Administrative Expenses – Query

Dear Sir,

I am a frequent visitor of your blog SRRF. It is a great source of resources. Couple of times I interacted with you through emails and even posted some questions and answered for others’ queries too.

In the light of new form FC4 for filing annual returns introduced by FCRA in the place of F6 which is being focused on Administrative Expenses apart from other distinguished features, we need some clarification with regard to it.

Say an organization has Informal Literacy Program. And the structure of human resource involved in it is in this manner –

  1. Adult Learners (the beneficiaries who gets basic reading writing skills)
  2. Adult Education Teacher (a volunteer who teaches in a center with 20 Learners and gets monthly honorarium)
  3. Project Manager (a volunteer who oversees 5 centers and gets monthly honorarium)
  4. Field Coordinator (a staff working full time with the organization, collecting reports and training 40 centers as and when required and gets monthly salary)
  5. Head Office work force (staff on full time basis paid salaries regularly)

Now, my question is among the above 5 whose costs are considered as administrative expenses?

  • As per rule 5 (ii) of FCRA whether 4 & 5 costs are considered as Administrative Expenses? Or
  • As per rule 5 (ii) of FCRA whether 3, 4 & 5 costs are considered as Administrative Expenses? Or
  • As per rule 5 under provision 1st Para which talks about “training or collection”, only Sl. No.5 costs need to be considered as administrative expenses?

Looking forward for kind and expert opinion.

With thanks and regards,

Prasanna Kumar

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4 Responses to Administrative Expenses – Query

  1. I think in shortly, whoes salary, Travel and other general administartive cost which are not covered by the Project & Programmes are administartive expenses. i.e. Accounts Staff, Admin Support staff, Office rent, Comunication expenses etc.

  2. Subhash Mittal says:

    First of all, thank you for your appreciation Mr Prasanna.

    Interpreting Admin Exps. under Rule 5 is not easy. While other rules are relatively easier to understand, however I would suggest you to go back and have a relook at Rule 5(ii). I quote the rule :
    Following shall constitute administrative expenses:
    5(ii) all expenses towards hiring of personnel for management of the activities of the ‘person’ and salaries, wages or any kind of remuneration paid, including cost of travel, to such personnel

    In the above rule word ‘person’ has been used, exactly what it means. From above rule it is clear that only salaries, wages, travel and other expenses of those personnel would be treated as administrative who are involved in the ‘management of the activities of the person’. S.2(1)(m) defines person as individual, HUF, Association & S.8 company.

    From the above I conclude that we need to consider only those personnel’s salaries and expenses as administrative who are involved in the management of the ‘person’, i.e. society, etc. Thus salaries of CEOs, accounting, HR staff, etc. and others who are involved in the management duties. On conservative side, I would even include all managers posted at HO / main office of the society, which could even include Program personnel, unless one can prove that the person concerned is exclusively involved in implementation of a particular project.

    On the basis of analysis, in your question personnel identified under (5) would be Admin Exps. Even Field Coordinators who are working exclusively on the project (4) could be treated as program costs. I would prefer to include Program Manager’s costs (3) as Admin costs.

    Hope the above provides some clarity.

  3. S.S.Shiva says:

    I also agree with the view of Mr. Sachin. Only the headquartees staff salary, rent, EB charges will fall under the heading of administrative charges. The other expenses could be booked under programme expenses of the project.

  4. sachin says:

    Dear Mr. Prasanna Kumar

    Your third option is the correct one and should be treated as administrative expenditure.

    Regards

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