NGOs play a critical role in the progression of the economically/ physically weaker sections of the society. Also, usually, operations of NGOs are entirely dependent on donations from both domestic and foreign sources.
However, NGOs often drift along an indistinct line while gaining funds and capital. The source of these funds can range from foreign funding, charity, government-funded campaigns, donations as well as Corporate Social Responsibility.
While locally-sourced funds are not under extreme scrutiny, foreign funding is highly regulated, owing to concerns about the source, and ultimate goals, of the funds.
To that end, the Foreign Contribution (Regulation) Act (FCRA) monitors foreign funding for NGOs. Nearly 30,000 Indian NGOs are enlisted with the FCRA to procure foreign money.
In this article, we will help you understand how to generate foreign funding keeping in mind the provisions of the FCRA.
Is your NGO eligible to obtain foreign funding?
Under the Act, all societies, companies, associations and NGOs have to fulfil definite criteria to be eligible for foreign funds. Moreover, registration with the Central Government is also crucial. However, there is a particular provision to take prior permission based on each case.
Eligibility for grant of registration
1. The NGO must be registered under an existing law like the Companies Act, the Indian Trusts Act or the Societies Registration Act etc.
2. The NGO must have been in operation for three years.
3. The NGO must not have an already registered parent society under FCRA.
4. The NGO must not have a foreigner on the board.
Besides from being in operation for at least three years, the NGO must submit evidence of projects undertaken in the specified field of activity. Also, the NGO is also required to spend Rs. 10,00,000 or more during the last three years on its aims and objectives, excluding the expenditure on administration.
Moreover, the NGO needs to maintain an independent bank account purely for foreign transactions, and no other funds should be kept in the account. This is mandatory for both prior permission and registration.
Eligibility for grant of prior permission
Eligibility may not be granted to an organisation which is in its initial stages, for registration. Therefore, prior permission for the grant of registration may be sought under the FCRA, 2010. Prior permission may be granted if such an organisation has received a specific amount from a specific donor and also for certain projects and activities.
However, if the association or organisation is seeking foreign contribution without having a registration, it can be done only with prior permission granted by the FCRA Dept.
The circumstances under which such prior permission may be granted are-
1. The association/ organisation must be registered under the Indian Trusts Act, Indian Societies Act, Indian Societies Act, or any other existing statute.
2. The association/ organisation must also submit a specific Letter of Commitment issued by the donor, which states the amount and purpose of the foreign contribution.
3. Prior permission shall be granted to the Indian recipient organisations, in instances of common members of Indian recipient and foreign donor organisation, by the FCRA, subject to certain conditions.
When can an NGO apply?
The application should only be made after three years. Although there is nothing in the Act preventing the NGO from sending such an application within 3 years.
However, the form available to apply for prior permission and registration, i.e. Form FC-3, provides for uploading of NGO’s audited statements of the past three years. Due to the requirement of Form FC-3, it is generally understood that application for registration under FCRA can only be submitted after three years of the NGO formation.
Supreme Court’s take on the time-period
The Supreme Court, in the case STO v. K.I. Abraham stated that the authority making the rules did not have the power to impose any time frame.
In fact, the FCRA rules don’t provide any constraint on the time limit. It is only the requirement of Form FC-3 that requires activity reports and audited statements for three years. The Court held that these requirements are only directory and general in nature and thus, must not be interpreted as a restriction by the FCRA.
Documents needed to apply for an FCRA Certificate-
A detailed list of documents is required as proofs to apply for registration or prior permission with the FCRA.
- The NGO’s Registration Certificate of Association
- Memorandum of Association (MoA) or a Trust Deed
- A Letter of Commitment from the donor organisation
- Project Report against which an FC is sought
- Audit Reports of statements of accounts of last three years.
- Activities Report of the NGO for the past three years.
- Certified copy of the Certificate of Registration if the association is a registered Trust or Society.
- Copy of the Memorandum of Association (MoA) and/or the Articles of Association (AoA).
- A copy of the latest commitment letter from the donor.
- A copy of the Project Report against which an FC is sought including project outlay and budgeting.
- Names and addresses of the Executive Committee or Governing Council member etc. of the Association.
- Copy of prior permission granted to the organisation (if any).
- List of present office bearers and members of the Governing Body of the organisation.
- Copy of any Journal or publication published by the organisation.
- Details of any subsidiary, parent or sister company registered under the FCRA along – with its Ministry of Home Affairs (MoHA) file number.
- The reference number of any application submitted earlier by the association.