ACNC errors report finds corrections to total revenue worth $2.8 billion

The review analysed financial information for the 2023 reporting period from annual information statements (AISs) and annual financial reports (AFRs) for 250 charities and reporting groups.

Commissioner Sue Woodward said the ACNC’s ambition was to assist charities in correcting reporting errors, as well as to define where charities might be challenged by reporting demands.

“We compared financial information in charities’ AFRs with financial information in their AISs – 82 per cent of charities reviewed had no material differences when we compared their AFR and AIS,” Woodward said.

“But after the reviews we contacted the remaining 18 per cent. As a result, corrections totalling $2.8 billion in total revenue and $5.8 billion in total assets were made.”

An ACNC spokesperson said the figures related to the total volume of adjustments made through the review process. “There were positive and negative adjustments made to total revenue and the total value of assets in the charities’ annual information statements. The review found some amounts were understated and some were overstated,” they said.

The review initially identified charities that appeared to have significant variations in their reported financial figures year on year, meaning the review examined the charities more likely to have made errors, not all of Australia’s registered charities.

The focus was on medium and large charities, checking whether details contained in their AISs and AFRs were consistent, as well as whether details in other specific reporting requirements – including recently established requirements covering key management personnel and related party transactions – were correct, the ACNC spokesperson said.

The review found that more than 57 per cent of charities examined had made material errors in their reporting, requiring a corrected AIS or AFR.

Of the large charities reviewed, 25 per cent had made one or more key management personnel (KMP) remuneration errors in their AIS. These charities had said they had no more than one remunerated KMP in their AIS, but their financial report said differently, or they had lodged the wrong number of KMPs, or an incorrect total remuneration figure, in their AIS.

However, the ACNC reported that there was no material difference between the financial information in the AFR and the financial information in the AIS of 82 per cent of charities, and 93 per cent of charities had correctly completed related party transactions in their AIS.

Woodward said the ACNC had also completed a review of “charities operating within a complex structure”, which the commission defined as charities operating “as a group, including multiple entities, [with] potentially more than one legal structure and a mix of charitable and for-profit work”.

Charities with complex structures often faced more intricate governance challenges, and it was important they were aware of and equipped to manage those, Woodward said.

“Without careful management, these issues can lead to inadvertent non-compliance with relevant laws,” she said. “We know that most charities are trying to do the right thing, and pleasingly, our review confirmed this. There are often good reasons for the establishment of multiple entities, maybe even a requirement for it. We understand this.

“We looked at how charities are managing the governance and compliance challenges that come with operating within a complex structure. We found excellent examples of charities complying with the law.”

Woodward said the primary goal of the complex structures review, as of the errors review, was education, not punishment for missteps. “Our compliance and enforcement reviews shine a light on practices that demonstrate how charities are managing risks and draw our attention to areas of concern where we need to act,” she said. “While enforcement is part of our role, our primary focus is on supporting charities to achieve compliance through an education-first approach.”

More information

ACNC website