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AccountAid Capsules 2007 (227-261) |
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261:
Add-on Modules for Tally 9 259:
Vodafone India Foundation 254:
Precautions for Wire Transfers 253:
FCRA Bill to be modified? 252:
Filing FC-3 Online - optional 250:
Safeguarding Account Payee cheques 249:
Fraud Alert: funds for charity! 248:
Fraud Alert: Grants by Lottery! 247:
Changes in ITR-7 (Income Tax Return) 245:
Foreign Contribution in 2005-06 242:
Executive Disclosure in US 239:
Charity begins in the Boardroom... 238:
FCRA surfacing in Venezuela? 237:
Budget 2007 – Higher Cess 236:
Budget 2007 – TDS for Consultants 235:
Budget 2007 – condonation of delay 234:
FCRA Bill 2006 - 'shall not lead to...' 233:
The 50% Administration Cap in FCRA Bill 2006 232:
Comments to Standing Committee on FCRA Bill 2006 231:
Mother of All Cash Payments 229:
FCRA Bill 2006 referred to Standing Committee |
(23-Oct-07) A Mumbai-based software
company, Antra Web Technologies Pvt. Ltd. is
offering some useful add-on modules for Tally 9. These modules can be
purchased separately and installed on your computer. This will allow you to
increase the features of your Tally accounting software: 1.
Voucher-Type Level Security:
Restrict user to creation/alteration of a specific voucher type 2.
Report Generator for Tally:
Construct your own reports using data from Tally without programming
knowledge. 3.
Audit Trail: Entire trail of
a voucher starting from when it was created, by whom and on what date. For pricing and other details
you will need to get in touch with the company: 202, Mahavir
Industrial Estate, Nr. Paper Box Factory, Opp. Nelco, Off. Mahakali
Caves Road, Andheri (East), Mumbai - 400
093 Tel :- 26875114, 26874491/2 . Fax :- 26874493 sales@antraweb.com [References: Please note that AccountAid has not evaluated this product or the
company. This capsule is meant for general information only. –Ed.] (11-Oct-07) Over the last three years, Sh.
KV. Ramani, a software engineer from Chennai made
about Rs.200 crores from the booming share market in India. He attributed
this success to the blessings of Sai Baba of Shirdi.
He has now given Rs.68 crores to the Sai Baba Mandir
Trust, Shirdi for construction of a rest house for
the devotees. According to him, this is Sai Baba’s share of the profits which
he made from the market! This is not an isolated
instance. In many regions, Hindu business persons formally put down their isht-dev as a partner in the partnership
deed. His / her share is also specified and regularly paid out in the form of
contributions to charity. This arrangement is also recgonised
by income tax authorities. [References: Sai Baba of Shirdi (1838-1918) is different
from Sathya Sai Baba (b. 1926) of Puttaparthy. - Ed. isht-dev: Patron God, a particular whose favours are sought by the devotee. ‘Aay 200 crore, baba ko
68 crore’, Rajasthan Patrika, p.1, 4-Oct-07] (9-Oct-07) Recently, Vodafone took over
Hutch in India. And the Hutch mascot decided that change was good. There is now news of more
change – Vodafone is setting up its 24th foundation, to be called
Vodafone India Foundation. And the mother, Vodafone Group Foundation, based
in UK, has committed $10 million to the new baby. That’s about 39 crore
Rupees. Vodofone’s Chief Executive, Sh. Arun Sarin, will also be the Chairperson of this foundation.
The Foundation plans to support local and international NGO on projects
related to education and skill-building. [References: http://www.vodafonefoundation.org/5.0.html(news/item11.xml)] (8-Oct-07) If you are holding any FCRA
investments in mutual funds, should you then get rid of them? Not straight away. The
statement on the FCRA web-site is a general information statement, of unclear
origin. It is not a signed order issued by the Government. It also does not
offer any reference to the section or rule in FCRA 1976, which supports this
interpretation. Secondly, it is difficult to
categorize all mutual funds as speculative investments. Growth-based mutual
funds are subject to market-risks, because these invest in equity shares.
