quality governmental audits and the value of such audits to purchasers of governmental audit services.
Appropriate consideration of the audit procurement process is a key aspect of helping to ensure a quality audit.
Why Audit Quaiity's important to Audit Purchasers
If you are associated with the audit procurement process, you likely already know about the reliance that the public and other stakeholders place on your organization and its activities. Therefore, you have a vital fiduciary responsibility to ensure that your audit is of the highest quality, independent audits of organizations like yours, including financial statement audits and compliance audits of federal or state expenditures, are an important accountability mechanism. These audits provide a form of assurance to your management, those charged with governance, regulators, and other stakeholders (e.g., bondholders). Quality financial statement and compliance audits can help you:
● Fulfill your fiduciary responsibility;
● Obtain assurance related to the financial integrity of funded programs; ● Identify possible noncompliance and other issues early to avoid interruption of current funding;
● Lower the risk of future noncompliance; and
● Strengthen your ability to secure additional funding in the future.
How to Use This Document
The guidance provided in this document details the various steps involved in the procurement of audit services. Reviewing this guidance will help ensure that your procurement process runs more smoothly and that the outcome of the process will be the hiring of an auditor that has the appropriate qualifications. The guidance included is generic and should be used for reference purposes only. It is not all-inclusive and Copyright ©2014 by the American Institute of Certified Public Accountants, Inc., New York, New York. depends on the particular circumstances of your organization. The best approach to using this document is to have those involved in the procurement process read it, and then collectively customize the steps in the document and make sure the selection process meets your organization’s specific needs. You should also ensure you obtain and read other guidance that is available to help you with the audit procurement process. The “Other Resources” section at the end of the document summarizes resources that you may wish to consider.
Procurement Steps
1. Planning for Procuring Audit Services: Careful planning for the procurement process helps ensure that audit objectives will be met in accordance with applicable laws, regulations, and contractual agreements. It will also help ensure a quality audit. In planning for procuring audit services, consider each of the following items.
Each item is followed by additional information and/or questions for your consideration:
a. Applicable federal, state, local and contractual audit procurement requirements and internal policies. Are there any special procurement requirements that your organization is subject to? If so, be sure to consider these and incorporate them into the procurement process. For example, if your organization expends federal funds and is subject to an audit referred to as a “single audit” under Office of Management and Budget (0MB) requirements, you are likely, subject to specific compliance requirements relating to procurement,
b. Defining the entity to be audited. Will the entire organization be covered under the audit? Or, alternatively, will only a portion of the organization be covered (e.g., a primary government, a component unit, a department or a fund of a government, a subsidiary of an NPO, etc.). Be sure to keep in mind generally accepted accounting principles (GAAP) requirements and any pertinent legal requirements,
c. Delineating the scope of the financial statement audit. Will the audit include the basic financial statements only or will it also include other financial statements such as individual funds for a government or a subsidiary of an NPO? Will required supplementary information (RSI) or supplementary information (either required by GAAP or provided voluntarily) be presented that will require the auditor to perform additional procedures? d. Determining the specific audit requirements. Are there specific laws or regulations that apply to your organization that impose certain audit requirements (e.g., the Single Audit Act, a state law, etc.)? Additionally, is your organization subject to contractual provisions that impose audit requirements (e.g., through debt provisions)? Are there other professional Copyright © 2014 by the American institute of Certified Public Accountants, Inc., New York, New York.
services that might be required that can be procured jointly with financial statement and single audit services, such as reports on compliance with policies (e.g., investment guidelines) or agreed-upon procedures required by lenders, bond covenants, or contracts?
e. Determining the relevant auditing standards. Generally, the financial statement audit for governments, NPOs and non-public for-profit organizations are performed under auditing standards issued by the AlCPA.
