Indian Railway Codes and Manuals-General Financial Rules-2017-Chapter- 4 (IV) GFR-2017.

 

Chapter – 4

GOVERNMENT ACCOUNTS

Rule 71

Preparation and presentation of Accounts. Accounts of the Union Government shall be prepared every year showing the receipts and disbursements for the year, surplus or deficit generated during the year and changes in Government liabilities and assets. The accounts shall be prepared by Controller General of Accounts, certified by the Comptroller and Auditor General of India and along with the report of the Comptroller and Auditor General of India on these accounts, shall be submitted to the President of India, preferably within six months of close of the Financial Year, who shall cause them to be laid before each House of Parliament.

Rule 72

Form of Accounts. By virtue of the provisions of Article 150 of the Constitution, the Accounts of the Union Government shall be kept in such form as the President may, on the advice of the Comptroller and Auditor General of India, prescribe. The Controller General of Accounts in the Ministry of Finance (Department of Expenditure) is responsible for prescribing the form of accounts of the Union and States, and to frame, or revise, rules and manuals relating thereto on behalf of the President of India in terms of Article 150 of the Constitution of India, on the advice of the Comptroller and Auditor General of India.

Rule 73

Principles of Accounting. The main principles according to which the accounts of the Government of India shall be maintained are contained in Government Accounting Rules, 1990; Accounting Rules for Treasuries; and Account Code VolumeIII. Detailed rules and instructions relating to the forms of the initial and subsidiary accounts to be kept and rendered by officers of the Department of Posts and other technical departments are laid down in the respective Accounts Manuals or in the departmental regulations relating to the Departments concerned.

Rule 74

Cash based Accounting. Government accounts shall be prepared on cash basis. With the exception of such book adjustments as may be authorised by Government Accounting Rules, 1990 or by any general or special order issued by the Central Government on the advice of the Comptroller and Auditor General of India, the transactions in Government accounts shall represent the actual cash receipts and disbursements during a financial year as distinguished from amounts due to or by Government during the same period.

Rule 75

Period of Accounts. The annual accounts of the Central Government shall record transactions which take place during a financial year running from the 1st April to the 31st March thereof.

Rule 76

Currency in which Accounts are kept. The accounts of Government shall be maintained in Indian Rupees. All foreign currency transactions and foreign aid shall be brought into account after conversion into Indian Rupees.

Rule 77

Main Divisions and structure of Accounts. The accounts of Government shall be kept in three parts, Consolidated Fund (Part-I), Contingency Fund (Part-II) and Public Account (Part-III). Part-I – Consolidated Fund is divided into two Divisions, namely, ‘Revenue’ and ‘Capital’ divisions. The Revenue Division comprises the following sections: ‘Receipt Heads (Revenue Account)’ dealing with the proceeds of taxation and other receipts classified as revenue and the section ‘Expenditure Heads (Revenue Account)’ dealing with the revenue expenditure met therefrom. The Capital Division comprises three sections, viz., ‘Receipt Heads (Capital Account)’, ‘Expenditure Heads (Capital Account)’ and ‘Public Debt, Loans and Advances, etc.’. These sections are in turn divided into sectors such as ‘General Services’, ‘Social and Community Services’, ‘Economic Services’, etc., under which specific functions or services are grouped corresponding to the sectors of classification and which are represented by Major Heads (comprising Sub-Major Heads wherever necessary). In Part-II – Contingency Fund- are recorded transactions connected with the Contingency Fund set up by the Government of India under Article 267 of the Constitution or Section 48 of Government of Union Territories Act, 1963. There shall be a single Major Head to record the transactions thereunder, which will be followed by Minor, Sub and/or Detailed Heads. In Part-III – Public Account- transactions relating to debt (other than those included in Part-I), reserve funds, deposits, advances, suspense, remittances and cash balances shall be recorded.

Rule 78

Classification of transactions in Government Accounts. As a general rule, classification of transactions in Government Accounts, shall have closer reference to functions, programmes and activities of the Government and the object of revenue or expenditure, rather than the department in which the revenue or expenditure occurs. Major Heads (comprising Sub-Major Heads wherever necessary) are divided into Minor Heads. Minor Heads may have a number of subordinate heads, generally known as Sub Heads. The Sub Heads are further divided into Detailed Heads followed by Object Heads. The Major Heads of account, falling within the sectors for expenditure heads, generally correspond to functions of Government, while the Minor Heads identify the programmes undertaken to achieve the objectives of the functions represented by the Major Head. The Sub Head represents schemes, the Detailed Head denotes sub scheme and Object Head represent the primary unit of appropriation showing the economic nature of expenditure such as salaries and wages, office expenses, travel expenses, professional services, grants-in-aid, etc. The above six tiers are represented by a unique 15 digit numeric code.

Rule79

Authority to open a new Head of Account. The List of Major and Minor Heads of Accounts of Union and States is maintained by the Ministry of Finance (Department of Expenditure – Controller General of Accounts) which is authorised to open a new head of account on the advice of the Comptroller and Auditor General of India under the powers flowing from Article 150 of the Constitution. It contains General Directions for opening Heads of Accounts and a complete list of the Sectors, Major, Sub-Major and Minor Heads of Accounts and also some Sub/detailed heads, authorised to be so opened. Ministries/Departments may open SubHeads and Detailed Heads as required by them in consultation with the Budget Division of the Ministry of Finance. Their Principal Accounts Offices may open Sub/Detailed Heads required under the Minor Heads falling within the Public Account of India subject to the above stipulations. The Object Heads have been prescribed under Government of India’s Orders below Rule 8 of Delegation of Financial Power Rules. The power to amend or modify these Object heads and to open new Object Heads rest with Department of Expenditure of Ministry of Finance on the advice of the Comptroller and Auditor General of India.

Rule 80

Conformity of budget heads with rules of classification. Budget Heads exhibited in estimates of receipts and expenditure framed by the Government or in any appropriation order shall conform to the prescribed rules of classification.

Rule 81

Responsibility of Departmental officers. Every officer responsible for the collection of Government dues or expenditure of Government money shall see that proper accounts of the receipts and expenditure, as the case may be, are maintained in such form as may have been prescribed for the financial transactions of Government with which he is concerned and tender accurately and promptly all such accounts and returns relating to them as may be required by Government, Controlling Officer or Accounts Officer, as the case may be.

