Viewing page 25 of 175

This transcription has been completed. Contact us with corrections.

-12-

February 22, 1988

REPORT TO THE AUDIT AND REVIEW COMMITTEE

FROM: The Treasurer's Office ^[[initials]]
SUBJECT: Rotation of Auditors

The Chairman of the Audit and Review Committee has asked The Treasurer's Office to survey the greater community to determine audit rotation policies. This document reports on the results of that survey.

It will be recalled that following the June 23, 1987 meeting of the Audit and Review Committee Norman Mineta suggested that the Institution change auditors every ten years. The matter was discussed at both the September 28, 1987 Regents' meeting and the October 8 meeting of the Committee, where it was agreed that the Committee should discuss relevant considerations and arrive at a recommendation to the Board approximately 1 1/4 years prior to the end of the present audit firm's tenth year at the Smithsonian. 

Telephone calls were placed to nearly forty organizations since the Committee met in October 1987. Most calls were made during the last weeks of January and the first weeks of February so that information is very current. The contact point for each call was the Comptroller or Chief Financial Officer of the organization. A copy of the questionnaire used is attached as Exhibit I.

[[underlined]] Summary [[/underlined]]

The responses group into four categories:

1. Federal agencies such as the Library of Congress are audited by the General Accounting Office or internal staffs reporting to the Inspector General. These agencies have neither Audit & Review Committees nor rotation policies.

2. Cities are most likely to be mandated by law to rotate their auditors or at least to issue an RFP every four to five years, even if the bid is awarded to the same firm.

3. Colleges and universities generally have long established relationships with their auditors. Only three of those surveyed had changed auditors in the last ten years. Most had audit firm relationships exceeding twenty, some exceeding thirty-five years. None had rotation policies.

4. Museums and like non-profit organizations generally favored retaining the same auditor. Several had changed auditors "for cause" while others had moved from smaller local firms to the "Big Eight." Decisions as to a new auditor most often rested with the Chief Financial Officer or the Board based upon non-formalized solicitations. None had rotation policies.