AUDIT, ACCOUNTING AND MANAGEMENT ADVISORY SERVICES

State of Connecticut Board of Regents for Higher Education Questions with Answers to RFP BOR-1516 AUDIT, ACCOUNTING AND MANAGEMENT ADVISORY SERVICES Questions & Answers The Board of Regents for Higher Education received the following questions concerning RFP BOR-1516 during the open question period. The questions, along with the response of the BOR, are as follows: Section A: 1) Please provide the names of the firm(s) currently performing this work. Answer: PricewaterhouseCoopers (University and College audits) and O Conner & Drew P.C. (Charter Oak audit) 2) Please provide the fees paid to each firm(s) for each year under the existing contract. Answer: Auditor System 2014 2015 PwC University $ 342,670 $ 353,049 PwC College $ 256,000 $ 256,000 O'Conner & Drew Charter Oak $ 37,000 $ 37,000 3) Please provide the hours billed by each firm(s) for each year under the existing contract. Answer: Fixed fee 4) The RFP states the work to be performed is for Fiscal Year Ended June, 30. Please confirm if the work is for Fiscal Year Ended June, 2015 or Fiscal Year Ended June, 2016. Answer: June, 2016 5) Please confirm if the CSCU 2020 expenditure audit is part of the scope of this RFP. Answer: This is not in the scope of this RFP 6) Please confirm if the state intends to award this contract to one vendor or multiple vendors? Answer: The intention is to find a single vendor if it makes financial sense to do so. 7) The scope of the RFP includes, Other Services (Section V.D). Under the existing contract, did the state request incumbent vendors to perform Other Services? If yes, can you describe the services requested and the associated fees? Page 1 of 16

Answer: In most cases the other services requested have been advisory in nature or additional guidance on new accounting statements, rules and regs. This has typically been provided as a part of the overall fixed fee 8) Attachment A states, That should any part of this proposal be accepted in writing by the Board within one hundred twenty (300) calendar days from the date of opening, unless an earlier date for acceptance is specified in the proposal schedule.. Can you please confirm if the proposals/fees are valid for 120 days? Answer: 300 calendar days from the date of the opening. Section B: 1) What were the fees paid for services for the prior audit period for all services and deliverables requested in the RFP? Please include the number of hours billed and/or incurred for the fees. Answer: see A.2. 2) Could you provide a copy of any deliverables related to the prior audit period that are not available at the web address for financial documents as noted in the in RFP? Answer: See attached. 3) What, if any adjustments were proposed and/or made by the auditor for the prior year? Answer: An adjustment on the ACA calculation for the colleges. 4) Is the current auditor eligible to propose on the services in the RFP? Answer: Yes 5) Did the prior auditor encounter any difficulties, unexpected issues or unexpected circumstances in connection with the prior engagement? Answer: None that we are aware of. 6) Are there any significant differences in the financial activity to be audited in 2015 as compared to the 2014 financial activity? Answer: No 7) What assistance will be provided by management and staff in preparing the financial statements and related footnotes? Answer: These are primarily prepared by staff, reviewed by management then reviewed by the audit firm for advice and suggestions. Footnotes are also done with the guidance of the audit firm. Page 2 of 16

Section C: 1) What is the degree of centralization of the finance function and typically how much audit work is performed at the individual institutions and how much is performed at the Central office? Answer: Universities; Each of the four universities and the system office is on its own ERP Banner instance. Audit work is done at each location and then the audit work on the consolidated financial statements is done at the system office. Colleges; All 12 colleges and the college system office is on a single Banner instance where the accounting function is centralized. Most audit work is all done at the system office. During the interim audit our current auditors do a site visit of four different colleges for one day each. It is a different four colleges each year. Charter Oak; This college has its own accounting function and audit work is done at their location. 2) Does CSUS prepare the financial statements, including the consolidation? Answer: The system office prepares the consolidated financial statements with the exception of Charter Oak which currently prepares their own financial statements and the system office reviews their final draft. 3) What has been the typical volume of audit adjustments? Answer: Few to none 4) What has been the typical timing of interim and final fieldwork and what are the reporting deadlines? Answer: Present audit scope to the Board: June Interim audit tests: May July Year-end procedures: September October Financial statement tie-out: November Issuance of Audit Report: Early-Mid December 5) Has a management letter been issued and if so, will you provide a copy? Answer: Yes, see attached 6) What are the current fees for the audits? Answer: See A.2. Page 3 of 16

