Does Your Childcare Center Need a PHLpreK Fiscal Review, AUP, or Audit?

Many childcare centers and early learning providers participating in PHLpreK are surprised to learn that their year-end financial reporting requirements can vary significantly based on the amount of PHLpreK funding received. Understanding which level of review applies to your organization is critical to maintaining compliance, avoiding delays in funding, and preventing last-minute surprises.

Understanding the FY26 PHLpreK Financial Review Requirements

The PHLpreK program requires providers to undergo different levels of fiscal review depending on their annual organizational PHLpreK revenue. All required reviews must be conducted by a Certified Public Accountant (CPA) and include specific financial schedules and reporting requirements. Providers are generally required to submit their final fiscal review documentation by October 30.

Providers Receiving $299,999 or Less

Organizations receiving $299,999 or less in annual PHLpreK funding typically must submit a Year-End Budget vs. Actual Expense Report unless selected for a fiscal desk review. PHLpreK may also conduct fiscal adherence reviews on a sample of providers to verify compliance with billing and reporting requirements.

What This Means

While a full audit may not be required, providers should still maintain complete financial records and documentation to support program expenditures and budget reporting.

Providers Receiving $300,000 to $499,999

Organizations receiving between $300,000 and $499,999 in annual organizational PHLpreK revenue must obtain an Agreed-Upon Procedures (AUP) engagement performed by an independent CPA in accordance with professional attestation standards. The engagement must separately identify PHLpreK funding and expenditures and include a dedicated PHLpreK schedule.

Common Challenge

Many providers mistakenly assume an AUP is the same as an audit. In reality, an AUP follows different procedures and reporting requirements, making it important to engage a CPA familiar with PHLpreK guidance.

Providers Receiving $500,000 or Greater

Organizations with $500,000 or more in annual PHLpreK revenue are required to obtain a Yellow Book Audit conducted under Generally Accepted Government Auditing Standards (GAGAS). The audit must separately report PHLpreK funding and expenditures and include extensive financial statement reporting and compliance testing.

Required reports may include:

• Independent Auditor's Report
• Statement of Financial Position
• Statement of Activities
• Statement of Cash Flows (when applicable)
• Notes to the Financial Statements
• Internal Control Reports
• Compliance Reports
• Disclosure of findings or corrective actions when applicable.

Organizations Subject to a Federal Single Audit

Providers receiving $1,000,000 or more in Federal Revenue and required to undergo a Federal Single Audit must treat the PHLpreK program as a major program and include supplemental schedules reconciling PHLpreK activity. Additional federal reporting requirements may apply.

Why Planning Ahead Matters

One of the most common issues we see is organizations waiting too long to engage a CPA. PHLpreK may require confirmation that a provider has initiated the review process, and extensions generally require supporting documentation from the CPA firm. Missing deadlines can potentially impact invoice processing and create compliance concerns.

How to Prepare Now

Before year-end, childcare centers should:

• Review their expected PHLpreK funding levels.
• Determine which fiscal review category applies.
• Reconcile grant receipts and expenditures.
• Organize supporting documentation.
• Engage a CPA experienced with nonprofit and government-funded programs.
• Address potential reporting issues before submission deadlines.

Need Help With Your PHLpreK Fiscal Review?

Whether your organization requires a Budget vs. Actual Expense Report, Agreed-Upon Procedures engagement, Yellow Book Audit, or Federal Single Audit support, working with a CPA who understands PHLpreK requirements can help streamline the process and reduce compliance risks.

Contact our office to discuss your organization's PHLpreK reporting requirements and develop a plan to meet upcoming deadlines with confidence.

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