Rule 82

Classification should be recorded in all the bills and challans by Drawing Officers. Suitable classification shall be recorded by Drawing Officers on all bills drawn by them. Similarly, classification on challans crediting Government money into the Bank shall be indicated or recorded by Departmental Officers responsible for the collection of Government dues, etc. In cases of doubt regarding the Head under which a transaction should be accounted, the matter shall be referred to the Principal Accounts Officer of the Ministry/ Department concerned for clarification of the Ministry of Finance and the Controller General of Accounts, wherever necessary.

Rule 83

Charged or Voted Expenditure. The expenditure covered under Article 112 (3) of the Constitution of India is charged on the Consolidated Fund of India and is not subject to vote by the legislature. All other expenditure met out of the Consolidated Fund of India is treated as Voted expenditure. Charged or Voted Expenditure shall be shown separately in the accounts as well as in the Budget documents.

Rule 84

Capital or Revenue Expenditure. Significant expenditure incurred with the object of acquiring tangible assets of a permanent nature (for use in the organisation and not for sale in the ordinary course of business) or enhancing the utility of existing assets, shall broadly be defined as Capital expenditure. Subsequent charges on maintenance, repair, upkeep and working expenses, which are required to maintain the assets in a running order as also all other expenses incurred for the day to day running of the organisation, including establishment and administrative expenses shall be classified as Revenue expenditure. Capital and Revenue expenditure shall be shown separately in the Accounts.

Rule 85

Banking Arrangements. The Reserve Bank of India (RBI) shall be the banker to the Government. It shall maintain cash balance of the Government and provide banking facilities to the Ministries and subordinate or attached offices either directly through its own offices or through its agent banks. For this purpose, RBI shall, in consultation with the Controller General of Accounts, nominate a bank to function as Accredited Bank of a Ministry or Department. Pay & Accounts offices and Cheque Drawing and Disbursing Officer shall have assignment accounts with the identified branches of the Accredited Bank of the Ministry. All payments shall be made through these identified bank branches. These branches shall also collect departmental and other receipts. Tax revenues of the Government shall be collected by the RBI through its own offices or through the nominated branches of its agent banks. Note: Detailed procedure to be followed for remittance of Government receipts into Government cash balance and reimbursement of payments made on behalf of Government by the banks are laid down in the Memoranda of Instructions issued by the Reserve Bank of India.

Rule 86

Public Financial Management System (PFMS).— (1) Public Financial Management System (PFMS), an integrated Financial Management System of Controller General of Accounts, Government of India, shall be used for sanction preparation, bill processing, payment, receipt management, Direct Benefit Transfer, fund flow management and financial reporting. (2) All the ministries sanctioning grant-inaid shall register all implementing a g e n c i e s t i l l l a s t l e v e l o f implementation on PFMS to track fund flow and unspent balances. (3) All the payment, to the extent possible, shall be released ‘just-in-time’ by the Ministries through PFMS. (4) Detailed Demand for Grants (DDG), as approved, must be uploaded on PFMS at the start of each Financial Year. (5) All the re-appropriation orders, surrender order shall be generated through PFMS system. (6) All grantee institutions shall submit Utilisation Certificates on PFMS.

Rule 87

Direct Benefit Transfer.

(1) Transfer of benefits should be done directly to beneficiaries under various G o v e r n m e n t S c h e m e s a n d Programmes using Information and Communication Technology (ICT). Necessary process reengineering to minimise intermediary levels and to reduce delay in payments to intended beneficiaries with the objective of minimising pilferage and duplication should be done for all Government Schemes and Programmes. The process for implementation of DBT as prescribed should be adopted.

(2) DBT should include in-kind and cash transfers to beneficiaries as well as transfers/honorariums given to various enablers of government schemes like community workers, etc. for successful implementation of the schemes.

(3) Transfer of cash benefits from Ministries/Departments should be done (a) directly to beneficiaries from Ministries/Departments; (b) through State Treasury Account; or (c) through any Implementing Agency as a p p o i n t e d b y C e n t r e / S t a t e Governments.

(4) In-kind Transfer to Individual Beneficiary/ Household/Service provider includes schemes or components of schemes where in-kind benefits are given by the Government or through any Implementing Agency as appointed by Centre/State G o v e r n m e n t s t o I n d i v i d u a l Beneficiary/Household/Service providers.

(5) Ministries/Departments will use PFMS platform for processing of payments for cash / in kind transfers to individual beneficiaries as per framework laid down by Department of Expenditure, Ministry of Finance.

(6) Implementing Agencies shall generate Electronic Utilisation Certificate (E-UCs) on PFMS portal and submit them online. E-UCs shall be used to certify that money was actually utilized for the purpose for which it was sanctioned to eliminate the need for physical generation of UCs.

(7) Transaction charges for the financial intermediaries facilitating DBT payments shall be paid as stipulated by Ministry of Finance.

II. ANNUAL ACCOUNTS

Rule 88

Appropriation Accounts. Appropriation Accounts of Central Ministries (other than Ministry of Railways) and of Central Civil Departments (excluding Department of Posts and Defence Services) shall be prepared by the Principal Accounts Officers of the respective Ministries and Departments (under the guidance and supervision of the Controller General of Accounts) and signed by their respective Chief Accounting Authorities i.e., the Secretaries in the concerned Ministries or Departments. Union Government Appropriation Accounts (Civil) required to be submitted to Parliament, shall be prepared annually by the Controller General of Accounts by consolidating the aforesaid Appropriation Accounts. Appropriation Accounts pertaining to Departments of Posts and Defence Services shall be prepared and signed by the Secretaries to the Government of India in the Department of Posts and Ministry of Defence respectively and that of Ministry of Railways by the Chairman, Railway Board.

Rule 89

Finance Accounts. Annual accounts of the Government of India (including transactions of Department of Posts and Ministries of Defence and Railways and transactions under Public Account of India of Union Territory Governments), showing under the respective Heads the annual receipts and disbursements and statement of balances for the purpose of the Union, called Finance Accounts, shall be prepared and signed by the Controller General of Accounts countersigned by the Secretary (Expenditure), Ministry of Finance.

