SEVAI, Welcome to Society of Education Village Action and Improvement

Particulars of Expenditure

Original Budget

Amount Spent

Under (or) Over spent

Up to the

Month

Current

Month

Welcome to SEVAI - Society for Education Village Action and Improvement

SEVAI

MANAGEMENT SYSTEM OFFICE MANUAL.

Registration of SEVAI

Background.

A Non Governmental Organization (NGO) like SEVAI has to be registered under any one of the following acts.

I Societies Registration Act

II Public Charitable Trust under the Indian Trust Act 1882

III Company Registered under Section 25 of the Companies Act.

Central

IV Co-operative Institutions State Act

V Trade Union Act

SEVAI has been registered under Societies Registration Act.

I Societies Registration Act

The Government of India passed the Societies Registration Act of 1860 and subsequently the State Governments passed various amending Acts repealing the Central Act Tamilnadu Government has amended this act as Tamilnadu Societies Registration Act of 1975 and subsequently amended this act at various occasions and SEVAI complies with this Societies Registration Act.

The common characteristics are:

Any Society having the objective of promoting Education, Science, Literature, etc., may register itself under the Act.
SEVAI has Memorandum and Bye-Laws, which will be the constitution for the Societies.
There must be a minimum of seven members to form a Society. The Bye-Laws and Memorandum may be amended after passing a special resolution in the General Body and it must be registered with the Registrar.SEVAI has 17 members in General Body of SEVAI and 9 members serve in Executive Committee of SEVAI.

The following statements have been sent to the Registrar of Societies every year after SEVAI Society is registered.

Consolidated Statement of Accounts of the Organization for the year ending 31^st March.
Continuation/Functioning Certificate
Activity Report
List of Executive Committee Member/changes and the list of General Body members
The Amendments if any in the objective clause and major amendments in memorandum and rules have to be approved by the Annual General Body meeting by a special resolution.

Ownership and dissolution

All the SEVAI assets are registered only in the name of the Society and not in the name of the office bearers or any other personal name. Similarly, income of the Society cannot be distributed among the members and must be utilised for the activities.

At the time of dissolution, the Assets must not be divided amongst the members, but must be transferred to other Societies with similar objectives.

Foreign Contribution (Regulation)

Act, 1976

The Foreign Contribution (Regulation) Act, 1976 has been framed to regulate

§ Acceptance and

§ Utilisation of Foreign Contribution

The Organisation shall accept Foreign Contribution (FC) only if it:

Registration itself with the Home Ministry either permanently or by obtaining prior permission.
Agrees to receive such FC only through specified account of the Bank.

SEVAI Organisation

Submits the following in duplicate to the Home Ministry before 31^st July every year.

FC-3 Returns for the year ending 31^st March.
Receipts and Payments Account, Balance Sheet and Income & Expenditure A/c. duly certified by the Chartered Accountant.

In addition, the Organisation will also maintain:

§ FC-6 Register for Articles received

§ FC-7 Foreign Securities like shares, debentures.

§ Register for Foreign Contribution

Foreign Contribution includes:

Donation
Delivery
Transfer of funds from a foreign source.

Foreign Sources includes:

Government of Foreign Country, or Foreign Trust/Foundation /Organisation including individuals of Foreign Origin, but
Excludes any UNO or its specialised agencies indicated in the notification by the Home Ministry.

The Income Tax Act

SEVAI complies with the following statutory requirements of income tax department.

Income earned by Organisations is liable to Income Tax (IT), bit exemptions are provided:

¨ SEVAI has been registered under U/S 12 (A) with the Commissioner of Income Tax. Property must be in the name of the Organisation and not in the name of the individual and the from the property must be used for Charitable/Development or other activities of the Organisation.

¨ The accounts must be audited if the income exceeds Rs. 50,000/- and surplus funds must be invested in approved securities.

¨ The Organisation must utilise 75% of the total income of the year within the year for the activities of the Organisation (Utilisation includes capital expenses also).

¨ If 75% is not utilised, Form No.10 may be filed with a request to carry forward the balance to be utilised in subsequent years. A Resolution of the Executive Committee is to be attached with Form -10.

Corpus Fund

¨ Specific letter from the Donor indicating the funds to be set apart for corpus fund has to be obtained.

¨ Interest out of Corpus fund may be used for the activities, but the corpus must not be used for activities of the Organisation.

¨ Corpus fund must be invested in approved securities.

¨ Unutilised balance of grant cannot be treated as corpus fund.

Income Generating Programmes (IGP)

¨ The Organisation cannot run business with profit motive.

¨ The Organisation can run Income Generating Programmes (IGPs) if they are within the objective. Surplus earnings of IGP activities have to be used only for the programmes of the Organisation and must not be divided among the members.

Returns

The Organisation has to file IT Returns every year in Form No.3-A, along with the following documents.

Combined Receipts and Payments Account for the year ending 31^st March.
Income and Expenditure Account,
Balance Sheet and
10-B Certificate duly certified by a Chartered Accountant.
List of Board of Trustees/Members.

The Accounting System followed in SEVAI.

SEVAI ensures that the Management of the Organisation depends largely on the efficient orgnaisation of its accounting systems.

Accounting helps to: Record,Clarif up, Sum up.

