A significant issue for charities is that of private benefit – where the resources of the charity are used for the benefit of those close to or related to the charity, rather than for the charity’s beneficiaries, and for its charitable purpose.
Related party transactions are those between the charity and ‘related parties’. These can be people or organisations, such as:
- those with a significant influence over the charity’s strategy and finances (including board members or executive officers, rather than operational managers), and close members of their families (such as a parent, partner, sibling, or child), and
- Organisations with a significant influence over the charity (for example, an organisation that appoints one of the members of the board of the charity).
The concept is linked to that of 'conflict of interest'. The terms 'related parties' and 'related party transactions' are not specifically defined in the ACNC legislation. Both terms are defined in the Australian Accounting Standards.
The ACNC's Governance Standards cover the way Responsible Persons need to handle conflicts of interest and related party transactions in order for the charity to retain its registration.