NATIONAL SEMINAR ON CO-OPERATIVE AND

NPO SECTORS

Documentation and Audit Reporting in NPO Sectors

Patna 23rd July 2012

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

Setting the context......

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

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

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

Documentation......

When were you born?

SCHOOL SCHOOL

BIRTH CERTIFICATE

BIRTH CERTIFICATE

Who will get admission?

Are you a couple?MARRIAGE

CERTIFICATEMARRIAGE

CERTIFICATE

Who will be left alone?

BALANCE SHEET

What documents do you have?

BANKBANK

BALANCE SHEET

Who will get bank loan?

DEATH CERTIFICATE

When did he die?

DEATH CERTIFICATE

How else can you prove?

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....)

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, ....

How do we document...... Reports Minutes Records, Registers, Statements Dedicated software e.g. Tally for

Accounting records Videography Photography Guidelines and Manuals ........

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

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

Systems and Procedures Manual

Level of compliance

Siz

e of

NG

O

Low levels of compliance

Systems and Procedures Manual

Existing form of Manual Available in Trust/ Society deed Coverage includes

Appointment of the BoardNumber of meetingsAuthority for banking operation, etc.

But what needs to be covered is much more than what really exists…….

Contents of the ManualGovernance 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

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

Contents of the ManualInternal Control Systems and Risk Management Internal control procedures Internal Audit Internal checks Procedures of cheque and voucher

sanction Compliance with law

Contents of the ManualFinancial 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

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

Audit Reporting in NPOs......

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...

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 …..

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

Opportunities for Members......

Opportunities for Members

Concept Vision Mission ObjectiveNGO

Name Formation Registration Legalities

Proposal Funders Appraisals FundsProjects

Guidance Monitoring Evaluation LearningsExecution

Cap Building Trainings Manuals On lineCapacity

Audits Compliances Returns GovernanceRegulation

Government Profession SectorContribution

Expertise Value Guidance DirectionCA

Legal frame

Masses

etc.

etc.

etc.

etc.

etc.

etc.

etc.

etc.

Discussion......

Thank You