Following query received from John Dalton on the topic of “Return of donor money”. Kindly provide your responses.
Dear Sir/Madam,
I am a member of this group and I have a question raised by a friend in UK who works for a small donor agency.
If a foreign donor has sent excess funds (in this instance Rs 20 Lakhs) to an organisation in India what are the procedures to send the excess funds back. Presumably it can be reported as spent in FC6 but what are the bank regulations with regard to foreign currency?
Thanks and best wishes,
John Dalton
Dear friends,
Would like to add some views also from my side on this rather extraordinary situation.
Somewhere Mr. Udayshankar has stated that the funds can only be transferred to another Indian FCRA registered organisation. I think that seems to be the only option with the donor. Also some of you have also stated this is not a commercial receipt/loan and hence is out from the RBI control/FEMA and cannot be paid back to the Donor directly, which also seems to be correct and this further validates above view. Moreover, how to report the refund in FC-6 is also a typical problem which cancels out the ‘Grant refund’ option!
Therefore, If the Donor has transferred extra money then either
they specifically allow the NGO to use it expecting utilisation reports for the same OR
Can ask the recipient organisation to transfer it to another Indian FCRA registered NGO of donor’s choice which effectively is a ‘refund’ for all practical purposes.
In my opinion, fundamentally, Grants/Donations (restricted or unrestricted) once made cannot be taken back, at least not in India as per the existing FCRAct.
Some hints could also be found in favour of this view in Section 14,15 of FCRAct as well as Rule 14 and 15 of FCRrules… where unutilised funds of the NGO (with Cancelled FCRA) vests with the Government/Bankers and are not to be returned back to donor. Also, in my information some German donors are already using the method of taking refunds by way of transfer of unutilised grants to their other Indian NGO partners.
Hence, I would recommend that that the affected NGO writes to the Donor regarding the above 2 options and let them decide suitably.
Bharat
Dear Friends.,
I have seen the responses from many members and would just like to respond to some of them:
1. We need to differentiate between pure charity and restricted grants. As per my understanding the query was raised with respect to a restricted grant. Had the fund been given as a charity, the transaction would have concluded with the transfer of funds to the recipient.
2. One option could be to transfer the funds to some other FC registered organization supported by the same agency but this is subject to donor’s requirement. As a recipient, an NGO cannot take a call on this.
3. Also, we should also remember that FCRA in no way restricts the transfer of funds back to the donor. This has also been stated clearly by Subhashji.
4. The question of redonation does not arise as this is a case where the donor is seeking his excess funds back. Again the redonation or retention is the prerogative of the donor and not the recipient
The only issue that really needs to be addressed is the issue of accounting the same and then showing this as an utilization in the annual returns. I understand, the point made by Subhashji is apt and that is what many of the NGOs do in such cases.
Thanks and regards,
B V Soma Sastry
Simple procedure: The Donor sends a letter authorizing the NGO to transfer the excess amount(to be specified) to another of their Indian partners having FCRA certificate(second recipient), for any purpose permissible under FCRA.
Of-course, what Soma Sastryji suggests is also valid. RBI’s permission may be required. if the amount exceeds certain limit.
If the fund is received as DONATION for some project then you could not return the same to the donor, But with Govt. approval it could be transferred to other project of similar nature.
Hi guys,
Would both of you consider redonating the excess funds to a corpus fund we are setting up here ? I dont really know if it can be worked out thru the financial framework. But please do let me know.
Regards
Jamshed Chinoy
As per our law once we have received money from our donor for project ,we cannot return it.
I am fully agree with the statement that unspent money is to be refunded to the organisation form where we have received this fund or if the said funding agency told us to transfer this money to other NGOs we can do so only if it is registered organisation under FCRA Act.
The money paid or transferred will be shown as payment means utilisation of fund in the FC6.
One option is that the funds are transferred, on the Donor’s directive, to another FCRA registered organisation in India. This has been done in the past.
J S D’Souza
T25/304, Orchid Petals,
Sector 49, Sohna Road,
Gurgaon 122 018
Dear John/Payal,
Greetings!
Incase the funds have to sent back to the donors, get in touch with the bank where the designated FC account is maintained. The branch will guide you the the branch of the same bank dealing in forex transactions. The bank will give you a from (i do not remember the number of the form) which has to be filled up with the signatures of the authorized signatories of the NGO. On submission of the form to the said branch, the amount will be transferred
The documents will have to be maintained for organizational records.
Thanks and regards,
B V Soma Sastry
Dear Soma,
Thanks for your response, while I agree with you that funds can be refunded back, since there is nothing in FCRA Act / Rules which prohibit such return of money. RBI also allows it as long as purpose is disclosed in the Form requesting purchase of foreign currency for transfer.
Hwever there is a practical problem, how do we disclose the refund in Form FC6. There is no such provision in the online form, therefore only option is to disclose it as utilisation.
Showing refund of money as utilisation – will that be a correct disclosure ? Since there does not seem anyother option, perhaps this is the only option, with adequatte disclosure in attached financial statements.
Look forward to others views on this treatment.
rgds
subhash
To my understanding there are some missing links in the question itself. How the Donations can be returned? Donations are one sided gratis payment. Once, the donation is accepted, the transaction concludes at that point.
If the conditions attached to the donations by the donor cannot be fulfilled then in that event only, the donee may return. FEMA and the extant regulations do not give any process on how such amount can be refunded, primarily because this is a non-commercial transaction; and thus, may not fall within the criteria specified for current account transactions to the extent applicable on outwards remittances made from India. Therefore, best option is to request authorized dealer with complete details to remit back due non-fulfillment of donor’s conditions attached to teh donation, through the same banking channel; and if, the AD deems fit may seek approval from RBI. In all likelihood, RBI shall refer the matter to RBI. Preferably, the request may include routing back the amount through the same banking channel that made the inward remittance, and to the same account of donor from where the donation was made.
Once AD/ RBI approves, FC6 disclosures shall be subservient. And may be disclosed as utilized by specifying the purpose as Refunded to the Donor Agency per RBI/ AD approval.
My query is :
If there is a balance in the FCRA account, but the project has finished, can the balance be returned to the foreign donor? How?
Thank you.