Our June webinar looked at further changes that will affect how some charities report to the ACNC. These changes centre on key management personnel remuneration and related party transactions. In the webinar, we looked in detail at what the changes are, when they come into effect, who they affect and what charities can do now to prepare.
Hello everyone. Welcome to our June webinar today, which is going to be looking at some changes to reporting that are going to affect some charities when it comes to their reporting to the ACNC. These changes centre on key management personnel remuneration and related party transactions.
So, we're going to provide a little bit of context, information, some rundown on the who, what, when, where, why and how of what's going to be happening, and, most importantly, how charities can prepare and get ready for these changes.
My name's Chris Riches. I'm from the ACNC's education section, or education team, in fact. Joining me today is Mel Yates, who is the Director of Reporting and Red Tape Reduction at the ACNC. Hi Mel. It's great to catch up again. How's things?
Hi Chris. Very good, thank you.
Very good. Very good. Now, before we get rolling and before we launch in, just some quick housekeeping bits and pieces as per usual. If you've got some troubles with the webinar audio, you can try listening through your phone. You can call the number listed in the email that you have received when you signed up to attend today. There's an access code in there and you can listen in that way.
Now, we've got some colleagues today - Deb and John - who are going to be answering some questions as they come through in the background. Feel free to send some questions through, through the GoToWebinar interface, and we will do our best to get to them where we can.
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Now, we've got our slides, which you can see. You can probably see that we're on camera as well. If you want to switch views and flick and whatever, depending on what device you are on, you might need to wiggle your fingers backwards and forwards or you might want to click a mouse or a pad, so feel free.
We're recording this webinar as well. As always, the recording of the webinar as well as the presentation slides, they'll be available very soon afterwards. Hopefully today, perhaps tomorrow. We will also be sending out an email to everyone who's registered today with links to the presentation and to the recording.
Finally, again, we always like to get some feedback from you. We've got a short feedback survey after the webinar today. It takes about 30 seconds. It's two or three questions. If you could give us a little bit of feedback, that would be wonderful.
So, now that's done, we go onwards with things. Let's see what we've got. Here's our agenda for the day.
Look, first thing we're going to be doing is just a very quick summary of the changes, the scope of them but also the timing. So the timing between the two different sets of changes is different, so it's important that we know that. What the changes will mean for charities and their reporting. Most importantly here, and a bit of context and some practical advice on what charities need to do, what they should be doing right now to get ready for things, and we'll also sum up, we'll have some questions at the end as well.
All righty. What are the changes? We've got two and one involves key management personnel and one involves related party transactions, and what I am probably going to do is I'm going to probably throw over to Mel to just, I guess, start things off and have a look at some of the key information about the changes that are occurring in relation to key management personnel remuneration.
So key management personnel remuneration reporting, these changes take effect from 1 July 2022. Now, they're part of the 2022 Annual Information Statement, or the AIS as we call it at the ACNC.
This change only affects large-sized charities and remember that there are also changes to the size thresholds which take effect from 1 July this year. So that means that these new reporting requirements for key management personnel only affect large-sized charities and that is annual revenue of $3 million or more.
So in the 2022 AIS, noting that the bulk of charities will be completing their 2022 AIS for the period that ends on 30 June this year. There are a number of charities which have a substituted accounting period, so they might need to lodge their 2022 Annual Information Statement for a period that ends a bit later. And charities will need to report the total amount of remuneration that has been paid to key management personnel.
All right. So that's the rundown on the key management personnel remuneration. The second one we'll look at - and I'll just flick the slide here - is in regards to related party transactions. Now, there's a little bit of different timing on this one, isn't there, Mel?
There is, there is. So the reason that we're including this today is really because we want to raise awareness. So these changes don't take effect until 1 July 2023 in the 2023 Annual Information Statement. Now, the reason that we are raising this is - and we'll get into this in more detail later in the webinar - is because there are things that charities need to do now to prepare for this.
The difference between key management personnel and related party transactions is that this change affects all sized charities. So whether your organisation is a small, a medium or a large-sized charity, there will be changes to reporting requirements and this will need to be included in the 2023 AIS.
And yeah, that's a very important point. This one does affect charities of all sizes, so it's relevant to every charity out there, whereas the key management personnel remuneration isn't as widespread and is only looking at large charities.
