CORPORATE SOCIAL RESPONSIBILITY (CSR) FAQ – India
Q: What is the CSR clause of Companies Act, 2013?
Ans: The Ministry of Corporate Affairs has notified Section 135 and Schedule VII of the Companies Act 2013 as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014 to come into effect from April 1, 2014.
With effect from April 1, 2014, every company, private limited or public limited, which either has a net worth of INR 500 crore (~USD$ 77M) or a turnover of INR 1,000 crore (~USD$ 154) or net profit of INR 5 crore (~USD$ 77,000) , needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility activities. The CSR activities should not be undertaken in the normal course of business and must be with respect to any of the activities mentioned in Schedule VII of the 2013 Act. Contributions to any political party are not considered to be a CSR activity and only activities in India would be considered for CSR expenditure.
Q: Corporates can spend their CSR budgets on what activities according to schedule VII?
Ans: The activities listed out in Schedule VII of the Companies Act of 2013 under Section 135 are mentioned below
(i) eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation including contribution to the Swatch 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 arts and handicrafts;
(vi) measures for the benefit of armed forces veterans, war widows and their dependents;
(vii) training to promote rural sports, nationally recognized sports, paralympic sports and Olympic sports;
(viii) contribution to the Prime Minister’s National Relief Fund or any other – fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women;
(ix) contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government;
(x) rural development projects.
(xi) slum area development.
Q: Who handles CSR responsibilities in the Corporates?
Ans: The board forms a CSR committee that a) formulates and recommends to the Board a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;(b) recommends the amount of expenditure to be incurred on the activities; and (c) monitors the Corporate Social Responsibility Policy of the company from time to time.
Q: Who administers and supports CSR activities on behalf of Rotary?
Ans: The Rotary Foundation (India) (RF(I)) will assist local Rotary clubs and districts in accepting CSR gifts and support the development and administration of global grant applications.
Q: Are Rotary’s areas of focus eligible for CSR funding under Schedule VII of the Companies Act?
Ans: Yes, except for Peace and Conflict Prevention/Resolution. Five of Rotary’s areas of focus are eligible for funding under Schedule VII: Water and Sanitation, Maternal and Child Health, Economic and Community Development, Disease Prevention and Treatment, and Basic Education and Literacy.
Q: How will CSR funds be used by Rotary?
Ans: All CSR funds received through RF(I) will be granted to Rotary clubs/districts in India to be used exclusively on projects approved through global grants.
Q: How will Rotary Clubs/Districts attract CSR funds?
Ans: Clubs/Districts/Rotarians may approach corporates for CSR contributions with the CSR kit comprising of the TRF Annual Report, CSR Brochure, and the Areas of Focus Policy Statements. After discussions with corporates; RF(I) will provide the required due diligence documents of RF(I) to clubs for onward submission to corporates.
Q: What is the relationship between clubs and corporates in spending CSR funds?
Ans: The Rotary club or district serves as the implementing agency for the Corporate’s CSR project through Rotary’s global grant program.
Q: What recognition is available for Corporates?
Ans: TRF donor recognition is available to the owner of the corporate as per the amount of gift which is detailed below:
Level 1: $10,000 to $24,999; Level 3: $50,000 to $99,999
Level 2: $25,000 to $49,999; Level 4: $100,000 to $249,999
Also, all corporates contributing CSR funds will receive a Certificate of Appreciation from RF(I).
Q: How is a CSR contribution counted toward club and district giving?
Ans: The CSR contribution will be added to a club or district’s restricted/other giving. No Foundation Recognition Points will be available for CSR funds.
Q: Who will report to Corporate?
Ans: RF(I) will report to Corporate based on the reporting done by clubs/districts to RF(I) for this purpose. The reporting deadlines will be for activities up to 30 September by 30 November and for activities up to 31 March by 31 May. Reporting to the corporate on the CSR funds will be submitted on the template approved by Corporates in the signed MOU. Additional information if required by the Corporate will be collected by RF(I) from participating clubs or districts.
Q: How will stewardship concerns be handled?
Ans: Stewardship concerns will be governed by Rotary policy for the global grant program. The grant will be closed only when RF(I) receives the completion certificate from the Corporate.