Others, such as debt-funds invest in corporate bonds etc. Debt-funds (such as
gilt or liquid funds) which invest in government securities and money markets
can not really be called speculative. Remember also
that all mutual funds approved by SEBI are eligible for investment of trust
funds under Income Tax Act (NGOs in Maharashtra and Gujarat face some extra
restrictions). Therefore, if you receive a
letter from your bank, don’t offload your investments straight away. First
establish that your bank is following a clear legal procedure, based on
authentic sources. Secondly, consult your advisers. They may even suggest
that you make a representation or approach the courts for relief. Third, take
a decision based on your evaluation of the advice and your own situation. [References: FAQ on FCRA
web-site at http://www.mha.nic.in/fcra.htm AccountAid Capsule 257, 8-Oct-07] (8-Oct-07) FCRA Department
has taken the following position on mutual fund investments: “ Q.29
Can NGOs use the foreign contributions for investment in Mutual Funds
and other speculative investments? A.29 No. The foreign
contributions received after prior permission/ grant of registration under
the Act are to be utilized for the purpose for which
they have been received and they are not to be invested in any speculative
investments…. “ Based on
this, some banks have started asking their clients holding FCRA accounts with
them to disinvest in mutual funds. [References: FAQ on FCRA web-site at http://www.mha.nic.in/fcra.htm] (12-Sep-07) The Institute of
Chartered Accountant of India is inviting participants for the ICAI Awards
for Excellence in Financial Reporting for the year 2006-07. This award is presented among seven
categories of organizations. NGOs,
educational institutions, charitable hospitals and section 25 companies can
file their nominations under category VII. Last date for
filing your nominations is 30th September, 2007. No fee is to be paid for entry. At present very few NGOs are filing their
nominations, so there are good chances that your organization may get the
first or the second award. The entry form
and conditions for entry are given on the ICAI website http://www.icai.org/icairoot/announcements/announ1077.pdf
The nominations should be sent to the Technical Directorate, The
Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No.7100,
Indraprastha Marg, New Delhi – 110 002.
E-mail: research@icai.org and tdte@icai.org . [References: ICAI website http://www.icai.org/icairoot/announcements/announ1077.pdf] (29-Aug-07) NASSCOM
Foundation, India and Tech Soup, USA have launched an initiative to give
legal software at nominal charges to NGOs in India. About 35,000 NGOs are
likely to be eligible to receive such software. To get the
software, you have register online at Big Tech web-site giving your tax
exemption [under section 12A or 10(23(c)] and FCRA approval number. After
this you can select and apply for particular software. A software company is
likely to make only one donation per year to your NGO, so plan your
requirement carefully. Once your application is approved, you will be asked
to pay a small administrative fee. After this the software will be delivered
to you. The whole process may take about two weeks. For more details, please visit Big Tech web-site at http://www.bigtech.in/about-bigtech-program. In most cases,
the donation will be treated as foreign contribution in kind. Please record
it in your FC-6, and report the value of the contribution in the annual FC-3. [References: NASSCOM Foundation http://www.nasscomfoundation.org/newsite/ TechSoup: www.techsoup.org/ ‘Microsoft to Boost Charity in India’, Washington Post, http://www.washingtonpost.com/wp-dyn/content/article/2007/08/27/AR2007082700699_pf.html ‘New NASSCOM programme to aid NGOs’, ZDNet India, http://www.zdnetindia.com/index.php?action=article&prodid=11717&chid=126&Ref=Software (14-Aug-07) Reserve Bank of
India has recently issued a circular regarding wire transfers (TTs or
Telegraphic Transfers). This circular is intended to prevent misuse of
wire-transfers by terrorists and other criminals. Accordingly, if
you are expecting funds to be transferred to your account, ask the donor
agency to include the following information with the payment message: 1. Their bank account number. If
there is no bank account number, then a unique reference number must be
included. 2. Their name and address Banks have been
asked to withhold any transferred funds till this information becomes
available. This applies to all international transfers, no matter what the
size of the transfer. Similar
conditions apply to domestic transfers of Rs.50,000
or more. [References: RBI Circular:
DBOD.AML.BC No 77/14.01.001/2006-07 dated April 13, 2007 http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=3415&Mode=0] (27-Jul-07) In a pleasant
surprise, some Congress heavy-weights have supported the NGO sector in
