You can read the information below in over 15 languages! Simply use the translation tool in the top-left corner of the screen to select your preferred language, including অসমীয়া, বাংলা, ગુજરાતી, हिन्दी, ಕನ್ನಡ, മലയാളം, मराठी, মৈতৈলোন্, नेपाली, ଓଡ଼ିଆ, ਪੰਜਾਬੀ, संस्कृतम्, தமிழ், తెలుగు, and اُردُو.
### ### Objectives of an NPO - Primary objective: Maximise social benefits/services/impact for beneficiaries it serves - Secondary objective: - Economy - control costs - Efficiency - achieve objective in minimum costs (Process, doing things right) - Effectiveness - measure of achievement with reference to objectives (Result, doing the right thing) #### Change - The New Norm for NPOs - Change - Donor expectation - Statutory and regulatory landscape - Govt orientation towards charity - Technological developments - Change offers: Risks and opportunities - Impacts organisation in terms of future growth, even existence. #### Types of Resources an NPO uses - Material - capital goods, program goods, supplies, technology - Money - financial resources - Manpower - Human resources of organisation #### Main Functions of an NPO - Program - Finance & Accounts - Admin - Communications, Advocacy and Public Relations - Research - New Business (fund raising) - Training & Capacity Building - Every staff in every of above function performs a finance role ### Financial Management - Financial Management is the business function that deals with planning, organizing, monitoring and controlling financial resources of an organization. - It focuses on spending financial resources to deliver greater social impact - Why financial management: - Accountability and Transparency to donors and communities we serve - Allocation of financial resources for organisation activities - Investment decision for resources - Statutory/regulatory compliance - Financial Reporting to stakeholders - Futuristic planning-Financial security, Sustainability and long term growth - Internal Controls framework - Custody of financial resources to minimise resource misuse and embezzlement - Better decision making on Finance to fulfil the Mission based o data and analysis - Enhanced credibility and trust thereby giving a competitive edge - Manging risk through Internal Controls - Meeting organisation goals #### Finance Function in an NPO - Finance function ensures organization's financial health and sustainability - The finance function’s role in an NGO is: - Manage financial resources of the organization - Make strategic finance decisions for sustainability - Operational support-uphold internal controls and support other functions including fundraising - Report to stakeholders to help decision-making - Statutory and regulatory compliance - Manage risks through suitable internal controls Difference between Accounting & Finance though used interchangeably: Accounting looks Back while Finance looks Forward! #### 3 key roles of Finance function in an NPO 1. Enable Value Creation 2. Shape Value Creation 3. Narrate Value Creation - These are in chronological order - Role is performed by CFO and team he/she leads in Finance function duly supervised by Chief Functionary and Governing Board - Value creation for an NPO means maximising social outputs/outcomes using the various resources ### Role of Finance Function in NPO #### Enables Value Creation through 1. Planning: - Financial Resources for operations - Financial sustainability - For Controls (Framework)-Polici 2. Forecasting-long term and short term - Budgets-organisation and programs/projects - Fund flows - Operating Cash 3. Resource Allocation: manpower, material, money - Banking - Treasury & cash management - HR, Goods and services procurement as per policy and prevalent laws - Inventory management-slow moving, waste, loss - Asset management-depreciation, obsolescence, loss etc 4. Recording: - a. Book keeping i.e. recording transactions - Accounting i.e. summarisation, analysis and interpretation of financial data - Closing and reconciling-bank, vendor, employee, grant etc ### Role of Finance Function in NPO #### SHAPES value creation through 1. Performance Measurement and Management - Budget monitoring (budget variance analysis) - organisation, projects - Measuring Value for money (VFM) - ratios - Return (social return) on investment (SROI), Social impact audit 2. Monitoring Controls - Budgetary (realignment, reallocation) - Adherence to policies and procedures for Internal control - Audits and assurances-statutory, internal donor, Govt - Monthly MIS-Financial, Program 3. Facilitator - support on finance to all other functions #### NARRATES the value creation through 1. Financial reporting - Donors - periodic FR, annual audited UC, supporting fundraiser with financial data - Govt bodies - IT, FCRA, Registering agency, EPF, ESI, TDS, GST - Board/top management - financial health 2. Focal point with external stakeholders on institutional matters - obtaining statutory approvals - financial assessment by donors, govt etc. ### Role of Non Finance Staff in Financial Matters - Non finance staff handle resources which have value - Non finance staff authorise various types of expenditure - travel, procurement, office exp, statutory dues - Non finance staff own and operate project budgets - Project decisions of Non finance staff in field have financial implications - allowance/disallowance - Decisions in field of Non finance staff have compliance implications with laws of land - Non Finance staff actions affect reputation and even our very existencePlease note: Information is for reference only. Read our disclaimer [here](https://pattic.org/t/website-disclaimer/72).
# Grant ManagementYou can read the information below in over 15 languages! Simply use the translation tool in the top-left corner of the screen to select your preferred language, including অসমীয়া, বাংলা, ગુજરાતી, हिन्दी, ಕನ್ನಡ, മലയാളം, मराठी, মৈতৈলোন্, नेपाली, ଓଡ଼ିଆ, ਪੰਜਾਬੀ, संस्कृतम्, தமிழ், తెలుగు, and اُردُو.