For-profit public companies are likely subject to the auditing standards of the Public Company Accounting Oversight Board (PCAOB). You may also be required by law, regulation, or contract (e.g., by the Single Audit Act, by a state law, contracting agency requirement, etc.) to have your financial statement audit performed under Government Auditing Standards issued by the Comptroller General of the United States (also referred to as the Yellow Book),
f. Determining whether single audit requirements or another federal compliance audit requirement applies to your organization. Has your state, local government or NPO expended federal awards over the threshold for a single audit? If so, a single audit will be required, in addition to your financial statement audit. If you are a for-profit organization, have you contractually agreed to have an audit performed in accordance with a federal compliance audit requirement and/or federal audit guide? Access a GAQC compilation of various audit requirements for for-profit organizations. g. Determining whether state compliance requirements apply to your organization. Does the state impose any additional compliance audit requirements (e.g.. State “single audit” requirements) that your organization would be subject to?
h. Identifying the attributes necessary in an auditor. What attributes will you be requiring of your auditor? Consider the following questions in making this determination: (1) Does the auditor have experience with entities similar to yours? (2) Does the auditor have experience with performing the type of audit that your organization needs (e.g., under Government Auditing Standards, single audit requirements, or a specific federal audit guide). (3) Does it appear that the auditor is committed to quality (e.g., participation in the peer review process, participation in other quality control programs like the AlCPA’s GAQC, etc.)? (4) Are the auditor and firm licensed and independent?
i. Determine whether there are any additional services which will be required? Examples of additional services include financial statement preparation, bookkeeping, cash to accrual conversion, or Form 990 preparation among others. Professional standards require that CPAs performing these nonaudit Copyright © 2014 by the American Institute of Certified Public Accountants, Inc., New York, New York.
services meet certain independence requirements before beginning the audit engagement,
j. Establishing an auditor selection process. What factors and degree of importance of those factors will you consider when you evaluate potential auditors? The technical expertise of the auditor and the auditor’s commitment to quality should be considered as strong factors,
k. Determining the audit engagement term. Will a one-year term or multi-year term work better for your organization? One factor to consider in determining the term is that the first year of an audit usually involves significant start-up costs as auditors devote considerable time to learning about the organization and its interna! control. Using this groundwork, the auditor may be able to perform the audit in less time and at less cost in the succeeding years. If your organization has policies that define the term of an audit contract, be careful to structure the terms of the RFP to match.
I. Determining how you can assist the auditor in the performance of their audit.
Does your organization have the capacity to use resources from your internal audit or accounting staff to assist the auditor?
m. Establishing a work schedule. Have you determined dates for certain audit process milestones to be accomplished? Determination of such milestones or deadlines will help ensure the timely preparation and issuance of financial statements and related audit reports. Firm deadlines for issuance of audited financial statements and reports, such as those imposed by law or bond indentures should be considered. Additionally, other key dates should also be established for such areas as entrance conferences, pre-fieldwork planning conferences, end of on-site fieldwork conferences, and exit conferences. You should consider imposing consequences for missed deadlines.
2. Develop RFP and Obtain Proposals from Potential Auditors: Encouraging as many qualified auditors as possible to submit a proposal for auditing your organization increases the likelihood that you will receive a quality audit at a fair price. You may want to consider compiling a list of potential auditors from general and professional directories and from your past experiences. One source is the membership section of the AlCPA's GAQC Web site fwww.aicpa.org/GAQC) which includes a listing of its members (sorted by organization name and also by state) that perform single audits or audits under Government Auditing Standards. Some state CPA societies also include listings of auditors that practice in certain specialized industries. You may use many means to solicit proposals for audit services; however, the RFP is a reliable and efficient method. A well written and detailed RFP will help ensure your organization receives proposals that meet your Copyright © 2014 by the American Institute of Certified Public Accountants, Inc., New York, New York.
