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How to file Audit Report of Trust?

Audit Report of Trust

As per Income Tax Act, every Trust has to file Audit Report for the relevant Assessment Year in Form 10B.

E-Filling of Form 10B

This Audit Report of Trust has to be filled in Form 10B. It is mandatory to file this form online with Income Tax department website. This form is initiated by Chartered Accountant of Trust and later on approved by Authorized Representative (Trustee/secretary/chairman) of the Trust.

Last Date

Last Date for filling Audit Report of Trust in Form 10B is 30th September. So For Financial year 2013-14 last date is 30th September 2014.

Video Tutorial

Just go through our video below showing tutorial on how to file Audit Report of Trust.

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How to file FC6 return?

It is mandatory to file FC6 Return to FCRA department of Home Ministry, External Affairs by every NGOs India having FC registration. Last date for filling FC6 Return is 31st December. It is compulsory to file e-Return on the fcra website www.fcraonline.nic.in.

Though the filling procedure of FC6 return is very simple, here I present a video tutorial on how to file fc6 return?

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Credit Rating of NGO by CRISIL

Credit Ratings of NGOs in India

Grading an NGO is not a new idea, since 2004 Credibility Alliance  was rating NGOs and till now rated more than 200 NGOs in India. Globally, credit ratings of NGOs are done by third party since very long specifically in USA and UK. But now, when CRISIL has introduced credit rating of NGO in India, this will definitely change the scenario of existing fund raising and play very crucial part to attract large donations.

CRISIL is very known agency in India for Credit Ratings and Risk Analysis. CRISIL has recently graded two NGOs, HelpAge India was assigned a VO-1A grade and SOS Children’s Village (SOSCV) was given a ‘VO-2A grade.

CRISIL Grading System for NGOs

CRISIL has come up with two sets of grades for NGO. One for Capacity Delivery and Second for Financial Proficiency. In case of Capacity Delivery ratings are from VO 1A  (very strong) to VO 5A, And for Financial Proficiency grades are High, Moderate and Low.

Norms of CRISIL for NGOs

As mentioned above CRISIL has come up with Capacity Delivery and Financial Proficiency.

In Capacity Delivery mainly three things are focused –

1) Profile  – means people driving the NGO, Founders, Trustees and such other aspects

2) Process – means how sound an NGO is in Processes,  training of Field Staff, project implementation process etc.

3) Program – Impact Analysis of Flagship program of NGO.

To Analyse Financial Proficiency, there has been rigorous procedure to check  –

1) Ability of NGOs to raise funds.

2) How well funds are utilized.

How to apply for NGO ratings of CRISIL?

CRISIL has not mentioned anything on its website regarding application for Credit Rating of NGOs. However I am in touch with their officials and try to get the information. If you wish to apply for CRISIL, put your request and email ID here. I will get back to you once I got all the information.

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NGO and Budget 2014 – Less “Khushi” More “Gham”

NGO and Budget 2014

Finance Minister has proposed many changes for NGOs and Trust in the Finance Act 2014. On one hand many relief are given and on the other hand adding more powers to CIT will cause hardship to NGOs. Let us take highlights of both :

Retrospective Tax Exemptions

It is proposed by Finance Minister that now a trust can claim exemption u/s 12 AA even for the period before applying registration of 12AA. Earlier trust can get tax exemptions only from the date of getting registration.

Exempt Past Assessment years

The Finance Bill, 2014 proposes to exempt Past Assessment Years where the assessment proceedings are pending before the AO on the date of registration.

Anonymous Donation

It is proposed that while calculating Tax Liability of Trust, instead of excluding entire amount of anonymous donation, only the amount in excess of 5% of total income or Rs. 1 Lac whichever are higher should be deducted.

Power of Cancellation

The amendment may create discomfort among NGOs is to increase powers of CIT to cancel Registration.  Earlier only in two cases CIT can cancel the registration 1) If he feels that activities of organization were not genuine and ii) activities were not being carried out in accordance with the object of the trust. In current Finance Act, another four such provisions added –

 if the institution’s activities are being carried out in such a manner that:

iii) its “income does not enure for the benefit of general public”

iv) “it is for benefit of any particular religious community or caste”

v) “any income or property of the trust is applied for benefit of specified persons like author of trust…”

vi)  its “funds are invested in prohibited modes”

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Manager, Programs – Require in CFD, Ahmedabad

We Centre for Development, need one person for One-to-One child sponsorship program. The designation would be called Child Welfare Officer. We need a person who can coordinate program in Gujarat. S/he would be based in Ahmedabad. Candidate must have knowledge of English language for report writing and communication. Candidate also have knowledge of computer, internet, scanning and uploading data and information online If candidate have experience of working with children will be given priority.