#### What is a Grant? - Funds given from one entity to another for a public benefit/charitable purpose - Usually given to a charitable entity or NPO - Is not an automatic entitlement, it is for an obligation to be discharged - Grant is trust money with 3 actors-grantor, grantee (trustee with fiduciary responsibility to grantor and beneficiary) and beneficiary - Grantor does not get direct benefit and grantee is not expected to payback if utilised for the intended purpose - Grant comes in different forms from different sources-govt (grant-in-aid), retail, corporate, foundation - Are awarded directly or through a competitive process ##### Exchange Transaction vs Grant - Exchange transaction (as per GST Act) involves: - Supply of goods and services - Consideration - In course of furtherance of business - Grant is not exchange transaction since there are - No specific beneficiaries - Nothing in return from beneficiaries or benefit derived by grantee - Not for furtherance of business Understanding above for grant contract is crucial otherwise contributions maybe considered as exchange transactions inviting GST and TDS implications and also charitable status maybe jeopardised. ### Grant Management - Involves two key players: - Grantmakers-grantor/donor - Grantseekers-grantee/donee - Grant management is a system that includes identifying, applying for and securing grants, adhering to grant conditions, evaluating outcomes. - Grant management process in grant management system (GMS) is the grant management lifecycle. #### The Grand Management Process - Planning - Opportunity - Application - Award - Execution - Closeout #### Grant Management Life Cycle - Pre award - Planning-need identification, SWOT, due diligence preparatory etc - Scout Funding opportunity - Grant application & review-eligibility and Qualification - Award - Award Negotiation - Award Decision - Award Notification/Contract - Post Award - fund request-advance, reimbursement etc, - Implementation - Reporting-program and finance - Post award amendment-key changes and approval, budget realignment, NCE - Performance/impact - Closeout - Reapplication #### Principles of grant management - **Accountability, Transparency & Trust** for grant funds - **Efficiency & Effectiveness** with grant funds - **Compliance** with laws of the land - **Adherence** to terms and conditions of Grant Agreement - **Internal controls** in place - **Communication & Timely Reporting -** narrative and financial as per grant contract ### Fund Accounting NGOs follow Fund Accounting for managing grants: - Fund accounting is an accounting system for recording and tracking project resources (fund) whose use is limited/restricted by specific conditions by donor through a grant contract - This accounting system emphasizes accountability/productively over profitability which is the accounting basis for for-profits Features: - Separate funds (buckets/compartments) - Restriction on use - Separate budget established for each fund/project and income credited and expenses debited from the fund - Transparency - Software for recording - Good internal controls - Monitoring and Reporting mechanisms ensures fund accounting #### Type of funds for NPOs Grant word is not comprehensively defined in Indian laws, referred to as Voluntary contribution/donation (VC) in Income Tax law. FC under FCRA and CSR fund under CSR law. ICAI has classified funds for NPOs in its Technical Guide on Accounting for NPOs: 1. **Unrestricted funds: Funds with no specific restrictions on use (purpose)/time** - Corpus (acknowledged in IT law)-non-refundable, non reducible, reinvestment obligation. - Corpus only - when specific donor direction that it be treated as corpus by donor - not income but capital per IT Act - to be invested in section 11(5) modes of investment - considered application when replenished - not application if given to another charity. Corpus income shown in I&E. - Donations i.e. no obligations attached, a gift - Designated/earmarked funds-appropriated and set aside for specific purpose/future, self imposed by management and not binding in law for NPOs - General funds-surplus/deficit transferred from I&E which are not designated. Free reserves 2. Restricted funds: funds with conditions/restrictions - Project/program grants-to be utilized as per terms and conditions of award, Restriction-by purpose and by time. There could be other conditions/restrictions. Principle of fund based accounting - Endowment: fund amount cannot be utilized, only income utilized for general/specific purpose as per donor stipulation. The recipient owns it but does not control it. - Restricted funds maybe - Permanent restriction - Temporary restriction: restricts use for a certain period or meeting objectives after which it becomes unrestricted. ##### Format of financial statements as per ICAI BALANCE SHEET AS AT \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ SOURCES OF FUNDS (LIABILITIES) Schedule Current Year Previous Year - UNRESTRICTED FUNDS Corpus Fund/General Fund/Designated Funds - RESTRICTED FUNDS-Unutilised Grants (Deferred Revenue), Endowment - LOANS/BORROWINGS-Secured/Unsecured - CURRENT LIABILITIES & PROVISIONS TOTAL APPLICATION OF FUNDS (ASSETS) - FIXED ASSETS-Tangible Assets/Intangible Assets/Capital Work-In-Progress - INVESTMENTS-Long Term/Short term - CURRENT ASSETS-LOANS, ADVANCES & DEPOSITS-Grant Receivable TOTAL Significant Accounting Policies and Notes on Accounts #### Net Assets - In NPOs, net assets is like net worth (share capital+reserves & surplus) in case of for profit entities - Net assets=Total Assets-Total Liabilities - Net assets means owner funds (capital) although there are no owners in charitable institutions generally - In an NPO, net assets mainly include corpus and general funds --- Format of financial statements as per ICAI Name of Entity \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ INCOME AND EXPENDITURE ACCOUNT FOR THE PERIOD/YEAR ENDED \_\_\_\_\_\_\_\_\_\_ INCOME Schedule Schedule Current Year Previous Year - Grants & Donations - Other Income-rent, interest, incidental business Income, Fee & Subscription, TOTAL (A) EXPENDITURE - Program Exp - Administrative and General Expenses, Finance costs - Depreciation & Amortisation Expenses TOTAL (B) Excess of Income over Expenditure (Surplus) or excess of Exp over Income (Deficit)(A-B) (Net Income in for profit entity) - Balance Being Surplus (Deficit) Carried to Balance Sheet-General Fund, Transfer to Designated fund, Building fund/ Others (specify) Significant Accounting Policies and Notes on Accounts --- #### Accounting for grant recognition by NGOs in India **Practise followed as per convention-no legal directive:** Option 1: Gross grant treated as income Option 2: Gross grant routed through Balance Sheet only-asset and liability side settled Option 3: Grant treated as income to the extent of expenditurewhile unutilised grant is a liability--hybrid method - AS 9 mentions income recognition to the extent of expenditure for grants applicable if there is business/commerce etc - Follow the principle of prudence in selecting the option for recognition. #### Recipient, Sub-recipient and Vendor **Recipient** is the organization receiving the grant, sometimes called the Prime recipient because it has full responsibility for grant funds. The document evidencing this arrangement is grant contract **Sub-recipient** is