This article originally appeared in the fall 2015 issue of the Association of Minnesota Counties’ newsletter. With the recent Minnesota law change, we feel the information is still relevant in 2016 and hope it’s of value to Minnesota counties considering using a private CPA firm to complete their audit.
As you know, in 2015 the Minnesota Legislature passed a bill that now allows Minnesota counties to hire private accounting firms to conduct their annual audits. With this law change, county administrators, auditors/treasurers, finance directors, and commissioners have found themselves seeking information about how to choose a qualified audit firm that will best fit their county’s needs. Although individual counties may have slightly different needs, the following criteria should be considered:
Reputation for quality and commitment to technical excellence
Because counties are accountable to numerous stakeholders, including taxpayers, cities, school districts, the state, the federal government, and bondholders, the auditor’s reputation for quality and commitment to technical excellence should be a critical component in your county’s evaluation criteria. Factors to consider include the following:
- Experience auditing federal programs – Counties rely on federal funding for many programs, which typically requires a single audit. These highly technical audits are further complicated by the new comprehensive grant reform rules issued by the Office of Management and Budget that are now in effect. Your auditor should have substantial experience auditing federal programs.
- Understanding of county-provided services – Your auditor should understand the major services you provide and have experience auditing similar programs. Services and programs that are unique to counties often include health and human services, highway, and solid waste, among others.
- Understanding of the Minnesota Legal Compliance Audit Guide – This guide outlines the standards for complying with applicable state laws and regulations.
- Results of peer reviews and regulatory inspections – Public accounting firms are regularly inspected by regulators and peer reviewers. Your auditor should be willing and able to share the results of these inspections and information about their system of quality control.
Integrity, independence, and objectivity
Maintaining independence and objectivity is vital to the audit process, and your auditor must be free from any conflicts of interest that may give rise to questions about their ability to remain independent throughout the period of the audit engagement. Because auditor independence is so important, many governments request a statement confirming independence as part of the auditor selection process.
Service and communication
Service and communication may be last on this list, but they are certainly not least in terms of importance. The firm you choose should be willing to work with you on your timeline, be proactive in communicating changes and responsive to questions, and be accessible throughout the year to make certain the process is efficient and any issues are addressed promptly and appropriately.
When assessing service providers, consider how the provider interacts with you during the proposal process. If they are actively engaged in seeking to understand your people, processes, and technology during the proposal process, there is a good chance they will be responsive and timely if selected to serve as your auditor.
Evaluating these criteria
Following a Request for Proposal (RFP) process is a common approach to selecting an auditor and will yield solid information about potential providers of audit services. There are several steps to help ensure your RFP process provides the information you require to evaluate and select a firm with a great reputation for quality, integrity, and service:
- Pre-identify a short list of potential service providers – Consider meeting with potential service providers prior to releasing an RFP, and only invite those that you deem to be a good fit to participate.
- Ask the right questions – Use the RFP to gather the information that is most important to your organization and that will help you identify and evaluate relative differences in the strengths of responding firms in areas such as technical skills and expertise, audit quality, service, and approach to performing the audit. The Government Finance Officers Association has an excellent publication to aid in your development of an RFP which can be found at http://www.gfoa.org/audit-procurement.
- Check references – Take time to speak with each reference to help get a feel for the service, experience, and quality they are receiving from their audit firm.
Choosing an auditor is an important element of a county’s fiscal responsibility. The first step involves reviewing your county’s needs and requirements and from there, determining the most qualified and capable provider of the service.