Trustees are aware they must always act in the best interests of the charity and not for any private benefit. It is therefore important that all related party transactions are identified and conflicts of interest properly handled.
A recent review by the Charity Commission identified “…a significant proportion of charities are not fully reporting their related party transactions.” and “…the vast majority of charities disclosed trustees’ remuneration and, to a lesser extent, trustees’ expenses in the notes to their accounts. However, the disclosure of transactions with persons and entities closely connected to the charity or its trustees was significantly less complete.”
The Charities SORP for the preparation of accruals accounts require that accounts must disclose:
· Trustees’ remuneration and benefits
· Trustees’ expenses
· Transactions with those persons and entities that are closely connected to the charity or its trustees, referred to as related parties
If there have been no transactions of each type, this fact must be stated.
These are the increased disclosure requirements brought in by the Charities SORP (FRS102) effective from 1January 2015 and intended to ensure transparency in accounts by providing greater assurance on the full disclosure of related party transactions.
The charity needs to have a system or process in place to ensure conflicts of interest are recorded and managed; the auditor or independent examiner cannot be expected to know of all the related parties involved with a charity so it important that Trustee’s co-operate with them to ensure that disclosures are comprehensive and complete.
Click here to find out more about responsibilities in Section 6 of The Essential Trustee: what you need to know: what you need to do.
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