The Institute of Chartered Accountants of India (ICAI) has recommended that all non-governmental organisations (NGOs) that have gross revenue of and above Rs 50 crore must follow accrual system of accounting account for all receipts and expenses as and when the transaction happens to maintain transparency in the public money.
In fact, there is a serious need of financial control in the several NGOs operating in the country as it is a very important way to curb money laundering and suspected terrorist financing, accounting regulator ICAI has said in its report on the Accounting and Reporting Requirement of NGOs submitted to the ministry of corporate affairs last month.
According to the accounting regulator, there is need of one single regulatory authority for all NGOs as currently they are established under different laws ranging from Societies Registration Act to Trust Act. This leaves a wide regulatory gap and hence helps in laundering the public money, an ICAI source told The Indian Express.
There are two kinds of funds received by the NGOs– restricted funds and unrestricted funds. Restricted funds are purpose specific. The ICAI has suggested that these NGOs must follow fund-based accounting, which means that there should be a separate bank account for restricted funds and the NGOs must maintain a separate balance sheet, income and expenditure account and cash flow statement.
This will help in curbing funds diversion, the source added.
The regulator has also suggested that it should be made mandatory for NGOs having gross revenue above Rs 50 crore to follow all accounting standards framed by the ICAI while those having gross revenue up to Rs 50 crore may follow the standards subject to certain relaxation by the ICAI.