Why have we got these changes coming in, Mel? What are the reasons why, I guess?
Yeah. So this change, again, which only affects large-sized charities, $3 million annual revenue or more in the 2022 AIS or later, the reason that this has been introduced is that this was actually part of the ACNC legislation review and it was one of the recommendations that the independent expert panel suggested was required. The government agreed with that recommendation and so they made changes in November of last year and made the date of effect of the introduction of this change 1 July this year.
And for the related party transactions, again what's the logic there or what's the, I guess, the aims there behind the changes?
Sure. So in terms of related party transactions, again this is also one of the recommendations in the ACNC legislation review that the independent expert panel recommended and the government supported this change and that was introduced in November of last year as well, and the real reason is to support increased transparency of transactions that pose a higher risk to charitable assets being used for private benefit.
So it's really around making sure that organisations are managing these transactions and they're disclosing them for public accountability if they need to.
And also just - and I'll flick back one slide here, too. The key management personnel reporting changes, again we're looking at issues here around the transparency of remuneration of key management personnel, and that transparency goes towards the public generally but also particularly to donors and charity beneficiaries as well. So there's a transparency and accountability, I guess, component there as well. So now I'll flick forward a couple of slides.
What we'll do, we'll look at the key management personnel remuneration changes in some detail now. I guess the first thing for some charities might be to get a bit of an idea or to get a clearer idea on actually what or who key management personnel are. They might be familiar, Mel, with the idea of Responsible People but there's a bit of a difference, isn't there?
There is, and this is really, really important. So the definition is actually taken from Accounting Standards and key management personnel include 'those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, which includes any director, whether they are executive or otherwise, of that entity.'
Now, that's a lot of words there, so we'll try and break that down and make it a little bit easier to understand. Bearing in mind that the definitions in the Accounting Standards, they don't just apply to charities, they apply to other sectors as well, so that's why the language may not seem like it's fit for charities but the concepts do apply.
So in terms of what does that actually mean for a charity, it would mean the senior decision makers in a charity. It doesn't include operational managers or team leaders. So we're talking about Responsible People, as you mentioned, Chris. So board committee members, or any other name that your charity has for these people, as well as senior executives.
So these are the people that are in charge of certain functions or are in charge of the organisation, and examples include the CEO, the chief financial officer, the chief operating officer. They're some of the terms that you might use. Executive directors. But they are people who are senior and they are in charge of the control, decision making, and they have authority to make those decisions within the organisation.
Yeah, and I do like that term 'senior decision makers'. That's one that's probably - put it in your brain, sort of file it away. That's not a bad reference point to go with when you're thinking about who key management personnel actually are.
Now, the actual changes themselves, Mel. What's coming into play here?
This is where the detail starts to be really important. So, some organisations have key management personnel but they're not remunerated, so this change will not apply to them, but for those charities that are large in size (that is annual revenue of $3 million or more) who remunerate key management personnel (that is Responsible People or senior executives), if they are remunerated, they will need to provide information about the total amount that has been paid for key management personnel.
Now, one point which is on this slide which is really important, some charities use a separate management body that provides the equivalent services to a charity that are the same as having key management personnel but, for various reasons, they might effectively outsource these functions or these roles to another organisation, which is known as a separate management body.
Now, we've included an example here. An accounting firm might provide a CFO to a charity. So even though someone is performing that role of CFO, they might be employed by a separate entity. So these are the types of situations and scenarios that will also be caught under these new requirements.
And again, that example is a very handy one to have there as well, and it's one that's not uncommon as well. So again, keep that in mind as a bit of an example when you're having a think about, as we've called it here, separate management bodies that provide an equivalent service to a charity in this way.
So, I guess, what are the finer details, if we can say that, Mel?
So, let's jump down a little bit deeper again. So, generally speaking, all large charities will need to report the total amount which has been paid to key management personnel each year where the charity has two or more individuals who meet that definition or a charity uses the services of a separate management entity.
Now, bearing in mind that that is not every charity, so further information about this is available on our website and I won't go into that in any more detail here, but essentially, if a charity has two or more individuals or does use the services of a separate management entity, the total amount of key management personnel will need to be disclosed.
