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Foreign Contribution (Regulation) Amendment Act: Greater Transparency into Foreign Funding of NGOs

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Bringing transparency into every realm of governance has been a hallmark of the Modi Administration. In that vein of action, the Foreign Contribution (Regulation) Act is now being amended to ensure greater transparency into foreign funds that are flowing into Non-Governmental Organizations (NGOs) in India.

Lok Sabha has already passed this important piece of legislation meant for strengthening the compliance mechanism, enhancing transparency and accountability in the receipt, and utilisation of foreign contribution worth thousands of crores of rupees that flow in to India every year.

Need for Tighter FCRA

Statement of Objects and reasons of the FCRA amendment act state the reason for its amendment quite clearly.

The Foreign Contribution (Regulation) Act, first introduced by Indira Gandhi’s government in 1976, was amended after a long time in 2010 to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by individuals or associations or companies. The 2010 amendment also aimed to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to national interest.

At the time of the 2020 amendment, it was also noted that while the annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, the recipients of foreign funding were in violation with respect to their usage. They either did not use them for the intended purpose of donation or did not follow the compliances outlined in the Act properly, such as submission of annual returns and maintenance of proper accounts.

Union government took a very strict view of this and cancelled certificates of registration of more than 19,000 recipient organisations, including non-Governmental organisations between 2011 and 2019.

Criminal investigations have also been initiated against dozens of such non-Governmental organisations which indulged in outright misappropriation or mis-utilisation of foreign contribution.

The legislation noted that there is a need to streamline the provisions of the FCRA so that genuine non-Governmental organisations or associations who are working for the welfare of the society are facilitated. The enhanced compliance will also usher in more transparency and accountability from the errant organisation.

Enhanced Transparency and Accountability

The Act has the following provisions with which any organisation getting foreign contributions in India have to comply with:

  • Public servants are barred from receiving foreign funding, a move that will shield public servants from undue foreign interference
  • Strengthening the norms, Aadhar has been made mandatory for all office bearers of NGOs and other organisations which are seeking foreign contributions
  • The amendment also prohibits any transfer of foreign contribution to any association/person i.e. only the organisation for which the contribution was intended for can use it. This reduces the scope for organisations to start dubious entities from where they can reroute their funds
  • It has also decreased the maximum amount that can be spent on administrative expenses to 20% from 50% ensuring the maximum quantum of contribution received is used for actual social welfare rather than for their own lavish expenditure
  • In a major move to ensure transparency and streamlining of funds, foreign contributions can be received only in dedicated FCRA account at state bank of India branch located at New Delhi

This amendment will significantly deter any foreign contribution that seeks to fund acts detrimental to India’s interest from being used here and also ensure NGO’s and organisation that receive these funds actually use it for public service rather than spending it on themselves.