Rule 90

Presentation of Annual accounts. The Appropriation and Finance accounts mentioned above, shall be prepared by the respective authorities on the dates mutually agreed upon with the Comptroller and Auditor General of India, in the forms prescribed by the President on the advice of the Comptroller and Auditor General of India and sent to the latter for recording his/her certificate. The certified Annual Accounts and the Reports relating to the accounts shall be submitted by the Comptroller and Auditor General of India to the President in accordance with the provisions of Section 11 of the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 and Clause (1) of Article 151 of the Constitution of India.

Rule 91

Administrative Ministries / PSUs / Subordinate / Statutory / Autonomous Bodies may have financial stakes in Public Private Partnerships (PPP)/ Production Sharing Contracts (PSCs)/ Joint Ventures (JV’s)/ Subsidiary companies etc. In such case details of the financial stakes of the Government or other entities mentioned above, should be disclosed in the Annual Report of the Administrative Ministry.

III. PROFORMA ACCOUNTS

Rule 92

Subsidiary Accounts of Government Departments undertaking commercial activities. Where the operations of certain Government Departments working on a commercial or quasi-commercial basis e.g., an industrial factory or a store cannot be suitably brought within the cash based Government accounting system, the Head of the units shall be required to maintain such subsidiary proforma accounts in commercial form as may be agreed between Government and Comptroller and Auditor General of India. This includes the maintenance of suitable Manufacturing, Trading, Profit & Loss Accounts and Balance Sheet.

Rule 93 Methods and principles on which subsidiary accounts in commercial form are to be kept. The methods and principles in accordance with which subsidiary and proforma accounts in commercial form are to be kept shall be regulated by orders and instructions issued by Government in each case.

Note 1. Proforma accounts of regular Government Workshops and Factories shall be kept in accordance with the detailed rules and procedure prescribed in the departmental regulations. Proforma accounts relating to Public Works shall be prepared by the Accounts Officers in accordance with the instructions contained in Account Code for Accountants General.

Note 2. The Heads of Account (which should, as far as possible, be common to the Government accounts and the General Ledger maintained by a Commercial Undertaking) shall be selected with due regard to the principles of Governmental and Commercial accounting so that the monthly classified account of income and expenditure of the undertaking may be prepared readily from the General Ledger maintained by it.

Rule 94

Adequate regulations to be framed to ensure cost deduced is accurate and true. Where commercial accounts are maintained for the purpose of assessment of the cost of an article or service, the Head of the unit shall ensure that adequate regulations are framed with the approval of Government in order to ensure that the cost deduced from the accounts is accurate and true.

Rule 95

Maintenance and submission of subsidiary accounts and statements by department units. The Head of the unit shall arrange to obtain the orders of Government regarding the nature and form of subsidiary accounts and statements, if any. Such accounts and statements shall be submitted to the Accounts Officer on such date as may be required by him. The same shall be appended to the Appropriation Accounts of each year.

 

 

 

IV. PERSONAL DEPOSIT ACCOUNTS

Rule 96

Personal Deposit Account. Personal Deposit Account is a device intended to facilitate the Designated Officer thereof to credit receipts into and effect withdrawals directly from the account, subject to an overall check being exercised by the bank in which the account is authorised to be opened. The Designated Officer shall ensure (with the help of a personal ledger account to be maintained by the bank for the purpose) that no withdrawal will result in a minus balance therein. Only Government officers acting in their official or any other capacity shall be the Designated Officer thereof.

Rule 97

(1) Authority to open Personal Deposit Account. The Personal Deposit Account shall be authorised to be opened by a special order by the concerned Ministry or Department in consultation with the Controller General of Accounts. Such special order or permission shall be issued or granted by the Ministry or Department concerned after it is satisfied that the initial accounts of the moneys to be held in a personal deposit account and disbursed, shall be arranged to be maintained properly and shall be subject to audit. Every personal deposit account so authorised to be opened, shall form part of the Government Account and be located in the Public Account thereof. The provisions relating to “Personal Deposit Account” are contained in para 16.7 of Civil Accounts Manual and Rule 191 to 194 of Central Government Account (Receipts and Payments) Rules.

Rule 97

(2) Personal Deposit accounts shall generally be authorised to be opened in the following types of cases:

a) in favour of a Designated Officer appointed for the purpose of administering monies tendered by or on behalf of wards and attached e s t a t e s u n d e r G o v e r n m e n t management. It shall also be ensured that proper arrangements are made for the maintenance and audit of connected initial accounts; (b) in relation to Civil and Criminal Courts’ deposits, in favour of the Chief Judicial Authority concerned; (c) where, under certain regulatory activities of the Government, receipts are realised and credited to a Fund or Account under the provisions of an Act to be utilised towards expenditure thereunder and no outgo from the Consolidated Fund is involved. (d) where a personal deposit account is required to be created by a law or rules having the force of law and certain liabilities devolve on the Government out of the special enactments; (e) officers commanding units and others concerned in the administration of public funds in the Defence Departments can be authorised to open personal deposit accounts for such funds.

V. CAPITAL AND REVENUE ACCOUNTS

Rule 98

Capital Expenditure. Significant expenditure incurred with the object of acquiring tangible assets of a permanent nature (for use in the organisation and not for sale in the ordinary course of business) or enhancing the utility of existing assets, shall broadly be defined as Capital expenditure. Subsequent, charges on maintenance, repair, upkeep and working expenses, which are required to maintain the assets in a running order as also all other expenses incurred for the day to day running of the organisation, including establishment and administrative expenses, shall be classified as Revenue expenditure. Capital and Revenue expenditure shall be shown separately in the Accounts. Expenditure on a temporary asset or on grants-in-aid cannot ordinarily be considered as a capital expenditure and shall not, except in cases specifically authorised by the President on the advice of the Comptroller and Auditor General of India, be debited to a Capital Head. Capital expenditure is generally met from receipts of capital nature, as distinguished from ordinary revenues derived from taxes, duties, fees, fines and similar items of current income including extraordinary receipts. It is open to the Government to meet capital expenditure from ordinary revenues, provided there are sufficient revenue resources to cover this liability. Expenditure of a Capital nature as defined above, shall not be classed as Capital expenditure in the Government Accounts unless the classification has been expressly authorised by general or special orders of Government. Expenditure of a Capital nature shall be distinguished from the Revenue Expenditure both in the Budget Estimates and in Government Accounts.

