Tendering for a new external auditor

In 2023, Progress Housing Group (PHG) re-tendered its external audit service when it was due for review, after having the same auditors for six years.

Its Group Audit Committee reviewed the service, supported the tender recommendation, and approved the process and officer delegations. The existing auditors did not want to re-tender, which didn’t reflect the good audit relationship enjoyed over the years.

Committee members were aware the market for external auditors was small and that some associations had struggled to receive many tender responses, so their approach was carefully considered.

Here’s their top tips for anyone embarking on the same process:

• Start early and plan the audit tender so you can appoint no later than September or October, prior to the start of the audit for a March year-end. This will give bidders sufficient time to plan their resources well in advance. Governance rules may require a special general meeting to confirm the appointment.
• Have a conversation with potential firms in advance of the formal process. Audit firms are less likely to respond to tenders if they arise out of the blue and they are unfamiliar with the tendering organisation. Having knowledge about the potential client’s scale, scope and unique features will be helpful.
• PHG met some of the new entrants into the audit market 12 months earlier at ‘speed-dating’ sessions at the National Housing Federation Finance Conference in March 2023, followed up with separate exploratory meetings with four or five firms many months ahead of the formal tender.
• It will be more challenging for housing associations that are Public Interest Entities as they have listed bonds. The number of firms who can accommodate this work is fewer, and the scale of resources needed is greater.
• Consider your funders’ requirements. There may be provisions in the funding agreements that might influence or limit your choice of auditor, and there may be special requirements in addition to statutory audit, such as the audit of covenant calculations. Notify your funders once the appointment is confirmed.
• Do think about which firms you currently work with for your outsourced or co-sourced internal audit service, if you have one. The same firm cannot provide other internal and external audit services for a client as it would likely compromise audit independence.
• Consider your ideal timetable and share that with tenderers - but have some flexibility.
• Don’t make the procurement documents too onerous and provide sufficient time to complete the tender.
• Be clear about what you want to achieve. PHG’s tender scoring focussed on timing and a desire to complete more audit work at the interim stage, along with the capacity to deliver, communication and fair cost.

PHG had a good response to its audit tender, resulting in a long list of four firms who were all of high quality and appointable.

Its panel shortlisted two firms to go through to the final interview stage, followed by a second Q&A session led by the Group Audit Committee which made the final decision and appointed Beever and Struthers in Autumn 2023.

About Progress Housing Group

Progress Housing Group (PHG) is a not-for-profit housing provider of around 12,000 homes for social rent based in Leyland, Lancashire.

Its subsidiary brand, RWP, is one of the UK’s leading providers of supported living for residents who have a learning disability or who are autistic.

The Group comprises three housing associations, which are Community Benefit Societies, and three Companies Act companies, which include a charity and joint venture.