Maintaining transparency and accountability is fundamental to running a successful and trusted charity. One area that requires special attention in this regard is related party relationships and transactions. They are an essential part of financial reporting, often raising unique challenges. In this blog post, we at aim to simplify related party reporting for Australian charities.
What is a Related Party?
In the context of charities, a related party can be a person or an entity that has the ability to control or significantly influence the financial or operating decisions of the charity. This can include responsible persons (such as board members), key management personnel, their close family members, or any entities that they control or jointly control.
What is Related Party Reporting?
Related party reporting is the disclosure of transactions and outstanding balances involving related parties. These disclosures provide important information to stakeholders about the charity’s financial health and risk exposures. They also help to ensure that the charity is acting in the best interests of its mission and not for the personal benefit of individuals connected with the charity.
The Reporting Standards
The Australian Charities and Not-for-profits Commission (ACNC) sets out the reporting requirements for registered charities in Australia. As part of the ACNC’s reporting standards (Australian Accounting Standards Board – AASB 10, AASB 124), charities are required to disclose certain information about their related party relationships and transactions in their financial statements.
What Should be Disclosed?
- Details of Related Parties: Charities must disclose relationships with related parties, including the nature of the related party relationship.
- Information about the Transactions: Charities must disclose information about transactions with related parties, including a description of the transaction, the amount, any outstanding balances and terms and conditions, including any guarantees given or received.
- Bad Debts and Allowances: If there have been any bad debts or allowances for doubtful debts related to a related party, these must also be disclosed.
- Commitments: Charities must disclose commitments made to related parties, including the amount and nature of the commitment, and the terms and conditions.
Navigating Related Party Reporting with Caroline Rose Charity
At Caroline Rose Charity, we recognize the intricacies of related party reporting. Through our Business Planning and Advisory service, we offer assistance to help your charity navigate these complexities while maintaining compliance. Our Secretariat Services are also available to aid with essential paperwork and reporting, ensuring your charity upholds transparency and integrity.
In summary, although related party reporting may appear intricate, it holds critical importance in preserving trust and confidence in your charity. By staying well-informed about your charity’s obligations, proactively planning, and seeking support when necessary, you can approach this vital facet of financial reporting with confidence. Caroline Rose Charity is dedicated to supporting Australian charities on this journey, fostering an environment of transparency, accountability, and ultimately, success. Contact us today to explore how we can assist you