Everything Need to About CSR Impact Assessment Studies

The CSR for companies has been controlled by the Companies Amendment Act under the Ministry of Corporate Affairs (MCA). From 22 January 2021, the provisions for impact assessment have come into effect. According to the rules declared on 22 January 2021, the companies with an average CSR obligation of INR 10 Crore or more in the preceding three financial years will have to undertake an impact assessment with the help of an independent agency. The Ministry of Corporate Affairs (MCA) has estimated the CSR expenditure to have increased approximately over INR 70,000 Crores.

So, in accordance with the new rules, it is mandatory for all the companies fulfilling the mentioned criteria, undertaking CSR activities to register themselves with the Central Government by filling the electronic CSR- 1 form for all the CSR projects effective from April 1, 2021. After registering, a unique CSR number will be generated. The Ministry of Corporate Affairs will have an account of the registration numbers of all the companies enrolled. In this way, the execution of the CSR activities can be monitored and assists in timely execution of the proposed activities.

Objective of CSR Impact Assessment

Objective of CSR Impact Assessment is to evaluate and disclose the societal outcome of a CSR project. The impact assessment is conducted to understand the limitations of the current impact, and the future impact vision when the project is extended. It helps to verify data and update the stakeholders of the company, and the CSR project heads for data verification and accountability. In this way, it helps to identify the pitfalls in the project.

Benefits of Impact Assessment:

• Impact assessment of a CSR project helps to understand where the CSR project is headed towards. Whether the project is progressing as per the plan and helping the beneficiaries, or the stakeholders and the project managers might need an intervention.

• It helps understand the strengths and the shortcomings of the stakeholders and implementing partners to plan the future projects.

• CSR impact assessment will help understand the financial audit and the financial disbursement for the CSR project reliability, accountability, and integrity of the financial resources.

• It will provide insights on the dynamic requirements of the beneficiary and helps gain an insight on the development of the target community.

• The assessment reports offer a window for the stakeholders and the implementing officials to be transparent with the progress of the project and the impact created.

• It will assist in tracking the performance of the stakeholders and if they have fulfilled the assigned task and responsibilities.

SoulAce are the pioneers in specialised CSR research and consulting firm in India for 13 years. Our clientele includes large Indian businesses, public sector undertakings, MNCs, Universities, NGOs, and SMEs. SoulAce has their footprint in over 14 major cities and has covered projects in almost 200 Indian districts in 28 states. Our areas of focus for CSR are:

1. (a) Education

2. (b) Healthcare

3. (c) Water and sanitation

4. (d) Skills and livelihood

5. (e) Environment

6. (f) Sports

We have been involved in different verticals of CSR like impact assessment, financial audit, baseline study, CSR planning and strategy, CSR program implementation and few more. As a company pioneering leadership in Corporate Social Responsibility (CSR) consulting, SoulAce has completed 1500+ projects in CSR impact assessment for over 100+ corporate clients. Our CSR impact assessing experts team comprises MSW, MBA graduates, research scholars and social work experts with an average of more than 10 years of industry experience.

Process of Impact assessment by SoulAce:

Our approach to impact assessment focuses on including the key elements like

• Extensive Discussions with Client and Project personnel.

• Procuring Project related documents.

• Mapping Beneficiaries and Key Stakeholders.

• Preparation of Tools and Frameworks for the study.

• Bringing out an appropriate Sampling Framework.

• Primary Data Collection- using Mixed Approach.

• Discussions with Key Stakeholders.

• OECD Framework for Impact Analysis.

• Presentation of Research Findings.

• Recommendations and Suggestions.

• Coming up with Research Report.

SoulAce’s impact assessment procedure, starting from project planning, designing, detailed analysis and study of the tools, conduct primary study, perform data validation and analysis, and reporting.

• Project Planning:

  The SoulAce team collects a list of locations for executing the projects, sets up the baseline report, and other details like reviewing project documents to create a base for a clear project execution plan.

• Design of the project:

  We take in consideration the stakeholders of the CSR entity and the NGO to understand the status of the projects to identify location-wise stakeholders and prepare a blueprint for the project.