needs, terms, and conditions. A quality RFP plays a large role in ensuring the hiring of a quality auditor,
a. Consult with Others in Developina the RFP. Consider consulting with others in your organization or industry when developing your RFP to ensure that everything necessary has been addressed. For example, you could consult with your audit committee (if applicable), legal advisers, accountants, internal auditors, procurement officers, and any other technical resources on staff. It is also helpful to check with trusted peers who have recently gone through the RFP process. These similar entities may have great input and detailed RFP examples that can be utilized to develop a very effective RFP and help your organization avoid common RFP pitfalls and mistakes,
b. What to include in your RFP? The purpose of an RFP is to provide potential auditors with enough information to develop proposals that address all of your organization’s audit needs and concerns. The AlCPA has developed, as part of its Audit Committee Toolkits for governments. NPOs. private companies, and public companies, tools for ensuring that an organization’s RFP is complete and contains the necessary elements for the successful procurement of auditing services, Each of these toolkits, which can be purchased from the AlCPA, includes either an RFP preparation checklist or a sample RFP. In addition to the guidance provided in these tools, the GAQC recommends that you also consider asking potential auditors to disclose the quality improvement programs that they participate in (e.g., membership in the GAQC) in the RFP.
c. Consider the Necessity of a Proposers’ Conference. As a best practice, you should consider inviting prospective auditors to a proposers’ conference to provide an opportunity for your organization to disseminate more information and for proposers to ask questions. This is also an opportunity to explain unique circumstances, rules, or operations, and to emphasize important points, such as the importance placed on timeliness and auditor staff continuity. Consider making the meeting mandatory to ensure that all prospective auditors hear explanations and answers to other’s questions, and can meet the key people they would be working with if they are selected. If attendance at the meeting is not mandatory, make sure you provide a mechanism for information sharing to all proposers that are unable to attend the proposer’s conference (e.g., disseminate all questions asked and the associated answers, explain additional guidelines discussed, etc.)
3. Evaluation of Proposals Received:
Committee (see below) perform separate evaluations of the proposals based on technical criteria and price.
It is recommended that an Evaluation
Copyright © 2014 by the American Institute of Certified Public Accountants, Inc., New York, New York.
A properly defined evaluation process promotes consistency and fairness in the selection process. After the due date for proposal submission has passed, your organization can begin the technical evaluation. The technical evaluation is important for two reasons. First, it provides a systematic framework for selecting an auditor based on the requirements contained in the RFP. Second, it documents the selection process and helps ensure a fair selection. The review of the auditor’s proposals and qualifications in response to the RFP should be thorough, uniform, and well documented. Consider using your audit committee or, if there is no audit committee, selecting a committee or Board to perform the evaluations (hereinafter referred to as Evaluation Committee). Also consider the following:
a. Role of Evaluation Committee. This group should include individuals with appropriate technical skills (e.g., a background in accounting, auditing, budgeting, procurement laws, and other specialty experiences). Members should not have any conflicts of interest with the prospective proposers under review such as a family relationship, close friendship, previous employer or current business relationship,
b. Requiring Minimum Standards. Using minimum standards is an effective and efficient tool to limit the number of proposals the Evaluation Committee has to review. Therefore, your organization should consider establishing a process to screen prospective proposals. If certain proposers do not possess the minimum standards, they should not be evaluated by the Evaluation Committee (unless the Evaluation Committee requests to see them for some reason as they go through the selection process). The following are some minimum standards you should consider in the screening process:
1) The responsiveness of the proposal to the RFP.
2) The auditor meets appropriate state licensing requirements. 3) The auditor meets applicable independence requirements, especially if they are performing any nonaudit services such as financial statement preparation.
4) The auditor has a record of responsible work.
5) The auditor is in compliance with applicable peer review and continuing professional education (CPE) requirements.
6) The auditor meets other minimum standards set forth in the RFP, such as those pertaining to the auditor’s financial condition, adequacy of staffing, and experience auditing similar organizations, c. Technical Criteria. The required technical criteria were developed during the “Planning for Procuring Audit Services” step above. They were described in the RFP and should be used in the evaluation process.
Copyright © 2014 by the American Institute of Certified Public Accountants, Inc., New York, New York.
