AccountAid Capsules 2006 (190-226)

The Bill seeks to regulate the acceptance, utilization and accounting of foreign contribution and acceptance of foreign hospitality by a person or an association and repeal the existing Foreign Contribution (Regulation) Act, 1976.

It is expected that the new law and its effective implementation thorough utilization of tools of information and communication technology will put in place more efficient system to regulate the acceptance, utilization and accounting of foreign contribution in the country by ensuring greater accountability, transparency and simplification.

[References:

http://pib.nic.in/release/release.asp?relid=23453]

225: Approval of FCRA Bill by Centre

(10-Nov-06)

Centre has approved the final draft of FCRA Bill. This will become law only when it passed by the Parliament and signed by the President.

The bill also takes care of NGO concerns regarding periodically renewal of FCRA and cap on administrative expenses.

Now, registration will be automatically renewed except for defaulters. Also cap on utilisation of funds for administrative purpose will be 50%.

[References:

"Centre clears new FCRA Bill ", Hindustan Times, New Delhi Edition, 10-Nov-06, page 15]

224: 8,673 NGOs can revive their FCRA now!

(30-Aug-06)

Remember those 8,673 NGOs who lost their FCRA for not filing their FC-3? Well, now they have been given a chance to revive it.

All they need to do is file their pending FC-3 for the years 2001-02, 2002-03 and 2003-04. This must be done latest by 31-December-2006. Remember, you need to file FC-3 even if your receipts during a year were NIL.

In case they had multiple FCRA registration numbers, then they can submit proof of filing their FC-3 for at least one of these.

In case they had already filed their FC-3 for these years earlier, then they should submit proof of having filed their FC-3 (proof of sending registered post letter to FCRA). Along with this they can also send a copy of the FC-3 for the relevant years.

If you are filing your FC-3 now, remember that it must include copy of audited FCRA accounts, and audit certificate. For more guidance on this, see AccountAble 20, 72 and 73. Latest form is available as AccountAble 21. All these are available at www.AccountAid.net.

[References:

AccountAid Capsule 190

MHA Notification No. II/21022/52 (25)/2005-FCRA-II (MU), dated 16-June-2006]

223: Accountability Charter and Corruption

(26-June-06)

The charter also promises that acts of bribery or corruption by staff or consultants etc. will be specifically prohibited.

However, this statement may cause some confusion, paricularly among the critics of the sector. Everyone thought such acts were not permitted anyway!

[References:

"NGOs and Relief Agencies Sign Accountability Charter", Asian Tribune, 14-Jun-06, http://www.asiantribune.com/index.php?q=node/553,

For viewing the charter itself, please visit: http://www.survival-international.org/files/related_material/432_769_INGO_Accountability_Charter.pdf

AccountAid Capsule 207, 221, 222]

222: Assessing the Accountability Charter

(26-June-06)

The Accountability Charter makes commitments regarding responsible advocacy, fair criticism, and ethical fund-raising, among others.

Expectedly, it also talks about transparency. However, this is limited to essentially doing what most INGOs are already doing or are required by local laws to do anyway.

For instance, they promise to comply with 'relevant governance, financial accounting and reporting requirements' in the countries where they operate.

They also commit to reporting once a year, and including some financial information in the reports. They also promise to ensure that accounts are audited by independent auditors.

The Charter mentions that signatories will 'make information publicly availble'. However, it is not clear whether this will also mean the signatories will publish their audited accounts in print or on internet.

[References:

"NGOs and Relief Agencies Sign Accountability Charter", Asian Tribune, 14-Jun-06, http://www.asiantribune.com/index.php?q=node/553,

For viewing the charter itself, please visit: http://www.survival-international.org/files/related_material/432_769_INGO_Accountability_Charter.pdf

AccountAid Capsule 207, 221, 223]

221: INGOs sign Accountability Charter

(26-June-06)

Eleven International NGOs have recently signed an Accountability Charter. The charter is designed to ensure that International NGOs remain responsbile, accountable, transparent and well-governed while they go about their work.

The signatories include ActionAid, Greenpeace, Oxfam, Save the Children Alliance, Terres des Hommes, Transparency International, and World YWCA.

