CHAPTER - 2

General System of Financial Management

Rule 7. General Principles : All moneys received

by or on behalf of the Government either as dues
of Government or for deposit, remittance or
otherwise, shall be brought into Government
Account without delay, in accordance with such
general or special rules as may be issued under
Articles 150 and 283 (1) of the Constitution.
Rule 8.
.(1)

.(i) Under Article 284 of the Constitution all

moneys received by or deposited with any officer
employed in connection with the affairs of the
Union in his capacity as such, other than revenues
or public moneys raised or received by
Government, shall be paid into the Public Account.
.(ii) All moneys received by or deposited with
the Supreme Court of India or with any other
Court, other than a High Court, within a Union
Territory, shall also be dealt with in accordance
with Clause (i) of sub-rule (1).
.(2) The Head of Account to which such
moneys shall be credited and the withdrawal of
moneys therefrom shall be governed by the
relevant provisions of Government Accounting
Rules 1990 and the Central Government Account
(Receipts and Payments) Rules, 1983 or such
other general or special orders as may be issued
in this behalf.

Rule 9. It is the duty of the Department of the

Central Government concerned to ensure that the
receipts and dues of the Government are correctly
and promptly assessed, collected and duly
credited to the Consolidated Fund or Public
Account as the case may be.
Rule 10. The Controlling Officer shall arrange to
obtain from his subordinate officers monthly
accounts and returns in suitable form claiming
credit for the amounts paid into the treasury or
bank as the case may be, or otherwise accounted
for, and compare them with the statements of
credits furnished by the Accounts Officer to see
that the amounts reported as collected have been
duly credited. For this each Accounts Officer will
send an extract from his accounts showing the
amounts brought to credit in the accounts in each
month to the Controlling Officer concerned.
Rule 11.
.(1) Detailed rules and procedure regarding
assessment, collection, allocation, remission and
abandonment of revenue and other receipts shall
be laid down in the regulations of the department
responsible for the same.
 .(2) In departments in which officers are
required to receive moneys on behalf of
Government and issue receipts therefor in Form
GAR-6 the departmental regulations should
provide for the maintenance of a proper account of
the receipt and issue of the receipt books, the
number of receipt books to be issued at a time to
each officer and a check with the officer's accounts
of the used books when returned.

Rule 12. Amounts due to Government shall not be

left outstanding without sufficient reasons. Where
such amounts appear to be irrecoverable, the
orders of the competent authority shall be obtained
for their adjustment.
Rule 13. Unless specially authorized by any rule
or order made by competent authority, no sums
shall be credited as revenue by debit to a
suspense head. The credit must follow and not
precede actual realization.
Rule 14. Subject to any general or special orders
issued by a Department of the Central
Government, an Administrator or a Head of a
Department responsible for the collection of
revenue shall keep the Finance Ministry fully
informed of the progress of collection of revenue
under his control and of all important variations in
such collections as compared with the Budget
Estimates.
Rule 15. Rents of buildings and lands :
.(1) When the maintenance of any rentable
building is entrusted to a civil department, other
than the Central Public Works Department, the
Administrator or the Head of the Department
concerned shall be responsible for the due
recovery of the rent thereof.
.(2) The procedure for the assessment and
recovery of rent of any building hired out will be
regulated generally by the rules applicable to
residences under the direct charge of the Central
Public Works Department.
.(3) The detailed rules and procedure,
regarding the demand and recovery of rent of
Government buildings and lands, are contained in
the departmental regulations of the departments in
charge of those buildings.

Rule 16. Fines :

.(1) Every authority having the power to
impose and/ or realize a fine shall ensure that the
money is realized, duly checked and deposited
into a treasury or bank as the case may be.
.(2) Every authority having the power to refund
fines shall ensure that the refunds are checked
and no double refunds of amounts of fines
collected or refunds of fines not actually paid into a
treasury or bank as the case may be, are made.