Now, there is an exception to reporting this and that is where a large charity only remunerates one KMP [key management personnel] individual during the period. So where a charity has two or more or uses a separate management entity, the charity will need to report the total amount paid for KMP remuneration.
But if a charity doesn't have more than one KMP for the whole reporting period at any point in time, then they do not have to provide that total amount, and that's in accordance with, I guess, the intent of this change, and that's to protect the privacy. So we do know that many organisations have raised privacy as an issue, so the exemption for one key management personnel who is remunerated is included and that is to protect the privacy.
Now, I don't want to complicate things too much but there are different types of financial statements which can be prepared and this is where I really encourage our audience to have a look at our guidance on the website because there is more detail about the different types of financial statements that your charity may prepare and what those requirements are. So I'm really talking about those charities which have not had to do this previously and this is therefore a new requirement for them. There are some charities that have done this that do not qualify for an exemption so I'm not really focusing my efforts on that at the moment.
And that guidance, as you mentioned, Mel, it's up on the website. It's acnc.gov.au/kmp. As you mentioned, look, it goes into far more detail than what we can realistically go to here and it also provides some good examples, but also provides some information about maybe some of the exceptions or exemptions or the different types of reporting and some of the results or consequences of them as well. So yeah, go and have a look at that page on the website - forward slash KMP - and that'll definitely, definitely help you out as well.
With this, there are things that charities should be doing now to get themselves ready, which is what we're going to have a little bit of a look at here. How are some or what are some of the things charities can do to prepare themselves, Mel?
Very good point that you make, Chris. There are steps your organisation should be taking now. One of the key things is to ensure that everyone in your organisation who might be affected by these changes understands what these changes mean, who it affects and what your charity needs to do. So a really good suggestion is that at your next board meeting or your committee meeting, whatever you call it, it would be really good to discuss these changes so that all Responsible People know that this change is happening, and for some charities this new information will need to be reported for the first time, so this needs to be understood, and in a similar way, I would strongly encourage your charity to make sure that, if you do have any senior executives, that they are made aware of these changes as well within your charity.
So, because it really focuses on Responsible People and senior executives who are paid, and we know that not all charities pay for these positions, but where your organisation does pay for those positions, I would strongly encourage having an internal discussion and really understanding what these changes are.
Now, because both of these groups are going to have their remuneration disclosed in total for the charity, if there are two or more individuals or you use a separate management entity, then it's really important that, because this is going to be disclosed in the financial report and in the Annual Information Statement, that everyone understands what this means.
So in the AIS, there will be some changes to the questions which we ask all charities and that will be around the remuneration of key management personnel and some of the details and then the total amount which has been paid to key management personnel. Now, the financial report and the AIS are available on the Charity Register and that helps with transparency and to maintain trust and confidence in charities. So it's why it's really important that your charity and everyone who's affected knows about these changes.
Yeah. Look, there's some practical ways that you can prepare and some, I guess, steps forward. I know one of the ways that was mentioned just on the previous slide is as simple as getting the word out there and ensuring that the people who need to know actually do know what's going on but also the detail, as well. Put it on the agenda at a board meeting, even. That's one way forward. But yeah, get the knowledge out there is the key thing.
Now, I guess there's some compliance messages or messaging coming from ourselves as well, isn't there, Mel? What should we be talking about, and I'll pre-empt for a second and say that, as you can see, we've got that mention of some guidance, again, which is that forward slash KMP. So I guess a first point would be go and have a visit, go and have a look and go and have a read and take some time to understand what the go is through the information on that page, but we've also got some other compliance messages, haven't we, Mel?
We do. So in addition to what we've already said, really, if your charity uses an accountant or a professional adviser or anyone who assists you with your accounts or your obligations in terms of reporting, then it's really important that a conversation is had with that individual or that firm or whoever it is that provides any support or assistance. Make sure that everyone is on the same page.
As you've outlined, Chris, the guidance has been developed. We did a lot of consultation in relation to that guidance and spoke to a lot of charities and a lot of people that support charities to make sure that it's meaningful and it's helpful, and so that really is a bit of a one-stop shop because it includes information about who KMP are, what remuneration includes, it's got information about separate management entities which I've been talking about, what the reporting obligations are in financial reports, and the key thing is that there are examples on that page which you can think about, well, how does that apply to my charity? So they're really, really practical ways to think about what this means for your organisation.