Rule 99

Principles for allocation of expenditure between Capital and Revenue. The following are the main principles governing the allocation of expenditure between Revenue and Capital: (a) Capital shall bear all charges for the first construction and equipment of a project as well as charges for intermediate maintenance of the work while not yet opened for service. It shall also bear charges for such further additions and improvements, which enhance the useful life of the asset, as may be sanctioned under rules made by competent authority. (b) Subject to Clause (c) below, revenue shall bear subsequent charges for maintenance and all working expenses. These embrace all expenditure on the working and upkeep of the project and also on renewals and replacements and additions, improvements or extensions that are revenue in nature as per rules made by Government. (c) In the case of works of renewal and replacement, which partake expenditure both of a capital and revenue nature, the allocation of expenditure shall be regulated by the broad principle that Revenue should pay or provide a fund for the adequate re- placement of all wastage or depreciation of property originally provided out of capital grants. Only the cost of genuine improvements, which enhance the useful life of the asset whether determined by prescribed rules or formulae, or under special orders of Government, may be debited to Capital. Where under special orders of Government, a Depreciation or Renewals Reserve Fund is established for renewing assets of any commercial department or undertaking, the distribution of expenditure on renewals and replacements between Capital and the Fund shall be so regulated as to guard against overcapitalisation on the one hand and excessive withdrawals from the Fund on the other. (d) Expenditure on account of reparation of damage caused by extraordinary calamities such as flood, fire, earthquake, enemy action, etc., shall be charged to Capital, or to Revenue, or divided between them, depending upon whether such expenditure results in creation/acquisition of new assets or whether it is only for restoring the condition of the existing assets, as may be determined by Government according to the circumstance of each case. (e) Expenditure on a temporary asset cannot ordinarily be considered as a capital expenditure and shall not, except in cases specifically authorised by the President on the advice of the Comptroller and Auditor General of India, be debited to a Capital Head.

Rule 100

Allocation between capital and revenue expenditure : The allocation between capital and revenue expenditure on a Capital Scheme for which separate Capital and Revenue Accounts are to be kept, shall be determined in accordance with such general or special orders as may be prescribed by the Government after consultation with the Comptroller and Auditor General of India

Rule 101

Capital receipts during construction mainly to be utilised in reduction of capital expenditure : Capital receipts in so far they relate to expenditure previously debited to Capital accruing during the process of construction of a project, shall be utilised in reduction of capital expenditure. Thereafter their treatment in the accounts will depend on circumstances, but except under special rule or order of Government, they shall not be credited to the revenue account of the department or undertaking.

Rule 102

Receipts and recoveries representing recoveries of expenditure previously debited to Capital Major Head: Receipts and recoveries on Capital Account in so far as they represent recoveries of expenditure previously debited to a Capital Major Head shall be taken in reduction of expenditure under the Major Head concerned except where, under the rules of allocation applicable to a particular department, such receipts have to be taken to Revenue.

Rule 103

Conversion of outstanding loans into equity investments or grants-in-aid. Government takes from time to time, suitable measures to strengthen/ restructure the Capital base of public sector enterprises so that these enterprises can improve their performance and productivity. As a part of the package scheme, financial relief in the form of conversion of outstanding loans into equity investments or grants-in-aid are also agreed to. Where loans outstanding against Public Sector Undertakings are proposed to be converted into equity investments in or as grants-in-aid to the Public Sector Undertakings, the approval of the Parliament to such proposals, shall be obtained by including a token provision in the relevant Demands for Grants or Supplementary Demands for Grants as may be found expedient. The details of such conversion of loans may be explained in the relevant Budget/Supplementary Demand documents. After obtaining the approval of the Parliament, the balances under loans and the progressive expenditure of the Capital Heads of Accounts shall be corrected proforma in the relevant Accounts of the Union  Government, under the Loan/Capital Major Heads concerned.

 

VI. INTEREST ON CAPITAL

Rule 104

Interest rate. Except in special cases regulated by special orders of Government, interest at such rates as may be specified from time to time shall be charged in the accounts of all Commercial Departments or units for which separate capital and revenue accounts are maintained within the Government accounts.

Rule 105

(1) Charging of interest on capital outlay met out of specific loans raised by Government. For capital outlay met out of specific loans raised by Government, the interest shall be charged at such rate as may be prescribed by Government, having regard to the rate of interest actually paid on such loans and the incidental charges incurred in raising and managing them. By specific loans are meant loans that are raised in the open market for one specific purpose which is clearly specified in the prospectus and in regard to which definite information is given at the time of raising of the loans. Rule 105 (2) For capital outlay provided otherwise, interest shall be charged at the rate of interest to be determined each year by the Department of Economic Affairs, Ministry of Finance.

Rule 106

Method of calculation of interest. The interest shall be calculated on the direct capital outlay at the end of the previous year plus half the outlay of the year itself, irrespective of whether such outlay has been met from current revenues or from other sources. Rule 107 How interest charged to capital is to be written back. When under any special orders of Government, charges for interest during the process of construction of a project are temporarily met from capital, the writing back of capitalised interest shall form the first charge on any capital receipts or surplus revenue derived from the project when opened for working.

VII. ADJUSTMENT WITH GOVERNMENT DEPARTMENTS ETC

Rule 108

Adjustments with State Governments. Subject to the relevant provision of the Constitution or of law made by Parliament or any orders issued thereunder, adjustments in respect of financial transactions with State Governments shall, unless otherwise provided for, be made in such manner, and to such extent as may be mutually agreed upon between the Central Government and the State Government concerned. However, adjustments with State Government in respect of the matters mentioned below shall be regulated by the rules contained in Appendix-5 to the Government Accounting Rules, 1990. The rules are based on reciprocal arrangements made with the State Governments and are, therefore, binding on all of them:- (i) Pay and Allowances, other than Leave Salaries. (ii) Leave Salaries. (iii) Pensions. (iv) Expenditure involved in Audit and keeping Accounts. (v) Cost of Police functions on Railways including the cost of protecting Railway Bridges. (vi) Cost of Forest Surveys carried out by the Survey of India, and Forest maps prepared by that Department. (vii) L e a v e S a l a r y a n d Pe n s i o n Contributions recovered in respect of Government servants lent on Foreign Service

Rule 109

Re-audit. As a convention, a period of three years has been accepted by the Central and State Governments for the reaudit of past transactions involving errors in classification

Rule 110

When adjustment necessary. Adjustment shall always be made unless otherwise agreed upon — (a) If a commercial department or undertaking or a regularly organised store department or store section of a department is concerned, or (b) If under the operation of any rule or order, an adjustment would have been made if the particular transaction with State Government were a transaction between two departments of the Central Government.