Rule 17. Miscellaneous Demands : The

Accounts Officer shall watch the realization of
miscellaneous demands of Government, not falling
under the ordinary revenue administration, such as
contributions from State Governments, Local
Funds, contractors and others towards
establishment charges.
Rule 18. Remission of Revenue : A claim to
revenue shall not be remitted or abandoned save
with the sanction of the competent authority.
Rule 19.
.(1) Subject to any general or special orders
issued by the Government Departments of the
Central Government, Administrators and Heads of
Departments, other than those in the Department
of Posts, shall submit annually on the 1st of June to
the Audit Officer and the Accounts Officer
concerned, statements showing the remissions of
revenue and abandonment of claims to revenue
sanctioned during the preceding year by
competent authorities in exercise of the
discretionary powers vested in them otherwise
than by law or rule having the force of law,
provided that individual remissions below Rupees
one hundred need not be included in the
statements.
.(2) For inclusion in the statements referred to
in Rule 19 (1) above, remissions and
abandonments should be classified broadly with
reference to the grounds on which they were
sanctioned and a total figure should be given for
each class. A brief explanation of the
circumstances leading to the remission should be
added in the case of each class.

Rule 20. Departments of the Central Government

and Administrators may make rules defining
remissions and abandonments of revenue for the
purpose of Rule 19 above.

I. GENERAL PRINCIPLES
RELATING TO
EXPENDITURE AND
PAYMENT OF MONEY
Rule 21. Standards of financial propriety :
Every officer incurring or authorizing expenditure
from public moneys should be guided by high
standards of financial propriety. Every officer
should also enforce financial order and strict
economy and see that all relevant financial rules
and regulations are observed, by his own office
and by subordinate disbursing officers. Among the
principles on which emphasis is generally laid are
the following :-
.(i) Every officer is expected to exercise the
same vigilance in respect of expenditure incurred
from public moneys as a person of ordinary
prudence would exercise in respect of expenditure
of his own money.
 .(ii) The expenditure should not be prima facie
more than the occasion demands.

(iii) No authority should exercise its

powers of sanctioning expenditure to pass an
order which will be directly or indirectly to its
own advantage.
.(iv) Expenditure from public moneys should
not be incurred for the benefit of a particular
person or a section of the people, unless -
.(a) a claim for the amount could be enforced in a
Court of Law, or
.(b) the expenditure is in pursuance of a
recognized policy or custom.
.(v) The amount of allowances granted to meet
expenditure of a particular type should be so
regulated that the allowances are not on the whole
a source of profit to the recipients.

Rule 22. Expenditure from public funds : No

authority may incur any expenditure or enter into
any liability involving expenditure or transfer of
moneys for investment or deposit from
Government account unless the same has been
sanctioned by a competent authority.
Rule 23. Delegation of Financial Powers : The
financial powers of the Government have been
delegated to various subordinate authorities vide
Delegation of Financial Powers Rules, 1978 as
amended from time to time. The financial powers
of the Government, which have not been
delegated to a subordinate authority, shall vest in
the Finance Ministry.
Rule 24. Consultation with Financial Advisers :
All draft memoranda for Expenditure Finance
Committee or Public Investment Bureau and
Cabinet Committee for Economic Affairs or
Cabinet shall be circulated by the Ministry or
Department concerned after consultation with the
concerned Financial Adviser of the Ministry or
Department. A confirmation to this effect shall be
included in the draft memorandum at the
circulation stage.
Rule 25. Provision of funds for sanction :
.(1) All sanctions to the expenditure shall
indicate the details of the provisions in the relevant
grant or appropriation wherefrom such expenditure
is to be met.
.(2) All proposals for sanction to expenditure,
shall indicate whether such expenditure can be
met by valid appropriation or reappropriation.
.(3) In cases where it become necessary to
issue a sanction to expenditure before funds are
communicated, the sanction should specify that
such expenditure is subject to funds being
communicated in the Budget of the year.

Rule 26. Responsibility of Controlling Officer in

respect of Budget allocation: The duties and
responsibilities of a controlling officer in respect of
funds placed at his disposal are to ensure :
.(i) that the expenditure does not exceed the
budget allocation.
.(ii) that the expenditure is incurred for the
purpose for which funds have been provided.