The initiative will also affect partners of these INGOs, as the signatories have committed to 'ensuring that [their] partners also meet the highest standards of probity and accountability'.

[References:

"NGOs and Relief Agencies Sign Accountability Charter", Asian Tribune, 14-Jun-06, http://www.asiantribune.com/index.php?q=node/553,

For viewing the charter itself, please visit: http://www.survival-international.org/files/related_material/432_769_INGO_Accountability_Charter.pdf

AccountAid Capsule 207, 222, 223]

220: Government to unveil National Policy on NGOs?

(23-June-06)

According to a news-story in Hindustan Times, the Government of India is shortly expected to announce a national policy for NGOs. The policy has been formulated by the Planning Commission in consultation with NGOs and the concerned Government agencies. A final draft of the policy is with the Prime Minister for approval.

Some of the significant regulation related changes that the policy is expected to announce are:

1. Modifying tax and FCRA laws to allow Indian NGOs to expand their programs to outside India;

2. NGOs to set up a self-regulatory agency, and also to help formulate a reliable accreditation methodology;

3. NGOs to file documents related to constitution, board, membership etc. with the Government, and make them available over the internet

4. Classification of NPOs into public utility organisations (schools, hospitals) and public benefit organisations (NGOs) to help tailor suitable tax-exemptions and incentives

5. Study feasibility of enacting a central law which will offer an option to NGOs to register in order to operate across state-boundaries and also outside India

6. Liberalisation of FCRA

7. Tax rebate on donations in the form of shares and stock-options

8. Assess feasibility of liberalising minimum-spending norm of 85%

9. Tighter administrative and penal procedures to check misuse of such benefits by paper-charities

[References:

"End of free lunch: Move to regulate NGOs", Hindustan Times, Delhi, 23-June-2006, p.1, 11; http://epaper.hindustantimes.com

219: Zakat Administration in Pakistan

(22-June-06)

In Pakistan, the collection of Zakat is mandated under the Zakat and Ushr Ordinance, 1980. Each state has a Minister for Zakat and Ushr. Zakat was initially collected from all Sunni Muslims, but in 1999, the Supreme Court made it a voluntary payment. About 4 arab Rupees is collected annually.

The Ordinance provided for use of Zakat funds for elimination of poverty and beggary and the creation of a welfare state. However, this was modified in practice in view of certain technical difficulties. Currently, Zakat funds are handed over to the Zakat Committees at the District level, who look after its redistribution.

As there are thousands of Zakat Committees, it is somewhat difficult to monitor proper distribution of Zakat funds. As a result, Zakat sometimes ends up with relatives of people who chair the Zakat Committees. In 2003-04, about 150 such cases were reported in Punjab, involving about 70 lakh Rupees.

According to present rules, Zakat funds can be distributed to individuals and to madarsas, on the basis of list of individual students. Hospitals can also treat the poor, and claim the cost from Zakat funds.

[References:

"Editorial: The sad story of Zakat", Daily Times, Pakistan 15-June-2006, http://www.dailytimes.com.pk/default.asp?page=2006%5C06%5C15%5Cstory_15-6-2006_pg3_1;

AccountAble 113: Accountability and Islamic Charity, www.AccountAid.net

arab = 1 billion = 100 crores

Zakat is like a poor tax of 2.5% payable by all wealthy Muslims. Authority for Zakat comes from The Quran Sharif. In some countries, the collection and administration is centralised, whereas in other countries, the concerned individuals manage it. – Ed.]

218: German Charity and Church Tax

(22-June-06)

A large amount of foreign contribution to Indian NGOs comes from Germany. In 2003-04, Germany contributed 8 arab Rupees (15%), and ranked second, just after USA, with 31% of contribution.

Bulk of this aid comes from German donor agencies. How do these agencies raise their funds? Well, from an innovative tax, commonly called 'church tax'.

Church tax is to be paid by every person registered as a Christian in Germany. The tax is collected by the German Government, and passed on to the main churches (Protestant, Catholic, Lutheran, etc.). Payment is compulsory for registered Christians. The amounts collected are very significant, at around 10 billion dollars annually (approximately 4.5 kharab Rupees).