However, at a minimum, the Evaluation Committee should be able to answer yes” to the following questions about the contents of the proposals;
1) Does it demonstrate an understanding of the requirements (your organization’s needs) and the product to be delivered?
2) Does it have a sound technical plan and workable timetables? 3) Does it have satisfactory start and end dates for audit? 4) Does it have a practical approach to meeting benchmarks and deadlines?
5) Does it provide a description of the approach for planning the audit, conducting and timing of the fieldwork and the proper opportunity for your organization to review the reporting products before their issuance (including subsequent years for multiyear contracts)? 6) To avoid a duplication of efforts, does it indicate a willingness to use work from other auditors (i.e., internal and external) to the extent possible?
7) Does it demonstrate the auditor has experience with performing the required audit work for an organization similar to yours in both type and size, including any less-common aspects of your operations requiring specialized expertise (e.g., public utility experience)? 8) Does it demonstrate, if applicable, the auditor’s experience with performing audits under Government Auditing Standards, single audit requirements, other applicable federal compliance requirements, and/or federal audit guides?
9) Does it describe the auditor’s participation in quality improvement programs (e.g., membership in the AlCPA GAQC)?
10) Does it contain references from prior or current clients that are similar to your organization?
11) Does it identify and demonstrate the individual and collective experience of the audit team and its leaders?
12) Does it clearly state the experience and qualifications of key personnel (e.g., specific audit engagements, areas of specialization, CPE, etc.)? 13) Does it address whether key personnel identified in the proposal will be adequately involved and accessible throughout the performance of the audit?
Copyright © 2014 by the American Institute of Certified Public Accountants, Inc., New York, New York.
14) Does it state that your organization will be notified and consulted if key personnel changes are made?
15) Does it contain the auditor's latest peer review report and letter of response (if applicable)?
d. Considering the Price. It is recommended that the Evaluation Committee perform separate evaluations of the proposals based on technical criteria and price. While the price for the work to be performed is a factor in the selection process, your organization is more likely to get the best combination of a high quality audit and at a fair price by independently evaluating technical ability and price,
e. Rating the proposals. The review of an auditor's proposal should be thorough, uniform, and well documented, in order to objectively evaluate proposers, you should develop an objective scoring system for the technical abilities of each auditor as presented in their proposal. The Evaluation Committee should review the information contained in the proposals as submitted listing the strengths and weaknesses for the technical requirements and ensuring that the proposal meets minimum requirements,
documented. After the technical evaluation is complete, the Committee should review the prices offered by the proposers. Consider the best technical proposals for your organization along with price and be prepared to select a proposal based on criteria other than price. You should consider determining the “percentage weighting” of technical ability versus price in advance of the actual rating process,
f. Oral Interviews. After evaluating the written proposals, the Evaluation Committee may want to interview a few of the highest rated auditors to obtain additional explanation regarding their proposals or to learn more about them prior to making a contracting decision. Be sure not to discuss or reveal proprietary information submitted by other proposers during this process.
4. Documenting the Agreement; A signed written agreement represents a contract and is binding upon your organization and the auditor. This is often referred to as the engagement letter. For that reason, when reviewing the agreement, you should consider seeking the advice of your purchasing office or legal counsel on the agreement’s form and substance. The RFP itself should indicate that a signed written agreement is required from the auditor that is selected. It is not unusual for the auditor to request amendment or clarifications of certain provisions. The agreement should include details concerning requirements and proposed audit work.
At a minimum your written agreement should contain the following; ● Names and parties to the contract
Any minimum requirements not met should be
Copyright ©2014 by the American Institute of Certified Public Accountants. Inc.. New York, New York.