(iii) that the expenditure is incurred in public

interest.
.(iv) that adequate control mechanism is
functioning in his department for prevention,
detection of errors and irregularities in the financial
proceedings of his subordinate offices and to
guard against waste and loss of public money, and
.(v) that mechanism or checks contemplated
at (iv) above are effectively applied.

Rule 27.
.(1) Date of effect of sanction : Subject to
fulfillment of the provisions of Rule 6 of the
Delegation of Financial Powers Rules, 1978, all
rules, sanctions or orders shall come into force
from the date of issue unless any other date from
which they shall come into force is specified
therein.
.(2) Date of creation to be indicated in
sanctions for temporary posts: Orders
sanctioning the creation of a temporary post
should, in addition to the sanctioned duration,
invariably specify the date from which it is to be
created.

Rule 28. Powers in regard to certain special

matters : Except in pursuance of the general
delegation made by, or with the approval of the
President, a subordinate authority shall not,
without the previous consent of the Finance
Ministry, issue an order which -
.(i) involves any grant of land, or assignment
of revenue, or concession, grant, lease or licence
of mineral or forest rights, or rights to water power
or any easement or privilege of such concessions,
or
.(ii) involves relinquishment of revenue in any
way.

Rule 29. Procedure for communication of

sanctions : All financial sanctions and orders
issued by a competent authority shall be
communicated to the Audit Officer and the
Accounts Officer. The procedure to be followed for
communication of financial sanctions and orders
will be as under :-
.(i) All financial sanctions issued by a
Department of the Central Government which
relate to a matter concerning the Department
proper and on the basis of which payment is to be
made or authorized by the Accounts Officer,
should be addressed to him.
 .(ii) All other sanctions should be accorded in
the form of an Order, which need not be
addressed to any authority, but a copy thereof
should be endorsed to the Accounts Officer
concerned.

(iii) In the case of non-recurring contingent

and miscellaneous expenditure, the
sanctioning authority may, where
required, accord sanction by signing
or countersigning the bill or voucher,
whether before or after the money is
drawn, instead of by a separate
sanction.
.(iv) All financial sanctions and orders issued
by a Department of the Central Government with
the concurrence of the Internal Finance Wing or
Ministry of Finance, as applicable, should be
communicated to the Accounts Officer in
accordance with the procedure laid down in Rule
25 of the Delegation of Financial Powers Rules,
1978, and orders issued thereunder from time to
time.
.(v) All financial sanctions and orders issued
by a department with the concurrence of the
Ministry of Home Affairs or Comptroller and
Auditor General of India or Department of
Personnel should specify that the sanction or
orders are issued with the concurrence of that
Department along with the number and date of
relevant communication of that Department
wherein the concurrence was conveyed.
.(vi) All orders conveying sanctions to
expenditure of a definite amount or up to a specific
limit should express both in words and figures the
amount of expenditure sanctioned.

(vii) Sanctions accorded by a Head of

Department may be communicated to
the Accounts Officer by an authorized
Gazetted Officer of his Office duly
signed by him for the Head of
Department or conveyed in the name
of the Head of the Department.
(viii) All orders conveying sanctions to
the grant of additions to pay such as
Special Allowance, Personal Pay, etc.,
should contain a brief summary of the
reasons for the grant of such additions
to pay so as to enable the Accounts
Officer to see that it is correctly termed
as Special Allowance, Personal Pay,
etc., as the case may be.
(ix) Orders issued by a Department of a Union
Territory Government where Audit and
Accounts (a) have not been separated shall be
communicated direct to the Audit authority; (b)
have been separated, copies shall be
endorsed to the Audit authorities.
 In case of sanctions in respect
of matters, where reference was made to the
Central Government under the Rules of
Business framed under Section 46 of the
Government of Union Territory Act, 1963, the
following clause shall be added in the sanction
endorsed to Audit:-
" A reference had been made in this case to the
Central Government and the above order/letter
conforms to the decision of the Central
Government vide Government of India,
Ministry / Department of ……..Letter
No…………dated…………..".
.(x) Copies of all General Financial Orders
issued by a Department of the Central
Government with the concurrence of the
Comptroller and Auditor General of India shall be
supplied to the Comptroller and Auditor General of
India.
.(xi) Copies of all sanctions or orders other
than the following types should be endorsed to the
Audit Officers:-
.(a) Sanctions relating to grant to advances to
Central Government employees.
.(b) Sanctions relating to appointment or
promotion or transfer of Gazetted and non-
Gazetted Officers.
.(c) All sanctions relating to creation or
continuation or abolition of posts.
 .(d) Sanctions for handing over charge and
taking over charge, etc.
.(e) Sanctions relating to payment or
withdrawal of General Provident Fund advances to
Government servants.
.(f) Sanctions of contingent expenditure
incurred under the powers of Head of Offices.
.(g) Other sanctions of routine nature issued
by Heads of Subordinate Officers (other than
those issued by Ministries or Departments proper
and under powers of a Head of Department).

