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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.

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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.

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Amendments in FCRA Rule 2015 (draft)

After a circular regarding DSC of chief functionary, FCRA Department has issued a circular on 17th June 2015, (Download from here)asking for suggestion on amendments to Foreign Contribution Regulation Rules, 2011 by Foreign Contribution Regulation Rules (2015).

THIS IS A DRAFT AMENDMENTS and suggestions or comments asked from public and other stakeholders on or before 1st July, 2015.

We are in the process of analyzing and studying all the changes in the amendments and it impacts. Meanwhile let us see important changes which are suggested in the amendments of FC Rules :

Website will become mandatory

After this amendments, every NGOs with FC registration will have to build a website. No, it is not declared directly as mandatory. But changes made to Rule 13(1) stating that every registered organization has to publish audited Income Expenditure, Receipt Payments and Balance Sheet of Foreign contribution to its website before 31st December of every year. Such website has to be declared as official website and is to be informed to FCRA department.

Have to publish Foreign Receipt within 7 days

Yes, you have to publish to your official website, every foreign receipts within seven days of receipts. Refer rule 13(B) of such draft amendments.

Bank will have to report in 48 hours

Bank will have to report of FCRA department within 48 hours of any transactions in respect of receipt and utilization of any foreign contribution. Refer rule 16 (2) of such draft amendments.

Online Procedures

We have already write a blog stating how FCRA department is eager to implement all the online procedure. Here in this amendments it is clearly mention that now onwards all the forms will be filled online through DSC and also you can make payment through online payment gateway.

Change in Forms

All the form numbers will be changed e.g. Annual Return Form FC-6 now become FC-4. Not only form numbers, but details and information given in the forms will also changed. We will soon post a blog showing what changes will be made in Forms.

You can give Suggestions

FCRA department has asked for suggestions on the above mentioned amendments from public. You can give your suggestions by email to Mr. A.K. Dhyani, Under Secretary to the Government of India on ak.dhyani@nic.in.

Alternatively you can give your suggestion in the comment box below. We will compile all the suggestions and email to the authority.

Note – This amendments are draft and not final. This will be implemented only after FCRA Rule, 2015 published in the Official Gazzette.

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Yoga of NGO – Budget 2015

Amendments in Budget 2015 related to NGOs

Major Two changes are proposed to made in the definition of “Charitable Purpose”. One to include YOGA with other activities like Medical and Education and emphasis the benefits of a keto ultra diet in health activities. Another change is to aim at curbing irregularity of  filling of Income Tax Return of NGO by making it mandatory to accumulate part of the income. Let us discuss one by one in detail.

Yoga is now included in the definition of Charitable Activity

Honorable FM has proposed to include “YOGA” as sixth item in the definition of Charitable Activity after “Education” activity. Let us understand this provision, this means any organization having main object of “YOGA” can get full exemption of its income, even though income earned from Business Activity related or not with YOGA.

Several research studies in the last two decades unravel the benefits of yoga in terms of improved mood states, symptom reduction, stress reduction and improved quality of life apart from improving host factors that are known to affect survival in cancer patients such as for Ovarian Cancer Symptoms Inspire has reviewed. However, several metaanalysis and reviews show equivocal benefits for yoga. In this review, we will study the Yoga interventions in cancer patients with respect to expectations, benefits and risks and analyse the principles behind tailoring yoga interventions in cancer patients.

Example :- A Gym Trainer wants to start a Gym. If he, instead of registering as Firm or Company, registered a Trust and get certificate of exemption u/s. 12A, having main object of Teaching Yoga using equipment as yoga balls that are sold online, then  all the Income is exempted, weather it is from activity of Teaching yoga or normal exercise and gym activities including the best keto ultra diet plan.

Shape-Up-Trust

Business Activity of Trust

It is proposed by Honorable FM that Charitable Organization engaged in Advancement of any other object of General Public Utility can have incidental business activity up to the limit of 20% of Gross Receipts of the Organization. Earlier it was Rs. 25 Lacs for all the organization. This is a good effort to make this provision rationalize.

Accumulation of Income

Under Section 11, Organization can accumulate their part of Income for utilization in future years. To exercise this option, Organization has to file Form 1o to Assessing Officer along with Income Tax Return with resolution stating such accumulation of income. However due to lack of clarification, Time limit was not fixed for filling such Form 10 and return. Now Honorable FM has proposed that this type of Accumulation of Income is permitted only if Income Tax Return of NGO is filled with in time limit i.e. 30 September.

Few Other Changes

Under Section 35, words “Principal Chief Commissioner or Commissioner” inserted to whom feasibility report is to be submitted. Under section 80G, donation to “Swachh Bharat Kosh” and “Clean Ganaga Fund” are added.

