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New Updates related to CSR Audit

Utilisation Certificate is asked by every Funding Agency and CSR funding Corporates. Generally, NGO frequently submits various reports of the implementing of the project including financial spent and position. At the end of the project or year-end, an audited utilisation certificate is asked, which includes expenses spent on the project against budget and remaining fund balance.

No Uniform format for UC

But the problem with UC is that there is no proper format suggested in any act or law. Thus, every auditor issued UC as per their format or funding agency insist in a particular format. This happens with CSR corporate also. And it is very difficult for statutory auditor of corporate to rely upon UC.

ICAI issued Advisory

So, ICAI (Institute of Chartered Accountants) has issued an advisory to its member regarding this recently. In such advisory, it is instructed to member / CAs to provide UC in a particular format of the report which is called “Independent Practitioner’s Report on Utilisation Funds” . Also, ICAI has advised such companies to obtain such Report from NGOs / CSR entity.

Download Advisory from Here

Lets talk about Report

It is usual audit report, but includes following :-

  • Management (NGO) Responsibility
  • Auditor’s Responsibility
  • Opinion of Auditor

So, under this report, Auditor has to give audit report after considering following :-

  • Checked whether the entity has incurred amounts on the Corporate Social Responsibility (CSR) activities specified in Schedule VII of the Companies Act, 2013.
  • Traced and agreed the amounts in the attached Statement.
  • Traced the amount spent on CSR activities from the bank statements / cash book of the entity.
  • Checked whether amounts spent on CSR activities have been adequately disclosed in the financial statements.
  • Obtained written representation from the management of the entity on the total amount unspent and their plan to disburse the unspent amount related to the project
  • Tested the arithmetical and clerical accuracy of the Statement

Conclusion

Thus, now onwards, most of corporates will ask NGOs to submit UC in this particular format for CSR projects.

Checkout my Video

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NGO Audit Report Revise Format in Form 10B

Every NGO, whether be it Trust, Society or Sec 8 Company, which is registered u/s 12AA, has to get their accounts audited with the Chartered Accountant. He has to give his Audit Report in Form 10B. (Checkout our video on how to file Audit Report of NGO). This report need to be filled online on Income Tax Website. This form is going to be changed with coming Financial Year. Earlier Form 10B Audit Report is just for 3 page which now change and become 8 pages. All the information from FCRA to 80G Donations to Expenses to Dis-allowances to TDS deductions – everything need to be certified by Auditor now.

Suggestions are welcome

Income Tax Department has issued a draft notification on May 21, 2019 (download it from here) for revising Form 10B. Also, department has asked suggestions from general public, NGOs and chartered accountants for such changes. Let us discussed such changes in Brief.

Donations

Till now, there was no mechanism in Income Tax to cross verify Donation receipts issued u/s. 80G by NGO and exemptions claimed by Individual Tax Payer for 80G. Here in this new form, Auditor has to certify total donation receipts issued by organization u/s 80G.  And it is mandatory now to take PAN of the donor.

The format is as under :-

Anonymous Donations

If PAN is not available from the donor, it will considered as Anonymous Donation. This also need to report and certify by Auditor in specific format. Thus to eliminate anonymous donation, even a small amount of donation mus be backed by PAN and donor details.

Donations in kind

Also, a separate information is to be provided for Donation in kind. However, in one of the point No I – 1, the form asked the detail whether this donation in kind is invested properly as per sec 11(5). There is some confusion here. Suppose you got a Car in Donation, how do you invest the same as sec 11(5)?

FCRA Details

Earlier only FC registration number was to mention. But in new form, auditor has to give all the details regarding FC Contribution received with Name, Address and Country Code of Foreign Donor.

Business Receipts

Even, auditor has to certify about the receipts from business or professional activities of NGOs. Thus all those income received by NGOs for providing goods or service need to be reported by Auditor.

Other Changes

There are many other notable changes where auditor has to certify about Loan taken or given by NGO, Non-Deduction of TDS, Late filling of TDS returns, other penalty paid, Depreciation detail, Investment made by NGO etc..

NOTE –  This is a draft report format. If you have any doubt, query or suggestions, income tax department has given email address – niraj.kumar82@nic.in

You can email your suggestions to above email address or write to us.

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How to get CSR Funding for your NGO ?- Internal Control System

Why a company having huge CSR funds and want to implement genuine projects, should give funds to your organization ?  This is the question you should ask to yourself and do not indulge into the malpractices as mentioned in this part 1 of this CSR series.

How to get CSR funding for your NGO?-PART 1

Most of the organizations are good at what they are doing in terms of implementing projects and grass root work, but they are not good in maintaining documentations and showing their good work to the world. Read this Part 2 blog, where I mentioned how you should showcase your good work.

How to get CSR Funding for your NGO ?- Program Quality – PART 2

Before we go ahead with Part 3 of this series regarding maintenance of Financial and Internal Control System, look at this latest news regarding spending Rs. 2,80,00,00,00,000 in last three years under CSR by the companies.

