Dear Sir/Madam
An FCRA registered organization has erroneously given its FCRA bank account number to a local donor. These funds were to be received as local donation. Effectively, Local donations are credited to FCRA account (Amounting to Rs.2.88 lacs). What is the remedy. What steps should be taken to rectify the mistake.
Thanking you in anticipation.
—
Paresh S Sarda
1/1170 Sadashiv Peth
Tilak Road, Pune
Dear Mr Sarda,
I think you have received very good responses. Basic principle behind these advises is that you should be able to document to prove that error was genuine and not malafide and that you have corrected the same as soon as you realised the mistake. Since the mistake happened on last day of the financial year of 2015-16. Suggest that this should not be treated as a Bank balance but can remain as an pending adjustment in your Bank Reconciliation Statement. That means you do not account for it in FY 2015-16.
As Tom has suggested you can transfer the funds in current year to your local account and then the amount can be accounted for.
1) If the transaction happened during 2015-16: (a) Pass a Journal Entry with a liability payable to the LOCAL Account as on 31st March, 2015 with the error remarks. (b) Make the bank transaction to clear the liability as on date.
2) If the transaction happened during 2016-17: (a) & (b) can be made as on date.
Immediately withdraw the amount by cheque and put in in your Indian or Local fund account. Do document the transaction by putting up a note so that in case there is a query from the MHA it can be proved that there is no malifide intention.
Inform the bank about the mistake and your inability to provide ‘Source of Funds Declaration’ they can always reverse the transaction.
Dear Mr. Paresh,
When was this amount credited? Did you withdraw any amount for your expenditure? The best thing you can do is, withdraw the amount immediately from the FC account and deposit it in the local account. If the transaction has taken place in the previous finacial year, i.e., before March, 2016, you may request the auditor not to reflect the amount in FCRA account. You may even write to the FCRA dept. mentioning about the mistake and telling about the rectification action you have taken.
Dear Mr Shiva,
The bank account was credited on 31st March 2016. No money was withdrawn from such funds. Thank you for your valuable inputs.