(xii) Sanctions accorded by competent authority to

grants of land and alienation of land revenue,
other than those in which assignments of land
revenue are treated as cash payment, shall be
communicated to the Audit and/ or the
Accounts Officer, as the case may be, in a
consolidated monthly return giving the
necessary details.
Rule 30. Lapse of sanctions : A sanction for any
fresh charge shall, unless it is specifically
renewed, lapse if no payment in whole or in part
has been made during a period of twelve months
from the date of issue of such sanction. Provided
that -
.(i) when the period of currency of the
sanction is prescribed in the departmental
regulations or is specified in the sanction itself, it
shall lapse on the expiry of such periods; or
.(ii) when there is a specific provision in a
sanction that the expenditure would be met from
the Budget provision of a specified financial year, it
shall lapse at the close of that financial year; or

(iii) in the case of purchase of stores, a

sanction shall not lapse, if tenders have
been accepted (in the case of local or direct
purchase of stores) or the indent has been
placed (in the case of Central Purchases)
on the Central Purchase Organization within
the period of one year of the date of issue of
that sanction, even if the actual payment in
whole or in part has not been made during
the said period.
Rule 31. Notwithstanding anything contained in
Rule 30, a sanction in respect of an addition to a
permanent establishment, made from year to year
under a general scheme by a competent authority,
or in respect of an allowance sanctioned for a post
or for a class of Government servants, but not
drawn by the officer(s) concerned, shall not lapse.
Rule 32. Remission of disallowance's by Audit
and writing off of overpayment made to
Government servants : The remission of
disallowance's by Audit and writing off of
overpayments made to Government servants by
competent authorities shall be in accordance with
the provisions of the Delegation of Financial
Powers Rules, 1978, and instructions issued
thereunder.

II. DEFALCATION AND LOSSES

Rule 33. Report of Losses :