Section D: 1) How long has PWC been the performing the auditing services for the Universities/Colleges? Answer: FY02 2) Could you please provide a typical timeline for the audit field work? We re planning procedures performed prior to year end? Answer: See C.4. 3) The RFP mentions "for each year under the contract, the contractor shall conduct up to three financial statement audits". Does this indicate that more than one contractor could be selected in the process? Answer: See A.6. 4) We understand that the State Auditor performs the single audit of the State. Does PWC perform any procedures in regards to the compliance aspect of student financial aid? Answer: No 5) On page 6 of the RFP, under F.1.(k), the last sentence indicates "one of the covenants of the loan agreements requires the annual submittal of audited financial statements"...are there any other financial related covenants? Answer: Standard continuing disclosure requirements related to tax exempt issuances as well as the debt compliance letter 6) Are there plans in the short term and long term for additional bond issuances? Answer: The system is currently working on a 5 yr. capital plan for CHEFA issuances. There will likely be an issuance when this is complete (within 1-2 yrs.). 7) How has the timing been in the past receiving the audited statements from the various component units? Answer: Typically receive all component unit financial statements by Oct. 30th 8) Was a report to management (as indicated on page 8) been issued in the past, and, if so, is it available for review as part of this process? Answer: Yes, see attached. 9) Is the Certification of Matchable Endowment Receipts available for review? Answer: See F.2. 10) Page 10 of the RFP indicates additional possible services that may be provided during the course of the contract. Were any of these services provided over the past 5 years? ( more specifically, items # 4,5 and 8) Page 4 of 16

Answer: See A.7. 11) Are prior year's audit fees available to be disclosed? Answer: See A.2. 12) Has the system finalized a plan to implement GASB 68 for the current year? Answer: The State s pension liability is managed and paid centrally by the Comptroller s office. They have informed their enterprise funds (which include the CSCU system) that they will not be allocating out the pension liability. As a result, the CSCU financial statements will not reflect this liability for the FY15 statements. 13) Who generally prepares the audited financial statements? Answer: See B.7. and C.1. 14) How many of the campuses did PWC visit each year as part of their audit process? Answer: See C.1. 15) Do you have an estimate of hours it took PWC to perform the audit engagement for the CCC and the CSUS? Answer: No, they are progress billings throughout the engagement based on the fixed fee in the contract. 16) When are the books generally closed so the auditors can begin year end fieldwork at each College/University and system office? Answer: See C.4. 17) Were there adjusting entries recorded in the prior year, and, if so, please disclose how many and the nature of the entries. Answer: See B.3. 18) Does PWC also audit Magnet High Schools? It appears the audit report only mentions the Foundations were audited by other auditors. Answer: The magnet schools are members of larger independent organizations that are independently audited. There currently is some testing done by the external auditor on the individual magnet schools affiliated with our colleges that are considered component units. Page 5 of 16

Section E: Please provide: 1) The budget for the requested services Answer: See A.2. 2) The most recent fees paid for the requested services Answer: See A.2. 3) The most recently available independent auditors reports Answer: See Attached 4) Finally, could you clarify the due date for proposals? The RFP states that proposals are due on Friday, August 13 th however the 13 th will be a Thursday. Answer: The bids are due on Thursday, August 13 th, 2015. Section F 1) The RFP mentions several times that there are up to 3 annual financial statements audits Connecticut State University System; Connecticut Community Colleges; and Charter Oak State College. Is there any Federal Single Audit requirement? Do any of the institutions receive Federal funds that would necessitate such? Answer: No, the state Auditor of Public Accounts fulfills the single audit requirement 2) Can you provide the latest AUP report for the Certification of matchable endowment receipts? Is this still applicable? Our understanding and experience points to the fact that the State match has ceased. Answer: Correct, the state match has not been renewed by the legislature for FY16. In addition, in almost all cases endowment contributions are directed toward our foundations. This was left in the RFP in case the program was renewed in future years of this contract period. 3) Is the independent audit over the expenditures under the Public Act 07-7 Program outside the scope of this RFP? Answer: Yes, this audit is out of scope of this RFP 4) For CSUS, CCC, and COSC will the Foundations continue to be audited by other auditors? Answer: Yes Page 6 of 16

