MHA directs NGOs to open account in designated banks integrated with PMFS

The Union Ministry of Home Affairs (MHA) has directed all NGOs, individuals and business entities receiving foreign funds to open accounts in any of 32 designated banks, including one foreign, within a month. The MHA order comes in exercise of the powers conferred under Foreign Contribution (Regulation) Act (FCRA), 2010.

Purpose

These accounts opened in 32 designated banks will be integrated with central government’s Public Financial Management System (PFMS). Its purpose is to provide higher level of transparency and hassle-free reporting compliance.

Background

In recent times, Government has tightened rules for NGOs and had taken action against all such entities for violation of various provisions of FCRA 2010 which include non-filing of annual returns as mandated in law. Government had cancelled registrations of 18,868 NGOs between 2011 and 2017 for violating laws.
The FCRA 2010 provides for regulation of acceptance of foreign funds/foreign hospitality by certain individuals, associations, organisations and companies. It ensures that such contributions or hospitality is not being utilised for activities detrimental to the national interest. Currently, around 10,000 FCRA-registered NGOs are operating in country.

Public Financial Management System (PFMS)

The PFMS is an end-to-end solution for processing payments, tracking, monitoring, accounting, reconciliation and reporting. It functions under the Controller General of Accounts in the Ministry of Finance.
It provides financial management platform for all plan schemes, database of all recipient agencies, integration with core banking solution of banks handling plan funds. It also provides integration with state treasuries and efficient and effective tracking of fund flow to lowest level of implementation for plan scheme of government.
It also provides information across on fund utilisation leading to better monitoring, review and decision support system to enhance public accountability in the implementation of plan schemes.
Significance: Its introduction has resulted in effectiveness in public finance management through better cash management for transparency in public expenditure and real-time information on resource availability and utilisation across schemes. It also has resulted in improved programme administration and management, direct payment to beneficiaries, reduction of float in system and greater transparency and accountability in use of public funds.

Month: Current Affairs - December, 2017