CSR IMPLEMENTATION THROUGH NGO
muruganandam anandam
Dear Colleague,
Our company has a Corporate Social Responsibility (CSR) spending obligation of ₹1 crore(APPROX) for the current financial year. We propose to fulfil this obligation by contributing to eligible NGOs which hold valid CSR registration and are engaged in benevolent activities falling within Schedule VII of the Companies Act, 2013.
In this connection, certain members have sought clarity on whether a mere transfer of the CSR amount to such an NGO would suffice, or whether the company is required to link the contribution to specific CSR projects and monitor their implementation.
As per the CSR provisions under section 135 of the Companies Act, 2013 and the Companies (CSR Policy) Rules, 2014, the primary responsibility for ensuring that the CSR amount is applied towards eligible CSR activities rests with the company and its Board. The company is required to:
Approve specific CSR projects or programs or a series of projects, preferably aligned with its CSR Policy, and falling within the activities specified in Schedule VII.
Enter into a written agreement or MoU with the implementing agency (NGO) clearly setting out the project objectives, geographical area, target beneficiaries, budget, timelines, reporting and audit requirements.
Ensure that the NGO is duly registered with MCA by filing Form CSR-1 and otherwise meets the eligibility conditions prescribed under the CSR Rules.
Put in place a mechanism for regular monitoring of the project, including obtaining periodical progress reports, utilization certificates, and such other documents as may be necessary to satisfy the Board that the CSR funds have been used for the approved purposes.
Make appropriate disclosures in the Board’s Report and the annual CSR report in the prescribed format, including project-wise details of CSR expenditure and outcomes.
In view of the above framework, a mere one-time transfer of CSR funds to an NGO, without identifying the specific CSR project, without clear documentation, and without any monitoring of utilization, would not be advisable and may not be regarded as adequate compliance with the company’s CSR obligations. It is desirable, and in our view necessary from a governance and compliance perspective, that the contribution be linked to a particular CSR activity or project and that the company monitor, at least at a supervisory level, whether the activity is in fact carried out by the NGO in accordance with the agreed terms.
Members are requested to share their views, practical experience, and any precedents followed in their respective companies on this aspect, particularly with reference to the documentation and monitoring practices adopted while routing CSR spends through implementing agencies/NGOs. Your inputs will help us in framing a robust and compliant approach for our company’s CSR implementation.
With warm regards,
ASHOK
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