Annual Audits

Under WIC §4652.5, any service provider that receives funding from a California Regional Center may be required to have an annual CPA review or audit, depending on the amount of funding received.

Important: The reporting thresholds are based only on the amount received from Regional Centers, not on your organization’s total revenue from all sources.

Annual Funding Thresholds

Measured using the State fiscal year: July 1–June 30 (even if your organization uses a different fiscal year).

🌟 $500,000 – $1,999,999 in Regional Center Funds

CPA Review Required - A review provides limited assurance and includes analytical procedures and inquiries with management. It is less extensive than an audit but still subject to professional standards.

🌟 $2,000,000 or More in Regional Center Funds

Independent Audit Required - An audit provides a higher level of assurance and includes testing of transactions, reviewing internal controls, and evaluating compliance with DDS requirements.

These rules exist to ensure financial transparency and proper use of public funds. Choosing the wrong reporting level or misunderstanding how funding is calculated can create compliance problems or delay referrals.

If you’re unsure which requirement applies to your organization, preparing early and maintaining good documentation throughout the year is the best way to avoid last‑minute issues.

👉 To meet the requirements of WIC §4652.5, organizations typically must:

1. Obtain an Independent CPA Review or Audit determined by your Regional Center funding level.

2. Submit Reports to DDS On Time. Completed reports must be filed with DDS within required timelines after your fiscal year end.

3. Meet the 85/15 Program Spending Rule. At least 85% of Regional Center funding must be spent on direct program services, and no more than 15% may be used for administrative or overhead costs.

4. Provide Accurate Financial Statement Disclosures. Revenue sources, expenses, and compliance statements must be clearly presented.

5. Maintain Adequate Records. Documentation must support how you allocated program and administrative costs.

6. Ensure Strong Internal Controls. Audits often assess processes related to financial management and compliance.

7. Use Proper DDS Format When Submitting Reports. Incorrect formatting can cause delays or rejection.

DDS requires organizations to show that:

• At least 85% of Regional Center funds were spent directly on client services

• No more than 15% went toward administrative or overhead costs

This calculation applies only to Regional Center funding—not your total organizational budget.

Why Classification Is Important

Incorrectly classifying expenses (such as salaries, rent, shared costs, or professional fees) is one of the most common reasons providers fall out of compliance. Planning ahead and maintaining accurate records throughout the year helps ensure you meet the 85/15 requirement.

Failing to meet WIC §4652.5 requirements can result in:

• Placement on the DDS “Do Not Refer” list
  (Regional Centers may pause referrals or, in severe cases, vendorization could be jeopardized.)

• Delays in payment or reimbursement

• Contract or renewal complications

• Increased oversight or additional reporting requirements

• Damage to reputation with Regional Centers and stakeholders

The best way to avoid issues is to prepare for your audit well in advance of your reporting deadline.