ENHANCING ACCOUNTABILITY: THE AMENDMENTS TO THE FOREIGN CONTRIBUTION (REGULATION) ACT, 2010

In recent days, numerous headlines have highlighted the challenges faced by Non- Governmental Organizations (NGOs) due to the Foreign Contribution Regulation
Amendment Act, 2020 (Amended Act), was swiftly passed by the BJP-led government. These amendments have introduced new complexities in the process of receiving foreign funds, leaving many NGOs in a state of uncertainty.

To appreciate these changes, it’s essential to revisit the historical context. In the past, India received significant foreign funds, often directed towards political and religious purposes, with minimal regulation. In 2010, the UPA government introduced the Foreign Contribution Regulation Act 2010, imposing restrictions on foreign contributions to political and religious activities.

Under this Act, NGOs were required to register with relevant authorities and adhere to a stringent process to receive foreign funds. The Hon’ble Home Minister noted that the influx of foreign contributions nearly doubled between 2010 and 2019. However, many recipient organizations failed to utilize these funds for their intended purposes and neglected statutory obligations, such as filing annual returns and maintaining proper accounts. Consequently, the Central Government revoked the registration certificates of over 19,000 recipient organizations, including NGOs, between 2011 and 2019. Some organizations faced criminal investigations for misappropriation of foreign contributions. Thus, the need for the Amendment Act arose.

The primary objectives of these amendments are to enhance transparency and accountability. They introduce several significant changes, such as:

1. Inclusion of “Public Servants”: The amended Act categorically bars public servants from receiving foreign contributions.
2. Restriction on Funds Transfer: Earlier, registered NGOs could transfer foreign funds to non-registered organizations. However, the amendments impose a blanket ban on such transfers, ensuring more stringent control.
3. Limit on Administrative Expenses: The expenses allowed for utilizing foreign contributions have been reduced from 50% to 20%, directing a more significant portion towards the intended purposes.
4. Registration with Central Government: The amendments empower the government to conduct a summary inquiry and suspend an NGO’s utilization of unutilized foreign contributions pending the inquiry.
5. Foreign Contribution through Scheduled Bank: NGOs can now receive foreign contributions only in designated “FCRA Accounts,” to be opened at a specified branch of the State Bank of India in New Delhi. However, they can transfer funds to other scheduled banks of their choice for utilization.
6. Aadhar and ID Proof Requirement: Section 12 now mandates Aadhar and other identification proofs of office bearers and directors.
7. Extension of Suspension Period: Section 13 grants the government the authority to suspend the registration certificate for up to 360 days (previously 180 days) during an inquiry for registration cancellation.
8. Cancellation Surrender Provision: Section 14 introduces a provision for organizations to voluntarily surrender their certificates, provided they meet specific conditions.
9. Renewal Procedure: Amendments enable the Central Government to conduct inquiries to ascertain whether applicants for renewal meet all conditions specified in Section 12.

While these amendments are aimed at plugging loopholes and ensuring transparency, concerns arise regarding the increasing bureaucratic burden. Requiring NGOs to open accounts only with SBI in New Delhi, conducting summary inquiries, and demanding additional information and documents will escalate administrative complexity. Notably, none of these amendments directly address the filing of annual returns.

Balancing transparency and ease of operation is crucial, especially considering that foreign funds play a vital role in various developmental activities in India. Simplifying processes and reducing bureaucracy could encourage NGOs to continue their essential work without unnecessary hindrances. Achieving transparency and accountability doesn’t have to come at the cost of increased bureaucracy.