Common Audit Challenges Faced by Singaporean Non-Profits and How to Overcome Them

Common Audit Challenges Faced by Singaporean Non-Profits and How to Overcome Them

Audits are essential for ensuring transparency, governance, and regulatory compliance in the non-profit sector. In Singapore, where public trust and accountability are paramount, audits are not just regulatory formalities—they are powerful tools that validate the integrity of charitable and social work. However, many non-profit organisations (NPOs), particularly those with limited resources or volunteer-run operations, encounter several common challenges during audits.

In this article, we’ll explore the key audit challenges faced by Singaporean non-profits and practical strategies to overcome them, so your organisation can confidently manage future audits and maintain long-term trust with stakeholders.

1. Incomplete or Poor Financial Records

Challenge:
One of the most common audit issues is the lack of complete and well-organised financial records. Many smaller NPOs do not have full-time accounting staff and rely on volunteers or part-time administrators to maintain books. This can lead to inconsistent or incomplete documentation.

Examples:

• Missing invoices or receipts

• Lack of donation tracking

• No segregation between restricted and unrestricted funds

Solution:

• Implement proper accounting software (e.g., Xero, QuickBooks, or non-profit-specific platforms).

• Train staff and volunteers on basic bookkeeping.

• Maintain proper filing systems—digital or physical—for every transaction.

• Use donor management systems to track and reconcile donations.

• Engage part-time or outsourced bookkeepers for professional support.

2. Inadequate Internal Controls

Challenge:
Auditors often identify weak internal control systems in non-profits. This includes the absence of clear approval hierarchies, inadequate segregation of duties, or failure to monitor petty cash usage.

Examples:

• One person handles both payment and approval

• No regular reconciliation of bank accounts

• Lack of inventory tracking for donated goods

Solution:

• Establish clear financial policies and standard operating procedures (SOPs).

• Ensure segregation of duties: for example, different people should prepare payments, approve them, and record them.

• Perform monthly bank reconciliations and petty cash reviews.

• Have your board or finance committee conduct quarterly reviews of financial statements.

Strong internal controls reduce the risk of fraud and errors and build auditor confidence in the organisation.

3. Difficulty Understanding Audit Requirements

Challenge:
Many non-profits, especially smaller ones or newer charities, may not fully understand what documents and processes are required for an audit. This often results in confusion and delays during the audit process.

Solution:

• Engage your auditor early and request a Prepared-by-Client (PBC) checklist.

• Attend training or seminars hosted by the Charity Council, NCSS, or other non-profit support organisations.

• Use resources like the Charity Transparency Framework (CTF) to guide governance practices.

• If unsure, consider hiring a consultant or part-time accountant to prepare your organisation before audit season.

4. Improper Fund Accounting

Challenge:
Non-profits frequently deal with restricted and unrestricted funds, yet many fail to properly record or track how these funds are used. This mismanagement can lead to audit qualifications and compliance issues, especially for IPCs.

Examples:

• Mixing general donations with project-specific funding

• Not tracking utilisation of government grants

• Lack of fund-specific reporting

Solution:

• Open separate accounts or sub-ledgers for restricted funds.

• Maintain clear records showing how each dollar is used, with supporting documents.

• Use fund accounting software to allocate expenses to specific funding sources.

• Regularly review fund balances with the Board or Finance Committee.

Grant and donor compliance is essential—especially when reporting to funders such as Tote Board or NCSS.

5. Weak Governance and Oversight

Challenge:
The Board or Management Committee may not be actively engaged in overseeing the financial health of the organisation. Auditors often note that board minutes lack financial discussions or that directors are unaware of financial risks.

Solution:

• Include financial review as a standing item in board meetings.

• Require board members to review and approve monthly/quarterly financial statements.

• Ensure an Audit Committee or Finance Subcommittee is formed to oversee audits and risk.

• Attend governance training or workshops offered by the Charity Council or professional bodies.

Active board oversight strengthens the organisation’s resilience and financial stewardship.

6. Delayed Responses During Audit

Challenge:
When finance teams are understaffed or unfamiliar with audit processes, they may delay in responding to auditor requests. This can result in audit delays, missed compliance deadlines, and reputational risk.

Solution:

• Allocate dedicated time and resources for audit preparation.

• Set internal deadlines ahead of auditor deadlines.

• Assign a single audit coordinator to liaise with the auditor.

• Ensure documents are prepared and indexed ahead of the fieldwork.

Prompt responses speed up the audit and demonstrate a culture of readiness and transparency.

7. Volunteer-Run Operations with Limited Capacity

Challenge:
Many Singapore-based NPOs operate primarily through volunteer manpower, which can pose challenges in maintaining year-round financial discipline and continuity. Volunteers may come and go, and there may be a lack of formal training or documentation.

Solution:

• Develop a volunteer handbook for finance-related duties.

• Create checklists and SOPs for donation processing, petty cash, and expense approvals.

• Appoint a Finance Lead or Treasurer with experience and authority.

• Consider outsourcing accounting functions to professionals, especially during the audit season.

Professionalising even basic functions greatly improves audit outcomes.

8. Compliance with the Charities Accounting Standard (CAS)

Challenge:
Many charities and IPCs in Singapore are required to prepare financial statements in accordance with the Charities Accounting Standard (CAS). However, some use simplified templates or FRS formats that may not fully meet CAS expectations.

Solution:

• Confirm with your auditor whether your organisation should apply CAS or FRS.

• Use CAS-compliant templates, available from the Commissioner of Charities’ website.

• Ensure your accounting staff or bookkeepers are trained in CAS.

• Regularly review your accounts against CAS checklists to ensure proper classifications and disclosures.

Following the appropriate accounting framework is critical to avoiding audit qualifications.

9. High Turnover of Key Personnel

Challenge:
Turnover of finance officers, treasurers, or executive staff can disrupt financial record-keeping and handover processes. If key persons leave without proper transition, audit preparation becomes difficult.

Solution:

• Maintain documentation of processes and access credentials.

• Create a handover checklist for finance-related responsibilities.

• Cross-train at least two individuals in critical finance tasks.

• Store documents and records in a secure, centralised cloud-based system.

Continuity in financial practices ensures audits are not derailed by unexpected departures.

Conclusion

While audits can be daunting for Singaporean non-profits, most challenges are avoidable with the right systems, preparation, and governance culture. Being audit-ready is not just about compliance—it reflects the organisation’s commitment to financial transparency, donor trust, and long-term sustainability.

By proactively addressing the challenges above and building strong accounting and governance frameworks, non-profits can not only pass audits confidently but also enhance their credibility in the eyes of funders, partners, and beneficiaries.

If you need help with your Non Profit Audit, visit https://kohlimaudit.sg/services_post/ngo-non-profit-charity-audit/