Q: What is the minimum CSR contribution amount?
Ans: The minimum CSR contribution is $32,000. This is inclusive of 5% CSR overhead cost.
Q: Is conceiving and delivering of CSR projects the club’s responsibility?
Ans: Yes, the project will be conceived and delivered by the club, however, the reporting to the corporate will be done by RF(I). The project will be implemented following global grant guidelines. All usual reporting will need to be provided by the club to RF(I).
Q: What if a corporate CSR committee requests more frequent reporting on the CSR project?
Ans: The reporting timelines and reporting templates are part of MOU signed between RF(I) and the Corporate. Hence, project reporting will be done bi-annually i.e. activities up to 30 September will be reported by 30 November and activities up to 31 March will be reported by 31 May.
Q: What if the corporate’s office is in one place and the plant/manufacturing facility is in another place and the corporate wants to work within a 15-km radius of the plant? How does a club/district move forward in such situations?
Ans: District leadership will be able to decide and move the project to a designated club for program implementation.
Q: What if a Public-Sector Unit (PSU) in principle agrees to fund a project through a CSR grant and asks for required sanctions from the concerned district collector’s office before signing the MOU and releasing the CSR funds?
Ans: District leadership will work along with the club to obtain necessary approvals if required in the case of a CSR grant from PSUs. It is not always necessary that every PSU ask to obtain required sanctions.
Q: As clubs/districts are the project implementing agency for the corporates, what kind of documents are required to be provided to the corporates?
Ans: All due diligence documentation to corporates will be done by RF(I) that includes RF(I) Annual Report, 3 years audited financial statements, and registration certificate.
Q: Is it possible to have these documents available online in one place for easy access for Rotarians?
Ans: RF(I) will provide all this documentation to the clubs as they approach any corporate. The RF(I) website does not currently have these documents available, but they could be available online in near future.
Q: Will CSR funds generate any credit for a club/district?
Ans: Yes. The overall contributions of a club/district will increase.
Q: Will Foundation match the CSR funds?
Q: Can a project be supported by CSR funds as well as DDF and cash contributions from other partners?
Ans: Yes. The minimum CSR contribution needs to be $32,000 excluding DDF and cash contributions from other partners.
Q: Can clubs/districts contribute the 5% overhead cost on behalf of the corporate?
Q: What are the tangible benefits to RF(I) of receiving CSR funds?
Ans: RF(I) will develop corporate partnerships which will enhance funding to global grants implemented by clubs/districts.
Q: Is there information available which can be shared with corporates?
Ans: Yes. RF(I) can facilitate availability of due diligence documents such as the RF(I) Annual Report, 3 years audited financial statements, and registration certificate.
Q: Generally, at the financial year closing (around 31 March) corporates work on their balance sheet. They will require information on how much funds were utilized and what is the current balance on 31 March? How will this be reported to the corporate?
Ans: RF(I) will provide the project report along with the Utilization Certificate for activities up to 31 March.
Q: If some corporate wants to know the total contributions made by the foundation till date, is this information available and can we share it with corporate?
Ans: TRF will share the audited balance sheet to corporates as part of due diligence documentation.
Q: What is the difference between CSR funds and a Term Gift?
Ans: The differences are:
- CSR funds is the CSR contribution from the corporate, whereas the term gift is a contribution from an individual/entity.
- Minimum CSR contribution is $ 32,000 in which 5% will be the overhead cost of RF(I) whereas the minimum contribution in Term gift is $30,000
Q: Will CSR funds be matched?
Ans: CSR funds will not be matched, similar to term gifts.
Q: What is the benefit for clubs/districts of soliciting CSR funds on behalf of RF(I)?
Ans: RF(I) will give all the due diligence documents on behalf of the club/district and will sign the MoU with the corporate. RF(I) will give the Certificate of Appreciation and Major Donor Recognition to the corporate. Additionally, the overall giving of clubs/districts will increase.
As per company’s act, the implementing agency should be a registered entity such as a society, trust, foundation or Section 8 company (i.e., a company with charitable purposes) that has an established record of at least three years in CSR-like activities. Many clubs do not have this type of registration and record which is a further incentive for CSR funds to be contributed to RF(I).