Related Party Transaction Reporting in Charity Accounts
Trustees must always act in the interests of their charity and not for their own personal benefit, but it is not uncommon for conflicts of interest to arise. It is important the charity is open and transparent in such situations, and it is good governance to handle these conflicts appropriately.
In charity accounts, the reporting of related party transactions is integral to complying with the SORP and providing details about their transactions with persons and entities closely connected to the charity or its trustees.
The Charity Commission has recently undertaken a review of a sample of Charity accounts and although reporting was found to be significantly better in larger charity accounts, less than two thirds of the charities in lower income samples fully complied with the SORP’s transparency requirement.
Charities preparing accruals (SORP) 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
Trustees may delegate accounts preparation to charity staff or their accountant but remain responsible for approving the trustees’ annual report and accounts. The independent examiner or the auditor cannot be expected to know all of the related parties involved with the charity and so trustees need to co-operate with them to ensure that the disclosures provided in their accounts are complete.
If you have any questions on charity reporting, please do not hesitate to contact one of the charity specialist team at MHA Moore and Smalley.