Procuring Contracts

Below is a listing of sample contracts that can be used with your RFP or for information purposes only. All audit contracts must be approved by the State Auditor. Any contract that has been altered without prior written approval from the State Auditor will be rejected. If you have any questions, please contact:

Frank Valdez
Phone: (505) 476-3800
Email: Frank.Valdez@osa.state.nm.us

Audit Contracts

• Cover Letter (Appendix A, pdf) *Print on Agency Letterhead*
• Evaluation Form (Appendix B, pdf)

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Sample RFP Information

• Sample RFP's (off site link)

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Sample Audit Contracts for FY 2008

Schools

This is the contract used for school districts and include provisions for charter schools who are a component unit of the school district.
contract-school.pdf

Higher Education

Contract used for Colleges and Universities.
contract-higher-education.pdf

Hospitals, MDWCA and stand alone Housing Authorities

contract-hospitals.pdf

State Agency

Who are required to have DFA approval.
contract-state-agency.pdf

District Courts

District Courts, District Attorneys and State Agencies (Who do not require DFA Approval)
contract-district-courts.pdf

Local Government

Municipality and Counties (Include provision for component units).
contract-local-government.pdf

Special Districts and Workforce Development Boards

contract-special-districts.pdf

Housing Authority Limited Liability Corporations

Contract currently not available.

 

RFP Guidance

www.state.nm.us/spd/spd_rfp.html (off site link)

Step By Step Audit Contracting Process

Step 1 – Develop a list of audit firms eligible to perform government audits for the current fiscal year.

The State Auditor’s Office will issue an invitation to audit firms interested in performing government audits to complete an application known as the  firm profile datasheet.  Firms will submit the application along with the required documentation indicated on the profile datasheet to the State Auditor’s Office by a deadline specified by the State Auditor.

Upon reaching the deadline for receiving applications from the firms,   the Office will conduct an extensive review of each application.  The areas of review include verification that educational requirements have been met, the firm’s documents such as professional liability insurance, New Mexico firm permit, etc. are current and  a review that the firms are in compliance with requirements set forth in the Audit Rule relating to due dates, late audit notifications, quality of work, etc. 

Upon the conclusion of the review, firms will fall into several categories:  1) approved, 2) approved with limitations (often limiting the number of audits they are eligible to perform), 3) approved to be on the list of firms eligible to perform audits however there is some requirement that must be met before the Office will approve and issue contracts.  Some of the most common items that can cause this restriction is a) an expired or upcoming expiring peer review, b) not having an at least one audit manager with a current New Mexico CPA license, c) having outstanding audit reports for prior years, d) having expired documentation, e) not meeting the CPE requirements, etc.

Once the list of approved firms has been finalized the information is posted on our website.

Step 2 – Update and finalize the current year Audit Rule.

For More Information: The Office annually reviews and updates the 2.2.2 New Mexico Administrative Code (NMAC) “Requirements for Contracting and Conducting Audits of Agencies”, know as the State Auditor’s Rule.  The updates include administrative updates, changes based on the outcome of legislation and changes resulting from auditing standards.

Step 3 – The State Auditor selects the audits his Office will perform and all other agencies will be sent written notification that they can procure their auditor.

More Information: State Auditor has the option to select any agency and have his office perform the annual financial and compliance audit.  Once he has made his selection all other agencies must wait until they receive written notification from the State Auditor that they can contract for audit services.  Agencies needing to go out to Request for Proposals (RFP) can use the sample audit contracts in their RFP process.  They can also contact General Services, Purchasing Division at 827-0472 or their website for any questions relating to Request for Proposals.   Once an agency has received their proposals and evaluation form must be completed for each proposal received.  The agency will submit the evaluation for the firm they are recommending.  All other evaluations forms need to stay in a procurement file.

Step 4 – The State Auditor’s Office conducts statewide trainings on the Annual Contracting Process.

More Information: The State Auditor’s Office will conduct statewide training sessions at the beginning of the audit contracting cycle.  The trainings are usually 3-4 hours in length and cover a variety of issues including 1) highlights from the State Auditor, 2) the contracting department will cover the steps that agencies need to follow to get an auditor in place to perform their audit including providing statistics from previous audit years and 3) the audit department will cover overall changes that will affect the audit and give an overview of upcoming changes in standards that may effect future audits.

Registration is requested and can be completed on are website.

Step 5 – Agencies submit a cover letter and evaluation form on the audit firm they are recommending perform their annual financial and compliance audit.

