Foreign Contribution Regulation Act (FCRA) in India.

Foreign Contribution Regulation Act is defined as donation received from foreign sources. FCRA was enacted through Foreign Contribution Regulation Act 1976, it was redefined and changed in 2010 as the previous act was unable to keep the pace with the India’s Economic growth. The basic objective of this FCRA Act, 2010 as mentioned in the preamble of this Act is “to consolidate the law to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.”

As per FCRA 1976 and FCRA 2010, any individual or organisation carrying out a definite cultural, educational, economic, religious or social programme is required to be registered with the Central Government or obtain prior permission of the Central Government before accepting any foreign contribution. Such an NGO cannot in turn transfer the foreign contribution received by it to any other person unless such other person is also registered or has obtained prior permission under FCRA.

The process of registration is strict and loaded with bureaucratic process. Unless the NGO has a track record of at least 3 years, as a matter of practice, registration has generally not been granted under FCRA 1976. As per FCRA 2010, the requirement of having a track record is now codified, as this Act specifically provides that before granting registration, the Central Government shall verify whether the NGO has undertaken reasonable activity in its chosen field for the benefit of society. If the NGO is not able to fulfil the requisite conditions for registration, then the only alternative would be to apply for prior permission, which would be valid only for the specific purpose and source for which it is obtained. Even for prior permission the NGO would have to show that it has a done some reasonable projects for the benefit of society for which the foreign contribution is proposed to be utilised.

Previous FCRA Act 1976 was simpler as per as registration is concerned whereas under FCRA 2010, it is specified that application for registration or prior permission should, after inquiry, be ordinarily granted within 90 days of the application or the Government should communicate the reasons for not granting the same.

But the FCRA registration is valid only for 5 years after that the organization should apply for a fresh registration again. Foreign funding should be received in a separate bank account and the books of accounts to be maintained properly for the said transactions which later should be sent to Central Government with every transaction details of foreign contributions. They should also give details of funds routed through them to a specific authority.

NGO Fund Sources

Non-Government Organisations are formed to deliver services towards various sections of society and to promote various underdeveloped segments. In order to deliver services every NGO whether it is Trust or Society needs funds on long term basis. Because without adequate funds it is not possible to convert various social services into reality. Amount of funds required by a NGO can vary with the size and scope of work they are planning to do. Whereas small NGO need limited budget to operate but large NGO may have annual budgets in millions or billions of dollars.

Donations are the major source of funds for NGO-Society and Trust in order to operate their activities. Donations can be received from various sources like Government Funding, Corporate Funding, Foreign Funding & Individual Donors.

To be eligible for Government funding NGO should complete 3 years and they should have 12A and 80G registration. Once they have completed 3 years and possesses 80G they can apply for huge amount of Government funds under various schemes.  There are various schemes available under State Government as well as Central Government.

Corporate funding can be received under Corporate Social Responsibility i.e CSR funds.  Under the new Companies Act , 2013 all profitable companies with a sizeable business would have to spend every year at least 2 % of 3 year average profit on CSR activities. This would apply to all the companies with net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more. During financial year 2012-13, state owned oil companies like ONGC and OIL Corporations spent almost Rs 385 crore in CSR activities as per statement from Oil Ministry. As per latest reports there are more than 500 corporate companies spending around 63 billion in CSR activities to fulfill the 2% norm.

Foreign Funding plays a major role in funding now a days. But in order to receive foreign funding NGO must register under FCRA (Foreign Contribution Regulation Act). In order to get permanent FCRA registration NGO should complete 3 years. Foreign Funding can be received under AIDS Control and Awareness, Women Empowerment, Eradication of Child Illiteracy, etc. But Foreign funding has always been a matter of controversy as it has been found to be a source of corruption for both government as well a nongovernmental level. Most development countries expect that on every dollar spent for developmental support, 40% returns back through volunteering and consultancy and only 60% actually reaches organizations.

Individual donors play a very important role as a source of funding for NGO. There are various fund raising activities that NGO’s organized on regular basis to attract donors like businessman, celebrities , politicians , and dedicated donors.

In order to receive funds from all the sources NGO should prepare Annual Project report so that they can show what kind o activities they have done and what they are planning to do.