If your organization receives funding from a California Regional Center, you may be required to obtain an independent CPA audit or review under Welfare & Institutions Code §4652.5.
These compliance requirements are not optional and failure to meet them can result in placement on the Department of Developmental Services (DDS) “Do Not Refer” list.
Not sure whether your organization requires an audit or review?
Who Is Required to Obtain a Regional Center Audit or Review?
According to the Welfare & Institutions Code §4652.5, service providers that receive funding from a California Regional Center may be required to obtain an independent CPA review or audit each year.
Important: The thresholds are based specifically on the amount of funding received from California Regional Centers not your organization’s total gross revenue from all sources.
Annual Funding Thresholds
Your reporting requirement is determined by the total amount of Regional Center funding received during the State’s fiscal year (July 1 through June 30). Even though reporting may be completed on your fiscal‑year or calendar‑year basis, the funding threshold is measured using the State’s fiscal year.
$500,000 – $1,999,999 in Regional Center Funding
CPA Review Required
Organizations within this range must engage an independent CPA to perform a financial review in accordance with professional standards. A review provides limited assurance and includes analytical procedures and management inquiries.
$2,000,000 or More in Regional Center Funding
Independent Audit Required
Organizations receiving $2 million or more in Regional Center funding must undergo a full financial statement audit. An audit provides reasonable assurance and includes testing of transactions, evaluation of internal controls, and verification of compliance with Department of Developmental Services (DDS) reporting requirements.
Why the Distinction Matters
These requirements are designed to promote financial accountability and ensure compliance with Department of Developmental Services (DDS) oversight standards. Failing to meet the appropriate reporting level or misunderstanding how funding thresholds are calculated can result in compliance issues and potential referral restrictions.
If you are unsure which level applies to your organization, early planning and proper documentation are critical to avoiding last-minute complications.
You can also request a free audit or review quote so you know exactly what level of reporting your organization may require.
What WIC §4652.5 Compliance Actually Requires
What Does WIC 4652.5 Compliance Include?
Welfare & Institutions Code §4652.5 establish financial transparency standards for organizations receiving funding from California Regional Centers. Compliance typically includes the following:
Independent CPA Engagement
An annual CPA Review or Audit must be conducted depending on your funding level.
Financial Reporting to Department of Developmental Services (DDS)
Completed reports must be submitted to the Department of Developmental Services (DDS) within required timelines following your fiscal year end.
85/15 Program Spending Compliance
Organizations must demonstrate that at least 85% of Regional Center funding is spent on direct program services.
Financial Statement Disclosures
Your financial statements must properly reflect revenue sources, expense classifications, and compliance representations.
Documentation & Record Retention
Supporting documentation must be maintained to substantiate revenue allocation and expense categorization.
Internal Control Considerations
Audits often evaluate financial processes and internal controls to ensure compliance with Department of Developmental Services (DDS) expectations.
Proper Submission Format
Reports must meet Department of Developmental Services (DDS) formatting and documentation standards to avoid rejection or delay.
Understanding the 85/15 Program Spending Rule
Under Department of Developmental Services (DDS) regulations, organizations receiving Regional Center funding must demonstrate that:
- At least 85% of funding is used for direct program services
- No more than 15% is allocated to administrative or overhead expenses
This calculation applies specifically to Regional Center funding not necessarily to your total organizational expenses.
Why Expense Classification Matters
Misclassification of expenses can unintentionally push an organization out of compliance. Items such as:
- Salaries
- Rent
- Administrative payroll
- Professional fees
- Shared costs
must be carefully allocated and documented.
Improper classification is one of the most common issues identified during Regional Center audits.
Proactive Planning Reduces Risk
Proper bookkeeping throughout the year rather than waiting until audit season significantly reduces compliance risk and last-minute adjustments.
If you’re unsure whether your organization currently meets the 85/15 requirement, it’s best to review your reporting before your compliance deadline.
Consequences of Non-Compliance
What Happens If You Fail to Meet WIC §4652.5 Requirements?
