Wednesday, September 3, 2008

Your Nonprofit Library Second Shelf - A Sample Nonprofit Audit RFP

1. The completed written audit report is due to NPO XXX (Organization, Address, contact number) on (Date), 2008.

2. (An introduction about the Organization, 2-3 short paragraphs, include date of incorporation and date of IRS recognition as a 501 (c) (3) tax exempt organization, paragraph about fiscal staff, financial record keeping )

3. The audit report will cover the period of July 1, 2008 through June 30, 2009.

4. All costs preparing the proposal are borne by the bidder. Bidders shall provide (y) number of copies of the bid. The proposal shall be filed with the organization sealed envelopes There shall be no acceptance of late filing and no sending by fax or electronic communication,

5. The length of time for the contract will be 4 years (or other number of years) subject to approval of the board, satisfactory work and satisfactory continuing terms

6. The auditing agent (Contractor) shall provide an entrance and exit conference with the Executive Director, the chief financial officer of Not for Profit Organization XXX and the Audit Committee of the Board of Trustees.

1) (NOTE: Some states call the third sector “nonprofit”, others “not for profit” and so on. Use the language in your state law)
2) (NOTE: States vary in the use of the words “trustees” and “directors” to describe members of the board. Use the language in your state law).

7. Contractor will provide the organization with (z) number of copies of the audit.

8. The Contractor is to perform a financial and compliance audit to determine whether the financial statements present fairly the financial position and the results of financial operations in accordance with generally accepted accounting principles, and whether NPO XXX complied with applicable laws and regulations having a material effect upon the financial statement. The auditor will provide a management letter

9. The Contractor must follow the generally accepted auditing standards (GASS) of the American Institute of Certified Public Accountants (AICPA) and OMB Circular A-122, Cost Principles for Non-Profit Organizations and Circular A-133 Audits of States, Local Governments, and Non-Profit Organizations.

NOTE: As needed the following standards may be part of the requirements: The Contractor must also follow the guidelines presented in the General Accounting Office’s Standards for Audit of Governmental Organizations, Programs, Activities and Functions, commonly referred to as “generally accepted government audit standards” or GAGAS; the AICPA guide, Audits of State and Local Government Units; the U.S. OMB Circular A-128, Audits of State and Local Governments, Grants and Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit Organizations or other applicable circular letters.

10. The auditing agent will be responsible to acquire any manuals from funding sources at her/his own expense.

11. Bidders shall demonstrate the technical factors to be involved in the audit, the technical experience, qualifications of staff, the size and structure of the firm, and provide client references

12. The audit report must include, at a minimum:
  • Financial statements, including notes to financial statements:
  • Combined balance sheet – all fund types and account groups.
  • Combined statements of revenues, expenditures and changes in fund balances – all governmental fund types.
  • Combined statements of revenues, expenditures and changes in fund balances – budget and actual – general and special revenue fund types (and similar governmental fund types for which annual budgets have been legally adopted).
  • A statement that the financial statements present fairly the financial position and the results of financial operations in accordance with generally accepted accounting principles and an opinion on the fairness with which the financial statements present the financial position, results of operations and changes in financial position.
  • A statement and opinion on internal accounting control – The auditors shall report on their study and evaluation of internal accounting controls made as part of the financial and compliance audit. They shall identify as a minimum:
    1) the entity’s significant internal accounting controls,
    2) the controls identified that were evaluated,
    3) the controls identified that were not evaluated (the auditor may satisfy this requirement by identifying any significant classes of transactions and related assets not included in the study and evaluation), and
    4) the material weaknesses identified as a result of the evaluation.
    5) If a study and evaluation of internal control was not made, the auditors must describe in their report why a study was not made.
  • A statement and opinion on Compliance and Fraud, Abuse and Illegal Acts – The auditor shall make a statement of positive assurance on those items of compliance tested and negative assurance on those items not tested. This statement shall also include material instances of noncompliance and instances or indication of fraud, abuse or illegal acts found during or in connection with the audit. A statement and opinion on compliance and material reportable conditions relative to requirements and regulations of the funding, attached.
  • Listing of any questioned costs with comments.
  • Comments on corrective actions taken or a written plan for corrective action
  • The auditor shall promptly notify the Executive Director, chief financial officer and chair of the board/audit committee of any suspicion of fraud, defalcation or misapplication of funds. Such notice shall be in addition to any notice to grantors required by single audit legislation, if applicable in the future.
  • The work papers and reports of the audit must be retained by the auditor for a minimum of three years from the date of the audit report, unless the auditor is notified in writing by the grantor(s) for the need to extend the retention period. The audit work papers and reports shall be made available upon request to the grantor(s).
NOTE: The number of years that the auditor shall retain copies is negotiable unless a certain time in required by one or more funders. It is not unusual for the time to extend to six years. That is not a substitute for the organization’s retention of and ability to access its own material related to the audit each year.
13. Any new award funded after the signing of the audit contract and beginning operation prior to the end of the fiscal year must be included in the current Single Audit Report.