involved in substantive activities of the award project. The recipient passes on some or all of its duties to the sub-recipient called sub award. All the terms and conditions from the grant award flow down to sub-recipients through a document evidencing it called sub grant contract **Vendor/service provider** provides goods/services to the recipient to accomplish project’s purposes. Selected terms and conditions might be passed through to the vendor. The document evidencing is a goods/service contract #### Cost-Key concepts **Cost-amount spent to acquire an asset** **Expense-amount spent on regular operations** - Classification of expense for NPOs **Natural expense head-WHAT (type of expense) the funds are being spent on-salary, rent, hotel accommodation etc** - The natural expenses are grouped into group heads like HR cost, Travel, capital cost, office exp, legal & professional etc - Group head-Travel-natural expense-conveyance, airfare, meals, accommodation etc - Group head-HR-natural expenses-salary, HRA, PF, Gratuity **Furcation expense head- WHY (purpose of expense) the funds are being spent** - Program cost (program implementation, MEL) - Support cost (Accounting, Admin, Fund raising) #### Cost - Key concepts NPOs should follow functional expense head for presenting reports, that is what is the basis for their constitution and work. Broadly the functional heads are two-Program/service delivery and Support/Admin & General **Costs for a project for NGO** - Direct costs (100% direct traceability to a program/support function) to benefit the beneficiary as per project design. No cost if no project. - Common/Shared costs-benefit multiple projects-shared cost apportionment based on time, space, no of employees/beneficiaries/ no of project locations Understanding and computing direct and shared cost crucial for correct and realistic budget formulation - Apportionment method and share of common cost included in common cost policy Common cost be reviewed every year within the purview of common cost policy **Total cost for a project:** - Direct cost+ - Common Direct cost - Shared cost apportioned to the project Institutional/Management cost/indirect cost if permitted basis donor grant management policy to address contingency/create a reserve #### Other types of cost **Capital & Revenue cost:** - Capital Costs: Capital costs are one-time fixed assets purchases that will be used for revenue generation over a longer period- more than one year. - Revenue Costs: are referred to as operating expenses are short-term expenses that are used in running the daily business operations. **Fixed and Variable Costs:** - Fixed cost is one that does not change in total within a reasonable range of activity.Since the fixed cost remains constant in total, the fixed cost per unit of activity decreases when the volume increases and vice versa - Variable cost or expense is where the total cost changes in proportion to changes in volume or activity. - Historical cost: original cost of asset when it was purchased. - Sunk cost: money spent that cannot be recovered. - Marginal cost: change usually decrease in the cost of producing one more unit or serving one more customer. - Opportunity cost: value of next best alternatives when taking a decision given the resource constraint. ##### Cost Principles in grant budgeting for NPOs Costs budgeted for a project grant should be - Allowable cost-costs which are not subject to any restrictions/limitations in the grant award. - Allocable cost-costs which are incurred specifically for the attainment of the objective of the grant. - Reasonable cost-cost which is generally recognized as necessary to be incurred by a prudent person in the conduct of normal business - Consistent: cost applied in same fashion throughout the grant - Unallowable cost-those costs that cannot be incurred and paid under the grant. **Budget** **basics** A budget is estimation of revenue and expenses over a specified future period, usually the project period for a grant. It is financial plan (blueprint) of the project plan. One need to budget the plan and not vice versa Budget is a Planning (align with objectives)Tool, Control (within policy framework) Tool, Compliance (ceiling) Tool and Mirrors the Financial Report A budget covers quantitative, qualitative and cost aspects. **The purpose of budget is to:** - Ascertain reasonable estimation of costs for interventions/activities in a grant proposal/award. - Segregates costs-direct/common/indirect or OH costs - Cost matching/sharing (co-financing) for multi donor grant, in kind match. - Is a framework for donor-donee in a grant award - Enables course correction based on measurement of actual achievements versus estimates - Statement of SOF and Estimated Costs - Enables Recognition-activity, group, period, income, expenditure, deficit, surplus **Pre requisites** - Organisation structure. - Data. - Chart of accounts. - Managerial support. - Formal process for formulation. **Types of Budgets: Activity budget** **Activity based budget** as the name suggests, covers the costs required for implementing a project activity. In ABB, one looks at resources required for completing an activity and the resources cost ***For example***, if project strategy is to build capacity of civil society leaders, workshops is an activity. Workshops costs would be towards hiring resource persons, booking a venue, transportation cost, food, lodging and materials and handouts. **Illustration:** **Activity** **Budget for Conducting a Workshop**| **Particular of Expense** | **Rate per unit** | **No of Units** | **Total in Rs** |
| Trainer Fees | @ Rs 1000 per day | 3 days | 3,000 |
| Venue | @ Rs 500 per day | 3 days | 1,500 |
| Rental for Furniture | @ Rs 500 per day | 3 days | 1,500 |
| Rental for Equipment | @ Rs 100 per day | 3 days | 300 |
| Catering Exp for Lunch and tea two times | @ 100 per person | 55 persons X 3 days = 165 | 16,500 |
| Conveyance paid to attendees | @Rs 50 per person per day | 50 attendees x 3 days = 150 | 7,500 |
| Printing of handouts | @ Re 1 per page | 50pages x 50 copies = 2500 pages | 2,500 |
| Grand Total | **32,800** |
| **Expenses** | **Unit** | **\# of Units** | **Unit Rate ($)** | **Costs ($)** |
| **Human Resources** | ||||
| CEO | Per day | 3 | 350 | 1050 |
| Trainer Fees | Per day | 2 | 200 | 400 |
| ***Subtotal Human Resources*** | **1450** | |||
| **Travel** | ||||
| Trainer Airfare | Per Person | 1 | 300 | 300 |
| Participant Transportation | Per Person | 30 | 10 | 300 |
| ***Subtotal Travel*** | **600** | |||
| **Equipment and Supplies** | ||||
| Materials and hand-outs | Per Person | 30 | 15 | 450 |
| ***Subtotal Equipment and Supplies*** | **450** | |||
| **Other costs, Services** | ||||
| Venue | Per day | 2 | 300 | 600 |
| Catering | Per Person | 30 | 15 | **450** |
| ***Subtotal Other costs, Services*** | ||||
| Subtotal | 3550 | |||
| Overhead (10%) | 355 | |||
| **TOTAL** | **3905** | |||
Please note: Information is for reference only. Read our disclaimer [here](https://pattic.org/t/website-disclaimer/72).
# Overview of Financial Statements of NGOsYou can read the information below in over 15 languages! Simply use the translation tool in the top-left corner of the screen to select your preferred language, including অসমীয়া, বাংলা, ગુજરાતી, हिन्दी, ಕನ್ನಡ, മലയാളം, मराठी, মৈতৈলোন্, नेपाली, ଓଡ଼ିଆ, ਪੰਜਾਬੀ, संस्कृतम्, தமிழ், తెలుగు, and اُردُو.