The church tax, introduced under a concordat signed between the German government and the Vatican in 1933, is primarily meant to support the church infrastructure and clergy salaries. The surplus is used for charity at home and abroad.

[References:

"German Churches among World's Wealthiest", OhMyNews, Korea 20-June-2006; http://english.ohmynews.com/ArticleView/article_view.asp?menu=A11100&no=299873&rel_no=1&back_url=

MHA Foreign Contribution Report 2003-04, http://www.mha.nic.in/fcra.htm

kharab = 100 arab = 100 billion; arab = 1 billion = 100 crores]

217: Increasing regulation for NGOs across the Globe?

(21-June-06)

According to a report released by Oxford Analytica, NGOs are gradually becoming subject to more and more regulation across the world. Examples include Eritrea, Sudan, Nepal, Russia, Kazakhstan, and European Commission. Recently we have also heard about Uganda and Bangladesh, as well as India.

According to the think-tank, this is primarily because "In many countries, NGOs are exercising significant and increasing degrees of influence on decision-making through their research, public education and media campaign[s]." Such influence may not always be to the liking of the host country or its Government, particularly in the economically poor regions.

Analytica goes on to add that "NGOs are not elected entities, and their constituencies may be too selective or narrow. ... The transparency of NGO processes often remains poor, in part because they remain largely unregulated."

However, some Governments often work closely with NGOs, examples include UK and France. USA is another example, which often provides funds to NGOs for research and consultation on policy issues.

[References:

"NGOs losing privileged status", Global Policy Forum, 31-January-2006; http://www.globalpolicy.org/ngos/state/2006/0131losing.htm]

216: Use of funds by Schools in Delhi

(21-June-06)

Delhi School Education Act, 1973, governs use of surplus funds with schools in Delhi. The Act allows schools to use surplus funds to set up another school. However, in 1999, the Delhi High Court restrained schools from transferring funds to another body, whether it's parent institution or another school. The Supreme Court later confirmed this in 2004.

Based on this, St. Columba's, a premium school in Central Delhi has been de-recognized by the Delhi Education Directorate. Reason: the school has transferred Rs.1.83 crores from its surplus to its parent body, the Congregation of Christian Brothers of India (CCBI). This was possibly based on an arrangement that 12% of the annual fees collection was to be transferred to CCBI.

These transfers have occurred in 2002-03 (Rs.53 lakh), 2003-04 (Rs.71 lakh), and 2004-05 (Rs.59 lakh).

The officials are also apparently concerned that the school still reported surpluses in each of the three years (59 lakh, 43 lakh, and 68 lakh). The Department's conclusion? The school is overcharging its students.

Another 150 schools are also being examined for irregularities.

[References:

"St. Columba's derecognised over faulty fund use", Hindustan Times, New Delhi, p. 1, 5, 21-Jun-2006; http://epaper.hindustantimes.com/Default.aspx]

215: Five HIV-AIDS NGOs blacklisted

(19-June-06)

According to a news-story in Indian Express, Kolkata, five NGOs working on HIV-AIDS have been blacklisted by Health Department. Charges against them range from lack of transparency, to poor quality of work.

The story also indicates that some of the NGOs took funds from multiple sources for the same project. Some showed false bills running into lakhs of rupees. Bills for purchase of contraceptives were also false.

One innovative technique was taking photographs of same Focus Group Discussion from different angles, and passing these off as separate discussions. This allowed them to charge the same expense several times in the accounts.

The scam was detected by West Bengal Project Support Unit, working under the State Health Department.

[References:

"Health Dept smells HIV scam, blacklists 5 NGOs", Indian Express, Kolkata Newsline, p. 1, 18-Jun-2006; http://cities.expressindia.com/archivefullstory.php?newsid=188515&creation_date=2006-06-18]

214: Funneling FCRA Funds

(19-June-06)

The same story goes on to suggest how some NGOs funnel foreign funds. Methods include:

1. Using a private (personal?) bank account in a non-computerised branch

2. Using a company account

3. Shadow –lending (using another FCRA registered NGO to bring in funds)

4. Using an export-import business to bring in foreign contribution as receipts for goods sold

If the above were true, then it would certainly be a matter of concern for the FCRA Department.