More Information: An agency will need to submit to the state auditor a completed cover letter and two page evaluation forms.  Agencies who will have a one year audit performed or an agency in who has a multi-year proposal and is in the first year of the multi-year proposal must submit the cover letter and two page evaluation form.  Agencies who are in a multi-year proposal and are in year #2 or year #3 must submit a cover letter and a copy of the evaluation form part 2 from the
the original evaluation form initially completed.  If the information is unavailable the agency can fill out part 2 of the evaluation form.

If the State Auditor denies an agency’s recommendation they will be notified in writing with an explanation and will be asked to make another selection.   If the recommendation is approved the State Auditor’s Office will issue the audit contract and mail it to the agency with instructions.  There will be several areas within the contract that must be completed by the agency before signing the contract and sending it to the auditor for their signature.  The final signature will be the State Auditor.  Once he has signed the contract copies will be distributed to all parties. (Only contracts issued by the State Auditor Auditor’s Office will be accepted)

If you are an agency who requires DFA approval, once you receive the audit contract you will need to make 3 additional copies so that when it is returned to the State Auditor’s Office there will be four original copies of the contract all with original signatures.  The contract should be signed by the agency, audit firm, Taxation and Revenue and Legal Counsel.  The contracts should accompanied by an approved requisition and contract brief.  The State Auditor will sign the contract and his office will hand deliver the contracts to the Department of Finance & Administration for approval.  When the contract has been approved by Department of Finance and Administration they will return them to the State Auditor’s Office for distribution.  The audit firms have 10 days from the entrance conference with an agency to submit the dated and signed engagement letter along with the list of client prepared documents to the State Auditor’s Office.

Step 6 – Audit firms will submit audit reports to the State Auditor for review and release beginning in September through December.

More Information: Section 2.2.2.9 – Report Due Dates will outline the due dates for the audit reports.  Once an audit report with the required documentation (completed audit review guide, management representation letter and letter of past adjustments or an indication there were none) is received in the State Auditor’s Office we will post on our website the date the audit was received.  Any audits received lacking any of the required documentation including the engagement letter will not be considered received until all the required documents are received.

A completed audit report submission then will go through a review process.  Upon completion of the review the Office will fax a letter of comments to the auditor with a copy to the agency awaiting response.  The audit firm is given 20 business days to respond.  If no response is received a letter will be sent to the firm and the agency reminding them of the required response time. 

Once the corrections have been completed the office will issue an “ok to print the final copies of the audit report”.  When the final audit reports are received (including a required copy on disc) the Office will briefly review it making sure all the corrections noted in the draft are reflected in the final audit report.  The Office will then issue our standard release letter which indicates that the audit report will have 10 days before becoming public record.  An agency can request a waiver of the 10 day holding period; however the request must be in writing (sample 10 day waiver) and received PRIOR to the report being released.

Government Agencies

Notification Letter

Agency must receive written notification from the state auditor before beginning the selection process. Notification letters are the Agencies approval to acquire an auditor for the current fiscal year. Notification letters are sent out on yearly basics.

Submitting Auditor Recommendation

Agencies will submit auditor recommendation by June 2, 2008.

(Note: The Audit Rule for 2008 states that the Auditor Recommendation is due by Saturday, May 31, 2008, although the next business day is Monday, June 2, 2008.)

Prior Year Audit Fees for Governmental Agencies

The prior year fees for governmental agencies can be used as a tool to help agencies and firms.

Sample Contracts for RFP Purposes

The sample contracts for RFP purpose can be used as a tool to help agencies and firms in the RFP Process.

(Note: The sample contracts section should not be used to re-type contracts or reword contract.)

List of Approved Firms

What Is An Audit

AUDIT TUTORIAL—WHAT IS AN AUDIT? WHY EVEN BOTHER WITH ONE?

TYPICAL AUDIT OBJECTIVES (WHAT YOU’RE TRYING TO ACHIEVE)

S_afeguarding of Organizational Assets
C_ompliance with Regulation, Policy & Other Requirements
A_ccomplishment of Organizational Goals & Objectives
R_eliability of Information (Reporting)
E_conomy & Efficiency of Operations

TYPES OF AUDITS (NOT ALL AUDITS ARE CREATED EQUAL)

Financial
Major Focus—Accuracy of Financial Reporting
Key Measure—Materiality of Errors and Misstatements
Opinions—Based on Professional Standards and Judgment
Note: Certified Public Accountants (CPAs) licensed
to express opinions related to Financial Reporting
Primary Stakeholders—Decision-Makers (legislators)
Funding Sources (taxpayers)

Performance
Major Focus—Achievement of Goals & Objectives
Key Measure—Project Management
Primary Stakeholders—Decision-Makers (legislators)
Funding Sources (taxpayers)
Users (beneficiaries of public services)

Regulatory
Major Focus—Statutory/Regulatory Adherence
Key Measure—Compliance
Primary Stakeholders—Decision-Makers (legislators)
Regulators (other agencies)

