Audit of Charitable Institutions

## Audit of Charitable Institutions

### 1. General Procedures

• Study the constitution under which the institution was set up.
• Verify whether the institution is managed in the manner contemplated by the law.
• Examine the system of internal check, especially regarding accounting of amounts collected.
• Verify income in detail and confirm all amounts received have been deposited in the bank regularly and promptly.
• Examine the Trust Deed or Regulations.

### 2. Subscriptions and Donations

• Ascertain any changes in annual or life membership subscriptions.
• Confirm that official receipts are issued; check adequate control over unused receipt books.
• Obtain all receipt books for the period under review.
• Test-check counterfoils with the cash book; investigate cancelled receipts specifically.
• Obtain the printed list of subscriptions and donations and agree with total collections.
• Verify total subscriptions and donations with figures published in reports by the charity.

### 3. Legacies

• Verify amounts received by reference to correspondence with any figures and other available information.

### 4. Grants

• Vouch the amount received with relevant correspondence, receipts, and minute books.
• Obtain a certificate from a responsible official showing the amount of grants received.

### 5. Investments

• Vouch amounts received as dividend and interest, checking counterfoils.
• Check calculations of interest on fixed-rate securities.
• Confirm appropriate dividend was received where investments were sold ex-dividend or purchased cum-dividend.
• Compare dividend received with the schedule of investments; make special enquiries for investments with no dividend received.

### 6. Rent

• Examine the rent roll and inspect tenancy agreements, noting amounts and due dates.
• Vouch rent from counterfoils of receipt books and check totals of the cash book.

### 7. Special Functions (e.g., Concerts, Dramatic Performances)

• Vouch gross receipts and outgoings for any special functions held in aid of the charity.

### 8. Income Tax Refunds

Charitable institutions are generally exempt from income tax. Where TDS has been deducted from investment income:

• Vouch the IT refund with correspondence with the Income Tax Department.
• Check the calculation of the repayment claim.

### 9. Expenditure

• Vouch payment of grants; verify grants were paid only for charitable purposes within the objects of the institution.
• Ensure no trustee, director, or committee member benefited directly or indirectly.
• Verify schedules of securities held and inventories of movable and immovable property.
• Verify cash and bank payments.
• Ascertain that funds contributed for a specific purpose were utilised for that purpose only.