#### Need for Financial Reporting Framework for NGOs - Financial reporting should provide true and fair view of state of affairs in conformity with generally accepted accounting principles (GAAP). - India GAAP is based on Accounting Standards formulated by ICAI - TFV means financial statements are accurate, complete and present a fair representation of the company's financial position and performance. - This confirmation is provided by an external auditor as per its opinion in the auditor report. This auditor is accredited with the apex accounting body i.e. ICAI - Financial reporting (statements) should provide uniformity, clarity and common understanding to various stakeholders. - For NGOs, lack of awareness and uniform applicability, inconsistency in basis of accounting, non-uniform terminology etc. results in financial statements being neither standard nor comparable. - Financial reporting framework for NGOs is detailed in *Technical Guide on Accounting of NGOs (Jan 2022)* by ICAI for uniformity and standardisation. #### Components of Accounting Framework as per Technical Guide 1. **Elements of financial statements:** Identify and define the items that should be considered as income, expenses, assets and liabilities in NPOs. 2. **Principles for recognition of items:** These principles lay down the timing of recognition (when) in the financial statements. 3. **Principles of measurement:** These lay down at what amount items should be recognised. 4. **Presentation and disclosure principles:** These explain the manner of presentation and disclosures required. *Note: 1, 2 and 3 are sector-neutral (not different for NPOs and for profit entities), while presentation and disclosure differ for the two sectors.* #### Accounting Terms **Assets** These are resources or items that the NGO owns Assets have future economic value that can be measured and can be expressed in monetary terms. Examples include investments, cash, inventory, accounts receivable, land, supplies, equipment, buildings and vehicles. Three categories: 1. Fixed Assets 2. Investments 3. Current Assets **Liabilities** These refer to the legal financial obligations or debts that NGOs incur during business operations. They are settled over time through the transfer of economic benefits such as money, services or goods. Liabilities include payables, loans, accrued expenses, provisions. Two types: 1. Long term 2. Short term **Equity/Capital, Net Assets** Refers to the amount of money that is required to return to its shareholders after all assets are liquidated and all liabilities paid off. Equity capital is not returned to founders/promoters in NGOs **Revenue/Income** Refers to income that an NGO generates for/on its normal operations i.e. grants, donations, interest etc. **Expenses** Expenses refer to the costs of operations that for profit incur to generate revenue. In NPOs, income is received for making expenses normally. Common expenses include employee wages, payments to suppliers, equipment depreciation and factory leases. #### What is a financial statement? Financial statement is a collection of summary-level reports about an organization's financial results, position and cash flows. Financial statements include: 1. balance sheet as at the end of the financial year, 2. income and expenditure account during the financial year, 3. Receipt & payment (cash flow) statement during the financial year and 4. Accounting Policies (principles for preparing the financial statement based on Accounting Standards) and explanatory notes These come with Auditor Report with its opinion on the TFV of financials statements #### BS, I&E, R&P - **Balance Sheet**: Presents assets and liabilities I.e. what you own and owe. - **Income & Expenditure Statement**: Presents income earned and expenditure incurred during the year, Any excess is carried to the Balance Sheet - **Receipt & Payment Statement**: Present actual receipts of funds and payments during the reporting period. - FCRA registered entities have to prepare FCRA financial statements separately for its FC operations. #### Key Points for Preparation of Financial Statement - Basis of accounting: Accrual system of accounting recommended - Prepared annually - Contain standard information for various stakeholders - Comparative information for at least one year - Different from donor reporting, govt compliance but these are extracted from the financial statements - Should reflect restricted and unrestricted funds separately - Format: Schedule III of Companies Act for section 8 company and other forms of charitable organisations also follow CA #### MRL and ML **Management Representation Letter (MRL)** is issued by the client (Auditee/NGO) to the auditor in writing as part of Audit Evidence. Management takes responsibility for the complete and accurate information provided to auditor to provide TFV. This document during the audit clarifies the separation of responsibilities of the auditor and auditee (management). **Management Letter (ML)** is a letter sent from auditors to Governing Board advising them of findings indicating control weaknesses identified during the audit, and suggestions to remedy these. It is an outcome of the audit process. The Board is supposed to respond to the observations and confirm compliance within a timeframe #### Maintaining Books of Accounts for NGOs - There was no regulation regarding books of accounts by NGOs upto FY 21-22 - Section 12A(1)(b)(i) inserted for maintaining of books of accounts and other documents wef AY 23-24. Books of accounts & other documents: The specified books of accounts shall include - Cash book - Ledger - Journal - Copies of serially numbered receipts, original copy of invoices, etc. 1. Record of all the projects and institutions run by the organisation 2. Record of income of the organisation during the previous year 3. Record of application out of the income during the year 4. Record of specified application out of the income of preceding years 5. Record of voluntary contribution with a specific direction to form Corpus 6. Record of contribution received under 80G(2)(b) being treated as corpus 7. Record of Loans and Borrowings 8. Record of properties held by the organisaiton 9. Record of specified persons, as per section 13 (3) of the Act 10. Any other document #### Bookkeeping Guidelines 1. Form of keeping books of accounts and documents: Kept in written form or electronic form or digital form or printouts or any other form of electromagnetic data storage device. 2. Place of maintaining books of accounts and other documents: shall be kept and maintained at its "registered office“. If the accounts are maintained other than the registered office or at various project locations, intimate Assessing Officer in writing, giving full address of the other places supported by resolution of the board 3. Period for which books of accounts & other documents should be kept: Kept and maintained for a period of ten years from the end of the relevant assessment year - Organisation having income subject to section 11(4) and 11(4)(a) to maintain separate set of books of account of such income in line with the provision under Income Tax Act. #### Accounting Standards - Formulation of uniform Accounting Standards is necessary in the preparation of accounting information and its presentation in financial statements for bringing about a greater degree of uniformity in accounting measurements. - Accounting Standards lay down the rules for measurement and presentation of accounting information by organizations and are prescribed by ICAI ##### AS-1: Disclosure of Accounting Policies **Fundamental assumptions:** Going concern, Consistency, Accrual. **Considerations** in selection of accounting policies to reflect true and fair view of the financial statement a. **Prudence:** Profits are not anticipated but recognized when realized. Provision is made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only as an estimate. b. **Substance over Form**: The accounting treatment and presentation of transactions and events in financial statements should be governed by their economic substance and not merely by the legal form. c. **Materiality:** Financial statements should disclose all “material” items, i.e. items the knowledge of which might influence the decisions of the user of the financial statements. ##### AS-1 Points to Remember - Areas for accounting policy disclosure for NPOs-Depreciation, FA valuation, valuation of investment, treatment of employee benefits, contingent liabilities. - All significant accounting policies used in the preparation and presentation of financial statements should form part of the financial statements as a Schedule. - Change in the accounting policies which has a material effect should be disclosed and amount by which the financial statements is affected should also be disclosed. Where such amount is not ascertainable, wholly or in part, the fact should be indicated. - If the fundamental accounting assumptions are not followed, the fact should be disclosed in financial statements. ##### AS-10: Accounting for Fixed Assets 1. Gross and net book values of fixed assets at the beginning and end of an accounting period showing additions, disposals, acquisitions and other movements; 2. Expenditure incurred on account of fixed assets in the course of construction or acquisition; and 3. Revalued amounts, the method adopted, the nature of indices used, the year of any appraisal made and whether an external valuer was involved ##### AS-13: Accounting for Investments - Investments are assets held by an organization for earning income by way of dividends, interest and rentals, for capital appreciation, or for other benefits. - Classification of Long term and short term investments should be as specified in the standards. - The requirements of this Standard regarding cost of investment, carrying amount of investment, disposal, reclassification etc should be followed. # Overview on Procurement, Contracts, Fixed Assets & Inventory Management for NGOsYou can read the information below in over 15 languages! Simply use the translation tool in the top-left corner of the screen to select your preferred language, including অসমীয়া, বাংলা, ગુજરાતી, हिन्दी, ಕನ್ನಡ, മലയാളം, मराठी, মৈতৈলোন্, नेपाली, ଓଡ଼ିଆ, ਪੰਜਾਬੀ, संस्कृतम्, தமிழ், తెలుగు, and اُردُو.
