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P RESENTATION ON FCRA

O VERVIEW
       
Accounting for Aid. Aid in Accounting
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AccountAid India,
55- B, Pocket ² C, Siddharth Extension,
New Delhi- 110 014
Ph.: 011-2634 3128, Ph./Fax: 011-2634 3852
E-mail: info@accountaid.net
Web: www.AccountAid.net
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Accounting for Aid. Aid in Accounting
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FCRA

u ÿistory
u Evolution
u Purpose
u FCRA in Other Countries
u Funds
u Formalities
u Concerns
       
Accounting for Aid. Aid in Accounting
For Associations
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FCRA - H ISTORY
u   Niyogi Committee Report
u   Newsweek and New York Times
u   Debate in Lok Sabha
u    Government promises FCRA
u   FCRA bill introduced
u   Referred to JPC ʹ Joint
Parliamentary Committee
u   JPC final report
       
u   FCRA Act passed
Accounting for Aid. Aid in Accounting

FCRA - E VOLUTION

u Niyogi Committee focus on missionaries


u Lok Sabha debate focus on politicians
u   law Focus on politics
u    Kudal Commission
u   amendment extended to NGOs ʹ
concern involvement in politics
u 

 FCMC Bill 


u 

 FCRA Bill 


       
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 P URPOSE

u Prevent Foreign influence on


National electoral politics
National media
National establishments
u Restriction of terror funds w  an
objective

       
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FCRA IN O THER C OUNTRIES

u  countries have FCRA or look alikes


u Most focus on foreign funding of
elections
USA, UK, Germany,.
u Some extend to regulation of NGOs
Bangladesh, Russia, Uzbekistan, Peru,
Brazil
u Some control NGOs through alternate
means
China, Nepal, Pakistan
u Perspective difference between givers
and takers
       
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FCRA F UNDS

u , registered NPOs/associations


(
Oct 


u ,  NGOs filed FC  for


u Reported receipt of Rs. , Crore
USA 

u Funds growing at . annually since
 

       
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TOP 3 R ECEIVERS

u ñorld Vision of India, Chennai,


TN Rs. Cr.
u Rural Development Trust,
Ananthapur,
Andhra Rs. Cr.
u Believers Church India,
Pathanamthitta,
Kerala Rs.
 Cr.
       
Accounting for Aid. Aid in Accounting

TOP 3 D ONORS

u ñorld Vision
International, USA
Rs. Cr.
u Gospel for Asia,
USA Rs. Cr.
u Fundacion Vincent
E. Ferrer, Spain
Rs. Cr.
       
Accounting for Aid. Aid in Accounting

W HAT IS F OREIGN
C ONTRIBUTION ?
u Foreign contribution =
Funds/ material/ shares
received from a foreign
source [Sec ( (c
Manner of delivery / transfer
 Any form ʹ donation, delivery or
transfer
 Any Currency ʹ Indian or foreign
       
Accounting for Aid. Aid in Accounting
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F OREIGN S OURCE -1

u Defined u/s Sec ( (e


Any source under control of foreigners is
a foreign source.
 Some examples of foreign sources
(AccountAble 
 Multi lateral agencies are not a foreign
source (AccountAble 

       
Accounting for Aid. Aid in Accounting

F OREIGN S OURCE -2
u Individuals of Foreign nationality
(citizenship
Concept of NRI/ PIO
Foreigner living in India
u Government of a foreign country
u International Agencies (except UN Org.
u Foreign NPOs
Trusts, Foundations, Societies, Clubs,
Corporations, Trade Unions
       
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F OREIGN S OURCE -3

u Business Organizations
Foreign company, Subsidiary of a foreign
company, Foreign corporation, Multi
national corporation, Company
controlled by foreigners
Concept of foreign company/ MNC
 Status of Indian organizations registered
abroad
 Determining shareholding pattern
       
Accounting for Aid. Aid in Accounting

S IX T YPES OF R ECEIVERS
u Categories of Receivers section ( ,
(A
. Political parties
. Organizations of a political nature
. Individuals in public life
. NGOs/ NPOs
. Private individuals
. Business organizations
       
Accounting for Aid. Aid in Accounting
 C OVERAGE

u Covers all associations with a definite


program ʹ CEERS
Association of individuals
Registered or un registered
Office in India
Includes Society and any other forms of
organisation

