NGO Funding

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Context: The Ministry of Home Affairs extended the validity of FCRA registration of NGOs.

Details

• The Ministry of Home Affairs (MHA) extended the validity of Foreign Contribution (Regulation) Act (FCRA) registration of NGOs till June 30, revising its previous extended deadline of March 31.
• The order added that “In case of refusal of the application for renewal of registration, the validity of the certificate shall be deemed to have expired and the association or the NGO shall not be eligible either to receive the foreign contribution or utilise the foreign contribution received.”
• Registration under FCRA is mandatory for any NGO or association to receive foreign funds and it is renewed every 5 years.

Foreign Contribution (Regulation) Amendment Act, 2020

• The Act regulates the acceptance and utilisation of foreign contribution by individuals, associations and companies.
  • Foreign contribution is the donation or transfer of any currency, security or article (of beyond a specified value) by a foreign source.
• Prohibition to accept foreign Contribution: Certain persons are prohibited to accept any foreign contribution. These include:
  • Election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others.
  • The Bill adds public servants (as defined under the Indian Penal Code) to this list. Public servant includes any person who is in service or paid by the government, or remunerated by the government for the performance of any public duty.
• Transfer of foreign Contribution
  • Foreign contribution cannot be transferred to any other person unless such person is also registered to accept foreign contribution (or has obtained prior permission under the Act to obtain foreign contribution).
  • The Act prohibited the transfer of foreign contribution to any other person. The term ‘person’ under the Act includes an individual, an association, or a registered company.
• Aadhar for registration
  • Any person seeking registration (or renewal of such registration) or prior permission for receiving foreign contribution must make an application to the central government in the prescribed manner.
  • The Act adds that any person seeking prior permission, registration or renewal of registration must provide the Aadhar number of all its office bearers, directors or key functionaries, as an identification document.
  • In case of a foreigner, they must provide a copy of the passport or the Overseas Citizen of India card for identification.
• FCRA Account
  • Foreign contributions must be received only in an account designated by the bank as “FCRA account” in such a branch of the State Bank of India, New Delhi, as notified by the central government.
  • No funds other than the foreign contribution should be received or deposited in this account.
  • The person may open another FCRA account in any scheduled bank of their choice for keeping or utilising the received contribution.
• Restriction in utilisation of foreign contribution
  • The Government may restrict usage of unutilised foreign contribution for persons who have been granted prior permission to receive such contribution.
• Renewal of licence
  • Every person who has been given a certificate of registration must renew the certificate within 6 months of expiration.
  • The Act provides that the government may conduct an inquiry before renewing the certificate.
• Reduction in use of foreign contribution for administrative purposes
  • A person who receives foreign contribution must use it only for the purpose for which the contribution is received.
  • They must not use more than 20% of the contribution for meeting administrative expenses (earlier it was 50%).
• Suspension of Registration
  • Earlier governments may suspend the registration of a person for a period not exceeding 180 days.
  • The Act adds that such suspension may be extended up to an additional 180 days.

About NGOs

• Characteristics
  • They are private, separate from the Government.
  • They are self-governing, i.e., not controlled by the Government.
  • They are registered organisations or informal groups, with defined aims and objectives.
• Majority of the NGOs are small and about three fourths of all NGOs are run entirely by volunteers.
• Foreign contributions to NGOs are governed by Foreign Contribution Regulation Act (FCRA), 1976.

Significance

• Non-state actors and institutions keep a watch on the state, protesting against its injustices.
• NGOs supplement the efforts of the state in developmental activities. Ex: Poverty reduction, etc.
• State agencies are often too large and spread widely to solve problems and satisfy needs of the local community at the grassroots level. This gap is often filled by non-state actors such as NGOs, Civil society organisations and SHGs.
• Due to their non-state nature, they are capable of experimenting freely with innovative approaches. They are generally not bound by strict procedures.
• They are much specialised in nature, such as some Bachpan Bachao Andolan (rescuing children from labour), Akshay Patra (providing nutritional food), Goonj (channelling donations), etc.
• Some NGOs also have dedicated personnel who voluntarily join the organisation. So, commitment and dedication would be more from their side than from Government officers.
• NGOs also have access to philanthropic donations from rich persons which are not that easily available to State agencies.
• Even Government directs its agencies to involve NGOs in the implementation of projects. For instance, state governments partner with Akshaya Patra Foundation to implement the Mid-Day meal Programme.

Concern related to NGOs

• Some NGOs are big and some are very small thus leading to asymmetry of power.
• Only about 10% of the over 22 lakh NGOs file their annual income and expenditure statements, revealed by CBI.
• IB report stated that the working of few NGOs in the name of protests against the government activities have become detrimental to the nation's development. It led to a loss of 2-3% of the country's GDP.
• It is estimated that only about 1.5% of NGOs actually undertake developmental work.
• Some NGOs are involved in political activism with foreign funds. A large proportion of NGOs have actively taken part in political campaigns, including working as proxies for certain political parties.
• Claiming involvement in human rights initiatives or social empowerment, these organisations are allegedly fronts for foreign supported extremist and secessionist groups.

Way Forward

• All States must have adequate regulatory mechanisms to keep track of the money issued to the NGOs.
• Establish a national regulatory agency to oversee the working of NGOs.
• Instead of blocking the foreign funds it is necessary for the government to ensure further transparency in categorising the NGOs based on their funds sources.
• There is a need to strengthen public confidence in the voluntary sector by opening it up to greater public scrutiny. Making online disclosure of annual reports mandatory.
• Strengthening of institutional mechanisms to verify annual reports and budgets. Encourage social audits to facilitate scrutiny by the beneficiaries themselves.
• Public donation is an important source of funds for the NGO sector and one that can and must increase substantially. Tax incentives play a positive role in this process. At the same time, the Government must ensure that these incentives are not misused by paper charities for private financial gain.
• Bring all NGOs directly under the purview of the RTI Act.
• The Government should encourage all relevant Central and State Government agencies to introduce training modules on constructive relations with the voluntary sector. These could cover registration, income tax clearances, financial assistance, etc.

https://www.thehindu.com/news/national/fcra-registration-of-ngos-extended-till-june-30/article65256684.ece