5) For CSUS, CCC, and COSC who is responsible for the initial drafts of the audited financial statements, including MD&A and disclosures? Answer: See A.7. and C.2. The initial draft of the MD&A is prepared by management. 6) Within the MD&A sections of the prior year s reports, mention was made of decreasing enrollment. Have there been any plans put in place or are there any plans/policies in the works to address this? Anything aimed at out-of-state students? Anything related to tuition freeze perhaps? These are just some of the things we have seen in the industry to combat declining enrollment. Answer: We have a number of strategies underway to help with enrollment. You may have heard of our Go Back to Get Ahead program in FY15. The state provided scholarships to pay for three free classes at any of our 17 institutions, including fees, if the prospective student paid for another three. The program required that the prospective student have already attended one of our institutions, and have been out of school for eighteen months. The intent was to bring students back to graduate, and the program attracted over 1,200 students. We have developed programs to attract students to our colleges who may not ordinarily elect to come to school; an example is our advanced manufacturing programs which can lead either to a certificate or Associates Degree. We have invested in infrastructure to support this study, as manufacturing jobs are a target for the state. Our Universities are looking at ways to bring more out of state students into the four institutions: one has engaged in a marketing study to help with the strategy. We continue to be concerned with our enrollments as the Connecticut demographics suggest a continued decline in 18 year-olds for the next decade. 7) For CSUS and CCC will the State confirm the amounts due to the Universities and Colleges? Answer: The state does not typically confirm this. 8) For COSC will the State confirm the amount of cash held in Treasury for COSC? Answer: State confirms through CORE system 9) For CSUS and CCC can you briefly describe/explain whether processes are similar across Universities and Colleges? Answer: Processes for CSUS are still very decentralized. There is overarching policy set by the Board for the CSUS and separate policies currently in place for the CCC. Procedures for the CCC are for the most part consistent because of the single ERP instance and a central accounting function. The consolidation / standardization of overall policies are a work in progress. 10) For CSUS and CCC can you briefly describe/explain whether the reporting function is similar across Universities and Colleges? Is reporting centralized? If not, who does the consolidation schedules, including elimination entries? Answer: For the CCC this is done centrally at system office. For CSUS the consolidated statements are done at system office but entries are done at the universities in their individual Banner systems. Page 7 of 16

11) For CSUS and CCC can you briefly describe/explain how field work is performed and where records are located? In other words, do the audit teams spend time at all the Universities and Colleges to cover the parts of the audits that each entails? Answer: See C.1. 12) For CSUS inventories have historically been just under $1 million at year end have the auditors observed inventory in the past? Answer: See I.25. 13) For CSUS is the current investment portfolio (US Government mutual funds and Guaranteed Investment Contracts) similar to the most recently issued audited financial statements? Answer: Yes 14) For CSUS debt is primarily in the form of CHEFA bonds. Are there any related swap arrangements in place that are aimed to fix interest rates on debt? Answer: No 15) For CSUS, CCC, and COSC please provide any covenant requirements, including financial statement delivery dates. Answer: See D.5. Continuing disclosure filing due March. 16) For CSUS, CCC, and COSC are there any new material litigation cases to be aware of? Answer: No 17) For CCC why were the 2013 financials of the Foundations (component units) restated? Answer: Most years have included restatements for one foundation or another. Reasons vary one foundation changes their fiscal year, or there is a re-categorization of net assets between restricted, partially restricted and unrestricted, also a reclassification of prior year revenue, etc. These are determined by the foundation and independently audited separately from this engagement. 18) For COSC will the Connecticut Distance Learning Consortium continue to be combined into the audited financial statements going forward? We noted that 2014 was the first year the statements were done that way. Answer: Yes 19) For COSC where are the accounting records housed? Answer: At the COSC office location, 55 Paul J Manafort Dr. New Britain, CT 06053 20) For COSC is the make-up of the Foundations investment portfolio consistent with such reported in the prior audited financial statements? Page 8 of 16