its campaign to rationalise the FCRA Bill
2006. In a meeting on Wednesday, the leaders stressed on “increased
safeguards” to ensure “transparency and natural justice” while taking any
steps to prevent the misuse of such funds. In a balanced
editorial, Indian Express has also called for avoiding paranoia regarding
foreign funds, while agreeing to the need for reasonable precautions:
"Another problem is the ‘home ministry mindset’ that heavily informs
this piece of legislation currently... Instead of putting large collectivities
under the bureaucratic scanner, we need to efficiently zero in and screen out
money flows from only those elements and agencies that pose a credible threat
to the country. Precautions, not paranoia, should be the watchword." [References: 'Foreign funding Bill: Cong for
changes', Indian Express, Posted online:
Thursday, July 26, 2007, http://www.indianexpress.com/printerFriendly/206926.html 'Colour of money: Indian Express, Posted online: Friday, July 27, 2007, http://www.indianexpress.com/printerFriendly/207120.html] (16-Jul-07) Online filing of FC-3 has been introduced by FCRA department recently. This is an optional facility for the time being. You can continue to file your paper FC-3 as before, if you do not wish to use online filing. [References: AccountAid Capsule 227, 251 http://mha.nic.in/fcraweb/fc_login.aspx
http://mha.nic.in/fcraweb/fc_fc3_help.htm] (16-Jul-07) First you have to create your user ID and password (http://mha.nic.in/fcraweb/fc_login.aspx). Then you need to login and fill up the form while online. Step by step instructions are given at http://mha.nic.in/fcraweb/fc_fc3_help.htm. After the form has been filled, and you have checked it, you have to file it by clicking on 'submit'. Then you should take a printout of the online return and sign it. Send the form by registered post to MHA within seven days. Also send the usual printed audit report (part of FC-3), and audited accounts with the printout. [References: AccountAid Capsule 227, 252 http://mha.nic.in/fcraweb/fc_login.aspx http://mha.nic.in/fcraweb/fc_fc3_help.htm] (13-Jul-07) You may think that by marking a cheque 'a/c payee, not
negotiable' it remains quite safe. We ourselves have told you this in the
past. Unfortunately, this is not true any more. Consider the following two cases: 1. A donor agency sends an account payee draft of Rs.3,80,000 payable to an NGO called 'Sravanti'. Some person steals the draft, opens an account in the name of 'Sravanti Chakraborty', and encashes the cheque. Police are invesitgating the case. 2. A firm issues an 'a/c payee, not negotiable' cheque to an employee. The employee deposits the cheque in H bank's drop box. The cheque is stolen by someone, who opens an account in the same name in Bank S, and encashes the cheque. H Bank simply denies that the cheque was ever deposited in their branch. Police simply don't bother, as the amount is too small. What are the lessons to be learnt? First, if you are issuing a cheque, make it by writing the person's name, account number and bank / branch also. E.g., the draft could have been made in name of 'Sravanti's a/c no. 246129 with XYZ bank, Maldah'. Second, if you are deposting a cheque that you have received, insist that the bank stamps the deposit slip, and a bank officer signs / initials the slip. Third, reconcile your bank account statement every month with your account books. You make your money with a lot of hard work. These simple precautions will help safeguard it. (13-Jul-07) The following is a typical sample. Its simplicity itself is a warning. However, as scamsters say, a sucker is a born every minute. Just make sure that you or your frineds don't fall for this kind of a trick. --------------------------------------------- ----- Original Message ----- From: "Mrs.Tina Smith" <tina2007smith2007@yahoo.com> To: <accountaid@vsnl.com> Sent: Thursday, 12 July, 2007 10:11 AM Subject: CHARITY DONATIONS > Dear
beloved, ------------------------------------------------------ If you receive this kind of an e-mail, just ignore it. Or
better still, send it to your friends, with a
warning. (12-Jul-07) Fraudsters
have now discovered a new line – offering you a grant from a well-known
grant-maker. Following is an e-mail received recently at our office: -------------------------------------------------------------------------- ----- Original Message ----- From: dkshowli@midsouth.rr.com Sent: Thursday, 12 July, 2007 9:36 AM Subject: GRANT/DONATION 2007 (£850,000.00) CHRISTIAN
AID ORGANIZATION This
is to notify you that you have been chosen by the Board of Trustees of the
Christian Aid (NGO UK) as one of the final Recipients of a Cash
Grant/Donation for Economic Growth and a Poverty Alleviation Scheme Through
your email. Terry
Williams ----------------------------------------------------------------------- How does one know that this e-mail is a
