Fred’s Take: You might think that picking a CPA to audit your ERISA plan is easy and not fraught with danger. Think again. According to the DOL’s Chief Accountant, the agency is focusing on the quality of the plan’s auditor. So, like most things ERISA, have a well thought out process that is followed and documented is the key as related in the three-part article by industry experts at Fiduciary Plan Governance. In the third article republished below, the key is to have a framework to evaluate the auditors before you start reviewing candidates, which might seem subtle but is really important. Then list obvious, and then not so obvious non-starters. It’s worth reading the other two articles if you find this one helpful.
Evaluating responses to your plan auditor request for proposals can be done simply and efficiently if you lay out the criteria you consider most critical in advance and assign a weight in terms of importance to each. This approach creates a framework of objectivity before you begin reviewing the proposals.Each evaluator should assign their own weighting to each criterion rather than for the group to come up with a common weighting. We have found that this allows each evaluator’s perspective to be aired during discussions with the candidates and the evaluation team.
For example, if working directly with a partner with extensive EBP audit experience is highly valuable from one evaluator’s perspective they might give that criterion a weight of 3 on a weighting scale of 0 (no importance) to 3 (extremely Important). For another, it may be fine to have an associate or staff person conducting the actual onsite work, perhaps because the hourly cost is much lower, so they might weight the same criterion 1 (somewhat important) or 2 (important). In our experience, it’s critical to a successful process for those differences in view to be identified and considered, especially as elimination or selection of candidates for interview is determined.
We suggest you also determine if there are any “non-starters” in the criteria that would eliminate a candidate regardless of how it responds in other areas. For example, some obvious “non-starters” might be:
- Not being licensed in the state in which your organization is domiciled for tax reporting purposes
- Having a history of DOL audit quality findings or referrals
- Having had ethics or other negative referrals by a State CPA Society or AICPA
- A history of or current litigation, esp. in the EBP audit area
Less obvious “non-starters” could be:
- Not being a member of AICPA’s Employee Benefit Plan Audit Quality Center
- A very short history or EBP audits by either the firm or the partner-in-charge of this area of the practice
- Inability to demonstrate significant EBP audit specific training for partners and staff
You will also need to determine the scale you will use for scoring. We have developed a system that uses either a five or ten point scoring scale for 12-15 criteria that works very well with the wide range of plan sponsors we work with. The point is to create, execute and document a thorough process for evaluating and screening candidates so that you can legitimately narrow the field with whom you will meet and from whom you will select your auditor.
Copyright 2016 Fiduciary Plan Governance. All rights reserved.