All accounts can be classified under either of the two categories:

i) Capital ii) Revenue

Capital expenditure may be described as expenditure resulting in the increase or acquisition of an asset. Example: Land, Building, vehicle etc.
Revenue expenditure is recurring expenditure incurred for the activities of the Organisation. Example: Administrative Expenses, maintenance charges, programme cost.
Capital receipt is an amount arising as a result of disposal of properties, capital grants, endowment funds, contributions to the corpus or life membership fees.
Revenue receipt is that which arises from day to day transactions e.g., General donations, Grants for specific activities, interest on Bank Accounts, etc.

The following statements have to be prepared separately for Foreign Contribution, Local Contributions, Income Generation Project and a combined one for the whole Organisation.

1. Receipts and Payments account for the year ending 31^st March.

2. Income and Expenditure account for the year ending 31^st March.

3. Balance Sheet as on 31^st March.

4. Auditor’s Report.

5. In the case of IGP Account, separate statement of transactions to be attached.

Receipts and Payments account

It is a summary of the Cash book for the year/period.
The statement will start with opening cash and bank balances.
The receipts either Grant-in-aid or corpus are shown on the receipt side.
All payments are shown on the payment side.
Closing Bank and Cash balances are shown as the last item on the payments side.

Main Features

a. It is a summarised copy of the cash book classified under major heads.

b. All Receipts and Payments are included irrespective of revenue or capital in nature.

c. It only reflects the actual inflow and outflow of funds. Non-cash entries like provision for salary, rent, depreciation, etc., will not be included.

Receipts & Payments A/c. for the year ending 31^st March

Receipts

PaymentsPaym

Opening Balance Donation/Grants

Bank interest

Other Receipts

Personnel Expenses Programme Expenses Administrative Expenses Closing Balance

Income and Expenditure A/c.

Income and Expenditure account is drawn up in the case of non-profit Organisations. It is equivalent to profit and loss account in the case of profit making Organisation.

· It must include only revenue income and revenue expenditure

· It must not include transactions which are of capital in nature

· It may include all the transactions relevant during the accounting period depending on the basis of accounting policies being followed, and expenditures like pre-paid payments must be excluded.

· Income is shown on the right side and expenditure is shown on the left side.

· Surplus or deficit is the difference between the two sides. This amount will be transferred the General Fund in the Balance Sheet.

· Depreciation for the Assets may be charged in the General Income and Expenditure account.

Income and Expenditure A/c. for the year ending 31^st March

Expenditure

Income

Expenses relating to the year

Income relating to the year

The difference between Receipts and Payments Accounts and Income and Expenditure Account is indicated below

#	Receipts and Payments	Income and Expenditure
1	This is a summarised statement of cash/bank transactions of a particular Period/ year.	This is a reflection of income and expenditure for that Particular period/year alone.
2	This starts with opening cash, bank and other balances and ends with closing balances	There is no opening or closing balance.
3	This account contains all the Receipts and Payments both capital and revenue irrespective of whether they belong to previous, current or succeeding years.	This records only revenue items excluding capital items relating to the current year. Items relating to the past and future years are excluded
4	In this account Receipts are shown in Left hand (Debit) side and payment are shown on the right hand (Credit) side	In this account income is shown on Right hand (Credit) side and expenditure on left-hand (Debit) side.
5	This does not include outstanding income and expenditure.	The outstanding income and expenditure are included.
6	This account need not be accompanied by a balance sheet.	This account must always be accompanied by a balance sheet.
7	Depreciation and provisions are not included	Depreciation and provisions are included
8	Payments are regulated by taking into account the availability of Bank/cash balances.	The actual as well as accrued income and expenditure of the accounting year is reflected.

Balance Sheet

This is a statement of the financial position of an Organisation on a particular date. It has two sides namely Assets and Liabilities

Balance Sheet as on 31^st March

Liabilities

Assets

Ø Funds – e.g., Capital Fund, Life membership

Ø Other earmarked funds- e.g., Capital, Balance of Grants

Ø Corpus Fund

Ø Loans - e.g., Over Drafts, Government Loans

Ø Current Liabilities

Ø Excess of Income over Expenditure

Ø Fixed Assets

a) Land

b) Buildings, etc.

Ø Movable Assets Vehicles, etc.

Ø Investments – Fixed Deposits Advances, Other Advances.

Ø Other Current Assets – Closing Stock

Ø Excess of Expenditure over Income (to be carried over)

Ø Cash and Bank Balances

Record/Books maintained:

1) Vouchers	a) Payments to be supported by vouchers with details b) Must have serial number c) Must indicate head of account/purpose d) To be kept for 10 years e) Must be signed by the claimant f) Revenue stamp must be affixed if the gross claim exceeds Rs.500/- g) Must be passed by the competent authority
2) Receipts	a) Receipts to be supported by the letters/especially Corpus Donation b) Must be serially numbered c) Must be stamped, if necessary
3) Cash Book	a) Record of receipts and payments b) To be maintained in Double Entry system c) Daily closing balance must be shown
4) Journal	Intended mainly for non-cash adjustments
5) Ledger	a) Classification of expenses b) Sanctioned budget must be written on top
6) Trial Balance	List of balances at the end of the period, extracted from the ledger
7) Bank reconciliation	To be prepared for all Bank Accounts monthly
8) Receipts and Payments Account	Consolidation of all cash transactions
9) Income and Expenditure Account	Reflecting the transaction for the period alone, disclosing the net surplus/deficit
10) Balance Sheet	Position of assets and liabilities as on a particular date
11)ControlRecords	a) Attendance Register b) Salary Records c) Stock Records – Stationery, medicine, etc. d) Staff Appointment Order e) Staff file showing Academic qualification, Training undergone, Position held, Meritorious achievement, Resignation and Disciplinary proceedings etc. f) Fixed Assets Register g) Investment Register/Fixed Deposits h) Telephone and Trunk Call Register i) Postal Inward Register j) Postal Outward Register k) Vehicle Log Book l) Cheque /Register m) Advance Payment/Adjustment Register (i) Tour Advance (ii) Programme Advance n) Foreign contribution receipts register

A. Receipt Book

A separate Receipt book for each of the following must be maintained:

a) Foreign Contribution

b) Corpus Fund

c) Others

At the time of issuing the receipt book to the cashier, the serial number must be noted.

B. Bank Account

Minimum two bank accounts are considered essential, one for funds received under FCRA and another for funds received under local contributions. There is no restriction on the number of accounts that can be opened for local funds. There shall be separate bank account for LC Corpus fund. In the case of FC Corpus, it must be credited in the approved FCRA account and then invested. The interest of the FC Corpus must be credited in the FCRA account.

C) Cash Book

A Cash Book with a bank column is essential. The FC Cash Book must be separate. A ledger and a journal book are required to be maintained separately.

These must be supported by receipt books, cash and bank vouchers and journal vouchers.

D) Maintenance of vouchers

All the vouchers are to be approved by the Director or the Secretary as per the rules. Every voucher will have to pass through three persons when the payment is made, one person who prepares the voucher, another who verifies it and the Chief Functionary or Director who approves it.

Auditing

¨ The Auditors are appointed by the General Body of SEVAI every year.

¨ The details of engagement letter and Agreement must be given to the Auditor.

¨ The Auditor’s role and expectations must be clearly spelt out in the engagement letter.

¨ The Auditor’s services may be utilised not only for checking and certifying the Statement of Accounts but also for getting advice and strengthening the existing Financial Systems and Internal checks which also includes field visits.

Certificate to be obtained from the Statutory Auditor

¨ FC Statements in Form-3 with Receipts & Payments Account and Balance Sheet (Income & Expenditure A/c.)

¨ Consolidated Statement of Accounts to be sent to the Income Tax Department along with 10-B and other Certificates.

¨ Statement of Accounts to be sent to the Donors, Register of Societies and others

Clarifications.

The following clarifications were made during the Finance Management Programmes organised by SEVAI in consultations with auditors.

1. Please explain the amounts to be declared as the second/subsequent Recipient columns in Form-FC 3?

a) Normally the International donors transfer funds directly from their Headquarters in Foreign

Source to the Organisations in India which will be treated as First Receipt. There are certain

Cases where the Branch Office of the International funders receives first in India and then

transfers the funds to the Organisations. In such cases, the Organisations have to declare

these amounts in the second column and subsequent recipient.

b) Similarly, in the case of interest earned, it is to be declared as second/subsequent recipient

Column.

c) The realization of Assets sold must also be declared as a second/subsequent receipt.

d) The same procedure has to be followed in the case of receipt in kind.

2. Who can inspect the Books of Accounts and whether the NGOs have to show the FC Books

to them?

The Central Intelligence Bureau Officer or the State Revenue Official or any other Government Officer who has been authorised to inspect the Books of Accounts shall inspect the Books of Accounts. The Organisation has to necessarily allow them to inspect the Books of Accounts and may request them to initial the Books of Accounts. If they are requesting certain information to be furnished in writing, it could be furnished in writing in the official letter head signed by the Chief Executive and a copy of such correspondence may be marked to the Home Ministry for information.

3. There are certain Village level Sangams or Organisations which to not have approval from the

Home Ministry: is it possible to transfer the Foreign Contribution money to them to strengthen

There activities?

It is not possible to transfer Foreign Contribution directly or indirectly, to any other Organisation registered or unregistered which does not have approval from the Home Ministry to receive Foreign Contribution.

4. Can NGOs receive funds from a Foreign Visitor?

a) Any Organisation which has regular number/approval from the Home Ministry can receive

Donation/Grant from a Foreign Visitor.

b) This donation/grant may be in Foreign or Indian Currency or in kind

c) The Organisation must make a Receipt indicating his name, passport number and other details and

such donation must be deposited in FC Account and it must be utilized for the purpose for which

the amount has been received.

5. If an NGO receives funds for Revolving Fund, can the collection made out of this Revolving Fund, be deposited in FC Account?

The collected amount must be deposited only in FC Account. The amount may be re-distributed again. Necessary accounting records must be maintained and such transactions must be reflected under the head, “Any other purpose” in FC-3 statements with details of Opening Balance, Closing Balance, etc. The amount collected must be reflected as “second and subsequent recipient” and amount distributed must be shown as utilisation. The receipts and payments account and Balance Sheet of Foreign Contribution must also reflect the transaction.