fraud? Well, people don't give you 850,000 pounds out of the blue. Secondly,
a search on the internet shows that this kind of an e-mail is listed on a
scam e-mail depository (see link below). Thirdly, a visit to the Christian
Aid web-site shows no refrences to Terry Williams
or Deanna Showli. The scam depository also warns that such scamsters can be quite dangerous. You should avoid all
contact with them – simply ignore the e-mail. Do pass this
fraud alert on to your friends. [References: Scam e-mail Depository at http://www.repository.izone.me.uk/repository.pl?action=read_email&email=20070514045618&month=June&year=2007 ChristianAid
Web-site at http://www.christianaid.org.uk/
] (13-Jun-07) As proposed in the Finance Bill 2007, the form ITR-7 (Income Tax Return) has been changed. This has been also notified by Income Tax Department vide Notification No.169/2007, dated 14-5-2007. All NGOs who are registered under section 12A or 10(23C) of Income Tax Act need to file their annual Income Tax Return in this revised form only. This form is applicable from the assessment year 2007-08. It means this form must be used for filing the Income Tax Returns for the financial year 2006-07. You can down load this form, which is available in PDF format at http://incometaxindiaefiling.gov.in/download/newforms/I.T.R-7.pdf. [References: http://www.incometaxindia.gov.in/; http://incometaxindiaefiling.gov.in/download/newforms/I.T.R-7.pdf] (1-May-07) A small church in Canada has become involved in a large tax scam. The All Saints Greek Orthodox Church, Toronto contracted out its fund-raising a few years ago to a company called ICC Worldwide Missions Ltd. ICC enticed about 3000 donors to give it money in name of the church. The donors were given inflated receipts against the amounts they donated. A donor giving $3,405 would get a receipt for $20,650. How? ICC told the donors it would appraise the goods purchased with the money at a higher value. From 2001 through 2005, ICC collected 46 million dollars. Of this amount, it retained 55% as 'handling charges'. Some of the remaining money was used to purchase goods, which went around the world. Some of the goods even came to India! ICC issued receipts for 273 million Canadian dollars against the collection of 46 million Canadian dollars. The Canadian Revenue Agency has launched an audit. It is suspected that the Government could have lost about 107 million dollars as taxes through this scam. Perhaps ICC was not paying attention when Lord Jesus held up a dinar and said to his followers, a long time ago: “Render unto Caesar the things which are Caesar’s, and unto God the things that are God’s". [References: "Charity tax dodge entangles parish", Toronto Star,
28-April-2007; http://www.thestar.com/News/article/208325
Currency references are to Canadian dollars (CAD). 1 CAD = Rs.37 'Dinar', which is a currency used in some Arab countries even now, was
called 'denarius' in Roman times. It is also found in Sanskrit as 'deenarah', meaning a gold coin. – Ed.] (30-Apr-07) In 2005-06, a total of Rs.78.78 arab was received by Indian NPOs from foreign sources. This is a relatively large jump (26%) over the previous year's inflow of Rs.62.57 arab. As the Rupee remained stable during this period, the increase is seen as a real increase in flow of private aid to India. In 92-93, foreign contribution stood at Rs. 15.84 arab. Since then it has been growing at an average of 13.13% annually. [References: Source: FCRA Annual Report 2005-06 (http://www.mha.nic.in/fcra.htm)] (24-Apr-07) A US NGO which trained journalists and media persons in Russia is likely to temporarily shut down its Moscow office. The NGO, called Educated Media Foundation, was raided last week by Government authorities. Its Executive Director, Ms. Manana Aslamazian, was recently detained at an airport after failing to declare excess cash. This raid could be connected with her detention, or it could be based on the new NGO law in Russia. The new law, passed by Russia in 2006, restricts the activities of foreign NGOs, particularly in connection with political or quasi-political activities. [References: 'U.S. NGO shuts down', St. Petersburg Times, 24-April-2007; http://www.times.spb.ru/index.php?action_id=2&story_id=21421
AccountAid Capsule 217 (21-Jun-06), AccounAble
116, p. 4, www.AccountAid.net
] (29-Mar-07) The International NGOs (INGOs), which signed an accountability charter last year have now launched a web-site for the charter. The charter includes principles and practices, which are expected to make INGOs more accountable, transparent and better governed. It may be noted that the charter does not break new ground with regard to financial accountability. It merely promises to disclose what is required under law or what many INGOs disclose any way for purposes of fund-raising. [References: Charter web-site at http://www.ingoaccountabilitycharter.org/index.html