Rule 111

Petty and isolated claims for services rendered not to be preferred. The Central Government (which includes Union Territories) and the State Governments have agreed under reciprocal arrangements not to prefer petty and isolated claims for an amount not exceeding Rupees ten thousand against one another

Rule 112

Criteria in determining whether a particular claim is covered by the reciprocal arrangement. The significant criterion in determining whether a particular claim is covered by the reciprocal arrangement mentioned above, will be that the claim shall be both petty and of an occasional character and shall cover services rendered and not supplies made unless the latter forms part of service. The term “service rendered” will be taken to mean an individual act of service, like providing police escort to a high dignitary and will not apply to supply of stores etc. Claims relating to Commercial undertakings under the Government of India or the State Governments such as those of the Railways, the Department of Post, the Electrical undertakings, etc., shall fall outside the purview of the proposed reciprocal arrangements and shall continue to be settled as hitherto. If a doubt arises as to whether a particular claim would fall within or outside the purview of the proposed arrangement, it shall be decided by mutual consultation. The above arrangements will remain in force without any time limit in respect of all State Governments.

Rule 113

Projects jointly executed by several State Governments. In the case of Projects, jointly executed by several Governments, where the expenditure is to be shared by the participating Governments in agreed proportions, but the expenditure is ab-initio incurred by one Government and shares of other participating Governments recovered subsequently; such recoveries from other Governments shall be exhibited as abatement of charges under the relevant expenditure Head of Account in the books of the Governments incurring the expenditure initially

Rule 114

Claims of State Governments on account of the extra cost of agency functions. Claims of State Governments, on account of the extra cost of agency functions entrusted to them under Article 258 of the Constitution shall be dealt with and settled in accordance with such directions as may be issued by the President in this regard from time to time

Rule 115

The following principles shall be generally observed in dealing with claims preferred by State Governments under Clause (3) of Article 258 of the Constitution: — (i) If the agency work involves the employment of a State Commercial Department, it would be open to that department to charge its normal commercial costs. (ii) Public Works Department agency costs shall be represented by such percentage charges on the cost of Central Works executed by the State as may be agreed between the Central and the State Government concerned, works outlay being treated as an amount placed at the disposal of the State Government for actual expenditure on the execution of the work. (iii) The cost of regular joint establishment shall be shared as far as practicable on the basis of fixed annual sums settled in agreement with the State Government concerned. (iv) In other cases, the following procedure shall be adopted unless there are special orders to the contrary:- (a) Details of claims preferred by State Governments shall be ascertained. (b) If the work has been performed by the State Government in the past, the charges shall be compared with those charged in the past but it is not necessary to be meticulous in the matter. (c) If the charges are found to be reasonable and do not exceed Rupees Fifty thousand per annum for any individual item (or connected group of items), a five years contract shall be offered to the State Government during which the Central Government would pay the fixed sum per annum for the work. The amount will be subjected to review at the end of each period of five years. (d) If the amount agreed upon exceeds Rupees Fifty thousand, it shall be necessary to have an annual statement of proposed c h a r g e s f r o m t h e S t a t e Government at the time of preparation of the Budget. However, if in any individual case, the charges are obviously static, then the contract system may be adopted in these cases also. (v) In exceptional cases in which arbitration has to be resorted to, the Ministry of Finance will make the requisite arrangement in the matter. (vi) The Ministry of Finance shall be consulted on all matters arising under Article 258 (3) of the Constitution.

Rule 116

Principles governing transactions in connection with the agency functions entrusted to State Government. The following procedure shall be followed in regard to transactions arising in connection with the agency functions entrusted to the State Governments under Article 258 of the Constitution: (i) The expenditure on extra staff or contingencies which the State Government have to incur-The extra cost to the State Government arising mainly in respect of the additional staff employed or contingent and other expenditure, as in the case of work devolving on the State Governments in connection with the administration of the Census Act, is reimbursable under Article 258 (3) of the Constitution. Expenditure in this regard shall be provided in the State Budget in the first instance and adjusted in the accounts of the State Governments under the normal Heads of Accounts. These will be reimbursed in lumpsum to the State Governments, necessary provision being made under a distinct sub-head ”Amounts paid to other Governments, Departments, etc.”, under the concerned Demand of the Ministry administratively concerned with the subject. In computing the extra cost, the element of leave and pensionary charges can also be included, provided the relevant service and financial rules of the State Governments provide for this. (ii) The expenditure on work entrusted to the State Government, such as expenditure on construction and m a i n t e n a n c e o f N a t i o n a l Highways, expenditure on Defence Works, Aviation Works, etc.-The expenditure directly connected with the execution of the scheme or work entrusted to the State Government such as expenditure on the construction or maintenance of National Highways etc., will be adjusted direct in the accounts of the Central Government under the relevant Head of Account. The question of including the estimates in this regard in the Budget of the State Governments and subjecting them to the vote of the State Legislature will not arise. The expenditure will be adjusted under the Head “8658 – Suspense Accounts –PAO Suspense” in the Remittance Section of the State Accounts in the first instance pending their eventual clearance in accordance with the prescribed procedure. Note: In the converse case relating to the entrustment of a State function to the Central Government under Article258-A of the Constitution, a procedure similar to that indicated in the Rule 116 above shall be followed. The extra cost on staff and other contingent expenditure, etc., will accordingly have to be provided in the Budget of the Central Government in the usual manner and recovery made in lumpsum from the State Government concerned. The other expenditure on execution of the work proper should be debited to the State Government concerned directly and the question of obtaining a vote of the Parliament for the same will not arise.

Rule 117

Crucial date for closure of InterGovernmental adjustments. InterGovernmental adjustments can be carried out upto the 15th of April on which date the books of the Reserve Bank are closed for the month of March. Every endeavour must, therefore, be made to settle as far as possible all transactions with State Governments before the close of the year.

Rule 118

A d j u s t m e n t s w i t h f o r e i g n Governments, outside bodies, etc. Unless exempted by Government by general or special orders, services shall not be rendered to any foreign Government or non-Government body or institution or to a separate fund constituted as such except on payment.

Rule 119

Recoveries of expenditure for services rendered to non-Government parties. Recoveries of expenditure for services rendered or supplies made to nonG o v e r n m e n t p a r t i e s o r o t h e r Governments (including local funds and Governments outside India), shall in all cases, be classified as receipts of the Government rendering such services.