Answer: Yes 21) Where necessary, are actuarial reports obtained by the Universities and Colleges to support pension obligations? Answer: We do obtain the actuarial report although our pension liability is not and will not be reported in our financial statements. This liability is managed and reported on the State s books. Section G: 1) Please confirm that this contract would begin for the System s fiscal year ending June 30, 2016 (not FY ending June 30, 2015). Answer: Correct 2) Please confirm that this contract does not include audit services of the System s federal expenditures under the Single Audit Act. Who performs those services for the System (state auditor?). Answer: See F.1. 3) What is the general timing of the audit procedures for both interim and final fieldwork? When are the books closed and ready for audit after year end? Answer: See C.4. 4) Its seems that many processes are centralized for the system, are there any key internal accounting processes that are not centralized? (for example, cash receipts, fixed asset inventory etc) Answer: See F.9-10. Cash receipt and fixed assets are not centralized. 5) Is the audited conducted in one location or are records located at each of the institutions included in the combined financial statements? Answer: See C.1. 6) How many journal entries are typically proposed by auditors annually, if any? Answer: Few to none 7) Have there been any difficulties or significant findings for the entities audited by other auditors? Answer: See management letter attached. 8) Could you provide a copy of last years Certificate of Matchable Endowment Receipts? If not, does the auditor provide a formal opinion on the procedures requested (i.e. through an Agreed Upon Procedures engagement)? Page 9 of 16

Answer: See F.2. 9) Could you provide an example of the internal control report deliverable that you have received in the past? Answer: Please see H.2. 10) Have the auditors historically used your internal auditors to assist with audit procedures? Answer: No 11) Paragraph 6(b)(ii) indicates that closing conferences should be held with each university president and the CSCU president. How many closing conferences are typically held each year? Answer: Six, One for each university, One at Charter Oak and one at System Office for the entire system. 12) Can you provide some examples of management advisory services that have been provided by your current service provider in the last 3 years. Answer: GASB and FASB guidance and assistance in implementation of new requirements. Professional advice on other industry requirements, standards and best practices. 13) The Charter Oak State College financial statement link does not appear to be working (indicates file is damaged) and we could not access the file. Answer: Please try the file at this location; http://www.ct.edu/finance#documents 14) Would the fact that we don t have an office in Connecticut preclude us from bidding on the services? Answer: Not having an office in Connecticut, does not preclude a firm from bidding for these services. 15) Could you provide the fees paid for the basic audit services and any additional services provided for the last three years? Answer: See A.2. Section H: 1) Is there expected to be a bond issuances to take place in fiscal 2016? If so, what is expected timing and purpose of the bond offering? Answer: There is a possibility of an offering next spring. The bond offering would most likely be residential or parking related. 2) To clarify the request for Reporting on Internal Control (Section V 4a), are you looking for an Opinion on the effectiveness of internal controls over CCC, CSUS and Charter Oak? Is the request similar to a Page 10 of 16