AccountAid Capsules 221, 222 (26-Jun-06), http://www.accountaid.net/
] (29-Mar-07) In USA the rules of disclosure have changed recently. The Securities and Exchange Commission now requires listed companies to file details of top executive compensation. And newspapers are feasting on the scandalous headlines. The top package that has emerged so far is that of Mr. Ken Lewis, who heads Bank of America. His annual salary is a modest 114 million dollars. That comes to just a little over 5 arab Rupees. Annually. The voluntary sector in America has been living with such disclosures since early nineties. The American tax code requires all NGOs (except religious bodies) to disclose top five salary payments along with top five consultancy payments. In India, all companies are required to disclose salaries of highly paid executives in their annual report. However, this rule does not apply to NGOs. So far. [References: ‘The politics of pay’, The Economist,
March 24th 2007, p.67-68, http://www.economist.com/ 1 arab
= 100 crores ] (29-Mar-07) FCRA seems to be spreading across the world like a virus. In December 2006, Peru amended its International Cooperation Legal Framework to create Peruvian Agency for International Cooperation (APCI). The APCI will have extensive powers to direct and influence the activities of NGOs in the country. The law will also allow the Government to regulate flow of foreign funds, especially to NGOs engaged in human rights work. [References: Peruvian Law No. 27692 Creating
the Peruvian Agency for International Cooperation (in Spanish), http://www.apci.gob.pe/portal2/portal/quienes_somos/leyes/Ley%20Nro.%2027692,%20Ley%20APCI.pdf ‘12-08-2006: Recent Changes to
Peru’s International Cooperation Legal Framework Raise International and
Comparative Law Issues’ http://www.icnl.org/knowledge/news/2006/12-08.htm Last visited 29-Mar-07 (12-Mar-07) The Venezuelan development has attracted a lot of attention. However, some time ago (2003), Uzbekistan set up a similar regulatory structure. Among other things, the changes require NGOs and public foundations to deposit all donations in Government-controlled banks. This allows the Government to monitor the funds closely, and withhold payments, if found necessary. This led to a choking of foreign funds – by some estimates over 80% of foreign grants have been blocked as a result of these changes! The uproar over this led to a significant development. Recently, the Uzbekistan Senate approved a law called "On guaranties of activities of the non-state non-profit organizations”. This law is supposed to ensure an NGO friendly administration and Government financial support to NGOs. Whether the new law will actually help NGOs remains to be seen. [References: An overview of the Uzbekistan laws affecting NGOs is
available at http://www.icnl.org/journal/vol4iss4/cr_NISuzb.htm "On guaranties of activities of the non-state
non-profit organizations” Adopted by the Legislative Chamber of Oliy Majlis on 11 October 2006
and approved by the Senate on 1 December 2006. Text available at http://uzbekistan.neweurasia.net/?p=148 Text in Russian language available at http://www.icnl.org/knowledge/news/2007/1-29_Uz_Law_NGO_Rus.pdf] (10-Mar-07) Keeping true to the Indian tradition of 'gupt daan' (donating in secrecy), Indian companies gave away more than Rs.110 arabs in 2005-06. That's nearly twice the amount that came in through the FCRA route. If you haven't seen any of the money, and are worried about a missed opportunity, don't bother. A large portion of this charity may have been to in-house corporate projects approved under section 35AC. Then some of it may have been on paper only. Olga Alexeeva has also pointed out that the new philanthropy in the BRIC countries (Brazil, Russia, India, China) tends to be hands-on. Entrepreneurs prefer to set up their own charities and run the show themselves. And the Ministry is somewhat suspicious. The revenue foregone statement shows that the Government lost some 35 arabs in taxes due to such deductions. And in 2006-07, this is set to go up to 51 arabs! This also ties in quite neatly with the rumours of people going around to NGOs offering them big corporate donations if they have 35AC. The catch, of course, is that you have to return most of it in cash. [References: "India Inc. turns generous to survive tax axe",
Economic Times, 9th March 2007, http://economictimes.indiatimes.com/articleshow/1733780.cms. The
Economic Times estimate of Rs.220 arabs is based on
the assumption that most of the money was donated under section 80G. However,
over the past few years, section 35AC approvals for corporate charity have
increase manifold. Our estimate assumes that a large portion of the donations
were made u/s 35AC. –Ed. "New philanthropy: a micro-world of busy
youngsters", Olga Alexeeva, Alliance Magazine,