• We create questionnaires, sampling strategies, primary study tools, and inception reports for primary study tool creation and sampling strategy.

• During the primary study, we initiate individual interaction with the beneficiary and the stakeholders, along with their individual interviews for data compilation. We also update the weekly status reports with any issues reported and solved.

• As a next step, we validate the data collected from various sources like the stakeholders, beneficiaries’ team, NGO partner and project team. After validation, we prepare reports with inferences, compile the data and cross analyse the same.

• After the compilation of the validated data, we discuss the draft report with the client, get to know of their perspectives, feedback, get them incorporated in the report and submit the final report to the client.

Evaluation:

The CSR impact assessment evaluation process can be classified as qualitative and quantitative evaluation. Qualitative evaluation includes group discussions, interviews with major stakeholders for providing an in-depth understanding of projects and their activities. The quantitative evaluation involves more of close-end surveys, and achievement of pre-defined indicators and objectives covering aspects. After the collection of relevant data, the evaluation happens through an OECD framework with six evaluation criteria:

1. (a) Relevance

2. (b) Coherence

3. (c) Effectiveness

4. (d) Efficiency

5. (e) Impact

6. (f) sustainability

Why SoulAce for Impact Assessment?

• Scientific and Robust Research Methodologies.

• Each study is customized according to project nature, goals and objectives.

• Ensuring objectivity in the research process from the starting to the end.

• Advantage of wide geographic spread out covering the length and breadth of the country.

• Experienced Research professionals and Domain Experts to guide the study process.

• Clarity in reporting, guiding clients to choose the appropriate course of action.

• Peer Reviewing, scrutinizing of reports and following high standards of Quality Control.

• Adhering to Research ethics.

Latest Amendments in CSR:

MCA amended the Companies (Corporate Social Responsibility Policy) Rules, 2014 ("Rules") by notice dated September 20, 2022. The aforementioned amendment aims to eliminate the redundant requirements in Rule 3(2) that require companies to continue making CSR expenditure and other compliances even after they are no longer subject to the thresholds under Section 135(1). It also provides for the continuation of the CSR committee in the event that money remains in the CSR account that has not yet been spent, modifies the scope of implementing agencies, the ceiling on expenditure for impact assessments, and makes some changes to the annual report on CSR.

Salient Features of the New Amendments:

• Accordance between Rule 3 and Section 135(1):

  Rule 3(2) was omitted; this is a remedial adjustment to bring the Rules into compliance with section 135 (1). Before this change, firms that would no longer be covered by section 135(1) of the Companies Act, 2013 ("Act"), i.e., incurring CSR expenses, creating committees, etc., were also obliged to continue with section 135 compliance for up to three financial years. This rule 3(2) requirement has been left out. In light of the changes made to Section 135(1) by the Companies (Amendment) Act of 2017, which changed the time frame for which the thresholds to be checked from "any" of the previous financial year to "immediately preceding financial year," it is important to note that this provision was already superfluous.

• Requirement of the constitution of the CSR Committee:

  Second proviso to Rule 3(1) insertion: As long as there remains money in the company's unspent CSR account, the CSR Committee must remain in place and cannot be terminated since it will continue to be necessary to supervise CSR actions for money spent from that account.

• Expanding the range of entities that can be recognized as implementation agencies:

  A company may, in accordance with Rule 4(1), carry out CSR activities directly or designate an additional organization, known as an implementing agency, to operate on its behalf. A new kind of entity that may function as an implementing agency has been added by the MCA through this amendment.

  A company can now carry out its CSR efforts by: a section 8 company, a registered public trust, or a registered society established by the company, either alone or in conjunction with another company, and exempt under sub-clauses (iv), (v), (vi), or (via) of clause (23C) of section 10 and approved under section 80G of the Income Tax Act, 1961; or a section 8 company, a registered public trust, or a registered society exempt under sub-clauses (iv), (v), (vi),

  Entities that are covered within the aforesaid sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 of IT Act are as follows:

  Clause iv under section 10(23C) of IT Act, 1961

  Any other fund or institution established for charitable purposes which may be approved by the Principal Commissioner or Commissioner, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States

  Clause v under section 10(23C) of IT Act, 1961

  Any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be approved by the Principal Commissioner or Commissioner, having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof

  Clause vi under section 10(23C) of IT Act, 1961

  Any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iii ab) or sub-clause (iii ad) and which may be approved by the Principal Commissioner or Commissioner

  Clause vi (a) under section 10(23C) of IT Act, 1961

  Any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, other than those mentioned in sub-clause (iii ac) or sub-clause (iii ae) and which may be approved by the Principal Commissioner or Commissioner.

