Auditing Small Club Accounts

The Auditing of small club accounts is an important process that promotes transparency, accountability and confidence for both the members of the club and their financial supporters. While clubs often find the overhead of an audit to be frustrating it is often a requirement if they are receiving grants or other government support. Depending on the size of the club they may also be required to have a review or audit under the ACNC audit rules for Not for Profits.

What Is a Small Club?

Small clubs are typically community based, not for profit entities such as:

Sporting clubs
Social and recreational clubs
Community and cultural associations
Volunteer-run organisations

These can be either incorporated associations, incorporated not for profits under ASIC or unincorporated associations. They will tend to rely on membership fees, grants, sponsorship and volunteer fundraising activities in order to fund their operations.

Why Is Auditing Important for Small Clubs?

Although generally seen as more an annoying overhead than a practical, outcome focused process, the auditing of a small club’s financials helps to provide independent assurance that:

Income and expenses are being properly disclosed to members and stakeholders
Funds have been used for their intended purposes
Any related party transactions have been properly disclosed
The committee has fulfilled its statutory obligations

It is worth noting that Small Club Audits are not generally forensic audits, so the auditor is checking for material misstatement but not focusing on detecting fraud or theft.

When Is an Audit of a Small Club Required?

There are many reasons a club may require an audit including:

When required under its own constitution or governance rules
When required under state-based legislation if an incorporated association as opposed to a corporation structure (which is under federal legislation)
When required under the ACNC rules
When required as part of a government grant acquittal process

Once you are turning over more than $250,000 then generally the ACNC will require a Not for Profit Association to complete either a review of a full audit of their financial statements.

What Does Auditing Small Club Accounts Involve?

Auditing small club’s financials is basically a scaled down version of a standard audit starting with the Audit Engagement Process and then moving onto the Planning Phase and then the substantive testing. The Australian Auditing Standards must still be followed and sufficient evidence gathered to justify an audit opinion.

In the planning phase the auditor will work to get an understanding of the club’s activities, objectives, sources of income and governance structure. From this understanding they will design an audit plan testing the internal controls along with substantive testing.

A review of the internal controls looks at things such as the segregation of duties, how payments are authorized, cash handling procedures and the level of oversight of the personnel handling funds for the organisation.

This substantive testing will involve your auditor reviewing key financial information including:

Bank statements, bank reconciliations and bookkeeping records
Financial reports including the profit and loss, balance sheet and statement of cashflows
Source documents such as invoices justifying expenses paid
Cash handling procedures and records
Asset registers (where the organisation holds physical assets)

This testing is designed to detect any variances which would suggest that everything has not been correctly disclosed in the financial statements.

Common Issues Identified in Small Club Audits

There are common issues which we often see in small club audits such as incomplete record keeping, delayed reconciliations (done the day before the audit), a lack of proper financial policies and weak controls. These issues are generally not malicious but rather unintentional and can often be used to help the organisations improve for the future.

It is worth noting that these sorts of issues do not automatically mean that an organisation will fail its audit.

Need an Auditor for Your Club?

As an audit firm, Auditors Australia has extensive experience auditing not for profit organisations of varying sizes. We try to take a practical approach which is proportionate to the size of the organisation and that recognises the reality of volunteer run community entities. While an audit can feel daunting, we are here to help you in the journey and provide members and stakeholders with confidence and trust in the financial records and disclosures of the club.

Contact our friendly team today to discuss your club audit requirements and receive a no obligation quote for your quote.