       
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FCRA O PTIONS

u Permanent Registration
u Prior permission
u Legal ÿolder?
u Scholarship, stipend or any payment
of a like nature (individuals
File FC , if fellowship/ stipend >
Rs.,

per annum

       
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½ FCRA FORMALITIES FOR
NGO S -1
u Registration (AccountAble 
Should be >  years old
Takes ~  months
Apply in form FC  (AccountAble 
 Presentation on online Filing of FC 
 Online application for FCRA Registration
http//www.mha.nic.in/fcraweb/fc_login.
aspx

       
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[ FCRA FORMALITIES FOR
NGO S -2
u Prior permission (AccountAble 
Takes   months
Apply in form FC A (AccountAble 
Must file on line application
 Presentation on online Filing of FC A
 Online application for FCRA prior
permission
http//www.mha.nic.in/fcraweb/fc_login.a
spx
       
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å EY L IMITATIONS UNDER
FCRA
u All ͚organisations with a definite
program͛ need FCRA to receive
foreign funds.
u FCRA funds always remain FC
Can be passed on to other FCRA
organisations only
u FCRA organisations cannot engage
in politics or political activities
u Publication of newsletters
       
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Electronic Newsletter
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R EQUIREMENT FOR NGO S
u Funds in designated FCRA bank
account
Project/Donor wise Bank account?
 AccountAble 

u Maintain separate set of account


books
Project/Donor wise Cash Book?
 AccountAble 
       
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R EPORTING BY NGO S

u Must maintain Form FC 


For contribution in kind
 AccountAble 

u Must file annual return in Form FC 


by Dec 
ñhether FC received or Not
Option for on line filing of FC 
 AccountAble  Form FC 
       
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M ULTIPLE FCRA B ANå
ACCOUNTS
u Various practices
u Show cause notice issued when discovered
u May lead to violation of section  (CROSS
case
u Legal Position
Not permitted under present FCRA rule ( (b
Permission granted for secondary accounts on a
case by case basis, where sufficient reason
shown
FCRA Bill 

 allows multiple secondary bank


        accounts (section 
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C HANGE OF FCRA B ANå

u Is permitted, if supported by reasons


u Use an existing account or a new one
u Need to apply to Ministry for
permission
Application to MÿA
u Fresh letter of registration issued,
with new Bank Account Number
u Takes   months

        u Detailed procedure in AccountAble 


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C HANGE IN N AME &
A DDRESS
u Need to report in the change of
Name and address of Association
ñithin 
days
u Need to apply to Ministry for
permission
Application to MÿA
Fresh certificate with changed address
and name

        u Takes   months
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S HADOW-L ENDING
u Not allowed under FCRA
u Still in many cases funds passed on
u Discovery leads to show cause notice
and nuisance
u FCRA rarely cancelled
u More common among networks
       
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S HADOW-L ENDING - 2

u Methods used
Legal holder
Consultancy agreement
Transacting in cash
Showing CF as employee
Out of innocent error

       
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S HADOW-L ENDING :
W EAåNESSES
u Legally untenable
u Vulnerability
ñeak paper work
Dissatisfied employees
Dissatisfied network members
Ignorance of law

       
Accounting for Aid. Aid in Accounting
S HADOW- LENDING : AUDIT
ISSUES
u Audit of third party vouchers ʹ
logistical issues
u Sec.  of FCRA whether CA liable as
advisers

       
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FCRA B ILL 2006

u FCRA Bill tabled in Rajya Sabha in


December 


u Bill to replace existing FCRA once
passed
u Current status Recommendation/
Report given by Parliamentary
Standing Committee

       
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R EFERENCE M ATERIAL
u Acc wAble 22: Myseries  FCRA
u Acc wAble 19: F rm FC-1A; 33: Pri r-permissi w
u Acc wAble 26: F rm FC-8; 42: FCRA Regisrai w
u Acc wAble 21: F rm FC-3
u Acc wAble 20: Filliwg p FC 3 -Basic
u Acc wAble 72, 73: Iwricacies  FC-3: Par 1 & 2
u Acc wAble 84: F reigw S rce iw FCRA
u Acc wAble 35: Fell ship; 27: F rm FC-5
u Acc wAble 58: Maiwaiwiwg FC-6; 28: F rm FC-6
u Acc wAble 29: FCRA Pewalies
u Acc wAble 116: His ry  FCRA
u Acc wAble 122-126; 127-128: Awalysis w FCRA Bill 2006
       
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Thank you!

       
Accounting for Aid. Aid in Accounting