Auditing Non-Profit Associations and Foundations: What the Law Requires and How to Be Ready Before the General Assembly

An association is legally required to engage a licensed CPA, and to file an approved annual report within four months. We audit with restricted donations and zakat funds in view, and deliver on time.

What the Associations and Foundations Law requires

The financial obligations in the law are explicit and time-bound:

  • Engaging a licensed CPA to audit the accounts is a direct obligation on the association (Article 21/5), and appointing the auditor and setting the fee is a power of the ordinary general assembly (Article 14/6), which also examines the auditor’s report on the financial statements and approves them after discussion (Article 14/1).
  • An annual report to the Ministry within four months of the year-end, approved by the general assembly, covering the association’s activities and including a comprehensive financial report certified by the auditor and a copy of the budget for the new year (Article 20).
  • Displaying the audited financial statements at the association’s premises or on its website at least one week before the general assembly meets (Article 21/7) — which alone means the audit must finish two weeks before the date, not the day before.
  • Recording the accounts in registers showing income and expenditure in detail (Article 21/4), depositing cash in the association’s name with a bank in the Kingdom, not spending it on anything other than what it was allocated for, and disbursing only on the signatures of two officers authorised by the board (Article 21/6).
  • Restrictions on funds: zakat received may be disbursed only in accordance with Sharia (Article 21/10), and the association’s funds may not be invested in financial speculation (Article 21/11).
  • A foundation has an annual budget and a final account, and the Ministry may permit a statement of its income, expenditure and uses of funds by the nature of the allocated money under its articles in place of that account (Article 33).

Non-compliance is not a formality: the Minister may, by reasoned decision and after a warning, suspend the association’s activity, dissolve it, or merge it, on grounds including inability to meet its financial obligations and disposing of its funds otherwise than as allocated (Article 23).

The findings that recur in non-profit accounts

  1. Restricted funds mixed with general funds: a donation allocated to a specific project is spent on operating costs, which is Article 21/6 at its clearest. The fix is both control and accounting: a sub-account for every restricted project and a movement report for every allocation.
  2. Zakat funds not segregated: received and disbursed from the general account with no separate record of their uses, so compliance with Article 21/10 cannot be demonstrated to the auditor or the supervising body.
  3. Unrecorded in-kind donations: goods, assets or services received and never recorded, so income and expenditure are both understated and the association loses its real impact in the annual report.
  4. Disbursement on a single signature, or under an authorisation not documented in a board minute, contrary to the requirement of two authorised signatures (Article 21/6).
  5. The budget prepared at the last moment to attach to the report, producing figures that cannot be monitored during the year.
  6. Late closing: the audit starts days before the general assembly, so the one-week display requirement (Article 21/7) cannot be met and the board has to postpone the meeting.

How we help associations and foundations

  • Auditing the accounts and issuing the report as a firm licensed by SOCPA, on a timetable that finishes well before the general assembly date, within our external audit service.
  • Preparing the financial statements and the final account and tightening the detailed income and expenditure records, within our accounting and bookkeeping service.
  • Segregating restricted funds and zakat funds in a chart of accounts and reports that evidence each allocation reaching its intended use.
  • Practical financial governance: a disbursement authority matrix with dual signatures, a procurement cycle, and procedures for receiving in-kind donations, within our governance service.
  • The general assembly file: the financial report, the budget, and the pre-meeting display, ready in a form the members and the supervising body accept.

Frequently asked questions

Must every association appoint a CPA?
Yes. Article 21/5 requires the association to engage a licensed CPA to audit its accounts, and the appointment and the fee are decided by the ordinary general assembly (Article 14/6).

What is the deadline for the annual report?
Four months from the end of the financial year. It is submitted to the Ministry approved by the general assembly and includes the comprehensive financial report certified by the auditor and the budget (Article 20).

When must the audit be finished?
At least one week before the general assembly, because Article 21/7 requires the audited statements to be displayed at the premises or on the website at least a week before the meeting.

Does a foundation differ from an association?
In governance, yes: a foundation has an annual budget and a final account, and the Ministry may allow a statement of income, expenditure and uses of funds by the nature of the allocated money in its place (Article 33). But disciplined records and segregation of allocations are required in both.

Related detailed guides

The general assembly date is known from the start of the year, and an audit that begins a week before it unsettles everyone. Set a timetable with us that starts at the closing.