Managing Foreign Contribution Regulation Act (FCRA) compliance is a critical responsibility for NGOs in India that receive foreign funds. Here's a breakdown of the special requirements and considerations:
Key FCRA Compliance Requirements:
- FCRA Registration/Prior Permission:
- NGOs must obtain FCRA registration or prior permission from the Ministry of Home Affairs (MHA) to receive foreign contributions.
- Eligibility criteria involve legal registration, a proven track record, and adherence to FCRA rules.
- Designated FCRA Bank Account:
- Foreign contributions must be received exclusively in a designated FCRA bank account at the State Bank of India (SBI), New Delhi Main Branch.
- This dedicated account ensures transparency and facilitates monitoring of foreign fund inflows.
- Accurate Record-Keeping:
- NGOs must maintain meticulous records of all foreign contributions received, including:
- Source of funds.
- Purpose of funds.
- Date of receipt.
- Utilization of funds.
- These records must be preserved for a specified period.
- NGOs must maintain meticulous records of all foreign contributions received, including:
- Utilization of Funds:
- Foreign contributions must be utilized solely for the purposes specified in the FCRA registration or prior permission.
- NGOs must ensure that funds are used for approved activities and in accordance with their stated objectives.
- Annual FCRA Returns (Form FC-4):
- NGOs are required to file annual FCRA returns (Form FC-4) with the MHA within the stipulated time frame.
- These returns provide detailed information on foreign contributions received and utilized during the financial year.
- The return must be filed by December 31st of the following financial year.
- Compliance with Administrative Expenditure Limits:
- FCRA regulations impose limits on the percentage of foreign contributions that can be used for administrative expenses.
- NGOs must carefully track and manage administrative costs to ensure compliance.
- Intimation of Changes:
- NGOs must promptly inform the MHA of any changes in:
- Key functionaries.
- Address.
- Bank details.
- Objectives.
- NGOs must promptly inform the MHA of any changes in:
- Avoiding Prohibited Activities:
- NGOs must refrain from engaging in activities prohibited under the FCRA, such as:
- Using foreign funds for political purposes.
- Transferring foreign contributions to unregistered entities without prior permission.
- NGOs must refrain from engaging in activities prohibited under the FCRA, such as:
- Regular Audits:
- Having regular audits of FCRA accounts by qualified chartered accountants.
- Staying Updated:
- FCRA regulations are subject to change. NGOs must stay informed about the latest amendments and guidelines issued by the MHA.
- Proper documentation:
- Maintaining all documents related to the FCRA process, and all transactions, in good order, and in a safe location.
Key Considerations:
- Professional Guidance:
- Given the complexity of FCRA regulations, NGOs are advised to seek guidance from FCRA experts or chartered accountants.
- Technology Solutions:
- Utilizing accounting software and FCRA compliance tools can help streamline record-keeping and reporting processes.
- Internal Controls:
- Establishing robust internal controls is essential to prevent errors and ensure compliance.
By adhering to these requirements and considerations, NGOs can effectively manage FCRA compliance and ensure the responsible use of foreign contributions.
