Docking NGOs for a few bad

CONTEXT: Government recently amended the Foreign Contribution(Regulation) Act in order to strengthen the compliance mechanism will create unintended operational challenges for many Non-Government Organizations (NGOs).

Need for the amendments: to strengthen compliance mechanisms, enhance transparency and accountability in the receipt and utilization of foreign contributions.

• Safeguarding National Interest: During the three years up to 2018-19, over Rs58,000 crore of foreign funds have been received by non- government organizations (NGOs).
• Boosting Compliance: Criminal investigations were initiated against ‘dozens’ of NGOs that indulged in outright misappropriation or misutilization of foreign contributions.
• The Bill indicates that from 2011to 2019, the Government cancelled FCRA registrations of more than 19,000 entities.

Measure took by the Government in the past:

• Restricting the usage of unutilized foreign contributions based on a summary inquiry,
• Suspension of the registration for an additional 180 days pending completion of investigations.

• If obligations such as non-filing of annual returns and non-maintenance of books of accounts were not met, FCRA registrations have been cancelled.

Impact of measures taken:

• Reduction in the number of defaulters: The latest available reports by the Ministry of Home Affairs shows that the number of defaulters reduced to just 10% in 2018-19.

Changes in the amendments:

• Frequent Renewal of  Registration Certificate:
•  Under FCRA 1976 registration certificate was issued for perpetuity has been changed and 
• Under the 2010 amendment, NGOs will have to renew it every five years. Certificate under the old act can be renewed or will stand expired as of 1st October 2016.
• Recent amendments include – the need for specific documentation of key personnel and a more stringent verification process.
• Renewing Registration Certificate: Earlier rule of registration certificate issued for perpetuity has been changed, and now NGOs will have to renew it every five years. Certificate under the old act can be renewed or will stand expired as of 1st October 2016.

Issues With the amendments:

• Mandatory Aadhar for office bearer creates an issue of widening the scope for Aadhar, while stringent verification process would cost NGOs their license non-filling of annual return and non-maintenance of books.
• Between 2011-19, Government cancelled 19,000 FCRA registration, with criminal investigations for misappropriation of funds. 
• As of 2019, only 10% of NGOs registered under FCRA have not submitted their filings.
• Operational Challenges: 
• Reducing the Cap on administrative expenses: capped at 20% for foreign funds received (against 50% earlier)
• Restricted freedom in transferring of funds: NGOs are restricted from transferring foreign funds to any entity of its affiliates.
• Mandatory opening of FCNR account: at SBI branch in New Delhi despite the NGOs being already integrated with the Public Financial Management System (PFMS).

Way Ahead: Regulating a few non-complaint NGOs, while creating operational hurdle and impact all NGOs working in diverse areas of education, medical relief and rural development, needs a solution