Rotation of Board Members in NGO

Do your organization have “Board Rotation Policy” ? Many funding agency and corporate asking this question before giving funds. It sounds irrelevant, but it is not. Every donor wants 100% utilization of single rupee, he donates to you. And every donor wants that an NGO should have highly effective governance. Today let us discuss this issue of rotation of board members or trustees in NGO from various view points.

Is it Mandatory?

First and obvious question is about its legal implications. As, there are various acts in india under which an organization can be registered, there is no such specific rule regarding board member rotation and about timing. However, this issue is mostly addressed in the Trust Deed or Memorandum of NGO. If there is a clause in your Memorandum or Trust Deed regarding change or rotation of Board Members, you must follow it strictly.

Of-course, it is beneficial

It is not mandatory to rotate board members of NGO, but the benefits of such policy are very obvious that one should follow this practice. First and foremost, it shows good governance prevail in your NGOs, if you have rotation policy at regular interval. Second, it gives impression that, your NGO is having separate identity than only one or two individual founder members. It gives NGO more life span, when second generation leaders are trained this way.

Rotation or Change?

Depends upon the scenario and what mentioned in Trust Deed. However, only changing designation of same persons over years will definitely gives sense to Donor about just implementing policy on paper and not in true senses. Thus, it is better to have a proper policy for mixture of both rotation and change.

What is best “Board Rotation Policy”

The best policy is one which include robust period for the person to be in the board of the trust. Good boards should always have agreed terms of office so that there is a regular turnover of trustees and boards remain vibrant. Two terms of three years with a review at the end of the first term is fairly typical. NGOs should adopt this as best practice.

Let the world knows – Disclouser

Once you have a policy for board rotation in your NGO, it is best practice to put the same in your Annual Return under some Compliance or Good Practice page.

Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subjects.

 

How to get CSR Funding for your NGO ?- Internal Control System

Why a company having huge CSR funds and want to implement genuine projects, should give funds to your organization ?  This is the question you should ask to yourself and do not indulge into the malpractices as mentioned in this part 1 of this CSR series.

How to get CSR funding for your NGO?-PART 1

Most of the organizations are good at what they are doing in terms of implementing projects and grass root work, but they are not good in maintaining documentations and showing their good work to the world. Read this Part 2 blog, where I mentioned how you should showcase your good work.

How to get CSR Funding for your NGO ?- Program Quality – PART 2

Before we go ahead with Part 3 of this series regarding maintenance of Financial and Internal Control System, look at this latest news regarding spending Rs. 2,80,00,00,00,000 in last three years under CSR by the companies.

Accounting and Financial Control System

When you are approaching companies for CSR funding, it is almost prerequisite that NGO’s Accounting and Financial Control system is matched with the industry standards. You have to remember this:-

  • Regular Accounting (zero backlog)
  • Accurate Accounting
  • High Quality of Supporting (Single rupee spent hast to be  supported by Bills and Vouchers)
  • Strong Internal Control System
  • Watertight Cash Management System
  • Efficient Advance Management System

 

Statutory Compliance

No company will be ready to fund your organization if you have not followed all the Statutory Compliance. As a first step, list down the following compliance and check which  you followed in your organization. For remaining compliance, why you are not following it. Take expert opinion whether it is applicable to your NGO or not.

  • 12A – 80G
  • TDS
  • Income Tax Act
  • GST
  • FCRA
  • PF
  • ESIC
  • Professional Tax
  • Trust and Society Act

 

Governance

How your NGOs working is governing by the members ? Is your NGO is  one man army? Is it look like Proprietorship or Partnership Firm? Whose taking decision and how? These are some of the questions which may be asked at the time or per-scrutiny of project.

