Approach used to identify errors
In line with the ACNC’s risk-based regulatory approach, the process through which the ACNC identified errors involved subjecting charities to checks according to certain criteria:
Level one check – identifying material errors
All charities (except Basic Religious Charities and charities with revenue of less than $5,000) had their financial data analysed to determine if they contained material errors. To conduct this analysis, the ACNC worked with Dr Andrew Young at the University of NSW’s Centre for Social Impact (CSI).
Level two check – comparing the financial information
For charities that declared over $30 million of income, assets, liabilities and/or expenses in their 2015 AIS, the ACNC compared the financial information the charity provided in its 2015 AIS with the information in its annual financial report.
Level three check – detailed annual financial report review
A random sample of 150 medium and large charities was selected for a comprehensive review of reporting obligations. In addition to the level one and two checks, the ACNC analysed the quality of the annual financial report to check that it complied with the requirements of the ACNC Act.
Figure C – The three levels of checks to identify errors in the 2015 AIS.