The Auroville Unity Fund proposal was first presented to the community in the middle of last year and it was first presented to the Governing Board at their meeting of September 2005. In November 2005 the FAMC set up a sub-group to look further into the proposal and come up with suggestions for its practical implementation.
The members of the sub-group were Anandi, Divya, Guy, Joster, Judith, Kathryn, Lyle, Michael T, Otto, Serge, Rathinam and Valerie. Selvaraj joined briefly at the end.
The presentation below represents the recommendations made by that sub-group with some feedback from the FAMC incorporated.
The main concern of both the sub-group and the FAMC has been that the creation of a completely new large representational working group, the Budget Coordination Committee, which though desirable in theory, may be difficult in practice due to shortage of people with competence in the realm of finance and budgeting.
For your consideration there is an alternative suggestion to the proposal outlined below, that the FAMC itself takes up this work. The reason for this suggestion is that the work of budgeting Auroville's income clearly lies within the existing mandate of the Funds and Assets Management Committee, which is already a widely representative group drawn from the more or less the same areas as though proposed for the Budget Coordination Committee.
Background to the proposal
Sources of income
Auroville Foundation receives income for the maintenance and development of Auroville from a variety of sources.
Projects are funded by direct grants from the Government of India;
Donations are received both specified and unspecified from Indian and foreign donors;
Commercial activities of units under the Auroville Foundation generate surplus income;
Unutilized incomes and reserves are invested and the interest income made available.
Auroville channels for income – present system
Government Grants are received into Auroville Foundation account and then transferred to the appropriate unit for utilization. (Some Governments grants are also received directly into the account of Auroville Fund and other units such as SAIIER, CSR, Auromitra, etc.)
All foreign donations are received into the Auroville Fund Bank account approved under the Foreign Contribution Regulations Act for receipt of all foreign funds into Auroville Foundation. Receipts are issued and signed by the Auroville Fund executives. Funds are then transferred to the appropriate Auroville units for utilization.
Indian donation incomes are directly received into various units depending upon the purpose of the donation; tax exempt receipts as appropriate are issued by the receiving unit but signed by Auroville Foundation officer.
Excess income from business units is transferred to Auroville units and projects at the discretion of the unit executive or retained in the unit as reserve for liabilities or development.
Interest income is utilized by the unit holding the reserve/deposits.
Disadvantages of the present system
Under this decentralized system, the income of Auroville is received through a number of channels. There is no one unit account which reflects either the totality of income or the associated expenditures. There is neither a unified financial planning process nor an overall Auroville budget.
It is a complex operation each year to compile for the tax authorities the required returns and reports of receipts and of utilization of incomes under the various tax exemptions availed of by the Auroville Foundation. It is not possible to easily obtain this overview from the Auroville Foundation balance sheet and accounts as presently presented to the Parliament
Further the reserves of the commercial activities are retained within the business unit accounts which lead the Income Tax authorities to question the application of this income.
AUROVILLE UNITY FUND
The Funds and Assets Management Committee, in consultation with the Working Committee and the Residents of Auroville, proposes to establish a unit AUROVILLE UNITY FUND–Auroville Foundation under the Auroville Foundation.
It is further proposed that the FAMC, with the approval of the Residents' Assembly, will constitute a working group called the Budget Coordination Committee (BCC), which will have the specific function of managing an all-Auroville budget, supervising and advising on the utilization of Auroville's income and budgets in such a way as to ensure that all income under the Auroville Foundation is applied towards the objectives of Auroville in an effective and transparent manner.
The unit AUROVILLE UNITY FUND–Auroville Foundation would have the following functions:
To receive centrally all donations and income of the Auroville Foundation
All grants and donations both foreign and Indian will come to the AUF, whether given for Matrimandir, Auroville Fund projects, SAIIER, CSR, etc. Other non-commercial income of the AUF would include guest contributions, Aurovilian contributions to Central Fund and interest on deposits.
All commercial surplus income and current fixed deposits will also come to the AUF. It is proposed that units can earmark their surplus subject to budget approval of the ABC–BAG (Budget Approval Group) and the BCC but it would remain in the AUF until needed.
The issuing of appropriate receipts for the income of Auroville including the tax exempt receipts for donations received under the various tax exemptions granted to Auroville Foundation.
As the AUF is to receive all the grants and donations, it is important that the Foreign Contribution Account is renamed and includes the Auroville Foundation in the account name, i.e. Auroville Unity Fund-Auroville Foundation-Foreign Contribution Account
Similarly tax exempt income from India will have to be received into relevant accounts called Auroville Unity Fund-Auroville Foundation-Social Science Research or Scientific Research to avoid perpetuating any confusion when it comes to depositing income from grants and donations from foreign sources and from donations from India eligible for tax exempt receipts. All authorizations to receive such funds and issue such receipts are given in the name of Auroville Foundation and recently the question has been raised about the use of bank accounts bearing the name of the unit to deposit these donations. The creation of the Auroville Unity Fund is seen as an opportune moment to resolve this issue.
Under the direction of the BCC and in accordance with the approved Auroville budgets, channeling all incomes, contributions and donations to the respective unit and budget accounts.
Ensuring that utilization of funds is in accordance with donors' specifications.
Ensuring that accounts and supporting documentation are properly maintained.
Creating a comprehensive overview of Auroville's income and expenditure.