6. How to reflect Assets purchased both from FC & LC in the records?

It is not advisable to purchase Assets like Vehicles, partly from LC account and partly from FC Account. There will be problem in indicating the asset value in the Balance Sheet of FC. In the case of divisible assets, like land, it may be possible to purchase, provided separate cheques are issued from FC and LC depending on the availability of funds. This must be brought to the notice of the donors.

7. Can an NGO change the Executive Committee members and whether it will affect the present

registration with the Home Ministry?

The Notification dated 27.12.96 speaks only about the Office Bearers. If there is a change which leads to 50 percent or more office bearers, then, the Organisation has to send fresh application to the Home Ministry for approval and till such time, the FC account must not be operated. However the Organisation can apply for prior permission and if the permission is obtained it can operate the account.

8. How can an Organisation be registered?

An Organisation can be registered in anyone of the following ways:

i. As a Company (not for profit) registered under Section 25 of Company’s Act.

ii. As a Society, under Societies Registration Act.

iii. As a Public Charitable Trust, registered under the Indian Trust Act.

iv. As a Co-operative, under the Co-operative Act.

v. As a Trade Union, under the Trade Unions Act.

9. Which form of Organisation is good?

Every form of Organisation has its own strengths and weaknesses. The effectiveness depends upon the efficiency in the management of the Organisation. It is said that the Society is more democratic. But we can see a number of Societies management more autocratically. Similarly, the Trusts can be managed more democratically. It is the intention and working of the Management which is more important. Management must have broad based members and Board and must run the Organization more democratically and with social transparency.

10. Must an NGO intimate the amendments to the Registrar?

The Amendments must be intimated to the Registrar since only then they become operational.

11. The Trust Deed permits to have 5 trustees. Only 3 trustees have so far been appointed. Must we

register with the sub-registrar if we appoint any new Trustee?

No. Since the Deed provides for 5 Trustees, the new trustees can be appointed up to a total of 5 Trustees.

12. Can an International Donor insist that the project partner must comply with rules and regulations

of the partners’ country?

Yes. They have to. Normally this is included as part of their agreement.

13. Can an un-registered Organisation receive foreign funds?

Yes. It can receive after getting approval from the Home Ministry. However, it has to comply with other laws like the Income Tax, etc.

14. Can an Organisation change the Auditor?

Yes. That can be decided by the members in the Annual General Body Meeting.

15. Can we open different Bank accounts for different programmes?

All FC must be operated only in One FC approved Bank account. But in the case of LC, different accounts may be opened for different, programmes.

16. Must we show the peoples’ contribution in the FC account?

If the Local Contribution is declared to the funding agency at the time of presenting the proposal, you shall maintain a separate Local account to deposit all the local receipts.

The funds from local contribution must not be mixed and deposited in FC account. But a statement may be prepared indicating the amount spent in FC/LC and the total expenditure incurred.

Expenditure

Head

Foreign

Contribution

Peoples’

Contribution

Total

17. How to record the contributions which are not in cash?

Value the contribution in terms of money and record it as receipt. It must be reflected in accounting statements and must be certified by the Auditor. There are provisions in the revised FC-3 form to indicate the transactions in kind.

18. Can an Executive Committee Member with voting right of a Society get remuneration from the

Society?

Yes. It is possible only after obtaining the written permission from the Inspector General of Registration. In Tamil Nadu, Societies can send a detailed letter with the resolution of the Society and with a letter of approval from the Donors to the Inspector General of Registration through the respective Registrar of Societies and only after getting the written consent, the remuneration can be drawn. Similar procedure also exists in Andhra Pradesh and Karnataka.

19. Can land be purchased in the name of the President of the Organisation since the charges for

registration is less if we do so?

No. It is essential that any asset purchased using the Organisations’ funds must be registered only in the name of the Organisation even if we have to pay more as registration charges. It must be specifically worded that the land purchased belongs to the Organisation and must be utilized only for the activities of the Organisation. This is suggested to avoid Income Tax complication and also transparency of ownership of the Organisation. In case of vehicles, the registration must be in the name of the Organisation irrespective of the registration fees that we have to pay out of the Organisation funds. Any other alternative method would be viewed seriously both under the Foreign Contribution Act and the Income Tax Act.

20. What are the certificates to be issued by the auditor?

1. The actual expenditures compared with approved budgets bringing into light the under/over

expenditure in the individual budget item.

2. The appropriation from one head to another head without specific sanction/approval from SEVAI

must be brought to light.

3. The closing balance as on 31^st March must be indicated.

4. The interest earned out of SEVAI funds and details of utilisation of such interest has to be certified

by the auditor.

5. The Auditor’s report must be attached.

21. Is it essential that depreciation has to be charged in the book of accounts?

As per standard accounting practices, it is essential that depreciation has to be charged for the assets so that the financial statement reflects true and fair position. But in the case of Balance Sheet of the Foreign Contribution it is better that depreciation is not charged in the Statement of Accounts to be sent to the Home Ministry. The depreciation can be charged at the time of preparation of consolidated Statement of Accounts. Since SEVAI is funding for the purchase of assets, SEVAI will not reimburse depreciation charges.