Rule 120

Recoveries of expenditure for services rendered as an agent. When a Government undertakes a service merely as an agent of a private body, the entire cost of the service shall be recovered from that body so that the net cost to Government is nil. The recoveries shall be taken as reduction of expenditure. Explanation: The term ‘recovery’ is used in these rules to denote repayment of, or payment by non-Government parties or other Governments towards charges initially incurred and classified by a Central Government Department in the account, as final expenditure by debit to a Revenue or Capital Head of Account. Recoveries towards establishment charges, tools and plants, fees for procurement of inspection of stores or both etc., effected at percentage rates or otherwise, are some examples.

 

Rule 121

Payments to outside body or fund to be through grant-in-aid. Any relief in respect of payment for services rendered or supplies made to any outside body or fund shall ordinarily be given through a grant-in-aid rather than by remission of dues.

Rule 122

Charges relating to the maintenance and demarcations and disputes over boundaries. The incidence of charges relating to the maintenance and demarcations and disputes over boundaries between India and a foreign country is regulated by the following principles; (i) Maintenance – Half the maintenance charges will be borne by the Central Government, the other half being recovered, as far as practicable, from the foreign country, failing which the foreign country’s share will also be borne by the Central Government. (iii) Demarcation and Disputes – Charges relating to demarcation of boundaries and boundary disputes will be borne by the Central Government under Entry 10 of the Union List, subject to such recovery as shall be made from the Foreign Country. (iii) Where streams or other watercourses form the boundaries and where the ordinary principle of median line applies, the Government concerned (i.e., Foreign Country or India) will bear the cost of maintenance of the boundary line on its side. Where a separate set of survey marks is maintained by each of the two Governments on its side, the cost of maintenance of the survey marks shall be borne by the Government concerned. Exception: (a) The arrangement in (i) above in its application to Nepal will be subject to special arrangements worked out in consultation with the Nepal Government. (b) The share of the Bhutan Government for maintenance and demarcation of and disputes over boundaries will be borne by the Central Government for the present

VIII. INTER-DEPARTMENTAL ADJUSTMENTS

Rule 123

Inter-Departmental Adjustments. Save as expressly provided by any general or special orders, a Service Department shall not charge other Departments for services rendered or supplies made which falls within the class of duties for which the former Department is constituted. However, a commercial Department or undertaking shall ordinarily charge and be charged for any supplies made and services rendered to, or by, other departments of Government.

Rule 124

Principles for division of Departments for purposes of inter-departmental payments. For purposes of interDepartmental payments, the Departments of a Government shall be divided into service Departments and commercial departments according to the following principles:- (i) Service Departments. -These are constituted for the discharge of those functions which either- (a) Are inseparable from and form part of the idea of Government e . g . D e p a r t m e n t s o f Administration of Justice, Jails, Police, Education, Medical, Public Health, Forest, Defence; or (b) Are necessary to, and form part of, the general conduct of the business of Government e.g. D e p a r t m e n t s o f S u r v e y, Government Printing, Stationery, Public Works (Building and Roads Branch), Central Purchase Organisation (Director-General of Supplies and Disposals, New Delhi). (ii) Commercial Departments or Undertakings.-These are established mainly for the purposes of rendering services or providing supplies, of certain special kinds, on payment for the services rendered or for the articles supplied. They perform functions, which are not necessarily governmental functions. They are required to work to a financial result determined through accounts maintained on commercial principles.

Rule 125

Period for preferment of claims. All claims shall ordinarily be preferred between Departments, both commercial and non-commercial of the Central Government, within the same financial year and not beyond three years from the date of transaction. This limitation, however, may be waived in specific cases by mutual agreement between the departments concerned.

Rule 126

Procedure for settlement of inter departmental adjustments. The settlement of inter-departmental adjustments shall be regulated by the directions contained in Chapter 4 of Government Accounting Rules, 1990.

Rule 127

Inter-departmental and other adjustments to be made in the account year. Under the directions contained in the Account Code for Accountants General, Inter-departmental and other adjustments are not to be made in the accounts of the past year, if they could not have been reasonably anticipated in time for funds being obtained from the proper authority. In all cases, where the adjustment could have reasonably been anticipated as, for example, recurring payments to another Government or department and payments which, though not of fixed amount, are of a fixed character, etc., the Accounts Officer will automatically make the adjustment in the accounts before they are finally closed. The onus of proving that the adjustments could not have been reasonably anticipated should lie with the Controlling Officer. As between different Departments of the same Government, the recoveries effected for services rendered shall be classified as deductions from the gross expenditure. However, recoveries made by a Commercial Department, e.g., Railways, Posts or a departmental commercial undertaking in respect of services rendered in pursuance of the functions for which the Commercial Department is constituted shall be treated as receipts of the Department but where it acts as an agent for the discharge of functions not germane to the essential purpose of the Department, the recoveries shall be taken as reduction of expenditure. Exception.-Recoveries of fees for purchase, inspection, etc., effected by the Central Purchase Organizations of Government of India, are treated as receipts of the Department concerned.

NOTE 1.-The term ‘recovery’ is used in this rule to denote repayment of/or payment by one Department of the same Government towards charges initially incurred and classified by another Department in its accounts as final expenditure by debit to a Revenue or Capital Head of Account. Recoveries towards establishment charges, tools and plants, fees for procurement or inspection of stores or both, etc., effected at percentage rates or otherwise, are some examples.

NOTE 2.-Recoveries effected from another Department of the same Government which are to be classified as deduction from the gross expenditure, shall be shown in the relevant Demand for Grant as “below the line” recovery under the appropriate Major Head of Account etc. Recovery actually effected, irrespective of the year to which it relates shall be adjusted in accounts in the schedule of recovery to be attached to the Appropriation Account of the year in which the recovery is effected.

Rule 128

Adjustment of Pensionary Charges of certain Commercial Departments. Except as otherwise provided, the pensionary liability of commercial departments and undertakings, for which pro forma commercial accounts are maintained, shall be assessed on a contribution basis at such rates as may be fixed by Government from time to time. In the case of departments and undertakings, for which no regular commercial accounts are maintained either within or outside the regular Government accounts but which are allowed to charge for their products or services rendered, the pensionary liability shall be taken into account in the estimate of overhead charges and manufacturing costs for the purpose of calculating the issue price of goods manufactured or fees for services rendered. The calculation shall be made at rates prescribed for the purpose by Government.