14. Attached is a schedule of grants to be audited, including the approximate budget, contract period and funding source. (Attachment A)

15. Proposals must be submitted on forms provided. Proposals submitted in any other form will be considered non-responsive and will be rejected.

16. The Contractor shall comply with all applicable federal, state and local laws. The audit proposals shall be submitted in envelopes clearly marked “Single Audit Proposal” and must be received at the organization no later than (Date/hour) 2009. Proposals received after the scheduled deadline will not be considered.

17. Each proposal may be submitted with the understanding that the acceptance in writing by NPO XXX of the offer to furnish the organization-wide audit described herein shall constitute a contract between the auditing agent and NPO XXX. This contract shall bind the auditing agent on its part to furnish and deliver at the proposal price in accordance with the conditions of said accepted proposal and specifications.

18. Conditional proposals, or those which take exception to the specifications, may be considered non-responsive and may be rejected.

19. The organization reserves the right to postpone the proposal deadline for its own convenience and to reject any or all proposals or parts thereof. Changes to the specifications will be made by addendum. Contractors may make appointments to discuss these specifications.

20. The Contractor shall provide with the proposal, a copy of the (Name of state) State CPA license, certificate and, if reviewed by peers in AICPA, a copy of the findings. The Contractor must meet the qualifications stated in Government Auditing Standards (GAS) and has the responsibility for ensuring that

a. the audit is conducted by personnel who collectively have the necessary skills, training and continued education,
b. independence is maintained,
c. applicable standards are followed in planning and conducting audits and reporting results,
d. has an appropriate internal quality control system in place and
e. undergoes an external quality control review.

21. An representative of the auditor for the must complete the Independent Public Accountant Certification Form and submit it for review to the (your state licensing authority for a CPA) with a copy to the organization.

22. The Contractor shall provide with the proposal, the working experience of all personnel who will be working on the project.

23. In all cases, the services must be furnished as specified. Minor changes will not negate the contract. All proposals shall remain in effect 30 days after opening.

24. The award in the form of a contract will be made to the proposal that provides the most auditing service per audit dollar compared with the least amount of organization’s employee services. The organization reserves the right to accept or reject any or all proposals or parts thereof.

25. Terms will be negotiated with the Contractor and included in the contract.

26. The Contractor will not be allowed to take advantage of any errors or omissions in this specification. Full instructions to correct errors or omissions will be given to the Contractor, should errors or omissions be called to the attention of the Executive Director or designee of the organization.

27. The audit schedule due dates are subject to change upon agreement between the organization and auditor, and in future years

28. The Contractor will be responsible for assuring that any special schedules required by a particular funding source are included in the completed audit. The organization will provide the contact persons for each funding source. In general, most sources require standard audit reports, but certain grants require special schedules and the Contractor must determine what those schedules are.

29. The obligations of NPO XXX

a. Prepare and type confirmation letters
b. Prepare trial balances for all funds
c. Provide the updated figures for the statistical section of the Comprehensive Annual Financial Report (CAFR) (if required)
d. Provide budget figures in the format to be used in the CAFR
e. Provide analysis schedules: all revenues, investment, A/P, A/R, fixed assets/capital additions
f. Prepare transmittal letter
g. Any other supporting work expected to be provided by the organization should be described in the proposal.
h. The chief financial officer shall be responsible for coordinating the completion of the annual audit. The organization will provide work space convenient to the finance department and records. However, calculators, computers, and other office equipment and supplies are to be furnished by the independent auditor.
i. In the past, NPO XXX has traditionally called on its auditor throughout the year to answer questions regarding its finances. There has not been any additional charge for this contact. Inasmuch as questions will need to be answered in the next year after the audit is completed, what would your firm’s policy be?