### ### Procurement - Procurement is the process to acquire goods, services and works to fulfil the organization's operations (projects) and achieve desired objectives - Procurement is an end-to-end function from initial identification of a need to final payment and record-keeping. - As PC member, signatory to contracts, users and verifiers, it is mandatory that Non Finance staff have thorough knowledge of procurement process for efficient and effective procurement #### Key aspects of procurement 1. Need assessment as per program and budget in grant contract 2. Cost (value for money through price discovery/competition) & Operational Efficiency (desired outcome/impact) 3. Accountability & Transparency (ethical considerations/at arm’s length) 4. Adherence to Procurement Policy & procedures-Tool of Risk Management 5. Supplier diversity-strategic sourcing 6. Team effort-appropriate segregation of duty and authorisation hierarchy 7. Contract Management 8. Record keeping of procurement process 9. Continuous improvement in procurement policy and procedures as organisation evolves #### Procurement Categories Purchase of: - Capital Goods - Program goods and Office supplies - Services - Works #### 5 Rights of strategic Procurement 1. “Right Quality” 2. “Right Quantity” 3. “Right Place” 4. “Right Time” 5. “Right Price” #### Procurement Policy A procurement policy is a set of guidelines and rules that govern how an organization acquires goods and services. It outlines the procedures, standards, and principles that guide the procurement process, ensuring it's fair, transparent, and compliant with legal requirements. it's a roadmap for procurement activities within an organization. ##### Benefits of a Policy - Cost control - Transparency and fairness - Risk mitigation - Compliance ##### Procurement Policy elements - Purpose - Authorization & Delegation-Roles & Responsibilities - Procurement Process - Procurement Methods - Documentation and formats for the procurement method and process - Vendor management - Ethics #### Procurement Cycle (Process) 1. Precise technical specs 2. Budget for item 3. Constitute Purchase committee 4. Research potential suppliers 5. Solicit Bids 6. Bid evaluation and vendor selection 7. Issue Purchase Order/ Contract Signing 8. Receipt & Inspection 9. Invoice Approval & payment #### Procurement process| **S.No** | **Step** | **Who** | **Remarks** |
| 1. | Purchase Requisition | Program coordinators/concerned staff members | Document to capture all details eg. Explanation of the purpose, quantity, quality of goods/services , timeframe, project, budget availability etc. |
| 2. | Forwarding and approval of requisition | By Requisitioner Approval by Program Manager. | |
| 3. | Calling bids/Request for Proposal (RFP) | Admin Department | Either from approved list or eligible vendors. Bids must be written. Oral bids with justification allowed upto a certain threshold or through web-search. Understand the concepts- Open bid, Sealed bid/Closed bidding, Public bidding, Two stage bidding |
| 4. | Comparative Analysis, Negotiation with vendor and final offer, final vendor selection and terms of purchase finalized. L1 is the vendor generally selected | Procurement Committee (PC) | All deliberations and justifications for vendor selection are captured in the MoM of PC/ Justification note for vendor selection. |
| 5. | Issue of Purchase order or contract | Approved by appropriate authority as per authorization matrix | PO contains relevant details and terms and conditions of procurement. Delivered to and acknowledged by vendor. In case of services, work order or contract issued. For small value contracts, email order confirmation sent and acknowledged by vendor. Advance payment. |
| 6. | Receiving the goods or services | Physical delivery received, by the admin in-charge. User will certify the qualitative aspects whether the goods / services are as per terms and conditions of the PO/ Work order. | Receipt documented and entry in Stock Register/Fixed Asset Register. In case of works contracts, the running bills checked with MBs and material consumed etc. and certified by Technical Specialists. |
| 7. | Payment & Issue | Accountant Admin | Payment and correctly record in the books of accounts Issue goods and obtain receipt |
| For consultancy assignment, a formal contract is entered into with the consultant, documenting all the terms and conditions including deliverables and deadlines, payments, deduction of tax at source. | |||
| For general use items like stationary, office supplies etc., the procurement committee may consider obtaining quotations for annual rate contract. | |||
You can read the information below in over 15 languages! Simply use the translation tool in the top-left corner of the screen to select your preferred language, including অসমীয়া, বাংলা, ગુજરાતી, हिन्दी, ಕನ್ನಡ, മലയാളം, मराठी, মৈতৈলোন্, नेपाली, ଓଡ଼ିଆ, ਪੰਜਾਬੀ, संस्कृतम्, தமிழ், తెలుగు, and اُردُو.
