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Myths and facts about NGO Budget

myths-ARF

Importance of NGO Budget

Now a days, preparing NGO budget requires three dimension knowledge of Financial, Project and Activities and Presentation skills. NGO budget can not be prepared by each and every one. Today, Let us discuss some of the myths regarding NGO Budget.It becomes practice and tradition year after year. But facts are different than these myths.

 1. Budgets cannot be changed

Generally, we all believe that, once Budget is fixed an approved by donor, it can not be changed. But the fact is budgets can be modified to some extent. You can diversify your resources and cut your costs. Of course, take prior permission from your donor agency for this.

2. Budgets can be developed overnight

This is very common myth that budget can be prepared in couple of hours. Take the blank format of Excel Sheet, Put the figures and done. Often in our effort to meet deadlines, we develop budgets overnight. This ends up in poor planning and even rejection of proposals. Always take time to build your budget – your NGO should live with a budget always!

3. Budgets have approximate figures

While preparing budget, we believes that figures contain in the Budget need not be exact. If it is nearby or approximate, than its OK.  But the fact is Budget should be developed on a certain base. They cannot be developed without any basis. In most cases, the basis should be the previous year’s income and expenditure. If applying for a project, look out for the expenses of the project’s previous year.  Donor funding limitation to be also considered.

4. Budget can be developed by a single person

Generally, Budget is prepared by either Project coordinator or Trustee – single person or may be two persons. However Budget work is a joint exercise. It is a team work. Involving the entire team including Administrative and Accounting Staff is important to produce an effective budget.

5. Budgets have same formats

All budgets do not have same formats. Different budgets are developed for different purposes. If you are writing a proposal, it is a different budget format and if you managing an organization, you will have a different budget format. Similarly, different donor agencies have different budget formats.

source : fundsforngos

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Donation in cash for more than Rs. 10000

Donation in Cash

Can an NGO collect donation in cash? yes. NGO can collect donation in cash. However it is advisable to take donation by cheque and make the system transparent.

Income Tax Act and Cash Donation

From 1/04/2013, the donor will not get any tax benefit for donation in excess of Rs. 10000 unless such sum is paid by any mode other than cash.

As per the new sub section 5(d) to section 80G of the Income Tax Act 1961, any payment exceeding a sum of ten thousand rupees shall only be allowed as a deduction if such sum is paid by any mode other than cash.

Consequences

From the NGO point of view, NGO can accept donation in cash for more than Rs. 10000, but does not issue receipts claiming 80G exemption. From donor point of view, he can not get exemption under section 80G.

Also note that Rs. 10000 limit is per year per donor means a single donor cannot give more than Rs. 10000 in cash in entire year.

Applicability

This amendment will take effect from 1/04/2013 in relation to A.Y. 2014-15 and subsequent Assessment years.

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5 things you must do at the start of Financial Year in NGO

New Financial Year has just started, and everyone is busy in closing books of accounts of last year. Sometimes, the closing of financial year is done in the month of June or July. If Accounts and Finance running from one financial year to another as it is, without change, sooner or later, it will become absolute. So, this is my advice that at least follow this 5 things at the beginning of the Financial Year.

1. Annual Budget

NGO has establish to fulfill a mission with the vision in mind. And to achieve that, one needs long term plan which breakdown in a yearly column. That is called Annual Budget.  Now a days, its a trend that from big funding agency to CSR companies to small donors, everyone asking whether you have prepared Annual Budget or not. The right time for the preparation of Annual Budget for NGOs is in the Last week of March or first week of April, not later than that. Read this blog on Annual Budget.

 

2. Changes in Multi-Year Projects

If you  have multi year project, most likely budget of such project will change with the change in financial year. Mostly salaries and staff payments have incremental components and increase in the next financial year. Thus, Accountant must have to ascertain such changes in new financial year  in particular budget and should communicate to program team well in advance.

 

3. Update Financial Manual

Financial Manual is a policy document and need to review every year. Every year, there are many changes in laws and regulations which affects the financial transactions of your organization. Generally, accountant used to start following the new laws and regulation but forget to modify Financial Manual Accordingly.