The unit will have five executives who have the requisite skills to carry out the above functions in a spirit of goodwill, collaboration and transparency.
The following people are proposed as the executives of the Auroville Unity Fund:
Divya, Judith, Lyle, Otto and Rathinam ,
The Role of the Executives
The executives will be responsible for channelling all incomes, contributions and donations to the respective unit and budget accounts under the direction of the BCC and in accordance with the approved Auroville budgets, ensuring that utilisation of funds is in accordance with the donors' specifications , ensuring that accounts and supporting documentation are properly maintained and presenting an annual balance sheet of Auroville's income and expenditure.
The executives would also be responsible for ensuring that there is an adequate cash flow and that unutilized funds are invested to the best possible advantage for the Auroville Unity Fund. They will report regularly at least every quarter to the BCC and the FAMC on the state of the investments of Auroville Unity Fund. Investments would be done directly in the name of the AUF. (AVMF would only make investments with the funds deposited with them.)
The administrative expenses of the AUF will be covered either from a 1% deduction on all income or from the interest accrued from deposits. This will be decided by the Budget Coordination Committee. Auroville Fund, CSR, etc. will continue to cover their expenses from % contributions from projects. The AUF is not expected to add significant administrative expenses to the current setup.
Sanctioning Loans and Advances
It is proposed that, for the time being decision-making with regard to the sanctioning of loans and advances from the unutilised funds in the Auroville Unity Fund to Aurovilians and Auroville projects will follow the existing guidelines. Currently requests for loans or advances under Rupees one lakh can be sanctioned by the executives, above Rupees one lakh but below Rupees five lakhs the sanction can be given by the Small Loans sub-groups of the FAMC or the ABC, above Rupees five lakhs the prior approval of the FAMC is required. It is envisaged that this function will be taken up by the Budget Coordination Committee in due time.
Central Fund/ Economy Group
When the AUF is operational, it is proposed that the Central Fund will be one account which will receive a budget and the Economy Group will disburse it to the various services. The Central Fund will become a unit with a balance sheet. The Economy Group is already working toward complete double entry accounting of the disbursement of the Central Fund.
It was proposed to rename the Economy Group as the Central Fund Management Group.
The Group will have representation on the BCC.
In the new context Auroville Fund will remain a unit and will receive from the Auroville Unity Fund only the grants and donations for the projects it administers. Grants and donations from foreign sources which are currently channelled through Auroville Fund to other accounting groups and Trusts such as SAIIER, CSR, Auromitra, Health and Healing Trust, Auroville Village Action Trust will be directly channelled from the Auroville Unity Fund.
Auroville Maintenance Fund
The Auroville Maintenance Fund will need to be renamed. Its function will be confined to handling deposits accounts of individuals, activities and units and facilitating transfers and cash disbursements from those deposit accounts. The AVMF will continue to invest the unutilized funds accrued from these deposits. As Aurovilians deposit money with AVMF rather than keeping it in commercial banks because they agree that the interest accrued can be a donation to Auroville , this interest will, after relevant administrative expenses, be transferred to the AUF.
The Budget Coordination COMMITTEE will be mandated to carry out the following functions under the Funds and Asset Management Committee (FAMC):
- Co-coordinating the allocation of Auroville's income towards the development and maintenance budgets of Auroville, keeping in mind the direction and aims given by the Mother.
- Setting priorities and taking decisions for the allocation of Auroville's unspecified reserves, unspecified surplus incomes and unspecified donations in consultation with all concerned groups.
- Developing an annual Auroville maintenance and development budget in collaboration with the appropriate working groups.
- Developing a medium-term financial development plan.
- Publishing Auroville's annual budget for information.
- Providing relevant data to both the FAMC, the community and the Auroville Foundation as and when needed.
- Providing information to the FAMC and other relevant working groups about important economic trends within the community.
The group will be constituted by the FAMC and the members of the group will be proposed by the following working groups and activities. Those proposed need not be members of the listed groups.
- Auroville Board of Commerce
- Central Fund Management Group (Economy Group)
- Development & Infrastructure (Housing included)/ APDC
- Education and Culture
- Farms & Forests/Green Group
- Land Consolidation Committee
- Project Coordination Group
- Village Outreach/ Bio- regional Development
- Community at Large
- AUF executives
The list of areas of activity represented above for membership is meant as an indication only and may change and evolve.
The personal criteria for membership will be:
- Proven commitment to the realization of a collective organization and economy as envisaged by the Mother for Auroville
- A capacity to see beyond the particular needs of their own area of work and an openness and concern for the well being of all aspects of Auroville's maintenance and development.
- Capacity to working in a team in a spirit of goodwill, collaboration and transparency;
- Affinity and/or experience with community work in the domain of finances and assets management.
The group will select a chairperson from amongst themselves or from outside the membership if necessary and appoint a secretary to assist the members in carrying out their responsibilities and tasks .
The proposed term of office will be 3 years with the possibility of renewal.
Decisions in meetings of the BCC shall preferably be made by consensus. In case no consensus can be reached, decisions shall be made by consent, which implies that all arguments concerning the decision under discussion have been presented, and that no one of the persons present has any reasoned objection against the decision proposed. If the BCC cannot arrive at a decision by consent the issue can be referred to the FAMC.
The Mandate and the general constitution of the Budget Coordination Committee were approved by the Resident's Assembly Meeting of 10.02.2006.