Cost Certification Audits

Qualified project costs are the basis for tax credits. State agencies and equity investor partners require audits of the development costs to ensure that the costs have been incurred and are properly classified for tax credit purposes. We follow professional auditing standards, state agency guidelines and Internal Revenue Code in planning and performing cost certifications. Good communication between all parties makes this process successful.

Here’s how it works:

Planning – We spend a lot of time getting to know the client and the tax credit project.  We learn about the operating environment, study tax credit applications and make inquiries of management and others within the business.  We perform analytic analysis and test certain assumptions and transactions so we can prepare an accurate cost certification that is tailored to the specific project.  We work with the client to ensure proper documentation is being gathered to comply with the state agency requirements. 

Fieldwork – When the project is completed, we perform tests and analyses at the organization’s office, reviewing the appropriate documents and making additional inquiries as necessary.  Depending on the company’s accounting software, we may complete our work electronically.  We also perform a site tour of the project to ensure costs are being reported correctly.

Draft reports – When the audit procedures are complete and the work has been reviewed, the draft cost certification is provided to management for review. To indicate approval, company management signs a representation letter.

Final reports and wrap-up – When all approvals are received, we provide copies of the report to company management and submit the final report, along with all other required documentation, to the governmental agencies.  We coordinate final communications with investor partners and the state agencies on the client’s behalf.  We wrap-up our files in accordance with auditing standards and record retention policies.