#### ## Income Tax Law #### Types of entities that can register as charitable institutions in India For charitable activity, the following entities can be constituted: 1. Society 2. Trust 3. Not for profit Company While above entities have separate incorporation laws, the various laws apply uniformly for all above type of entities #### Definition of Charitable purpose in Income Tax Section 2(15) "charitable purpose" includes - Relief of the poor, - Education, - Yoga, - Medical relief, - Preservation of environment (including watersheds, forests and wildlife) and - Preservation of monuments or places or objects of artistic or historic interest, and - The advancement of any other object of general public utility: - Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on trade, commerce, business, service for a cess, fee or any other consideration unless— - such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and - the aggregate receipts from such activities during the previous year do not exceed twenty per cent of the total receipts. #### Types of registration/approval of charitable institutions under IT Act 1. **1.10(23C)** (approval category merged with 12A) 2. **12A, 12AB** (earlier 12AA now deleted) 3. **10(46)** - a body notified by Central/State Govt 4. **80G** Approval for tax deductions to donors for Donations 5. **S 35** - approved institutions for scientific research etc #### New regime of income tax registration for charitable organisations wef 1.4.2021 Re-registration/approval of existing charitable entities u/s 10(23C), 12A,35 and 80G approval for a period of 5 years, thereafter renewal once every 5/10 years. Perpetual registration abolished. Department wants to have database and better control/monitoring on charitable institutions which has been fragmented and decentralised until now. **Types of Approvals:** 1. Re-registration/Revalidation of existing registered entities-5 years 2. Registration for Unregistered entities 3. Provisional registration for new entitites-3 years 4. Provisional to Normal registration for new entities- Total period 5 years 5. Modification of objects clause for 12A entities(within 30 days) 6. If registered/approved both under 10(23C) and 12A, then retain one, the other becomes inoperative 7. Renewal of registration after 5 years #### Renewal of 12AB registration and 80G approval of existing registered entities - Renewal (Form 10AB) 6 months before expiry of 5 years and after due inquiry process - Most 12AB and 80G registration have been issued upto AY 26-27. Som renewal application in 10AB have to be filed by 30th Sep 2025 separately for 12AB and 80G. - Renewal will be in Form 10AD for both 12AB and 80G. - In Finance Act 2025, Small NGOs i.e. where income is less than Rs. 5 cr in previous 2 years preceding the year in which renewal application is made will get 12AB registration for 10 years instead of 5 years. - Not applicable for 80G approval and for provisional registration, registration by unregistered institutions which remains as 5 years. - Applicable from 1.4.2025 #### Department’s power to cancel registration Power to cancel registration for Specified Violations i.e. - spent income for other than object - business income not incidental and no separate books - private religious purpose, particular religious community/caste - violation of other laws which affect achievement of objectives - benefits u/s 13 (not reasonable) - section 11(5) non compliance - conditions not complied specified in registration certificate (Form 10AC).*Reference by AO to CIT/PCIT who shall pass order within 6 months from quarter in which notice was issued.*
#### Accreted Income or Exit Tax-Section 115TD of IT Act (1.6.2016) 1. Accreted income is excess of fair market value of assets over total liabilities of Trust. Accreted income is taxed at MMR 2. Conditions when 115TD triggered: - 12AB registration cancelled - Modification of objects not applied for regn/not in line with condition of registration and application rejected - Merged into an entity not with similar objects and not registered under 12AB - failure to transfer assets upon dissolution to another 12AB/10(23C) entity within 12 months - Newly added: non registration, non renewal, non conversion of provisional to regular registration wef 1.10.24*Merger of charities with same/similar objects-new section 12AC specifying situations of merger when accreted tax will not be applicable effective 1.4.2025.*
Anonymous donation-Section 115BBC of IT Act 1. For charitable trust, if name and address of donor is not known, it is anonymous donation. 2. Not applicable to Religious Truss or charitable cum religious trust except where the donation is for an educational or medical institution 3. Tax payable 30%. Threshold: Rs.1 lakhs or 5% of total donation received whichever is higher. #### Statement of Section 80G donation - 80G provisions: Cash donation upto Rs.2k permitted, not in kind and only through banking channels. No anonymous donation permitted u/s 80G. - 80G deduction-100%/50% with or without qualifying limit i.e. subject to 10% of adjusted Gross Taxable income. Donation to charitable institutions falls under 50% with qualifying limit. - 80GGA deduction-100% for donation for scientific research and rural development projects - Form 10BD-Statement of Donation provided approved under 80G - Donation type: a. Corpus b. Specific c. Others - UIN of donor-PAN, Aadhar. If PAN / Aadhaar is not available then either the passport No. /Election photo identity / Driving License/ Ration Card/ Tax Payer identification Number where the person resides outside India. - Mode of receipt-cash, kind, electronic and cheque, others - File by 31st May for each FY. Fee and Penalty for delayed filing - Revision can be made *Section 80G approval can be applied even if charitable status benefit taken which was not allowed earlier- effective 1.10.2024* #### Section 80G-Receipt/certificate of donation **Form 10BE Submission Guidelines** - Due by 31st May for the preceding financial year - Associated with the donor's UIN - Penalties apply for late submission - Generate and download receipt for donations from web portal after filing Form 10BD Provide the donor with system-generated Form 10BE for 80G benefit claim ### Code of Taxation for Charitable Institutions **Chapter III-Incomes which do not form part of total income:** 1. Section 11: Income from property held under trust for charitable or religious purposes. 2. Section 12: Income of trusts or institutions from voluntary contributions for charitable and religious purpose. - Section 12A – Conditions for applicability of sections 11 and 12 - Section 12AA – Procedure for Registration-repealed - Section 12AB – Procedure for Registration under new regime 3. Section 13: Section 11 not to apply in certain cases. ##### Section 11: Income from property held for charitable or religiouspurposes. Section 11(1): the following income shall not be included in the total income of the previous year of the person in receipt of the income— - Income derived from property held under trust wholly for charitable or religious purposes, to the extent such income is applied to such purposes in India; and to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; - Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution and provided it is deployed in Section 11(5) modes of investment. ##### Deemed Application-1 year As per clause (2) of Explanation to section 11(1): - If, in the previous year, the income applied to charitable or religious purposes in India falls short of 85% of the income from property held under trust by any amount— - for the reason that the whole or any part of the income has not been received during that year, or - for any other reason, - Then at the option of the person in receipt of the income (such option to be exercised before the expiry of the time allowed under section 139 (1) for furnishing the return of income) in form -9A be deemed to be income applied to such purposes during the previous year in which the income was derived. - Inter charity donation permitted*Note: If DA amount is not utilized in the next year then the amount will be taxable income.*