However, while shadow-lending is a fairly common method of bypassing FCRA, other methods are more exotic.

Secondly, while all this may be a violation of FCRA, it would not necessarily mean that the funds are misused or misapplied. Proper use or misuse of funds is not really dependent on whether the funds came in legally or illegally.

[References:

"Blackened by money", Hindustan Time, New Delhi, p. 9, 18-Jun-2006 (Gray Matter – HT Inquiry)

Also see AccountAid Capsules 213 and 212]

213: Government Funding and Accountability

(19-June-06)

According to a story published in Hindustan Times, NGOs are facing increasing competition for raising foreign funds for their programs.

Accepting corporate funds as an alternative often means a quid-pro-quo, thus compromising their independent image. If they turn to the Government, they have to toe the Government line. They also need to deal with corruption, which is almost endemic in the governance system now. According to an estimate, almost 20-30% of the funds may get paid as bribes to get funds.

There is no estimate available of how much funds the Indian Government spends through NGOs.

The story ends up suggesting that while foreign contribution is being closely monitored, the Government's own financial contribution is not monitored as well.

That is but natural: a lamp lights up the world, but it's own underbelly remains in darkness (deepak taley andhera...)

[References:

"Blackened by money", Hindustan Time, New Delhi, p. 9, 18-Jun-2006 (Gray Matter – HT Inquiry); http://www.hindustantimes.com/news/181_1722713,0035.htm]

212: From EU to Delhi, via Switzerland?

(14-June-06)

A human-rights NGO based in Delhi has been accused of channelising foreign contribution illegally, without FCRA registration or prior-permission. An enquiry has been launched by the Ministry of Home Affairs, and OLAF (European Union's Anti-Fraud Office).

According to the news report, the NGO opened a branch office and a bank account in Switzerland. It also opened four bank accounts in the name of a private limited company in Delhi. The name of the company was quite similar to the name of the NGO. The foreign contribution was received into the bank accounts of the company.

Large amounts, running into several crores, were received by the Company into its bank accounts. The money primarily came from USA, UK, and Europe.

The concerned NGO has denied the allegations, stating that it received money only for international consultancy contracts, on which taxes were duly paid.

[References:

"Foreign Funds: EU glare on rights NGO", Hindustan Time, New Delhi, p. 12, 14-Jun-2006; http://www.hindustantimes.com/ p.12 of Delhi Edition for 14-6-06 ]

211: Everybody loves a good hurricane also...

(14-June-06)

Last year, in September and October 2005, US coast was lashed by several hurricanes. Some of the people who were evacuated from the hurricane path were put up in Ramada Inn, Texarkana, Texas. Their bills were to be paid by Red Cross.

The Hotel manager reportedly thought up a way to make some money out of this. She continued to the show them as staying in the hotel, even when they had checked out. When there was a shortage of rooms, the evacuees were shown as staying in 'off-market rooms'. These are rooms that are temporarily closed due to repainting or renovation.

The manager allegedly helped the hotel earn $19,980 (~9 lakhs rupees) through her cleverness. In the process, she may have earned a jail sentence of upto 20 years for herself.

The problem of hurricane fraud seems to be so widespread, that the Attorney General has set up a 'Hurricane Fraud Task Force' to identify and persecute such cases.

[References:

"Hotel Manager Arraigned on Hurricane Fraud Charges", KFDM TV, Texas, 31-May-06, http://www.kfdm.com/engine.pl?station=kfdm&id=15023&template=breakoutlocal.html ]

210: Annual Registration for NGOs in Uganda

(14-June-06)

In April 2006, Ugandan Parliament also passed a law called 'Non-Governmental Organizations Registration (Amendment) Bill'.

This bill requires NGOs to re-register annually. Requests for re-registration can be rejected for various reasons, including that of the organisation being against "any government policy, plan or public interest".

