FCRA Dept has come out with a Circular dated 21st October 2014, as per which that NGOs utilizing funds out of their FC Designated accounts and FCRA Utilisation Accounts must utilize these funds through account payee cheques or through demand drafts. Any payments made in cash could result in scrutiny.
Thus please bring it to notice of all NGOs (share on facebook by clicking send link) that you are associated with to shun cash payments to the extent possible, but certainly no payments above Rs 20,000 should be made in cash.
You can access the circular from the following link: http://www.srr-foundation.org/circulars/fcra_notification_21-10-14.jpg
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Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
Telefax: 91-11-25722044, 25821088, 25817157
e-mail: socio-research@sma.net.in; website: http://www.srr-foundation.org
I think we need to discuss this issue in more detail. Exactly what it implies in practical terms. I believe any individual payment to a vendor which is more than Rs 20,000 in cash then it should be treated as cash payment. For example, since a non-profit does not have any business transactions (save for some educational / health or similar other institutions undertaking business). In fact Income Tax dept. is not asking for any such information in case of non-profits. That means there is no add back in case of IT assessment in such cases. (Request NGOs who are practically dealing with the Dept. to throw more light on this)
In case of FCRA, issue of this circular becomes even more puzzling. Purpose of FCRA is to utilise the funds as disclosed in the annual return. FCRA Dept is already asking for an audited certificate for the same. I am not sure how FCRA Dept will monitor cash payments. Would it mean now the Dept. will send its inspectors to visit the persons who are registered for FCRA, we all know that FCRA does not have that kind of manpower. I believe it would simply mean those entities who get caught not complying with return filing will be asked to bring their records to Delhi to have them scrutinized. And if such instances are brought to light, I do not know what FCRA Dept. will do (disallow such expenditure !!). If donor is happy, FCRA Dept.’s disallowance would hardly make any difference. Most probably they will come out with another circular imposing penalties for such cases. Thus making life of FCRA registered entities even more difficult.
I am not sure whether FCRA Dept understands that most NGOs work on grant basis and they just do not have any other income. All these penalties that the department has been imposing where would it come from. NGOs would be left with no choice but to start charging such costs to donors as utilisation, thus could even result in such malpractices.