October 23, 2016

FCRA Pro- Active Compliance



As you are aware, the Annual Return under Foreign Contribution Regulation Act (FCRA) is to be compulsorily filed electronically. It is highly expected that the regulatory authorities, may implement few electronic checks for FCRA compliance on such e-filed returns.
One of such apparent check, which may be implemented, is that the expenses for Administrative purposes should not exceed 50% of the foreign contribution received.
This is required as per Section 8 of the Foreign contribution regulation Act 2010.

Since 6 months of current financial year are over, we recommend to exercise this check with the help of following details. So that corrective measures, if any, may be implemented before completing the financial year in March 2017.

What are administrative expenses?

List of Administrative expenses is given in Rule 5 of the Foreign Contribution Regulation Rules 2011. It is as follows:

(i)            Salaries, wages, travel expenses or any remuneration realized by the Members of the Executive Committee or Governing Council of the organization

(ii)          all the expenses towards hiring of personnel for management of the activities of the person of the organization along with the salaries, wages or any kind of remuneration paid, including cost of travel, to such personnel shall come in the category of administrative expenses.

(iii)         Expenditure related to consumables like electricity and water charges, telephone charges, postal charges, repairs to premise(s) from where the organization or Association is functioning, stationery and printing charges, transport and travel charges by the Members of the Executive Committee or Governing Council and expenditure on office equipment will be counted as administrative expenses.
(iv)         cost of accounting for and administering funds;

(v)          expenses towards running and maintenance of vehicles;

(vi)         cost of writing and filing reports;

(vii)        legal and professional charges; and

(viii)      rent of premises, repairs to premises and expenses on other utilities:

What kind of activities will not come in category of administrative expenses?

1.    Expenditure that is incurred on salaries or remuneration of personnel engaged in training or for collection or analysis of field data of an association primarily engaged in research or training shall not be counted towards administrative expenses.

2.    If an expenditure is incurred in furtherance of the purpose of organization, it shall not be counted as administrative expense. Such as Salaries to doctor of hospital, salaries to teacher of school etc. 

In the light of above, you can find out the percentage of administrative expenses with foreign contributions received. And maintain the working on records.