I wanted your help with regards to a question I have on our FCRA account.
We are a NGO in Bangalore catering to cancer patients in their last stages with free treatment.
We have a donor who funds us every year for a portion of the operating expenses ( Salaries and Medicines) by remittance into our FCRA Account.
Their cycle of funding is from 1st Oct to 30 Sep of every year. This year we received their funds late ie only by December. So we met the expenses (medicines and salary and food) from our own rupee donations in another bank.
The question is whether we can now transfer the amount of those expenses from the FCRA account to our rupee account in the other bank.
Would be very grateful if you could provide an answer.
With kind regards
Yours Sincerely
Mathew Chandy
Dear Mathew,
I am not suggesting that the FC funds can no longer be utilised for the expenses incurred out of NFC bank account. Please refer to the response of Ritesh Katuwal on 31st January 2018 at 5:46 am. That is a solution if you do not transfer FC to NFC.
Thanks and regards,
B V Soma Sastry
Dear Mathew,
You cannot transfer FCRA funds that you received to Non FCRA Account.
It seems that your donor doesn’t mind whether the payment has been made from FC account or LC account for his funded project.
Now you want to use the FC money as LC money to pay your LC expenditures. Also it seems that you have spent LC money from general funds.
You can treat the FC money you received as general fund in your FC books. Through an executive committee meeting you can have a resolution to treat the money as General Fund and pay for those expenditure that you had budgeted under LC funds to be paid through FC funds. This way you will be able to spend the FC money.
However inform your donor of your intent to account the FC money as General Fund.
Hope this was helpful.
Dear Mr Chandy,
This is a problem created by practices as being followed by officials of FCRA Dept, rather than what is stated in the law. S. 17 of the Act states ‘….. receive FC in a single account only through such one of the branches of a bank as he may specify in his application…’ There is no provision how funds will be utilised, however S. 18 talks of that such person needs to file his annual return intimating the Govt ‘…. amount of each FC received by it, the source from which and the manner in which such FC was received, and the purposes for which, and the manner in which such FC was utilised by him’. For this purpose Rules give the prescribed format, which presently is FC4.
No where Act or rules explicitly state that FC and non-FC funds should not be mixed. First time prohibition for mixing the funds came it came in the FAQ. Even this FAQ has undergone several changes. Latest FAQ strictly prohibits mixing of local & FC funds, it states ‘Foreign contribution cannot be deposited or utilised from the bank account being used for domestic funds’.
Therefore in view of such clear instruction, I would go alongwith other commentators on this aspect, and suggest to avoid depositing funds in local account. Although I would add that I am not sure if this FAQ has legal backing, since many times organisations may not have any choice but to deposit FC fund in its local account, not as transfer but as funds utilised. There is a clear difference between ‘Transfer’ and ‘Utilisation’. In this regard you may also refer to an advisory on SRRF Dialogue website, though slightly dated but still relevant. http://www.srr-foundation.org/sas/sas_003_fcra.pdf
Dear Mr Subhash,
Your advisory note is very pertinent.
In a very practical sense, utilisation should be treated differently from transfer and so long as the donor accepts the legitimacy of the expense, albeit the payment from a non-FCRA account, towards spending out of their donation/Grant.
Isn’t it a logical course of action, without contravention of law?
Would be surprised if many NGOs are not facing a similar issue!
There seems to be an issue with the page layout.
– April 2017 funds are in FC Account
– May 2017 funds are in NFC Account
– July 2017 expenses are in FC and NFC Account respectively
– April 2018 funds are in FC Account.
I need your response about legitimate transactions to be posted in respective books of accounts for FC and NFC accounts.
FC Account (INR) NFC Account (INR)
April 2016 Fund received 100,000
May 2017 Funds Received 500,000
July 2017 Expenditure 150,000 200,000
April 2018 Funds received 50,000
Also, how would the balances be presented on the balance sheet as of 31 March 2017?
Thank you.
Dear friend Fcra 2010 amended act clear say fcra recevier Account is different and Operatiional Account diffrent, Fcra 2010 clear say no direct transaction from Fcra receiving account all transaction happened another Operational account this is maybe same bank or other bank.
Dear Mr Soma Sastry
So what I understand from your reply is that we will be unable to use that portion of the FCRA donation that we used from the NFC account.
Please confirm
Thanks and Regards
Mathew
Dear Mr Chandy,
The transfer is possible provided at the time of making such expenses you adequately documented that this as loan from normal account. Please create adequate documentation before you make such transfers. There is nothing in FCRA act to stop these transactions.
Thanks
Dear Mathew,
As per my understanding, the expenses have been incurred from the domestic account (NFC) of your organization. I also assume that the expenses have been incurred from the General Fund of your NFC account.You would be violating the provisions of FCRA if such a transfer were to happen from the FCRA account to the Non FCRA account.
The expenses have to be retained in the NFC books of your NGO. The reporting can be made accordingly since the donor reports are special purpose reports. The necessary adjustments can be made in the FC books.
Thanks and regards,
B V Soma Sastry
All expenses may be reimbursed to an employee from FCRA Bank Account to avoid direct fund transfer to local bank. All expenses may also be debited in the name same employee which already paid by local bank.
Dear Mathew,
Always follow the thumb rule of FCRA Acoount to FCRA account only. You should not transfer a single rupee to non FCRA account. You may fall into non compliance of FCRA rules.
So Mr Neeraj Sinha, does that mean that we will lose the opportunity to use that amount of money that we spent from the Non FCRA Account?