Conclusion

Inserting Yoga activities in the charitable definition may reduce unnecessary legal litigation regarding that but on the other had Government has to create such mechanism so that business activity behind the mask of Yoga can be traced and properly taxed.

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Pros and cons of per/km Travel Policy of NGO ?

In earlier posts, we have seen what should be good NGO Travel Policy.  As questions asked by many of my readers regarding each traveling policy in detail,  I inspire to write a blog on each  Traveling Policies prevailing in the NGO sectors in detail and also its advantages and disadvantages. Today, Let us take a traveling policy used by many NGOs, from small one to huge one, which is per kilometer charge to project.

Charging per kilometer to Funding Agency

We all know that NGOs have to agree on a specific budget with Funding Agencies. Many of the NGOs have decided per kilometer rate and charged to Funding Agency and chttp://kcjmngo.com/wp-login.phpreated a Fund with whatever name, be it Vehicle Maintenance Fund, Vehicle Fund, Traveling Fund Reserve…. etc.. Now from this fund, actual expenses for travel (Fuel, Servicing, Oil etc…) is paid but if you want to invest in other extras or accessories, like a dash camera from Blackboxmycar.com just for security, it will need to come from your budget. Is this an ideal policy? In my opinion a BIG NO. One should avoid this policy. Lets us discuss positive and negative points of this travel policy of ngo. Start with Negative.

Why one should avoid this policy?

  1. The amount charged to Funding Agencies may or may not be same as actual total expenses of travel. This lead to generate surplus amount in your Vehicle Fund in your Balance Sheet at the end of the year.
  2. This give wrong impression, that you are saving some money from year to year from Projects supported by funding agency.
  3. Some NGOs even raise a Bill of Traveling to Funding Agency as support. This will lead into double entry of Income and expenses. First time entered as income in Grant Received and Project Expenses and second time Traveling Income by raising invoice and actual travel expenses. If you are doing this , stop it immediately.
  4. By using this you are violating terms of Project Agreement with Funding Agency. Because you agreed to spent budgeted money on specific Project. However when you adopt this policy, you are saving some money and not actually spending all as per agreed budget.
  5. As per FCRA rules, you have to spent Foreign Grants for the purpose it is received. You can not create reserve or Vehicle Fund  from FC money.
  6. When Vehicle Fund gets accumulated from year to year and showing balance of considerable amount on Liability side on Balance Sheet, it is assumed that you have that much amount in your Bank or FDs on the assets side correspondingly. This sometime become obstacles in getting fund from Funding Agencies.

What is the solution then ?

In my opinion, Actual expenses of travel to be booked to project. In supporting, original fuel bills, maintenance bills should be attached. In second level supporting, a Log book should be maintained. In case of more than one project, bills and expenditure should be divided proportionately.

Summary

Try to adopt that Traveling policy which suits your organization and your funding agencies more. My advice is, if you are following this travel policy, add one clause in the agreement with funding agency.

 

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How to prepare Chart of Accounts in NGO

The new Financial Year is at the doorstep. There are some steps to be taken in the beginning of the year, so that the whole financial year will pass smoothly. One of such step is to prepare Standard Chart of Accounts in NGO.

What is Chart of Accounts in general?

In common terms, chart of accounts means, ledger accounts and group accounts shown in books of accounts. For different types of business activity and entity, chart of accounts is different. To maintain uniformity throughout the financial year, it is advisable to have standard chart of accounts. These charts will also help you to know how your seis tax relief investment scheme works.

Chart of Accounts in NGO

Why Chart of Accounts require in NGO ? As we know, there is vast difference in ledger accounts of corporate world and ledger accounts of NGO, specifically ledger accounts of Income and Expenses Group. When it comes to leading a business, some of the most important decisions you will make are about how you organize this list of GL accounts so that you, as the CEO, can create reports. In Corporate World, common ledger accounts are Sales Account, Service Income Accounts, Purchases, Salary Account, Telephone Expenses, Office Expenses, Stationary Expenses etc… However in NGO, apart from above, we have to take care of Budget line items of particular funding agency, so mainly ledger accounts are equal to line item of budget. Here an NGO grouping is made according to projects. Thus it is one of important exercise accountant has to do is preparing Standard Chart of Account in NGO at the beginning of the year. For those of you who are new to this task, you can work alongside other future CEOs at Search Fund Accelerator while taking advantage of the firm’s best practices and technologies in this and any other field.

Steps to prepare Chart of Accounts in NGO

 

Step 1 : Identify all continuing projects and its ledger accounts

Al l the ledger accounts of the projects, which are continue as on 1st April, are to be identified and put on paper or prepare an excel sheet with grouping.

