May 3, 1999

SUBJECT: Audit Services Contract

That the Board of Trustees extend the current contract with Martinez, Mendoza & Co. CPA for one additional year.

This item is consistent with Board Policy C-10, Purchasing.

The State Auditor=s Office (Office) has published an authoritative report providing a suggestion for auditor rotation. The Office in April 1999 published SAO Report No. 99-020 entitled AFinancial Statement Opinion Audit Guide for Texas Public Community Colleges.@ In Section B: Effect of Procurement Processes on Audit Quality, the Office addressed the question of AHow often should the college go through the solicitation process?@ In its report, AYthe GAO suggested that contract periods last for five years.@

Austin Community College does not include in the policy (C-6) on an external auditor any rotation principle. ACC could establish a five-year rotation guideline by extending the current contract of Martinez, Mendoza & Co. CPA for one year. Martinez, Mendoza & Co. have audited ACC for the previous four years. The extension of one additional year would put ACC on a five-year rotation.

Staff recommends that the Board of Trustees adopt a five-year rotation guideline for independent external auditors. Staff recommends that the extension of one year, the current independent CPA firm of Martinez, Mendoza & Co.

Funding is in the fiscal year budgets.

Jerry Miller, Vice President Business Services

1. Page B-3 of March 1999, Financial Statement Opinion Audit Guide for Texas Public Community Colleges published by State Auditor=s Office.

2. Board Policy C-6, Auditing

How often should the college go through the solicitation process?

In its report, the GAO suggested that contract periods last for five years. As the contract enters the final year of the contract, colleges should rebid the contract. The question that the colleges must consider is how to balance the cost savings by using the same audit firms with the different perspectives of new auditors, which is necessary to ensure the audit staff rigorously attempt to identify and test risk. Rotation of auditors is essential to get fresh perspectives on the audit. However, colleges should determine if their current audit firms could achieve this influx of new ideas by rotating their own staff. Regardless of what the colleges decide about rebidding, they should consider the benefits of rotation and establish policies regarding its use when appropriate. As a contract enters into the final years, colleges should begin the planning and solicitation process.

Excerpt from Financial Statement Opinion Audit Guide for Texas Public Community Colleges March 1999. Section B: Effect of Procurement Processes on Audit Quality, Page B-3.

College Policies