Areas of Internal controls which are focus during Donor Financial Due Diligence

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Why adhere to filing requirements?

2b (i). Compliance-Regulatory (Reporting)

  1. Income tax filing
    • Form 10B/10BB-Annual Audit Report
    • Form ITR-7-annual income tax return
    • Form 10BD-statement of donation
    • Form 10BE-Donation receipt/certificate
    • Form 9A/10 for deemed application/accumulation
    • Form 15CA/CB for making remittance abroad
  2. Income tax proceedings-ITR-7 acknowledgement, IT assessment-143(1) and (1A), 143(2), 143(3) etc
  3. FCRA
    • Annual Return in Form FC4
    • changes through forms FC-6A to 6E-change in name, objects, FC bank, office bearers
    • Renewal in Form FC-3C if covered through blanket permission (31.12.24 at present)
  4. TDS/TCS related
    • Monthly challan -Quarterly return
  5. EPF/ESI-ECR for EPF and payment challan for ESIC-15th of following month. Six monthly ESI return (Apr-Sep-11 Nov, Oct-March-12 May)
  6. PT payment as per state requirement
  7. SCE-reporting as per specific state act including annual reporting as required
  8. GST-monthly payment challan based on GSTR-3B, Monthly or quarterly return and Annual GST Return
  9. Gratuity-GGS policy premium based on actuarial calculation for compliance with Payment Gratuity Act
  10. Annual disclosure requirements as per Listing Obligations & Disclosure Regulations (LODR) of SEBI if registered on SSE

2b (ii). Compliance-constitution related

Annual reporting to registration authority

Vision & Values

Mission, Vision & Core Values of an organisation share the purpose of its existence and its direction and culture.

Why? The above helps donors assess whether there is alignment of organisation with their funding priorities and goals

Formulation, revision as org evolves and implementation in letter and spirit as robust internal controls framework. Policies should facilitate action and therefore policies are dynamic documents evolving with the org.

Policies should be in simple language and easy to understand and follow by all staff categories, that is key.

Audits & Assurance

Type of audit conducted for NPOs

Are statutory auditors approved by the General Body and with a formal agreement.

Audit process-periodicity, MRL, ML, independent auditor report and financials with Unique Document Identification No (UDIN) no from UDIN portal of ICAI, ATR.

Red flags, adverse observations, litigations etc pointed in audit reports.

Assurance undertaken-broader range of subjects.

Audit and assurance provide proxy indicators to donors on red flags for deciding to fund or otherwise Often, donors do get in direct touch with auditors.

Annual financial statements-separate for FC funds

Provides insights and assurance on ‘state of financial health’

Key points:

Key components of audited financial statements:

Balance Sheet-liability and assets of an org as at a point of time
ICE statement during a time period
RCP (cash) statement

Movement of inflow and outflow of cash

Accounting Policies and Notes to Accounts

Most organisations do not pay attention to this, many times these are not included in financial statements

Accounting policy exhibits the standards followed for arriving at and presenting various items of financial statements. ICAI has prescribed accounting standards to be followed so that the financial statements are standard, comparable and consistent. Notes to accounts is management’s explanatory notes for certain important items of financial statements for explaining and clarifying to the reader.

What do the donors look in audited financials?

Visibility & Reputational-Market due diligence

Please note: Information is for reference only. Read our disclaimer here.


Revision #13
Created 6 January 2025 08:26:21 by Pooja
Updated 23 June 2025 16:35:27 by Pooja