March 2007; http://www.allavida.org/alliance/mar07e.html 1 arab = 100 crores = 1 billion =
1000 million] (9-Mar-07) A framework law is under consideration in Venezuela. Venezuela, in South America is under a Socialist Government, headed by Mr. Hugo Chavez. Under the law, all NGOs will be required to register as legal entities. They will also be required to comply with all civil and tax regulations. An agency will be set up to oversee the receipt and disbursement of foreign funds. NGOs will be required to provide information on activities and financing on request. This is somewhat similar to the requirement in USA, where charities must make their detailed income tax return available to public. [References: Draft Law on International Cooperation, approved by
National Assembly of Venezuela on 13 June 2006 "With Marx, Lenin and Jesus Christ", p.37-38, The
Economist, Jan 13-19, 2007; Soft copy of above article is available at http://pmbcomments.blogspot.com/2007/01/jan-1107-article-worth-reading.html Last
visited 9-Mar-07 http://www.transparency.org/news_room/latest_news/press_releases/2006/2006_07_26_venezuela_ngo_freedom Last
visited 9-Mar-07 http://www.heritage.org/Research/LatinAmerica/em1005.cfm Last
visited 9-Mar-07 http://www.venezuelanalysis.com/articles.php?artno=1785 Last
visited 9-Mar-07] (1-Mar-07) An Education Cess of 2% was introduced several years ago. This is applicable to service tax, income tax etc. Now a new cess of 1% will be added to this. This will be called Secondary and Higher Education Cess. Hopefully, higher education includes doctoral theses also, else next year, we may see another cess of 0.5% towards Post Graduate Education Cess! [References: Clauses 130 of the Finance Bill, 2007] (1-Mar-07) Section 194 J provides for deduction of 5% tax at source when you pay any fees to a consultant or professional. This rate is now being doubled to 10%. This move will probably have two implications: 1. Many professionals haviing their own offices will be forced to seek tax refunds of excess deductions. 2. Full time consultants working with corporate houses may prefer to become employees instead. This will help them avoid 12.24% service tax, which is applicable presently. This change, if approved will apply from 1-June-2007. [References: Clauses 48 of the Finance Bill, 2007 – amendment of section
194J] (1-Mar-07) Fortunately, the Budget 2007 largely ignores the NGO sector, so far as taxes are concerned. However, not altogether. A new procedure for registration under section 12AA is to be introduced. This will become effective in three months (1-June-2007). According to this, tax exemption for NGOs will be available only from the year in which they apply. This means that they need not apply in the first few years, if their income is nominal. However, at the same time, the Department will no longer be able to condone delays in application. What does this mean? Suppose a large NGO has not applied for registration so far, but applies in July 2007. Now, its income will be exempted from the year 2007-08 onwards. However, it may be asked to pay tax on the past years' income! [References: Clauses 8-9 of the Finance Bill, 2007 – amendment of
section 12A and 12AA] (27-Feb-07) Clause g of section 12(3) contains some unusual wording. Accordingly, before granting FCRA registration, the Department should be sure that this : (i) shall not lead to incitement of an offence; (ii) shall not endanger the life or physical safety of any person. This wording is likely to create difficulties in processing applications. The clause effectively asks the approving authority for an iron-clad guarantee that no such problems shall arise if the permission is given. In practice this is impossible to ensure in all cases. Logically speaking, every approval will carry some risk, no matter how nominal. It would be more practical if the word “shall” is substituted by 'is not likely to...'. [References: FCRA Bill 2006, available at http://www.accountaid.net/ AccountAid Capsule 229, 232 at http://www.accountaid.net/ AccountAble 122-126, 127-128 at http://www.accountaid.net/] (22-Feb-07) The new FCRA Bill 2006 proposes a cap of 50% on administration expenses for NPOs. Administration expenses are not defined. Elements to be included in administrative expenses will be notified later through rules. This provision has immense potential for confusion. Firstly, 'administration' is a functional classification. The same expense can be classified as 'administration' or 'program' depending on the purpose of the expense. For example, salary of a person may be 'administration' or 'program' depending on what the person does. This kind of classification is very difficult to use in actual accounting work. Further, it is almost impossible to certify or audit in a reliable manner. Secondly, should the Government determine how much an NPO spends on administration? And if yes, then