Joint auditor RFP.pdf

Request for Proposal Joint Financial Audit Services

Introduction

The SC Office of the State Auditor (OSA) is requesting proposals from qualified CPA firms to perform a joint financial audit of the State of South Carolina for the years ending June 30, 2025 through June 30, 2029.

A pre-proposal conference will be held on April 23, 2025 at 2 pm in OSA offices at 1401 Main Street, Suite 1200, Columbia. Representatives of OSA and the Office of the Comptroller General (CGO) will meet with prospective proposers to review the Request for Proposal (RFP) and answer questions about the audit engagement. Copies of this RFP will be available at the proposer’s conference.

A virtual option is available upon request. Questions concerning this RFP should be directed to:

Sue Moss, CPA Interim State Auditor 1401 Main Street, Suite 1200 Columbia, SC 29201

(803) 832-8249 smoss@osa.sc.gov

The Reporting Entity

The State of South Carolina is governed by an elected legislature and constitutional officers. The reporting entity consists of the primary government and component units. The primary government includes State departments, agencies, commissions and authorities, including both governmental and business-type activities. The State’s component units are legally separate organizations for which the State is accountable for purposes of financial reporting.

While the State operates under a decentralized financial management structure, most State agencies use a common statewide enterprise information system (known as “SCEIS”), and chart of accounts for financial reporting. The Comptroller General, as the State’s chief accounting officer, maintains statewide financial records and sets statewide accounting policies and procedures used by state entities.

mailto:smoss@osa.sc.gov

Component Units

The State has identified the following component units for inclusion in its financial statements:

Blended

Tobacco Settlement Revenue Management Authority South Carolina Opioid Recovery Fund Palmetto Railways (a division of the Department of Commerce)

Discretely Presented

South Carolina Public Service Authority (Santee Cooper) South Carolina State Ports Authority South Carolina State Housing Finance and Development Authority South Carolina Lottery Commission The Children’s Trust Fund of South Carolina, Inc.

Connector 2000 Association, Inc.

The South Carolina Education Assistance Authority The South Carolina First Steps to School Readiness The South Carolina Jobs – Economic Development Authority (JEDA) South Carolina Research Authority The South Carolina Medical Malpractice Association The Patriots Point Development Authority 10 State-supported public universities 16 State-supported technical colleges

Audited Financial Statements

Component units issue an audited financial statement (AFS) which is audited by other auditors. In addition, the following state entities issue a stand-alone AFS audited by other auditors:

South Carolina State Accident Fund

South Carolina Department of Employment and Workforce - Unemployment Compensation Fund South Carolina Local Government Investment Pool South Carolina Medical Malpractice Patients’ Compensation Fund South Carolina Insurance Reserve Fund South Carolina Public Employee Benefit Authority – Insurance Benefits and OPEB Trust South Carolina Public Employee Benefit Authority – Retirement Systems

South Carolina Department of Transportation South Carolina Transportation Infrastructure Bank South Carolina Future Scholar 529 College Savings Plans InvestSC, Inc.

The joint Independent Auditors’ Report will reflect reliance on the reports of other auditors, which may include OSA or the contract audit firm auditing alone. Prior year AFSs of these entities can be found at osa.sc.gov/reports.

Annual Comprehensive Financial Report

The statewide Annual Comprehensive Financial Report (ACFR) is prepared by CGO utilizing SCEIS, agency-prepared reporting packages and financial statements of separately audited entities. Most agency-prepared reporting packages are due to CGO in August and September. Final stand-alone AFSs for state agencies and component units are due to CGO no later than October 1 annually for June 30 fiscal year end entities (or 120 days after year end for entities with fiscal year ends other than June 30). The AFS for the South Carolina Retirement Systems, Insurance Benefits, and Other Post-Employment Benefits Trust Funds administered by the South Carolina Public Employee Benefit Authority (PEBA) are due to CGO no later than October 15 annually.

During fiscal year 2024 the CGO began implementing Workiva, a platform design to help automate the ACFR compilation process.

Prior year statewide ACFR’s can be viewed at osa.sc.gov/reports. CGO is responsible for the ACFR assembly and publishing process with little to no auditor involvement.

Representatives from CGO will provide a detailed overview of the process followed for preparing the draft financial statements including year-end close-out procedures, schedule of reporting package, timing and CGO staff availability.

