What is NGO Audit?

An NGO Audit is an independent examination of an NGO’s financial records, books of accounts, and related documents by a certified Chartered Accountant (CA) to verify compliance with statutory laws and financial propriety. Governed by the Income Tax Act, Societies Registration Act, and in some cases FCRA (Foreign Contribution Regulation Act), the audit ensures that the NGO is using funds lawfully and ethically.

Auditing is crucial not only for legal compliance but also for reinforcing donor and stakeholder trust. A professionally conducted NGO audit provides clarity on fund allocation, program expenditures, and administrative costs. For NGOs receiving government or foreign funding, audit reports are mandatory for submitting to funding agencies, income tax authorities, and renewal of licenses.

✅ Benefits of NGO Audit

🎯 Provide 7 strong benefit points, written from the client's perspective.

1️⃣ Ensures Legal Compliance – Stay aligned with Income Tax, FCRA, and local laws
2️⃣ Boosts Donor Confidence – Transparent finances attract long-term support
3️⃣ Eligibility for Funding – Required for availing grants from government or foreign bodies
4️⃣ Highlights Financial Irregularities – Early identification of mismanagement or leakages
5️⃣ Supports Good Governance – Promotes accountability and internal control
6️⃣ Facilitates License Renewals – Smoothens compliance with registration and renewal norms
7️⃣ Strengthens NGO Credibility – Enhances organizational image in the public and private sector

📑 Documents Required for NGO Audit

📂 List all required documents with relevant emojis and brief explanations.

1️⃣ 📚 Books of Accounts – Cash book, ledgers, bank statements
2️⃣ 🧾 Receipts & Payment Vouchers – Evidence of transactions and expenditures
3️⃣ 📝 Donor Acknowledgements & Grant Letters – Records of funding received
4️⃣ 🧑‍💼 Employee Salary Registers – Details of remuneration paid
5️⃣ 📄 Bank Reconciliation Statements – Match bank entries with NGO books
6️⃣ 🗂️ Previous Audit Reports (if any) – For cross-verification and continuity

👤 Eligibility for NGO Audit

🧾 All registered NGOs, charitable trusts, societies, and Section 8 companies are legally required to conduct annual audits if their annual receipts exceed the tax audit threshold or if they receive foreign contributions.

You must conduct an NGO audit if:

• Your NGO is registered under the Societies Registration Act, Trust Act, or Companies Act

• Your annual receipts or expenditures cross the specified limit under Section 12A/80G

• You receive foreign contributions under FCRA, 2010

• You apply for or receive government grants or institutional funding

• You want to maintain transparency and donor credibility

🔄 Process of Getting NGO Audit

🔁 Provide a step-by-step explanation of how the service is executed from start to finish.

1️⃣ Initial Consultation – Understand NGO structure, funding sources, and compliance needs
2️⃣ Document Review – Collection and verification of all financial records and vouchers
3️⃣ Internal Control Assessment – Evaluation of financial systems and internal checks
4️⃣ Field Verification (if needed) – Visit project sites or branch offices for record sampling
5️⃣ Audit Report Preparation – Drafting of audit report with notes, observations, and disclosures
6️⃣ Submission & Filing – Final report shared with management and filed with relevant authorities

⏱️ Timeline for NGO Audit

⏳ The average time to complete an NGO audit is 2 to 4 weeks, depending on the volume of financial records, accuracy of books, and availability of documents. NGOs with multiple funding sources or foreign donations may require additional scrutiny and time.

❓ Frequently Asked Questions (FAQs) about NGO Audit

1️⃣ Is NGO audit mandatory?
Yes, for all registered NGOs with income exceeding basic exemption limits or those receiving grants/funds.

2️⃣ Who can conduct an NGO audit?
Only a certified Chartered Accountant (CA) registered with ICAI is authorized.

3️⃣ When should an NGO conduct its audit?
Ideally at the end of each financial year, before filing returns or applying for renewals.

4️⃣ Is audit required even if no funds were received?
Yes, if the NGO is active and registered, a basic audit is still recommended for compliance.

5️⃣ What happens if an NGO fails to conduct an audit?
It may lose tax exemptions, face penalties, and risk license or registration cancellation.

6️⃣ Is the audit report submitted anywhere?
Yes, to the Income Tax Department, funding agencies, or Ministry of Home Affairs (for FCRA NGOs).

7️⃣ Does the audit include FCRA funds?
Yes, and it must also comply with the reporting requirements under FCRA 2010.

8️⃣ What are qualified vs unqualified audit reports?
Qualified reports note discrepancies; unqualified reports indicate clean and proper records.

9️⃣ How much does an NGO audit cost?
It depends on the size, number of transactions, and complexity—consult us for a quote.

🔟 Can we audit multiple years together?
While possible, it's advisable to audit every financial year separately for compliance accuracy.