Councilman questions Elgin's reliance on audit firm

Editor's note: This story has been updated to correct the spelling of Sikich.

While Elgin is not the only suburb that has employed the same audit firm for more than a decade, the fact it does so without issuing requests for proposals appears to be unusual.

The city has used the Naperville-based audit firm Sikich for 14 years, a practice Councilman Rich Dunne questioned last week.

"Having a relationship with one auditing firm for over a period of five years is generally not accepted practice," Dunne said.

However, Stephen J. Gauthier, director of the technical services center of the Government Finance Officers Association, said there's no inherent problem with Elgin retaining the same firm for multiple years.

Still, "the GFOA believes the best approach is for a government to have a policy to undertake a full-scale, competitive audit procurement process at the end of each audit contract, but not to foreclose the possibility of the government's current audit firm participating in that process," he said.

Naperville and Arlington Heights have issued requests for proposals every five years; Aurora conducts a survey every four years to ensure the firm's rates are competitive, officials said.

Aurora has used Sikich for 26 years and Naperville has done so for 11 years, while Arlington Heights employed the firm for 10 years before switching to Lauterbach & Amen last year.

Schaumburg, on the other hand, sought a new audit firm this year, switching to Sikich after five years with Baker Tilly, Finance Director Lisa Happ said.

"We felt it was time, not for lack of service or anything like that, to switch auditors as a general best practice," she said.

Elgin City Manager Sean Stegall said the city doesn't issue requests for proposals for audit firms and instead has an "open-ended" relationship with Sikich based on funds allocated within the city's budget.

While there's "certainly value" in rotating firms, that would double the amount of time city staff members spend on audits in the first couple of years as the new firm familiarizes itself with the city's accounting, Stegall said. City staff already operates "at a bare minimum," he added.

Among the benefits of using Sikich long-term is the firm's "thorough understanding of the policies, internal controls, and accounting and financial reporting practices of the city," said Clayton A. Muhammad, Aurora's director of communications and public information.

Lynn Lockwood, Naperville's budget and financial reporting manager, and Tom Kuehne, Arlington Heights' director of finance, agreed that switching audit firms can be taxing. "It is always a lot of work to onboard another firm," Lockwood said.

Arlington Heights switched after a decade, with the new firm's low bid - at a 10 percent or so savings - "a primary factor" in the selection, Kuehne said.

Changing firms does ensure that "fresh eyes" do the job, but that goal also is achieved in Elgin because different Sikich team leaders, or partners, and team members have conducted the city's audits over time, Stegall said.

Happ agreed. "I know there's information out there that you can get too comfortable with auditors, which can lead to bad practices, but in reality a lot of audit firms would confirm there's a lot of turnover," she said. "It's not like you're working with the same people."

Naperville and Arlington Heights officials said it's a good idea to request new partners if the same audit firm is awarded consecutive contracts. Aurora requires rotating them every other year.

Elgin also could get a second opinion from another auditing firm at a cost of $20,000 to $30,000, proposed Stegall, who has served as a GFOA volunteer budget instructor.

But Dunne said his stance is not about double-checking audits. "Do I think there's improprieties? No," he said. "But do I think for transparency and for having best practices when it comes to finances, do I think we should be doing it? Yes."