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The purpose of this paper is to understand the nature of competition for private donations that occurs between not-for-profit organisations (NPOs). This competition occurs because NPOs do not produce commercially viable outputs and therefore rely on donations. The financial sustainability of NPOs is problematic, both individually and in economy-wide terms, as they do not produce commercial saleable outputs. Instead they raise funds by either relying on government grants or competing for private donations. Sustainability of NPOs becomes an even greater issue when governments reduce their grant-giving in times of stress – precisely the time when calls on NPOs’ resources increase.

The research asks the question, do donation-raising expenditures by NPOs increase donations or do they damagingly divert donations from other NPOs? Using Australian data, competition between NPOs for donations is analysed using a modified oligopoly market model. NPO fundraising expenditures are central to this model, but other factors, including unpaid-volunteers, organisational size and age, are also explanatory variables in determining success in fundraising. NPOs concerned with human welfare, other than specialised aged care, are the primary focus of this paper, although other NPOs such as those concerned with animal welfare, science and the arts are also modelled.

Crucially an NPO’s fundraising expenditure has a direct and positive impact on its level of donations. A major influence on level of donations is the presence of volunteers within an NPO. There seems to be an interesting reciprocal relationship between the effect of size and age of organisations on their donations and the effect on fundraising. Critically for sustainability, NPOs competing for funds are established as having a negative effect on the level of donations to other NPOs with similar functions.

It is believed that the material used here represents one of the first studies of financial sustainability of NPOs and highlights the value of both accounting and economic analysis of organisations’ operations. Financial sustainability issues are compounded by the existence of competition for funds among charities operating in the same areas (Parsons, 2003; Trussel and Greenlee, 2004; Trussel and Parsons, 2008); it has been argued that competition for funds diminishes sustainability (Lyons, 2001; Weerawandena et al., 2010).

The purpose of this paper is to show how dynamic regression models based on equilibrium correction principles can be used to form auditor expectations of account balances as part of the analytic review.

The design and method are empirical, using the automated econometric software of PcGets and annual data of the Toyota Company over the period 1950‐2004 to generate forecasts of sales and earnings.

Automated equilibrium correction models (AECMs) are shown to possess stable parameters and provide reliable one year ahead forecasts of sales based on macro‐economic data. AECMs are then used to generate indicative earnings forecasts conditional upon sales as an expectation generating tool for directing auditors' attention to possible sources of error in financial statements.

Analysis is illustrative of a general method and does not provide exhaustive treatment of the full range of potential application of AECMs.

Until recently, econometric problems have made the use of dynamic regression models in auditing difficult for non‐specialists to implement. Developments in automated software packages such as PcGets now make the use of such procedures by audit practitioners possible.

Relatively little is known about dynamic regression models in the accounting and auditing literature. This paper introduces the basic concepts underpinning AECMs and demonstrates their potential to contribute to the analytic review toolkit of the auditor.