Audit of NGOs 1

Features Non-profit organisations Purpose of their existence = social cause Registered as trusts/societies/ Sec-25 companies (1956 Act)/ Sec-8 companies (2013 Act) Accounts: Cash or Accrual Basis (Accrual basis is mandatory if registered under Companies Act) Whether to audit or not? Refer respective Acts 2

Registration of NGOs Registration of trusts- mandatory, if a) NGO created as trust b) Relates to immovable property worth more than Rs.100 ( Sec 17(1) of the Registration Act, 1908 and Sec 123 of the Transfer of Property Act, 1882) 3

Registration as per State Public Trusts Act, if any Ex: Bombay Public Trusts Act, 1950 Income Tax, 1961 Foreign Contribution (Regulation) Act, Registration of NGOs (Contd.,)

Sources of Funds for NGOs Corpus Contributions (towards Capital Fund. Exemption u/s 11(1)(d) of Income Tax Act, 1961) Revolving Funds Contributions (Interest Income is either added to Revolving Fund or credited to I&E a/c) Specific Donations (Specific FA) 5

Contributions-in-kind (Assets or Articles- like food/stationery, etc.) Other Income (like Subscriptions, Sale of produce or publications, etc.) 6 Sources of Funds for NGOs (Contd.,)

Application of Funds Establishment Costs Office and Establishment Costs Programme or Project Expenses Maintenance Expenses Charity, Donations and Contributions to other NGOs 7

Audit Aspects Audit of Income (Grants, Fees, Dividends and Interest etc.) Audit of Expenses (Establishment Expenses, Project expenses, etc.) Proper Controls on Assets received as Contribution Constitution, Bye-laws and Minutes Book verification 8

Audit Aspects (Contd.,) Earmarked funds are properly used?- verify letter from donors Verify controls in respect of contributions-in-kind Fixed Assets, Investments and Current Assets (Bank balance, Cash in hand, Stock, etc.) Loans and Advances, Receivables, Reserves 9

Audit Aspects (Contd.,) Corpus Funds Mechanism for BRS and Cheque and Cash collections. Maintenance of Receipt books Internal Controls on recording receipt of Donations and Grants 10

THANK YOU Vasudevan.V (Vasee) 11