Top 5 Mistakes Non-Profits Make During Audits — And How to Avoid Them
For many non-profit organisations in Singapore, an audit can feel like a daunting annual ritual. Whether it’s a statutory requirement or a donor-imposed condition, the audit process often causes unnecessary stress—not because audits are inherently difficult, but because of common and avoidable mistakes that non-profits make before or during the audit.
In this article, we’ll highlight the top five mistakes non-profits in Singapore frequently make during audits and, more importantly, how you can steer clear of them. Avoiding these pitfalls will not only help you pass your audit smoothly, but also improve your overall financial governance and build long-term trust with donors and regulators.
Mistake #1: Poor Record-Keeping and Documentation
Why It Happens:
Many non-profits operate with lean teams and rely heavily on volunteers. As a result, administrative tasks like filing receipts, tracking donation letters, and documenting approvals are often overlooked or inconsistently done.
Why It Matters:
Auditors rely on supporting documents to verify that financial transactions were legitimate, authorised, and in line with the organisation’s objectives. Missing or incomplete documents can lead to qualifications in your audit report or even compliance issues with regulatory bodies like the Commissioner of Charities or the Registry of Societies.
How to Avoid It:
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Implement a centralised digital filing system to store donation letters, invoices, bank statements, and receipts.
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Assign a staff member or volunteer to maintain financial records consistently.
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Train your team to understand the importance of documentation, especially for donations, grants, and fund disbursements.
Mistake #2: Not Understanding Restricted vs. Unrestricted Funds
Why It Happens:
Non-profits often receive donations with specific conditions attached, such as funds earmarked for scholarships, specific programs, or infrastructure. Failing to separate these from general-purpose funds can cause confusion in your accounts.
Why It Matters:
Auditors will check that restricted donations were used according to donor intent. Mixing restricted and unrestricted funds is not only a red flag for auditors—it can erode donor confidence and result in fund clawbacks or reputational damage.
How to Avoid It:
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Open separate ledgers or tracking systems for restricted funds.
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Ensure that your accounting software can tag and report these funds accurately.
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Include clear notes in your financial statements detailing the nature and usage of restricted donations.
Mistake #3: Lack of Internal Financial Controls
Why It Happens:
Some non-profits trust their staff or volunteers too much and fail to establish proper checks and balances. Tasks such as managing donations, authorising payments, and handling petty cash may be performed by the same person, leading to risks of error or fraud.
Why It Matters:
Auditors will assess the robustness of your internal control environment. Weak internal controls increase the risk of financial mismanagement and can lead to an adverse or qualified audit opinion.
How to Avoid It:
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Apply the segregation of duties principle. For instance, the person who handles payments should not be the same person who approves them.
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Require dual signatories for cheque payments or large fund transfers.
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Perform monthly bank reconciliations and have them reviewed by a board member or supervisor.
Mistake #4: Misinterpreting Audit Requirements
Why It Happens:
Non-profit leaders may misunderstand audit requirements, especially if they’re new to compliance frameworks such as the Charities Act, Societies Act, or the Code of Governance for Charities and IPCs. This can lead to confusion over what financial statements to prepare and what level of assurance is needed.
Why It Matters:
Submitting unaudited or improperly prepared accounts when an audit is required can result in regulatory penalties or delay in grant renewals and funding approvals.
How to Avoid It:
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Know your audit obligations based on your organisation’s legal structure and financial size:
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Charities with annual receipts or expenditure above SGD 500,000 must have audited accounts.
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IPCs must always submit audited financial statements, regardless of income level.
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Consult your appointed auditor or a qualified accountant if unsure.
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Refer to resources from the Charities Unit, Commissioner of Charities, or ACRA for guidance.
Mistake #5: Leaving Audit Preparation to the Last Minute
Why It Happens:
Many non-profits get caught up in their core mission—delivering social services, managing volunteers, fundraising—and put off audit preparation until the deadline looms. This results in rushed work, missing documents, and back-and-forth communication with auditors.
Why It Matters:
Rushed audits can lead to avoidable errors, audit delays, and increased audit costs due to inefficiencies. Worse, delays in filing audited accounts with regulators or funders may result in reputational damage or funding suspension.
How to Avoid It:
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Start audit preparation at least 2–3 months before your financial year-end.
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Create a year-end closing checklist that includes reconciliation of accounts, preparation of schedules, and collection of key documents.
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Set a realistic timeline with your auditor and assign internal deadlines to team members to complete their portions.
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Maintain ongoing communication with your audit firm to clarify expectations early on.
Bonus Tip: Engage Auditors with Non-Profit Experience
Auditing a non-profit organisation is different from auditing a for-profit business. The financial reporting standards, regulatory framework, and funding models vary significantly. Hiring auditors unfamiliar with the sector may result in irrelevant queries or misunderstandings.
Always choose an audit firm with a strong track record in the non-profit or charity space in Singapore. They will better understand your unique risks and compliance landscape, and can also offer valuable advice to strengthen your financial governance.
Conclusion: Audit Success Is About Being Proactive, Not Reactive
Audits don’t have to be stressful. By understanding and avoiding these common mistakes, your non-profit can transform the audit process into a positive, strategic experience. Remember, audits are not just about compliance—they are about building trust, improving systems, and showing your stakeholders that you’re serious about accountability.
With a bit of preparation, proper documentation, and the right internal controls in place, your next audit can run smoothly—and even uncover opportunities for improvement and growth.
Need Non Profit Audit help, find https://www.auditservices.sg/ipc-charity-ngo-audit-singapore/
