## CARO 2020 Clause (xx) – Corporate Social Responsibility (CSR)
### Applicability
This clause applies only to companies that must spend on CSR (i.e., Section 135 companies — those meeting the net worth / turnover / profit thresholds). The audit checks whether unspent CSR amounts have been properly transferred as mandated.
### Two Types of CSR Projects & Their Unspent Amount Rules
| Type | Legal Provision | Rule for Unspent Amount |
|---|---|---|
| Non-ongoing projects (one-time) | Section 135(5) | Transfer to Schedule VII Fund within 6 months of end of FY |
| Ongoing projects | Section 135(6) | Transfer to Unspent CSR Special Account within 30 days of end of FY |
### The Company Spends 2% of Average Net Profit
- Average Net Profit = Average net profit of the company during the 3 immediately preceding financial years (Section 198 calculation).
- Unspent amounts must be tracked separately by project type.
### What the Auditor Reports
1. Whether the company is required to spend CSR and whether it has spent the required 2%.
2. For non-ongoing projects: Was the unspent amount (if any) transferred to a Schedule VII Fund within 6 months of FY end?
3. For ongoing projects: Was the unspent amount (if any) transferred to the special account within 30 days of FY end?
4. Whether the required disclosures relating to CSR have been made in the financial statements.
### Schedule VII Funds (Examples)
- Prime Minister's National Relief Fund
- PM CARES Fund
- Swachh Bharat Kosh
- Clean Ganga Fund