Common Issues We See in Charity Audits

For charities and not-for-profit organisations, an audit is more than a compliance requirement.

It is an opportunity to strengthen governance, improve financial processes and give trustees, funders and stakeholders greater confidence in how the organisation is being managed.

Charities often operate with limited resources, busy teams and multiple funding streams. That can make financial oversight more complex, especially when processes have developed informally over time.

Here are some of the common issues that can arise during charity audits, and how organisations can prepare for them.

Weak or Informal Internal Controls

Strong internal controls help charities protect their assets, manage risk and reduce the chance of errors.

Issues can arise when controls are undocumented or too dependent on one person. This may include limited segregation of duties, unclear payment approvals, late bank reconciliations or informal expense processes.

For smaller charities, it may not always be possible to separate every role fully. But trustees should still be able to show what controls are in place and why they are appropriate.

Missing Records and Supporting Documents

Incomplete documentation is one of the most common causes of audit delays.

This can include missing invoices, grant agreements, payroll records, bank statements, fundraising records, board minutes or evidence of restricted fund spending.

Good record-keeping helps the audit run smoothly. It also supports transparency and gives trustees a clearer view of the charity’s financial position.

Restricted Funds Not Clearly Tracked

Many charities receive income for a specific purpose, such as grants or donations linked to a particular project.

Problems can arise when restricted funds are not tracked separately, or when the charity cannot clearly show that funds were used in line with donor or funder conditions.

Clear records should show where restricted income came from, what conditions apply, how funds were spent and what balance remains at year-end.

Governance Records Not Kept Up To Date

Audit work often involves reviewing board minutes, approvals and governance documentation.

Issues can arise when key decisions are made but not properly recorded. This may include decisions around budgets, reserves, large payments, conflicts of interest or use of restricted funds.

Minutes do not need to be overly complicated, but they should clearly show the decisions made and the actions agreed.

Reserves Policies That Need More Clarity

A reserves policy helps explain how much funding a charity aims to hold, why that level is appropriate and how reserves support the organisation’s work.

Issues can arise where there is no reserves policy, the policy is outdated, or trustees cannot clearly explain the level of reserves held.

A good reserves policy should reflect the charity’s size, funding model, commitments and future plans.

Limited Financial Reporting to Trustees

Trustees need timely and relevant financial information to make good decisions.

Where financial updates are limited, unclear or only reviewed once a year, it can be harder for trustees to identify risks or understand how the organisation is performing.

Regular management accounts, budget comparisons and cashflow updates can support stronger oversight throughout the year.

Audit Preparation Left Too Late

A smooth audit starts well before fieldwork begins.

When preparation is left until the last minute, charities may struggle to gather documents, answer queries or secure trustee approval within the required timeframe.

Agreeing an audit timetable early and keeping records up to date can make the process much more efficient.

How Charities Can Prepare

Charities can make the audit process more effective by taking a proactive approach throughout the year.

This includes:

• keeping financial records up to date

• reviewing internal controls regularly

• documenting trustee decisions clearly

• tracking restricted funds separately

• preparing useful financial reports for trustees

• maintaining a clear reserves policy

• agreeing audit timelines early

A well-prepared audit does more than support compliance. It helps trustees understand the organisation better and strengthens confidence in how the charity is run.

How UHY FDW Can Help

At UHY FDW, we work with charities and not-for-profit organisations to deliver practical, clear and supportive audit services.

We understand the pressures charities face, from funding requirements and governance responsibilities to limited resources and increasing expectations around compliance.

Our team takes the time to understand your organisation, your purpose and the environment you operate in. We help identify areas for improvement, support stronger financial oversight and provide guidance that helps trustees meet their responsibilities with confidence.

If your charity is preparing for audit or reviewing its financial governance, speak to our Charity and Not-for-Profit team.

We’re here to help you strengthen your processes, support good governance and achieve a better future together.

Get in Touch Today!