SACCO audits: Why they matter and how they strengthen member confidence

Savings and Credit Cooperative Organizations (SACCOs) play a major role in promoting financial inclusion and empowering communities, especially in Kenya where millions of members rely on SACCOs for savings, loans, and investment opportunities. To ensure transparency, accountability, and financial stability, SACCOs are required to undergo regular audits. These audits are not merely procedural—they are essential for protecting member savings, enhancing governance, and ensuring that the SACCO remains compliant with regulatory standards.

This article explains what SACCO audits are, why they are important, who conducts them, and what members should know about the audit process.

What Is a SACCO Audit?

A SACCO audit is a systematic examination of the SACCO’s financial records, internal controls, operations, and compliance with the law. It involves reviewing transactions, accounting policies, management practices, and governance processes to ensure that everything is transparent, accurate, and fair.

In Kenya, SACCO audits are guided by the Cooperative Societies Act, the SASRA Regulations, and International Financial Reporting Standards (IFRS).

Why SACCO Audits Are Important

1. Protecting Members’ Savings
   SACCOs exist primarily to safeguard and grow members’ savings. An audit checks whether the funds are being managed responsibly and used only for approved purposes.
2. Preventing Fraud and Mismanagement
   By examining financial processes and internal controls, audits help detect irregularities such as unauthorized withdrawals, inflated expenses, ghost loans, forged signatures, or misappropriation of funds.
3. Strengthening Transparency and Trust
   Members need confidence that their SACCO is well-run. A clear and independently verified audit report reassures members that the SACCO’s finances are in order.
4. Ensuring Regulatory Compliance
   Audits confirm whether the SACCO is following the rules set by the government and regulators such as the Sacco Societies Regulatory Authority (SASRA).
5. Supporting Strategic Decision-Making
   Audit reports highlight weaknesses and areas that need improvement. This information helps management and members make informed decisions for growth and proper governance.

Who Conducts SACCO Audits?

SACCO audits are conducted by independent certified accountants or audit firms registered and approved by the Commissioner for Cooperative Development and SASRA.
External auditors ensure that the process is impartial and credible. Internal auditors may also exist within a SACCO to monitor daily financial activities.

Key Areas Covered During a SACCO Audit

A SACCO audit normally reviews:

• Financial statements (income statements, balance sheet, cash flow)
• Loan portfolio management
• Savings and deposits records
• Investment accounts and assets
• Procurement procedures
• Compliance with the SACCO’s bylaws and national laws
• Performance of the management and board

The auditors compare documented transactions with actual financial activities and member records.

Common Issues Uncovered During SACCO Audits

Some challenges that often emerge include:

• Poor record keeping
• Weak internal controls
• Unauthorized loans or loan advances
• Delayed loan repayments and high default rates
• Misuse of members’ funds
• Conflict of interest among board members
• Non-compliance with SASRA regulations

Identifying these issues early helps prevent bigger financial risks.

What Happens After the Audit?

Once the audit is completed, a report is prepared and presented during the Annual General Meeting (AGM). Members are informed of the SACCO’s financial health, profits or losses, and any governance issues discovered.

Members have the right to:

• Question unclear financial details
• Request clarification or corrective action
• Vote on decisions such as dividend payments and board changes

If serious irregularities are found, SACCO officials can be removed, fined, or prosecuted.

Why SACCO Members Should Pay Attention to Audit Reports

Many members do not review audit reports, yet these reports hold the key to whether the SACCO is performing well or facing hidden financial trouble.

By understanding the audit report, members can:

• Assess whether their SACCO is profitable
• Determine if loans are being managed properly
• Monitor how their savings are being invested
• Hold the leadership accountable

Author: Andrew Walyaula

Andrew Walyaula is a seasoned multimedia journalist. satrendmagazine@gmail.com