MISAPPROPRIATION OF CSR FUNDS

The Anti-Corruption Bureau of the CBI raided the houses of former top officials of public sector technical consultancy Company Kerala Industrial and Technical Consultancy Organization Ltd (KITCO) in Kochi and Kottayam. This was in connection with the probe into instances of alleged misappropriation of Corporate Social Responsibility (CSR) funds.

Among the alleged cases of fund misappropriation – the agency engaged an outreach wing of an institution to train women in the Kuttampuzha tribal belt in bee keeping and making value-added products from bamboo reeds. According to the case, funds either did not reach the intended beneficiaries or did not serve the purpose for which the money was meant for. RTI activist N Sivakumar had alleged that Kitco has siphoned off Rs.53.23 lakh in the name of empowering tribal women.

The CBI has registered an FIR for criminal conspiracy, cheating, forgery and criminal misconduct against the accused persons. As per the FIR, KITCO ex-MD Cyriac Davis misused his official position and handed over the implementation of CSR projects worth Rs.53.23 lakh to Rajagiri Outreach without inviting tender in violation of the guidelines of the Central Vigilance Commission. The project was to impart training to 30 tribal women in Kuttampuzha in apiculture and bamboo reed crafting. However, a preliminary probe revealed that Rajagiri Outreach was inexperienced in the field and government agencies like Vanasri and Van a Samrakshana Samithi were overlooked. Funds were misappropriated by producing fake and exorbitant bills for purchase of materials from a non-existent firm supposedly owned by Mathew George, an apiculture trainer.

Governance of CSR Program

This incidence once again emphasizes on the steps that Company must take in order to protect themselves from any risk arising out of misappropriation of funds given for CSR program. CSR rules under the Companies Act, 2013 mandates that the CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company. The selection of appropriate CSR partner and the need for effective monitoring of CSR spend is crucial for effective implementation of CSR program.

The process of due diligence will ensure that the CSR partner has the credibility, competence, and integrity to deliver effective CSR programs. Similarly, a well-structured monitoring and evaluation process leads to identification of relevant issues in a time-bound manner enabling companies enhance their ability to address the issues and take course correction. Monitoring and evaluation is increasingly becoming a major requirement wherein many corporates are investing in doing impact assessment of their CSR program. It’s imperative to note that any company would like to invest in CSR program which will have positive impact on its reputation.