And as you've said, Chris, we can't stress enough, put this on the agenda at the next board meeting or the next committee meeting of your charity because everyone needs to be aware, especially people who are remunerated for their services or their work. It's really important that these people are aware of this change.
We also mention here too, and there's a bit of a mention here on the screen at the moment, maybe the people who might be slightly external to your organisation as well. People who might advise you, but accountants as well. Getting the word out amongst them and sort of, I guess, having a chat to make sure that, again, you're all on the same page. That's vital too, isn't it?
All right. So that's our look at key management personnel remuneration, and I've managed to say 'remuneration' without stumbling over my tongue a number of times, so that's a good thing. We will take another sort of a step forward and have a look at the reporting changes relating to related party transactions.
Now, these ones, I guess there is a little bit of familiarity or a little bit more widespread familiarity with the idea or the concept of related party transactions, isn't there, Mel?
There is. So at the core of this, and please refer to the information on the slides - at the core of this, a related party is someone who's connected to a charity who has got influence, who has got - and I should preface this by saying it depends on the size of your charity. So, for small charities, the focus is around significant influence. Once you get into medium and large-sized charities, there are additional factors such as control or joint control, which are also relevant.
Now, all of these terms - key management personnel, related party transactions - they sound very complicated and they use a lot of words, so please don't be put off by them. They are terms that are documented and defined in Accounting Standards. But at the heart of what a related party is, it is really just someone who has got the ability to influence or exercise control, and that's what a related party really is. And a related party transaction, that is between this related party, which we've just talked about, and the charity.
Now, an example of a transaction can go both ways. So, it could be monies that are flowing to the charity or it could be monies that are flowing to the related party from the charity.
So a couple of examples. It could be that a board member who is a related party, their spouse may be employed by the charity, which happens from time to time. A CEO might sell a property or some sort of asset to the charity. Another example might be a board member makes a really critical donation to a charity, so that's money going to the charity as opposed to money flowing to the related party. There might be a senior executive who owns a transport business and the charity uses the transport business to deliver items to beneficiaries. So these things are quite common in charities. They're not necessarily bad or they don't need to create concern or worry, as long as they are managed effectively and in the best interests of the charity.
A related party transaction is really - can be very helpful to a charity, but it's got to provide a benefit to the charity which enables the charity to meet its purpose and continue the charitable mission, but it generally is where there is conflict between someone's individual personal interests and the best interests of the charity. So this is why it's important that they do need to be managed carefully, because where there is that conflict, what might be good for the charity might not be good for the related party, for example.
So, as you can see there on the slide, transparency is key. It's really important that decision makers know about related party transactions, that people are aware and understand what these issues are, what they mean, and it's really important to think about what is the best interests of the charity as opposed to the best interests of the individual in terms of making decisions about whether a charity enters into a related party transaction, whether the charity does buy the asset from the board member, whether the charity does employ the board member's spouse. So those sorts of things.
And again, it comes back - as we mentioned earlier and as we again mention here - it's transparency, it's accountability. These sorts of, I guess, themes or thrusts are at the centre of not only ensuring you manage related party transactions properly, but also at the centre of the changes in reporting that charities will have to do around related party transactions.
Now, the good news is, again, we've talked about the key management personnel remuneration, the guidance that we've got on the site. We've also got plenty of guidance around related party transactions and managing conflicts of interest, as well. As you can see, there's a couple of links there for you to go and peruse if you wish. We've got a conflict of interest template policy that your charity can - a good starting point to use and maybe adapt to set in place, so that you've got the conflicts of interest, related party transactions, you've got their management and their monitoring sort of under control.
We also, last March, did a webinar on related party transactions and conflicts of interest - I think myself and my colleague, Peter, were speaking with that one - and look, it was a pretty good one. It was one that really sort of dived pretty deeply into this concept. So if you want to go and have a look on our website - acnc.gov.au/webinars - scroll on down to the one on the topic - it was from March last year - and we recommend you have a bit of a look at that as well if you're not a hundred percent sure or if you feel you need to brush up on some detail.
