Request for Information

February 26, 2021

This document is a Request for Information (RFI) for the ’s (Lottery) financial statement audit and related services.

The Lottery is seeking to encourage qualified Certified Public Accountants’ (CPA) firms to provide input for these auditing and related services. This RFI is non-binding and the Lottery will have no obligation under it and no contract will be awarded based on it. A response to the RFI is optional and not a requirement. Responses may be used to structure a Request for Proposals (RFP), which may serve as the basis of a contract award. When the Lottery issues the RFP, it will be distributed to all respondents to this RFI in addition to other public business opportunity postings.

In the opinion of the Lottery, this Request for Information is complete and without need of explanation. However, if you have questions, or should you need any clarifying information, the contact person for this RFI is:

Muhammad Chechi California State Lottery [email protected]

Please note that no verbal information given will be binding upon the Lottery unless such information is issued in writing as an official addendum.

i

I. Background

In November 1984, the voters of California approved Proposition 37, the California State Lottery Act (the Act). The stated purpose of the Act is to provide additional monies to benefit education without the imposition of additional or increased taxes. The Act requires that not less than 87% of the total annual revenues from the sale of lottery tickets be returned to the public in the form of prizes and net revenues to benefit public education. The Lottery Commission determines the percentage of total annual revenues that are to be returned to the public in the form of prizes, subject to a required minimum of 50%.

The Act provides for the Governor to appoint a five member Lottery Commission, to develop and oversee the operations of the Lottery, and a Director, whose responsibilities include ensuring that the Lottery maintains appropriate financial records and prepares financial statements in conformity with generally accepted accounting principles.

As set forth in section 8880.46.5 of the California Government Code, the Act requires the Director to engage an independent firm of certified public accountants to conduct an annual audit of all accounts and transactions of the Lottery. The audited financial statements must be presented to the Commission, the Governor, the Controller, the Treasurer, the Attorney General, and the Legislature not more than 120 days after the close of the fiscal year, and the independent auditor's report must be posted on the internet. The State Controller’s Office, however, requires a final audit report earlier, before October 25th.

The Lottery is required to meet annual reporting requirements for Party under the ® and ® agreements.

Lottery Operations

The basic business operating mission of the Lottery is to sell lottery tickets, draw the winning numbers, pay winners their prizes and transfer the net revenues to public education.

Lottery Accounting System

The Lottery currently uses a customized version of Epicor software for its accounting system including the general ledger, accounts payable, accounts receivable and asset management. Funds are transferred to and from the Lottery to its contracted retailers using bank electronic transfers. The State Controller’s Office sends the Lottery monthly files containing payroll and data disbursement data. These files are stored in Epicor.

2

II. Objective

The Lottery wishes to explore the engagement of a qualified CPA firm with significant expertise and experience in conducting financial audits of accounts and transactions. This includes the contract duration commonly supported by the financial audit industry.

The audit reports that the CPA firm issues, regarding the Lottery’s financial statements, are presented to the Legislature, appropriate state officials, government agencies and the general public to inform them of the financial condition and results of Lottery operations. It is expected that the CPA firm assists the Lottery Commission and Lottery management in evaluating the organization’s systems of internal controls, policies and procedures and make suggestions for improving and strengthening them. The Lottery may seek advice of the CPA firm on financial and accounting related issues.

The Lottery is interested in knowing how it can improve the solicitation to encourage bidding. Please respond to the following questions:

1. How many years of qualified experience is recommended and supported by the industry for the individual CPA’s required to perform this type of work? 2. Does this type of work require experience and knowledge specific to Lottery type of businesses? If so, what specific experience is recommended? 3. What length of contract term is optimal for you to be interested in bidding in an upcoming solicitation? 4. What requirements and/or information should we consider including to increase the likelihood that you would be interested in submitting a bid? 5. What requirements and/or information should we consider excluding to increase the likelihood that you would be interested in submitting a bid? 6. Where can we make improvements to increase bidder participation? 7. Optional Question (response is not required): The Lottery is not seeking a cost proposal or specific pricing associated with these services or this RFI; however, if you were providing potential clients with a price range for these services, what would be a reasonable expectation of annual costs of services given only the information provided in this RFI?

III. Scope of Work

The information provided in this Section is for informational purposes only. Actual work performed as part of a successful solicitation and award process may differ dependent on information gained through this RFI. 1) Financial Audits

3

For each fiscal year (beginning on July 1st and ending on June 30th), the awarded Contractor must perform financial audit services on the Lottery’s annual financial statements, as specified herein: A. Receive all the requested work papers, and documents including the unaudited financial statement from the Lottery.

B. Preparation of an annual audit report, in accordance with generally accepted auditing standards approved by the American Institute of Certified Public Accountants and in accordance with Government Accounting Standards Board Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments. These standards require, among other things, that a study and evaluation of the Lottery’s system of internal control be performed. The audit report must state an opinion as to whether the Lottery’s financial statements have been fairly presented in conformity with generally accepted accounting principles, as reflected by the following statements and schedules:

i. Statement of Net Position ii. Statement of Revenues, Expenses, and Changes in Net Position iii. Statement of Cash Flows iv. Various other schedules as appropriate v. Notes to the Financial Statements vi. Required Supplementary Information

The Lottery Act requires that the final audit report be presented not more than 120 days after the close of the fiscal year. The State Controller’s Office, however, requires a final audit report earlier, generally on or before October 25th. A deliverable date for the annual audit report is set by the Lottery each year, based on these requirements.

C. Review and provide guidance on the Lottery’s Comprehensive Annual Financial Report (CAFR) which is written and created by the Lottery. The CAFR includes the annual audit report.

D. Preparation of a management letter at the conclusion of an audit to report the adequacy of the Lottery’s system of internal accounting control based on the study and evaluation performed as part of the audit.

E. Submission of progress reports as deemed necessary by the Lottery.

2) Related Services

Perform annual Agreed Upon Procedure engagements to assist in meeting reporting requirements for Party Lotteries under Mega Millions and Powerball agreements. These Agreed Upon Procedure engagements will be conducted in

4

accordance with attestation standards established by the American Institute of Certified Public Accountants and will be documented in a separate engagement letter.

By request of the Lottery, there may be additional services required related to the audits of the Lottery’s financial statements.

IV. Timeline for Responses

Event Date Time RFI available to prospective bidders February 26, 2021 Questions due to Lottery March 04, 2021 3:00pm PST Responses to Questions March 08, 2021 Final Date for Response submission March 15, 2021 3:00pm PST

V. Responses

1) Responses for this RFI are to be submitted as follows:

Responses and/or inquiries must be submitted electronically via email the questions must be addressed in the order that they appear in Section II. Documents must be submitted in a PDF format with 12-point Arial font. Responses must include a contact name, address, phone, and email address.

Please submit your RFI proposal, no later than 3 p.m. on March 15, 2021 electronically to:

California State Lottery Muhammad Chechi (916) 822 – 8065 [email protected]

5