Expected Salary

Salary would be between 20,000 to 30,000 INRs. according to the experience.

Please send your CV on cfd.ad28@gmail.com by 1st of July, 2014.

Browse here about introduction of CFD

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Pros and cons of per/km Travel Policy of NGO ?

In earlier posts, we have seen what should be good NGO Travel Policy.  As questions asked by many of my readers regarding each traveling policy in detail,  I inspire to write a blog on each  Traveling Policies prevailing in the NGO sectors in detail and also its advantages and disadvantages. Today, Let us take a traveling policy used by many NGOs, from small one to huge one, which is per kilometer charge to project.

Charging per kilometer to Funding Agency

We all know that NGOs have to agree on a specific budget with Funding Agencies. Many of the NGOs have decided per kilometer rate and charged to Funding Agency and chttp://kcjmngo.com/wp-login.phpreated a Fund with whatever name, be it Vehicle Maintenance Fund, Vehicle Fund, Traveling Fund Reserve…. etc.. Now from this fund, actual expenses for travel (Fuel, Servicing, Oil etc…) is paid but if you want to invest in other extras or accessories, like a dash camera from Blackboxmycar.com just for security, it will need to come from your budget. Is this an ideal policy? In my opinion a BIG NO. One should avoid this policy. Lets us discuss positive and negative points of this travel policy of ngo. Start with Negative.

Why one should avoid this policy?

  1. The amount charged to Funding Agencies may or may not be same as actual total expenses of travel. This lead to generate surplus amount in your Vehicle Fund in your Balance Sheet at the end of the year.
  2. This give wrong impression, that you are saving some money from year to year from Projects supported by funding agency.
  3. Some NGOs even raise a Bill of Traveling to Funding Agency as support. This will lead into double entry of Income and expenses. First time entered as income in Grant Received and Project Expenses and second time Traveling Income by raising invoice and actual travel expenses. If you are doing this , stop it immediately.
  4. By using this you are violating terms of Project Agreement with Funding Agency. Because you agreed to spent budgeted money on specific Project. However when you adopt this policy, you are saving some money and not actually spending all as per agreed budget.
  5. As per FCRA rules, you have to spent Foreign Grants for the purpose it is received. You can not create reserve or Vehicle Fund  from FC money.
  6. When Vehicle Fund gets accumulated from year to year and showing balance of considerable amount on Liability side on Balance Sheet, it is assumed that you have that much amount in your Bank or FDs on the assets side correspondingly. This sometime become obstacles in getting fund from Funding Agencies.

What is the solution then ?

In my opinion, Actual expenses of travel to be booked to project. In supporting, original fuel bills, maintenance bills should be attached. In second level supporting, a Log book should be maintained. In case of more than one project, bills and expenditure should be divided proportionately.

Summary

Try to adopt that Traveling policy which suits your organization and your funding agencies more. My advice is, if you are following this travel policy, add one clause in the agreement with funding agency.

 

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Statutory Compliance for NGO after its registration

Statutory compliance for ngo in india

We have already discussed in this post about how to form NGO. After forming NGO in India, there are statutory compliance for NGO, which requires utmost care. Let us discuss all in detail, one by one.

PAN

After registration of NGO with State Charity Commissioner or Collector or Society Registrar, first thing is to apply for PAN of NGO. It is compulsory to apply for PAN after registration of NGO. You can apply PAN online through this website.

Registration u/s. 12A of Income Tax Act

Commonly known as 12A certificate, this registration is NOT mandatory. Purpose of getting this registration u/s. 12A is to get exemption from Income Tax on the Income of the trust, if all the conditions laid down in this section are fulfilled. You can check detail procedure here how to apply for 12A certificate.

Registration u/s. 80G of Income Tax Act

Again, this is NOT a mandatory one. However to give benefit of 50% or 100% exemption on donation to our donors, it is per-requisition to get the registration u/s. 80G of Income Tax Act. It is indirectly benefited to NGOs to raise funds. Go through this post for detail procedure to get 80G Certificate.

FCRA Registration

If there are possibilities to receive Foreign Funds for projects of NGO, a registration with FCRA department, Ministry of Home Affairs is compulsory. Without FCRA registration, NGO cannot receive any foreign donation or grants. Check more FAQs on FCRA here.

