Chapter: 2.2 Budge/Account/Audit of the Trust Act

Budge/Account/Audit

Budget: Trustees of a Public trust which has an annual income exceeding (Rs. 5000 in the case of a trust for public religious purpose and Rs. 10,000/- in other cases) has to submit at least one month before the commencement of the accounting year, a budget shoving probable receipts and expenses during the year. This budget must have provisions for carrying out the objects of the trust and the maintenance of trust property. It is also necessary to send a copy of the resolution passed by the Board of trustees sanctioning the budget.

Maintenance of Accounts: It is compulsory for all trusts to keep regular and proper accounts. The accounts have to be balanced on 31st March and be audited by a Chartered Accountant. After the Auditor has certified the accounts, they have to be submitted to the Charity Commissioner in the prescribed from within six months of closing of the financial year.

The statements of accounts are then scrutinized at the Charity Commissioner's office to check whether expenditure has been Incurred properly on the object of the trust

Investment of Public Trust money

Where the trust property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustees are bound to deposit the money in specified securities and bonds and in specified financial institutions. The Money can be invested in

• Nationalized Banks
• Co-operative Banks
• Specified Foreign Banks
• Specified institutions / Industries.

Investment in the purchase of immovable property:
Trustees have to reels the Charity Commissioner's consent while making investment in the purchase of immovable property. The following particulars must be submitted along with the application seeking consent.

(1) A true copy of the resolution of the trustees.
(2) If the property is to be constructed, then the estimated cost along with estimate and the plans.
If already build up property is to be purchased, valuation report by an expert.
(3) Complete details regarding the location of the property such as survey No., road, area etc.
(4) Copy of documents regarding proposed transaction i.e. agreement of sale or sale deed.
(5) The value of financial consideration of the property.
(6) The details as to from which source the consideration will be supplied.
(7) The present status of the money source.
(8) Net annual return of the proposed investment.
(9) The present investment pattern of the trust.
(10) Objects of the trust.
(11) Particulars of the trust income and money spent on the objects of the trust for last 3 years.
(12) Whether the person from whom property is sought to be purchased is related to any of the trustees or is in way concerned with the trust.

If the trust intends to make additional construction for its objects it is not necessary to take permission, However if the said construction is to earn more income then it is necessary to obtain prior consent of the Charity Commissioner.

The Charity Commissioner has to assess any such application with a view to ascertain whether such construction will be beneficial to the trust. The permission is granted only after the Charity Commissioner is satisfied.

Alienation of immovable property of the Trust:

There is a mandatory restriction on the trustees of all public trusts not to sell, exchange, and gift any immovable property belonging to a public trust without the previous sanction of the Charity Commissioner. Similarly, there can be no lease of any public trust (in the case of agricultural land for a period exceeding 3 years and in the case of non-agricultural land for a period exceeding 10 years) without the previous sanction of the Charity Commissioner.

This restriction on the trustees of all public trusts was introduced because many trusts have extensive vacant lands, which were unscrupulously disposed off or otherwise alienated by trustees to the detriment of the trust interests. The Charity Commissioner accords his sanction only after considering the interests of the trust.

Sometimes the trustees misrepresent material facts to. suppress some vital facts and obtain sanction of the Charity Commissioner fraudulently. In such cases, if the said facts are bought to the notice of the Charity Commissioner, he may institute inquiries.

However, the trustees against whom allegations of having obtained the sanction by fraud are leveled will be given a reasonable opportunity by the Charity Commissioner to submit explanations and clarify their positions.

If the Charity Commissioner, after making detailed inquiries finally comes to the conclusion that the trustees have acted, fraudulently, he will revoke the sanction and give directions to the concerned trustees to recover the property within 180 days. If the trustees fail to take steps to recover property, the Charity Commissioner can assess the advantages received by the trustees and direct them to pay compensation to the trust equivalent to the advantage as assessed.

Thus there is no prohibition on alienation of immovable property but only precautionary measures are adopted in the interests of public trust. Any alienation made without complying with these statutory requirements is void and not binding on the trust.

Any such application for alienation has to give elaborate particulars such as the necessity for alienation, details of a concrete proposal, clarification as to how the proposal is in the interest of the trust, the resolution of the trustee board regarding the proposal etc.

While granting sanction to any alienation, it is the duty of the Charity Commissioner to make necessary inquiries. The Charity Commissioner issues a public notice giving particulars of the proposed alienation in a newspaper in the language of the region and with a wide circulation and invites offers from intending purchasers. The offer, which will fetch the highest price, is then selected by the Charity Commissioner.

Powers and duties of trustees:
Every trustee is supposed to administer the affairs of the trust and utilise funds and properties of the trust as per the terms of the trust and directions of the Charity Commissioner, if any.

Restrictions on trustees:The trustees cannot borrow money for or on behalf of the trust except with the previous consent of the Charity Commissioner.
Trustees cannot borrow money for their own use from any property of the public trust.