Accounting and Financial Control System

When you are approaching companies for CSR funding, it is almost prerequisite that NGO’s Accounting and Financial Control system is matched with the industry standards. You have to remember this:-

  • Regular Accounting (zero backlog)
  • Accurate Accounting
  • High Quality of Supporting (Single rupee spent hast to be  supported by Bills and Vouchers)
  • Strong Internal Control System
  • Watertight Cash Management System
  • Efficient Advance Management System

 

Statutory Compliance

No company will be ready to fund your organization if you have not followed all the Statutory Compliance. As a first step, list down the following compliance and check which  you followed in your organization. For remaining compliance, why you are not following it. Take expert opinion whether it is applicable to your NGO or not.

  • 12A – 80G
  • TDS
  • Income Tax Act
  • GST
  • FCRA
  • PF
  • ESIC
  • Professional Tax
  • Trust and Society Act

 

Governance

How your NGOs working is governing by the members ? Is your NGO is  one man army? Is it look like Proprietorship or Partnership Firm? Whose taking decision and how? These are some of the questions which may be asked at the time or per-scrutiny of project.

  • Authority Matrix
  • Decision Flow
  • Rotation in the Board Members
  • Election or Selection procedure of new board members
  • General Meeting and Executive Body Meetings
  • Maintenance of Minutes of such meetings
  • Intimation of Change in the Board Members

 

Policies

Following policy documents should be prepared and implemented in the NGO

  • Financial Policy
  • HR Policy
  • Accounting Manual
  • General Work Policy
  • Anti Corruption Policy
  • Gender Policy
  • Child Policy, if applicable

Hope the above information will be useful to you in getting CSR funds. We will discuss in next part of this series on how to approach companies for CSR funding.

Part -4 How to approach companies for CSR funds? – Coming Soon

Disclaimer : This blog is purely for the education purpose and author is NOT providing any services to get CSR funding.

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How to get CSR Funding for your NGO ?- Program Quality

How to get CSR funding for your NGO? – PART 1

We have seen in last blog here (How to get CSR Funding for NGO?) , what NGO should not do to get CSR funds. Let us see now what NGO should do to get CSR funding. How your should prepared your NGO for CSR funding. One of the important aspect is how effectively your NGO implement the given project i.e. Program Quality.

Program Quality

Obviously, as a Chartered Accountant, I can not suggest about how to implement program effectively, but yes, I can suggest on how to maintain documents in such a manner, so that it can easily draw an idea about NGO working.

Past and Current Programs

Programs, which are completed in last five years should have been documented properly. There has to be proper file for each program containing all the documents starting from agreement, budget, all financial utilization certificates, quarterly reports, photographs and note on impact of the program. I suggest to have a “Program Closure Card”, a brief summary of Program. Please see below example.

This is illustration how Program Closure Card look

This is illustration how Program Closure Card look

 

Future Program

Every company ask full project plan for which you need CSR fund. Thus, NGO should have keep ready such kind of different project plans – mainly divided in two parts, short term plans and long term plans. Many CSR companies even provide funding for ongoing project or contribute in Long Term Project Plan of NGO.

Coming Soon – How to get CSR funding for your NGO? – PART 3

 

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How to get CSR funding for your NGO?

There is no straight forward answer to this question – how to get CSR funding? However, one thing is very sure that there is huge funds under CSR, which all the eligible companies should invest in communities. You can check amount spent by companies under CSR in this official website of Ministry of Companies Affairs – Here

So, today, I am not discussing here how much funds available in CSR and which companies are liable  to spare this fund.

Let us discuss from the view point of NGOs. How one grass-root NGO can get CSR funding ? In my opinion, NGOs should make efforts to reach out to CSR company rather than wait to be found by them.

So, before going into details on how a grass-root NGOs have to be prepared themselves for CSR funding and how to approach companies, let us first see what an NGO should not do to get CSR funding.

Don’ts – CSR Funding

 

1. Stay Away from Middle Man

Now days, you can found so many from this species called “Middle Man” . Stay away from this type of person who gives you guarantee to get funding in consideration of some “commission” or “cuts” or “payback” whether this person is your CA, friend, some funding agency employee or company employee. Just stay away from such middle man.

2. Routing of Funds

Another wrong practice, where company gives you CSR funds on a condition (of course unofficially) to route some portion of funds to the specific interested person or companies in the form of Salary, Fees or some procurement expenditures or by any other legal transactions by whatever name called. Though, speaking in legal terms, it may be correct, but still that will affect the credibility of your organization.

Do’s – CSR Funding

Before, approaching for funds to companies for CSR, NGO should do a self-evaluation, particular in the area of progarm implementation and control system. I have divided CSR funding process in three steps –

  1. Improve Program Quality
  2. Establish various Systems
  3. Approach Companies for CSR

Check out this chart –

We will discuss all the above steps in detail in the next part.

How to get CSR funding for your NGO? – PART 2

 

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