##### Accumulation-5 years As per section 11(2): If, in the previous year, the income applied to charitable or religious purposes in India falls short of 85% of the income derived during that year from property held under trust, but is accumulated or set apart for application to such purposes in India, such income shall not be included in the total income of the previous year provided the following conditions are complied with, namely:— - such person furnishes a statement in the prescribed form (Form 10) and in the prescribed manner (Online) to the Assessing Officer, stating the purpose and period for which the income is being accumulated or set apart which shall in no case exceed five years (not applied amount taxable in 5th year alone); - the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) and utilised for the purpose for which accumulated - Not transferred to an entity covered under Section 12A of the Act - Form 10 is furnished on or before the due date specified under section 139 (1) for furnishing the return of income for the previous year. - Repurposing of accumulation can be permitted by the Department. ##### Disallowance of Cash/bearer Payments Section 40(A)(3) provides that “Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account \[or through such other electronic mode as may be prescribed\], exceeds Ten Thousand Rupees, no deduction shall be allowed in respect of such expenditure”. **Note:** - The expenditure as disallowed above, will be taxed @ 30% - The cash payments made by staffs and reimbursed by organisation shall also be treated as cash payment - Disclose non-compliances in ITR, if same noticed by Assessing Office during Income Tax Assessment, additional penalty and interest may also be levied. - Exceptions in Rule 60D ##### Disallowance for Non Deduction of Tax at Source Section 40(a)(ia) provides that 'Where the assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B then the amount equal to 30% of expenditure shall not be allowed at the time of computation of Income’ **Note:** - The expenditure as disallowed above, will be taxed @ 30% - Disclose non-compliances in ITR, if same noticed by Assessing Office during Income Tax Assessment, additional penalty and interest may also be levied. #### Section 12A ##### Conditions for Applicability of Section 11 & 12 The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless organization is registered under section 12AB Books of accounts of the organization have been maintained and audited by the Chartered Accountant Organization has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. ##### Section 13 of Income Tax Section 13(1): Section 11 not to apply when - Trust for private religious purposes which does not ensure for the benefit of the public. - Trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste. - If any part of income of trust ensures directly or indirectly for the benefit of any person referred to in sub-section (3). - If any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3). - Non compliance of Section 11(5)-permitted modes of investment Section 13(6): The exemption under section 11 or section 12 shall not be denied in relation to any income, other than the income referred to in sub-section (2) of section 12, by reason only that such trust has provided educational or medical facilities to persons referred to in sub section 3. S. 115BBC-Tax @30% on denied income for 13(1)© and 13(1(d) violations. 2. Penalty for providing unreasonable benefits to specified persons- s 271AAE penalty equal to amount of benefit in first year and twice for subsequent year ##### Section 13(3): List of persons a. the author of the trust or the founder of the institution. b. any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; increased to Rs.1 lakhs in that PY and aggregate Rs.10 lakhs during lifetime of institution by Finance Act 2025 c. where such author, founder or person is a Hindu undivided family, a member of the family; cc. any trustee of the trust or manager (by whatever name called) of the institution; d. any relative of any such author, founder, person, member, trustee or manager as aforesaid; e. any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. "relative", in relation to an individual, means— a. spouse of the individual; b. brother or sister of the individual; c. brother or sister of the spouse of the individual; d.any lineal ascendant or descendant of the individual; e. any lineal ascendant or descendant of the spouse of the individual; f. spouse of a person referred to in sub-clause (b), sub-clause (c), sub-clause (d) or sub-clause(e) g. any lineal descendant of a brother or sister of either the individual or of the spouse of the individual #### Section 13(2): The income or the property of a trust deemed to have been used or applied for the benefit of a person referred to in 13(3) - If any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both. - if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation; - if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services; - if the services of the trust or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation; - if any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in sub-section (3) during the previous year for consideration which is more than adequate; - if any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate - if any income or property of the trust or institution is diverted during the previous year in favor of any person referred to in sub-section (3) #### Objective of TDS 1. Regular Inflow of Revenue for Government 2. Checking of Tax Evasion 3. Widening of Tax Base ##### Tax deducted at source(TDS) and Tax Collected at source (TCS) - TDS deducted from income • Deducted by payer • Imposed when payment crosses threshold - TDS return-24Q/26Q - TCS is collected from sale • Collected by seller • Collected on specific goods under section 206C - TDS return-27EQ #### TDS Sections - Section 192 (Salary) - Section 194 C (Contractual Payment) - Section 194 J (Fees for Professional & Technical Payment) - Section 194 I (Rent) ##### 192 – TDS on Salary - Deduct at rate of Income Tax computed on the basis of rates in force - Rates in force for person other than Senior Citizens| **Income Tax Slab** | **Tax Rate** |
|---|---|
| Up to ₹2,50,000\* | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% of total income exceeding ₹2,50,000 |
| ₹5,00,001 to ₹10,00,000 | ₹12,500 + 20% of total income exceeding ₹5,00,000 |
| Above ₹10,00,000 | ₹1,12,500 + 30% of total income exceeding ₹10,00,000 |
| **Income Tax Slab FY 25-26** | **Tax Rate** |
|---|---|
| Up to Rs 4 lakh | Nil |
| Rs 4 lakh to Rs 8 lakh | 5% |
| Rs 8 lakh to Rs 12 lakh | 10% |
| Rs 12 lakh to Rs 16 lakh | 15% |
| Rs 16 lakh to Rs 20 lakh | 20% |
| Rs 20 lakhs to Rs 24 lakhs | 25% |
| Rs 24 lakh and above | 30% |
| **Particulars** | **TDS Rate** |
|---|---|
| Professional Fees | 10% |
| Technical Fees | 2% |
| Payment to call center operator (Domestic Co. only) | 2% |
| **Particulars** | **Rate of TDS** |
|---|---|
| Renting of machinery / plant / equipment | 2% |
| Renting of land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings | 10% |
**Note:** corpus donation, kind contribution, activities outside India except training of sports person is not CSR.
#### Modes for undertaking CSR CSR activities can now be undertaken by the company itself or through a. Section 8 company/registered public trust/registered society-12A and 80G registration under Income-tax Act, 1961 established by the company, either singly or along with any other company, or b. Section 8 company/registered trust/registered society established by the government; or c. Any entity established under an Act of Parliament or a state legislature; or d. Section 8 company/registered public trust/registered society, (with 12A and 80G registration under Income-tax Act, 1961) having an established track record of at least three years in undertaking similar activities. - Companies may now engage international organisations for designing, monitoring and evaluating the CSR projects and for capacity building of their personnel for CSR. Notified by CG under this Act. - Administrative overheads have been defined and capped to 5% of total CSR expenditure. Admin OH means any expenditure for general management and administration for CSR function but designing, implementation, monitoring and evaluation of CSR projects will not be part of admin overheads. ##### CSR Committee - CSR Committee mandatory if CSR spend is more than Rs. 50 lakhs in a year or there is unutilised CSR fund otherwise discharged by BOD. - The CSR Committee shall formulate and recommend to the Board, an annual action plan in pursuance of its CSR policy, which shall include the following, namely: a. the list of CSR projects or programmes that are approved to be undertaken in areas or subjects specified in Schedule VII of the Act; b. the manner of execution of such projects/programmes as specified in rule 4; c. the modalities of utilization of funds and implementation schedules for the projects d. monitoring and reporting mechanism for the projects or programmes; and e. details of need and impact assessment, if any, for the projects undertaken by the company: - Annual Report format on CSR activities from 1.4.2020 (Annexure II) to be appended to the company AR - unspent, impact asstt. Admin OH, capital assets, location of CSR projects etc. ##### Visibility and UC by CFO - **Display of CSR activities on company website.