Clarification on Advance FC funds to the staff

Dear Friends,
Greetings from Hyderabad!

I am writing this mail to seek clarification on the issue of advancing FC funds to the staff of the organization. These advances could be in the form of salary advance, travel advance, program advance or any other advance required for the smooth functioning of the project.

1.       Will this amount to mixing of NFC and FC funds?
2.       If yes, what is the recourse?

Looking forward to hear from you on the issue.

Thanks and regards,

Soma Sastry

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One Response to Clarification on Advance FC funds to the staff

  1. Subhash Mittal says:

    Dear Soma,

    I am glad you have raised this issue as this is a most common issue faced by all FCRA receipient organisations.

    S. 17 of FCRA Act 2010 requires that that persons registered or having prior permission should receive foreign contribution in a single designated account. The second proviso further states that ‘no funds other than foreign contribution shall be received or deposited in such accounts or account’.

    While it is clear to all of us that we should not deposit any non-FCRA funds in the FCRA designated account, however confusion is created when FCRA funds which were given as advances or security deposits are rec’d back. One has to take a call exactly which account these funds should be deposited. I believe since ‘act of giving advances / deposits’ is not utilisation, but only conversion of cash into another form of asset for the purposes of utilisation. Nature of funds will continue to remain ‘FCRA’ till these are utilised for the purposes intended by the donor. Thus any refund of such security deposit / advance will still be treated as a FCRA fund, since these have never been utilised, and hence should be deposited back in the designated account. Otherwise how this amount will be reported as utilisation in NGO’s annual return.

    Of course practical problem is that often bankers may not accept this as FCRA fund and hence depositing the amount back in the designated account may pose practical problems. This would need discussion with the banker and convincing him about the genuineness of the funds being FCRA. Sometimes they may require a certification from you (or even a CA certificate, if the amount is large).

    Hope the above clarification is useful.

    warm rgds from a very chilly morning at Delhi

    subhash mittal

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