10 Common Mistakes to Avoid During a Charity Audit

When a charity undergoes a charity audit, it faces a vital test of its financial honesty and accountability. These audits check if funds have been used properly and records kept in line with regulations. Done right, they build trust with donors, boards, and regulators. But when mistakes creep in, they cause delays, raise red flags, and sometimes even harm reputations.

In this guide, we’ll walk through the ten most common slip-ups made during these audits — and how your team can avoid them.

1. Poor Record-Keeping

One of the most common mistakes involves messy or missing records. Auditors need full access to income, expenses, receipts, and bank statements. If records aren’t clear, it slows the audit and can lead to inaccurate findings.

Organisations should use a consistent system to track every pound spent or received. Store everything in one place and review it monthly to spot errors early.

2. Mixing Personal and Charity Funds

Sometimes, staff or trustees mix personal spending with charity expenses. Even small overlaps cause confusion. It may look like someone used charity funds for private use.

Set clear rules from the start. Open a dedicated bank account for the charity and never use it for personal transactions. This simple step keeps things clean and avoids doubt.

3. Ignoring Internal Controls

Many charities focus on the work they do, but forget about the rules that protect them. Internal controls are checks that stop fraud, catch mistakes, and keep data safe.

Common gaps include no approval process for big purchases or too few people handling large amounts of cash. Write down your controls, follow them, and train your team on why they matter.

4. Misclassifying Income or Expenses

Auditors check not just how much money came in or went out, but how it was used. Mistakes happen when staff put a donation in the wrong category or count a grant as general income instead of restricted funds.

These errors make reports misleading. Always match each amount to its purpose, especially when donors attach conditions.

5. Delays in Providing Documents

When auditors ask for documents, delays slow down the whole process. Worse, it suggests you may be hiding something or simply unorganised.

Prepare ahead. Before the audit, gather key documents: bank statements, receipts, minutes from meetings, and details on grants. Assign one staff member to answer questions and track requests.

6. Not Understanding Compliance Rules

Each charity must follow local rules on reporting and audits. Some charities don’t know when audits are required or what documents must be filed.

If you’re unsure, read the guidance from your country’s charity regulator. Stay ahead by keeping up with changes in these rules. It protects your organisation and shows you take your duty seriously.

7. Underestimating the Scope of the Audit

Some think the audit only covers numbers. In truth, it checks much more — policies, processes, even ethics. Auditors may ask how the charity handles conflicts of interest or risk.

Think of the audit as a full health check. Prepare for questions on how your charity runs, not just what it spends.

8. Overreliance on One Person

Small charities often rely on one person to manage accounts. If that person leaves or falls ill, everything grinds to a halt.

Spread tasks among several people. Make sure more than one person understands the accounts and can answer questions. This strengthens your team and gives the charity better protection.

9. Incomplete Board Oversight

A board that doesn’t ask questions or check the books may miss signs of trouble. Some boards meet rarely, skip reviewing reports, or fail to ask how funds are spent.

Board members must stay involved. They should review financial statements, ask for updates, and sign off on major spending. Their role is vital during a financial services audit.

10. Failing to Learn from Past Audits

Charities often repeat old mistakes. Auditors may highlight issues, but no one follows up after the audit ends.

Use past audits as a guide. Create a checklist of improvements, assign tasks, and check progress every few months. This shows growth and makes each audit easier than the last.

Common Mistakes and Their Impacts

Let’s summarise the top mistakes and what they can lead to:

Mistake	Possible Consequence
Poor record-keeping	Delays, missing data, inaccurate findings
Mixed personal and charity funds	Misuse concerns, credibility loss
Weak internal controls	Fraud risk, financial errors
Wrong income/expense classification	Misleading reports, compliance issues
Late document submission	Audit delays, extra scrutiny
Compliance ignorance	Legal penalties, failed audits
Narrow audit view	Missed risks, weak governance
Single-person reliance	No backup, confusion during absence
Poor board oversight	Missed red flags, weak leadership
No follow-up from audits	Repeat mistakes, stunted improvement

Making the Audit Work for You

Audits might sound stressful, but they help charities grow stronger. Use them as a learning tool. Fix weak spots. Sharpen your financial health. Show supporters that your charity handles money with care.

An audit can shine a light on blind spots. Welcome it. Prepare well, answer honestly, and view it as a way to earn deeper trust.

Tips for Smooth Audits

Here are a few extra steps to make your next audit go well:

• Keep accounts updated monthly.

• File receipts immediately.

• Train your team on basic finance terms.

• Review past audits with your board.

• Store key documents in both print and digital formats.

  
  

These steps take effort, but they pay off when the auditor walks through your door.

Audit Preparation Checklist

To help, here's a short checklist of what to prepare before your next charity audit.

Task	Why It Matters
Review all financial records	Ensures full, clear data
Check for any personal expenses	Removes confusion
Update internal control policies	Shows governance
Categorise income correctly	Prevents misreporting
Assign one audit lead	Eases communication
Train the board on roles	Improves oversight
List of past audit findings	Helps fix old issues

Conclusion

A charity audit doesn’t have to be painful. By avoiding common mistakes — from poor records to weak controls — you can make the process smoother and more productive. A good audit proves your charity spends wisely, thinks ahead, and builds trust through every penny spent.

Plan well. Stay sharp. Treat the audit as your chance to  grow, not just check boxes. Each step taken today protects your charity tomorrow.