The Parliamentary Standing Committee on Finance has requested the Ministry of Corporate Affairs (MCA) to examine the top ten private companies’ corporate social responsibility spending, sector by sector and by parliamentary constituency, and provide a report within three months.
Concerns over Monitoring Mechanism of CSR Funds
The committee voiced its concerns about the CSR spending monitoring mechanism, finding that “information regarding CSR spending by companies is insufficient and difficult for a layperson to acquire.”
It stated that within three months, an examination of the top ten private enterprises, sector by sector, such as mining, real estate, and construction, as well as constituency-by-constituency CSR spending, should be completed and given to the committee.
Third-Party Audit of CSR Fund
A third-party audit of the CSR fund was also requested in the report, which was just submitted to parliament. The MCA, on the other hand, has told the panel that such an audit is unnecessary because existing law requirements provide appropriate safeguards.
Companies will be expected to provide more details about their CSR spending beginning April 1st, according to the ministry, with the introduction of the CSR 2 form.
“We have now introduced a new form CSR 2 in which they will have to furnish the CSR details including a list of projects and the information like where they are doing it, what kind of money is being spent,” the ministry of corporate affairs said in its response.
The committee noted that local expenditure was being neglected, particularly by mining corporations and heavy industries, and suggested that the Act’s requirements, which are now advisory in nature, be made mandatory to ensure that local spending is prioritised.
What is CSR-2 Form?
Corporate India was already required by the government to produce a full report on its unique CSR programmes. Companies will be required to disclose information on the CSR amount spent in the three prior financial years, as well as details of any current projects, under the new 11-page form announced by the MCA on February 11, 2022.
The corporate affairs ministry can use this new information to build successful CSR policies. On or before March 31, 2022, businesses must file the new Form CSR-2 for the previous fiscal year (2020-21). This is in addition to the Registrar of Companies’ Form AOC-4, which is used to file the company’s financial statement. These disclosures are also included in the annual CSR report that corporations are required to file by the MCA. According to the Ministry of Corporate Affairs (MCA), this document must be filed to the Registrar of Companies for the preceding financial year (2020-21) and onwards.
To know all you need to know about the CSR-2 Form, click here.