Failure to comply with WIC §4652.5 requirements can result in serious operational consequences, including:
Placement on the Department of Developmental Services (DDS) “Do Not Refer” List
Regional Centers may suspend referrals until compliance is restored or even worse, you could lose your vendorization.
Payment Delays
Failure to submit required reports can delay reimbursement or future funding.
Contract Disruption
Non-compliance may impact vendor agreements or renewal status.
Increased Regulatory Scrutiny
Repeated reporting issues may trigger closer oversight or additional documentation requests.
Reputational Impact
Compliance issues can affect trust with Regional Centers and stakeholders.
The best way to avoid compliance issues is to prepare your audit well before your reporting deadline.
Why Choose Breard & Associates
Specialized Regional Center Compliance Expertise
Breard & Associates focuses on compliance-driven audits for Department of Developmental Services (DDS)-regulated organizations. We understand the nuances of WIC §4652.5 reporting requirements, common audit findings, and the complexities of 85/15 program allocation.
As independent accountants and auditors, your company deserves niche expertise. Our firm has over ten years’ experience and have spoken at Regional Centers on this topic.
Our approach emphasizes:
- Clear communication
- Proactive documentation guidance
- Efficient audit timelines
- Reduced disruption to your operations
- Practical compliance insight beyond the audit report
We work with both nonprofit and for-profit Regional Center vendors and tailor our process to the size and structure of your organization.
Regional Center Audit FAQs
What triggers an WIC §4652.5 audit requirement?
WIC §4652.5 requires a CPA review or audit when a service provider receives $500,000 or more annually in funding from a California Regional Center. The specific reporting requirement depends on the total funding amount received during the fiscal year.
What is the difference between a CPA Review and a CPA Audit?
A CPA Review provides limited assurance based primarily on analytical procedures and inquiries. A CPA Audit provides reasonable assurance and includes detailed testing of financial records, internal controls, and compliance with Department of Developmental Services (DDS) regulations.
What happens if a Regional Center vendor fails to submit their audit on time?
Failure to submit required financial reports may result in placement on the Department of Developmental Services (DDS) “Do Not Refer” list, meaning Regional Centers may temporarily stop referring new clients to your organization until compliance is restored.
Does WIC §4652.5 apply to both nonprofit and for-profit vendors?
Yes. WIC §4652.5 applies to both nonprofit and for-profit organizations that receive funding through California Regional Centers.
What is the 85/15 rule under Department of Developmental Services (DDS) regulations?
The 85/15 rule requires that at least 85% of Regional Center funding be used for direct program services, with no more than 15% allocated to administrative or overhead costs.
Are audit thresholds based on total company revenue?
No. The thresholds are based specifically on funding received from California Regional Centers, not total organizational revenue.
How long does a Regional Center audit typically take?
Most audits or reviews take several weeks depending on financial complexity, internal controls, and the timeliness of documentation provided.
Can your firm help correct prior-year compliance issues?
Yes. We assist organizations in addressing past audit findings, improving documentation procedures, and strengthening internal compliance controls to avoid recurring issues.
When are reports due to Department of Developmental Services (DDS)?
Deadlines vary depending on your year end. Due date is 9 months after your year end.
It is important to begin planning several months before your reporting deadline to avoid submission delays.
Do Regional Center vendors also need tax return preparation?
Many vendors require both compliance audits and annual federal/state tax return preparation. We coordinate both services to ensure reporting consistency.
Where can I find a list of all California Regional Centers?
California’s Department of Developmental Services oversees 21 Regional Centers throughout the state.
Each Regional Center serves a specific geographic area and provides coordination and funding for services to individuals with developmental disabilities.
If you need contact information or want to determine which Regional Center serves your area, you can view the full directory of Regional Centers here.
Still Unsure Which Requirement Applies to Your Organization?
Complete our brief intake questionnaire and receive a tailored quote based on your Regional Center funding level and reporting obligations.