Internal
Major Focus—Organizational Needs
Key Measure—Adequacy of Internal Controls
Primary Stakeholders—Organizational (management & employees)

Fraud/Special
Major Focus—Investigative in nature; focused on specific allegations
of financial fraud, waste and abuse associated with specific
individuals and/or specific transactions
Key Measure—Fiduciary Duty
Primary Stakeholders—Prosecuting Authority (DA, AG, Justice Dept)
Decision-Makers (legislators)

Fiduciary duty is characterized as being “the highest standard of care imposed at either equity or law,” requiring the fiduciary to be “extremely loyal to the person to whom they owe the duty (the principal),” and requiring those entrusted in this manner “not put their personal interests before the duty, and not profit from their position as a fiduciary, unless the principal consents.”

Source: Wikipedia Encyclopedia (http://en.wikipedia.org) Note: The principal, with respect to public resources, is ultimately the taxpayer/citizen.

WHO DOES WHAT?

Financial
Typically done by Independent Public Accountants (IPAs) that are
Certified Public Accountants (CPAs), or by CPAs on staff within
the Office of the State Auditor

Performance
Typically done by staff employed by the Legislative Finance
Committee (LFC) of the New Mexico State Legislature
Note: The Office the State Auditor does not normally assist the
LFC in this regard or otherwise engage in performance auditing

Regulatory
Typically done by outside auditors associated with a regulatory body

Internal
Typically done by the Internal Audit or Inspector General function
established within or otherwise associated with the organization
being audited

Fraud/Special
Typically done by IPAs that are Certified Fraud Examiners, or by
CFEs on staff within the Office of the State Auditor

HOW TO READ A TYPICAL FINANCIAL AUDIT REPORT

Background —Normally provides perspective on organizational mission, key processes or initiatives, funding levels, how the audit came about, major concerns triggering the audit etc.

Executive Summary —Normally provides a high level summary of significant audit findings, observations or conclusions.

Scope of Work —Normally identifies the areas being evaluated, the time period under review, and may specify activities or transaction types looked at or not looked at.

Methodology —Normally describes how the audit was conducted in terms of sampling methodologies or transactions selected for evaluation

Findings —Describes significant shortcomings identified during the audit. A finding is typically organized in the following manner:

• Condition (the specific situation/shortcoming)
• Criteria (policy, duty or good business practice being violated)
• Effect (risk or adverse impact associated with this condition)
• Cause (the likely reason this condition exists)
• Recommendation (how the condition might be remedied/fixed)

Management Response —When included, normally constitutes a managerial perspective on corrective actions considered necessary to resolve the finding

Note: Due to the nature of Fraud and Special Audits and the primary stakeholders associated with such audits, a Management Response will typically not be associated with the related audit report.

 

 

Audit Firms Information

Application Process

If you are an audit firm holding a permit issued pursuant to the provisions of the 1999 Public Accountancy Act [61-28B-1 to 61-28B29 NMSA 1978], registered and in good standing with the Board who is interested in performing government audits click here.

Firms need to complete the firm profile datasheet and submit it to the State Auditor’s Office along with the required documentation mentioned in the firm profile datasheet by the date specified by the State Auditor.

Application Review Process

The Office will conduct an extensive review of each application.  The areas of review include verification that educational requirements have been met, the firm’s documents such as professional liability insurance, New Mexico firm permit, etc. are current and  a review that the firms are in compliance with requirements set forth in the Audit Rule relating to due dates, late audit notifications, quality of work, etc. 

Limitations / Restriction

Upon finalizing the review of the firm profiles the firms will fall into one of several categories: 

1) Approved
2) Approved with limitations (often limiting the number of audits they are eligible to perform)
3) Approved to be on the list of firms eligible to perform audits however there is some requirement that must be met before the Office will approve and issue contracts. 

Some of the most common items that can cause this restriction is a) an expired or upcoming expiring peer review, b) not having an at least one audit manager with a current New Mexico CPA license, c) having outstanding audit reports for prior years, d) having expired documentation, e) not meeting the CPE requirements, etc.

Prior Year Audit Fees for Governmental Agencies

The prior year fees for governmental agencies can be used as a tool to help agencies and firms.

Audit Review Guides

Contract Addendum for Subcontracted Work

Click here to review a “Sample Format for a Contract Addendum for Subcontracted Work”.

State Auditor Rule

Audit Rule 2008

Adobe Acrobat Files

Audit Rule 2008 (111 pgs, 638 kb)

Summary of Audit Rule 2008 Changes (6 pgs, 33 kb)

Amendment to Audit Rule (December 2008)

 

 

Statewide Training

 

Audit Rule 2009 Training Registration

 

Coming Soon!