  • Authority Matrix
  • Decision Flow
  • Rotation in the Board Members
  • Election or Selection procedure of new board members
  • General Meeting and Executive Body Meetings
  • Maintenance of Minutes of such meetings
  • Intimation of Change in the Board Members

 

Policies

Following policy documents should be prepared and implemented in the NGO

  • Financial Policy
  • HR Policy
  • Accounting Manual
  • General Work Policy
  • Anti Corruption Policy
  • Gender Policy
  • Child Policy, if applicable

Hope the above information will be useful to you in getting CSR funds. We will discuss in next part of this series on how to approach companies for CSR funding.

Part -4 How to approach companies for CSR funds? – Coming Soon

Disclaimer : This blog is purely for the education purpose and author is NOT providing any services to get CSR funding.

Change in objects of NGO – Whom to intimate?

Every NGO, whether registered as Trust or Society or Sec8 Company has very specific main objects. However, sometimes during the lifespan of trust, it need to change (add or modified) some of the objects already stated in the constitution of the NGO.  The question is to whom NGO should intimate regarding the change.

Registration Authority

Depending upon the entity, NGO should intimate to the authority under which it got registration originally. Suppose, NGO is registered as Trust under the Bombay Public Trust Act and Society Registration Act. Then, intimation should be sent to Charity Commissioner and Society Registrar. It is mandatory to intimate the authority.

FCRA Department

If NGO has FCRA registration, at the time of registration, nature of association is to be mentioned. There are five types of nature of association specified in the Act. They are Religious, Cultural, Economic, Educational, Social. It is advisable to check the registration certificate of FCRA where it is clearly mentioned. If NGO has change its objects and which is not mentioned in the registration certificate, NGO has to file Form FC6 regarding change of objects of the trust.

Income Tax Department

 

After the amendments in Income Tax Rules 2018, Income tax department has notified on 19.02.2018 ,If you are a registered charitable trust, society or a company registered u/s 8 of the Indian Companies Act 2013 and if you have changed or amended the objects of your organization, the Income tax Act 1961 now requires your organization to apply afresh for registration u/s 12A in the new online Form 10A. This must be done within “thirty days from the date of such adoption or modifications of the objects”.

Donor / Funding Agency

It is not mandatory, but advisable to even intimate about change in main objects of the trust to donors and Funding Agency. It is a good practice.

List of Banks allowed by FCRA -UPDATED

NEW LIST UPDATED – 46 Banks

https://fcraonline.nic.in/fc_bank_list.aspx

Bank Integration – FCRA

FCRA department has issued a notification dated 22.12.2017, instructing organization to have FCRA Bank Account only with the list of banks mentioned in the attachment.

Purpose

The purpose is to link FCRA Bank Account with PFMS – Public Financial Management System.  However, system of some of the banks are such that account can not be linked with PFMS.

Action

Thus, if your organization having bank account with the bank other than mentioned in the list, you need to change the FC account with the given 32 Banks within a month.

How to get CSR Funding for your NGO ?- Program Quality

How to get CSR funding for your NGO? – PART 1

We have seen in last blog here (How to get CSR Funding for NGO?) , what NGO should not do to get CSR funds. Let us see now what NGO should do to get CSR funding. How your should prepared your NGO for CSR funding. One of the important aspect is how effectively your NGO implement the given project i.e. Program Quality.

Program Quality

Obviously, as a Chartered Accountant, I can not suggest about how to implement program effectively, but yes, I can suggest on how to maintain documents in such a manner, so that it can easily draw an idea about NGO working.

Past and Current Programs

Programs, which are completed in last five years should have been documented properly. There has to be proper file for each program containing all the documents starting from agreement, budget, all financial utilization certificates, quarterly reports, photographs and note on impact of the program. I suggest to have a “Program Closure Card”, a brief summary of Program. Please see below example.

This is illustration how Program Closure Card look

This is illustration how Program Closure Card look

 

Future Program

Every company ask full project plan for which you need CSR fund. Thus, NGO should have keep ready such kind of different project plans – mainly divided in two parts, short term plans and long term plans. Many CSR companies even provide funding for ongoing project or contribute in Long Term Project Plan of NGO.