Again, there are things that charities can do right now to be prepared, to get themselves ready for these changes, even though they're coming down the pipeline at a slightly different timeline to the ones that we've previously talked about.
Mel, what are we talking about here? Now, the changes are going to come into focus - I guess, greater focus in the coming months, but in time for reporting in the 2023 Annual Information Statement; that's correct, yeah?
That's exactly right, and that's why we are talking about this today. So it's all about planning, understanding what these changes are, and making sure that your charity is aware of these changes and is taking steps to manage them internally if your charity does have any related party transactions. So even though the reporting aspect does not start until 2023, it will cover the period that many charities will begin on 1 July 2022, and so that's why it's important that we're talking about this now.
Now, I really want to stress that some of the words I've used, they sound complicated, and they might not mean much to our audience, and that's why it's really critical that the guidance that we've put on our website, which has been referenced and which is included throughout this webinar, is referred to, so that it includes information about the who, the what, the when, the how, and it's got examples.
So, it's really important that if you read the guidance material and if something doesn't make sense, ask someone. Ask your accountant. Ask your adviser. Ask whoever it is who helps you manage your financial affairs within the charity, because the charity will need to have records of any related party transactions in order to complete the 2023 AIS and, depending on the size of your charity, if you need to prepare financial statements and financial reports. And, at the heart of this, it's all about good governance. So, if you have the records for related party transactions, it will demonstrate that your charity is being run well and you are complying with the Governance Standards.
And that's like we would normally ask any registered charity in regards to record-keeping. There are requirements under our Governance Standards to ensure that charities keep certain records, financial records and operational records, so this is just another component of that to ensure that you're keeping the records and, in turn, that shows that the charity is well managed, well run, and is complying with what it needs to comply with.
What are - and I pre-empt by having this slide up here - there are other ways, obviously, charities can prepare, Mel. Again, we mention the agenda, chucking it on the agenda for the board or committee. That's, again, something that's very important, isn't it?
It certainly is because it's really important that everyone understands what this means. So it's a great opportunity that, if someone is unsure - and it would probably be really good - even if people say they understand, it'd probably be a very good idea to still put it on the agenda because there might be people who actually don't understand but they don't want to appear like they're not aware of this change. So even if people think they are aware, by covering this again at a future committee meeting or a board meeting and discussing it with the senior executives in your charity, it will provide an opportunity for questions to be asked, points of clarification to be raised, and hopefully the understanding of these changes will lift, so that's a win-win situation, really, for the charity and for yourselves who are needing to manage these changes.
In terms of making sure that you've got appropriate systems, controls and processes in your charity, think about whether your charity's got a policy. Does your charity have a policy on related party transactions? Does it need one? So we've got some really good resources on our website, and think about setting up a policy if there's not one in place.
They might not be common but when related party transactions do happen - and in some charities they are common and this is the really interesting thing. It's really dependent on each individual charity, what the charity is doing, who's involved in the running of the charity. So they may be common, they may be uncommon. And this is where it's important to think about your particular charity's needs and what's best for your charity. So if you don't have a policy, it wouldn't hurt setting one up and having one in place just in case a related party transaction does occur.
In the same way, what's going to happen if there is a related party transaction? You need to know how to record it and how to treat it. So that's why setting up a register would be another suggested item that charities should think about and, if you don't have a related party transaction register, set one up. Again, we've got an example on our website that might be really useful.
And the bottom point there, Chris, is really about advice. If this brings up questions in your charity and you're not sure what those answers are, then it's really important to get those answers resolved. Contact your accountant. Contact your professional adviser. You might have a lawyer or an accountant that you know or that you use. You might have an auditor or someone who actually does some assurance work over your financial statements. Any of those questions can be directed to any of those stakeholders, who should be able to provide you with the answers or direct you in the direction where you can find out the answers to those questions.
There's an importance, I guess, again - we speak about the awareness required among Responsible People, among senior leadership. Again, this is something that's important to spread the word around and to ensure that those people who - to use a phrase, so it might be the people who set the direction of your charity and your organisation - know what's coming down the pipeline and know what perhaps needs to be done or at least are going to be looking and thinking, well, we need to sit down and chat about this, isn't it, Mel? It's vital, this sort of stuff.