Proposal Timeline

Request for proposal issued April 9, 2025 Pre-proposal conference April 23, 2025 Due date for proposals May 5, 2025 Firm interviews, if needed Week of May 12, 2025 Selected firm notified Week of May 12, 2025

About the Joint Audit

The joint audit is conducted under auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

OSA and the contract audit firm work as a team in completing the joint audit of the statewide financial statements. Each organization will contribute approximately one-half of the anticipated total hours needed to complete the audit using an appropriate mix of staff experience. Total engagement hours vary by year, but typically are in the 6,000-hour range.

Each organization will provide laptops and other equipment, supplies, etc. for their respective staff. While remote work is acceptable, contract audit firm staff assigned to the engagement, including managers and partners or equivalent, are expected to be onsite from time to time throughout the engagement. The primary fieldwork location is the Wade Hampton Building, 1200 Senate Street, Columbia, which provides convenient access to CGO staff as well as to the Office of the State Treasurer. Travel to and work from other locations, generally within the Columbia metropolitan area, may be necessary from time to time.

http://www.osa.sc.gov/reports

Status meetings among the team and/or with representatives of CGO or other agencies will take place periodically throughout the engagement, including approximately weekly beginning in the final month or so prior to report issuance. Attendance is expected by key audit team members to facilitate the exchange of information and to address issues. Status meetings usually include a virtual option.

Other meetings (such as with CGO staff and/or staff of other agencies) also generally occur during the audit process. In person attendance may be necessary depending on the nature of the meeting.

A presentation to governance (State Fiscal Accountability Authority) may be required. The presentation will depend on when the ACFR is issued, but typically occurs in January.

In addition to time, equipment and supplies, OSA will provide the following:

• Overview of the statewide system of funds and accounts.

• Access to and introductory training on SCEIS, the statewide enterprise information system.

• Working space in OSA offices for contract audit firm auditors assigned to the engagement as may be needed from time to time.

The contract audit firm will provide, in addition to time, equipment and supplies:

• Access to and introductory training on the firm’s engagement management and audit methodology systems (see Note below).

• An information technology (IT) specialist(s) to determine the effect of IT on the audit, identify and assess IT risks, understand IT controls, design and perform tests of IT controls and substantive procedures and identify IT control deficiencies.

• Access to and introductory training on audit tools used by the firm which may be beneficial to this engagement.

• A digital confirmation process platform, such as Confirmation.com for approximately 50 confirmations.

• Valuation and pricing application for use in testing fair market value of investments.

• Evaluation of SOC1 reports for asset servicing by appropriate firm specialist(s).

• Consultation with OSA and CGO on technical matters, including implementation of GASB pronouncements or auditing standards throughout the term of the contract.

• Review of the ACFR and selected workpapers by a partner or equivalent not a regular member of the engagement team who has sufficient governmental financial audit technical expertise and experience.

• Access to firm subject-matter experts when issues arise that may require consultation.

• Detailed time reports by the 5th day following month end.

The contract audit firm may also provide access to and introductory training on the firm’s engagement management and audit methodology systems. OSA currently uses Thomson Reuters Engagement Manager and PPC for engagement management and audit methodology, respectively. We will explore the possibility of using Engagement Manager with the successful proposer.

Regardless of which entity provides the engagement management application, access to workpapers must be provided to both parties for any year of the joint audit contract, preferably in a way that preserves workpaper signoffs and allows workpapers to remain in their native application. OSA’s document retention period is 7 years.

About SCEIS

The South Carolina Enterprise Information System (SCEIS) was implemented in 2012, consolidating agency financial, purchasing and human resource/payroll processes into a single statewide system. SCEIS uses SAP enterprise risk planning software.

Auditors will be provided read-only access to SCEIS.

SCEIS is migrating to the SAP S/4HANA platform over the next 2 to 4 years, pending funding. The new platform will provide improved process flows, faster processing and enhanced functionality, but is otherwise not expected to have a major impact on the audit.

Typical Timetable – Events Related to CGO Preparation (Subject to change)

Reporting packages/forms due July/August/September Stand-alone AFS due (excluding PEBA) October 1st Stand-alone AFS due– PEBA October 15th Draft ACFR provided to auditors Notes to financial statements October 20th Complete draft ACFR October 30th

Typical Audit Engagement Timetable (Subject to change)

Audit planning and strategy development May Systems evaluation May/June Testing and analysis July - October Workpaper review by senior team members October/November Financial statement tie-in and review October/November Reporting and follow-up November Auditors’ report date Approximately November 15th **

** Actual date determined annually in conjunction with CGO.

Proposal Requirements

To provide the maximum degree of comparison, we require that proposals strictly adhere to the following format and content. Proposals should not exceed 30 pages, excluding items included as an appendix.

