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Related Parties - Understanding related parties and their transactions in charity accounts

Updated: Apr 19, 2023

When it comes to running a charity, it's not just about managing the finances of the organization itself. It's also important to consider the relationships between the charity and any other parties that it interacts with, such as trustees, staff members, and other organizations. These relationships are known as "related parties," and they can have a significant impact on a charity's financial statements.


So, what exactly is a related party in a charity finance context? According to the Charities SORP (Statement of Recommended Practice), a related party is any individual or organization that has the ability to control or influence the charity's financial or operating policies. This can include the charity's trustees, their immediate family members, any companies or organizations that the trustees have a significant influence over, and any other charities or organizations that are closely connected to the charity.


When it comes to preparing a set of year-end accounts, the Charities SORP requires that charities disclose any transactions or relationships that they have with related parties. This includes any loans, guarantees, or other financial arrangements that the charity has entered into with related parties, as well as any transactions that have taken place between the charity and related parties during the financial year.



In order to provide a clear picture of the charity's financial position, the SORP also requires charities to disclose any balances or amounts owed to or from related parties, as well as any potential conflicts of interest that may arise from these relationships.

It's important to note that these disclosure requirements are not just a matter of legal compliance – they are also a key part of ensuring transparency and accountability in the charity sector. By providing clear and detailed information about their relationships with related parties, charities can help to build trust with their donors and stakeholders, and demonstrate that they are operating in an ethical and responsible manner.


In summary, related parties are individuals or organizations that have a significant influence over a charity's financial or operating policies. The Charities SORP requires charities to disclose any transactions or relationships that they have with related parties, as well as any balances or amounts owed to or from related parties, in order to ensure transparency and accountability in the charity sector. By following these requirements, charities can demonstrate their commitment to ethical and responsible financial management, and build trust with their stakeholders.


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