Charitable Institutions refer to those organizations which are constituted and worked for the purpose of public charity. It may be a trust registered under respective act or a company registered under section 8 of the Companies Act, 2013 (or section 25 of the Companies Act, 1956) for the cause of social wellbeing.
Charitable Institutions can be a Public Trust, Society, Section 8 Company, Co-operative Society, Multi State Co-operative Society, Non-Profit Organizations etc.
They can be governed under Companies Act, 2013 (Section 8 Co.), The Maharashtra Public Trusts Act, 1950, The Rajasthan Public Trust Act, 1959, The Societies Registration Act, 1860, The Indian Trust Act, 1982, Income Tax Act 1961 & Foreign Contribution (Regulation) Act, 2010 etc.
For audit of such institutions following matters should be kept in mind during audit procedure
- Constitution of Charitable Institution under which it has been set up and their scope.
- Examine the laws which is properly followed or not by the institution.
- Verify the Accounting of collections under Internal Check System.
- Proper utilization of income and their supporting where they used.
- Subscriptions and donations are the important source of Income which must be accounted properly.
- Examine the frequency or movement of life membership subscription during the year.
- Verification of official receipts.
- Control check over unused receipt books.
- Verify the sequence of all receipt books.
- Give proper attention on counterfoils of Cash book.
- Examine the source of subscriptions & donation as well as their list of names.
- Check the total subscriptions and donations with the books & tally with figures.
- Examine the process of Cash management and their accounting with books.
- Examine the available resource and verify them in figures with amounts received.
- Grants play a key role in the income of any charitable Institutions because as per Income Tax Act there is a provision to use the grant for their purpose. So, it must be check carefully.
- Obtain the certificate of grant received.
- Vouch the grant amount with receipts and Minute Books.
- Vouch the Bank book and Investment Certificate on which amount received as Interest and Dividend.
- Check the computation of Interest received.
- Reconcile the Bank Book with appropriate details maintained by Institutions.
- If the Institution is registered under Income Tax Act, then check their 26AS and reconcile the TDS deduction with books.
- Examine the rent agreement and their applicability along TDS provision if available.
- Vouching of receipts and expenditure in respect to any special events organised.
- Verify the fixed assets schedule and their physical appearance.
- Examine the Income Tax refund and calculation of claim repayment.
- Vouch the payment of grants and their utilization as per laws under which the Institute has been set up.
- Physical verification of documents of securities.
- Verify the Cash & Bank Balance.
- Ascertain the documents regarding any funds contributed for a special purpose.
- Ascertain & verify the previous Audit Report and all applicable Forms submitted or not.