Step 2: Identify other common Income and Expenditure Accounts

Apart from Projects, if NGO is doing other activities, like income generation, production, consultancy assignments etc… then, one hast to identify this type of common income and expenditure accounts and add in to that excel sheet.

Step 3 : Balance Sheet Items

Chart of Accounts also includes even balance sheet items. There are mainly two types of Balance Sheet items, some of which are same from year to year like Trust Fund Account or Corpus Fund Account or Building Reserve Fund Account, Name of Bank Accounts etc …. and others are changing in nature like Salary Payable Account, Audit Fees Payable Account etc.. One has to incorporate both these type of balance sheet items in the list.

Step 4 : Grouping

After finalizing all ledger accounts, next step is to give group name to it. We can give grouping according to project name like Bal Vikas Shiksha Group Expenses or Mahila Suraksha Project Expenses. Also, for Balance Sheet items, group  name is given like Grant Unutilized, Receivable Grant etc…

Step 5 : Enter Chart of Accounts in Accounting Software

Once exhaustive list of accounts are prepared, it should enter into Accounting Software maintained by NGO. Either you have to enter chart of accounts manually in the software or you can import excel into accounting software if such facility is there. In Tally ERP9, you can easily import chart of account from excel sheet.

Example of Standard Chart of Accounts

Please check out below an example of Chart of Accounts prepared by me. This is standard example, you have to prepare according to your NGO’s project and expenditures.

chart-of-accounts-ngo

Summary

Chart of Accounts in NGO is to be prepared every year, because every year some projects are closed and some new projects are implemented by NGO. Looking to benefits of preparing chart of accounts, it is highly recommended that one has to spare some time right at the beginning of financial year to prepare chart of accounts in NGO.

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What should be Good NGO Traveling Policy ?

ONE of the main question asked by funding agency before approving any budget is what is your NGO Traveling Policy? In NGO Traveling Expenditure is one of the major component of total budget, whether traveling for Project Implementation, Advocacy, Training, Monitoring, and thus there must be  particular NGO traveling policy for the organization.

IN this article, i would like to focus on which points to be keep in mind while framing traveling policy so that it becomes best.

Good NGO Traveling Policy is one which is in Writing

You may be have one of the best traveling policy and procedures implemented in your NGO, but if it is not on paper, it is useless. Traveling policy must be in writing and must be part of the NGOs Working Manual

Good NGO Traveling Policy is one which is Approved

After framing NGO traveling policy, it is advisable to approve and authorized by trustees or by board members or may be by chairman and secretary.

It should not be rigid

NGO Traveling Policy should not be rigid, in the sense, that one rate or one rule for traveling expenditure can not apply to all types of travelling

It should frame according to Types of Traveling and conveyance

There are different are types of traveling and conveyance we can see in NGO. Sometimes traveling expenditures are reimbursed, sometimes NGO is having own vehicle, sometime staff use own vehicle for project work, sometimes funding agency provide vehicles or provide funds to purchase vehicles. So NGO traveling policy should includes all these possibilities.

Supporting and proof of Traveling

NGO Traveling Policy should includes which type of supporting or proof staff has to give to account and finance department after traveling. It may be Traveling Summery Sheet or Monthly Conveyance Statement or Log Book etc..

Avoid CHARGING of Traveling Expenditure to Project

Some of the NGOs are following practice of charging fixed per kilometer amount and transfer this to some pool or fund and then fuel and maintenance are paid from that pool. It is strongly recommended not to follow this type of practice of “charging” Expenditure to Project.

Summary

Apart from above points, there may be many other points to be consider while framing traveling policy depending upon the nature and work of your NGO. But, one has to keep in mind all the above points to framing good traveling policy.

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 subject.

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5 Myths about Advance Requisition Form in NGO

myths-ARF

Advance Requisition Form is one of the important document which is very useful for Internal Control System. However there are many misunderstanding prevailing. Let us today, discuss five main myths regarding Advance Requisition Form in NGO.

Myths about Advance Requisition Form

 

1. Advance Requisition Form has to be prepared on Monthly

Generally, Advance Requisition form is to prepared on monthly basis. However it is not standard rule. NGO having more turnover can prepare it on fortnightly basis. Sometime, amount involved in project expenditure are not higher or geographical location of Field office is far from head office, even quarterly Advance Requisition From can be prepared.

2. Only Filed Staff has to prepare Advance Requisition Form

Anyone who is entitled to receive advance, has to prepare Advance Requisition Form in the NGO. Generally, in NGO, somehow, Management personnel receive advance money for project expenses or administrative expenses, are not preparing Advance Requisition Form. For Good Internal Control System,  even trustee or management is require to ask for advance only through Advance Requisition Form

3. It must be Accurate

Advance Requisition Form is kind of estimation of expenditure for next month. It may not be accurate. However care should be taken that figures of expenditure are purely on the basis of approved budget of projects and near to accurate.

