CORPORATE SOCIAL RESPONSIBILITY (CSR) – STANDARD OPERATING PROCEDURE (SOP)

CSR – Corporate Social Responsibility

Governing provisions: Section 135 of Companies Act, 2013 read with The Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended thereto.

Important definition/terms:

1. Threshold limits of the previous financial year

a) Net worth =/exceeding Rs.500 Cr

b) Turnover =/exceeding Rs.1,000 Cr

c) Net profit =/exceeding Rs.5 Cr (Net Profit after Tax).

2. Net Profit for spending: For the purposes of this section “net profit” shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198 and does not include any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise and any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise. (Usually we take Net Profit before tax).

3. “Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall include such project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the board based on reasonable justification.

4. “CSR Policy” means a statement containing the approach and direction given by the board of a company, taking into account the recommendations of its CSR Committee, and includes guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan;

5. “Administrative overheads” means the expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme;

The standard operating procedure shall cover the following aspects in order to ensure smooth compliance:

  • Identifying & Implementation the project
  • CSR Compliance
  • Annual Reporting
  • Impact assessment

Identifying the project – Form A (To be filled by CSR Identification team)

S.No Particulars Complied or not/details
1. Whether the activity is falling under Schedule VII – detailed in Annexure I.
2. Is the activity attracting any of the following?

¾ Any activity undertaken by the company outside India except sports activity representing at National and international level.

¾ Contribution of any amount directly or indirectly to any political party

¾ Activities benefitting employees of the company

¾ Activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services

¾ Activities carried out for fulfilment of any other statutory obligations under any law in force in India

If any of the above attracts, the activity cannot be treated as CSR.

3. Area (place) at which the activity is proposed
4. Ultimate beneficiary of CSR activity
5. Is the activity in line with principles of the company and CSR policy
6. Budget and time frame for execution of CSR activity – It cannot exceed a period of 3 years (excluding the year of commencement) otherwise funds to be transferred to recognised CSR funds – Ex: PM Fund.
7. Detailed time frame and obstacles which may fall for execution of project
Implementation of project – Directly by the Company or through Trust/NGO
8. In case CSR activity is carried out directly by the company following points be taken care

¾ Whether it’s a direct contribution or requires Man power planning

¾ Proposed department to carry out the activity

¾ Overhead cost not to exceed 5% of the amount allocated to the project

9. Eligible agencies for Indirect route

¾ A company formed as NGO under section 8 of Companies Act/Trust/Society registered under section 12A & 80G of Income Tax Act. (Internally by the Organisation)

¾ A company established as NGO under section 8 of Companies Act/Trust/Society by the Central Government/State Government. (Government NGO)

¾ Any entity established under an Act of Parliament or a State legislature. (Recognised as NGO – may be suitable in case of emergency funds)

¾ A company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities. (Any outside NGO must have three years of track record)

10. Form A1 to be filled and submitted from end of indirect route

Form A1– Identification of indirect agencies – (To be filled by CSR Identification team)

S.No Particulars Complied or not/details
1. Eligible agencies for indirect route
2. Organisation set up NGO – Documents required

¾ Certificate of registration

¾ MOA & AOA/Trust deed/Society

¾ Certificate of registration under Section 12A of Income Tax

¾ Certificate of registration under Section 80G of Income Tax

¾ Form CSR-1 filed with MCA and Unique Registration CSR number be provided w.e.f 1st April, 2021.

¾ Objects of NGO to cover CSR Activity

¾ Letter of acceptance from Authorised Signatory of NGO

¾ Certificate of CSR to be issued to the Company with specification of amount received by NGO, area and scope of CSR covered, utilization receipts and invoices of all purchases made.

¾ Photos of CSR activity be obtained for records and audit purpose.

¾ Time frame – Not to exceed 3 years

3. Government NGO

¾ Certificate of registration

¾ MOA & AOA/Trust deed/Society

¾ Form CSR-1 filed with MCA and Unique Registration CSR number be provided w.e.f 1st April, 2021.

¾ Proof of establishment by Government

¾ Objects of NGO to cover CSR Activity

¾ Letter of acceptance from Authorised Signatory of NGO

¾ Certificate of CSR to be issued to the Company with specification of amount received by NGO, area and scope of CSR covered, utilization receipts and invoices of all purchases made.

¾ Photos of CSR activity be obtained for records and audit purpose.

¾ Time frame – Not to exceed 3 years

4. Any entity established under an Act of Parliament or a State legislature

¾ Certificate of registration

¾ MOA & AOA/Trust deed/Society

¾ Form CSR-1 filed with MCA and Unique Registration CSR number be provided w.e.f 1st April, 2021.

