Key things members should look for in an audit report

Audit reports are among the most important documents in any SACCO. They provide an independent assessment of how the SACCO has managed members’ money over a specific financial year. While most members receive these reports during Annual General Meetings (AGMs), many do not fully understand what the reports mean or what details they should pay close attention to.

Knowing how to read an audit report helps members make informed decisions, identify risks early, and hold leaders accountable. It is also a way for members to protect their savings and ensure that the SACCO is being run responsibly.

Below are the key things that members should look for in an audit report and why each of them matters.

1. Table of Contents

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   Auditor’s Opinion

This is one of the most critical parts of the report.
The auditor’s opinion tells members whether the SACCO’s financial statements are accurate and reliable. The opinion generally falls into one of four categories:

• Unqualified (Clean) Opinion – The records are accurate and the SACCO is in good standing.
• Qualified Opinion – There are some issues, but not severe enough to misrepresent the entire report.
• Adverse Opinion – The financial statements are not reliable. This is a serious red flag.
• Disclaimer of Opinion – The auditor could not obtain sufficient information to complete the audit. This is also a major warning sign.

If the report is not a clean opinion, members should ask questions and seek clarification from management.

2. Income and Expenditure Statement

This section shows how much money the SACCO earned and how much it spent. Members should look for:

• Whether expenses are rising faster than income.
• Any unusual or unexplained expenses.
• Whether administrative costs are too high.

A financially healthy SACCO should control expenses and ensure that most income comes from member loans and investments.

3. Balance Sheet / Statement of Financial Position

This section gives a snapshot of what the SACCO owns (assets) and what it owes (liabilities). Members should check:

• Loan Portfolio – Are most loans performing, or is there a high number of defaulters?
• Investments – Are investments prudent and aligned with member interests?
• Liabilities – Does the SACCO owe too much?

A SACCO that has more liabilities than assets may be in financial trouble.

4. Loan Portfolio Quality

Loans are the backbone of SACCO operations. Members should look at:

• Non-performing loans (NPLs) – How many loans are overdue?
• Provisioning for bad loans – Has the SACCO set aside money for risky loans?
• Loan recovery measures – Is the SACCO actively following up on defaulters?

High levels of defaulting weaken the SACCO and reduce dividends.

5. Dividends and Interest on Deposits

Members should verify:

• Whether the SACCO has made profits that justify the declared dividends.
• How the dividend rate compares to previous years.
• Whether the dividend rate is realistic or being used to impress members while hiding underlying issues.

Unsustainable dividend payouts can drain reserves and weaken long-term stability.

6. Internal Control and Governance Observations

Auditors often comment on how the SACCO is managed. Members should look for:

• Cases of mismanagement or conflict of interest.
• Weaknesses in record keeping, approvals, or procurement.
• Whether recommendations from previous audits were implemented.

If the same issues keep appearing year after year, leadership may not be acting responsibly.

7. Compliance With Laws and Regulations

The report also shows whether the SACCO is complying with:

• The Cooperative Societies Act
• SASRA regulations (for regulated SACCOs)
• Internal policies and by-laws

Non-compliance puts the SACCO at risk of penalties or deregistration.

8. Recommendations and Action Points

At the end of the report, auditors provide recommendations. Members should ensure:

• The board explains how they plan to implement these recommendations.
• A follow-up plan is recorded and shared with members.
• Progress is reviewed in the next AGM.

If recommendations are ignored, management may be hiding weaknesses.

Author: Andrew Walyaula

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