1 / 81

NPO Audits

NPO Audits. 2. 5. 6. 4. 1. 3. Special Issues. Preparation. Types & Scope. Role & Responsibility. Standards & Guides. Audit Management. Focus. NPOs - Not for Profit Organisations Include: Schools, colleges, hospitals Project-based NGOs Donor Agencies. Schools & Hospitals. NGOs.

jescie-rodgers
Download Presentation

NPO Audits

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. NPO Audits

  2. 2 • 5 • 6 • 4 • 1 • 3 • Special Issues • Preparation • Types & Scope • Role & Responsibility • Standards & Guides • Audit Management

  3. Focus NPOs - Not for Profit Organisations Include: • Schools, colleges, hospitals • Project-based NGOs • Donor Agencies • Schools & Hospitals • NGOs • Donor Agencies

  4. Scope of Audit

  5. Audit Types • GPFS • Tax / FCRA • NGO • Internal • Client? • Pre-funding • Donor • Utilisation • Systems

  6. Audit Scope • Derived mainly from • Terms of engagement or • Terms of Reference • Whose side are you on?

  7. GPFS Audit • Required under registration law or own bylaws • True and Fair view • Assets and Liabilities, including fund balances • Surplus or deficit • Receipts and Payments

  8. Tax Audit • Form 10B / 10BB • Utilisation of funds • for charitable purposes • within India • Personal gain? • Form 3CD

  9. CAG on Trust Taxation • Excess accumulation of surplus • Investment of capital gains • Commercial activities • Separate books

  10. CAG on Trust… • Claims for • Deficit of earlier years • Depreciation claim • Repayment of loans • 80G - control over receipts issued • Deficiencies in audit report format

  11. FCRA Audit • Validation of receipts, utilisation and balance • Does not cover details in form FC-6 itself • Correctness of FCRA BS, I&E, R&P • Compliance with accounting and banking norms

  12. Internal Audit • Checking • Transactions • Updating of records • Legal Compliance • Review of system design and lapses • Risk-based internal auditing

  13. Donor-initiated Audits

  14. Pre-funding Audit • Objective • Forecasting risk to donor funds • Focus • Legal status / compliance • Assessing control systems • Accounting and reporting capacity • Funds absorption capacity

  15. Grant Audit • Objective • Proper use of funds • Focus • Verifying utilisation of funds • Validating donor reports • Compliance with grant conditions • General assessment of systems and records

  16. Risk-based Internal Audit • 3rd Generation Audit Approach • Primarily for business organisations • Simplified for use in NGO audits

  17. Source: AuditAble 5, www.AccountAid.net, (c) AccountAid India

  18. FRAMS+ • Financial Risk Assessment & Mitigation System • Assesses risk in six areas • Suggests mitigation • Plus? • Verification of funds utilisation • Validation of donor reports

  19. NGO Audit Aspects

  20. Issues: NGO Audits • Environment • size, systems, locations, staff, donor directives • Accounting • corpus, earmarked funds, unspent grants, depreciation • Compliance • FCRA, income tax, TDS, service tax, gratuity • Diversion • double booking, overlap, salaries, fake supports • Book-keeping • multiple books, allocation (expenses/ income), recoveries

  21. Environment

  22. Big is small…

  23. Locations • Remote - difficult to reach • Most payments in cash • Difficult getting reliable bills • Distributed records

  24. Staff and Systems • Technical background / training of staff • Understanding of systems - differences • Systems - Donor driven

  25. Accounting Issues

  26. Corpus • Concept • Corpus or endowment fund • Nominal corpus vs. real corpus • Using corpus funds • Investing corpus funds • Corpus donations - tax issues

  27. Unspent Grants • Donations and grants • General grant or project grant • Accounting and presentation • Safeguarding unspent funds

  28. Ear-marked Funds • Different types of funds • Discretionary or general • Restricted or ear-marked • Accounting and safeguarding

  29. Depreciation • Historical purpose • Relevance to NGO operations • Under Income Tax • For donor reporting • Matching of revenue and expenses

  30. Book-keeping

  31. Separate Books • Origins and purpose • ‘Separate Accounts’ or ‘separate books of account’ • Legal requirements • Income Tax • FCRA • Donor directive • Alternative?

  32. Source: AuditAble 13, www.AccountAid.net, (c) AccountAid India

  33. Source: AuditAble 13, www.AccountAid.net, (c) AccountAid India

  34. Allocation Issues • Common expenses • Allocating to multiple donors • Basis? • Interest on bank account • Allocating to donors • Average monthly balances

  35. Recoveries • Use of NGO resources • Costing and setting a price • Accounting and control issues • Suggested approach • Direct cost or market, whichever is lower

  36. Double Booking • Problem of double booking • Expenses • Salaries • Common Methods • Suggested solution

  37. UNDP Funds • BM Funds • SDTT Funds

  38. Overlap • Program overlap • Segment overlap • project staff used for fee-based activities • Identifying and dealing with overlap

  39. Bills and Supports • Importance of proving expenses • Field realities • Blank bills / signed vouchers • Alteration of bills • Paper bills / rubber stamped bills • Printing of bills

  40. Multiple Entities • FIRM • NGO • ? • Movement

  41. Compliance

  42. FCRA • Separate set of accounts and records • Columnar presentation for FCRA and non-FC • Filing nil FC-6, FC-7, FC-8 • India-based foreign sources?

  43. Income Tax • Expenditure outside India • Transactions with key persons • Including managers • Minimum spending norms

More Related