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CS Professional · CSR and Social Governance · Financial and Non-financial Reporting of Different Non-Corporate Entities

Asha Vikas Trust receives a restricted grant of Rs 40 lakh for a girls' education project and spends Rs 28 lakh on that project during the year. The trustees show the unspent Rs 12 lakh as general free funds and use Rs 5 lakh of it for office renovation. Which accountability failing is evident?

The trust failed to treat the grant as a restricted fund. Unspent grant money must remain earmarked for the donor's stated purpose, so showing it as free funds and using Rs 5 lakh for renovation is a diversion and a breach of accountability.

  1. AFailure to hold the grant as a restricted fund and apply it only for the stated purposeCorrect
  2. BExcess spending on the project
  3. CFailure to pay interest to the donor
  4. DOver-disclosure of project expenses

Explanation

A restricted grant must be accounted for separately and used only for the purpose specified by the donor. Showing the unspent Rs 12 lakh as free funds and spending Rs 5 lakh on renovation diverts it, breaching purpose-restriction and transparency. The project spent less than granted, so there is no overspending.

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