Monitoring of CSR

UNIT 4 CSR AUDIT & SOCIAL AUDIT Projects/ Programs

Structure
4.1 Introduction
4.2 Objectives
4.3 Need for CSR Audit
4.4 Need for Social Audit
4.5 Audit Procedure
4.5.1 Procedure for financial audit
4.5.2 The procedure for the compliance audit of the Companies Act, as well as the
Corporate social responsibility policy and business process of the company
4.5.3 Auditing procedure for results in accordance with the project report
4.5.4 Establishment of a protocol for auditing
4.6 Selection of Audit Personnel
4.7 Let Us Sum Up
4.8 Keywords
4.9 Terminal Questions
4.10 Bibliography and Selected Reading

4.1 INTRODUCTION
The term “corporate social responsibility,” abbreviated “CSR,” refers to the concept
that firms have a moral obligation to voluntarily contribute to the social and
environmental uplift of their communities. Businesses ought to include social and
other positive concerns into their day-to-day operations for the sake of the
stakeholders in their businesses as well as society as a whole. With the passing of
the Companies Act, 2013, by the Ministry of Corporate Affairs, Government of
India, it is now required for companies in India to do CSR projects that help people.
During the Covid-19 epidemic, corporate social responsibility (CSR) played a very
significant part in assisting the country’s continued social and economic development.
The social compliance regulatory mechanism is progressively becoming more
comprehensive. The system of checks and balances designed to ensure people follow
the rules is expanding. Stakeholders, on the other hand, want more evidence of
the results of these CSR initiatives. It is becoming increasingly important for both
the government and corporations to evaluate the social investments made in CSR
activities to determine whether or not these investments are in compliance with the
provisions of the Companies Act and whether or not these investments are having
an effect by providing the social dividend to the corporation and the nation.

4.2 OBJECTIVES
After studying the unit, learner would be able to:
 Explain what is the need for CSR audit & Social audit;
 Detail out the audit procedure
 Discuss on the selection and qualification of audit personnel 225
Project Management,
Monitoring & Evaluation 4.3 NEED FOR CSR AUDIT
of CSR Programms
Auditing is an essential component of a Management Information System (MIS),
which forms the basis for a significant number of management decisions. The purpose
of any audit is to acquire information and provide additional discipline on the internal
processes to validate proper functioning of the specific system.
A CSR audit is a management tool that evaluates CSR organization, process and
management to create social value for stakeholders. It is systematic, documented,
periodic and objective. The audit is an objective assessment of the following
areas:
1) Adherence to policies and principles;
2) Adherence to systems, procedures, and practices;
3) The effectiveness of CSR-related elements;
4) Adherence to regulatory requirements; and
5) The accuracy of data management, record keeping, and disclosure.
This ensures legislative compliance, reduces social risk and liability and boosts CSR
project efficiency and efficacy. A good auditing method is the most important part
of any successful programme. Auditing gives you a better idea of how tracking works
and what’s available of records and information that can be used to evaluate projects.

