Social Audit in the Context of CSR by Nirbhay Lumde

By Nirbhay Lumde

In the context of welfare state, Social Audit has become a key component of evaluating democratic governance and a tool to implement anti-corruption strategies. It is also one of the ways of understanding the quantity and quality of public resources including public services, policies and decisions.

The Centre for Good Governance in its social audit toolkit defines Social Audit as “an independent evaluation of the performance of an organization as it relates to the attainment of its social goals. It is an instrument of social accountability of an organization” In the governance process, the executive and the legislature are evaluating newer ways of Social Audit to evaluate their performance.

In general, Civil Society Organizations undertake ‘Social Audit’ to monitor and track achievements of the institutions that claim social development. Community Based Organizations use Social Audit as an information tool to influence in governments’ decision making processes.

In the historical context, Social Audit has been associated with measuring the impact of an organization’s non-financial objectives through systematic and regular monitoring processes and interacting with key stakeholders. These stakeholders include, funders, employees, volunteers and the beneficiaries impacted by the intervention.

The World Bank considers Social Audit as a process, “that collects information on the resources of an organization. The information is analyzed and shared publicly in a participatory fashion.

Although the term ‘Audit’ is used, Social Auditing does not merely consist in examining costs and finance – the central concern of a social audit is how resources are used for social objectives”.

The current paper examines various aspects of Social Audit with special reference to CSR Act, and provides a rough road map to structure and plan Social Audits for CSR projects.

Social Audit
Social Audit refers to a process for measuring, understanding and improving the social performance of an activity of the organization. It also measures and reports the social performance in order to achieve improvement and suggest course correction.

It is also an independent evaluation of the performance of an organization and an instrument to measure social accountability.

Social Auditing enables an organization to assess and demonstrate its social, economic and environmental benefits. It is a way of measuring and evaluating the extent to which an organization or an entity has lived up to the agreed common social objectives.

The CSR Act, 2013 mandated Companies to undertake the programs on a project mode in accordance with its approved CSR policy, Social Audit becomes even more prominent to track and report the progress. Therefore, every corporate company has to evolve mechanisms to track and report the progress of social development programs mentioned under Schedule VII of the Act.

In the context of the Act, Social Audit is a tool through which companies can plan, manage and measure CSR sponsored social development projects. It also helps monitor consequences of the intended and unintended impacts of social development projects their geographies. Social Audit initiated by the Corporates may also include financial audit geared towards verification of reliability and integrity of financial information.

Scope and Objectives of the Social Audit
Social Audit is a transparent process to measure and report the social objectives of the CSR project. It is expected to identify inconsistencies between agreed objectives and the final implementation of the CSR project.

It will aid Companies to understand the current impact and limitations to expected impact. It will also provide multi-stakeholder perception of CSR projects and inputs to the CSR policy. Internally, it helps ensure greater verifiability of data and accountability.

It’s important to have strict and accurate monitoring and evaluation plan as part of any successful project implementation and CSR projects are no exception. It not only helps to be assured of implementation of policies as planned but also helps address intense public scrutiny and legal compliance. Social Audit helps:

Track, assess and report the progress of the sponsored project and undertake course corrections.

Facilitates CSR team to understand how each stakeholder has met assigned responsibilities.

Assist CSR Sub-Committee plan and execute CSR activities in a transparent and fair way.

Assess the capabilities of implementing partners and plan future CSR projects based on their strengths.

Social Auditor
The auditing process may be conducted internally by the donor company. However, it is advisable to have conducted by an outside consultant or agency to reduce biases. Social Auditor could be a not for profit organization or a private entity specialized in conducting social audits. It is a matter of fact that the financial audit conducted an outside auditor will brings credibility to the evaluation. The credibility is essential if the donation tranches are subject to audit reports.

It would be appropriate to hire an agency that has worked with United Nation bodies or World Bank or large scale organization that has undertaken impact assessments as they have one of the strongest and detailed social audit tools in built in to undertake audits. The audit report also helps in drafting Board of Directors report in compliance to the Company’s Act, 2013 and an integral of part of company’s annual report devoted to social responsibility activities.

Social Audit Report
The donor company may decide to have a framework of the social audit report with some of the following components:

Context of the social audit
Techniques of analysis
Status of social accounting and book keeping
Perception of the Company and implementing stakeholders
Perception of the beneficiaries
Summary and conclusion
Implications for policy, program and implementation

The essentials for an unbiased social audit lies with the company sharing as much information about the project with the social auditor such as, CSR policy, background of the project, objectives, agreed milestones and budget allocations. The Social Auditor will use a mixture of techniques that will facilitate the researcher in capturing both quantitative and qualitative information. The Social Auditor will also verify books with respect to the specific CSR project vis-à-vis sanctioned budget.

In the context of managing of large scale projects, it’s time that the CSR personnel have to level-up their conceptual clarity in differentiating traditional ways of monitoring and evaluation vis-a-vis social audit practices for better project management. It is essential for every CSR personnel to understand the significance of Social Audit in the context of managing CSR projects.

It also helps in providing timely project updates to CSR Sub-Committee, senior management and inputs to CSR policy. Snippets from the Social Audit report are an excellent way of updating internal communication channels. It’s time to incorporate CSR project proposals with built-in components for regular tracking, monitoring and reporting for successful social development projects.

Nirbhay K is a CSR professional and an IIT alumnus. Author can be reached @NirbhayK2

Disclaimer: The views and opinions expressed in the article are solely of the author in personal capacity and do not in any way represent views of any institution, entity or organization that the author may have been associated with.

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