Having been on both sides of the equation, as a CFO and an audit partner, I’ve had a lot of experience with the request-for-proposal (RFP) process—some of it good, some of it not so good. A well-executed RFP process can greatly enhance a not-for-profit entity’s (NFP’s) ability to identify and engage an audit firm ideally suited to its needs while simultaneously helping prospective firms determine whether they are the right fit for the client. On the other hand, a thoughtless or poorly executed RFP process could end up wasting significant time and creating hard feelings on both sides. NFPs can maximize the efficiency of the RFP process and save themselves, and the firms invited to propose, precious time by following a few key “dos and don’ts.”
First and foremost, don’t embark on an RFP process unless you’re seriously considering dismissing your current firm. “Due diligence” is not a reason to canvass the market every three or five years. If your auditor is providing timely, quality service at a fair price, why change? If all you really want to do is to determine that the price is, in fact, fair, simply ask two or three other firms to perform a “sanity check” on the price you’re paying. They would much rather spend a little time helping you verify pricing fairness than later feeling duped into having been dragged through a long and costly proposal process accomplishing the same end. Additionally, if you've been using the same partner at your current audit firm and want a fresh viewpoint, consider a partner rotation versus embarking on the RFP process. Rotating partners in the same firm provides for a fresh perspective on key audit issues and processes while retaining historical knowledge of your organization. This can save you time and effort while providing the benefit of rotating part of the audit team.
If you are seriously considering a change, do talk to your current firm first. Have an open, honest dialogue to see whether your concerns could be corrected without changing firms. Perhaps it’s a service issue, a personality conflict with a member of the audit team, or a disagreement of some kind. Often, a candid conversation is enough to air out the issue and come to a resolution.
If all else fails, and you’ve decided to proceed with an RFP process, then consider the following:
- Do refer to the Sample Audit Services RFP on the AICPA Not-for-Profit Member Section website.
- Don’t copy the sample verbatim. Instead, use it as a starting point; then adapt it to meet your individual circumstances, needs, and concerns. Determine what questions are most important to you and ask respondents to give those questions the most attention.
- Do ask for anticipated time by staff level to allow you to compare firms’ estimates of the staffing levels and time required to complete the scope of work. Inquire of those firms whose time estimates appear to be outside the norm, or whose pricing appears to be misaligned with that of other respondents, as to why their estimates are so different.
- Do ask for multi-year pricing, including any one-time, first-year audit costs and how those will be handled. Multi-year pricing helps both parties to set reasonable expectations for the future.
- Do ask under what circumstances the firm has sought additional fees in other audit situations. Ask whether there are any conditions under which the firm would seek additional fees in the first year of the engagement, and what could prompt increases in subsequent years.
- Do ask firms to share specifics about what uniquely qualifies them to serve your organization, what skills they bring, what services they can offer, and what experience they have that others may not have.
- Don’t ask proposers to describe how they are different from other firms being considered. Unless you tell them, they won’t know who else is being considered, and even if they know who else is in the mix, it’s an unfair question because it presumes that each firm intimately knows the others. If you’ve done your homework upfront, you’ve invited only those firms qualified to serve you. The RFP should ask them to explain what they bring to the table.
- Which brings me to the next point—don’t send your RFP to every firm under the sun. Narrow the field to no more than the three to six firms you know are best suited to serve you.
- Do agree to meet with interested firms to answer questions, provide additional information, and get an initial feel for how you may work together. Interact as much as possible. If you’ve ever purchased something on the internet based on glowing product descriptions and testimonials, only to be disappointed when it arrived, then you know what I mean.
- Don’t make it a secretive RFP process. Share historical fees paid and the underlying hours required to compete the work. If you don’t know the hours, you can at least report how may staff came to your office for how many days, and let the proposing firms work with that. Estimating how long an audit will take the first year is one part up-front inquiry, two parts experience, and one part luck. Proposing firms are hard pressed to know just how prepared (or unprepared) you will be for the audit. After all, nobody’s perfect.
In the end, finding the right firm is a bilateral process in which each party helps to make the right decision. Both parties must be committed to the relationship, and the best way to foster that commitment is to get to know one another as much as possible via a thoughtful RFP process. One Final Do: Commit to the process and enjoy the opportunity to meet some great auditors along the way!