is FCRA Department equipped to deal with the issues that will arise? The ratio of adminsitration expenses would vary from one category of NPOs to another. And there is very little information available on what is adequate for different types of NPOs. There are other problems also. Suppose an NPO is getting core financial support from FCRA funds for managing an existing micro-credit revolving fund. Most of the FCRA funding may be for administration in such a case. How will the authorities deal with this? The Department has enough on its plate without getting into internal administration of NPOs. [References: AccountAid Capsule 229, 232 AccountAble 122-126, 127-128 at www.AccountAid.net] (20-Feb-07) The Parliamentary Committee has invited comments and memoranda from individuals and organisations on the new FCRA Bill 2006. Last date for submission of the memoranda is 20th March 2007. The Bill is available at http://rajyasabha.nic.in/. A copy is also available at http://www.accountaid.net/. Your comments should be sent to Shri Rohtas, Under Secretary, Rajya Sabha Secretariat, Parliament House Annexe, New Delhi – 110001 (Ph.: 23034252, Fax: 23012007). The comments should be in English and Hindi. Two copies of each should be sent. The comments that you send are treated as confidential. No one is allowed to print, circulate or publicize these. This can be treated as a breach of privilege of the Committee. [References: AccountAid Capsule 229 Advertisement published on p.14 of Hindustan Time, Nw Delhi on 19-Feb-2007 AccountAble 122-126, 127-128 at www.AccountAid.net] (7-Feb-07) Many NGOs face constant criticism by their auditors for making excessive cash payments. Now the US Government, known for its sophisticated accounting and control system, is facing similar problems. The problem arose when the US administration sent 12 billion dollars recently for paying salaries to the local employees in Iraq. The money was in cash and was packed in crates. It weighed 363 tonnes. Translated into Indian money, the figure comes to approximately 540 arab Rupees, or 10 times what the Indian NGOs received in entire 2003-04! The US administration is now facing a congressional hearing over this, as large amounts of this money has disappeared. It is suspected that a lot of it has found its way into the hands of Iraqi rebels. [References: BBC news-story, broadcast 7-Feb-07, 8:30 a.m. IST] (16-Jan-07) In the Finance Act 2006, a quiet change was made in the sections related to service tax. The phrase 'commercial concern' was replaced with 'any person', when it came to listing services on which service tax is applicable. What does this mean? Theoretically, now service tax applies even if a service is being provided by an NGO or a non-commercial organisation. For instance, if IIM underakes a development study for a donor agency, then it may have to pay service tax, as this may fall within clause 105(r) read with clause 65 of section 65. Similarly, if an NGO is providing training or helping in group formation, it may be required to pay service tax. However, it must be shown that the service is being provided to the client and not to the beneficiaries. The rate of service tax, including cess etc. is currently 12.24%. This is expected to go up in the coming budget, possibly to 15% or more. (16-Jan-07) The new FCRA Bill, introduced in the Rajya Sabha last month, has been referred to a Standing Committee. This is expected to delay the passing of the new FCRA. The Committee is inviting public representations, and is expected to give its final report by end of March 2007. (16-Jan-07) An organisation (name withheld) based in Jamia Nagar has been accused of operating several illegal bank accounts in Saudi Arabia and Delhi. The case came to the notice of Enforcement Directorate when the NGO received Rs. 9 crores in its Daryaganj bank account in 2002. The ED then fined the NGO and one of its office bearers for Rs. 2 lakhs each. Around the same time, Saudi authorities froze the accounts of one of its donors, Islamic Investment Company. Later a case was filed under FCRA by MHA. The Court has now asked for evidence to be submitted in the case. In the past, in 1997, one of the NGO's accounts in Saudi Arabia was also frozen [References: 'Foreign Donations: Islamic Centre probed'; Times of India,
New Delhi, 12-Jan-07 http://timesofindia.indiatimes.com/articleshow/1140260.cms (16-Jan-07) Ministry of Home Affairs has introduced FCRA Online Services. This allows: · Online filing of annual account in FC-3 Form · Online filing of application for grant of registration under FC(R) Act, 1976 (FC-8 form). Instructions for online filing of annual account and for registration are given on the web-site itself. This involves registering yourself for online services and creating a username and password. [References: |
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