¾ Proof of establishment by Government

¾ Objects of NGO to cover CSR Activity

¾ Letter of acceptance from Authorised Signatory of NGO

¾ Certificate of CSR to be issued to the Company with specification of amount received by NGO, area and scope of CSR covered, utilization receipts and invoices of all purchases made.

¾ Photos/Credit confirmation of CSR activity be obtained for records and audit purpose

¾ Time frame – Not to exceed 3 years

5. Any private NGOs

¾ Certificate of registration

¾ MOA & AOA/Trust deed/Society

¾ Form CSR-1 filed with MCA and Unique Registration CSR number be provided w.e.f 1st April, 2021.

¾ Project report of last three years on various activities undertaken by the NGO

¾ Objects of NGO to cover CSR Activity

¾ Letter of acceptance from Authorised Signatory of NGO

¾ Certificate of CSR to be issued to the Company with specification of amount received by NGO, area and scope of CSR covered, utilization receipts and invoices of all purchases made.

¾ Photos/Credit confirmation of CSR activity be obtained for records and audit purpose

¾ Time frame – Not to exceed 3 years

6. Computation of overhead expenses to be within the prescribed limit of 5% of eligible CSR expenditure.
7. Approval required

¾ Note be prepared by CSR Identification team and submitted for approval of:

¾ Approval from finance department

¾ Approval from Secretarial department

¾ Approval from CSR Committee

¾ Approval from Board, if suggested by Secretarial Department

¾ Authorised signatory to sign the expenditure outlay

Form B – CSR Compliance – quarterly checklist

S.No Particulars Complied or not/details
1. Check the threshold limits of the previous financial year

d) Net worth =/exceeding Rs.500 Cr

e) Turnover =/exceeding Rs.1,000 Cr

f) Net profit =/exceeding Rs.5 Cr

2. Composition of Committee

a) Minimum 3 members

b) One member be independent director

c) Independent Director need not be Chairman

d) Executive Directors can be members of Committee

*Not applicable in case independent director is not required to be appointed (only 2 members would be enough)

3. Meetings of Committee

a) Nothing prescribed under the law

b) Should meet minimum once a year

c) Notice of the meeting – 7 clear days/shorter notice

d) Detailed agenda be sent along with notice

e) Quorum shall be minimum 2 Directors

f) Independent Director may or may not attend the meeting

g) Draft minutes be circulated within 15 days of the meeting

h) 7 days for confirmation of members

i) Final minutes be entered in the register within 30 days of the meeting.

j) Minutes can be signed anytime before the next meeting.

4. Amount eligible for spending as approved by CSR Committee and Board: Manner of computation:

S.No Particulars Amount
1. Profit before Tax for FY 2017-18 XXXXXXX
2. Profit before Tax for FY 2018-19 XXXXXXX
3. Profit before Tax for FY 2019-20 XXXXXXX
4. Total XXXXXXX
5. Average Profits – Total/3 XXXXXX
6. 2% of Average Profits XXXXXX
5. Formulation of Annual Action Plan by CSR Committee:

(a) the list of CSR projects or programmes to be identified

 

(b) the manner of execution

(c) the modalities of utilisation of funds and implementation schedules for the projects or programmes;

(d) monitoring and reporting mechanism for the projects or programmes; and

(e) details of need and impact assessment, if any, for the projects undertaken by the company:

Provided that Board may alter such plan at any time during the financial year, as per the recommendation of its CSR Committee, based on the reasonable justification to that effect.

6. Check all form A & A1 and back-up documents
7. Prepare summary of expenditure in Annexure II of CSR Rules and present before CSR Committee as part of Agenda and minutes
8. Keep all copies of form CRA-1 and CSR Registration number of indirect agencies
9. Track eligible amount to be spent, unspent and reasons for not spending
10. In case the project has crossed 3 years and not completed, bring to the notice of management, CSR Committee and process requisite approvals.
11. Updating of photos on website on quarterly basis for CSR activities

Form C – CSR Annual Reporting

S. No Particulars Complied or not/details
1. Policy check:

¾ Whether all activities under schedule VII is included or not?

¾ Includes guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan;

¾ Defines role of committees

¾ Methodology of spending the CSR Funds

¾ Approval of activities and manner of spending

¾ Selection of third-party agencies – Eligibility Check

¾ Clauses for overhead expenses

¾ Usage of unspent amount and mandatory credit to unspent CSR account

¾ Modification and governing clauses included or not

¾ Updated on website of the company

¾ Updating of changes in the law, if any

*Policy modifications to be approved by CSR Committee and Board of Directors

CSR Spending
2. Annual Statement of expenditure

a) Procure from accounts department complete ledger copies of amount spent and future outlay of project

b) Implementation and budget spend should be within 3 years from the year of commencing

3. Any unspent amount of ongoing project be brought to the notice of management and ensure credit to funds under schedule VII of Companies Act, 2013 – before 30th April of following financial year under the account by name – “Unspent Corporate Social Responsibility Account” and be used within a period of 3 yrs.

