Home Affairs Ministry mandates CAs to report violations of FCRA in their Audits

The Union Ministry of Home Affairs (MHA) of Foreign Division has announced that Chartered Accountants (CAs) filing audit returns on behalf of NGOs must specify whether the organisation violated provisions of the Foreign Contribution (Regulation) Act, 2010 (FCRA), according to officials on Sunday.

According to officials, the FCRA requires a CA to certify whether an association or NGO used foreign contributions received for the reasons for which it was registered, and annual statements must be uploaded to the FCRA portal.

The foreigners’ division stated in a December 31, 2024 notification, a copy of which is with the TNIE, that “CAs will have to mention the name, email address, and registration number of the auditor while issuing the audit certificate”.

It went on to say, “CAs will have to specify if the NGO has violated the provisions of FCRA, 2010 or rules made there under or notifications issued thereunder mentioning the details of the violations.” The auditors would also be required to clarify whether or not the NGO has committed any violations, it added.

“I have examined all relevant books and records, including the items mentioned in column 8 of FC-4, and to the best of my knowledge and belief (name of the person/ association) has not violated any provisions of the FCRA, thereunder or notifications issued thereunder.” The notification changes the Foreign Contribution (Regulation) Rules of 2011.

However, in response to the newly declared requirements, a member of an NGO stated that this would make it more difficult for non-governmental organisations (NGOs) to find auditors to file returns for them.

Earlier in 2021, the MHA recommended chartered accountants to guarantee that foreign funds be accepted and used by NGOs “within the four corners of the law”.

Although current notification gives NGOs the option of carry forward any unspent portion of permitted administrative expenses from one financial year to the next. The FCRA allows for just 20% of foreign funds to be spent on administrative expenses in a specified bank account with the State Bank of India (SBI).

It should be mentioned that since 2015, the FCRA registrations of over 16,000 NGOs have been cancelled due to “violation” of one or more provisions of the Act.

In addition, FCRA registration is required for non-profit organisations that accept donations or funds from abroad entities.