4.4 NEED FOR SOCIAL AUDIT

“Social Audit refers to a process for measuring, understanding and improving
the social performance of an activity of the organization. It also measures and
reports the social performance in order to achieve improvement and suggest
course correction.”
“Social Auditing enables an organization to assess and demonstrate its social,
economic and environmental benefits. It is a way of measuring and evaluating
the extent to which an organization or an entity has lived up to the agreed
common social objectives.”
Companies are required by the CSR Act of 2013 to run their programmes as projects
in line with their approved CSR policies. This makes Social Audit even more important
to track and report success. So, every corporation must come up with ways to
keep track of and report on the results of the social development programmes listed
in Schedule VII of the Act.
Tata Iron & Steel Company Ltd. (TISCO), Jamshedpur, was the first Indian business
to perform social audits in 1979.The 73rd amendment to the constitution gave it
more weight because it dealt with Panchayat Raj institutions.
In order to ensure the smooth functioning of Panchayat Raj institutions, the 9th FYP
(2002-07) approach paper emphasized social audit and granted gram sabhas the
authority to conduct Social Audits in addition to their other responsibilities.
An example of Social Audit can be related to the Mahatma Gandhi National
Rural Employment Guarantee Act of 2005 (MGNREGA) which includes a social
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audit clause. The Act says that gram sabhas (village meetings) must keep an CSR audit & Social audit
eye on and evaluate how all MGNREGA projects and works are carried out.
Scope and Objectives of Social Audit:
A CSR project’s progress towards its social goals can be tracked and reported
on with the use of a social audit. Disparities between the planned and actual results
of the CSR project should be revealed.
Successful project implementation, including CSR programmes, requires a thorough
and detailed monitoring and assessment strategy. It’s useful for ensuring that policies
are carried out as intended and for meeting the demands of public scrutiny and
legal compliance.
Social Audit helps:
 Monitor, evaluate, and report on the progress of the sponsored project,
as well as make any necessary course adjustments.
 Allows the CSR team to better understand how each stakeholder has
met the duties that have been allocated to them.
 Assist the CSR Sub-Committee in planning and carrying out CSR
initiatives in a manner that is open and equitable.
 Conduct an analysis of the capabilities of the implementing partners,
and base the planning of future CSR projects on the partners’ areas
of expertise.
Scope of Social Audit
The following are some examples of socially conscious business practises that
can be evaluated through a social audit: (i) support for employees with
disabilities; (ii) support for other employees; (iii) support for other
underprivileged communities; (iv) support for the creation of employment
opportunities; (v) support for proper resource conservation; (vi) support for
the prevention of environmental pollution; (vii) support for other underprivileged
communities; (viii) contributions to the implementation of employee welfare
measures; (ix) contributions to rural development; (x) contributions to
community development; (xi) contribution to ethical and moral advancement,
as well as (xii) contribution to sustainable development.
Thus, depending on the social mandate of a corporate or company, social audit
may include wide areas for assessment, including the following:
 Issues of environment and pollution control
 Consumer rights
 Wages, hiring and promotion policies
 Pricing and advertising
 Community relations, stakeholder management and public relations
 Employment stabilization
 Corporate giving 227
Project Management,  Research and development
Monitoring & Evaluation
of CSR Programms  Human Rights
Principles of Social Audit:
Some basic principles associated with Social Audit are as follows:
 Transparency: Complete openness in the administrative and decision-
making processes is what we mean when we talk about transparency.
This means that it is the responsibility of the government to ensure that the
general public has unlimited access to any and all information that may be
relevant.
 Accountability: refers to the immediate and open responsibility that elected
officials and other government personnel have to all parties who are directly
or indirectly affected by the actions or inactions that are important to their
positions.
 Participation: All impacted individuals, not just their representatives, must
be given the opportunity to have their voices heard and their perspectives
considered as part of the decision-making and validation process.
 Representative Participation: The ability of those who will be impacted
to give their informed permission collectively or singly, as the case may
be, when choices are limited by necessity.
 Comprehensive report: Detailed information on every aspect of the
organization’s performance and activities should be included in the
comprehensive report.
 Consistency: Create social accounts on a consistent basis to guarantee
that the concept and the practice will become ingrained throughout the entire
organization’s culture.
 Comparative: Provide a means by which the company’s performance can
be compared to that of other companies and to industry standards.
 Verified: Verified: A qualified individual or organization with no financial
interest in the organization audits social accounts.
Process of Social Audit:
The stages involved in social auditing are as follows:
1. Initiating
At this stage, users need to decide what they want to audit, how they want
to evaluate that, who will be in charge of the audit as a whole, and how
much money they will require.
2. Planning
In this phase, the users will need to choose a strategy, figure out who the
company’s stakeholders are, and understand how the government makes
decisions. They will then need to work together on different approaches
and practices and work with the government’s peers.
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 3. Implementing CSR audit & Social audit

During this phase, the users will be responsible for performing the audit
function, sourcing and analyzing all of the information, disseminating the
results and the information, and then taking into consideration factors such
as institutionalisation and sustainability.
4. Closing
During this stage, the users will be responsible for following up in order to
guarantee that the social audit is a success

(Source: https://www.wallstreetmojo.com/social-audit/)

Check Your Progress/Activity:

1. Visit the CSR department of a company in your vicinity. Ask them about
the categories of CSR audit done in their company. Write down their
responses.
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2. Visit the CSR department of a company and find out what is their
understanding about social audit. Write down their response.
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4.5 AUDIT PROCEDURE

A planned and well-executed audit procedure should clearly demonstrate the
following:
1) Accountability for the expenditure of the funds.
2) It establishes responsibility for duties.
3) Feedback regarding objectives met.
4) Objectives that have not been achieved.
5) Whether or not all available resources have been utilised.
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Project Management, 6) Indicators that are clearly defined and provide concrete evidence for
Monitoring & Evaluation
of CSR Programms
all future interventions.
7) The flaws in the procedure.
8) Modifications to be made to the structure, the procedure, the strategies,
etc.
9) Serves as a guide for future policy/intervention development.
Audit should be done on a regular basis. Internal audits should be done more
often and should be backed up by random audits done by outside agencies.
This would help find out how efficient and effective the internal audit system
is and what training audit staff needs.
To ensure objectivity, several organizations should do different audits. The report
should include a remedial action plan with responsibilities and timeframes based
on site management’s documentation proof. Consistency and follow-up require
a structured questionnaire.
Site officials and the auditor should create a follow-up action plan to implement
audit findings and reduce system flaws. Top management can resolve
disagreements.

4.5.1 Procedure for financial audit

This is a technique that has been followed for quite some time and is an essential
component of the company’s financial audit. This guarantees that the company’s
financial resources are utilised in a manner that is consistent with its financial
process.