TAN

During the working of NGO at any point of time, if NGO become liable to deduct tax from source, it has to first apply for TAN. Like PAN , TAN application can be made online thought this website.

Service Tax Registration

Only when NGO is providing services like consultancy work or research activity etc… and if gross revenue from such activity cross the basic exemption limit of service tax, then NGO has to first apply for Service Tax Registration number. Again it is an online procedure and you can apply for registration here.

Professional Tax

Professional Tax is a liability of NGO to deduct from the salary of employee and deposited to Government. Professional Tax is State Government look out and thus different states of India having different rules for Professional Tax.

Retirement Benefit

Retirement benefits like Provident Fund, Gratuity, ESIC etc.. is applicable to NGO when it grow up and having employees more than prescribed limit in this acts.

Summary

Depending upon the work and size of NGO, you can either apply for all the above statutory compliance immediately after registration of NGO or you can apply as and when requirement arises.

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How to prepare Chart of Accounts in NGO

The new Financial Year is at the doorstep. There are some steps to be taken in the beginning of the year, so that the whole financial year will pass smoothly. One of such step is to prepare Standard Chart of Accounts in NGO.

What is Chart of Accounts in general?

In common terms, chart of accounts means, ledger accounts and group accounts shown in books of accounts. For different types of business activity and entity, chart of accounts is different. To maintain uniformity throughout the financial year, it is advisable to have standard chart of accounts. These charts will also help you to know how your seis tax relief investment scheme works.

Chart of Accounts in NGO

Why Chart of Accounts require in NGO ? As we know, there is vast difference in ledger accounts of corporate world and ledger accounts of NGO, specifically ledger accounts of Income and Expenses Group. When it comes to leading a business, some of the most important decisions you will make are about how you organize this list of GL accounts so that you, as the CEO, can create reports. In Corporate World, common ledger accounts are Sales Account, Service Income Accounts, Purchases, Salary Account, Telephone Expenses, Office Expenses, Stationary Expenses etc… However in NGO, apart from above, we have to take care of Budget line items of particular funding agency, so mainly ledger accounts are equal to line item of budget. Here an NGO grouping is made according to projects. Thus it is one of important exercise accountant has to do is preparing Standard Chart of Account in NGO at the beginning of the year. For those of you who are new to this task, you can work alongside other future CEOs at Search Fund Accelerator while taking advantage of the firm’s best practices and technologies in this and any other field.

Steps to prepare Chart of Accounts in NGO

 

Step 1 : Identify all continuing projects and its ledger accounts

Al l the ledger accounts of the projects, which are continue as on 1st April, are to be identified and put on paper or prepare an excel sheet with grouping.

Step 2: Identify other common Income and Expenditure Accounts

Apart from Projects, if NGO is doing other activities, like income generation, production, consultancy assignments etc… then, one hast to identify this type of common income and expenditure accounts and add in to that excel sheet.

Step 3 : Balance Sheet Items

Chart of Accounts also includes even balance sheet items. There are mainly two types of Balance Sheet items, some of which are same from year to year like Trust Fund Account or Corpus Fund Account or Building Reserve Fund Account, Name of Bank Accounts etc …. and others are changing in nature like Salary Payable Account, Audit Fees Payable Account etc.. One has to incorporate both these type of balance sheet items in the list.

Step 4 : Grouping

After finalizing all ledger accounts, next step is to give group name to it. We can give grouping according to project name like Bal Vikas Shiksha Group Expenses or Mahila Suraksha Project Expenses. Also, for Balance Sheet items, group  name is given like Grant Unutilized, Receivable Grant etc…

Step 5 : Enter Chart of Accounts in Accounting Software

Once exhaustive list of accounts are prepared, it should enter into Accounting Software maintained by NGO. Either you have to enter chart of accounts manually in the software or you can import excel into accounting software if such facility is there. In Tally ERP9, you can easily import chart of account from excel sheet.

Example of Standard Chart of Accounts

Please check out below an example of Chart of Accounts prepared by me. This is standard example, you have to prepare according to your NGO’s project and expenditures.

chart-of-accounts-ngo

Summary

Chart of Accounts in NGO is to be prepared every year, because every year some projects are closed and some new projects are implemented by NGO. Looking to benefits of preparing chart of accounts, it is highly recommended that one has to spare some time right at the beginning of financial year to prepare chart of accounts in NGO.

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