What changed
For years, California Regional Center vendors have known the basic rule: if you receive enough funding from a regional center, you must obtain an independent CPA review or audit each year under Welfare & Institutions Code §4652.5. What's new is how much is riding on it.
Under AB 143 (2025), beginning in FY 2026-27, a provider must be compliant with its annual fiscal review and audit requirements — along with electronic visit verification and home- and community-based services rules — as a condition of eligibility for the Quality Incentive Program.
Why this is bigger than the old penalty
Rate Reform changed how you get paid. Your full rate is now made up of two parts: a 90% base rate and a 10% quality incentive rate. Qualifying for that 10% depends on meeting program requirements — and your audit or review compliance is now one of them.
So the stakes have shifted. Previously, falling behind on your §4652.5 report mainly risked the "Do Not Refer" list, where a regional center pauses new referrals until you're compliant. That risk still exists. But now, a lapse can also jeopardize 10% of the rate you're paid on every authorization. For most vendors, that is a far larger number than the cost of the audit itself.
Do you need a review or an audit?
It depends on how much regional center funding you receive — not your total revenue from all sources:
- $500,000 to $1,999,999 in regional center funding: an independent CPA review (limited assurance).
- $2,000,000 or more in regional center funding: a full independent audit (reasonable assurance).
The thresholds are measured on the State fiscal year (July 1–June 30), while your report covers your own fiscal year. Both the report and any management letter are due to your vendoring regional center within nine months of your fiscal year end.
The exclusions most vendors miss
Not every dollar counts, and not every entity is covered. Three points catch people off guard:
- Usual and customary rates don't count. Payments made at usual and customary rates (as defined in Title 17) are excluded from the threshold calculation.
- Government entities are exempt. State and local agencies, the University of California, and the California State University are not subject to the requirement.
- Work activity programs can owe a review under $500,000. Title 17 can require a review even below the usual threshold.
What a clean report earns you
Getting it right has real upside beyond simply staying compliant:
- A two-year exemption. At the review level, the regional center must grant a two-year exemption if it finds no issues affecting regional center services in your prior-year review. At the audit level, an unmodified opinion — or a qualified opinion where issues aren't material — can earn a two-year exemption.
- No escalation to the State. If your report carries a qualified opinion or flags significant issues, the regional center must report it to the Department of Developmental Services within 30 days, with a resolution plan. A clean report keeps your file out of that process.
Plan ahead — and budget for it correctly
Two practical notes. First, the nine-month clock runs from your fiscal year end, but good preparation starts long before that — clean books and proper expense classification throughout the year prevent last-minute findings. Second, you cannot recover the cost by asking for a rate increase: WIC §4652.5 specifically bars rate adjustments submitted solely to fund the cost of compliance. Treat the engagement as a fixed, planned cost.
How Guidepost helps
Guidepost focuses specifically on Regional Center vendor compliance — it's our practice area, not a side service — and we work with vendors across all 21 California regional centers. We know the thresholds, the deadlines, the exemption rules, and how a clean report protects both your referrals and your quality incentive rate.
Frequently asked questions
This article is general information about California Regional Center vendor audit requirements and is not legal or accounting advice for your specific situation. For guidance on your organization, contact a qualified CPA.