22. What are the various forms used by the Development Organisation?

Forms under the Foreign Contribution (Regulation) Act (FCRA)

Form FC 1-A For Prior Permission
Form FC 8 Registration/Approval for receipt of FC
Form FC 3 Annual Returns alongwith Receipts &

Payments A/c. and Balance Sheet of FC

Form FC 6 Foreign Contribution Article A/c.
Form FC 7 Foreign Contribution Securities A/c

Forms under the Income Tax Act

Form No\10 Accumulation of Fund Approval to carry forward

The unutilized funds to the subsequent years

Form No\10-A Registration under Income Tax Act
Form No\10-G Application for Approval U/S. 80/(G)
Form No\3-A Annual Returns alongwith Consolidated

Statement of Accounts of the Organisation

Form No\10-B Certificate to be issued by the Charted Accountant

- Form 10-B must be enclosed along with Form

3-A to be sent to the IT Department

Other Statutory Authorities

¨ Annual Returns to the Registrar of Societies

¨ Annual Returns to the Regional Provident Fund Commissioner as per provisions contained in the Act

23. Whether an NGO can start business so that profits can be used for the activities?

An NGO cannot start business with profit motive. However, the IGP can be substantiated, if the Donor specifically sanctions the amount to the invested as IGP as a part of sustainability.

a) If IGP were to create employment opportunities for people.

b) If IGP were to be a part of training strategy to train people. Each case has to be substantiated on

the basis of merit. The surplus of IGP can get exempted provided,

(i) The IGP undertaken is within the objective of the Trust.

(ii) The activity is a part of the sustainability or provides employment opportunities for people.

(iii) Surplus, if any, will not be distributed amongst the members of the Board, but will have to be utilized for the activities of the Trust.

24. Is it essential that the Chief Functionary must live within the operational area?

No necessary. But it will be difficult to organize and control the activities if she/he is not living nearby. The remote control operation seldom works with NGOs. If there is a good professional team, it will work.

25. Can an NGO publish regular Newsletters or books?

No. NGO cannot publish without getting the approval. But if the publication is incidental to the attainment of the objective of the Society/Trust, the Organisation can publish periodicals, books, etc.

26. Can an NGO publish Newsletter/books, etc., as ‘For Provide Circulation Only’ without getting

the approval?

Mentioning as ‘For Private Circulation Only’ does not differentiate the provisions of the Act. If the publication is brought out at periodical intervals, then it may be considered as a regular newspaper. The Government however may permit Associations if they apply in Form “X” and get approval (Notification No.50760 (E) dated 3.8.1987).

27. In the case of prior approval, if the value of money exceeds the approved amount due to the raise

in the Conversion rate, how to deal with the excess amount?

If the permission if for the amount in foreign currency, then there is no problem. If the approval is in Indian currency then, the NGO has to get the approval from the Government before transacting such excess funds.

28. Can we redeposit the amount withdraw from the FC Bank Account?

Yes. We can.

29. Will it not be a second entry, if we redeposit the amount withdraw from the FC Bank Account?

No. We must record the entries in the Cash Book and proper documentation is to be kept.

30. Some Funding agencies ask us to maintain a separate Cash Book for their funds. How do

maintain?

Subsidiary Cash Books can be maintained. But only one master Cash Book must be maintained as per the FCR Act. In such cases it may be advisable to maintain separate ledgers for Donors.

31. Is it necessary to submit FC-3 Returns if the Organisation has not received any money for a

particular period?

Yes. Nil Returns have to be submitted.

32. Will there be any inspection to the Organisation from the Registrar’s office, if the Organisation is

registered under the Societies Act/Trust Act?

Yes. As per the Societies Registration Act, the Registrar can inspect. There is no provision to this effect if the Organisation is registered under the Trust Act.

33. The societies Act permits any General Body Member to become Executive Committee Member once

in 2/3 years through election. But the FCRA now says that if more than 50% of the Executive

members are changed, we will have to apply again to get it registered under FCRA. Is this not

interference in the democratic rights of the members

Yes. The recent ammendment of FCRA seems to be undemocratic and an interference in the democratic rights. There were representations to the Home Ministry in this regard. FCRA only indicates about 50% the change of office bearers. The Associations have to distinguish between office bearers and Executive Members.

34. What is meant by Financial Management in an Organisation?

a) Preparation of the Annual Budget Estimates

b) Withdrawal and disbursement of Funds

c) Maintenance of prescribed accounts

d) Ensuring Audit of Accounts

e) Rendering Returns to the authorities concerned

35. What is budget and what purpose does it serve?

Budget is a document showing the estimated annual income and expenditure of the Organisation for implementing a particular project. It shows the availability of Funds for various activities to be undertaken during the year. Timely and proper utilisation of funds based on the budget provision implies achievement of the goal/objective for which the funds are needed. This is why, estimates have to be framed on realistic basis so that there may not be scope for non-utilisation/under utilisation/diversion of funds. Budget monitoring at frequent intervals is a must. The budget monitoring at frequent intervals is a must. The budget can be regarded as a mirror for the growth of the Organisation.

36. Does the budget provision laps at the end of the year?

The budget provision that remains unutilized automatically lapses at the end of the financial year (31^st March). The unutilized balance must be carried forward to the subsequent year, with proper resolution of the Governing Body of the Organisation and with the concurrence of the Donor; otherwise the unutilized balance requires to be refunded to the Donor.

