Our friends at GoodNumbers have recently provided some advice on the above topic, a topic which can cause confusion or even disharmony in an organisation.
The GoodNumbers article is entitled “What are Related Party Transactions? It starts:
“What are transactions with close relationships (sometimes called related party transactions)? These are important to disclose in financial statements when someone who helps make decisions about how money is spent also receives money or benefits from the organisation.
In many cases, paying someone who is connected to the organisation is totally fine and often part of the normal course of running a non-profit. This section helps anyone reading your financial statements understand the purpose of those payments or benefits and know that they were appropriate. For example, many charitable trusts allow their trustees to be paid for specific skills or significant work, such as accounting, maintenance, or communications.” <Read the full article here>