NGOs will now have to execute a bond in favour of the President of India and breach of trust will entail refund of grants while inviting the tag of "black listed" organisation, the Centre told the Supreme Court today.
It said to regulate the funding and use of grants by over 32 lakhs NGOs and voluntary organisations (VOs), their financial statements will be audited annually by the Comptroller and Auditor General of India and the chartered accountants.
The Centre, which tightened the monitoring process of accounts of NGOs, has framed the guidelines under which every auditor will have access to all the books, vouchers and other records in possession of the organisation concerned.
A bench of Chief Justice J S Khehar and Justice D Y Chandrachud was told by ASG Tushar Mehta that the auditor's report should state whether such expenditure, failure, omission, loss or waste was caused in consequence of breach of trust, or misapplication or any other misconduct on the part of employees/officials/trustees or any other person.
The Centre also barred the appointment of auditors if they are in any way related or have business interests with office bearers of the VOs/NGOs.
It further said that where the accounts are audited by the CAG in a financial year, he shall continue to do the audit of accounts for next two years.
The guidelines also stipulate disciplinary procedures in case of misappropriation of funds or breach of trust by the NGOs/VOs including initiation of a legal case and refund of funds with interest.
The guidelines, which were taken on record by the apex court, said, "The members of executive committee of the organisation shall execute a bond in favour of the President of India, for the sanctioned amount in the prescribed format binding themselves jointly and severally to the terms and conditions.
"In the event of the grantee failing to comply with the conditions or committing breach of the conditions of the bond, the signatories of the bond shall be jointly and severally liable to refund the President of India, the whole or part amount of the grant with interest at the rate of 10 per cent per annum or the sum specified under the bond," it said.
The government said if it is not satisfied with the progress of the project or considers that there have been violations of the norms then it "reserves the right to terminate grant in aid with immediate effect and black listing of such organisations".
"After providing an opportunity of hearing NGOs, and conducting field visit, if necessary, if the ministry comes to the conclusion that there is a case of material irregularity including diversion or misappropriation of funds given to the NGOs, the ministry shall immediately stop any further grants to the NGO and black list the particular NGO to ensure that further public grants are not made available from other institutions," it said.
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