What is an accounting audit for private kindergartens, certified childcare centers, etc.?

Private kindergartens and certified child care centers are run with the aim of improving early childhood education and childcare, and many facilities receive subsidies from the national or local government.

When public funds are invested, proper management of the funds and transparency of operation must be ensured. Facilities that meet certain conditions can receive the following subsidies under the Private School Promotion Subsidy Law:AccountingDo the following:Prepare balance sheets, income statements and other financial documentsand external expertsReceived a certified public accountant's audit,Submit audited financial statements to the prefectureYou are required to do so.

Which entities require audits?

The New Child and Child-rearing Support System that came into effect in 2015 has significantly changed the system for providing early childhood education and childcare, and the need for accounting audits varies depending on the management structure of the facility.

Corporations requiring audits

• Private kindergartens operated by educational corporations
  Based on the accounting standards for school corporations, we are required to undergo an audit to ensure the fairness of our financial situation.
• Certified childcare facilities that receive a certain amount of public subsidies
  Audits will be mandatory to ensure that subsidies are being used properly.
• Corporations with a certain financial scale or larger
  If assets or income exceed a certain level, an external audit may be required.

Corporations that do not require audits

On the other hand, the following types of corporations are not, in principle, required to undergo statutory audits:

• Unlicensed kindergartensEarly childhood education and childcare facilities
  If an organization does not receive subsidies from the national or local government and is run solely through its own financial resources, it is not required to undergo an audit.
• The amount of the subsidy is less than 10 million yen
  School corporations that receive subsidies of less than 10 million yen and have been approved by the competent authorities are exempt from audits.

However, even corporations that are not required to undergo audits may voluntarily undergo audits in order to improve transparency or strengthen their internal control systems.

What is the purpose of an accounting audit?

Financial audits of kindergartens and childcare centers are conducted for the following purposes:

Ensure accuracy of financial statements

Ensure that income and expenses are properly recorded.

Ensuring proper use of public funds

Verify that subsidies and grants are being used correctly.

Increased transparency and accountability

We will establish a system for providing proper financial reporting to stakeholders related to operations (parents, local governments, boards of education, etc.).

Strengthening governance

We inspect internal control systems to prevent inappropriate accounting practices and support efficient management.

Specific contents of the audit

Inspections of private kindergartens and certified childcare centers focus on checking the following points:

Financial statement verification

• Integrity of income statements and balance sheets
• Is the accounting process being carried out appropriately in accordance with accounting standards?

Confirmation of proper use of subsidies

• Use of subsidies and grants from the national and local governments
• Check for fraud and misuse

Checking internal controls

• Accounting procedures and appropriate management systems
• Are checks in place to prevent fraud?

Appropriateness of fund management

• Are facility operating funds being managed appropriately?
• Is the purpose of use clear and have appropriate procedures been followed?

Benefits of being audited

There are several benefits to private kindergartens and certified childcare centers undergoing accounting audits, including:

• Increased financial transparency and trust from parents and stakeholders
• This will enable proper management of public subsidies, leading to sounder cash flow.
• Prevent fraud and incorrect accounting practices and strengthen risk management
• The management system will be optimized, leading to long-term management stability.

summary

For private kindergartens and certified childcare centers, accounting audits are not just a duty, but an important process for proper management and improving credibility. Proper accounting management helps maintain the sound management of the facility and ensures accountability to parents and other related parties.

Kawanishi Certified Public Accountant and Tax Accountant Office has extensive experience in auditing private kindergartens and certified child care centers, and provides appropriate support tailored to the characteristics of each facility.

The service area is nationwide.

If you have any questions or concerns regarding audit procedures, please feel free to contact us.