Under WIC §4652.5, your organization's Regional Center funding level determines whether you need a CPA review or a full independent audit. While they sound similar, the scope, cost, and "assurance level" are significantly different.
The Funding Thresholds
The first step is determining your aggregate Regional Center funding for the state fiscal year (July 1 – June 30):
- $500,000 to $1,999,999: CPA Review required.
- $2,000,000 or more: Independent Audit required.
If you receive less than $500,000 in annual Regional Center funding, you are generally exempt from the annual review/audit requirement, though you must still maintain accurate financial records.
What is a CPA Review?
A review is a "limited assurance" engagement. The CPA performs analytical procedures and makes inquiries of management to ensure the financial statements are plausible and free of material misstatements.
Key characteristics of a review:
- No Transaction Testing: The CPA generally does not test individual invoices or bank entries.
- Analytical Focus: The focus is on ratios, trends, and variances.
- Negative Assurance: The report states that the CPA is "not aware of any material modifications" that should be made.
- Cost: Typically 40–60% less expensive than an audit.
What is an Independent Audit?
An audit is a "reasonable assurance" engagement. It is the highest level of assurance a CPA can provide. The CPA must obtain evidence through transaction testing, physical inspection, and third-party confirmations.
Key characteristics of an audit:
- Detailed Testing: The CPA selects samples of transactions to verify accuracy and compliance.
- Internal Control Evaluation: The CPA must assess the design and implementation of your organization's internal controls.
- Confirmations: The CPA contacts banks, vendors, and sometimes the Regional Center directly to verify balances.
- Positive Opinion: The report states that the financial statements "present fairly, in all material respects" the financial position of the organization.
Which One Should You Choose?
If you are near the $2 million threshold, you might be tempted to aim for a review. However, if your funding fluctuates and you suspect you might hit $2M by year-end, it is often safer to plan for an audit. Switching from a review to an audit midway through fieldwork is costly and can cause you to miss your submission deadline.
"A review provides a snapshot; an audit provides a deep dive. For larger organizations, the audit is not just a compliance requirement—it's a tool for strengthening internal controls and reducing fraud risk."
How Guidepost Can Help
We provide both reviews and audits for Regional Center vendors. Because we specialize in this niche, our process is streamlined and focused on the specific requirements of WIC §4652.5, saving you time and reducing the burden on your administrative staff.
Not sure which one you need? Contact us for a free consultation and we'll help you determine your requirement based on your current funding levels.