The Bill is now awaiting the President's assent. Freedom House and ICNL have urged the Ugandan President to reject the bill.

This bill is seen by ICNL as part of the growing trend. Similar laws have been passed in other African countries, including Eritrea, Sudan, and Zimbabwe, as well as in former Soviet nations like Russia, Kazakhstan, Uzbekistan, and Belarus.

Closer to home, Bangladesh is considering regulation of micro-credit NGOs. In India, a draft FCMA bill is under consideration, which will require NGOs to revalidate their FCRA registration every five years.

[References:

'President Museveni Urged to Reject Ugandan NGO Bill', Freedom House Press Release, 9-June-06, Washington; http://www.freedomhouse.org/template.cfm?page=70&release=389

Also see AccountAid Capsules 209, 183, 177]

209: Regulation for Micro-Credit NGOs in Bangladesh

(8-June-06)

A draft Bill called 'Micro Credit Regulatory Authority Act, 2006' has been placed in the Bangladesh Parliament. The Bill proposes a micro-credit regulatory authority. The law will cover all micro-credit programs, whether run by NGOs or by the Government.

The new law is expected to ensure accountability of micro-credit institutions. They will have to get approval of the MCRA afresh. They will not be allowed to get into any activities, transactions or services that run against the 'purpose and spirit of the act'.

Each institution will be required to have a minimum reserve fund as specified by the law. They will not be able to use the reserve fund without approval. No institution will also be able to distribute the profit without the permission of the MCRA Board, an authority being constituted under the law.

Violators can be punished with upto one year in prison, as also a fine of upto 5 lakh Taka.

[References:

'Bill to clip NGO wings placed' The Daily Star, Dhaka, Bangladesh. 8th June 2006; http://www.thedailystar.net/2006/06/08/d60608011812.htm ]

208: NGOs in Kenya

(7-June-06)

The NGO Coordination Board, Kenya has warned 'briefcase' NGOs in Kenya that they will be identified and closed down shortly. The Executive Director has requested donors to be more careful in choosing and funding the right kind of NGOs.

Currently, there are over 4,000 NGOs in Kenya, employing . more than 20,000 people.

[References:

'Board warns Bogus NGOs', African News Dimension, Johannesburg. http://www.andnetwork.com/

'Briefcase NGOs' is a local colloquial term for NGOs which exist only in a briefcase. – Ed.]

207: Accountability Charter for NGOs

(6-June-06)

A group of international charities are launching an Accountability Charter for NGOs today in London. The charter is the result of work done by five international NGOs: Oxfam, Amnesty, Save the Children, Greenpeace and Care.

This is reportedly in response to increasing off-the-record criticism of NGO accountability.

The details of the initiative are not yet known. It is likely to be a code of conduct, with a commitment by signatories to make themselves more accountable to the stakeholders.

[References:

"NGO Accountability – a charter for success", Ethical Corporation Magazine - London,UK, http://www.ethicalcorp.com/]

206: Zakat Collections

(6-June-06)

According to the Saudi Director General of Zakat and Income Tax, total zakat collections have risen to $ 960 million (43.20 arab rupees). This is an increase of 20% over the last year.

Zakat is an annual Islamic tax, much like the Christian tithe, levied at 2.5% of assessable wealth on an annual basis. In most countries, both tithe and zakat are voluntary. However, in some countries these are enforced through or managed by the Government.

In Saudi Arabia it is levied both on individuals as also on companies.

[References:

‘Saudi Arabia: Collected Zakat up’, 1-Jun-06, http://www.albawaba.com

AccountAble 113: Accountability and Zakat, www.AccountAid.net]

205: Charitable Institutions and misuse of Income Tax Act

(11-April-06)

In this year’s budget speech, our learned Finance Minister made an important comment:

‘The Standing Committee on Finance has expressed concern that many charitable institutions misuse the provisions of the Income Tax Act. I propose to focus on one misuse...’ (para 168)

What does the Honourable Minister have in mind? Is the tax on anonymous donations just the beginning of a long taxation winter for NGOs? Or will it help protect them from pseudo-charities?

Only future budgets will tell.