report to management, whereby, any material weaknesses, significant deficiencies and/or control deficiencies/observations are communicated? Are you looking for a report on internal controls as it relates to Charter Oak (similar to what is included in the 2014 f/s whereby the purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance)? Answer: Yes, please use prior year examples as a guide to what we are requesting. 3) During the three year proposal period, are there any governing / reporting changes expected related to the combination of CCC, CSUS and COSC, or in the combination of the governing boards of the institutions? Answer: There is a single governing board (Board of Regents) but given how they system is allotted its resources by the State we don t expect to combine the financial statements of the three former systems anytime in the near future. 4) What are the top organization strategic objectives of central finance over the next three to five years? Answer: Unify financial policies across the three systems, agree to/implement a unified chart of accounts across our institutions and gradually expand central/shared financial services, standardizing procedures in the process. 5) Specific to COSC, who will be preparing the financial statements and related support for Charter Oak? Have there been any changes in the key personnel from the prior year? Does the System office have the same controls/processes over this entity as it does for CCC and CSUS? Answer: These statements will be prepared by COSC management. There have been no changes in personnel. System office will review the draft statements prior to finalizing. 6) Is oversight and management of the IT General Controls for Jenzabar centrally managed by the CSU/BOR System Office or Charter Oak themselves? Answer: Those controls are managed by the COSC IT department. 7) Is there a Report to Management/Required Communication available from the prior year audit related to COSC? Answer: See attached 8) Would we have access to the prior year audit work papers of COSC and when would this be available? Answer: Request would have to be made to O Connor and Drew. They maintain the work papers. Page 11 of 16

Section I: General 1) As clarification, the period to be covered by our proposal should be fiscal years 2016, 2017 and 2018. Can you please confirm this to be correct? Answer: Correct 2) Please provide copies of the following documents - Required communications for the past three fiscal years (if there are matters of fraud that were communicated separately, please provide copies of those communications as well) - Internal control letters, or other board handouts in lieu of those letters - Copies of A-133 reports for all entities within the scope of the RFP Answer: No issue of fraud reported to our knowledge. Please see additional attachments and the A- 133 report is completed by state for all state agencies and this report can be found on the state s website, http://cga.ct.gov/apa/audit-statewide.asp 3) Please provide a general description of the year end closing process, as well as the nature and volume of adjusting journal entries proposed by your auditors. Answer: The CCC Banner system used by all 12 colleges and the system office is managed and controlled by the system office. This includes all year end processing and rolls of the G/L and closing of the Operating ledger and the accrual period which close generally the last Thursday in July. Banner includes a GASB module where all statement entries are made and from which all statement numbers are generated. All GASB postings are made by the system office. Accounting for construction projects over 2 mil are administered by DAS?DCS and accounted for in Core. These numbers are pulled from Core (the state s system), reviewed and accounted for via GASB entries. Little to no adjusting entries proposed by auditors. Each of the universities and COSC is handled independently and follow a similar process. University financial statements are compiled and reported centrally by system office staff. COSC is currently done entirely separately and SO only reviews drafts throughout the process. 4) Are the accounting, reporting, compliance and internal control systems documented by management (for all reporting entities)? Answer: Yes 5) Are there any major changes in operations / transactions / revenue streams expected in 2016 (or thereafter)? Do you anticipate any changes in the fundamental make-up of the assets or liabilities in 2016 (or thereafter)? Answer: No major changes planned 6) Were the reporting deadlines met in each of the past three years? Answer: Yes Page 12 of 16

7) In section V.A.4 you are requesting a report on internal controls. Is this only in the context of the GAGAS audit requirements or is this for the entire financial statements of CSCU? If for the entire financial statement audit, can you provide a copy of the most recent report issued? Answer: Please see H.2. and the documents attached. 8) In prior audits, what has been the composition of the team (by staff level, by specialty (audit/tax/it support))? Answer: The typical audit team for the universities and colleges has included; Partner Relationship Partner Engagement Leader Engagement Senior Manager Engagement Manager Senior Associates (5) Staff (varies) In addition, there have been specialists assigned in areas such as enterprise risk management, tax, regulatory and IT to advise on the corresponding areas. The audit team for COSC has included; Engagement Partner Engagement Leader Engagement Manager Staff (2) 9) What has been the general timing of planning, interim, fieldwork and wrap up of the financial statements? How many weeks and how many staff are in the field for each phase of the audits? Answer: See C.4. 10) Please provide copies of the proposals from the most recent audit bid process, unless protected under FOIA. Answer: These proposals are protected under FOIA. 11) Do you have any current or planned major IT projects or implementations that impact any of the systems relevant to the audit? Answer: Beginning FY16 we have the CSU System office migrated to the CCC banner instance as a separate business unit. 12) Does CSCU utilize outside service providers for any significant functions? Are internal control reports (or SSAE 16s) available that cover at least six months of CSCU s fiscal year for all material service providers? Answer: The CCC s use Vangent for 1098T filing and Asset Works for the annual fixed asset inventory. 13) For clarification, the RFP does not request any tax services (other than within the optional services in section V.B.2 and C.7)- is this correct? Page 13 of 16