38. How do you regulate withdrawal of funds from the Bank?

In as much as the project activities are met out of Foreign Contribution accounts, the day-to-day withdrawal of the funds from the Bank must be based on actual requirements. For this purpose, the details of activities to be carried out in a Calendar Month must be discussed at the Planning Meeting held with the Programme Co-ordinators, Administrator and Accountant for assessing the funds requirement. The Director presiding over the meeting will have to sanction the monthly indents for drawing of funds. Based on Monthly indents, the accounts department will provide funds on day-to-day basis, as per requirements put forth by the Programme Co-ordinators/Administrator. Under no circumstance, the funds not required for immediate disbursement must be withdrawn from the Bank.

39. What safeguards are to be kept in mind while making cash disbursements?

a) Ensure submission of the proper voucher duly signed by the claimant and sanctined by the

Director.

b) In the case of suppliers/contractors payment must be made by cheques/drafts and cash receipt must

be obtained.

c) Insist on stock entry certificate for the materials purchased.

d) Deduct advance/part payment already made, while making the payments.

e) The staff members may be induced to maintain Savings Bank Accounts for crediting their monthly

salaries.

40. What steps are taken for ensuring safe custody of office cash?

a) Vehicle facility must be availed for bulk withdrawal of funds from the bank.

b) Minimum cash balance alone must be kept in the office for urgent expenses.

c) The daily closing balance of the cash must be recorded with notes/coins details and attested by the

Secretary/Treasurer.

d) The office cash chest must be provided with double-locks, of which one key will be kept by

accountant and another key by the Director.

e) Relevant Insurance policies must be taken.

41. What checks do you exercise in respect of non-salaried items of expenditure?

a) In the case of purchases, the store keeper will have to furnish the certificate regarding the quality

and quantity of material purchased, as also the stock entry certificate on the bill copy of the

supplier.

b) The supplier’s must be in the name of the Organisation and not in the individual’s name.

c) The payment must be made by crossed cheques.

d) The above conditions shall apply in respect of bills of all work contracts.

e) In the case of the staff T.A. claims, the supporting vouchers for journey undertaken, lodging bill,

hotel bill etc., have to be enclosed. It may also be seen whether the duration of halt in camp places

is reasonable and the hospitality expenses incurred, if any, are justified.

42. Is it essential that the statement of accounts and reports should be sent to the Donors regularly?

Yes. The International Donors are collecting funds from Governmental and non-governmental philanthropists in their own respective countries.

They are answerable to:

a) Their own Institutional donors including their Government

b) Individual donors and others who contribute

c) Their Board Members

d) Tax authorities and other legal regulatory personnel to whom they are accountable as per

their statutes, and

e) Their statutory and internal auditors.

Hence the donors are insisting on,

(i) Information about the Organisation, present and future action plans, half yearly and annual

reports

(ii) Half-yearly statement of accounts and the annual audited statement of accounts

The International donors collect the above information – statement of accounts – documents and present them to their donors, their auditors and to their authorities. This flow of information helps them to be transparent and also helps to increase their efforts with regard to resource mobilization.

43. Suggest measures for streamlining the financial administration in the Organisation?

a) Economy in expenditure by adhering to the budget provision.

b) Systematic writing of accounts and keeping the books of accounts up to date.

c) Proper filling of vouchers.

d) Periodical review of Bank balances and investment of surplus funds under short term Fixed

Deposits in CO-Operative Bank offering higher rate of interest.

e) Preparation of Monthly Receipts and Payments Accounts.

f) Reporting quarterly financial transactions to the Governing Body of the Organisation.

g) Periodical verification of Fixed Assets and Disposal of unserviceable items.

h) Keeping minimum of stock of consumable items.

i) Speedy action for getting the adjustment voucher for the outstanding items of Programme

Advances.

j) By keeping minimum cash balance in the office.

k) Closing of Books of accounts at the end of six months period and submission of accounts to the

statutory Auditor for interim Audit.

l) Rendering the reports and Accounts to the Statutory Authorities and the Donors within the due

dates.

44. Mention the list of records/books to be submitted to the Statutory Auditor.

a) Vouchers

b) Cash book

c) Receipt budget

d) General/subledger

e) Trial balance

f) Bank Reconciliation certificate

g) Bank Pass Books

h) Cash balance certificate

i) Budget Communication

j) Donor’s Letter sanctioning Grants

k) Bank Credit Advice for Receipt of Grant

l) Receipts and Payments Accounts

m) Income and Expenditure Accounts

n) FC-3 Form Statement

o) Donorwise Receipts and Payments Accounts

p) Activity Report

q) Income Tax Statements

r) Fixed Asset Register

s) Fixed Deposits Register

t) Investment Register

45. Specify the duties and responsibilities attached to the Accounts Department in the Organisation.

a) Preparation of budget

b) Donor’s approval/execution of agreement

c) Release of funds

d) Requirement of funds for each month

e) Need based withdrawal for each month

f) Disbursement on submission of bills

g) Scrutiny of bills/vouchers

h) Entry in Cash book

i) Computerisation of day-to-day transactions

j) Review of monthly accounts with reference to budget estimates

k) Salary bill preparation

l) Sanction of loan to staff and maintenance of General Register

m) Issue of printed Receipts

n) Placing of monthly accounts before the Finance Committee

o) Arranging and fixing of Executive Committee Meetings

p) Review of Affairs of the Society by the Executive Committee

q) Final settlement of Staff Welfare Claim to staff tendering resignation

r) Audit of annual accounts

s) Adoption of the accounts of the Society at the Annual General Body Meeting

t) Filing of Annual Returns to the Statutory Authorities – Ministry of Home Affairs, Income Tax

Office & Registrar of Societies

u) Rendering of Project Accounts to the Donors

Budgeting and Monitoring

Budgeting and Monitoring involves a system of planning, executing the plan and monitoring and evaluating the performance and financially managing the activities of the Organisation.

