Related Parties

Following on from our post on Conflict of Interest, we now highlight the subject of Related Parties.  It is the responsibility of a charity to identify and disclose related parties and related party transactions and implement adequate accounting and internal control systems so that related party transactions are appropriately identified. 

A simple example might be like this – if a Trustee suggests that his business partner in their decorators’ business be given a contract to paint the charity’s kitchen, then this would involve a conflict of interest, that business partner would be a Related Party, and the deal would involve a Related Party Transaction.  Nobody would have done anything wrong, but it must be accurately recorded and reported in the charity’s accounts.

The SORP 2005 gives a very detailed explanation of Related Parties in its Appendix 1 Glossary GL50.  Access the document here 

The Pricewaterhouse Cooper website suggests a Four Step approach to Related Party Management here

Conflict of Interest

ABOUT CONFLICTS OF INTEREST

You have a legal duty to act in your charity’s best interests when making decisions as  a trustee.  If there’s a decision to be made where a trustee has a personal or other interest, this is a conflict of interest and you won’t be able to comply with your duty unless you follow certain steps.

For example, if you’re a trustee, you would have a conflict of interest if the charity is thinking of making a decision that would mean:

  • you could benefit financially or otherwise from your charity, either directly or indirectly through someone you’re connected to
  • your duty to your charity competes with a duty or loyalty you have to another organisation or person

Conflicts of interest are common in charities – having a conflict of interest doesn’t mean you’ve done something wrong. But you need to act to prevent them from interfering with your ability to make a decision only in the best interests of the charity.

Follow a 3 step approach (identify, prevent, record) so that you are able to comply with your duty and avoid:

  • making decisions that could be overturned
  • risking your charity’s reputation
  • having to repay your charity if you make unauthorised payments to trustees

Legal requirement: you MUST declare a conflict of interest immediately you are aware of any possibility that your personal or wider interests could influence your decision-making.

More details can be found here

Holiday Entitlement and Holiday Pay

Almost all workers are legally entitled to 5.6 weeks’ paid holiday per year (known as statutory leave entitlement or annual leave).  An employer can include bank holidays as part of statutory annual leave. More details can be found here:

https://www.gov.uk/holiday-entitlement-rights

Workers are entitled to a week’s pay for each week of leave they take.

A week’s pay is worked out according to the kind of hours someone works and how they’re paid for the hours.  This includes full-time, part-time and casual workers. Help can be found here:

https://www.gov.uk/holiday-entitlement-rights/holiday-pay-the-basics

Holiday pay should be paid for the time when annual leave is taken.  An employer cannot include an amount for holiday pay in the hourly rate (known as ‘rolled-up holiday pay’).  If a current contract still includes rolled-up pay, it needs to be re-negotiated.