[References:

UPD.BPD.CIR.No. 30/14.01.062/2005-06, dated 30-Jan-06 - 'Collection of Account Payee Cheques - Prohibtion on crediting proceeds to third party account'

Also see AccountAble 12 and 66 at www.AccountAid.net]

204: Pseudonymous Donations

(11-April-06)

The Finance Ministry has recently proposed introducing a tax on anonymous donations.

Also covered are pseudonymous donations. What does that mean? A person comes and gives you Rs.1,000. He gives you his name and address. Later the same turns out to be fictitious. This could be treated as a pseudonymous donation.

So what is the solution? Should NGOs ask the donor for a voter card? Or carry out address verification before accepting the donation?

Probably not. However, they will be required to maintain a record showing the name and address of the donor. Also for their own protection, they may prefer to receive donations through account payee cheques.

[References:

FM’s budget speech (2006) – para 168

Proposed section 115BBC. Finance Bill, 2006; India

AccountAid Capsule 196]

203: RBI on Account Payee Cheques

(31-March-06)

Most people think that an account payee cheque can not be credited to another person's account. In reality, it happens all the time, under the guise of 'prudent market practice'. This problem has assumed the proportion of an epidemic with the rush of IPOs.

The RBI has now come out with a circular under the Banking Regulat Act, 1949. Accordingly, banks have been prohibited from crediting the payment to a third party's account. If the customer insists on this, then the bank should tell them to get 'account payee' crossing cancelled by the person who issued the cheque.

[References:

UPD.BPD.CIR.No. 30/14.01.062/2005-06, dated 30-Jan-06 - 'Collection of Account Payee Cheques - Prohibtion on crediting proceeds to third party account'

Also see AccountAble 12 and 66 at www.AccountAid.net]

202: US Government and Religious Charity

(30-March-06)

With the coming of the Bush administration, US Government has increasingly supported faith-based charities. A recent White House report has disclosed that the amount given to religious charities by the US Government last year came to nearly $2.15 billions (approximately 96.75 arab Rupees).

The US public has always been supportive of faith-based charities. According to Indian University's Centre on Philanthropy Panel study, nearly 62% of all giving in USA is to faith-based charities. However, the Bush Government initiative has drawn some flak as the USA is consitutionally secular - i.e. committed to keeping religion separate from Government.

The Bush years have also seen 11 government agencies setting up relgious offices to help coordinate the provision of social services by faith-based organisations.

Will this move make the faith-based organisations better governed? Or will it make the US Government more faithful?

Only time will tell.

[References:

The Hindu, 12-March-06, Madurai. P.13

'The Business of Giving', The Economist, Feb 25th-March 3rd, 2006]

201: Charities exempted from PF

(29-March-06)

NGOs and other charities have been exempted from EPF Act for a period of five years (1-April-05 to 31-Mar-2010). This will apply only if the NGO or charity has been notified as such under the Income Tax Act, 1961.

However, the exemption is not available to any NGO or charity, which runs a college, school, hospital, nursing home, clinic etc. against charging of fees from students or patients.

[References:

Gazette of India - July 2, 2005. Government S.O. 2368 dated 7-Jun-05; F. No. S-35014/3/02-SS-II

AccountAble 32 and 110 at www.AccountAid.net

We thank Ruchika Social Service Organisation, Bhuwaneswar for bringing this circular to our attention. - Ed.]

200: Crediting Rupee funds to FCRA Bank Account

(29-March-06)

Many NGOs and charities face difficulties in crediting rupee funds to their bank accounts. This is because some banks think that foreign funds can come only in foreign currency. However, this is not always correct. For example, if you receive a donation in Indian rupees from a foreign visitor, it remains FCRA. Same applies to redeposit of funds withdrawn from the bank account, or those transferred by another NGO out of their FCRA account.

The MHA has now requested the RBI to clarify this matter to all the banks, so that NGOs do not feel harassed on this account.

[References:

MHA Office Memorandum No. II/21022/23(17)/2006-FCRA I, dated 27.2.06

We acknowledge Vani’s help in bringing this memorandum to our attention. – Ed.]