NOTE: The Railways, Posts and Defence Departments are regarded as separate Governments for the purpose of adjustment of pensionary charges.

Rule: 129

Pensionary liability in the case of G o v e r n m e n t D e p a r t m e n t s / Undertakings declared as commercial. In the case of Government Departments and Undertakings declared as commercial, adjustment of Pensionary liability shall be made in the regular accounts by charging the average of the percentage for 15th year of service based on the rates of monthly contribution of pension as prescribed in the appropriate order issued from time to time under Appendix-II of Fundamental and Supplementary Rules.

Multiple choice questions:

1. Who is responsible for preparing the accounts of the Union Government every year?

a) Comptroller and Auditor General of India
b) Controller General of Accounts
c) Ministry of Finance
d) President of India
Answer: b) Controller General of Accounts

2. The accounts of the Union Government are certified by whom?

a) Ministry of Finance
b) President of India
c) Comptroller and Auditor General of India
d) Controller General of Accounts
Answer: c) Comptroller and Auditor General of India

3. Under which Article of the Constitution are the Accounts of the Union Government kept in a prescribed form?

a) Article 150
b) Article 112
c) Article 267
d) Article 48
Answer: a) Article 150

4. Who is responsible for prescribing the form of accounts of the Union and States?

a) Comptroller and Auditor General of India
b) Controller General of Accounts
c) Ministry of Finance
d) President of India
Answer: b) Controller General of Accounts

5. What is the main principle governing the maintenance of accounts of the Government of India?

a) Accrual-based accounting
b) Cash-based accounting
c) Double-entry system
d) Modified cash basis
Answer: b) Cash-based accounting

6. The accounts of the Central Government record transactions that occur during which period?

a) Calendar Year
b) Financial Year
c) Fiscal Year
d) Budget Year
Answer: b) Financial Year

7. In which currency are the accounts of the Government maintained?

a) US Dollars
b) Euro
c) Indian Rupees
d) British Pound
Answer: c) Indian Rupees

8. Which part of the Government accounts records transactions related to debt and reserves?

a) Consolidated Fund
b) Contingency Fund
c) Public Account
d) Revenue Division
Answer: c) Public Account

9. Which rule outlines the classification of transactions in Government Accounts?

a) Rule 75
b) Rule 78
c) Rule 80
d) Rule 82
Answer: b) Rule 78

10. Who has the authority to open a new Head of Account for Union and States?

 

a) Ministry of Finance 

b) Comptroller and Auditor General of India 

c) Controller General of Accounts 

d) Reserve Bank of India 

Answer: a) Ministry of Finance.

 

11. Appropriation Accounts of Central Ministries (other than Ministry of Railways) and Central Civil Departments are prepared by:

A) The Comptroller and Auditor General of India

B) The Secretary to the Government of India

C) The Principal Accounts Officers of the respective Ministries and Departments

D) The Controller General of Accounts

Answer: C) The Principal Accounts Officers of the respective Ministries and Departments

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12. The Finance Accounts of the Government of India are prepared and signed by:

A) The Comptroller and Auditor General of India

B) The Controller General of Accounts

C) The Secretary (Expenditure), Ministry of Finance

D) The Prime Minister of India

Answer: B) The Controller General of Accounts

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13. The Appropriation and Finance Accounts must be certified and submitted to the President by:

A) The Comptroller and Auditor General of India

B) The Controller General of Accounts

C) The Secretary (Expenditure)

D) The Ministry of Finance

Answer: A) The Comptroller and Auditor General of India

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14. Subsidiary proforma accounts are required to be maintained by:

A) Central Civil Departments

B) Government Departments undertaking commercial activities

C) The Reserve Bank of India

D) The Controller General of Accounts

Answer: B) Government Departments undertaking commercial activities

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15. Proforma accounts of regular Government Workshops and Factories are maintained according to:

A) General Accounting Principles

B) Departmental regulations

C) The Comptroller and Auditor General's instructions

D) The Ministry of Finance guidelines

Answer: B) Departmental regulations

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16. Personal Deposit Accounts are primarily intended to:

A) Facilitate transfers of benefits directly to beneficiaries

B) Manage departmental funds and expenditures

C) Facilitate direct withdrawals and credits by a Designated Officer

D) Record all government transactions in foreign currencies

Answer: C) Facilitate direct withdrawals and credits by a Designated Officer

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17. Authority to open a Personal Deposit Account is granted by:

A) The Comptroller and Auditor General of India

B) The Ministry of Finance

C) The concerned Ministry or Department

D) The Reserve Bank of India

Answer: C) The concerned Ministry or Department

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18. Capital expenditure is defined as expenditure incurred with the objective of:

A) Acquiring temporary assets

B) Enhancing the utility of existing assets

C) Managing day-to-day expenses

D) Conducting routine maintenance

Answer: B) Enhancing the utility of existing assets

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19. Revenue expenditure includes:

A) Costs for acquiring new assets

B) Charges for the first construction and equipment of a project

C) Maintenance and repair of existing assets

D) Grants-in-aid

Answer: C) Maintenance and repair of existing assets

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20. Expenditure on temporary assets is classified as:

A) Capital expenditure

B) Revenue expenditure

C) Extraordinary expenditure

D) Not classified under government accounts

Answer: B) Revenue expenditure

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21. Receipts and recoveries on Capital Account that represent recoveries of expenditure previously debited to a Capital Major Head should be:

A) Credited to the Revenue Account

B) Taken in reduction of expenditure under the Major Head concerned

C) Converted into equity investments

D) Recorded separately as a new Capital receipt

Answer: B) Taken in reduction of expenditure under the Major Head concerned

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22. Conversion of outstanding loans into equity investments or grants-in-aid requires:

A) Approval from the Ministry of Finance

B) A special order from the Controller General of Accounts

C) Approval of the Parliament

D) Certification by the Comptroller and Auditor General of India

Answer: C) Approval of the Parliament

23. According to Rule 104, interest on capital in Commercial Departments or units is generally charged:

• A) At a rate determined by the Department of Economic Affairs
• B) At a rate specified by special orders of Government
• C) Based on the average market interest rates
• D) Only if the capital is raised through bonds

Answer: B) At a rate specified by special orders of Government

24. For capital outlay met out of specific loans raised by Government, interest shall be charged at:

• A) A uniform rate determined by the Controller General of Accounts
• B) The rate prescribed by Government based on the actual rate of interest on loans
• C) A fixed rate as specified in the national budget
• D) The prevailing interest rates in international markets

Answer: B) The rate prescribed by Government based on the actual rate of interest on loans

25. How is the interest on capital calculated according to Rule 106?

• A) Based on the end-of-year capital outlay plus the full outlay of the current year
• B) On the direct capital outlay of the previous year plus one-quarter of the current year's outlay
• C) On the direct capital outlay at the end of the previous year plus half the outlay of the year itself
• D) Based on the total expenditure of the current year only

Answer: C) On the direct capital outlay at the end of the previous year plus half the outlay of the year itself

26. Under Rule 107, if capitalised interest charges during construction are met from capital, what must be done when the project is operational?

