Home / Companies / News /  Why Akshaya Patra decided to change its auditor

BENGALURU : The Akshaya Patra Foundation ended its more than a decade-old engagement with its statutory auditor, BSR & Co., after the India affiliate of KPMG red-flagged some of the transactions made with related parties and gave a qualified opinion of the Trust’s financial results for 2019-20.

Bengaluru-based Akshaya Patra has now hired Grant Thornton as its statutory auditor, according to an executive directly familiar with the development.

At the heart of the trouble at Akshaya Patra, the world’s largest provider of mid-day meals for children, is the lack of clarity over donations and the issue of resources being used by related parties such as Hare Krishna Movement for Charitable Foundation and Iskcon charities.

“The cross-charges made to the related parties for the periods covered under the special audit is 1,502 lakh ( 15.02 crore) based on management’s best estimate, which has been computed basis the methodology adopted by the Trust in earlier years, and no evaluation of arm’s length principles was performed as it was not considered applicable by the Trust. The special audit report has quantified the amount to be cross-charged to related party transactions (RPTs) of 2,340 lakh ( 23.4 crore), excluding 2,860 lakh ( 28.6 crore) based on the suggested methodology by the special auditor," said BSR when it audited the financials for 2019-20.

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Cross charges are when services or goods are used by related parties. So, food made in the kitchens run by Akshaya Patra is used for some of the other charitable trusts run by Hare Krishna Movement without complete financial disclosures, two former directors of Akshaya Patra said, requesting anonymity.

“The special auditors have expressed limitation that at some of the locations, they were unable to analyse donations received or collected by the related parties on behalf of the Trust if any, since the donation register of the related parties containing the details of the donors were not made available to them by the related parties," BSR said.

In December 2020, EY was entrusted to complete a special audit by the Foundation’s board after a few whistleblower complaints alleged poor corporate governance practices. Then, five independent directors, including former Wipro chief financial officer Suresh Senapaty, former Infosys board members T.V. Mohandas Pai and V. Balakrishnan, co-founder of Chrys Capital, Raj Kondur and an adviser to Manipal Group, Abhay Jain, asked for a forensic audit, and subsequently, resigned, over differences with Trust’s chairman Madhu Pandit Dasa.

EY undertook a forensic audit for the three years, starting 1 April 2017, and submitted a final report to the board earlier this year, according to the two executives. For now, Akshaya Patra has not made the report public, but said there was no wrongdoing. Still, KPMG dismissed the legal opinion obtained by the Trust that there was no misconduct in the working.

“The legal opinion obtained by the Trust has concluded that the findings in the special audit report did not result in any violation of the applicable laws and regulations, the donor mandates and agreements, including with the state government and other municipal bodies. However, the opinion does not provide a detailed basis for this conclusion," it said.

A spokesperson for Akshaya Patra did not comment on the issue of change of auditor, but clarified that EY’s conclusion of 28.6 crore in cross charges with regards to related party transactions is merely a theoretical number.

“BSR has not independently quantified such cross charges but referred to EY’s calculations. EY also suggested another estimate based on certain new and alternative principles of valuation of such charges at 28.60 crore for the above years. These are merely suggestive and theoretical and contrary to the principles consistently followed in the earlier years," said the spokesperson for Akshaya Patra. “The Trust will evaluate these suggestions in the future years for adoption, if at all."

“The trusts, which used the facilities from whom cross charges were raised, are not temple trusts but charitable trusts carrying similar objects as TAPF (The Akshaya Patra Foundation)," said the Akshaya Patra spokesperson.

“As a policy, we cannot comment on any company-specific matter," said a spokesperson for KPMG, declining to offer a comment.

An email sent to Grant Thornton went unanswered.

Akshaya Patra defines entities as related parties, which are trusts or societies that have at least a common trustee.

Iskcon founder Srila Prabhupada started Akshaya Patra as a public-private partnership in 2000. The foundation claims it provides 1.8 million meals to children daily across 13 states and a Union territory.

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Varun Sood

Varun Sood is a business journalist writing on corporate affairs for the last fifteen years. He also writes a weekly newsletter, TWICH+ on the largest technology services companies. He is based in Bangalore. Varun's first book, Azim Premji: The Man Beyond the Billions, was brought out by HarperCollins in October 2020.
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