Title Page Show the RFP subject, firm name, contact information and date.

Table of Contents Include a clear identification of the material presented by section and page number.

Letter of Transmittal In one or two pages, provide an understanding of the work to be done and a commitment to the timeline outlined in this RFP. In addition:

a) Provide the name and contact information of the individual who will be authorized to make representations on behalf of the proposer.

b) State that the person signing the letter is authorized to bind the proposer.

Profile of the Proposer

Provide a profile of the proposer to include:

a) Identification of the proposer as a local, regional or national/international firm.

b) Identification of the location of the office which will have primary responsibility for the work to be done.

c) Information regarding the firm size, including the office which will be primarily responsible for the work and/or the size of staff specialized in providing assurance services to state and local government.

d) Description of other services provided by the firm which may be relevant to the State.

e) Description of any business litigation brought against the firm or any of its officers or principals by any entity for fraud, malpractice, misrepresentation, negligence, or similar cause of action within the last 5 years.

f) Information on desk or other reviews of governmental engagements during the last 5 years that have resulted in correction or reissuance of a report or in disciplinary action.

g) A copy of the firm’s most recent peer review report, including findings for further consideration, response and letter of acceptance. This may be included in an appendix.

Summary of the Proposer’s Experience and Qualifications

a) Outline a proposed staffing plan and specifically identify the senior members of the proposed engagement team. Include resumes detailing relevant experience for each and include with the resume a list of the governmental CPE courses attended in the prior two CPE reporting periods.

The resume and CPE listing may be included as an appendix.

b) Address the firm’s commitment to staff continuity and describe how turnover is handled, particularly of more experienced staff members.

c) Describe new or innovative approaches the firm has implemented on similar engagements to improve audit quality or efficiency, including utilizing enhanced data analytics and artificial intelligence. Indicate how the firm proposes to work with OSA to use similar approaches on this engagement.

d) Provide a minimum of three recent engagements similar in scope to the services requested.

• Include entity name, total engagement hours and years audited

• Indicate if the entity prepares an ACFR and if the GFOA certificate was awarded

• Identify the members of the proposed joint audit engagement team who also work on the engagements described and the hours they contributed to each engagement

• Do not include extensive lists of governmental clients served

e) Provide references from a minimum of three of the proposing firm’s most relevant audit engagements. References should be from engagements within the last three years. Each reference should include the entity’s name and purpose, address, telephone number and the contact information, including email address, of the individual who will provide the reference Name the members of the proposed engagement team who also work on the engagements of the clients named as references.

f) Acknowledge that the firm is aware of current GAO Yellow Book requirements concerning continuing education and peer review and that the firm will comply with them during the term of this contract.

g) List any governmental clients that have terminated the firm’s audit service contract in the last three years for reasons other than the normal rotation of the auditor after a contract has expired.

Include the client’s name, date of contract termination, and reasons for termination.

Audit Approach Submit an outline that describes proposed objectives to be accomplished during each segment or phase of the engagement, including time estimates by segment or phase by staff level. Provide as much detail as is needed to allow proposal evaluators to understand the firm’s approach, flow, staffing levels and timeline, including critical benchmarks. Name the engagement management and audit methodology system the proposing firm would use for this engagement. The use of specialists or contractors should be specified.

Compensation State the total hours and hourly rate required by staff level and the resulting all-inclusive maximum fee, including out-of-pocket costs for each fiscal year 2025 through 2029.

Additional Data Provide additional information considered essential to your proposal.

Mandatory Criteria and Terms By submitting a proposal, offerer agrees that it complies with or agrres to the following mandatory criteria and terms.

Compliance with S.C. State Ethics Act.

Offerors are required to comply with applicable provisions of the South Carolina State Ethics Act.

Subcontractors.

Offeror must fully disclose any proposed subcontracting of any of the required services.

Requirements to which all offerors must agree.

a) That any contract resulting from this RFP will be subject to South Carolina law.

b) The State will not agree to any type of binding arbitration.

c) The State will not indemnify, defend, or pay attorneys’ fees on behalf of any party with which the

State of South Carolina contracts.

d) Offeror does not discriminate in employment of persons upon the basis of race, color, creed, national origin, sex, age, or physical handicap.

e) Offeror certifies that it will provide a drug free workplace during the term of this contract in accordance with the South Carolina Drug Free Workplace Act, SC Code 44-107-10 et seq., and that Offeror will comply with the Act as applicable.