Absolutely. You've nailed it, Chris, and I can't underline the importance of that any more. It's really important to be discussing this, to be talking about it, to make sure that information is being shared about this, and it might be - people might understand what related party transactions are but there might be someone who is not aware of a policy that your charity might have. Someone might not be aware of a register which your charity may have. Or your charity might not have any of these things, and that's okay.
Now's the opportunity to take action to fill those gaps in your governance processes, and the talking and the communication is so vital because then everyone understands what this challenge is, what it means for the charity, what it means for the individuals who will be captured by these requirements, and what it means for any other important stakeholders who use the information that the charity prepares and includes in the AIS, includes in the financial statements and is available on the Charity Register.
So it extends not just to board members, committee members, not just to senior executives, but your charity may be big enough that it has a finance manager or it has someone who pays the accounts, for example, or someone who does the administration. Whoever that person is, they need to be part of this conversation. Everyone needs to be aware so that there is no misunderstanding and everyone is clear on responsibilities, who's going to be impacted by this and what the charity may need to do.
And the other point there is understanding that there will be different reporting requirements. Now, we are getting some questions from charities asking, well, what are the reporting requirements going to be? We will communicate that in time. At the moment, it's really important that you actually collect information and put in place a system to manage related party transactions, then we will be able to talk about using that system and using the information that has been captured for reporting in 2023, which seems like a long time into the future but it's actually not because charities are just about to do their 2022 AIS and, as we've said, these systems need to be in place ideally from 1 July because that's the period that will be covered in the 2023 AIS.
Yeah, yeah. So, I guess the thing with this is, you know, watch this space, in some ways. Again, we'll be communicating through our various ways and means about further information and about the things that charities will need to report to us, but having those systems in place now means that, when the time comes, you're ready as a charity. You can report and you can do the right thing.
So what we'll do, we'll hop in and we'll go through maybe four or five, I guess, key little points to remember coming back from the two main focuses of this webinar. So I'll flip the screen. What have we got, Mel? What's the first couple?
So the first two, in terms of key management personnel remuneration reporting, this will start from 1 July 2022 in the 2022 AIS but it only applies to large charities. So large charities will need to include the total amount of remuneration that has been given to key management personnel, and again, some charities have been doing this but really we're focused on those charities that have not been doing this and this is a new requirement for them. And from 1 July or from the next reporting period (because some charities have a different reporting period) but from the beginning of the next reporting period, which for most charities is 1 July this year, all charities must be able to record related party transactions. So make sure that you've got your systems in place to collect that information about any related party transactions.
Now, point two rolls into point three there in that from 1 July 2023, and that's in the 2023 AIS, charities will have to start or have to have their reporting obligations going on related party transactions. Now, again, Mel, we want to emphasise that charities of different size are going to have different reporting obligations, aren't they?
Correct. They certainly are. So for medium and large charities who have to prepare financial statements, there are certain obligations which are outlined in the Accounting Standards which need to be met as part of the preparation of those financial statements and any assurance such as an audit, which many charities get done of their financial statements. For small charities that don't have to prepare financial statements, it'll be slightly different, but the important thing is that, as you've said, there will be reporting requirements for all sized charities. They will just be different.
And again, we've got some guidance on the site already surrounding some of the elements of both of these things, both the key management personnel remuneration and related party transactions. That guidance will be furthered - particularly from a related party transactions point of view - in the coming little while.
So, again, go and have a look at the website, go have a look at the pages that we've highlighted and the spots on the site that deal specifically with these issues, and soak some of the information up and use perhaps that information that's on the site to inform yourselves but also to perhaps form the basis of any discussions you might have to help share the information and share the knowledge a little bit.
Now, I think we've got one more. Yes we have. There we go. I'll let you read this one, Mel.
Excellent. And this is really, really key. So, if there are any questions, any misunderstandings, there's some uncertainty, it's really important to get assistance from advisers or from an accountant or an auditor or there might be a lawyer that your charity uses. Whoever your charity gets advice and assistance from, it's really important to get help if there is anything that is confusing or that will help everyone in your charity understand what this means and how it's going to impact your charity. So use the expertise of those professionals who provide support to your organisation.
