The Foreigner's Division of the Union Ministry of Home Affairs (MHA) has introduced new regulations requiring Chartered Accountants (CAs) to include specific declarations regarding compliance with the Foreign Contribution (Regulation) Act, 2010 (FCRA) when filing audit returns for NGOs. This move aims to enhance transparency and accountability in the utilization of foreign contributions.
Key Highlights of the Notification
- Mandatory Declarations by CAs: CAs must now explicitly state whether an NGO has violated any provisions of the FCRA or its associated rules and notifications. The audit certificate must include the auditor's name, email address and registration number.
- Certification Requirements: CAs are mandated to review all relevant books and records, including the details in column 8 of the FC-4 form. They must certify whether the foreign funds received were utilized for the purposes the NGO was registered for.
- Carry Forward of Administrative Expenses: The notification allows NGOs to carry forward unspent permissible administrative expenses (capped at 20% of foreign contributions) to the succeeding financial year, provided these are maintained in a designated State Bank of India (SBI) account.
Concerns Raised by NGOs
NGOs have expressed concerns that the new rules could make it harder for voluntary organizations, especially those critical of the government, to find auditors willing to certify compliance. A similar advisory issued in 2021 urged CAs to ensure strict adherence to FCRA provisions, further tightening the regulatory framework.
Historical Context
Since 2015, over 16,000 NGOs have lost their FCRA registration due to alleged violations of the Act. FCRA registration remains a mandatory requirement for voluntary organizations to receive foreign donations or funding.
Implications for NGOs
While the new rules enhance oversight, they also increase the compliance burden on NGOs. This could potentially impact the functioning of smaller organizations reliant on foreign contributions.
Conclusion
The MHA's latest notification reflects the government's commitment to ensuring accountability in foreign fund utilization. However, it also underscores the growing scrutiny faced by NGOs, particularly those engaged in advocacy and critical social causes.
This development is expected to have significant implications for NGOs and CAs alike, as the focus on compliance with FCRA regulations intensifies.
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