The Australian Charities and Not-for-profits Commission (ACNC) has mandated that medium and large charities will need to disclose related party transactions in their 2023 financial reports in accordance with the Australian Accounting Standard AASB124 for periods beginning on or after 1 July 2022. All charities except Basic Religious Charities will be required to report related party transactions in their 2023 Annual Information Statement.

The nature of many charities means it is very common for people or organisations related to the board or senior management to provide income or services to that charity. Even though these may be on an arms length basis, at a discount, or even for no price, the new requirements means any material transactions need to be identified and disclosed within the financial report. Some examples of the disclosures that will be common include:

• Remuneration of the key management personnel
• Profession services provided by entities related to a board member
• Material donations or other income provided to the charity by a related party
• Wages costs for spouse or children of directors and key management personnel

Many charities have not had to disclose related party transactions historically while others may not have fully appreciated the extent of these requirements. In order to be ready for the change, it is important for all charities to do the following:

Identifying who are related parties

We recommend that a register of related parties be established and kept up to date identifying all related parties.  Some information may be in the current conflicts of interest register but it is likely this would need to be expanded as related parties include:

• All board members and senior management who meet the definition of key management personnel
• The spouse (or domestic partner) and the children of any person identified in (i)
• Any entity that is controlled or jointly controlled by any person identified in (i) or (ii)
• Any entities within the charitable group including parent, subsidiary or fellow subsidiaries of the charity. This includes any entities within the group where control or significant influence exists

Establish process for approval and identification of related transactions

“An appropriate policy and corresponding procedure should be established to ensure all that an related party transaction are identified and approved appropriately.”

This policy may be similar to a conflicts of interest policy and will require knowledge of related parties at an operational level as it is likely that a finance team will compile the transactions list for disclosure within the related party register.

We have developed a related party register designed to assist you in identifying related parties and capturing transactions for disclosure. Please contact us for a copy.

Establishing the register and communicating the changes and information required with the board/finance committee needs to be done early to ensure you have the necessary information to enable your June 2023 financial reports to meet these new disclosure requirements. This will also allow you additional time to consider the wording of disclosures to communicate transparently with stakeholders.

For more information please email us at contact@sawarddawson.com.au