Illustration stated below.

4. On completion of 3 years, if funds are still unspent, the same will be credited in the manner as specified in point no.5.
5. Any unspent amount of CSR excluding ongoing project be brought to the notice of management and ensure credit to funds under schedule VII of Companies Act, 2013 within 6 months of closure of financial year.
Impact Assessment
6. Impact assessment is report on development and CSR projects/initiatives to comprehend tangible and intangible changes in the lives of the communities where the projects were implemented. This helps to understand the overall outcome and impact of the project from the eyes of the beneficiaries.
7. Eligibility check: Check whether

a) company is having continuous CSR obligation to be spent for Rs.10 Cr – say for financial year 2017-18, 2018-19 & 2019-20 and

b) has spent Rs.1 Cr or more on specified project and status of project is completed and one year has elapsed – Say the project is completed on 31st December, 2020 and one year has elapsed.

Then impact assessment be taken wherein the projects are completed and 1 year has elapsed.

8. Company is required to appoint Impact Assessment Independent Agencies for the financial year 2020-21.
9. Impact Assessment report be placed before the Board and form part of Annual Report
10. Overheads of Impact Assessment Report to be booked as CSR Expenditure not exceeding Rs.50 lakhs or 5%, whichever is less.
11. Display of CSR activities on its website. – The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.
12. Reporting of CSR expenses in Annexure II effective for financial year 2020-21 onwards
13. CSR Report and expenses be signed by CEO/Director/MD & Chairman of CSR Committee and expenditure statement be certified by CFO or person responsible for financial management.

Illustration:

If a company fails to spend for ongoing project within a period of 3 years of transfer to unspent CSR A/c, the same be transferred to fund under schedule VII within 30 days of closure of Financial Year.

The same is illustrated as follows:

If a company fails to spend CSR amount for FY 2020-21 as on 31st March 2021 Then the company shall transfer on or before 30th September 2021 to the Funds as mentioned in Schedule VII.
If a company is holding the unspent amount for ongoing project for FY 2020-21 as on 31st March 2021 Then open an account Unspent Corporate Social Responsibility A/c and transfer the unspent amount of CSR before 30th April 2021.

Such amount shall be spend within 3 years from the date of transfer i,e., on or before 30th April 2024.

If a company fails to spend amount in unspent CSR A/c – for a period of 3 years Then the company shall transfer on or before 30th April 2024 to the Funds as mentioned in Schedule VII.

Annexure -1 – CSR Activities under Schedule VII

Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:—

(i) Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation] and making available safe drinking water.

(ii) promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.

(iii) promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.

(iv) ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.

(v) protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts;

(vi) measures for the benefit of armed forces veterans, war widows and their dependents, Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF) veterans, and their dependents including widows;

(vii) training to promote rural sports, nationally recognised sports, paralympic sports and olympic sports

(viii) contribution to the prime minister’s national relief fund or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) or any other fund set up by the central govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women;

(ix) (a) Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government or State Government or Public Sector Undertaking or any agency of the Central Government or State Government; and

(b) Contributions to public funded Universities; Indian Institute of Technology (IITs); National Laboratories and autonomous bodies established under Department of Atomic Energy (DAE); Department of Biotechnology (DBT); Department of Science and Technology (DST); Department of Pharmaceuticals; Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of Electronics and Information Technology and other bodies, namely Defense Research and Development Organisation (DRDO); Indian Council of Agricultural Research (ICAR); Indian Council of Medical Research (ICMR) and Council of Scientific and Industrial Research (CSIR), engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).

(x) rural development projects

(xi) slum area development.

Explanation – For the purposes of this item, the term `slum area’ shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.

(xii) disaster management, including relief, rehabilitation and reconstruction activities.

Annexure – II

Format for The Annual Report on CSR Activities to be Included in the Board’s Report For Financial Year Commencing on or After 1st Day of April, 2020

1. Brief outline on CSR Policy of the Company.

2. Composition of CSR Committee:

Sl. No. Name of the Director Designation / Nature of Directorship Number of meetings of CSR Committee held during the year Number of meetings of CSR Committee attended during the year

3. Provide the web-link where Composition of CSR committee, CSR Policy and CSR projects approved by the board are disclosed on the website of the company.

