Section 19 of the FCRA 2010 provides that proper books of account with regard to FC receipt and utilization should be maintained. Further Rule 11 of FCRR 2011 provides that separate books of account and records should be maintained exclusively for foreign contribution received and utilized.
Maintenance of accounts. - Every person who has been granted registration or prior permission under section 12 shall maintain a separate set of accounts and records, exclusively, for the foreign contribution received and utilized.'
It may also be noted that the FCRA, 2010 requires filing of Income and Expenditure account, annually, which was not necessary earlier. Therefore, Books of Accounts should be maintained in such a way that the following statements can be prepared for the requirement of the form FC-4.
FCRA 2010 and FCRR, 2011 do not prescribe any specific method of accounting. Therefore, technically speaking, any legally consistent and otherwise acceptable method of accounting can be used for maintaining books of account for FCRA purposes.
Earlier, filing of Income and Expenditure account was not necessary which implied that FCRA reporting was strictly on cash basis. However, with the inclusion of Income and Expenditure account it is clear that under FCRA 2010 both accounting and reporting need not necessarily be on cash basis.
However, looking at the current structure and the requirements of the revised FC-4 form, it is always advisable that cash basis of accounting should be followed while filing the FCRA Annual returns since information such as Administrative expenditures, Transfers to other association etc needs to be filed on cash basis only.
Summarizing the above concepts, FCRA does not prescribe any method of accounting, and hence, any method of accounting (Cash, accrual or hybrid basis) may be followed in the FCRA books of accounts. However, FC-4 should be filed only on cash basis because of the structure and the requirements of the revised FC-4 form.
FCRR 2011 provides that the financial statements should be preserved up to six years. This provision is a great relief to the various organizations as in the old Act, the power to call for information and statements was not defined. Now the organizations should preserve financial statement and records thereof for six years only.