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Audit of NGOs

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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

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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)

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• Registration as per State Public Trusts Act, if any Ex:

Bombay Public Trusts Act, 1950

• Income Tax, 1961

• Foreign Contribution (Regulation) Act, 1976

Registration of NGOs (Contd.,)

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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)

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• Contributions-in-kind (Assets or Articles- like

food/stationery, etc.)

• Other Income (like Subscriptions, Sale of produce or

publications, etc.)

Sources of Funds for NGOs (Contd.,)

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Application of Funds

• Establishment Costs

• Office and Establishment Costs

• Programme or Project Expenses

• Maintenance Expenses

• Charity, Donations and Contributions to other NGOs

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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

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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

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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

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THANK YOU

Vasudevan.V (Vasee)(vasee.suresh94@yahoo.com)