With the increasing need for accountability, more and more nonprofits are turning to audit services. The accepted method of soliciting bids for auditing services is through a Request for Proposals (RFP).
Since auditing services are professional in nature, once you determine that a supplier has the requisite level of technical competence, your primary goal will be to determine the fit between the service provider and your organization.
There is no one best way to design an RFP, but Thomas A. McLaughlin, author of Streetsmart Financial Basics for Nonprofit Managers, suggests you keep the following ideas in mind:
Difficulty: Average
Time Required: NA
Here's How:
- Describe the organization thoroughly.
What is your mission? When were you founded? Are you a 501(c)(3) or some other type of nonprofit? What are your services? Are there special circumstances the auditors should know about (e.g., this is the first financial audit after a merger)? It is not necessary to include a copy of audited financial statements at this stage - you can make them available during preproposal interviews - but do include summary financial information such as revenues and their sources and balance sheet data. - State what you need.
State explicitly what you need the auditing firm to do. Some nonprofits want their auditors to audit the financial statements, complete the tax return(s), and file various financial reports, while others want only the audited financials. - Request qualifications.
Request that the auditors describe their qualifications to audit your organization. Explicitly link your needs with their qualifications, such as "Must have experience performing OMB A-133 audits." - Describe your timetable, decision process, and selection criteria.
Detail how you will make your decision, when, and on what basis. A formula with points for various criteria is bureaucratic but probably harmless. Best to be straightforward here. Note: By all rights, the auditors report to the board, so they should be the ultimate decision makers even if staff does most of the work. - Select the firms you will send the RFP to.
As much as possible, send the RFP to practitioners and firms you know to be skilled in your industry and appropriate providers of service. Be prepared to meet with each candidate in person (if they don't request a personal visit, ask yourself why). - Provide enough time for the audit firms to respond.
Give plenty of time for all parties concerned to do their jobs - four to eight weeks should work - and plan to put in at least as much time managing the process as any single candidate will in responding to you. Use the process as a management tool.
