1. Documentation and Audit Reporting in NPO Sectors Patna 23 rd July 2012

2. Contents  Setting the context  Documentation  Audit Reporting in NPOs  Opportunities for members  Discussion

4. Size of NPOs  There were nearly 33 lakh NGOs in India in 2009  Number of internationally operating NGOs is estimated at 40,000  53% are rural based and 47% are urban based  Nearly half of them are unregistered and mostly in rural areas  25% have religious identity, 21% are community/ social service based and 20% work on education  Those who are registered are majorly registered under Societies Registration Acts  Nearly 75% NPOs have only one or less paid staff and only 10% have more than 10

5. Revenue and Donors  No credible source of total funds received by NGOs from local sources  Total number of organisations registered as on 31.12.2011 was 43,033  Total receipts of NGOs for 2009-10 from Foreign Contribution was 10,338 crores and that till Dec 2011 was 7,810 crores.  More than 10 crore households donate for charitable causes  About 65% of all donors live in rural India

6. Other details  More than 20, 000 active organizations, half a million professionals  Uneven presence in the country, though can identify 5 good organisations per district  More than 100 organisations/professionals from such organizations received international awards & recognitions  More than 200 such organizations and their staff have been involved in supporting development projects in other developing countries

8. When were you born? SCHOOL BIRTH CERTIFICATE Who will get admission?

9. Are you a couple? MARRIAGE CERTIFICATE Who will be left alone?

10. BALANCE SHEET What documents do you have? BANK BALANCE SHEET Who will get bank loan?

11. DEATH CERTIFICATE When did he die? DEATH CERTIFICATE How else can you prove?

12. So what do we understand?  Documentation is very very important  It helps us in basic necessities (admission in school....)  It helps us in getting out of troubles (couple in a park....)  It helps us in our economic activities (getting bank loan....)  It helps us even after death (succession....)

13. What do we document?  Basic events – Registration, bank account opening, Income Tax registration, accounts,....  Activities – Workshops, meetings, trainings,....  Processes – Governance, Accounting, Basic implementation process, How to execute activities e.g. Trainings,....

14. How do we document......  Reports  Minutes  Records, Registers, Statements  Dedicated software e.g. Tally for Accounting records  Videography  Photography  Guidelines and Manuals ........

15. What are the common features of documentation?  Systematic  Preservation  Easy storage  Easily accessible  Uploaded on internet (reports, etc.)  Admissible in a court of law  Relied upon by enforcement agencies

16. Never do this  Use of photos/ banners of one event to show for another event  Showing other organisations events/ programmes as yours  New records shown to be maintained since long  Back dating of documents  Forged documents/ signatures ........ It gets caught very easily

17. Systems and Procedures Manual Level of compliance Size of NGO Low levels of compliance

18. Systems and Procedures Manual Existing form of Manual  Available in Trust/ Society deed  Coverage includes Appointment of the Board Number of meetings Authority for banking operation, etc. But what needs to be covered is much more than what really exists…….

19. Contents of the Manual Governance  Overall management of the organisation  Constitution of the Board  Appointment, Retirement, Removal of the members  Qualifications of the members  Powers, rights, duties and responsibilities of the Board  Changing the Trust/ Society deed  Board/ General body meetings

20. Contents of the Manual Programme Implementation  Organisation structure  Roles and responsibilities of staff  Reporting systems  Human Resource guidelines  Technical and Financial Monitoring  Programme Evaluation

21. Contents of the Manual Internal Control Systems and Risk Management  Internal control procedures  Internal Audit  Internal checks  Procedures of cheque and voucher sanction  Compliance with law

22. Contents of the Manual Financial Management  Fund Management and System of budgeting  Basis of Accounting and major accounting principles  Cash management and Banking operations  Management Information System  Fixed Assets Register and its purchase and sale  Adherence to various guidelines of different funding agencies  Inventory management  Local contribution and Investments

23. KYC Norms for Members  Name of the Organization  Deed of Registration  List of Governing Body Members/Board of Directors  PAN details of organization and Key Person  Details of main funding agencies and on-going projects  List of Bank Accounts  Registration / Recognition with various Government Departments  Contingent Liabilities  Previous Auditor

25. Realities of audit…..  All funding agencies require audited statements  All programmes requires audited statements  All Acts require audit – Societies Act, Trust Act, Income Tax, FCRA….  Government programmes are prone to external auditors  Many types of audits – Statutory, Social, Tax, Stock, Internal, Pre-audit…… It is said excess of everything is bad...

26. Realities of audit….. So what is the result…….  Audit is only done for compliance, no improvement in systems  Multiplicity of audits increase cost of compliance for the organisation  Quality of audit requires improvement  …..

27. Internal audit  Contribution in kind and records thereof  Maintenance of stock registers  Details of programme expenditure and matching with technical records  Livelihood and training activities  Self Help Groups and its activities ICAIs Technical Guide on Internal Audit of NPOs

29. Opportunities for Members ConceptVisionMissionObjective NGO NameFormationRegistrationLegalities ProposalFundersAppraisals Funds Projects GuidanceMonitoringEvaluationLearnings Execution Cap Building Trainings ManualsOn line Capacity Audits Compliances Returns Governance Regulation GovernmentProfessionSector Contribution ExpertiseValueGuidanceDirection CA Legal frame Masses etc.