Preparing the RFP

How to prepare a request for proposals

The first step in hiring a quality CPA firm is preparing the request for proposals (RFP) that will allow you to obtain and evaluate the information needed to make a sound selection. The RFP process from the initial decision to seek out proposals to getting the engagement letter signed can be a long process. But a little extra time spent on preparing a comprehensive RFP can make the process go much smoother and quicker. And it is important that you provide CPA firms with sufficient information about the nature of your religious organization and the engagement to allow them to make a meaningful and comprehensive proposal that addresses your specific needs.

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 discuss in general terms the objective to be achieved and the reason professional CPA services are being sought.

The introduction should also 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. We recommend asking 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.

Additionally, the introduction section also should include the following procedural information:

• Name of the contact person if further information is needed to respond to the RFP
• Number of copies of the proposal that must be provided
• 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)

Administrative Section

In this section, the RFP should provide a description of the nature of the entity.
The following information should be included in this section:
• Type of entity (corporation, not-for-profit, etc.)
• Fiscal year end
• The various locations of the organization if there are multiple locations
• Will the audit fieldwork be conducted onsite or remotely
• Expected due dates for completion of each service to be rendered
• Whether the proposed fee should be determined on a flat fee, flat fee plus expenses, hourly fee or hourly fee plus expenses basis

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.

Scope of Work

The RFP should describe the services to be provided. 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:

• Number of years that should be covered by the proposal
• State that the audit must be performed in accordance with generally accepted auditing standards
• Whether any other services are expected of the CPA firm (such as preparation of tax returns)
• Whether the CPA is expected to attend regular or special meetings with management, governance committees or other interested parties
• 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)

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.

You can also consider asking in 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.

Proposal content and other submission requirements

Firm information
• Size, location and history of the CPA firm
• Number of clients that are religious organiztions or nonprofits
• States in which the firm is licensed to practice
• Firm references — especially from similar type entities — and specific contact information
• The firm’s latest Peer Review Report and firm’s response, if any
• Whether the firm is subject to any current litigation
• Whether the firm has been the subject of any AICPA or state CPA society ethics referrals
• The firm’s working paper retention and access policies and requirements
• Whether the firm has insurance coverage (errors and omissions, workers’ compensation, etc.)

Personnel information
Information on firm staff and management that will be participating in the audit
• 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
• 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

Engagement information
• Audit approach
• A detailed fee schedule for each service to be rendered
• Reports to be issued
• Expected completion dates for each portion of the engagement
• Information that is expected to be provided to the CPA
• Work space requirements of the firm

Proposal evaluation

The RFP can also 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:

• Elements of the proposal that will be specifically evaluated (technical experience, industry expertise, etc.)
• Methodology for scoring the proposal
• Steps involved in the selection process
• A right-to-reject clause

Attachments

Attachments can be used to accompany the body of the RFP to provide relevant information to prospective respondents. Commonly useful attachments are: • Copy of most recent audited financial statements, including the auditor’s report
• Copy of most recent tax return, if applicable