199: Interest of FCRA Funds

(28-March-06)

There has been a long-standing confusion regarding interest on FCRA funds. Some people think that it is not to be treated as FC fund. Others think that it should be treated as FCRA fund.

From a legal point of view, the first view appears to be correct. However, if one takes the accounting logic of FCRA into account, then the second conclusion becomes inescapable (interest on FCRA funds needs to be credited in FCRA Receipts & Payments Account).

To resolve this confusion, the Ministry had modified the form FC-3 in July 2001. The modified form required that interest on FCRA should be reported in FC-3.

However, die-hard adherents of the first continue to argue that the position is not clear. Now the MHA has come out with an office memorandum on this.

Accordingly, “...interest earned from deposits made out of foreign contribution is also to be treated as FC under the Act. Non-deposit of these types of FC in the designated bank account of an organisation constitutes violation of the Act...”.

[References:

MHA Office Memorandum No. II/21022/23(17)/2006-FCRA I, dated 27.2.06

We acknowledge Vani’s help in bringing this memorandum to our attention. – Ed.

Also see AccountAble 20, 22 and 72 at www.AccountAid.net]

198: Last date for filing FC-3 extended

(28-March-06)

The FC-3 for 2004-05 was due for filing on 31st July 2005. However, many organisations have not filed this return so far.

The law requires that every organisation registered under FCRA (or having and active prior-permission) should file FC-3 each year. This applies even if they have not received any funds during the year.

Earlier the Ministry had extended the date to 31st October 2005. Now the date has been extended further to 31st March 2006.

If you have not filed the FC-3 (for 2004-05) so far, make sure you send it by registered post within the next three days.

The form should be sent to:

FCRA Department – Foreigners Division

Jaisalmer House,

26, Mansingh Road,

New Delhi - 110011

[References:

MHA Circular dated 14-3-06

Last year the Ministry of Home Affairs had extended the date of filing (for 2003-04) to 31st March 2005. – Ed.

We acknowledge Vani’s help in bringing this notification to our attention. – Ed.]

197: RBI says 'No' to Multiple FCRA Bank Accounts

(28-March-06)

Can you open and operate multiple FCRA Bank accounts? Section 6(1)(b) of FCRA says clearly that you should receive FCRA funds in the FCRA designated bank account only.

What happens after you receive the funds? Some people argue that rule 8(1)(b) is ambiguous on this. Therefore, they receive FCRA funds in the designated bank account. After this, they move the funds to other bank accounts.

These bank accounts may have been opened in far away locations, for operational convenience. Or these may have been opened in the same city for seggregating donor funds.

In March 2005, RBI has come out with a master circular on FCRA provisions. Under the heading 'Common Irregularities Observed', the RBI says:

"5. Some of the irregularities observed in this regard are as under:

(a) Certain associations were found to be operating more than one account, either in the same branch or in different branches (other than the account specified in the communication for registration), for carrying on transactions of foreign contributions."

The circular concldues with advice to the banks, requesting them to ensure strict adherence to the instructions issued. Further, it tells the banks that any lapses will be viewed seriously.

[References:

RBI Master Circular- Foreign Cotnribution (Regulation) Act, 1976 - Obligations of banks. Circular No. DBOD.AML.BC.No. 74/14.01.055/2004-05, dated 5-3-2005]

196: Anonymous Donations

(22-March-06)

Not yet. The Minister has dealt a big blow to the practice of 'gupt daan' by blocking anonymous donations.

If a charitable trust or NGO receives any anonymous donations, then they will have to pay tax @ 30% on it.

As it is worded, even coin-box collections will attract a tax of 30%. So don't be surprised if you are asked to show your voter card or driving license before dropping loose coins in a hospital collection box!

Apparently, the move is targeted at the practice of laundering business funds through charity. NGOs are not likely to be affected, as most of them maintain detailed records of their donors.

Religious organisations have been exempted from this provision, in view of wide prevalence of 'gupt daan' from devotees, for earning of 'punya'.

[References:

Proposed section 115BBC. Finance Bill, 2006; India

Anonymous donations are not eligible for deduction from taxable income under 35AC or 80G, as donations need to be itemised in the tax return before deduction can be claimed. - Ed.]

