Reporting related-party transactions
In 2023 annual information statements, all but basic religious charities will be required to report their related-party transactions to the ACNC due to changes announced in November 2021.
The commission has defined a ‘related party’ according to charity size – a simplified definition for small charities, and for medium and large charities the definition used in AASB 124 Related Party Disclosures.
For a small charity, a related party is a person or organisation that is connected to the charity and has significant influence over it. The definition includes:
- A charity’s responsible people and their close family members
- A charity’s senior management and their close family members, and
- Other people or organisations that can influence a charity’s decision-making.
ACNC commissioner Sue Woodward said: ‘The ACNC collecting information about related-party transactions is an important part of our work to
support good governance and transparency by registered charities. Keeping a record of related party transactions is also part of how
charities should manage any conflicts of interest’.
Reportable related-party transactions include:
- Fees paid to a related party for providing goods and services to the charity
- Loans from or to a related party
- Salary or wages paid to a related party’s relative
- Transfer of charity property or assets to a related party
- Charity goods or services provided at a discount to a related party
- Significant use of charity property by a related party, and
- Investment in a related party.
The commission recommends that each charity has a policy and procedure for dealing with related-party transactions. It would help ensure that the charity records and discloses related-party transactions appropriately.
It would also clarify who should be involved in making decisions about related-party transactions and what criteria should be met before entering into a related-party transaction.
The policy should also clarify how a charity can demonstrate that entering a related-party transaction was the best decision, and how it managed the conflict of interest that accompanied the decision.
ACNC guidance on related-party transactions has been updated and outlines how the new obligations apply to charities of different sizes. The commission has also developed a template for related-party transactions.