CSR audits to usher in transparency
Monitoring of Corporate Social Responsibility (CSR) funds will bring more accountability and transparency to the mandatory expenditure undertaken by India Inc. The projects implemented by companies under the existing CSR law are soon likely to be audited as part of the proposed monitoring.
India Inc spends around Rs 15,000 crore under CSR programme annually. There is definitely a need to look at the quality and efficacy of the expenditure. The Section 135 of Companies Act, 2013 makes it mandatory for businesses having net worth of Rs 500 crore (or turnover of Rs 1,000 crore, or a net profit of Rs 5 crore) to spend 2% of their profit on the social welfare projects. A third party could be engaged to monitor the projects. Another big change would be to allow companies to carry the unspent CSR budget over to next year.
As the definition of ‘local area’ is made more flexible, companies need not exclusively spend funds within their operation. The committee may also propose changes in the annual filing to allow more disclosures on the CSR work. A new e-form on CSR compliance is under consideration. While the committee is likely to suggest a number of changes in the CSR framework, the basic architecture of keeping it Board-driven will remain intact.
Source: DNA Money