Example

Cash Expenditure limit was decreased from Rs. 20000 to Rs. 10000. But still many NGO has the limit of Rs. 20000 in their Financial Manual. Nobody bothers to read and update it.

 

4. Splitting Tally Database

Mostly, Accountants in NGOs are lazy to split Tally company and whereby separating database according to Financial Years.  I have seen many NGO accounts, where tally database is same since last 8 to 10 years. Obviously, because of this, size of database increase and speed to work in Tally getting slow to worse. So, It is advisable to split the tally company at the end of the Financial Year.

 

5. Chart of Accounts

Chart of Account is the base of accurate accounting and desirable presentations of Income & Expenditure Accounts and Balance Sheet of NGOs. As, compared to corporate, NGO do not have standard format for its Financial Documents, but they can be created as digital documents in PDF format using software as sodapdf online. I observed, that accountant creates and alters ledger accounts as and when required. So, this is one of the important point to follow at the start of the Financial Year to prepare Chart of Accounts or modified according to the need.

 

Did I miss something?

Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subjects.

 

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Recruiting has begun

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Nulla consequat massa quis enim. Donec pede justo, fringilla vel, aliquet nec, vulputate eget, arcu. In enim justo, rhoncus ut, imperdiet a, venenatis vitae, justo. Nullam dictum felis eu pede mollis pretium. Integer tincidunt. Cras dapibus. Vivamus elementum semper nisi. Aenean vulputate eleifend tellus. Aenean leo ligula, porttitor eu, consequat vitae, eleifend ac, enim.

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Domain Extension “.ngo” – exclusively for NGO

Need for exclusive domain extension “.ngo”

Most of the NGO using .org extension for their website. However .org by comparison is an open address. Anybody, an individual, a not-for-profit, even a commercial organization, can register in .org, and there’s no requirement—it’s open. Because of this, urgent need emerge to have separate and exclusive domain for NGO.

Why .NGO?

.NGO will be the exclusive domain for local and global non-governmental organizations looking to advance their missions or to inspire their communities. .NGO will provide immediate recognition for organizations to pursue a cause and make a positive impact. PIR (Public Interest Registry) is the non-profit organization managing .ORG – the domain that has served the non-profit community for more than 25 years – making it the natural choice for managing the domain extension “.ngo”.

The NGO term holds great weight among their communities, setting these organizations apart from commercial or governmental entities. .NGO is the definitive domain address where NGOs can differentiate themselves. The NGO community plays host to many different types of organizations operating in a variety of areas. Environmental, educational, religious, and emergency relief are just a few areas in which NGOs operate. PIR believes that each of these communities could benefit from a specific , exclusive identification on the Internet provided by .NGO. .NGO is the exclusive domain address for self-identified NGOs worldwide. .NGO’s exclusivity lends itself to reaching a broader audience who are seeking to make a positive impact on the world in any way they can.

Who Qualifies for .NGO

A NGO is defined as an entity whose mission and activities are broadly centered on improving the human condition; and are (a) non-governmental, (b) non-profit and (c) non-criminal. Members of the NGO Community include both Non-Governmental Organizations (NGOs) and NGO membership organizations.

NGO membership organizations include the following, and may expand over time:

  • Global organizations: International associations and/or classification-based associations.
  • Regional organizations: Associations across broad geographic areas, potentially including multiple countries or jurisdictions.
  • Local organizations: Associations or groups that provide support and memberships at a country or local level

PIR is working with the NGO community to establish the most appropriate mechanisms to verify NGO status for .NGO registrants. PIR will apply these mechanisms for the registration of the .NGO TLD in close and continuing cooperation with the NGO community. .NGO will truly be a domain extension built for the community, by the community.

Are there any .NGO websites right now?

No, this will, likely, go live sometime in late 2013 or early 2014. The application process is still happening. The evaluation of applications will take a little bit of time. There have been 1,400 applications for new addresses from around the world, 1,400 new extensions. So, think .com, .net, .org, .in; 1,400 new addresses.

How to apply for .NGO ?