Budget is thus:

a) Financial statement with available quantitative details.

b) Prepared and approved prior to a defined period of time.

c) Is an instrument to implement the objectives of the Organisation.

Format for preparation of Budget

S.No	Description	Previous Year	Current Yea			Next Year
		Estimated Budget for the previous year	Actual Expenditure			Budget Estimation
		Estimated Budget for the previous year	Up to Sep.	Estimated Oct. to Mar.	Revised Budget	Budget Estimation
1	Staff Salary
2	Programme Expenses a) b) c)
3	Activity 1 Activity 2 Activity 3 Activity 4 Activity 5
	Total Expenses

Contribution from Funding Agencies

Contribution from Project Partners

Other sources with details

_____________________________________________________________________________________

Total Income

_______________________________________________________________________________

Surplus/Deficit

Budget/Monetary Control Statements

Performa: 1

Previous Year		Description	Current Month		Cumulative for the year		Remarks
Budget	Actual		Budget	Actual	Budget	Actual
							/p>

Proforma: 2

Requirement of SEVAI

1.0 Booking Keeping

1.1 Double Entry System to be followed:

A separate Cash Book with Bank Column must be maintained for FC received and Ledger has to be maintained.

Cash Book has to be maintained separately for Local Contribution received.

1.2 Ledgers as Budget Head

1. The approved Budget amount must be indicated in all the Ledger Folios in red ink at the top

2. The Budget Heads as approved by SEVAI must be adopted and separate Ledger Folio has been maintained for respective heads.

1.3 Registers

The following Registers has been maintained:-

1. Register of Land with Patta (title) number

2. Fixed Assets Registers

3. Register of Advances, Loans and Revolving Fund

4. Register for Travel Advance

5. Register for Stationery

6. Register for Trainings conducted

7. Log Book for Vehicles

8. Register for Investments

9. Salary Register

10. Attendance Register

11. Loans Register

12. Postal Register

13. Telephone & STD Register

14. Others, depending upon the needs of the Organisation

1.4 Cheque Transactions

Any payment exceeding Rs.19,000/- will be done either by a A/c. Payee/Crossed cheque/Demand

Draft. However, in exceptional cases, Cash may be paid with full details with supporting vouchers

1.5 Programme Advance

All Programme advances must be settled within 15days after the programme is implemented.

1.6 Bank Account

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There must be a separate Bank account for all Foreign Contribution transactions which must be approved by the Ministry of Home Affairs. Amounts received from SEVAI must be treated only as foreign source and it must be credited in FC Account. The Organisations can have local fund account depending upon the need.

1.7 Maintenance of Vouchers

All vouchers are to be approved by the Secretary of the Board or such other person(s) authorised by

The rules of the Society/Trust. All vouchers must be supported by bills evidencing payment. They

Must have serial number, must indicate head of account and purpose.

1.8 Separate Book Keeping for SEVAI Grant

For SEVAI funds, separate accounting (ledgers and registers) is necessary. This will help to know

The unspent balance available and the interest accrued. Even in the case of “co-funding” the interest

Accrued and unspent balance will have to be calculated in proportion of grants received from

Donors.

1.9 Accountant

Keeping in mind the importance of accounts, SEVAI would request the partners to have a regular

Accountant (full or part time depending on the work load of the particular Organisation).

11. Statements to be prepared

1. The following statements are to prepared for the financial year ending

	Receipts & Payments A/c.	Income & Expenditure A/c	Balance Sheet	Certificates/ Forms
1.01 Foreign Contribution				FC-3 Form
1.02 Local Contribution i. CAPART ii. Social iii. Welfare				Utilisation Certificate
Consolidation LC
1.03 EDP (Entrepreneurial Development Programme)				Profit and Loss Account
1.04 Consolidaiton of all the above
1.05 Statements for Income Tax purposes				a) Computaion of Income b) 10-B Certificate c) Profite and Loss Accounts of EDP

All the above said statements must have the usual schedules and annexure like the list of advances, etc. as per the requirement. Explanatory notes to the Financial Statements are to be attached.

i. Significant Accounting policies adopted

ii. Significant changes, if any in the accounting policies

Annual Report of the Organisations, details of beneficiaries and other required details as per the Agreement must be submitted. Separate Audited Statement of Accounts of Peoples’ Organisations related to Entrepreneurial Development Programme (EDP) must be sent as per the requirement.

2. In the case of Statement and Reports to SEVAI, the statement of Receipts and Payments for their

grants, must be prepared simultaneously with the following details.

i. The actual expenditure with the approved Budget/sanction and analysis of the reasons for

major variations. If modifications have been accepted by SEVI, the letters of reference

must be indicated.

ii. Similar exercise must also be done with corresponding expenditure of the previous years for

control purposes.

iii. The interest earned out of SEVAI funds must be shown separately in the details of approval

and utilisation.