4.5.2 The procedure for the compliance audit of the Companies

Act, as well as the corporate social responsibility policy
and business process of the company
This is built on the fundamental notion of quality known as PDCA, which stands
for plan, do, check, and act.
This will guarantee that CSR projects are appropriately planned, implemented,
monitored, and reviewed, and that the learning from these processes is deployed
back to enhance the policies and processes.

4.5.3 Auditing procedure for results in accordance with the

project report
The examination of both the qualitative and quantitative effects that the
community development projects that were carried out by the organization
had on the community is included in the scope of the outcome audit.

4.5.4 Establishment of a protocol for auditing

The scope of the audit procedure, both in terms of its contents and its depth,
will differ from one business to the next, depending on whether the firm seeks
basic compliance with regard to its financial processes, complete compliance
230 with regard to its legal and corporate policies and processes, or advanced
compliance in order to check the impact of the policy and improve its CSR CSR audit & Social audit
projects. It will depend on the age, size, and corporate social responsibility
budget of the organization. At the moment, there are no mandated requirements
that must be met in order to carry out any type of CSR audit. Because of this,
the company is responsible for coming up with its own plans for the scope
and procedure of the audit. An illustrative list of items that will be covered in
the CSR audit has been compiled and released by the ICAI.

4.6 SELECTION OF AUDIT PERSONNEL

The audit should be done by qualified, experienced workers who are not involved
in the day-to-day operations of the business. They should, however, be familiar
with the different steps of CSR projects and plans. This would help the management
evaluate and share information in a fair way.
It is important to select audit personnel without creating conflicts of interest whenever
possible. The personnel or the group that is involved in the creation and implementation
of CSR projects and programmes should not be involved in the internal audit in
any way. In a similar way, consultants and non-governmental organisations (NGOs)
that are involved in the creation and implementation of CSR projects and programmes
should not be included in the external auditing process.
Auditor qualifications include expertise and familiarity with the following:
1. Sector-specific technical expertise on CSR initiatives in areas such as
education, water management, community health, etc., as well as sector-
specific development indicators.
2. Second, you should be familiar with both the NDGs and the SDGs.
3. Be familiar with project management processes such as planning, carrying
out, and analyzing results.

4.7 LET US SUM UP

CSR audits are used as a starting point for development plans whose final goal is
to help society. It could help the business world figure out how well a business is
doing in terms of adding value to social capital. The CSR audit will not only make
sure that CSR activities follow the law and are financially responsible, but it will
also make it easier to create social and community capital and make the best use
of the money spent in CSR projects. It will also help the company reduce and manage
risks connected to the law, social unhappiness, and its reputation.
A social audit is an important thing to do. This is a good way to give society and
stakeholders peace of mind because it looks at a bigger range of things and is similar
to financial and operational audits. As a key learning goal, this unit wants to give
the student not only information about social audit but also ways to do it. Also, it
is hoped that the students will learn to think critically about social audit and its purpose.
This will give them ways to learn about, question, and improve a company’s CSR
and social welfare policies and how they affect people. Such efforts will improve
social auditing and corporate social responsibility (CSR) so that corporations and
their clients are more responsive and accountable. 231
Project Management,
Monitoring & Evaluation 4.8 KEYWORDS
of CSR Programms
CSR Audit : A CSR audit is a management tool that evaluates CSR
organization, process and management to create social value
for stakeholders.
Social Audit : A social audit is a formal review of a company’s endeavors,
procedures, and code of conduct regarding social
responsibility and the company’s impact on society. A social
audit is an assessment of how well the company is achieving
its goals or benchmarks for social responsibility.
Good Practice : Good practice is a process or methodology that has been
shown to be effective in one part of the organization and
might be effective in another too.

4.9 TERMINAL QUESTIONS

1. What knowledge should the auditors have?
2. Define CSR Audit.
3. Write the principles of social audit.
4. Why is social audit important?

4.10 BIBLIOGRAPHY AND SELECTED READING

1. https://indiacsr.in/social-audit-in-the-context-of-csr/
2. https://www.wallstreetmojo.com/social-audit/
3. file:///C:/Users/IGNOU/Desktop/Unit-2.pdf
4. file:///C:/Users/IGNOU/Desktop/Unit-3%20(1).pdf
5. https://www.clearias.com/social-audit/
6. https://egyankosh.ac.in/bitstream/123456789/77414/1/Unit-3.pdf
7. Carroll, A.B. and Beiler, G.W. (1975). Landmarks in the Evolution of Social
Audit. The Academy of Management Journal, Vol. 18, No. 3.
8. The Companies Act, 2013
9. Guide on Corporate Social Responsibility (CSR) Audit by The Institute
of Chartered Accountants of India
10. NIRD, MRD and Tiss (2016). Social Audit: A Manual for Trainers, National
Institute of Rural Development and Panchayati Raj and Tata Institute of
Social Sciences

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