• A) Capitalised interest should be written off as an expense
• B) Capitalised interest must be written back as the first charge on any capital receipts or surplus revenue
• C) The capitalised interest should be deducted from future revenue
• D) It should be adjusted in the annual accounts without specific instructions

Answer: B) Capitalised interest must be written back as the first charge on any capital receipts or surplus revenue

VII. ADJUSTMENT WITH GOVERNMENT DEPARTMENTS ETC

27. Adjustments with State Governments in respect of financial transactions are made:

• A) Based on federal regulations only
• B) As per mutual agreements between the Central Government and the State Government
• C) Following international financial guidelines
• D) Only through judicial orders

Answer: B) As per mutual agreements between the Central Government and the State Government

28. Claims for services rendered between Central and State Governments must not exceed:

• A) Rupees fifty thousand
• B) Rupees ten thousand
• C) Rupees one lakh
• D) Rupees twenty-five thousand

Answer: B) Rupees ten thousand

29. When adjusting claims for agency functions under Article 258 of the Constitution, which expenditure is generally covered?

• A) Only the additional staff costs
• B) Expenditure directly connected with the execution of the scheme or work
• C) General administrative expenses
• D) All costs including maintenance of equipment

Answer: B) Expenditure directly connected with the execution of the scheme or work

30. For joint projects executed by several State Governments where one Government incurs the expenditure initially, how are recoveries from other Governments recorded?

• A) As an addition to the expenditure Head of Account
• B) As abatement of charges under the relevant expenditure Head of Account
• C) As a new capital receipt
• D) As a liability in the books of the initial Government

Answer: B) As abatement of charges under the relevant expenditure Head of Account

31. According to Rule 119, recoveries of expenditure for services rendered to non-Government parties are classified as:

• A) General revenue receipts
• B) Receipts of the Government rendering such services
• C) Loans to non-Government bodies
• D) Miscellaneous income

Answer: B) Receipts of the Government rendering such services

32. When services are rendered to foreign Governments or non-Government bodies, unless exempted by Government, payment must be:

• A) Made in kind rather than cash
• B) Settled through a grant-in-aid
• C) Paid in advance
• D) Settled through reimbursement

Answer: B) Settled through a grant-in-aid

33. Charges for maintenance and demarcation of boundaries between India and a foreign country are shared:

• A) Equally between the Central Government and the foreign country
• B) Entirely by the Central Government
• C) By the foreign country only
• D) Based on the size of the boundary

Answer: A) Equally between the Central Government and the foreign country

34. According to Rule 123, which type of department is generally required to charge and be charged for supplies and services rendered?

• A) Service Departments
• B) Commercial Departments
• C) Non-Governmental Departments
• D) Administrative Departments

Answer: B) Commercial Departments

35. How are Departments classified for purposes of inter-departmental payments according to Rule 124?

• A) By their geographical location
• B) By their size and budget
• C) As Service Departments or Commercial Departments
• D) By their historical significance

Answer: C) As Service Departments or Commercial Departments

36. What is the standard period for preferring claims between Departments, according to Rule 125?

• A) Within the same financial year
• B) Within six months from the date of transaction
• C) Within three years from the date of transaction
• D) Within five years from the date of transaction

Answer: C) Within three years from the date of transaction

37. Rule 126 directs that the settlement of inter-departmental adjustments should be regulated by:

• A) National Budget Guidelines
• B) Directives in Chapter 4 of Government Accounting Rules, 1990
• C) International Accounting Standards
• D) Internal Departmental Policies

Answer: B) Directives in Chapter 4 of Government Accounting Rules, 1990

38. According to Rule 127, inter-departmental and other adjustments must be made in the account year unless:

• A) They are expected to occur in future years
• B) They could not have been reasonably anticipated in time for funds
• C) They involve international transactions
• D) They are less than a certain amount

Answer: B) They could not have been reasonably anticipated in time for funds

39. In cases where a Commercial Department renders services and makes recoveries, how should these recoveries be treated according to Rule 127?

• A) As deductions from gross expenditure
• B) As receipts of the Department
• C) As liabilities in the accounts
• D) As external income

Answer: B) As receipts of the Department

40. What is the procedure for showing recoveries that are to be classified as deductions from gross expenditure?

• A) They should be shown in the relevant Demand for Grant as “below the line” recovery
• B) They should be reported as new capital receipts
• C) They should be reflected in the monthly financial statements
• D) They should be adjusted in the following year's accounts

Answer: A) They should be shown in the relevant Demand for Grant as “below the line” recovery

41. Rule 128 outlines that pensionary liability for commercial departments and undertakings should be assessed:

• A) Based on actual pension payments
• B) On a contribution basis at rates fixed by Government
• C) By calculating the total expenditure on pensions
• D) According to a fixed annual percentage

Answer: B) On a contribution basis at rates fixed by Government

42. Which departments are regarded as separate Governments for the adjustment of pensionary charges according to Rule 128?

• A) Railways, Posts, and Defence Departments
• B) Health and Education Departments
• C) Public Works and Survey Departments
• D) Central and State Government Departments

Answer: A) Railways, Posts, and Defence Departments

43. In the case of Government Departments or Undertakings declared as commercial, how is pensionary liability adjusted according to Rule 129?

• A) By calculating the total pension payments for the year
• B) By charging the average percentage for the 15th year of service
• C) By assessing the total contributions made over time
• D) By reviewing the monthly pension contributions

Answer: B) By charging the average percentage for the 15th year of service

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