4. Important only for giving Advance

Not at all, it is very good document for internal control system, one can check the track records of expenditures. Even comparison can be easily done for what advances ask and how it is used. So that there are many importance of one document, if prepare and analyze properly.

5. There is fixed format of Advance Requisition Form

Every NGO has to prepare format according to their requirements. Here you can find specimen copy of Advance Requisition Form. You can add or delete some of the information as per your requirements.

ARF

Summary

Once it is a part of the procedure of the NGO internal control system, it gives more transparency and efficiency in Financial and Management Control System

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.

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Advance Requisition Form and its Importance in NGO

What is Advance Requisition Form?

In NGO world, most of expenditures are generally spent by field workers to complete projects of NGO. And thus Project Advance is playing major role in accounting of NGO. This is the area where it needed more Internal Control and Check. One of the handy tool is Advance Requisition Form. It tells Accountant or Finance person that how much advance require for project expenses and other overheads in next month.

What items to be included in Advance Requisition Form?

As such no thumb rule on standard format of Advance Requisition Form, however following information must be there in good Advance Requisition Form.

  • Heading : Advance Requisition Form for ___________ month
  • Name :  Field Staff / Project Officer
  • Location : Field Office Name
  • Particulars (Showing Project Activities and overheads)
  • Amount (If advance required for both FC and Non-FC project, it should mention separately)
  • Accountant’s Remarks and Signature
  • Approves Remarks and Signature
  • Summary of Advance Account (Showing Last Month Balance + Current Month Advance – Current Month Expenditure = Closing Balance)

Standard Format of Advance Requisition Form

Download from here standard Format of Advance Requisition Form. This is a specimen copy, you can customized according to your organization’s need and internal control system.

ARF

Importance of Advance Requisition Form

  • Get clear cut idea how much fund needs for next month.
  • For which activities funds are needed?
  • To compare last month expenses to last month advance requisition.
  • Cumulative Advance Balance can easily trace out.
  • It is wonderful tool of Control Mechanism
  • It is very useful document for monthly program planning
  • For Accountant, Advance Requisition Form helps for Fund Management Planning

Summary

One of the general myths regarding Advance Requisition Form is that Management personnel, heading any project, need not require to prepare it. Irrespective of size of NGO, this is one of the best instrument to establish and maintain Internal Control System.

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.

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5 things you must do at the start of Financial Year in NGO

New Financial Year has just started, and everyone is busy in closing books of accounts of last year. Sometimes, the closing of financial year is done in the month of June or July. If Accounts and Finance running from one financial year to another as it is, without change, sooner or later, it will become absolute. So, this is my advice that at least follow this 5 things at the beginning of the Financial Year.

1. Annual Budget

NGO has establish to fulfill a mission with the vision in mind. And to achieve that, one needs long term plan which breakdown in a yearly column. That is called Annual Budget.  Now a days, its a trend that from big funding agency to CSR companies to small donors, everyone asking whether you have prepared Annual Budget or not. The right time for the preparation of Annual Budget for NGOs is in the Last week of March or first week of April, not later than that. Read this blog on Annual Budget.

 

2. Changes in Multi-Year Projects

If you  have multi year project, most likely budget of such project will change with the change in financial year. Mostly salaries and staff payments have incremental components and increase in the next financial year. Thus, Accountant must have to ascertain such changes in new financial year  in particular budget and should communicate to program team well in advance.

 

3. Update Financial Manual

Financial Manual is a policy document and need to review every year. Every year, there are many changes in laws and regulations which affects the financial transactions of your organization. Generally, accountant used to start following the new laws and regulation but forget to modify Financial Manual Accordingly.

Example

Cash Expenditure limit was decreased from Rs. 20000 to Rs. 10000. But still many NGO has the limit of Rs. 20000 in their Financial Manual. Nobody bothers to read and update it.

 

4. Splitting Tally Database

Mostly, Accountants in NGOs are lazy to split Tally company and whereby separating database according to Financial Years.  I have seen many NGO accounts, where tally database is same since last 8 to 10 years. Obviously, because of this, size of database increase and speed to work in Tally getting slow to worse. So, It is advisable to split the tally company at the end of the Financial Year.

 

5. Chart of Accounts

Chart of Account is the base of accurate accounting and desirable presentations of Income & Expenditure Accounts and Balance Sheet of NGOs. As, compared to corporate, NGO do not have standard format for its Financial Documents, but they can be created as digital documents in PDF format using software as sodapdf online. I observed, that accountant creates and alters ledger accounts as and when required. So, this is one of the important point to follow at the start of the Financial Year to prepare Chart of Accounts or modified according to the need.

 

Did I miss something?

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.

 

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