Related Party Register

A related party is defined in AASB 124 Related Party Disclosures.

In summary, a related party is:

• a person that is connected to the entity, such as a Responsible Person or a close member of their family, that has control or joint control of the entity
• an organisation that is connected to the entity and has control or significant influence over the entity, such as a parent entity
• an organisation that the entity has control or significant influence over, such as a subsidiary entity
• any organisation and the entity that are members of the same group (for example, fellow subsidiaries)
• a member of the entities key management personnel (people with authority and responsibility for planning, directing and controlling the activities of the entity directly or indirectly) or a close member of their family
• an associate (an entity over which the entity has significant influence) or joint venturer (an entity that shares control of an arrangement with the entity and has rights to the net assets of the arrangement).

A related party transaction is a transfer of resources, services, or obligations between related parties. It does not have to include financial payment.

These transactions can include:

• purchases, sales or donations
• receiving goods, services or property
• leases
• transferring property, including intellectual property
• loans
• guarantees
• providing employees or volunteers
• a Responsible Person of a entity providing professional services (for example, accounting or legal services) at a discounted rate or for free.

Related party transactions are common and are not necessarily a problem in and of themselves. In fact they can sometimes bring about benefits, for example, access to discounted goods or services. However, related party transactions can also bring about issues with potentially damaging conflicts of interest, meaning there is a risk that a related party transaction may not be in the best interests of the entity.

Entities must carefully manage any related party transactions to ensure they are handled:

• appropriately,
• transparently, and
• in the best interests of the entity.

Maintaining good records is a key way for entities to properly manage related party transactions to ensure adequate reporting on related party transaction. One way to do this is through a related party register.

A related party register is a record of transactions between an entity and its related parties, such as board members, employees, or their family members. The register ensures:

1.     Transparency: as the register can help increase transparency and accountability. It can help donors, volunteers, and other stakeholders to identify and verify the legitimacy of an organisation.

2.     Compliance: maintaining a register can help entities comply with reporting requirements. It can also help the entity avoid potential penalties for non-compliance.

3.     Risk management: the register can help entities manage conflicts of interest and other risks associated with related party transactions. It can also help entities identify potential issues before they become problematic.

4.     Good governance: maintaining a register is a good governance practice that demonstrates the entities commitment to transparency, accountability, and ethical behaviour.

5.     Internal controls: the register can help the entity establish internal controls to prevent fraud, waste, and abuse.

6.     Improved decision-making: the register can provide valuable information to decision-makers within the entity. It can help them make informed decisions about whether to enter into a transaction with a related party.

If you would like a copy of the  FREE JG Audit template for related party register please do not hesitate to reach out.