CSR Funding Documentation

At Grant Initiation:

• Memorandum of Understanding (MoU) between the company and the NGO — defining scope, budget, reporting, and accountability
• Project Implementation Plan with activity-wise timeline and budget
• Fund Receipt Acknowledgement Letter
• Bank account proof for the dedicated CSR project account

During Implementation (Quarterly):

• Progress Reports — activity-wise status, expenditure tracking, milestone achievement
• Beneficiary Register — names, demographic data, services received, and signatures
• Photographic Documentation — geo-tagged photos with date, location, and beneficiary consent
• Expenditure Statement — voucher-supported statement reconciling funds received against utilised

At Project Completion:

• Utilisation Certificate — CA-certified statement confirming funds were used for stated CSR purpose
• Final Project Completion Report — comprehensive close-out with outcomes, beneficiary data, and financial reconciliation
• Impact Assessment Report — pre/post intervention comparison with measurable indicators
• Auditor Certificate — project-specific audit certificate for company's MCA CSR-2 filing

Under the Companies Act 2013, companies spending on CSR must file Form CSR-2 annually with MCA. This form requires the company to report:

• Name and CSR-1 registration number of each implementing agency
• Amount disbursed to each agency and purpose
• Utilisation confirmation — certified by the NGO
• Mode of implementation — directly or through agency
• Impact monitoring details

The NGO must provide all required information and documentation to the company for accurate CSR-2 filing. MFiling prepares the complete information package that the NGO needs to provide to its corporate donors for their MCA compliance.

Q: Can CSR funds be received in the NGO's regular bank account?
There is no statutory prohibition on receiving CSR funds in the NGO's regular bank account. However, best practice (and many corporate donors require it) is to maintain a separate bank account for each CSR project — enabling clean audit trails and preventing co-mingling of funds from different sources. MFiling recommends opening a dedicated project account for every CSR grant above Rs.5 lakhs.

Q: What happens if CSR funds are unspent at project end?
Unspent CSR funds must be returned to the corporate donor, unless the MoU specifically allows accumulation for multi-year projects. Companies that allow carry-forward of unspent funds for ongoing projects must report this in their CSR-2 filing. Unexplained unspent balances can result in the company being penalised under Section 135(7) of the Companies Act.

Corporate CSR projects are increasingly multi-year partnerships with structured fund flow mechanisms — annual tranches released against performance milestones, with utilisation certification requirements before each release. Getting the fund flow architecture right at the start prevents cash flow problems, compliance violations, and partnership breakdowns mid-project.

Recommended Fund Flow Structure for Multi-Year CSR Projects:

• Year-wise tranche agreement: Total project grant divided into annual tranches — Year 1 tranche released at project start, Year 2 tranche released after Year 1 utilisation certificate, etc.
• Utilisation threshold for next tranche: Most companies require 80–90% utilisation of the previous tranche before releasing the next — the NGO must time its spending and reporting accordingly
• Separate project bank account: CSR funds should be maintained in a dedicated project account — separate from operating funds and other donor funds. This enables clean fund-wise accounting for utilisation certificates
• CA-certified utilisation certificate format: The certificate must specify opening balance, receipts, expenditure category-wise, closing balance — and be certified by the NGO's statutory auditor, not an external CA
• Board resolution for fund acceptance: Each tranche should be accepted by a board resolution — important for Section 8 companies and governance-conscious trusts
• FCRA compliance (if corporate is foreign parent): If the CSR is funded by the Indian subsidiary of a foreign company, and the funding structure has any cross-border element, FCRA implications must be assessed

MFiling prepares complete CSR fund flow documentation — grant agreement review, utilisation certificate formats, board resolutions, and CA certification coordination.