Advances under FCRA

Advances under FCRA

It is not permissible to transfer FC programme funds to the bank account of the staff. Many organizations follow this practice for transferring project funds to remote places.However such practices may not be legally consistent. Some legal and accounting reasons against such practices are explained below.

Handling money or funds as a part of employment contract is permissible but accepting a fund for definite purpose in fiduciary capacity is not permissible. When an employee is handling the cash he/she is not a trustee to the fund, he/she is just an extended arm of the organization. For example, if an employee is withdrawing cash from the bank account of the organization; the organization can take transit insurance and if there is a theft then the FIR (First Information Report) can also be filed in the name of the organization. However, if the employee is withdrawing cash from his/her personal bank account the organization cannot take transit insurance and if there is a theft then the FIR (First Information Report) cannot be filed in the name of the organization.

Further, if some amount remains unutilized in the personal bank account of the staff at the end of the year, then such amount cannot be treated as a part of the FC closing balance of the organization, but the cash in hand with the employee is always be treated as a part of the FC closing balance of the organization.

Based on the above it is advised that NPOs should not transfer FC funds to the bank account of their employees to implement programmes in remote places.

 

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