FOREIGN CONTRIBUTION (MANAGEMENT & CONTROL)

BILL,2005

Implications on NGO’s

SUDHIR VARMAFCA; CIA(USA)

For

Forum for Ethics, Accountability and Transparency

20th to 23rd February 2006,

Jaipur

FOREIGN FUNDS IN INDIA

- To the Government

- In Business / Trade

- In the Development Sector

FOREIGN FUNDS IN INDIA

- With the Government No Controls

- In Business / Trade FERA

- In the Development Sector FCRA

FOREIGN FUNDS IN THE DEVELOPMENT SECTOR

For Charitable Activities

For Research

For Development

For Capacity Building

FOREIGN FUNDS – WHY CONTROLS

For Anti-Government Activities

For Anti-National Activities

FOREIGN CONTRIBUTION REGULATION ACT

Introduced in 1997

For Anti-Government activities

Little thought was given to the development sector

- On their working

- Their issues

- Their concerns

DEMAND FOR CHANGE IN FCRA

Pressure from the Development Sector.

Changes asked for were not specific

IN 1999 FERA WAS CHANGED TO FEMA

Diluting controls

Reducing paperwork

Diluting penalties

Government to be a watch dog.

CHANGE IN FERA – CIRCUMSTANCES

Growth in International Business / Trade

Increase in consumerism

Rise in standard of living

Industry happy

People happy

Government happy

COROLLARY TO CHANGE IN FERA

Change FCRA

Bring similar changes

DEVELOPMENT SECTOR – CIRCUMSTANCES

NGO’s work better than Government Agencies

NGO’s give better end results

NGO’s set bad precedents for comparisons with

Government data.

NGO’s have started questioning Government policies

NGO’s have started embarrassing the Government

CAN NGO’S EXPECT GOVERNMENT SUPPORT AND UNDERSTANDING.

FCRA TO BE REPLACED THROUGH

FOREIGN CONTRIBUTION (MANAGEMENT AND CONTROL)

FC(MC) BILL, 2005

FC(MC) is a change from FCRA, not necessarily for the better.

The intent of the Government - is not clear

- is not transparent.

WITH THE NEW ACT, THE GOVERNMENT HAS ENSURED THAT THEY HAVE

More interaction with NGO’s

More control over - the working of NGO’s

- the funds of NGO’s.

More intervention in the working of NGO’s.

APPREHENSIONS OF NGO’S

Some are well-founded

Some are exaggerated.

IMPLICATIONS OF FC(MC)

REGISTRATION

RENEWALS

UTILISATIONS OF FUNDS

SUSPENSION / CANCELLATION

IMPLICATIONS OF FC(MC)

REGISTRATION

RE-REGISTRATION

Old registration not valid for more than 2 years.

New registration not automatic

Registrations shall be done afresh.

Norms and rules for new registration have not yet been

defined.

Registration from date of application or for financial

years.

NEW REGISTRATIONS

Valid for 5 years at a time.

Perpetual existence under threat.

Continuity of projects not assured.

- Hospitals

- Educational Institutions

- Vocational Training Centers

Scope of activity gets restricted

NEW REGISTRATIONS

New entrants not allowed.

“Has done meaningful activity in the field”

Provisions for enquiry defined

Wide and open to interpretation

Officer can call for information

Officer can examine any person.

NEW REGISTRATION

A fee has been prescribed

Reasons for refusal have to be communicated.

NGO’s can appeal against refusal.

Time limit for disposal of appeal not define.

Justice delayed is justice denied.

IMPLICATIONS OF FC(MC)

RENEWALS

RENEWALS

Required every 5 years

Applications can be made after 3 years

i.e. 2 years in advance.

Gaps between expiry and renewal of registration.

Renewals from date of application or for financial

years.

More than 30,000 registrants at present

Can they be renewed IN TIME.

IMPLICATIONS OF FC(MC)

UTILISATIONS OF FUNDS

UTILIZATIONS OF FUNDS

MULTIPLE BANK ACCOUNTS

FC Funds continue to be received in one designated bank account. Subsequently funds can be transferred to other bank accounts

- For different locations

- For different projects

But subsequent bank accounts

- will be used exclusively for Foreign Funds - Foreign Funds shall not be directly received in these bank accounts

UTILIZATIONS OF FUNDS

MULTIPLE BANK ACCOUNTS

Long outstanding demand of donors to keep their funds in a separate bank account can now be met. A separate bank account can be assigned to each donor, if desired.

FC FUNDS

Definition of Foreign contribution enlarged. Interest earned on FC Funds shall be deemed to be FC

Funds Income earned from FC Funds shall be deemed to be

FC Funds.

Distinction required between

- Income earned from FC Funds

- Income earned from Assets / Facilities acquired from

FC Funds.

UTILISATIONS OF FUNDS

FC Funds can be used only for the purpose for which they have been received.

Only 30% of FC Funds can be used for Administrative Expenses.

ISSUES

FC Funds received for Administrative Expenses.

Definition of Administrative Expenses.

- Administration Expenses of a program

- Administration Expenses of the Institution.

FIXED ASSETS ACQUIRED FROM FC FUNDS

Governments intervention to decide

- Which assets can be disposed off.

- Manner of disposal.

- Procedure of disposal.

These decisions are not left with the donor. On suspension / cancellation of registration these assets can be seized by a Local Magistrate / Police Station.

IMPLICATIONS OF FC(MC)

SUSPENSION / CANCELLATION OF REGISTRATION

Registrations can be suspended or cancelled.

An opportunity will be given before passing such an order.

Suspension can be for 90 days. Cancellation shall be effective for atleast 3 years before an

application for re-registration can be made.

IMPLICATIONS OF FC(MC)

ON SUSPENSION / CANCELLATION OF REGISTRATION

The Government can take charge of all un-utilized FC Funds. The Government can also seize assets acquired by FC Funds.

On going activities / projects can be stalled.

OFFICE BEARERS

No person who has been prosecuted can be on the board

of Registered Institutions.

These persons cannot be on the board of registered

institutions even if any proceedings are pending in a court

of law.

TIME LIMIT

No time limit has been prescribed for accepting or rejecting an application for

- Prior permission

- Registration

- Renewal

FOREIGN CONTRIBUTION (MANGEMENT AND CONTROL) ACT

Should be released alongwith the

FOREIGN CONTRIBUTION (MANAGEMENT AND CONTROL) RULES

Thank You