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What to consider when running a charity audit tender process

Are you thinking about changing your auditors? Wondering how to go about it? Richard Barker, Director of Finance and Resources at Goodenough College, shares some advice.


the illustration shows the word tender spelled out. People work alongside the word and various images symbolise targets and data

When speaking to Charity Finance Group for its article on the challenges of charity audit, conversation turned to the topic of tendering for an auditor.

It’s a process I’ve been through several times, in various roles with different organisations. Here are some things I think it would be helpful to consider in order to make the process a success:

Why are we doing this? Is it definitely time for a change?

Before all else, you need to ensure your organisation buys into the process and its objective, so make sure to engage key trustees and other relevant internal stakeholders from the start of the process.

Often it will be the Audit Committee that is the driver for change so make sure they are clear on what they are trying to achieve.

Is there a particular area in which you feel your current auditor is not delivering? In this case, consider how you can vet prospective new auditors to ensure they won’t have the same challenges, weaknesses or blind spot.

Unless you are re-tendering because of serious concerns about your current auditor, or you are committed to change for change’s sake, consider inviting the incumbent to be part of the process.

It may be that you’re re-tendering because it is good practice to have a look periodically, and it has been a while since you’ve done so, or you may wish to challenge the fee.

In this case, communicate as much to your incumbent auditor when inviting them to be part of the process. They may choose not to take part. If so, take the time to understand why, listen to their feedback, and pick their brain.

You will want to be honest with your incumbent, but don’t want to be in the position of finding there is nobody as good as them after all. Their bid can also provide a helpful, informed benchmark.

Reappointing an incumbent after a tender can lead to a significantly improved and reinvigorated relationship, with the charity feeling renewed confidence in the value of their auditor, the auditor feeling valued and the added value elements of their proposition reinvigorated.

It will be helpful to those you do approach to know if the incumbent will be re-tendering.


Who to invite to tender?

Make sure you are approaching firms which are appropriate for your organisation, so they understand what you do, and you’re slotting into their client roster.

You might want to be in the middle to the top end of their clients in size terms, rather than at the bottom end, to ensure you are adequately supported, although this is clearly not possible for all charities.

Charity Finance’s Charity Audit Survey is a good source of information on the regard clients have of their auditor, average client sizes and average fees, to target who you approach.

If you want to see three to four firms at presentation stage, you will want to approach six to seven firms to initially seek their support for engaging the resources to tendering.

This may mean you are providing detailed briefings to five or six firms, in order to get sufficient credible tender submissions to shortlist your three to four.

In an increasingly virtual world, the option of having an auditor who is geographically distant, who will perform a remote audit, may seem viable.

My view is that notwithstanding new ways of working, there is value during an audit in that informal conversation at someone’s desk, and I’m not sure how well you can really understand an organisation without that, as I have seen from tender submissions that did not include an on-site visit.

Others may take a different view, of course, and this may in part depend on your charity’s policies around working location and remote working. The location, range, and nature of any fixed assets your charity has may also be relevant.


What do they need to know?

There is real value in investing significant time in briefing those firms you have invited to tender. This is vital to ensuring they understand what they are bidding for.

They will want to appreciate the true complexity of your business and gain an overview of your systems and processes so they can consider and allocate appropriate resources to their proposal.

If on receiving bids, it seems that there has been a broad misunderstanding of the business, consider going back and re-briefing on a fair and consistent basis - and doing so for all those tendering.

But equally, you may consider such a misunderstanding to be a sufficient sign on the quality of any single proposal to rule it out.


Examining their bids

In addition to their fee, you are likely to be looking for evidence of other things in tender submissions and indeed in the way audit firms approach the process as a whole: a helpful, cooperative approach to partnering with you; a properly resourced proposal; and a good understanding of your business.

The final two parts are intimately linked. You should get a sense of their understanding of your organisation and its complexities by closely examining their fee structure, how they arrive at their quote, and how many hours and the seniority of staff they are going to put into the work.

Make sure you ask for an appropriate level of detail on how many auditor hours they have assumed within the proposal.

Beware of lowball offers. A provider may quote something unsustainable with the expectation that they can revisit it once they have ‘gained a better understanding’ during the first audit. It is in no-one’s interest to have a poorly resourced, poorly performing auditor.

It’s also important to include consideration of additional annual services such as Corporation Tax and iXBRL returns that can be agreed within their competitive fee proposal.

Alongside the audit itself, you might want to consider the range and quality of other advisory services, such as VAT consultancy, governance training or other things, that they offer.

The ability to conveniently add extra tendered services may play a part in your decision, recognising the recent consultation potential restrictions on their provision of non-audit services (see the full feature for more on this).


A seller’s market makes it even more important to start your process early, to ensure you have enough time to engage bidders.

Also important is taking time to present your organisation and the reasons you are re-tendering clearly, rather than it being a rushed or unclear affair, to ensure that you give the impression of being an attractive prospect.

As for fees; ultimately, if you’ve got a truly competitive tender process, you should get a competitive price.


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