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FOREIGN CONTRIBUTION (MANAGEMENT & CONTROL) BILL,2005 Implications on NGO’s SUDHIR VARMA

FOREIGN CONTRIBUTION (MANAGEMENT & CONTROL) BILL,2005 Implications on NGO’s SUDHIR VARMA FCA; CIA(USA) For Forum for Ethics, Accountability and Transparency 20 th to 23 rd February 2006, Jaipur. FOREIGN FUNDS IN INDIA - To the Government - In Business / Trade

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FOREIGN CONTRIBUTION (MANAGEMENT & CONTROL) BILL,2005 Implications on NGO’s SUDHIR VARMA

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  1. FOREIGN CONTRIBUTION (MANAGEMENT & CONTROL) BILL,2005 Implications on NGO’s SUDHIR VARMA FCA; CIA(USA) For Forum for Ethics, Accountability and Transparency 20th to 23rd February 2006, Jaipur

  2. FOREIGN FUNDS IN INDIA - To the Government - In Business / Trade - In the Development Sector

  3. FOREIGN FUNDS IN INDIA - With the Government No Controls - In Business / Trade FERA - In the Development Sector FCRA

  4. FOREIGN FUNDS IN THE DEVELOPMENT SECTOR • For Charitable Activities • For Research • For Development • For Capacity Building

  5. FOREIGN FUNDS – WHY CONTROLS • For Anti-Government Activities • For Anti-National Activities

  6. 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

  7. DEMAND FOR CHANGE IN FCRA • Pressure from the Development Sector. • Changes asked for were not specific

  8. IN 1999 FERA WAS CHANGED TO FEMA • Diluting controls • Reducing paperwork • Diluting penalties • Government to be a watch dog.

  9. CHANGE IN FERA – CIRCUMSTANCES • Growth in International Business / Trade • Increase in consumerism • Rise in standard of living • Industry happy • People happy • Government happy

  10. COROLLARY TO CHANGE IN FERA • Change FCRA • Bring similar changes

  11. 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.

  12. 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.

  13. 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.

  14. APPREHENSIONS OF NGO’S • Some are well-founded • Some are exaggerated.

  15. IMPLICATIONS OF FC(MC) • REGISTRATION • RENEWALS • UTILISATIONS OF FUNDS • SUSPENSION / CANCELLATION

  16. IMPLICATIONS OF FC(MC) REGISTRATION

  17. 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.

  18. 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

  19. 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.

  20. 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.

  21. IMPLICATIONS OF FC(MC) RENEWALS

  22. 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.

  23. IMPLICATIONS OF FC(MC) UTILISATIONS OF FUNDS

  24. 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

  25. 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.

  26. 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.

  27. 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.

  28. ISSUES • FC Funds received for Administrative Expenses. • Definition of Administrative Expenses. - Administration Expenses of a program - Administration Expenses of the Institution.

  29. 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.

  30. 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.

  31. 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.

  32. 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.

  33. TIME LIMIT No time limit has been prescribed for accepting or rejecting an application for - Prior permission - Registration - Renewal

  34. FOREIGN CONTRIBUTION (MANGEMENT AND CONTROL) ACT Should be released alongwith the FOREIGN CONTRIBUTION (MANAGEMENT AND CONTROL) RULES

  35. Thank You

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