In an effort to regulate the unorganised NGO ecosystem in the country, the Supreme Court today issued a direction that will have a significant impact.

It directed the Central government to audit the accounts of more than 32 lakh NGOs which are functioning in the country and submit a report to the Court regarding the same.

The Bench also directed the Centre to frame guidelines with respect to accreditation of NGOs, maintenance of their accounts and auditing the same.

The direction was issued by a Bench presided by Chief Justice of India JS Khehar and comprising Justices NV Ramana and DY Chandrachud in a public interest litigation filed by advocate ML Sharma.

The Court heard the parties at length today and also placed reliance on the report submitted by Amicus Curiae Rakesh Dwivedi before issuing the order.

In its order, the Court noted that substantial funding is allowed for NGOs and voluntary organisations. Further, Rules 210-212 of the General Financial Rules, 2005 provide for a regulation mechanism for NGOs, though the respondents are not aware of the same. The court noted,

“There are 32 lakh NGOs out of which nearly 3 lakh are filing balance sheets. The respondents are not aware of the responsibility of audit in the General Financial Rules…There can be no doubt that the funds disbursed by CAPART [to NGOs] is public money and needs to be accounted.”

It, therefore, directed the Centre to complete the exercise of audit and submit a report by March 31 this year. It was directed,

“In case of non-compliance, it is essential to initiate civil and criminal action immediately after the completion of the exercise.”

Most importantly, the Court also directed the Centre to lay down guidelines/rules for accreditation of NGOs, the manner in which they shall maintain accounts and auditing of the same. The guidelines have to be placed before the Court on the next date of hearing.

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