The company works together with SoulAce to chart the best course of action to improve the CSR initiatives.
Why is the CSR fund utilization audit necessary?
Corporate Social Responsibility has been conceptualized in 1990s. Working towards social and environmental goals allows companies to give back to the community. However, its significance and prevalence in the workspace have increased significantly in the last decade. Since the Companies Act 2013 came in action, the government of India has been taking steps to increase the accountability and transparency of firms’ CSR reporting. With updates on the audit process and new mandates for reporting, it is pertinent for companies to work on this task with due diligence.
For companies striving to maintain ethical standards for working and accountability towards its stakeholders, utilisation of CSR funds auditing is important. It ensures greater transparency in how its budget and resources are managed. Financial and legal issues often crop up when CSR regulations are not complied with. Thus, it becomes vital for companies to invest in proper auditing of the CSR budget and fund utilization. Even from the perspective of the partner NGOs and other foundations, proper auditing of funds and resources help in forming a bridge that joins together ideation and implementation. They are also better aware of the management of resources and maintain accountability on their end, ensuring that the CSR activities are optimally carried out. Shareholders of the company also rely on audit reports for ascertaining the company’s value and thus, it helps the company in building a dynamic and loyal consumer and investor base.
Besides complying with government regulations, incorporating fund utilization audits for companies can have numerous benefits for firms, such as:
With often changing policies regarding funding and other activities regarding CSR initiatives, the CSR evaluation assures compliance with these regulations. In keeping up to date with the guidelines and amendments issued by the government, companies can avoid delays and costly penalties. This audit also entails an important aspect of the ESG (Environment, Social and Governance) rating of the company, which improves with proper documentation of audit reports and activities.
For longer-term implementation, CSR fund utilization audits prove useful in recommending practices for improving CSR. They also lend transparency and accountability to the process of conducting CSR activities. Thus, long-term planning and execution of the organization’s vision becomes more seamless.
When the third-party actors or NGOs that are tied with the company are also reviewed, the trust and faith in these organizations, as well as the company, is made stronger. Knowing how the funds are being allocated and utilized creates faith amongst investors and shareholders as well, who invest in the firm and believe in its CSR initiatives. As the world becomes increasingly focused on its share of social and environmental responsibilities, auditing makes up an important tread of this service-oriented tapestry.
When the fund utilization audit is carried out, companies become aware of the potential roadblocks or avenues that need to be addressed for better implementation of their goals and visions. In aligning the allocation of funds with the government mandates, the details of the funding and the goals’ execution can be better designed. With accountability coming to the forefront, budget sheets are made more realistic. This proves can also help companies to execute their CSR visions more effectively and implement actionable changes in their processes.
SoulAce employs the following processes for carrying out the fund utilization audit process:
1. Understanding the Project and Documentation: Starting with the company goals and values, the SoulAce team goes over the project details and all relevant documentation associated with the companies’ CSR activities. This helps in identifying the Key Performance Indicators (KPIs) of the company and aligning the company’s visions with the regulations set by the CFO and the board.
2. Collecting Evidence: SoulAce streamlines the documentation related to the audit process and performs analysis on the budgets submitted, their allocation, and their utilization that will contribute to the transparency of the CSR activities.
3. Confirming the Utilization: through interviews with the beneficiaries or partner organizations and site visits, the utilization of the budget is further checked and confirmed. This adds to the authenticity of the documents and improves responsible reporting of the CSR initiatives undertaken by the company.
4. Reporting: A comprehensive and detailed Audit report is framed, along with all the necessary documentation required to comply with government regulations. The report is not only updated to meet the evolving demands of the rules laid out by the government, but also includes recommendations for improving funding allocation and planning.
When these processes are carried out, they provide additional support to the company in the following ways:
1. The physical verification and documentation of the materials associated with the CSR projects ensure a fool-proof report. This report, when generated, ensures that there are no discrepancies in the forms filled to comply with government regulations. As mentioned, this saves the company from unfortunate delays and potentially costly penalties that they may incur due to incorrect or incomplete documentation.
2. According to section 135, pertaining to CSR regulations and monitoring, companies are required to meet certain conditions set by the government. The audit report is part of the responsibility of the companies. In diligently forming the report, the company aligns its budget and goals with the regulations set by the government.
3. The report also entails understanding the governance structure of the partner organization. These documents by the partner organization further authenticate and verify the report.
4. Sitting with internal stakeholders and partner organization members, along with site visits, helps in further understanding the goals and values associated with the CSR initiatives taken by the government. It reveals the employee engagement with the projects as well, and the resource and financial management for the projects. These meetings and visits add depth and clarity to the report.
5. Data analytics tools and AI systems for collating the report generated through the documentation and information collected from the company and beneficiaries make the process of auditing seamless. The KPIs are also assessed in this report and recommendations can be formed based on the indicators.
6. Following the due process in fund allocation and utilization can reveal more information besides the use of funds. The audit report is comprehensive, comprising interviews and data analytics, thus being able to provide information on employee engagement and recommendations for improving the company’s performance in CSR activities. This serves as feedback for motivating more employee participation, as well as optimal management of funds and execution of the company’s vision.
SoulAce’s team of CAs and thematic experts meticulously prepare checklists for cross-examination and confirm the reports for conducting the audits for CSR fund utilization. The company works together with SoulAce to chart the best course of action to improve the CSR initiatives. With transparency and accountability as hallmarks for successful auditing, companies can develop realistic strategies that better align with their CSR obligations.
Having already partnered with over 50 companies, and assessed over 200 projects valued above 500 crores, SoulAce is equipped with the tools and experience necessary to collate, assess, understand, and update the requirements of CSR fund utilization audits.