4. Provide the details of Impact assessment of CSR projects carried out in pursuance of sub-rule (3) of rule 8 of the Companies (Corporate Social responsibility Policy) Rules, 2014, if applicable (attach the report).

5. Details of the amount available for set off in pursuance of sub-rule (3) of rule 7 of the Companies (Corporate Social responsibility Policy) Rules, 2014 and amount required for set off for the financial year, if any

Sl. No. Financial Year Amount available for set-off from preceding financial years (in Rs) Amount required to be set-off for the financial year, if any (in Rs)
1.
2.
3.

6. Average net profit of the company as per section 135(5).

7. (a) Two percent of average net profit of the company as per section 135(5)

(b) Surplus arising out of the CSR projects or programmes or activities of the previous financial years.

(c) Amount required to be set off for the financial year, if any

(d) Total CSR obligation for the financial year (7a+7b-7c).

8. (a) CSR amount spent or unspent for the financial year:

Total Amount Spent for the Financial Year. (in Rs.) Amount Unspent (in Rs.)
Total Amount transferred to Unspent CSR Account as per section 135(6). Amount transferred to any fund specified under Schedule VII as per second proviso to section 135(5).
Amount. Date of transfer. Name of the Fund Amount. Date of transfer.

(b) Details of CSR amount spent against ongoing projects for the financial year:

(1) (2) (3) (4) (5) (6) (7)
Sl. No. Name of the Project Item from the list of activities in Schedule VII to the Act. Local area

(Yes/ No).

Location of the project. Project duration. Amount allocated for the project (in Rs.).
State. District.
1.
2.
3.
Total

(1) (8) (9) (10) (11)
Sl. No. Amount spent in the current financial Year (in Rs.). Amount transferred to Unspent CSR Account for the project as per Section 135(6) (in Rs.). Mode of Implementation – Direct (Yes/No). Mode of Implementation – Through Implementing Agency
Name CSR Registration number.
1.
2.
3.

(c) Details of CSR amount spent against other than ongoing projects for the financial year:

(1) (2) (3) (4) (5) (6) (7) (8)
Sl. No. Name of the Project Item from the list of activities in schedule VII to the Act. Local area (Yes/ No). Location of the project. Amount spent for the project (in Rs.). Mode of implem-entation – Direct (Yes/No). Mode of implementation – Through implementing agency.
State. District. Name. CSR registration number.
1.
2.
3.
Total

(d) Amount spent in Administrative Overheads

(e) Amount spent on Impact Assessment, if applicable

(f) Total amount spent for the Financial Year (8b+8c+8d+8e)

(g) Excess amount for set off, if any

Sl. No. Particulars Amount (in Rs.)
(i) Two percent of average net profit of the company as per section 135(5)
(ii) Total amount spent for the Financial Year
(iii) Excess amount spent for the financial year [(ii)-(i)]
(iv) Surplus arising out of the CSR projects or programmes or activities of the previous financial years, if any
(v) Amount available for set off in succeeding financial years [(iii)-(iv)]

9. (a) Details of Unspent CSR amount for the preceding three financial years:

Sl. No. Preceding Financial Year. Amount transferred to Unspent CSR Account under section 135 (6) (in Rs.) Amount spent in the reporting Financial Year (in Rs.). Amount transferred to any fund specified under Schedule VII as per section 135(6), if any. Amount remaining to be spent in succeeding financial years. (in Rs.)
Name of the Fund Amount (in Rs). Date of transfer.
1.
2.
3.
Total

(b) Details of CSR amount spent in the financial year for ongoing projects of the preceding financial year(s):

(1) (2) (3) (4) (5) (6) (7) (8) (9)
Sl. No. Project ID. Name of the Project. Financial Year in which the project was comm-enced Project duration Total amount allocated for the project (in Rs.). Amount spent on the project in the reporting Financial Year (in Rs). Cumulative amount spent at the end of reporting Financial Year. (in Rs.) Status of the project – Comp-leted /Ongoing
1
2
3
Total

10. In case of creation or acquisition of capital asset, furnish the details relating to the asset so created or acquired through CSR spent in the financial year

(asset-wise details).

(a) Date of creation or acquisition of the capital asset(s).

(b) Amount of CSR spent for creation or acquisition of capital asset.

(c) Details of the entity or public authority or beneficiary under whose name such capital asset is registered, their address etc.

(d) Provide details of the capital asset(s) created or acquired (including complete address and location of the capital asset).

11. Specify the reason(s), if the company has failed to spend two per cent of the average net profit as per section 135(5).

Sd/-

(Chief Executive Officer or Managing Director or Director).

Sd/-

(Chairman CSR Committee).

Sd/-

[Person specified under clause (d) of sub-section (1) of section 380 of the Act] (Wherever applicable).

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