• Amendments to the book expenditure restrictions for impact assessment:

  The upper limit of 2% of the overall CSR spending for that financial year or fifty lakh rupees has replaced the earlier lower limit of 5% of the total CSR expenditure for that financial year or fifty lakh rupees for the purpose of impact evaluation. The minimum amount that can be booked is 50 lakh, which may appear to be a limit increase, but when the math is done, it becomes clear that the higher limit (2% of the total expenditure) can only be used by businesses with an average net profit of at least Rs 1250 crores over the course of three financial years. There might only be a few businesses of this size. The earlier limits were taking into picture such companies with minimum average net profit of Rs 500 crores in three financial years.

• Rationalisation of the annual CSR report format:

  The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 made the annual report form for CSR more detailed. By removing the requirement that each project's specifics be mentioned, the same has now been justified (on-going and others). There have been a few additional changes made to the information's sequencing. It is important to keep in mind that while the material required for the CSR annual report has undergone this streamlining, the information required for Form CSR-2 has not changed and contains nearly all of the same facts.

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FAQ:

(a) Who can conduct impact assessment?

Rule 8(3) of the Companies (CSR Policy) Rules, 2014 requires that the impact assessment be conducted by an independent agency. The Board has the prerogative to decide on the eligibility criteria for selection of the independent agency for impact assessment.

(b) Which companies are required to undertake impact assessment?

Rule 8(3) of the Companies (CSR Policy) Rules, 2014 mandates following class of companies to conduct impact assessment:

• Companies with minimum average CSR obligation of Rs. 10 crore or more in the immediately preceding 3 financial years.

• Companies that have CSR projects with outlays of minimum Rs. 1 crore and which have been completed not less than 1 year before undertaking impact assessment. (“Help & FAQs - CSR”) "Impact assessment shall be carried out project-wise only in cases where both the above conditions are fulfilled." In other cases, it can be taken up by the company on a voluntary basis. (“Help & FAQs - CSR”)

(c) Whether companies are required to undertake impact assessment for FY 2020-21?

The provisions for impact assessment have come into effect from 22nd January, 2021. Accordingly, the company is required to undertake impact assessment of the CSR projects completed on or after January 22, 2021. However, as a good practice the Board may undertake impact assessment of completed projects of previous financial years. (“Help & FAQs - CSR”)

(d) Is expenditure on impact assessment over and above the administrative overheads of 2%, or included in the same?

Yes, the expenditure incurred on impact assessment is over and above the specified administrative overheads of 2%. Expenditure up to a maximum of 5% of the total CSR expenditure for that financial year or 50 lakh rupees (whichever is lower) can be incurred separately for impact assessment.

(e) Whether impact assessment reports of all the CSR projects shall be annexed to the annual report on CSR?

Rule 8(3)(b) of the Companies (CSR Policy) Rules, 2014 provides that impact assessment reports shall be placed before the Board and shall be annexed to the report on CSR. "It is clarified that web-link to access the complete impact assessment reports and providing executive summary of the impact assessment reports in the annual report on CSR, shall be considered as sufficient compliance of the said rule." (“Frequently Asked Questions (FAQs) on Corporate Social Responsibility (CSR)”)

(f) When two or more companies collaborate for implementation of a CSR project, should the impact assessment carried out by one company be shared with other companies?

"Yes, in case two or more companies choose to collaborate for the implementation of a CSR project, then the impact assessment carried out by one company for the common project may be shared with the other companies for the purpose of disclosure to the Board and in the annual report on CSR." The sharing of the cost of impact assessment may be decided by the collaborating companies subject to the limit as prescribed in rule 8(3)(c) of the Companies (CSR Policy) Rules, 2014 for each company. (“Help & FAQs - CSR”)