Coming Soon – How to get CSR funding for your NGO? – PART 3

 

Draft Guidelines providing stringent regulatory mechanism for NGOs

The Centre filed in Supreme Court on Wednesday its draft guidelines providing stringent regulatory mechanism for NGOs. Earlier, in January 2017, famous lawyer for his PILs, Advocate Mr. Manohar Lal Sharma, filled a PIL to regulate the unorganized NGOs ecosystem in the country. SC had asked the Centre to prepare guidelines to regulate NGOs and Voluntary Organisations after finding that nearly 30 lakh of them were operating in India.

In its order, the Court noted that substantial funding is allowed for NGOs and voluntary organisations. Further, Rules 210-212 of the General Financial Rules, 2005 provide for a regulation mechanism for NGOs, though the respondents are not aware of the same. The court noted,

“There are 32 lakh NGOs out of which nearly 3 lakh are filing balance sheets. The respondents are not aware of the responsibility of audit in the General Financial Rules…There can be no doubt that the funds disbursed by CAPART [to NGOs] is public money and needs to be accounted.”

It, therefore, directed the Centre to complete the exercise of audit and submit a report by March 31 this year. It was directed,

“In case of non-compliance, it is essential to initiate civil and criminal action immediately after the completion of the exercise.”

Most importantly, the Court also directed the Centre to lay down guidelines/rules for accreditation of NGOs, the manner in which they shall maintain accounts and auditing of the same.

Centre proposes stringent guidelines for NGOs and VOs requiring all existing ones to register afresh online with Niti Ayog‘s NGO-Darpan. The guidelines submitted by additional solicitor general Tushar Mehta to a bench headed by CJI J S Khehar required them to register afresh if they wish to get govt grants.
It said NGOs will be provided unique ID and subjected to income tax act and foreign contribution regulations act. Centre’s draft guidelines say NGOs/VOs past track record and performance will be put under scrutiny before grant of accreditation. The NGOs and VOs getting govt funds are required to execute a bond to refund the amount with 10% interest if work not done.

However, detailed draft copies of guidelines not available so that can not comment on in dept detail.

SC asked amicus curiae Rakesh Dwivedi to submit his suggestions on the draft guidelines in two weeks.

Second Chance for FCRA Renewal, if you didn’t get.

Many of the organizations have already received Renewal from FCRA. However, some of the organizations have not apply for renewal or not applied in online format or not paid online fees, may not received FCRA Renewal.

Last date for filling FCRA renewal was 30.06.2016 by online. If your organization fail to do so, your FCRA registration certificate is deemed to have ceased w.e.f. 01.11.2016.

Yesterday, FCRA department has issued a list of total 11319 organizations whose registration certificate is deemed to have ceased w.e.f. 01.11.2016.

Check the list here.

Next Course of Action

These organizations have to apply for renewal –

  1. Login to your account in FCRA website
  2. File Complete FC3 form online
  3. Upload the required documents like Trust Deed and Registration Certificate
  4. Upload a Letter stating reason for not filling renewal earlier
  5. Pay fees online.

No renewal if not filled Annual Returns

It is also mentioned in the notice that renewal shall not be granted if earlier annual returns have not been filled by the organization.

Last date

Last date to file such renewal is 28.02.2017

How to file FC3 Renewal form online ?

Check out this video.

 

Demonetization and NGO – Dos and Don’ts

We know the current scenario of demonetization of old currency notes of Rs. 1000 and Rs. 500. As every day new news coming in, it is difficult for us to decided what should be the correct step to deposit old notes.

Earlier, Trust and NGOs were already under the radar of the Government before demonetization,  now we can predict that more strict control coming in near future.

Let us discuss today about dos and don’ts by NGOs in a Question Answer Round.