Answer: Correct 14) In the RFP, section IIIA2, you request a Certification of matchable endowment receipts. We were not able to locate an example from a prior year on your website. Could you please provide a copy of that certification letter? Answer: See F.2. 15) On the website where the FS of the three entities was made available there was also a report on construction activities. Is that included in the scope of this RFP? Answer: No CCC 16) Per FS, CCC includes Foundations and high schools. Are those included in the scope of the audit services being requested by CSCU or will those entities continue to be audited by other auditors and reports furnished to the auditor of CSCU prior to issuance of the report on CCC? Answer: See D.18. The foundations are independently audited and no audit work is done on them as part of this engagement. 17) Can you provide some details with regard to the out of period adjustment to the Magnet High School FS? Answer: This adjustment corrected an error which related to grants and their related costs for FY13. 18) Are third parties used to determine the liability for accrued absences or is that accrual calculated by management? Are there any accounts that are determine in whole or in part by outside specialists? Answer: This is calculated by management. 19) Will CCC be adopting GASB 68 in FY15? Please describe the level of information to be provided by the state going forward on an annual basis if GASB 68 is to be adopted by CCC. Answer: See D.12. 20) Has management consider adoption of the new GASB pronouncement on OPEB, similar to pension? Answer: These liabilities are carried and managed by the State 21) For all of the audits to be conducted, is there any audit fieldwork that will need to be conducted at the various campuses or is all fieldwork conducted in a centralized location? Answer: See C.1. CSUS 22) Similar to question #18, per FS, CSUS includes Foundations. Are those included in the scope of the audit services being requested by CSCU or will those entities continue to be audited by other auditors and reports furnished to the auditor of CSCU prior to issuance of the report on CSUS? Answer: Same as above Page 14 of 16

23) Refer to questions #18-20 above, applicable also to CSUS. Answer: Same as above 24) What is the planned timing to adopt GASB 72? Answer: This FY 25) Does CSUS perform annual physical observations of the inventories and does the current auditor perform any observations as well? If it is done through a cycle count, please explain that process. Answer: The universities perform their annual inventory independently. The CCC s hire a vendor to perform an annual physical inventory. PwC has not performed any additional observations to our knowledge. Federally sponsored programs (these questions assume an A133 audit is included in the scope of the services being solicited) 26) Has CSCU had any audits or desk reviews performed by Federal agencies in the past 2 years that have indicated significant issues with the administration of your Federal programs? Answer: No 27) Do you expect the number of major Federal programs to vary significantly during the period covered by the RFP or will the number of programs be comparable to the number in 2014? Answer: Should be comparable to FY15 28) When will the next indirect cost rate proposal be submitted to the cognizant agency for review? Do you typically include the external audit firm in the review of that proposal prior to submission? Answer: Probably in 2017. No. Section J Please provide: 1) List of Items, Schedule of Requirements, Scope of Work, Terms of Reference, Bill of Materials Required Answer: Please see http://das.ct.gov/cr1.aspx?page=12 2) Soft copy of the Tender Document through e-mail Answer: See J.1. above 3) Names of countries that wo;; be eligible to participate in this tender Page 15 of 16

Answer: See J.1. above 4) Information about the Tendering Procedure and Guidelines Answer: See J.1. above 5) Estimated budget for this Purchase Answer: See J.1. above 6) Any Extension of Bidding Deadline? Answer: See J.1. above 7) Any addendum or Pre Bid meeting Minutes? Answer: See J.1. above 8) We would like to be informed of future tenders from your organization. Hence, we request you to add our name to your bidder's list and do inform us about upcoming Projects, Tenders. Answer: See J.1. above 9) We will be highly obliged if you can send us your complete & latest contact information. This will help us reaching to you faster. Answer: See J.1. above Page 16 of 16