Pre-Proposal Conference

The pre-proposal conference will provide interested firms with an opportunity to ask questions regarding the audit and the RFP. While attendance is not mandatory, a summary of questions and answers will not be distributed. In-person attendance is encouraged, but arrangements can be made for those who must attend remotely.

Participants are encouraged to submit questions in advance, so they can be covered during the pre-proposal conference.

Proposal Submission

Firms interested in responding to this RFP should submit a proposal electronically (in PDF format) no later than 5:00 PM on May 5, 2025, to officeofstateauditor@osa.sc.gov. Late proposals or proposals that do not adhere to the format and content stated in this RFP will be rejected as not meeting the mandatory RFP requirements.

Proposal Evaluation

Proposals should demonstrate the technical qualification, competence and capacity of the firm seeking to undertake the services required in this RFP. Evaluators will determine the winning proposal based on the qualifications of the proposing firm and proposed engagement team, audit approach, demonstrated understanding of and commitment to a team approach and cost.

Proposals that do not include the minimum requested information, including affirmation of mandatory criteria will automatically be rejected as not being responsive. OSA reserves the right to request additional information or clarifications from proposing firms during the evaluation process where it serves OSA’s best interest. Technical corrections or omissions may be allowed at the discretion of OSA.

OSA reserves the right to reject any and all proposals submitted.

OSA may, at its discretion, interview representatives of the highest-rated proposers prior to final selection.

OSA reserves the right to negotiate with the highest-rated proposer on final contract terms.

mailto:officeofstateaudit mailto:or@osa.sc.gov

Evaluation Factors

The following factors will be considered during our evaluation.

1. Responsiveness of the proposal in clearly stating an understanding of both the work to be performed and the joint audit:

• A firm representative attended the pre-proposal conference to obtain additional information or clarification needed to submit an informed proposal.

• Audit coverage and approach by segment or phase is appropriate.

• The proposal demonstrates a clear understanding of the joint audit, including providing examples where the firm and/or proposed staff have successfully completed other joint audits.

• Time estimates are reasonable for each segment or phase of the audit.

• Time estimates by staff reflect an appropriate mix of experience and indicate a high level of involvement by team leadership.

2. Qualifications and experience of the firm:

• The size and structure of the firm’s governmental practice indicate an ability to maintain the continuity of the project.

• The firm has recent experience with similar work and similar-sized engagements.

• The reputation of the firm and satisfaction with the firm’s services are positive as expressed by references.

• The firm has an ability to implement an approach or introduce new technology to enhance audit quality or improve efficiency.

3. Qualifications of staff to be assigned:

• Proposed staff qualifications include relevant experience with state governments as well as ACFR experience.

• Continuing professional education of proposed team members supports a focus in and commitment to governmental audits.

• Proposed staff, including partner and manager or equivalent, are committed to being on-site regularly throughout the audit process.

4. Commitment to a team approach:

• The proposal conveys through business beliefs and demonstrated practices an approach to the joint audit that values exceptional communication, knowledge sharing and openness among the joint audit team to complete the engagement efficiently and within expectations.

5. Cost:

• Proposed fees are an important factor in the selection process but do not outweigh the importance of the firm’s ability to handle an engagement of this size, nature, and complexity. Proposed fees will be given more weight when comparing proposals that demonstrate essentially equal qualifications.

Proposals reflecting hours or fees believed to be unreasonably low will be rejected.

Contractual Arrangements

Billings and Payment OSA will issue an award letter to the successful proposer stating the maximum fee to be paid by engagement year.

All invoices are to be submitted to OSA for payment. Services that may increase the fee above the maximum must have written approval of OSA before providing the additional service.

Progress billings should be based on the estimated percent of completion. Final payment will not be made until contractual obligations have been met. OSA reserves the right to hold progress billings should issues arise in the delivery of services or if there is a reason to believe billings are being submitted in advance of work being completed. A federal Employer Identification Number (EIN) must be provided with each invoice.

Workpaper Retention, Access and Security As noted previously, OSA will explore the possibility of using Thomson Reuters Engagement Manager for workpaper documentation or using the successful proposer’s documentation system. In either case, both parties will have access to the workpapers for 7 years, including after the joint audit contract is terminated. Each party will notify the other should workpapers need to be accessed by a regulatory body, including for purposes of quality control reviews.

Rights to Cancel The proposal must include a statement that OSA or the successful proposer can cancel this agreement without cause by written notice delivered no less than 150 calendar days prior to the State’s fiscal year end. A failed peer review or a peer review with findings related to this or other engagements is grounds for cancellation of this agreement without regard to the 150-day notice.