AUDITING OF NGO AUDIT PROJECT

PRESENTED BY :
ROHAN BHARAJ (05) RICHA SACHDEV (50) PRATEEK CHAUDHARY (08) BHAVIKA KEVALRAMANI (30) POOJA TOLANI (55)

What is Audit?

The word 'Audit' is originated from the Latin word 'audire' which means 'to hear'. In the earlier days, whenever there is suspected fraud in a business organization, the owner of the business would appoint a person to check the accounts and hear the explanations given by the person responsible for keeping the account and funds. In those days, the audit is done to find out whether the payments and receipt are properly accounted or not. The objective of modern day accounting is not only for the verification of cash but to report the financial position of the undertaking as disclosed by its Balance sheet and Profit and Loss account.

Definition of Audit?
According to Lawrence R. Dicksee, "an audit is an examination of accounting records undertaken with a view to establishing whether they correctly and completely reflect the transactions to which they relate.

What is an NGO?
A non-governmental organization (NGO) is any non-profit, voluntary citizens' group which is organized on a local, national or international level. Task-oriented and driven by people with a common interest, NGOs perform a variety of service and humanitarian functions, bring citizen concerns to Governments, advocate and monitor policies and encourage political participation through provision of information. Some are organized around specific issues, such as human rights, environment or health. They provide analysis and expertise, serve as early warning mechanisms and help monitor and implement international agreements. Their relationship with offices and agencies of the United Nations system differs depending on their goals, their venue and the mandate of a particular institution.

Non Profit Organisations are generally registered as legal entities in the following three categories:

1. Societies under the Societies Registration Act, Central or respective State Acts. 2. Public trusts under the Indian Trust Act 1882. 3. Companies registered under Section 25 of the Companies Act, 1956. 4. Mutually Aided Cooperative Societies Act (MACS) and Self Help Groups (SHGs)

In addition to the above incorporation laws, some of the major laws applicable to NGO sector organisations are as follows:
1. Income Tax Act 1961. 2. Foreign Contribution (Regulation) Act 1976.

Audit Under Income Tax Act 1961:

Where the total income of the organisation exceeds Rs. 50,000/- in any previous year, the accounts of the organisation have to be compulsorily audited as required under section 12A(b) of the Income Act 1961. The auditor has to issue the report in Form 10B, which is mandatory for obtaining exemption under the above Act.

Audit Under Foreign Contribution (Regulation) Act 1976:

Every organisation in receipt of foreign contribution must get its accounts audited by a Chartered Accountant under Rule 8(2) of the Foreign Contribution Rules 1976. The Audit Report has to be given in Form FC 3 as prescribed under the above Act together with the Balance Sheet as on 31st March and Receipts and Payments for the year ended 31st March.

Auditors on Behalf of Donors and Funding

Agencies:
When the donor organisation, both international as well as local, makes grants or provides funds, they enter into an agreement with the recipient non-profit organisation. In the above agreement various important provisions are made regarding the purpose of the grant, manner in which it should be utilised and the time frame, etc. An auditor has to peruse the above agreement to report on the compliance on the terms of the agreement. Most donors require an audit report and an audited statement of accounts. While certifying the report to donors, the auditor should ensure that the project has been implemented in accordance with the agreement executed. Several times, the auditor is asked by the donors to submit a special audit report to them in addition to signing the financial statements.

Audit programme for NGO :

a. Corpus Fund: The contributions/ grants received towards corpus are vouched with reference to the letters from the donor(s). The interest income is checked with investment Register and physical investments in hand. b. Reserves: Vouch transfers from projects/ programmes with donors letters and board resolutions of NGO. c. Ear-marked Funds (Specific funds): Check requirements of donors institutions, board resolutions of NGO, rules and regulations of the schemes of the ear-marked funds. d. Project/Agency Balances: Vouch disbursements and Expenditures as per agreements with donors for each of the balances. e. Loans: Vouch loans with loan agreements and receipts/repayments with counter-foil issued.

f. Fixed Assets: Vouch all acquisitions/ sale or disposal of assets including depreciation and the authorisations for the same. For

immovable property, check title deeds, etc. g. Investments: Check Investment Register and the investments physically ensuring that investments are in the name of the NGO. Verify further investments and dis-investments aremade after approval by the appropriate authority. h. Cash in Hand: Physically verify the cash in hand and impress balance, at the close of the year and whether it tallies with the books of accounts. i. Bank Balance: Check the bank reconciliation statements and ascertain details for old outstanding and unadjusted amounts. j. Stock in Hand: Verify stock in hand and obtain certificate from the management for the quantities and valuation of the same. k. Programme and Project Expenses: Verify agreement with donor/contributor(s) supporting the particular programme or project to ascertain the conditions with respect to undertaking

While planning the audit, the auditor may concentrate on the following:
a. Knowledge of the NGOs work, its mission and vision, area of operations and environment in which it operates. b. Reviewing the legal form of the organization and its Memorandum of Association, Articles of Association, rules and Regulations. c. Reviewing the NGOs organization chart, Financial and Administrative Manuals, Project and Program guidelines, Funding Agencies Requirements and Formats, budgetary policies, if any. d. Examination of minutes of the Board/Managing Committee/ Governing Body to ascertain the impact of any decisions on the financial records.

Our Experience at the NGO :

We worked in an NGO as part of our college project. The NGO Jyoticare Benevolent Foundation is a registered charitable trust, a non-profit, non-governmental organization (NGO), established on 24th September 2007. It is located in Mumbai, Maharashtra, and the main aim is to help maintain the eye health of children of rural and lower income group communities of India. We were initially trained by the NGO to do basic screening of the eyes. We then went to examine the eyes of underprivileged children of Seva Sadan Society Girls High School. It took us three days to examine 272 students. Then the students with poor eye sight were taken to the eye clinic for further check up. After the clinic check up some students were normal, while others with very poor eyesight were allotted spectacles by the foundation free of cost. The students who required further treatment were taken to the Bombay city hospital and were checked by the ophthalmologist. It was really shocking to see that young children aged between 612yrs could have such severe eye problems and we were fortunate to get this opportunity to help them out and to bring light in their lives.

Our Experience While working together as a group:

It was a great experience working together as a group. As we were already a part of the NGO project our coordination worked out easily. Preparing the role play was one of the most exciting part of this project.