Non governmental organization (NGO) is an organization which is formed by a group of individuals to render service to the society and people. NGOS should make audit of books of accounts every year. An auditor should perform following tasks while conducting audit of NGOS:
1. NGO has its own memorandum. S, an auditor should study it to know its activities.
2. NGOS may receive grant from foreign institutions. So, auditor should check whether it is received as per the provision of financial rules and regulations of the nation or not.
3. Auditor should check the use of government’s grants and proper account is maintained for the recording of such grants or not.
4. If such institution has received donation from any individual or organization, an auditor should check accounting of such amount and its use.
5. Auditor should examine the amount received as subscription/donation matching with counterfoils of the receipts.
6. Auditor should see and examine the decisions taken by the governing body.
7. Auditor should make physical verification of assets matching it with store ledger.
8. Auditor should check the liabilities and also wether its assets and its transfer is proper or not.
01 As per the Taxation Laws Amendment Act, 2006, wef. 1st April 2006, it is compulsory for every NGO to get its account audited where its income exceeds the minimum exemption limit. (As per the Finance Act 2008, presently the minimum exemption limit is Rs.1,50,000)
02 The implication of section 13(3) is extensive and therefore it may not be possible on the part of the Auditor to make independent inquiries. Therefore the Auditor before certifying the annexure to Form 10B must ensure and also clearly state the scope of his work and the responsibilities owned. It is important that the Auditor should mention in its report that the details of the persons covered under section 13(3) were provided by the Governing body of the NGO or the functionaries of the organisations. Income Tax Exemption under 12A.
03 Section 12A describes two conditions for availing the exemption available under the Act, the first condition is regarding application for registration and the second condition is regarding audit by the accountant as mentioned in the Explanation below sub-section (2) of section 288. All NGOs are required to apply for registration within one year from the date of their creation. If there is delay in applying for registration then the organisation should submit Audit Reports for the past three years or as may be available.
FILING OF RETURN
04 All NGOs having income exceeding Rs. 50,000 during the previous year are required to file their return of income. The ‘income’ for the purposes of filing the return should be computed without giving effect to the provisions of sections 11 and 12 of the Act. Such returns are to be filed with the Income-Tax Officer or the Assessing Officer under whose local jurisdiction they fall. The return is to be filed as per the provisions of section 139(4A) and (4C) as per the method provided in section 139 of the Act.
FILING OF RETURN MADE MANDATORY
05 The Finance Act, 2002 has inserted sub-section (4C) to section 139 making it mandatory for the organizations registered under section 10(21), 10(22B), 10(23A), 10(23B), 10(23C) etc. to file Annual Returns under section 139(1). Earlier there was no clear provision for filing of return by these organisations was available.
FORMS AND DUE DATES
06 All NGOs are required to file the return by the 30th September of the assessment year. The return must be accompanied by an Audit Report in Form 10B prescribed under Rule 17B of the Income-Tax Rule, 1962.
DELAYED SUBMISSION OF RETURN OF INCOME
07 An NGO which fails to furnish its return of income within the due date can still submit its return of income any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier. For instance, a return of income for the financial year 2001-2002 can be submitted upto 31st March, 2004.
08 Under section 272A(2)(e), any NGOs which fails to submit the return of income which it is required to submit under sub-sections (4A) and (4C) of section 139 or fails to provide it within the time allowed and in the manner required under that sub-section, it shall pay by way of penalty a sum of Rs. 100 for everyday during which the failure continues. Before imposing such penalty, an opportunity of being heard shall be given to the organisation.
DOCUMENTS TO BE ATTACHED WITH THE RETURN
09 One set of the following documents are required to be attached with the return:
(i) Audit Report in Form 10B.
(ii) Balance Sheet.
(iii) Income and Expenditure Account.
(iv) Receipt and Payment Account.
(v) Copy of the Registration Certificate.
(vi) In case the organisation has accumulated income, resolution for accumulation.
(vii) Form 10 in which application for accumulation is made.
REQUIREMENT OF AUDIT REPORT
01 Audit report is one of the most important documents, which is required for fundraising. It states the financial health of your NGO, which is taken seriously by any donors, grant making dept. and agencies.