.(1) Any loss or shortage of public moneys,
departmental revenue or receipts, stamps, opium,
stores or other property held by, or on behalf of,
Government irrespective of the cause of loss and
manner of detection, shall be immediately reported
by the subordinate authority concerned to the next
higher authority as well as to the Statutory Audit
Officer and to the concerned Principal Accounts
Officer, even when such loss has been made good
by the party responsible for it. However the
following losses need not be reported:
.(i) Cases involving losses of revenue due to -
.(a) mistakes in assessments which are
discovered too late to permit of a supplementary
claim being made,
.(b) under assessments which are due to
interpretation of the law by the local authority
being overruled by higher authority after the
expiry of the time-limit prescribed under the law,
and
.(c) refunds allowed on the ground that the
claims were time-barred:
 .(ii) Petty losses of value not exceeding
Rupees two thousand.
.(2) Cases involving serious irregularities shall
be brought to the notice of Financial Adviser or
Chief Accounting Authority of the Ministry or
Department concerned and the Controller-General
of Accounts, Ministry of Finance.
.(3) Report of loss contemplated in sub-rule
(1) & (2) shall be made at two stages-
.(i) An initial report should be made as soon
as a suspicion arises that a loss has taken place.
.(ii) The final report should be sent to
authorities indicated in sub rule (1) & (2) after
investigation indicating nature and extent of loss,
errors or neglect of rules by which the loss has
been caused and the prospects of recovery.
.(4) The complete report contemplated in sub-
rule 3, shall reach through proper channels to the
Head of the Department, who shall finally dispose
of the same under the powers delegated to him
under the Delegation of Financial Power Rules,
1978. The reports, which he cannot finally dispose
of under the delegated powers, shall be submitted
to the Government.
.(5) An amount lost through misappropriation,
defalcation, embezzlement, etc., may be redrawn
on a simple receipt pending investigation, recovery
or write-off with the approval of the authority
competent to write-off the loss in question.
.(6) In cases of loss to Government on account
of culpability of Government servants, the loss
should be borne by the Central Government
Department or State Government concerned with
the transaction. Similarly, if any recoveries are
made from the erring Government officials in cash,
the receipt will be credited to the Central
Government Department or the State Government
who sustained the loss.
.(7) All cases involving loss of Government
money arising from erroneous or irregular issue of
cheques or irregular accounting of receipts will be
reported to the Controller-General of Accounts
alongwith the circumstances leading to the loss, so
that he can take steps to remedy defects in rules
or procedures, if any, connected therewith.

Rule 34. Loss of Government property due to

fire, theft, fraud : Departmental Officers shall, in
addition to taking action as prescribed in Rule 33,
follow the provisions indicated below in cases
involving material loss or destruction of
Government property as a result of fire, theft,
fraud, etc. -
All losses above the value of Rupees ten
thousand due to suspected
fire, theft, fraud, etc., shall be invariably
reported to the Police for
investigation as early as possible.
Once the matter is reported to the Police
Authorities, all concerned
 should assist the Police in their investigation.
A formal investigation
report should be obtained from the Police
Authorities in all cases, which
are referred to them.
Rule 35. Loss of immovable property by fire,
flood, etc. : All loss of immovable property
exceeding Rupees fifty thousand, such as
buildings, communications, or other works, caused
by fire, flood, cyclone, earthquake or any other
natural cause, shall be reported at once by the
subordinate authority concerned to Government
through the usual channel. All other losses should
be immediately brought to the notice of the next
higher authority.
Rule 36. Report to Audit and Accounts Officers
: After a full enquiry as to the cause and the extent
of the loss has been made, the detailed report
should be sent by the subordinate authority
concerned to Government through the proper
channel; a copy of the report or an abstract thereof
being simultaneously forwarded to the Audit or
Accounts Officer.
Rule 37. Responsibility for Losses : An officer
shall be held personally responsible for any loss
sustained by the Government through fraud or
negligence on his part. He will also be held
personally responsible for any loss arising from
fraud or negligence of any other officer to the
extent to which it may be shown that he
contributed to the loss by his own action or
negligence.
The departmental proceedings for assessment
of responsibility for the loss shall be conducted
according to the instructions contained in
Appendix 1 and those issued by the Ministry of
Personnel from time to time.
Rule 38. Prompt disposal of cases of loss :
Action at each stage of detection, reporting, write
off, final disposal, in cases of losses including
action against delinquents and remedial measures
should be completed promptly with special
attention to action against delinquents and
remedial measures, taken to strengthen the
control system.
 III. SUBMISSION OF RECORDS AND
INFORMATION.
Rule 39. Demand for information by Audit or
Accounts Officer : A subordinate authority shall
afford all reasonable facilities to the Audit Officer
or Accounts Officer for the discharge of his
functions, and furnish fullest possible information
required by him for the preparation of any official
account or report.
Rule 40. A subordinate authority shall not
withhold any information, books or other
documents required by the Audit Officer or
Accounts Officer.
Rule 41. If the contents of any file are
categorized as 'Secret' or 'Top Secret' the file
maybe sent personally to the Head of the Audit
Office specifying this fact, who will then deal with
it in accordance with the standing instructions for
handling and custody of such classified
documents.