1. FOREIGN CONTRIBUTION (MANAGEMENT & CONTROL) BILL,2005 Implications on NGO’s SUDHIR VARMA FCA; CIA(USA) For Forum for Ethics, Accountability and Transparency 20 th to 23 rd February 2006, Jaipur

2. FOREIGN FUNDS IN INDIA - To the Government - In Business / Trade - In the Development Sector

3. FOREIGN FUNDS IN INDIA - With the GovernmentNo Controls - In Business / TradeFERA - In the Development SectorFCRA

4. FOREIGN FUNDS IN THE DEVELOPMENT SECTOR  For Charitable Activities  For Research  For Development  For Capacity Building

5. FOREIGN FUNDS – WHY CONTROLS  For Anti-Government Activities  For Anti-National Activities

6. FOREIGN CONTRIBUTION REGULATION ACT Introduced in 1997  For Anti-Government activities  Little thought was given to the development sector - On their working - Their issues - Their concerns

7. DEMAND FOR CHANGE IN FCRA  Pressure from the Development Sector.  Changes asked for were not specific

8. IN 1999 FERA WAS CHANGED TO FEMA  Diluting controls  Reducing paperwork  Diluting penalties  Government to be a watch dog.

9. CHANGE IN FERA – CIRCUMSTANCES  Growth in International Business / Trade  Increase in consumerism  Rise in standard of living  Industry happy  People happy  Government happy

10. COROLLARY TO CHANGE IN FERA Change FCRA  Bring similar changes

11. DEVELOPMENT SECTOR – CIRCUMSTANCES  NGO’s work better than Government Agencies  NGO’s give better end results  NGO’s set bad precedents for comparisons with Government data.  NGO’s have started questioning Government policies  NGO’s have started embarrassing the Government CAN NGO’S EXPECT GOVERNMENT SUPPORT AND UNDERSTANDING.

12. FCRA TO BE REPLACED THROUGH FOREIGN CONTRIBUTION (MANAGEMENT AND CONTROL) FC(MC) BILL, 2005  FC(MC) is a change from FCRA, not necessarily for the better.  The intent of the Government - is not clear - is not transparent.

13. WITH THE NEW ACT, THE GOVERNMENT HAS ENSURED THAT THEY HAVE  More interaction with NGO’s  More control over - the working of NGO’s - the funds of NGO’s.  More intervention in the working of NGO’s.

14. APPREHENSIONS OF NGO’S  Some are well-founded  Some are exaggerated.

15. IMPLICATIONS OF FC(MC)  REGISTRATION  RENEWALS  UTILISATIONS OF FUNDS  SUSPENSION / CANCELLATION

16. IMPLICATIONS OF FC(MC) REGISTRATION

17. RE-REGISTRATION  Old registration not valid for more than 2 years.  New registration not automatic  Registrations shall be done afresh.  Norms and rules for new registration have not yet been defined.  Registration from date of application or for financial years.

18. NEW REGISTRATIONS  Valid for 5 years at a time.  Perpetual existence under threat.  Continuity of projects not assured. - Hospitals - Educational Institutions - Vocational Training Centers  Scope of activity gets restricted

19. NEW REGISTRATIONS  New entrants not allowed. “Has done meaningful activity in the field”  Provisions for enquiry defined Wide and open to interpretation  Officer can call for information  Officer can examine any person.

20. NEW REGISTRATION  A fee has been prescribed  Reasons for refusal have to be communicated.  NGO’s can appeal against refusal.  Time limit for disposal of appeal not define. Justice delayed is justice denied.

21. IMPLICATIONS OF FC(MC) RENEWALS

22.  Required every 5 years  Applications can be made after 3 years i.e. 2 years in advance.  Gaps between expiry and renewal of registration.  Renewals from date of application or for financial years.  More than 30,000 registrants at present  Can they be renewed IN TIME.

23. IMPLICATIONS OF FC(MC) UTILISATIONS OF FUNDS

24. UTILIZATIONS OF FUNDS MULTIPLE BANK ACCOUNTS  FC Funds continue to be received in one designated bank account.  Subsequently funds can be transferred to other bank accounts - For different locations - For different projects  But subsequent bank accounts - will be used exclusively for Foreign Funds - Foreign Funds shall not be directly received in these bank accounts

25. UTILIZATIONS OF FUNDS MULTIPLE BANK ACCOUNTS  Long outstanding demand of donors to keep their funds in a separate bank account can now be met. A separate bank account can be assigned to each donor, if desired.

26. FC FUNDS  Definition of Foreign contribution enlarged.  Interest earned on FC Funds shall be deemed to be FC Funds  Income earned from FC Funds shall be deemed to be FC Funds.  Distinction required between - Income earned from FC Funds - Income earned from Assets / Facilities acquired from FC Funds.

27. UTILISATIONS OF FUNDS  FC Funds can be used only for the purpose for which they have been received.  Only 30% of FC Funds can be used for Administrative Expenses.

28. ISSUES  FC Funds received for Administrative Expenses.  Definition of Administrative Expenses. - Administration Expenses of a program - Administration Expenses of the Institution.

29. FIXED ASSETS ACQUIRED FROM FC FUNDS  Governments intervention to decide - Which assets can be disposed off. - Manner of disposal. - Procedure of disposal.  These decisions are not left with the donor.  On suspension / cancellation of registration these assets can be seized by a Local Magistrate / Police Station.

30. IMPLICATIONS OF FC(MC) SUSPENSION / CANCELLATION OF REGISTRATION  Registrations can be suspended or cancelled.  An opportunity will be given before passing such an order.  Suspension can be for 90 days.  Cancellation shall be effective for atleast 3 years before an application for re-registration can be made.

31. IMPLICATIONS OF FC(MC) ON SUSPENSION / CANCELLATION OF REGISTRATION  The Government can take charge of all un-utilized FC Funds.  The Government can also seize assets acquired by FC Funds.  On going activities / projects can be stalled.

32. OFFICE BEARERS  No person who has been prosecuted can be on the board of Registered Institutions.  These persons cannot be on the board of registered institutions even if any proceedings are pending in a court of law.

33. TIME LIMIT No time limit has been prescribed for accepting or rejecting an application for - Prior permission - Registration - Renewal

34. FOREIGN CONTRIBUTION (MANGEMENT AND CONTROL) ACT Should be released alongwith the FOREIGN CONTRIBUTION (MANAGEMENT AND CONTROL) RULES

35. Thank You