Unlocking Transparency: A Guide to Related Party Transactions for Charity Leaders

Dwayne Wescombe
Aug 19, 2025
5 min read

Updated: Sep 3, 2025

Related Party Transactions: A Guide for Charity Leaders

As the CEO, Chair, or Director of a charity, you already juggle competing demands. You’re managing staff, balancing the books, keeping programs running, and answering to a wide range of stakeholders. But one governance issue that often trips charities up is related party transactions (RPTs).

From July 2023, the Australian Charities and Not-for-profits Commission (ACNC) requires all registered charity, except Basic Religious Charities, to report RPTs in their Annual Information Statement (AIS) (ACNC, n.d.a). This shift reflects a broader push for transparency, accountability, and community confidence.

Handled well, RPTs can demonstrate integrity. Handled poorly, they can damage reputations, invite regulatory scrutiny, and risk your charity’s future. Let’s break this down in plain English and map out what your board and management team need to do.

1. What Counts as a Related Party?

Small Charities

For small charities (annual revenue under $500,000), the ACNC takes a simplified approach. A “related party” is anyone with significant influence over decisions; usually Responsible People (board members), senior management, or their close family (Lawbridge, 2023).

Medium and Large Charities

For medium and large charities, the definition follows AASB 124 (AASB, 2023). This is more technical and includes:

Responsible People and their close family,

Entities controlled by the charity (or controlling it),

Associates and joint ventures,

Key Management Personnel (KMP),

Entities where related parties have significant influence (BDO, 2023).

The takeaway? If someone has influence over decisions—or stands to benefit from them—they’re likely a related party.

2. What is a Related Party Transaction?

A related party transaction is any transfer of resources, services, or obligations between the charity and a related party. Importantly, it doesn’t have to involve money changing hands (ACNC, n.d.b).

Examples include:

Paying a board member’s company for consultancy services.
Employing a relative of a senior manager.
Renting office space owned by a director.
Accepting pro bono services from a related entity.
Providing discounted services or goods to a board member’s business (Moores, 2023).

Some of these may be entirely appropriate if they represent good value and are transparently handled. The red flag isn’t the transaction itself - it’s when it’s hidden, undocumented, or unfair that issues arise.

3. Why Related Party Transactions Matter

The ACNC makes clear that RPTs aren’t automatically wrong (ACNC, n.d.a). Sometimes they’re efficient. For example, if a board member’s firm provides services at a discount. But they raise risks of conflicts of interest and private benefit, which the regulator and donors alike take seriously.

Under ACNC Governance Standard 5 (ACNC, n.d.d), Responsible People must:

Act honestly and in the best interests of the charity,
Avoid misuse of position,
Disclose and manage conflicts,
Exercise care and diligence in financial management (Lawbridge, 2023).

Failure here can trigger investigations, sanctions, or even deregistration.

4. What You Must Report

Small Charities

Small charities must answer a yes/no question in the AIS about whether they had RPTs. If “yes,” you select from categories such as:

Fees for goods or services,
Loans,
Salary/wages paid to relatives of Responsible People,
Transfer of assets,
Discounted services,
Use of property,
Investments,
Other (ACNC, n.d.a).

Medium and Large Charities

Medium and large charities must disclose material RPTs in both the AIS and financial statements under AASB 124 (AASB 2023) and AASB 1060 (AASB 2024) (JacMac, 2023). “Material” means the transaction is significant enough that omitting it could mislead stakeholders.

5. Building a Practical System

5.1 Keep a Register

Every charity should keep a Related Party Transactions Register. The ACNC even provides a template (ACNC, n.d.c). At minimum, record:

Who the related party is,

The nature and value of the transaction,

The decision-makers involved (and any recusals),

Supporting documents such as contracts, invoices, or board minutes.

5.2 Strengthen Policies

A clear policy protects both the charity and individuals. It should cover:

How related parties are defined,
The process for declaring conflicts,
Rules on when board members must recuse themselves,
Expectations for “arm’s length” decision-making (Moores, 2023).

5.3 Train Your Board and Staff

Many governance failures happen because people don’t recognise what “counts” as a related party. Build it into induction, circulate guidance annually, and keep the issue alive in board discussions.

6. A Case Example: When Things Go Wrong

Imagine a regional health charity. The board chair’s spouse owns a catering business. The charity holds several large fundraising events each year and, without seeking quotes, uses that business every time.

Nobody questions the arrangement. The invoices look fair, but there’s no paper trail of decisions, no recusal noted, and no declaration of conflict. When a disgruntled volunteer raises concerns, the local paper picks it up. Suddenly, what seemed harmless becomes a reputational storm. Donors begin to ask: is this charity really acting in the community’s best interests?

This isn’t far-fetched, it’s the type of risk the ACNC is trying to address. Had the board documented a conflict declaration, sought competitive quotes, and recorded its rationale, the same arrangement might have been defensible.

7. A Positive Example: Getting it Right

Contrast that with an arts charity whose treasurer is a practising accountant. She offers to provide the annual audit at a 50% discount. The board:

Declares the relationship and records it in the minutes,
Confirms the reduced fee represents good value,
Updates the RPT register,
Discloses it in the AIS.

Here, transparency works in the charity’s favour. Donors see that the treasurer is helping the cause, not profiting unfairly. The risk is managed, and community trust is strengthened.

8. Step-by-Step Action Plan

At TakeControl Solutions, we recommend charities follow this six-step plan:

Clarify your obligations
Audit past transactions
Set up your register
Adopt a policy
Embed in governance
Review and disclose annually

9. Checklist for Boards

Before approving any transaction with a related party, ask:

Is the transaction in the best interests of the charity?
Have we considered alternatives or obtained competitive quotes?
Has the related party declared their interest?
Has the related party stepped out of the decision-making process?
Is the transaction documented in the register?
Will we be comfortable if this appears on the front page of the local paper?

If you can’t answer “yes” to all, stop and reassess.

10. Why This Matters for Trust and Impact

Charities operate in a trust economy. Donors, funders, and communities expect transparency. Related party reporting isn’t about catching charities out, it’s about showing that every decision prioritises mission and integrity. By being proactive, you reduce risk, improve decision-making, and strengthen your reputation.

As the ACNC itself has noted, these changes reinforce transparency and support public trust in the sector (ACNC, 2023).

Final Thoughts from TakeControl Solutions

At TakeControl Solutions, we don’t see related party transactions as red tape. We see them as an opportunity to prove your charity’s integrity. With clear policies, strong registers, and open disclosure, you protect both your people and your mission.

If your board or management team feels uncertain, we can help you build a practical system that works for your size and complexity.

Because governance isn’t about compliance for its own sake; it’s about creating confidence so your charity can do what it does best: serve the community.

TakeControl Solutions: Where not-for-profit governance gets geal - and gets results.