3. The following details must be prepared along with the statements:

a) In the case of Revolving Fund/Loan to villagers, the following particulars must be furnished:-

	Local Contribution	Foreign Contribution	TOTAL
	( in Rupees)
Opening Balance of the Revolving Fund
Amount collected during the year
Disbursement during the year
Closing Balance as on 31st March
Interest collected from RF, if any Utilisation of Interest

b) The Certificate of Balance from the Banks, for SB Accounts and Fixed Deposit as on 31^st

March must be obtained with details of interest paid/payable/ The Bank reconciliation statement

Each bank account must be prepared along with details of subsequent entries in the Pass

Book, etc.

4. All Travel Advances, temporary advances and other impressed advances must be adjusted

before 31^st March.

5. If depreciation is claimed, the original cost must be retained and the value actually spent for

acquiring the assets must be clearly indicated in the Balance Sheet. The accumulated

depreciation can be deducted out of the value and shown separately. SEVAI will not reimburse

depreciation charges, if any.

6. If the unspent balance as on 31^st. March is likely to be more than 25% of the funds received

during the year, it is essential to arrange for an Executive Committee meeting and pass a

resolution in the EC/Board to carry over the unspent balance to the subsequent year. The

Income Tax Department is taking a view that investment in Fixed Deposits during the year-end

Without any specific authorization/purpose will not be construed as expenditure. Caution may

Be taken in this regard, and in all the cases, if the expected utilisation is less than 75% of total

Receipt, it is always better to pass a resolution and file Form-10.

If any fixed asset is sold during the year, it is essential that the amount realized be used only

For the purpose of investment in fixed assets perhaps within the year.

12. Check List – Returns to be sent

Particulars	Period	Returns	Due Date
FOREIGN CONTRIBUTION (REGULATION) ACT
FC Amount Received	Annual Returns	Form FC-3 with 1) Receipts & Payments A/c. 2. Balance Sheet for the year ending 31st March.	Before 31st July
INCOME TAX ACT
INCOME TAX ACT
Total Income received	Annual Returns	a) Form No.3-A b) Consolidated (i) Receipts & Payments A/c.., (ii) Income & Expenditure A/c.., (iii) Balance Sheet along with Schedules for the year ending 31st March. c) 10-B Certificate, Form No.10 and 44(A) (B) wherever applicable	Before 31st October
SOCIETIES REGISTRATION ACT
SOCIETIES REGISTRATION ACT
Total Income received by the Society	Annual Returns	Consolidated Statement of Accounts, Consolidated Certificate change of Executive Committee/Board Members	1) Annual General Body must be called within 6 months and statements must be approved. 2. Returns to be filed after the General Body Meeting.

SEVAI REQUIREMENTS
Grant received from SEVAI	Annual Statement and Details	1. Consolidated Receipts and Payments A/c., Income and Expenditure Balance Sheet 2. FC-3 Returns along with the enclosures submitted to the Home Ministry of India 3. Comparative Statement of A/c. (related to amount approved and utilized) 4. Audit Report or Certificate by the Chartered Accountant 5. Annual Report of the Project as per the prescribed format of SEVAI	15th June













	Half yearly	1. Unaudited Statement of Accounts for 6 months 2. Comparative Statement 3. Half yearly Progress Report 4. Budget for the subsequent 5. Action Plan for the subsequent year	15th October

Tax Deduction at Source

RETURN OF TDS				TIME LIMIT TO REPORT
Salaries	Annual Returns	Form No.24	Before 31st May	Within 7 days of Deduction	Form No.16 to be issued
Payment to Contractors	Annual Returns	Form No.26	Before 30th May	Within 7 days of Deduction	Form No.16-A to be issued
If the consideration of contract exceeds Rs.20,000/-, 2% of the amount must be deducted and remitted to the Department
Payment of Professional fees	Annual Returns	Form No.26-K	Before 30th June	Within 7 days of Deduction	Form No.16-A to be issued
If the payment exceeds Rs.20,000/-, 5% of the amount must be deducted and remitted to the Department
i. Apply in Form No.49-B for allotment of Tax deduction Account Number ii. Remit the amount in any RBI or SBI or any other Authorised Bank iii. File Annual Returns of TDS and issue necessary certificates

Form No.1

Petty Cash Book

Period:……………………

Amount Received

Date

Voucher No.

Particulars

Total

Petty Cash Payments (Classification Account Headwise)

Date

Amount

Receipt

Payment

Date

Receipt Number

Receipts

Ledger Folio

Bank

Cash

Adjustment

Date

Voucher Number

Payments

Ledger Folio

Bank

Cash

Adjustment

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Note: 1. Instead of adjustment column, separate journal register may be maintained.

2. The Cash Book should be closed daily.

3. The Cash on hand should not exceed the maximum limit prescribed.

4. Separate Cash Book is to be maintained for FC & LC.

Form No.3

General Journal

Date	Voucher No.	Particulars	L.F.	Debit	Credit

Each voucher debit and credit should tally

L.F. – Ledger Folio

Form No.4

Ledger

Approved Budget

Date	Voucher Number	Account Particulars	Cash Book Folio	Debit	Credit