New ACNC Guidance on Related Party Transactions for Charities
We noted in November 2021 that the ACNC has been increasingly interested in related party transactions. This should not be a surprise because ensuring that charities follow best practice when managing conflicts of interest bolsters public confidence in the sector
The ACNC has now published further guidance for charities about how to handle related party transactions.
What is a related party transaction?
Put simply, related party transaction occurs when something of value (i.e. resources, services, obligations etc.) passes from a charity to a related party (i.e. a person or entity connected to the charity or with influence over the charity).
What does the guidance cover?
The new ACNC guidance helpfully provides:
- Guidance on what constitutes a related party;
- Examples of related party transactions;
- A template register for recording related party transactions;
- Guidance on related party disclosures for financial statements; and
- Guidance or links for guidance for Basic Religious Charities, Ancillary Funds, and Companies.
Why does it matter?
It is important to remember that governors (whether they be called the board, management team, management committee, or directors etc.) of charities have positive obligations under the ACNC governance standards to act in the charity’s best interests. This includes:
- not misusing their position;
- using the charity’s resources wisely; and
- disclosing and managing conflicts.
It goes without saying that a charity’s reputation is central to its ability to attract the public confidence (whether that be in the form of donations or volunteers) needed to do the good work that it was set-up to do. Effectively and transparently managing conflicts is a key part of building and maintaining that public confidence.
Practical ways to manage related party transactions
Having the right policies, procedures, and tools in place will help your charity make good decisions regarding conflicts of interest and related party transactions. The ACNC guidance and templates are a good place to start. However, in our experience, tailored training and policies are often needed to help put the principles in action.
Please contact us on (07) 3252 0011 if your Board would like training on identifying and managing related party transactions, or if you require advice on updating your charity’s policies to deal with related party transactions.