● Audit scope, objective, and purpose
● Audit schedule and deadlines for work to be performed ● Audit cost
● Reporting package and its format
● Type and timing of audit evidence to be provided by the auditee ● Professional standards to be followed for the audit
● Detailed listing of audit staff that were evaluated in the proposal process and stated to be assigned to the engagement. If there are staff changes, you should consider asking that staff changes be communicated by the auditor in writing; and
● Management’s responsibilities
Also, ensure that you consider including the following points about the auditor/auditee relationship, changes in the type and quantity of work required, and access and ownership of audit products;
● A statement that the auditor is an independent contractor. ● A statement that the auditee has the right, by written notice, to make changes or additions to the work within the general scope of the agreement. Also, a statement that in this case, an equitable adjustment to the price of the audit will be made using specified rates. ● A description of situations in which the auditor does not agree with changes and additions in work to be performed and how the auditor is to communicate this to the auditee. For example, disagreements should be in writing and within a specified time period. Also, you should include the process for final dispute resolution. ● A statement that the auditor owns its audit documentation and a specified period for which that documentation must be retained by the auditor (note that single audit requirements require a minimum 3-year retention of audit documentation and there may be other applicable laws and regulations with retention requirements that your organization is subject to).
● A statement that addresses access to audit documentation and photocopies that may need to be provided to regulatory reviewers such as, federal inspector generals, state auditors, etc.
● Statements that the audit reports rendered to the entity by the auditor are the exclusive property of the auditee for use subject to applicable laws and regulations.
Copyright © 2014 by the American Institute of Certified Public Accountants, Inc., New York, New York.
● Consider adding language for one or more of the following:
o Possible need to negotiate additional compensation for additional work - such as when new accounting and auditing standards greatly increase workload, or when there is a material increase in the number of “major programs” subject to single audit requirements,
o Hourly rates for special work requested by the entity (which does not pose an independence impairment for auditor),
o Compensation for work with successor auditors after conclusion of contract term, or if terminated early for any reason, o Compensation for work by auditor related to requests by federal agencies,
o Freedom of Information Action (FOIA) requests and whether auditor working papers are exempt,
o Rights of either or both parties to terminate prior to conclusion of term.
● Be aware that certain “standard” terms and conditions often used in government contracts may be problematic for an auditor to agree to.
For example, some government contracts inappropriately include indemnification clauses. Professional standards for CPAs do not allow the auditor to indemnify their clients. Governments sometimes also inappropriately include standard clauses relating to the ownership by the government of the work product. CPAs are required by regulators to make their working papers available but the audit firm retains ownership of the working papers.
● Be aware that standard consulting agreements are not designed as audit agreements and these standard agreements can cause issues such as those addressed in the bullet above.
5. Audit Monitoring: While the responsibility for performing a quality audit rests ultimately with your auditor, monitoring the audit and the work being performed helps ensure a timely and quality audit. The best group to monitor the auditor is the audit committee, if your organization does not have an audit committee, consider forming a group of individuals that have authority, as well as financial and organizational experience and knowledge, to monitor audit quality and progress. Timely and active monitoring ensures that: (1) problems are addressed and resolved early; (2) the auditor and auditee working relationship will be enhanced; and (3) any surprises are uncovered early and not at the conclusion of audit. Monitoring is especially important during the first year of a new auditor and during the audit of a particular Copyright © 2014 by the American Institute of Certified Public Accountants, Inc., New York, New York.
unit or segment of an organization that is unique or complex. Monitoring can include regular progress reports and regularly scheduled meetings. (NOTE: Make sure these regular progress reports and regular scheduled meetings are adequately explained and requested in the RFP.) It is most important to ensure that feedback on auditor performance is provided regularly and after the engagement to allow for any adjustments to subsequent audits. Finally, ensure that you communicate with the auditor after the completion of the audit and before the issuance of the final report(s) to avoid surprises and improve understanding.
Other Resources
You may want to consider reviewing past RFPs and contracts from your organization as you go through the audit procurement process. Various federal and state agencies may also have sample RFPs and other procurement guidance available. The Internet may also be a tool to help you gather information, formats, and procurement regulations.
Below are some Web sites that you may want to consider:
● AlCPA Audit Committee Toolkits
Various federal and state agency Web sites
Your own network of peers who have been through the RFP process Copyright © 2014 by the American Institute of Certified Public Accountants. Inc., New York, New York.