Personal and business Tax

Responding to a Nonprofit Audit and Tax RFP

When a nonprofit organization issues a request for proposal (RFP) for audit and tax services, the responses it receives reveal as much about the firms as the firms learn about the organization. Some responses are thorough, specific, and demonstrate an understanding of the nonprofit’s operations. Others are generic templates that could apply to any organization in any sector.

This guide describes what a CPA firm looks for in an RFP response, what the evaluation process typically involves, and how organizations can structure their RFP to attract the right firms and produce a decision-ready set of proposals.

The Letter of Introduction: What It Should Contain

The letter of introduction is the first document the firm reads. It sets the tone. A strong letter includes:

Organization background. A brief description of the organization’s mission, size, and structure. This helps the firm assess whether it has relevant experience.

Scope of services requested. Clear identification of what the organization is seeking: financial statement audit, Single Audit, Form 990 preparation, tax advisory, or a combination.

Current service providers. The name of the current auditor and the reason for the change. This is not an invitation to criticize the incumbent but a signal of what the organization values.

Timeline. The anticipated start date, the fiscal year end, and any deadlines that affect the engagement.

Contact information. A single point of contact for questions and follow-up.

What the RFP Should Ask

A well-structured RFP asks questions that allow firms to demonstrate competence rather than simply state it. Useful questions include:

Firm experience. How many nonprofit clients does the firm serve? What is the size range? Are any clients similar in mission or structure to the organization?

Single Audit experience. If the organization expends $1 million or more in federal awards, does the firm have Single Audit experience? How many Single Audits does it perform annually?

Team composition. Who will be assigned to the engagement? What are their credentials and experience? Will the partner be involved in fieldwork or only in review?

Approach to materiality and risk. How does the firm determine materiality? What areas does it typically identify as high-risk for organizations in this sector?

Fee structure. Is the fee fixed or hourly? What is included, and what is billed separately? Are there any additional charges for out-of-scope work?

References. Can the firm provide references from similar organizations?

The Evaluation Process

A typical evaluation process involves:

Screening. The organization reviews responses against the minimum requirements: active CPA license, nonprofit experience, and capacity to meet the timeline.

Scoring. A committee scores each firm on experience, approach, team qualifications, and fee. The weighting varies by organization.

Interviews. Shortlisted firms are invited to present. This is an opportunity to meet the engagement team and ask specific questions.

Reference checks. The organization contacts references to ask about responsiveness, communication, and the firm’s handling of issues that arose during the engagement.

Selection. The organization selects the firm and negotiates the engagement letter.

What Firms Want from the Organization

The best RFP processes are collaborative. Firms appreciate:

A clear scope. Ambiguity about whether a Single Audit is required or whether tax services include Form 990 preparation creates uncertainty that firms price defensively.

Access to prior-year reports. The prior auditor’s reports, management letters, and any findings provide context that helps firms understand the organization’s risk profile.

A realistic timeline. A request for a proposal due in one week and an engagement to begin in two weeks signals disorganization. Firms that respond to such timelines may not be the most qualified.

Transparency about budget. If the organization has a budget range in mind, sharing it allows firms to propose an appropriate scope rather than guessing.

Virginia and DC Nonprofit Considerations

Nonprofits in Virginia and DC face specific compliance obligations that should be reflected in the RFP. Virginia requires charitable solicitation registration with VDACS and, for organizations with gross annual revenue of $750,000 or more, a financial review performed by an independent CPA. DC requires separate tax exemption filing with the Office of Tax and Revenue.

The RFP should specify which jurisdictions the organization operates in and what filings are required. This allows firms to price the engagement accurately and avoid surprises after selection.

How Nova Tax & Accounting Services Can Help

Nova Tax & Accounting Services provides audit, tax, and advisory services to nonprofit organizations across Virginia and Washington DC. Our team has experience with financial statement audits, Single Audits, Form 990 preparation, and charitable registration compliance.

Organizations seeking a proposal can contact us at https://novataxservices.com/ or schedule a consultation to discuss scope and timing.

Additional Resources