TRAINING MATERIAL ON

General Financial Rules (GFR) -2017

Prepared By: Shri Saroj Kumar Mohanty, AAO
CHAPTER - I, II , III & IV

Chapter – 1 (Introduction)
 CAPEX Model of Expenditure:
o Meant for Capital Expenditure
o Used by the buyer to straightway purchase goods followed by procurement of
consumables, arranging comprehensive maintenance contact after warranty period and
finally disposing the product after useful life.
 OPEX Model of Expenditure.
o The seller provides the goods, maintains it and also provides the consumables as required
and finally takes back the goods after useful / contracted life.
o The expenditure made by the Buyer in a staggered manner as per the terms and conditions
of the contract.

Chapter – 2 (General System of Financial Management)

 Amounts due to Govt. shall not be left outstanding without sufficient reasons. :
o Action may be taken to recover from the Individuals; OR
o In case the amount is irrecoverable, may be adjusted/regularized by the Competent
Financial Authority by means of raising a loss statement.
 The Credit must follow and not precede actual realisation:
o Means 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.
 Standards of Financial Propriety:
o 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.
o The expenditure should not be prima facie more than the occasion demands.
 o No authority should exercise its powers of sanctioning expenditure to pass an order which
will be directly or indirectly to its own advantage.
o Expenditure from public moneys should not be incurred for the benefit of a particular
person or a section of people.
 Responsibility of Controlling officer in respect of Budget allocation:
o That the expenditure does not exceed the budget allocation.
o That the expenditure is incurred for the purpose for which funds have been provided.
o That the expenditure is incurred in Public Interest.
o That adequate Control Mechanism is functioning in his Department for prevention,
detection of errors and irregularities in the financial proceedings and to guard against
waste and loss of Public Money.
 Date of effect of sanctions:
o From the date of issue unless any other date from which they shall come into force is
specified therein.
 Lapse of Sanction:
o A sanction for any fresh charge shall lapse after a period of 12 months from the date of
issue of such sanction.
o 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.
o In case of purchase of stores, a sanction shall not lapse, if tenders have been accepted (in
case of local or direct purchase of stores) or the indent has been placed (in the case of
Central Purchase) within the period of one year of the date of issue of that sanction.
 Losses that need not be reported to Higher Authority:
o Cases involving losses of revenue due to mistakes in assessments which are discovered too
late to permit a supplementary claim being made, refunds allowed on the ground that the
claims were time barred, Petty losses of value not exceeding Rs 10000/-.
 Loss of Govt. Property due to fire, theft & fraud:
o If loss value is above Rs 50000/- : Reported to the Police for investigation as early as
possible.
o All loss of Immovable property exceeding Rs 50000/- shall be reported to the next higher
authority.
 Chapter – 3 (Budget Formulation & Implementation)
 Financial Year:
o 1st April to 31st March
 Issue of Budget Circular containing guidelines for preparation of Budget Estimates:
o By Budget Division of Ministry of Finance.
 What does the Budget Contain?
o Estimates of all revenues expected to be raised during the financial year;
o Estimates of all expenditure for each programme, scheme, project in that financial year.
o Estimates of all interest and debt serving charges and any repayments on loans in that
financial year.
 Revenue Receipts:
o Central Taxes, duties and cesses
o Local Taxes and Duties
o Interest Receipts of Loans & Advances by the Central Govt.
o Dividends on Equity investments
 Capital Receipts:
o Internal debt (Market Loan, Treasury Bills etc)
o External Debts
o Repayment of Loans and advances made by the Central Govt.
o Disinvestment Receipts
 Preparation of Estimates:
o Estimate for Locally Controlled Heads are prepared by lower level formations
(Units/Formations) & Centrally Controlled Heads (Salary & Pension) are prepared by
Armed Force HQs.
o Prepared in four stages – Preliminary Report (PR), Preliminary Revised Estimates (PRE),
Revised Estimates (RE) of the Current Year and Budget Estimates (BE) for the ensuing
year and finally Modified Appropriation (MA).
o Guidelines while preparing Estimates:
 The estimate of establishment charges should be framed taking into account the
trends over preceding three years
 No lump sum provision will be made in the Budget except where urgent measures
are to be provided for meeting emergent situations or for meeting preliminary
 expenses on a project/scheme which has been accepted in principle for being taken
up in the financial year.
 There should not be any provision for loss.
 Demands for Grants:
o The estimates for expenditure for which vote of Lok Sabha is required shall be in the form
of Demand for Grants.
o Generally one demand for grant is presented in respect of each Ministry or Department.
o However, more than one Demand may be presented for large Ministries or Departments.
o Demand for Grants are presented to Parliament at two levels – Main Demand for Grants &
Detailed Demands for Grants
o Main Demands for Grants – presented by the Ministry of Finance, Budget Division
o Detailed Demands for Grants – laid on the table of Lok Sabha by the concerned Ministries
/ Departments
o Detailed Demands for Grants will be scrutinized by Departmentally Related Standing
Committee (DRSC)
o For Ministry of Defence, there are four Demand for Grants – Ministry of Defence (Civil),
Defence Services (Revenue), Capital Outlay and Defence Services & Defence Pensions.
 Method of finalization of Estimates of Ministry/Department:
o To be scrutinized in the Budget Division of Ministry of Finance.
o To be deliberated in the Pre-budget meeting between the Secretary (Expenditure) & the
Secretary or Financial Adviser of the Department concerned.
o Finalised after scrutiny and deliberation..
 Outcome Budget:
o Outcome Budget Statement is prepared by Department of Expenditure in consultation with
the NITI Aayog and concerned Ministries.
o Outcome Budget Statement links outlays against each scheme/project with the outputs /
deliverables and medium term outcomes.
o Importance: The performance against specified outcomes would form the basis of deciding
on the continuation of the scheme and the quantum of budget allocation.
 Vote on Account (May not be relevant now):
o Article 116 of the Constitution.
 o To cover expenditure for brief period (preferably first two months of financial year – April
& May) pending approval of the Budget by the Parliament.
o To enable the Govt. to run the show
o Quantum – 1/6th of the Budget Estimate of Last year.
o Not to be utilized for expenditure on a ‘New Service’.
 Responsibility for control of Expenditure:
o Lies with the Department (Executives/Administrative Authority)
 Re-Appropriation of Funds:
o Means re-allocation of funds
o By a Competent Authority
o From one primary unit of appropriation to another within a grant or appropriation.
o Before the close of Financial Year
o Out of the savings only
o Re-appropriation is permissible only between the expenditure heads
o Re-appropriation is not possible in the following cases:
 After the close of Financial Year
 Between Charged and Voted Expenditure
 Between two different grants of charged expenditure
 To meet expenditure on a new service
 Between Capital & Revenue expenditure
o Authority Competent for Re-appropriation
 Between different Minor Heads under a Major Head – Govt. of India
 Between different Sub Heads within the Minor Head – Ministry of Defence
 Supplementary Grants:
o Article 115 of the Constitution
o If savings are not available within the Grant
o If the Expenditure is on ‘New Service’ or ‘New Instrument of Service’.
 Advance from Contingency Fund of India:
o To incur unforeseen Expenditure in excess of the Sanctioned Grant or Appropriation
o To incur expenditure on a New Service not provided in the Budget
o There is not sufficient time for the voting of the Supplementary Demand
 o To meet expenditure in excess of the provisions for the service included in the
Appropriation