195: Budget 2006

(18-March-06)

Before the Budget was read out, many people were expecting that this time the Finance Minister will wield the big stick on the NGO sector. As it happened, the Finance Minister has completely ignored the sector.

Time to celebrate?

[References:

Finance Bill, 2006; India]

194: 'We Serve Fudge'?

(18-March-06)

Outlook has recently published a provocative news story with the imaginative title 'We Serve Fudge'.

Some of the content is equally imaginative. For instance, the story concludes that 8,673 FCRA registrations were cancelled because the concerned NGOs were 'receiving foreign funding and not accounting for it' (p.34).

Or that the move to put them on the prior-permission list was 'unprecedented' (p.34). Or that because an NGO could not be located at the given address, means that it had furnished the wrong address to begin with (p.36).

There is no doubt that there are many organisations which fudge their accounts. Such organisations may be from the Public sector, corporate sector or from the NGO sector.

However, it is probably illogical to conclude that all NGOs fudge their accounts, just because the FCRA Department has just cleaned up its registration records of defunct FCRA numbers.

[References:

Outlook, New Delhi, March 14th-20th, 2006, pp.34-36]

193: The Economist on Philanthropy

(17-March-06)

The Economist, a London-based weekly, which has an opinion on everything under the Sun, has come out with a survey titled 'The Business of Giving'.

This is not intended to indicate that philanthropy is becoming a business. It merely means that it is becoming more business-like, which is possibly intended as a compliment.

The survey contains some interesting snippets of information, such as how Gordon and Betty Moore have given away more than 7.05 billion dollars (Rs.3.17 kharab) over the last five years. Or how religious giving accounts for 62% of the total giving in USA.

Unfortunately, the survey contains very little information on individual giving, or on giving in the East. That probably is not due to lack of giving, it is more likely due to lack of ready information on giving.

Overall, the survey concludes that philanthropy is becoming bigger, more sophisticated, and better targeted. And so it has a future after all.

[References:

The Economist, Feb 25th-March 3rd, 2006]

192: Still More on Cancellation of FCRA

(6-Feb-06)

Some of the better-known names include University of Delhi, IIT, CII, Diakonia, Ramakrishna Mission Hospital, Catholic Hospitals Association of India, Escorts Heart Institute and Research Centre, and IGNOU.

What will now happen to these organisations? In many cases, the organisations have stopped receiving foreign contribution, and will not be affected. In other cases, they have obtained registration under a slightly different name, and do not use the listed registration any more. \

Still, there are bound to be some cases, where the organisation is active and will be affected adversely by the cancellation.

In such cases, the concerned organisation should approach the FCRA Department for a revalidation of their FCRA registration.

[References:

MHA Notification no,. SO 1621(E), dated 26-October 2005, published in Extraordinary Gazette of India, Part II, Section (3)(ii) of 18th November 2005; available at http://www.mha.nic.in/fore_division.htm]

191: More on Cancellation of FCRA

(6-Feb-06)

The list of organisations whose FCRAs have been cancelled includes associations almost from each states: 1,277 in Andhra Pradesh, 974 in Maharashtra, 944 in Tamilnadu, 749 in Kerala, 732 in Uttar Pradesh. 441 organisations in Delhi have had their FCRA cancelled. There are many more in other states.

The list includes Universities, Chambers of Commerce, Religious organisations, hospitals, Institutes, and NGOs of every shade and opinion. For once, no one can say that the FCRA Department has been discriminatory. Because it has been quite indiscriminate!

[References:

190: 8,673 FCRA Registrations Cancelled

(6-Feb-06)

The FCRA Department has cancelled 8,673 FCRA registrations for non-filing of FC-3 for last three years (2001-02, 2002-03, 2003-04). This is the largest single cancellation in the history of FCRA.

The last time this happened was in 1997, when 497 FCRAs were cancelled.

[References:

"MHA bars 8,000 NGOs from seeking foreign funds", Indian Express, New Delhi, 4-Feb-06, p.1]

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