Amendment for NGO’s for provision of certification of funds received & utilized by CA/CS.
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The Honorable Prime Minister
Subject: Application to introduce amendment in the Act dealing for NGO’s like Society Registration Act 1860, Indian Trust Act 1882 and Companies Act 2013 and provide provision for certification of funds received by NGO as Donation and compliance check on the utilization by Chartered Accountant / Company Secretary in Annual returns.
We convey our greetings to you as members on behalf of the Institute of Chartered Accountant of India, Institute of Company Secretaries of India. We would also like to express our heartfelt gratitude to you for the ample improvements already extended by you in Indian Legal system and laws.
Non-governmental organizations (NGOs) refer to highly diverse groups of enterprises engaged in a wide spectrum of non-profit activities. The focus of NGOs can range from humanitarian and rural development to assisting local startups and businesses. There are roughly 3.7 million NGOs worldwide with an estimated 2 million of them in India.
We would like to draw your kind attention to the point that the most of NGO’s are functioning under conditions of inadequate physical infrastructure, non complaint working, non maintenance of accounts and proper records.
What Are the Main Challenges NGOs Face Today?
The main challenges to the missions of most NGOs are as follows:
1. Lack of Funds
Many NGOs find it difficult to garner sufficient and continuous funding for their work. Gaining access to appropriate donors is a major component of this challenge.
2. Absence of Strategic Planning
Many NGOs suffer from the lack of a cohesive, strategic plan that would facilitate success in their activities and mission. This renders them unable to effectively raise and capitalize on financial support.
3. Poor Governance and Networking
A lack of effective governance is all too common in NGOs. Many have a deficit of understanding as to why they must have a Board and how to set one up. A founder may be too focused on running the NGO for their own purposes; however, governance is foundational to transparency.
All The above challenges is primarily due to trust factor which NGO’s do not hold due to non compliance and non financial check.
I would like to quote a data here, more than 1000 companies are spending their CSR budgets and they are one or way confused in spending this budget with the NGO’s having operations less than 50 lacs. However they might be putting better and good value addition then the NGO’s who already achieved large scale and therefore they use their inhouse NGO’s or associated NGO’s only for spending their CSR activities.
In the absence of a proper policy towards keeping a check on the financial as well as operations from legal and compliance prospective, this trend is likely to continue unabated.
It is therefore arguably necessary that the government should evolve a policy of Compliance and Financial check for NGO’s receiving donation more than 10 lacs in a year either from inner sources by way of donation from trustee or outer sources by way of getting donation from government as well as private bodies by introducing annual certification by employed chartered accountant or company secretary or Practising chartered accountant/ Practising company secretary.
Most of NGO’s are applying for various license and approvals under Section 80g and 12A of Income tax act as well as FCRA for recieving foreign donations , where as the application require lot of verification of 3 to 5 year of their operations and activity proof and checking of financials, but no certification is prescribed to be attached. This provision of requiring certificate from the professionals would ensure the applications be resolved in less and timely manner as the professionals would play important role in checking the genuiness of affairs of ngo.
In this connection, we propose that government should set up committee to look into matter with the representatives from Institute of Chartered accountants of India as well as Institute of company secretaries of India.
In your earlier speeches, you had quoted CA;s to be financial gatekeeper and CS’s to be Compliance custodian. Now is the time, the CA and CS fraternity would like to take up the responsibility in collaboration with government to improve legal system.
NGO Board and NGO Council:
Many NGO’s were poorly informed of the difference between these two institutions, NGO Coordination Board and the National Council of NGOs; and unaware of their roles and responsibilities in relation to them. Most NGO’s expressed the opinion that the NGO Code of Conduct is outdated and needed updating soon. They are well aware that the NGO sector has a very poor public profile which they see as mainly due to the leadership wrangles, politics and infighting at the Council and among NGOs.
Also introduce participation of professionals at independent level say NGO’s having corpus of funds more than 2 crore. Same the way of Independent directors on board of the listed company make them strict disciplined more organized in terms of corporate governance. Atleast some code is required for governance of NGO’s too and that mostly feel now.
Apart from this, we further request you to personally and kindly extend your good office for this matter to be taken up with all necessary concerned departments in view of the necessity of the situation.
We firmly believe that this is a sector or an area from which we can bring about progress and development for society as a whole.
We, therefore, earnestly request you to take the necessary steps in this direction, for which we shall remain grateful.
CA Paras Mittal Mb: 8506916129 Email: firstname.lastname@example.org
CS Sanjay Aggarwal Mb: 9711733405 Email: email@example.com
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