Now, that's sort of nearish the end of our formal presentation for the day. We have been getting questions through. Thank you to John and to Deb and I also say thank you to Mel because I think you've jumped in and helped with a couple of the questions that have come through. So, as I said earlier, if there's a question that either doesn't get answered or you think of one two days hence, again, firstname.lastname@example.org, feel free to send them through and we'll get back in touch and we'll provide some information.
There was a question - there has been a question mentioned both before this webinar but also during the webinar and we sort of touched on it, Mel, in terms of key management personnel remuneration and the privacy aspect in terms of concerns or perhaps questions about if there's a single key management personnel person, to mangle a phrase, who is receiving remuneration, and obviously then there's some reporting that's going to be done on it. There might be a little bit of a concern over privacy and that sort of stuff. What's sort of in place for that? What are we doing here to try and, I guess, protect that?
Yeah. So it's a very, very good point, and this recommendation was really made by the expert panel with a focus on organisations that prepare special purpose financial statements. So if your charity prepares general purpose financial statements, then your charity is already required to be mentioning these disclosure requirements around key management personnel. So we're focused on special purpose financial statement preparers who have never had to disclose this information. So there is an exemption where there is less than two, so where there's one individual key management personnel person - I'll take your lead there, Chris - where there is only one, then the charity does not need to report the total that is paid to them, but if there are two individuals or if there is one individual and you use the services of a separate management entity, the charity will need to provide the total amount. And that really centres - where a charity has one, that exemption centres on that privacy aspect. So there's no intention to require charities to report the amount that's being paid to one person but, where there are two or more, there is a requirement to disclose that. So, hopefully that addresses that question adequately.
There's one more too, and we've got time for one more, he says looking over his shoulder at the clock. Honorariums - and I know that we have some information on the website about honorariums and there are charities out there that do pay them. I particularly think of RSLs would be one. Honorariums, if they're paid to a key management personnel, or if they're made to a key management personnel I should probably say, is that classed as remuneration and therefore will perhaps have to be reported?
So, it's a really good question and the short answer to that is that key management personnel remuneration includes all consideration. Now, an honorarium is essentially consideration and, if it's provided to a key management personnel person, then it may be considered material, so it really comes down to materiality. But that's where the information on our website about this which details all the things that do apply and it details how to work through that, that really should be a reference point for this. But in summary, the answer would be that yes, it would appear that an honorarium paid to a key management person as a bit of a thank you, a bit of an acknowledgement of the work that individual does, it would be consideration and, if it's provided by the charity, it would meet that criteria of key management personnel remuneration.
Well, that's a good one to keep in mind because there are a number of charities that might, I guess, fall into that boat, I suppose, and that might be very relevant to them, so keep that one in mind, and again, go back and have a look at the guidance as well, because that will be helpful to charities in these two areas as well.
What we'll do, and we're about six or eight minutes out from the hour - might be lunchtime or morning tea time various spots around Australia at the moment - we might say farewell and go from there.
Here's some ways that you can keep in touch with us through all manner of methods, I suppose. Again, our web guidance is there, with webinars and podcasts. Our Charitable Purpose, if you're not signed up to receive that, really recommend you are because we communicate changes like these and we communicate information about changes like these through The Charitable Purpose. The whole idea is to be able to say to charities, 'This is what's coming down the pipeline or this is some new material that we've got on the website in relation to something that's coming down the pipeline'. So again, sign up if you haven't. We've got a number of socials that we frequent if you want to pay a visit or subscribe or keep in touch with us.
Beyond that, to everyone, thank you very much for coming along today. Thank you to John and to Deb for typing away madly in the background. Thank you specifically or particularly to Mel for your time and for your knowledge. Thank you, Mel.
Thank you, Chris. Thanks for the opportunity to be here and thank you very much for pulling this together.
No problems. And look, again, I emphasise again, if you have a question that you figure out in a couple of days' time or one that doesn't quite get answered now, email@example.com. We will receive them and we will respond to them because beyond being the right thing to do, it's important that, if there's a question out there, the correct sort of information is coming back your way in response.
Again, we've got a survey at the end once this webinar is done. Please feel free to fill that in if you can. And yeah, thank you again for joining us. I'll say thank you. There you go. Thank you. And until next time, we'll bid you farewell and have a great day. Thank you. See you later. Bye.