30. The Contract between the organization and the successful auditing agent shall contain the following provisions:

Equal Employment Opportunity – The Contractor agrees to comply fully with Executive Order 11246, entitled “Equal Employment Opportunity”, as amended by Executive Order 11375, and as supplemented in Department of Labor regulations (41CFR Part 60) and Federal and (your State law relative to discrimination). Specifically, the Contractor agrees that in connection with the carrying out of this project, the Contractor shall not discriminate against any employee or applicant for employment because of race, age, gender, religion, color, sex, sexual orientation, veteran status or national origin. The Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated equally during employment, without regard to their race, age, gender, religion, color, sex, sexual orientation, veteran status or national origin. Such action shall include, but not be limited to, the following: Employment, upgrading, demotion or transfer, recruitment or recruitment advertising, layoff or termination, rate of pay or other compensation and selection for training, including apprenticeship.

No member, officer or employee of the organization during his or her tenure or for one year thereafter, shall have any interest direct or indirect, in this contract or the proceeds thereof.

No member of or delegate to the Congress of the United States, Federal or State Department, organization or parent company shall be admitted to any share of part of this contract or receive any benefit arising there-from.

If the Contractor shall fail to perform any material part of this contract, the organization may at its election, within 30 days after delivery, either reject the audit report and cancel the contract, or retain the report without prejudice to any right to damages for such breach of contract or to any other right arising from such breach.

31. The representation by the Contractor of the quality of the audit report shall be an essential condition of the contract and any non-compliance therewith shall give the organization the right to reject any of the audit report and to cancel the contract.
If audit work does not begin 30 days or more following the agreed starting date, the organization shall have the option of terminating this contract. If the audit report is not delivered 30 days or more after the close of the audit work, the organization shall have the option to demand delivery of the audit otherwise deliverable or terminate this contract.

The Contractor agrees to comply fully with NPO XXX’s policies relative to sexual harassment while working with NPO XXX’s employees. A copy of the Sexual Harassment policy is attached as Attachment B.

The Contractor agrees to comply fully with NPO XXX’s policies relative to a drug-free and smoke-free workplace while working in NPO XXX’s offices. A copy of the Drug-Free/Smoke-Free Workplace policy is attached as Attachment C.
The Contractor agrees to comply fully with NPO XXX's policies relative to recycling to preserve our natural resources and reduce the need for additional landfill space. The Consultant is encouraged to establish a recycling program within its own business. A copy of the Recycling Policy is attached as Attachment D

The contact person for the organization shall be _____________________. The contact person for the auditor shall be _____________________.

A $_______ per day penalty will be assessed against the Contractor for each day after ____ days that the audit is not delivered.

Any questions regarding the audit proposal specifications should be discussed with the organization.

The undersigned hereby agrees to provide the Audit Services in accordance with the specifications contained herewith. Auditing agent has carefully examined these specifications and certifies full knowledge thereof.

This proposal shall remain in effect for thirty (30) days after opening.

Name of Auditor, Partner or Authorized Signature


Contact Person Telephone Number

Proposed Cost/Hours:

Standard Audit Report proposal not to exceed $_____________________

Estimated Standard Report Hours

Supplemental Schedules proposal not to exceed $_____________________

Estimated Supplemental Report Hours

Total Written Audit Report Proposal (a+c) $_____________________

Estimated Total Audit Hours _________


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The AICPA Audit Committee Toolkit: Not-for-Profit Organizations -

Office of Management and Budget Circulars for Nonprofits -

The Dirty Little Secret of Nonprofit Boards -

Excellent Material about Boards and Their Legal and Fiscal Obligations -

What is an A-133 Audit? -

Criteria for Nonprofits’ Operating Reserves -

Preparing for the Audit by Susan Griffin, Director of Operations, Center for Nonprofit Excellence This sample audit RFP is not to be considered a legal document. It is only a sample of what an audit RFP might include. Any errors or ommissions shall be further indication this is only a sample and not a legal document. Check your state law about audits and requests for audit proposals as well as all grant applications and contracts. See earlier articles about nonprofit audits: Your Nonprofit Library Second Shelf – Considering An Audit Your Nonprofit Library Second Shelf - Request for Audit Proposals (RFP)

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