BUDGET CYCLE:

Budget
Appropriation Circular
Estimates
Accounts

End Product of Demand for

Auditing Function AAC Grants

Appropriation
Auditing Bill

Appropriation
Accounting
Act

Spending Allocation

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 CHAPTER 4 (Government Accounts)
 Preparation and Presentation of Accounts:
o Accounts of the Union Govt. are prepared every year showing the receipts and
disbursements for the year.
o Prepared by Controller General of Accounts (CGA)
o Certified by Comptroller & Auditor General of India (C&AG)
o Submitted to the President of India
o Due date – Within 6 months of the close of Financial Year
 Form of Accounts:
o The account of the Union Govt. shall be kept in such a form as the President may, on the
advice of the C&AG of India, prescribe.
o CGA in the Ministry of Finance (Dept. of Expenditure) is responsible for prescribing the
form of accounts of the Union and States on behalf President of India.
 Authority to open a new head of account:
o The list of Major and Minor Heads of Accounts of the Union and States is maintained by
the Ministry of Finance (Department of Expenditure – CGA).
o CGA is authorized to open a new head of account on the advice of the C&AG.
o Ministries/Departments may open Sub Head and Detailed Heads as required by them in
consultation with the Budget Division of the Ministry of Finance.
o The power to amend or modify the Object Heads and to open a new Object Head rests with
Department of Expenditure of Ministry of Finance on the advice of C&AG.
 Public Financial Management System (PFMS) :
o An integral Financial Management System of CGA
o Used for sanction preparation, bill processing, payment, receipt management, Direct
Benefit Transfer, fund flow management and financial reporting.
o Detailed Demand for Grants must be uploaded on PFMS at the start of each Financial
Year.
 Financial Accounts :
o Annual Accounts of the GoI.
o Shows the annual receipts and disbursements and statements of balances
o Prepared and signed by CGA
o Countersigned by the Secretary (Expenditure), Ministry of Finance.
 Personal Deposit Account :
o Device intended to facilitate the Designated officer to credit receipts into and effect
withdrawals directly from the account.
o The Personal Deposit Account shall be authorised to be opened by a special order by the
concerned Ministry or Department in consultation with the CGA.
o Personal Deposit accounts shall generally be authorised to be opened in the following
types of cases:
 In relation to Civil and Criminal Courts’ deposits, in favour of the Chief Judicial
Authority concerned;
 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.

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