Decoding "Ongoing Projects": Ensuring Smooth CSR Compliance as FY 2024-25 Concludes

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 Author: CS Pradeep Kumar Parakh

Executive Summary
As the financial year draws to a close, companies must ensure compliance with CSR regulations under India’s Companies Act, 2013. Failure to meet CSR obligations can lead to financial and reputational risks. This article outlines the key areas for CSR review and financial year-end planning.

1. The Concept of "Ongoing Projects" in CSR 
The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, introduced the concept of "ongoing projects," allowing companies to set aside unspent CSR amounts for multi-year projects. Clear understanding of this definition is crucial for year-end reporting.

2. Key Regulatory Concepts Requiring Attention
The Ministry of Corporate Affairs (MCA) has from time to time clarified the concept of “Ongoing Projects” via Section 135, The Companies (Corporate Social Responsibility Policy) Rules, 2014 and circulars issued from time to time:

  • The minimum duration for a project to be considered "ongoing": Perhaps specifying a minimum timeframe (e.g., exceeding one financial year) with a clear articulation in the CSR policy.
  • The process for identifying and approving ongoing projects: Emphasizing the role of the Board and the CSR Committee in this process and the need for detailed project plans with timelines.
  • The treatment of phased projects: Providing guidance on whether individual phases of a larger project qualify as separate ongoing projects.

  • The implications for transferring unspent amounts: Reaffirming the requirement to transfer unspent amounts pertaining to ongoing projects to a designated Unspent CSR Account within the stipulated timeframe (30 days from the end of the financial year).

3. Navigating the Financial Year-End 
For the financial year ending March 31, 2025, companies should:
  • Review their CSR project portfolio: Identify projects that meet the criteria for "ongoing projects" as per the latest clarifications.
  • Ensure Board approval: Confirm that the identified ongoing projects have been duly approved by the Board based on the recommendations of the CSR Committee.
  • Document project plans: Maintain detailed project plans outlining the scope, objectives, timelines, and budget for each ongoing project.
  • Calculate unspent amounts: Determine the unspent CSR amount pertaining to each ongoing project.
  • Transfer unspent amounts: Transfer these unspent amounts to the designated Unspent CSR Account by April 30, 2025.
  • Disclose in the Annual Report: Clearly disclose details of the ongoing projects and the amounts transferred to the Unspent CSR Account in the annual CSR report.
4. Case Study: Reliance Foundation 

Reliance Foundation has undertaken numerous long-term, multi-year projects in areas like rural transformation and education. Their well-defined project management frameworks likely enable them to clearly identify and manage their "ongoing projects" in accordance with the CSR rules, ensuring timely transfer of unspent amounts and transparent reporting. Their focus on sustainable impact necessitates projects spanning multiple financial years.

5. Avoiding Penalties 
Strict adherence to the guidelines on ongoing projects is crucial to avoid penalties for non-compliance with Section 135 of the Companies Act, 2013, and the associated CSR Rules.

Conclusion

A clear understanding of the definition and treatment of "ongoing projects," keeping a track of any recent clarifications, is essential for smooth CSR compliance as the financial year concludes. By following the prescribed procedures for identification, approval, transfer of unspent amounts, and reporting, companies can effectively manage their CSR obligations and contribute to long-term sustainable development.

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