My understanding on FCRA

By Himanshu Goyal, Manager Asha Impact

Why do organisations apply for FCRA?

Organizations seeking foreign contributions for definite cultural, social, economic, educational or religious programmes needs to obtain an FCRA registration. It is preferable for an FCRA applicant to be a Trust or Society or a Section 8 Company.

There are two ways for doing that:

1. Obtain a full-fledged FCRA registration that has to be renewed every 5 years:

— The not-for-profit entity must have been in existence for a minimum of three years while making the FCRA application and should not have received any foreign contribution prior to that without the Government’s approval. Additionally, the entity seeking registration should have spent at least Rs.10,00,000/- over the last three years on its aims and objects, excluding administrative expenditure. Statements of Income & Expenditure, duly audited by Chartered Accountant, for the last three years are to be submitted to substantiate that it meets the financial parameter.

2. Receive foreign contribution through “prior permission” route.

— In case a newly registered entity would like to receive a foreign contribution, then approval for a specific activity, specific purpose and from a specific source can be made to the Ministry of Home Affairs through the Prior Permission (PP) method.

Application:

If the organisation has been in existence for more than 3 years and doesn’t want to divulge the details of its donors, they should go forward with the full-fledged FCRA registration and not the Prior Permission route.

Application for FCRA registration has to be made online in Form FC-3 along with below mentioned preliminary documents:

• For FCRA Registration

1. Registration Certificate of Association
2. Memorandum of Association/Trust Deed
3. Activity Report for the Last 3 Years
4. Audited Statement of accounts for the last three years

• For Prior Permission Registration

1. Registration Certificate of Association
2. Memorandum of Association/Trust Deed
3. Commitment Letter from the donor organization and agreement
4. Project Report for which FC will be received

Practical Aspects:

Post application, the Ministry of Home Affairs scrutinizes the application along with a background check of the organisation and its trustees. In recent times, MHA has been significantly stringent in terms of its assessment criteria.

MHA may

• Scrutinise every aspect,
• Incur surprise visits to the office,
• Background check of Trustees and the Chief Functionary

Timing:

Based on our discussion with various top legal counsellors and considering the level of operations of a normal Trust, the timeline for getting the FCRA may range between 6 to 12 months.

Trustee check:

Detailed background checks of Trustees in expected. Post disbursement of FCRA funds, any default in terms of using foreign funds can be considered as a criminal activity and can have legal implications upon Trustees.

Miscellaneous:

There will be additional compliance requirements post-FCRA registration. The addition will be in terms of quarterly and annual reporting of activity reports and financials.

Disbursement into actual account will happen 30 days’ post disbursement by the foreign donor as the Indian Bank requires to do some internal due diligence before crediting the funds in the account.

P.S.
Something is extremely clear, the foreign financing agencies only donate those NGOs working in certain areas or for particular causes like Education, women empowerment, wellness, etc. The social welfare organisations who work in an authentic method get granted for their exemplary work and achievement. The slogan of NGO must not misuse the fund however to work for the social upliftment of the poor and needy and provide the world a boost.