You can apply for free pre registration here.
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What a wild ride!

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  1. Nulla consequat massa quis enim.
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  3. In enim justo, rhoncus ut, imperdiet a, venenatis vitae, justo.

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A small gallery

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  • Nulla consequat massa quis enim.
  • Donec pede justo, fringilla vel, aliquet nec, vulputate eget, arcu.
  • In enim justo, rhoncus ut, imperdiet a, venenatis vitae, justo.
  • Nullam dictum felis eu pede mollis pretium. Integer tincidunt. Cras dapibus. Vivamus elementum semper nisi.

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What you should check before Submitting FC-6?

FCRA Annual Return

Every NGO, registered under Foreign Contribution Regulation Act (FCRA), must have to file FCRA Annual Return under FC-6 form every before 31st December. You can check how to file FC-6 form here.

When you are filling FC-6 return online, there are less chances of mismatch of figures like grants, expenses and closing balance. However, some of the information must be checked before submitting the same.

Cross Check before filling FCRA Annual Return

Sr Financial Documents FCRA Online
1 Last Year FC Return Closing Balance FC6 Purpose & Address Previous Balance
2 Receipt & Payment (FC) Receipt Side FC6 Part II SR No 1(A)
3 Receipt & Payment (FC) Payment Side FC6 Part III Total Spent
4 Balance Sheet (FC) Closing Cash &Bank Balance FC6 Part III Closing Balance
5 Bank Pass Book  Credit Summesion FC6 Part II SR No 1(A)

 

 

 

 

 

 

Summary

Utmost care should be taken before filling FCRA Annual Return, so that any errors or mismatch of figures with books of accounts can be omitted. Such kind of errors while filling FCRA Annual Return may cause cancellation of FCRA registration to NGO.

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Trust Assest use by Trustee

Can Trust Assets used by Trustee?

Trustees can not used Trust Assets for purpose other than official. Mostly Car, mobile phones, Air Conditions other furniture etc.. if used by Trustee or other related party, trust must have collect the hire charges for that.

One of the coolest incident i have read is as follow :

Once upon a time, there was an NGO. One day they bought a refrigerator for Rs.5,445. They kept it at the Managing Trustee’s house. The income tax people wanted to know the reason for this. The NGO said: ‘Our office building was not ready. We wanted to offer cold water to our Swedish donors’.

Result? Tax people rejected the explanation and withdrew the NGO’s income tax exemption. The High Court also confirmed it.

Moral of the story?

Make sure the Trustees or key persons do not use the NGO’s assets. And if they are used, recover hire charges from them.

Hope this will help you in your NGO, if you have any question, you can ask here or chat with us. Also your comments are welcome on the above subjects.

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Do you show Disclosure of Related Party Payments ?

Disclosure of Related Party Payments

As per Accounting Standard 18, issued by Institute of Chartered Accountants of India, business entity has to show disclosure of Related Party Payments. This Accounting Standard is applicable from 1st April 2001. You can read full Text of AS 18 here.

NGO and Accounting Standard 18

AS 18 is also apply to NGOs  in some cases. NGO has to show such disclosure when salary, remuneration or any other payments made to Chief Functionary, Trustees or Top management and associated with NGOs.This disclosure will form part of annual audited financial statements.

Some Examples

Remuneration paid to Trustee, Managing Trustee, Chief Functionary
Consultancy paid to Trustee etc…
Consultancy paid to Related NGOs where one of the Trustee
However Reimbursement of Traveling Expenses to attend meeting is not covered by this AS.Where to show such disclosure

Generally, this disclosure is to be made in financial statement of NGO. As per Income Tax Act, even Auditor of NGO has to disclose such kind of payments to his Audit Report under section 10B. In my opinion to reflect greater transparency, one has to show it in Financial Statements, Audit Report and even in Annual Report of organization.

Summary

As public money involved in NGO, it is accepted that each and every transaction must be very very transparent. Such kind of disclosure serve the above purpose and also it works as an internal check system in broader senses.

Hope this will help you in your NGO, if you have any question, you can ask here or chat with us. Also your comments are welcome on the above subjects.

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