Q – Can old notes be deposited in NGOs Bank Account and what is the time limit?

A – Yes, old notes can be deposited in NGOs Bank Account till December 30.

Q – How much cash can be deposited?

A – As such no limits, but not more than the CASH ON HAND AS ON 8th NOV.

Q – Can we take cash donation in Old notes now?

A – No. After 8th Nov, old Rs. 500 and Rs. 1000 notes are not valid tender.

Q – Can we take donation in cash in back dated and thus create more cash balance as on 8th Nov ?

A – I suggest NO. Just two days back, not confirmed but, IT (Exemption) of Mangalore has issued notices to NGOs to submit authorized copy of cash books as on 8th Nov with denomination.

Q – Can we deposit cash in FC in old notes ?

A – Yes you can deposit old notes in FC account but not more than cash balance of FC books as on 8th Nov. I suggest if the cash balance is not much amount  get it exchange with new notes.

Q – What about staff advance already given before 8th Nov in old notes?

A – Do not take bake the advance and deposit in the Bank. It is advisable to ask staff members to exchange it.

Q – What about Donation boxes lying outside the offices like at airports, malls etc..?

A – Immediately get all the donation boxes back and record its cash on books as donation and keep photographs before and after opening of boxes or record a video at the time of opening of boxes with the current date newspaper. So that later, NGO can prove that the donation boxes open after 8th Nov and there were old notes which were deposited in the bank.

Q – What is advisable regarding taking donations between 8th Nov to 30th Dec..?

A – As a genuine NGO, one should not accept any donation in CASH during this period. If you received donation in new notes, kindly take the proof of the donors and keep the bank deposit slips.

All the above answers are purely my opinion. If you have any further questions, kindly ask in the comment section below this blog.

 

Be Ready to fill Renewal of FCRA again

New Notification by FCRA

On 14th December, FCRA department has issued a notification regarding filling Renewal of FCRA form. You can download this notification here.

Let me summarize this notification –

  1. All the earlier application sent manually in Form FC-5 is now void.
  2. Need to apply again for renewal.
  3.  New Form is FC-3 – (Go to https://fcraonline.nic.in/home/index.aspx)
  4. Only Online Form FC3. Not accepted in manual or offline mode.
  5. Make Payment online. ( Does every organization have online banking account ?????  )
  6. Only those organization listed here are exempted for online payment (because their DDs and cheques are accepted) (What about other organization’s DD??????) – Download organization’s name – payments are accepted.

Many more doubts and questions come up in coming time. Let us give some time to study whole process. We will get back with easy info video on how to file Renewal of FCRA in FC3 form online. Till then watch this space for more info.

FC Grant Now exempt from Charity Contribution – Gujarat

Gujarat Government published in the Official Gazette on May 20, 2015 (Download it from here) regarding change in Gujarat Public Trust Act, 1950 and these rules may be called the “Bombay Public Trust (Gujarat) (Amendments) Rules, 2015. One of the major welcome change is to consider Foreign Grant as deduction for calculation of Charity Contribution.

Earlier, only local contribution/grants and government grants were allowed to deduct from amount liable to contribution. No such provision related to Foreign Grants deduction was there, because of old act since 1950 and never amended thereafter.

Change in Balance Sheet and Income Expenditure format –

Schedule VIII related to Balance Sheet and major change is to show balance in FCRA Bank account separately. Have a look –

charitybS

Schedule IX is related to Income and Expenditure Account  and major change is to show Grants in Foreign Money  separately. Have a look –

charityIE

Change in Schedule IX-C – Statement showing amount Liable to Contribution –

Major relief comes here, where it is notified in this revised schedule of IX-C, that Grant and Donation under FCRA is not chargeable to contribution under section 58 and rule 32. Lets have a look –

charity9C

From when it is applicable –

As no date specified in the official gazette, we interpret that any Statements prepared after May 20, 2015 (date of notification) must be prepared as per this new format.