Dear Sir,
I have been following up srrf dialogue through a friend of mine. I would be glad to be a member of this group.
I am associated with VACHAN, an NGO registered as a society and a trust and functioning in Nasik district, Maharashtra. It is a registered organization under FC(R)A.
We are implementing a community based health program as a partner with a support organization which is providing technical and financial support.
For this project. we were receiving funds from Indian source. However, during FY 2016-17, we have been intimated that some parts or whole line items of the budget would be sourced as FOREIGN CONTRIBUTION.
Now, this raise some doubts which require your expert opinion:
Query 1: Is it allowed under the amended Foreign Contribution Rules and Regulations, 2010, to receive Indian and Foreign contribution for the same project?
The donor has inserted a clause about distribution of the funds, this includes Foreign Contribution which this donor has received and is re-transferred
“The fund requisition format for 6 months duly signed by the head of the organization and accompanied by the latest financial report need to be sent. The first installment of funds will be released for 6 months, 2nd installment will be for 3 months and for the remaining 3 months the partners are expected to incur the expenditure and the donor will ” reimburse the expenses as per the year 3 budget)”
This would mean that we would have to provide advance from funds available under the FC account for the remaining three months.
Query 2: Can FC(R)A allow to use FC available for a specific project as advance to another one under FC account? It would be an advance booked in FY 2016-17 and would be reimbursed in FY 2017-18. This is important because balance amount under the FC account (Bank statement) would not match the balance as per Annual FC Returns FC 4.
Thanks and regards
Dhruv Mankad
5 Gokul Apartments
Usha Kiran Society
Trimbak Road
NASIK 422002
Soma ji’s addressed the issue very well.
In continuation, I wish to enrich the queries with specific aspects to explore alternative options.
1. A vendor payment toward common budget line item for FC and Non-FC component, and TDS thereof. Whether cheques from respective bank accounts or through a common pool account of same NGO?
2. Whether requirement of separate books of accounts is met if in Tally like software we use/maintain Cost Center and separate voucher series for Grant Accounting?
3. Is there any tolerance limit on using domestic fund for FC component with an understanding to recover on receipt of foreign remittance in due course?
4. Can we treat the interest from Income Tax department (GOI) on tax refund in regard to Term Deposit out of FC money as Non-FC receipt?
Response in seriatum:
1. Avoid making FC payments from other than FC account, as far as possible. Hence suggest separate cheques to the extent possible.
2. My preference is always to have separate books of accounts, as we are required to prepare and submit FCRA Balance Sheet, I&E & Receipt & Payment.
3. AVOID it (use of capitals intentional)
4. Last one is really an interesting one, infact I find it quite humorous, that if one strictly follows the FCRA provisions, you have been able to make the IT Dept a foreign source !!!
Dear Friends,
Foreign Fund mobilizing Indian Donors fund legally valid project both from their Foreign fund Account and also from their local fund Account with a request to the legally valid recipient to keep separate books of Accounts and of course designated FC Account and LC Account with either the same Bank or two different Banks as per the recipient’s convenience. In addition, the recipient, if needed, can mobilise cofinancing from different foreign sources and local sources for the same project besides beneficiaries contributions in cash and kind and from local Government / Panchayath / Central Government. What matters is CAT (clarity, Accountability and Tranparency) in tune with the laws of our Land.
Dear Dhruv,
I agree with the comments of Soma that a donor could give two streams of funds, even on a single project. NGO receiving the funds duty is to ensure that FCRA related funds are rec’d in FCRA funds and utilised from there. This utilisation than will need to be reported to in the annual return of NGO (currently FC4). You will need to evolve your own reporting structure to the donor.
Regarding advance from FC. This is quite a common phenomena, your receipt & payment account & Balance sheet should reflect the advance amount clearly. Please make sure that advance being given should not be for a non-FC project or for a purpose which is prohibited under FCRA.
warm rgds
Dear Dhruv ji,
As mr. Soma Sastri ji Said we can use FC and NFC funds for the same projects. I think it can be used as convergence model of any of the projects with clearly mentioned terms and condition for programs. one thing we must follow is to maintain separate books of accounts and financial reports, For more clarity we can mention on the doners reports which activity has done under the FC funds and which is done in convergence with other local donors. same thing will be followed with local donors.
Thanks
Satya Prakash Jaiswal
It is a common knowledge, any organisation for its same operations cannot be/should not registered both as a Society and as a Trust. Choose one of the two options.
Second, for the same line of operations or a project there cannot be two sources of funding – FCRA or local resources. Choose any one. Otherwise, it is like selling the same property to two different identities which is illegal.
This does not appear to be a correct position.
Both points are incorrect. In some states, like in Gujarat, an entity registering under the Society’s Act are also automatically registered under the Bombay Public Charitable Trust Act. The reverse however is not done. This is perhaps done to manage affairs within the ambit of the office of the Charity Commissioner. So, there are plenty of organizations registered under both the Acts.
Secondly, while it is true that it is fraudulent to bill two different accounts for the exact same activity, that was not the question raised. The query here, i believe, is whether different parts of a single ‘project’ can be financed by FC and nonFC monies.
Dear Dhruv,
At the outset let me welcome you to the group.
There is no rule that prohibits the usage of FC and NFC for a same project. The challenge at your end will be to have separate budgets for both the funds. The books of accounts will have to be maintained separately for the FC and NFC funds. There needs to be clarity with the donor on the quantum of funds that is being funded from FC and NFC source.
Separate financial reports will be prepared for the FC and NFC funds. Donor reports are special purpose reports and hence if there is a donor requirement, then may send a consolidated financial report for the donor specific. It is akin to preparing FC and NFC financial statements and then consolidating the same for the IT purpose.
Also, the project or the activity will not recognize the nature of money. The money for the activities can be spent from NFC account as well and the reimbursement can be to NFC account at a later date. It is not necessary to advance money from FC account only.
I hope there is certain amount of clarity.
Thanks and regards,
B V Soma Sastry