** The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access. - UC by CFO of the company that the CSR funds have been spent as per AAP not the CSR Committee. ##### Impact assessment - **Rule 8:** Companies having an average CSR obligation of INR 10 crore or more in three immediately preceding financial years will be required to do impact assessment, through an independent agency. - CSR projects having outlays of INR 1 crore or more. Completed not less than one year before undertaking the impact study. - Ceiling 2% or Rs. 50 lakhs per FY whichever is higher. - Cost to be budgeted in the year of undertaking impact assessment. #### CSR, ESG and Sustainability overlap - **Sustainability:** The outcome achieved by balancing the social, environmental and economic impacts of business. It is the process that ensures that business goals are pursued without compromising any of the three elements (source: NGRBC). - Sustainability is the umbrella for ESG (BRSR) and CSR, both are ways business demonstrate commitment to sustainable business practices. - CSR is the starting point of ESG. - CSR strategy can be refined to fit into ESG (BRSR) metrics. - BRSR lends credibility to CSR by quantifying it. ##### Reporting compliance for corporates on Sustainability - Form CSR 2 - Annual Action Plan (AAP) - Annual CSR Report (Annexure II) appended to Board Report - Business Responsibility Report (BRR)-discontinued - Business Responsibility and Sustainability Report (BRSR) - BRSR Core-July 2023- subset of BRSR requiring mandatory disclosure on select key performance indicators on ESG like upstream and downstream value chain partners with reporting by 150 companies from 23-24 to all by 26-27 and guidelines for assurance providers. - Introduced in Feb 2022 effective 20-21. - Applicable to companies covered under 135(1). - **e-CSR 2 information:** (capture most details that we have covered in section 135 and required in Rules). It includes details of triggers, spend on ongoing and other than ongoing projects, unspent CSR amount, set off, assets created, impact assessment. - Filed within 30 days of holding of AGM as addendum to AOC 4. ##### Journey of ESG (BRSR) in India - **2011:** MCA issued the National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Business. - **2012:** SEBI mandated the top 100 companies (extended to 500 companies) by market cap submit BRR to report compliance with NVGs. - **2017:** SEBI recommended Integrated Reporting for BRR-together on financial and sustainable matters in single reporting. - **2018:** MCA issued national Guidelines on Responsible Business Conduct (NGRBC) to improve on NVGs. - **2021:** SEBI introduced improved BRRF requiring in form of BRSR applicable to top 1000 companies by m-cap from 22-23. ##### 9 Principles in NGRBC 1. **Principle 1: Ethical Business Conduct** - Businesses should conduct and govern themselves with integrity and in a manner that is ethical, transparent and accountable. 2. **Principle 2: Product Responsibility** - Businesses should provide goods and service in a manner that is sustainable and safe. 3. **Principle 3: Employee Welfare** - Businesses should respect and promote the well- being of all employees, including those in their value chains. 4. **Principle 4: Stakeholder engagement** - Businesses should respect the interests of and be responsive to all its stakeholders. 5. **Principle 5: Human Rights** - Businesses should respect and promote human rights. 6. **Principle 6: Environmental Responsibility** - Businesses should respect and make efforts to protect and restore the environment. 7. **Principle 7: Public Policy Engagement** - Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent. 8. **Principle 8: Inclusive Growth** - Businesses should promote inclusive growth and equitable development. 9. **Principle 9: Consumer engagement** - Businesses should engage with and provide value to their consumers in a responsible manner. #### BRSR - Each principle of NGRBC has core elements which enhance the operationalisation and objectivity of the principles. - BRSR is part of SEBI's Listing Obligation and Disclosure Regulations (LODR). - **BRSR format:** - General information - Management & Policy disclosures - Principle wise performance disclosure-essential indicators and leadership indicators - Voluntary BRSR permitted. # Overview on Key Policies for NGOsYou can read the information below in over 15 languages! Simply use the translation tool in the top-left corner of the screen to select your preferred language, including অসমীয়া, বাংলা, ગુજરાતી, हिन्दी, ಕನ್ನಡ, മലയാളം, मराठी, মৈতৈলোন্, नेपाली, ଓଡ଼ିଆ, ਪੰਜਾਬੀ, संस्कृतम्, தமிழ், తెలుగు, and اُردُو.
### What are Organisation Policies?You can read the information below in over 15 languages! Simply use the translation tool in the top-left corner of the screen to select your preferred language, including অসমীয়া, বাংলা, ગુજરાતી, हिन्दी, ಕನ್ನಡ, മലയാളം, मराठी, মৈতৈলোন্, नेपाली, ଓଡ଼ିଆ, ਪੰਜਾਬੀ, संस्कृतम्, தமிழ், తెలుగు, and اُردُو.
#### Why understand risk management| **Efficiency** | **Effectiveness** | |
| **Definition** | Efficiency refers to the act of performing activities with minimum wastage of time and optimum usage of resources timely and without error. | Effectiveness is the extent to which someone or something is successful towards meeting the desired outcome. |
| **Focuses on** | Doing the assigned task in a correct way | Doing the assigned task accurately |
| **Focuses on** | Efficiency is focused on the inputs and outputs | Effectiveness is focused on the extent to which work is done and the end result achieved |
| **Effort oriented** | Efficiency is effort oriented on operations | Effectiveness is effort oriented on strategy |
| **Time oriented** | Efficiency is time oriented | Effectiveness is not time oriented |
You can read the information below in over 15 languages! Simply use the translation tool in the top-left corner of the screen to select your preferred language, including অসমীয়া, বাংলা, ગુજરાતી, हिन्दी, ಕನ್ನಡ, മലയാളം, मराठी, মৈতৈলোন্, नेपाली, ଓଡ଼ିଆ, ਪੰਜਾਬੀ, संस्कृतम्, தமிழ், తెలుగు, and اُردُو.
### Audit and Assurance **Audit** is a Systematic and independent primarily through examination of financial records, transactions, and processes to assess their accuracy, transparency, and compliance with regulations and accounting standards. It is conducted through an internal team or an independent external auditor. The goal is to ensure the reliability and validity of financial information and to identify errors/irregularities and the effectiveness of internal controls. **Assurance** is a broader term which enhances the reliability and credibility of various information, including financial and non-financial data, processes, and systems. Audit is a subset of Assurance. Assurance provides independent and professional opinions that reduce information risk (risk from incorrect information) and is broader than Audit. Examples include financial statement audits, compliance audits, IT audit, Sustainability audit and assessments of internal controls and systems. ##### Rationale for Audits Financial audits and reviews are governance tools used to provide assurance to an organization's management and stakeholders that the resources and assets of the organization are being used judiciously for the intended purpose. Audit is a more thorough examination that provides a higher level of assurance, while a review is a less intensive assessment with a lower level of assurance. An audit verifies the accuracy of financial statements while a review assesses whether the statements seem plausible and reasonable. The priority of the audit process is to improve continuously on implementation of the financial and administrative policies. It is also an opportunity to identify and enhance financial control and documentation. A second priority of the auditing process is to identify gaps in policies or areas with substantial control risks so that such risks may be mitigated. A third priority is to establish independently that all personnel are handling financial affairs with integrity. ##### Why we don't like audits